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Ladies and gentlemen, welcome to
the Business Brew. 

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I am your host, Bill Brewster. 
As always, thank you for tuning 

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in. 
This episode features Richard 

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Cook of Cook and Bynum. 
Richard is a concentrated 

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investor that is currently 
focused on EM. 

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He can go anywhere. 
He's global, but seems to me to 

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that the current focus is on EM.
You can listen to the interview 

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and decide for yourself. 
Anyway, I have gotten to know 

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Richard now for, I don't know, 
probably close to a year, maybe 

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it's a little bit shorter than 
that, but it's been very fun 

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getting to know him. 
I hope that you are interested 

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in the conversation. 
He drops a fair amount of great 

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Nuggets. 
I don't know, I like this 

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conversation a lot. 
I hope you like it. 

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As always, nothing in this 
program is investment advice. 

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All of this is for entertainment
purposes only. 

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Do your own due diligence, 
consult your financial advisor 

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before making investment 
decisions. 

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And anything that Richard said 
on this interview, he can change

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his mind and he has no duty to 
update you or come on this 

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program to let you know. 
So that's that and enjoy the 

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show. 
Before this music drops, I do 

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want to give a shout out to my 
editing team at Speech Docs. 

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You can find them on Twitter at 
Speech and Docs's docs. 

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Dax and his team is are 
fantastic. 

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I met them. 
Well, I was introduced to them 

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when I was on Value After Hours.
They've done Toby's work, at 

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least on the transcript side. 
I don't know about editing the 

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pod because those pods are 
normally dropped live. 

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However, I moved from the 
podcast consultant to Speech 

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Docs and the transition has 
been, I would argue, seamless. 

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I hope that you as listeners 
have not noticed a difference. 

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And all I can say is that Dax 
and his team offer incredibly 

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good value and they're very 
responsive, and I very much 

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appreciate what they do on the 
back end of the show. 

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So if you are somebody who is 
thinking about starting a 

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podcast, please consider Dax and
his team at Speech Docs. 

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That's SPEECHDOCS. 
All right, ladies and gentlemen,

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Richard Cook from Cook and 
Bynum. 

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Thank you very much for joining 
the show. 

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Sir, how are you doing? 
Great. 

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Great to be with you, Bill. 
It's nice to do this. 

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Last time we saw each other was 
in New York. 

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That was a a decently fun panel 
I think. 

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Oh yeah, I enjoyed it very much.
Thanks for leading that. 

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I tried, I tried my best. 
There was a lot of discussion 

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about like governments and 
following election results, the 

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more so than I thought there 
might be, but I don't know if 

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that's just a function of what 
you have to follow when you're 

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in EM investing or not. 
Well, I think the course of 

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governments matter and I think 
they matter for more for some 

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businesses than they matter for 
other businesses. 

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I think a lot of the trading 
that happens in emerging markets

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is shorter event driven around 
the elections because that's 

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kind of the the amount of 
attention and focus that people 

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have. 
And I think there's less or I 

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think that's attracted to us 
about searching for names in 

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emerging markets as there's less
fundamental analysis and good 

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business analysis work 
happening. 

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But I mean, certainly 
governments matter. 

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They matter more in some 
countries than others. 

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Like a China wants to do 
something, they do it and Peru, 

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the government's pretty small 
and pretty ineffective. 

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So kind of capitalism happens 
regardless if the government 

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wants it or not. 
And so that there, but also we 

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think about the businesses we 
buy, we think about how 

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sensitive they are to a big 
shift to the laughter, a big 

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shift to the right and new 
administrations. 

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And I think that that's a 
important part of the 

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underwriting in the US as well. 
I think you still find the same 

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thing in the US, but certainly 
it's something to think about 

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when you're. 
Yeah. 

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For those that don't know, 
because we're jumping right into

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emerging, you tend to be skewed 
emerging right now. 

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But I mean you, you have 
disclosed an investment in ABM 

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Bev that has a substantial 
amount of US cash flow. 

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So and I don't think that you 
started as emerging right. 

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So it's not necessarily by 
design, it's sort of an an 

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outcome of a process or is it by
design? 

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Well, we've been doing good. 
We've had global unconstrained 

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go anywhere concentrated mandate
since we started back in 2001. 

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We're coming up, our 
anniversary's coming up in a 

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couple weeks. 
We'll be 20-3 years in. 

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So we started out, of course, 
because that was our base of 

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knowledge and our circle of 
confidence in the USI had a 

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couple mentors that really 
encouraged us starting in 2005 

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to look at emerging markets 
because they said they're less 

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people with your skill set there
and and that there's more of an 

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opportunity to have an edge if 
you do the type of work that we 

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do. 
So that's not sufficient. 

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But in that time period in the 
late 2000s, valuations got 

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pretty expensive in emerging 
markets relative to the United 

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States. 
So we had some positions that 

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worked fairly well and then our 
exposure shrunk. 

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And then maybe this has been too
soon, but maybe the last five 

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years or so, our exposure has 
increased as the relative 

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valuations with the US have 
gotten more extreme. 

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So, but we have a, we continue 
to have the same philosophy, but

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we continue to have a strategy 
that is global unconstrained. 

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And then we also have a flavor 
that is just emerging markets 

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excluding China. 
And when you, you say you said 

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global unconstrained and 
concentrated. 

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So that leads to two questions. 
Your top I'd, I'm going to say 8

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holdings because I don't even 
know if they're 10 consist of 

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how much of the portfolio 100%, 
OK. 

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And how many investments have 
you made since inception over 

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your 23 years? 
We've made 40 investments in 23 

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years. 
So you would say you're a little

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bit longer term than the street?
I guess, yeah, I mean we try to 

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think like business owners and 
we approach management as long 

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term oriented business owners. 
And I think our average holding 

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period's been about five years 
and we have delivered, we've not

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delivered a lot of short term 
capital gains to investors over 

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the years. 
We're conscious of transaction 

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costs, but especially if thinner
things that could be smaller. 

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But mainly we like to buy a 
business, assume that it's not 

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going to trade again and are we 
happy with the result. 

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So then we're not in a trap of 
trying to guess what sentiments 

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going to be or who's going to 
buy this from us later or 

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whatever. 
We could just compound capital 

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with the internal rate of return
of that business and you know, 

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this course other pieces of 
that, but that's our, our time 

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horizon as we, we go into 
something assuming we're going 

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to own it forever. 
Maybe best case, the stock goes 

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up a lot in the first, you know,
12 months in one day and then we

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can sell it and then earn a much
higher return than we expected. 

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But it could go the other way, 
could be that the sentiment goes

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more negative, but we're, you 
know, we're, we're underwriting 

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to a cash flows or, or to owner 
earnings that we expect the 

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business to generate over time. 
So we were talking about before 

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we, we hopped on when the stock 
price does go the other way and,

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and it's going against you. 
One of the things that you've 

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written about in the past is how
powerful buybacks at levels 

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below intrinsic value can be 
over the long term. 

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But I thought a wrinkle that you
put in your analysis that was 

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interesting that I'd love to 
hear you riff on is how a 

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controlling shareholder can help
that situation. 

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Yeah, I mean I've seen a number 
of you know a lot of businesses 

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that we've owned, we own now and
we've owned historically have 

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had controlling shareholders. 
I think that that suits us since

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we have a long time horizon. 
We like if we like the partners,

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we think we have to underwrite 
them and make sure they're 

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people we want to be in business
with. 

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But if we'd like them, that 
could be an advantage because 

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they are focused on 10 year 
horizons and longer and not on 

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my stock options are expiring. 
I need to get the stock up to or

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whatever the I think of. 
There's a different places, you 

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have different cultures around 
buybacks and different tax 

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incentives. 
But I can, I won't name the 

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company, but I can think about a
conversation I had with a large 

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U.S. business with a controlling
shareholder. 

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And the CEO was talking about 
how he's going to get his 

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valuation up and sort of upset 
that his valuation multiple 

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wasn't more like some of the 
business that he admired. 

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And I said to him, I said, you 
have a controlling shareholder 

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that they own almost nearly half
the business. 

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You're buying back stock 
aggressively every day. 

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Why do you want? 
It's in the benefit of your 

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controlling shareholder if the 
valuation just goes down. 

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I mean, the multiple guys are 
not the intrinsic value, but the

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multiple goes down. 
It's really powerful. 

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So I think the letter you're 
referencing, it was sort of came

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out of that discussion with him.
But in my mind, sort of shame on

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his controlling shareholders for
creating a fault, The bad 

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incentive for him that he wasn't
focused on building intrinsic 

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value per share. 
Yeah, because that that's where 

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he should be when you could 
think about different proxies to

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make that test that in your comp
agreement. 

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But we see that all the time 
that we see lots of companies 

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buying shares above intrinsic 
value or trying to get their 

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stock up and thinking short term
they'll do transactions, oh, if 

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we did this we'll get price more
like that. 

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Or if we list here, we'll get 
this multiple instead of the 

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multiple we have. 
And a lot of time and energy and

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money is wasted on things. 
And I'm always like, we'll just 

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make a better product. 
Satisfy your consumer, your your

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customer better, you know, be 
more efficient, find ways to 

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save money. 
Those are the those are the 

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things that we're more 
interested in when we are 

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talking to management teams. 
Yeah. 

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Well, the the letter that I was 
actually thinking of, the 

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comment that you had put in that
I thought was quite insightful. 

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And one one of those that when 
you read it, it's like, oh, 

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that's common sense. 
I wish that I had written that, 

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but it was that the controlling 
shareholder protects you from a 

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take under. 
Oh yeah, that's a good. 

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Point and well, you made it. 
It's very smart, right? 

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Yeah, it's brilliant. 
It's absolutely. 

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Brilliant, that guy who never 
heard television. 

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No, I mean, that is fair. 
I mean, you do deal with 

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companies where their stock is 
down and it makes them 

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vulnerable. 
But if you have a controlling 

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shareholder, that's not a risk. 
Yeah. 

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So that should give you more 
courage to, I mean, I talked to,

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we'll frequently meet with 
companies and this doesn't sound

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as quite as crazy in an emerging
market as it does in the US, But

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we're like, I'll ask him at the 
end of the meeting, why do you 

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have an investor relations team?
What is the goal of your IR 

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effort? 
And I think usually the answer 

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to that is their goal is to get 
stock price up. 

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It's like a sales effort. 
And what we're much more drawn 

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to companies that have no 
investor relations that, you 

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know, don't report in English 
or, or that are not, I mean, 

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where they're there just to 
provide information, perhaps 

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they're accessing the debt 
market and they need to have an 

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investor relations team in order
to improve their yields. 

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I mean, that's a good answer. 
But you know, if the IR effort 

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is really around not just 
communicating accurately with 

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investors, but trying to get the
stock off, you can figure that 

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out pretty quick. 
And not, never would we get 

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involved in those companies, but
it's definitely a, this 

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definitely means there's 
probably a difference in sort of

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values about what their goals 
are from what our goals are. 

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What are some of the tells that 
you've seen over time that 

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investor relations is kind of 
there for the multiple? 

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Well, sometimes they'll 
basically will say it, Hey, do 

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you know any conferences we can 
go to or we can reach a lot of 

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new investors or if they're, I 
mean, I get emails from investor

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relations teams like, hey, look 
at our stock. 

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I mean, that's just the worst 
kind of case. 

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But with the way they 
communicate, how frank are they 

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when you go back and read the 
way they communicated two years 

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ago and four years ago, how does
it compare? 

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Or they quick to say that this 
or that is temporary or needs to

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be adjusted out or is or 
whatever. 

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And then and maybe it does, 
maybe it is a one off event, but

227
00:12:32,480 --> 00:12:35,840
how does that, what does that 
kind of sniff test say about 

228
00:12:36,400 --> 00:12:41,400
what the reality is? 
And so I don't think it's that 

229
00:12:41,400 --> 00:12:44,440
hard of everybody's walked in a 
car dealership and gotten gotten

230
00:12:44,440 --> 00:12:47,040
pushed hard to buy something and
other times you walk. 

231
00:12:47,040 --> 00:12:51,200
But we've also dealt with some 
really wonderful people on the 

232
00:12:51,200 --> 00:12:54,320
best investor relations teams. 
Besides just not having one. 

233
00:12:54,880 --> 00:12:58,120
I would say the best teams are 
looking for ideas. 

234
00:12:58,560 --> 00:13:00,960
They're accessing people that 
are following their industry 

235
00:13:00,960 --> 00:13:05,240
seriously and they're looking to
gather information from you that

236
00:13:05,240 --> 00:13:09,880
they can convey to their CFO or 
their CEO to help them better 

237
00:13:09,880 --> 00:13:13,160
manage the business. 
And I think we've had some a 

238
00:13:13,160 --> 00:13:15,520
number of constructive 
relationships like that over 

239
00:13:15,520 --> 00:13:19,960
time where as an investor we 
have access to every public copy

240
00:13:19,960 --> 00:13:22,400
and industry in the world. 
And we will talk to them, we'll 

241
00:13:22,400 --> 00:13:24,520
follow them, we'll engage with 
them. 

242
00:13:24,520 --> 00:13:28,040
And sometimes they can bring 
competitors and peers and 

243
00:13:28,040 --> 00:13:32,040
suppliers and customer 
information to an investor 

244
00:13:32,040 --> 00:13:34,200
relations team and say, hey, you
know, they're, they're doing 

245
00:13:34,200 --> 00:13:37,840
this there and it seems to be 
working like this is an 

246
00:13:37,840 --> 00:13:41,040
opportunity for you or we're 
seeing this trend and it may be 

247
00:13:41,040 --> 00:13:43,400
a headwind for you. 
Think about how you can get 

248
00:13:43,400 --> 00:13:47,200
ahead of it just sort of be a 
part of the cross pollination of

249
00:13:47,200 --> 00:13:51,480
pitch of information. 
And I think with that you can 

250
00:13:52,080 --> 00:13:55,600
build, build a, you know, if 
you're useful to them, if they 

251
00:13:55,600 --> 00:13:59,040
view you as useful, then 
they'll, they'll, I, I think 

252
00:13:59,040 --> 00:14:01,320
that you're there more reasons 
for them to talk to you and you 

253
00:14:01,320 --> 00:14:03,240
have a better seat at the table 
about something else that you 

254
00:14:03,240 --> 00:14:05,360
want to influence. 
You know, in the last few, 

255
00:14:05,360 --> 00:14:08,160
several months, we've had two of
our CE OS come to Alabama to see

256
00:14:08,160 --> 00:14:10,400
us. 
We talked to our, our manager 

257
00:14:10,400 --> 00:14:13,640
teams frequently when just about
without exception. 

258
00:14:13,640 --> 00:14:17,200
And I think because we are 
focused on the long run and 

259
00:14:17,200 --> 00:14:23,160
maybe we're encouraging them to 
their sort of better angels to 

260
00:14:23,160 --> 00:14:25,520
not listen to what some 
investment maker has in their 

261
00:14:25,520 --> 00:14:28,040
ear about the short term, but to
think about the long term. 

262
00:14:28,040 --> 00:14:30,960
I think that the right 
management teams want that. 

263
00:14:31,480 --> 00:14:34,360
They want that feedback. 
And so it could be hopefully 

264
00:14:34,360 --> 00:14:35,840
we're able to add value that 
way. 

265
00:14:35,840 --> 00:14:38,040
Just maybe how to run this 
business. 

266
00:14:38,360 --> 00:14:40,040
Do it the way that you think 
it's best. 

267
00:14:40,040 --> 00:14:47,400
Don't ignore the noise and. 
So you write a lot about bias 

268
00:14:47,400 --> 00:14:52,480
and avoiding bias, and how do 
you think about the sort of 

269
00:14:52,480 --> 00:14:56,640
juxtaposition of getting to know
a management team and the bias 

270
00:14:56,640 --> 00:15:02,120
that that can create and 
remaining rational while being 

271
00:15:02,120 --> 00:15:04,720
engaged? 
I think that gets to your 

272
00:15:04,720 --> 00:15:06,280
personal disposition a little 
bit. 

273
00:15:07,000 --> 00:15:09,840
I, I mean, I know investment 
managers that don't want to know

274
00:15:10,280 --> 00:15:12,400
management teams because they 
sort of well management teams 

275
00:15:12,400 --> 00:15:15,760
are good salespeople. 
And I'm going to be biased. 

276
00:15:15,960 --> 00:15:17,520
I mean, I think it's really an 
important question. 

277
00:15:17,520 --> 00:15:21,000
I think you can. 
I certainly have seen investment

278
00:15:21,000 --> 00:15:26,080
managers get suckered in by 
charismatic leaders and I can't 

279
00:15:26,080 --> 00:15:28,720
think of where we've done that. 
And I'm just thinking through 

280
00:15:28,720 --> 00:15:31,480
our 40 investments. 
But I'll probably will think, 

281
00:15:31,480 --> 00:15:33,800
reflect on this tonight and 
think of one or two where maybe 

282
00:15:34,240 --> 00:15:35,760
we weren't as objective as we 
can be. 

283
00:15:35,760 --> 00:15:38,880
I mean, I'm certainly, we try to
avoid bias, but we're certainly 

284
00:15:38,880 --> 00:15:41,440
not immune. 
So I mean, Charlie Munger talks 

285
00:15:41,440 --> 00:15:43,480
about avoiding your fair share 
of folly. 

286
00:15:43,480 --> 00:15:48,960
And maybe that's a that should 
all be our goal, but maybe we, 

287
00:15:49,480 --> 00:15:53,440
whenever there's new information
about a business, we try to re 

288
00:15:53,440 --> 00:15:57,040
underwrite it from scratch. 
You know, we have models, of 

289
00:15:57,040 --> 00:16:00,360
course, that we carry along, but
I frequently will, you know, 

290
00:16:00,360 --> 00:16:02,920
open up a spreadsheet and sort 
of think about the business 

291
00:16:02,920 --> 00:16:07,680
totally anew. 
And so kind of refreshing all 

292
00:16:07,680 --> 00:16:11,120
the time, which is as if you 
didn't know anything is, is 

293
00:16:11,120 --> 00:16:14,400
important. 
I would also say that we have a 

294
00:16:14,400 --> 00:16:18,040
culture here that is different 
than a lot of other places that 

295
00:16:18,120 --> 00:16:21,400
I've been exposed to. 
And that I encourage everybody 

296
00:16:21,400 --> 00:16:23,800
on the team, not just the 
research team, but everybody on 

297
00:16:23,800 --> 00:16:27,120
the team to be able to say both 
sides of every question. 

298
00:16:27,240 --> 00:16:30,600
But like I'm in the context of 
research, you know, I don't want

299
00:16:31,000 --> 00:16:33,960
us to have a pitch and defend 
culture where someone owns a 

300
00:16:33,960 --> 00:16:37,280
stock, they present a stock, 
they get in the portfolio, their

301
00:16:37,600 --> 00:16:40,080
their bonus is tied to the 
results of that particular 

302
00:16:40,080 --> 00:16:42,280
stock. 
And then that creates this 

303
00:16:42,280 --> 00:16:45,080
incentive for them to hide 
information about that company 

304
00:16:45,080 --> 00:16:46,600
and only give you the best 
information. 

305
00:16:47,120 --> 00:16:50,440
It's really helpful if we spend 
6 months on an idea and then we 

306
00:16:50,440 --> 00:16:53,560
find one point that makes us not
want to invest like that should 

307
00:16:53,560 --> 00:16:59,600
be encouraged just as much. 
And I, I want everybody here to 

308
00:16:59,600 --> 00:17:01,920
be able to tell, hey, Richard, 
you're an idiot. 

309
00:17:02,520 --> 00:17:05,079
You're thinking about that the 
wrong way or you hadn't thought 

310
00:17:05,079 --> 00:17:09,359
about this or and hey, this is 
important, but this is also 

311
00:17:09,359 --> 00:17:10,920
important. 
They're counter to each other. 

312
00:17:11,119 --> 00:17:14,480
I want us to be seeking the 
truth wherever that is. 

313
00:17:14,560 --> 00:17:19,800
And that hopefully reduces some 
of the bias that they can creep 

314
00:17:19,800 --> 00:17:22,800
into any kind of investing. 
But it's certainly not 

315
00:17:22,800 --> 00:17:25,760
foolproof. 
But that's the best I got is to,

316
00:17:26,839 --> 00:17:29,400
you know, keep, you know, it's 
like if you write a paper and 

317
00:17:29,400 --> 00:17:31,480
then you put it aside, you read 
it again the next day, you'll 

318
00:17:31,480 --> 00:17:36,280
make improvements. 
And so those types of ways of 

319
00:17:36,280 --> 00:17:38,480
tricking yourself into 
rethinking, well, someone else 

320
00:17:38,480 --> 00:17:40,640
has got a bearish view on it. 
Let's be able to explain the 

321
00:17:40,640 --> 00:17:42,520
bearish view. 
Why do they get to that point? 

322
00:17:42,520 --> 00:17:45,400
How do they think that way? 
Can we challenge their 

323
00:17:45,400 --> 00:17:47,200
assumptions? 
We disprove that. 

324
00:17:47,640 --> 00:17:51,800
And how do we rub our nose? 
And and then another thing we do

325
00:17:51,800 --> 00:17:56,040
is kind of imagine a priori, if 
this is kind of our thesis about

326
00:17:56,040 --> 00:17:58,400
this business, We think they're 
going to do this. 

327
00:17:58,920 --> 00:18:02,200
Let's kind of write that down, 
think about it, and then as 

328
00:18:02,200 --> 00:18:06,760
events unfold, how did it turn 
out if we were expecting this to

329
00:18:06,880 --> 00:18:09,960
disprove our thesis, We have a 
test already out there, and then

330
00:18:09,960 --> 00:18:12,600
that happens harder for us to 
stick with it. 

331
00:18:13,000 --> 00:18:15,320
So, and we try to do that both 
the opposite way too. 

332
00:18:15,320 --> 00:18:18,200
We actually do that with the 
things we don't do, which is the

333
00:18:18,280 --> 00:18:20,320
long list of things we should 
have done that we thought about 

334
00:18:20,320 --> 00:18:22,320
doing that we didn't do. 
Oh, you mean like we were 

335
00:18:22,320 --> 00:18:24,200
worried? 
Like mistakes of our errors of 

336
00:18:24,200 --> 00:18:26,560
omission almost. 
Yeah, absolutely. 

337
00:18:26,720 --> 00:18:31,080
I'm constantly somebody is 
digging up from our teams chat 

338
00:18:31,080 --> 00:18:34,800
from 8 years ago where I said we
were worried about this or we 

339
00:18:34,800 --> 00:18:36,640
thought this was going to go 
that way and it didn't go that 

340
00:18:36,640 --> 00:18:38,080
way. 
And this worked out better than 

341
00:18:38,080 --> 00:18:39,960
we thought. 
And sometimes it's we were 

342
00:18:39,960 --> 00:18:41,680
worried about something and 
that's exactly what happened. 

343
00:18:42,480 --> 00:18:45,480
But, but also sometimes it's we 
were worried about this and 

344
00:18:45,560 --> 00:18:46,880
maybe we were too worried about 
that. 

345
00:18:46,960 --> 00:18:50,040
What can we learn from that? 
Or is it just been lucky that it

346
00:18:50,040 --> 00:18:53,000
didn't work out that way and 
that or hasn't worked out that 

347
00:18:53,000 --> 00:18:56,400
way yet? 
So I don't know trying to redo 

348
00:18:56,400 --> 00:19:01,160
decisions with postmortems is is
a frequent part of our of what 

349
00:19:01,160 --> 00:19:02,520
we're doing. 
Well, I shouldn't say you make 

350
00:19:02,520 --> 00:19:05,360
few decisions. 
There is not much activity in 

351
00:19:05,360 --> 00:19:11,520
your portfolio. 
So I would think that making 

352
00:19:11,520 --> 00:19:14,560
sure that you're not falling in 
love with an investment just 

353
00:19:14,560 --> 00:19:19,040
because you've owned it for a 
number of years is a skill set 

354
00:19:19,040 --> 00:19:22,200
that maybe has to be developed. 
Yeah. 

355
00:19:22,200 --> 00:19:24,160
I mean, we've made some mistakes
by holding on to things. 

356
00:19:24,160 --> 00:19:25,840
We've also made mistakes by 
getting rid of things. 

357
00:19:25,840 --> 00:19:29,600
I mean, we've lost more money by
selling things too soon for 

358
00:19:29,600 --> 00:19:32,120
sure. 
Seems to be a common refrain. 

359
00:19:32,120 --> 00:19:35,400
It could be a comment on where 
we are in a market cycle. 

360
00:19:36,440 --> 00:19:37,640
Yeah. 
Well, that's true. 

361
00:19:37,640 --> 00:19:40,600
But I've we've been through a 
few cycles, so I don't it's not 

362
00:19:40,600 --> 00:19:44,200
just this cycle. 
And we, we, we first started our

363
00:19:44,200 --> 00:19:46,120
business, we bought Tractor 
Supply Company. 

364
00:19:46,120 --> 00:19:47,320
Oh. 
Yeah, you told me. 

365
00:19:47,520 --> 00:19:51,480
This and it quadrupled and we 
sold it, thought we were 

366
00:19:51,480 --> 00:19:56,160
geniuses and then I think it's 
up more since we sold it than 

367
00:19:56,160 --> 00:19:58,520
the S&P or anything. 
Else you want to tell people how

368
00:19:58,520 --> 00:20:00,680
cheap he bought it. 
We bought it. 

369
00:20:00,760 --> 00:20:03,080
I don't know the split adjusted,
I can't give you all that, but 

370
00:20:03,080 --> 00:20:05,080
we paid about seven times 
earnings for it. 

371
00:20:05,600 --> 00:20:09,840
It was a double digit grower. 
The CEO owned about 15% of 

372
00:20:09,840 --> 00:20:13,200
business and he was buying stock
in the open market they had. 

373
00:20:14,400 --> 00:20:18,000
So that can't do the split 
adjusted, but they had about 40%

374
00:20:18,000 --> 00:20:21,720
of the stock, half the stock 
value in expanded working 

375
00:20:21,720 --> 00:20:23,720
capital. 
Basically they had put in a new 

376
00:20:23,720 --> 00:20:27,080
inventory system that had failed
and had no idea how much 

377
00:20:27,080 --> 00:20:29,840
inventory was in their stores 
and they made the decision to 

378
00:20:30,640 --> 00:20:32,440
that. 
They didn't want their customers

379
00:20:32,440 --> 00:20:36,040
to come to the store and leave 
dissatisfied, so they just 

380
00:20:36,040 --> 00:20:38,800
pushed inventory into the store.
So if you went and visited the 

381
00:20:38,800 --> 00:20:42,920
store, they'd have 7 wooden axe 
handles and seven synthetic axe 

382
00:20:42,920 --> 00:20:45,320
handles and they probably needed
one or two. 

383
00:20:46,040 --> 00:20:47,840
And that was true across every 
category. 

384
00:20:47,840 --> 00:20:50,920
So they knew that they needed to
get a picture of their inventory

385
00:20:50,920 --> 00:20:54,760
and they needed to, they needed 
to pull that go back to a more 

386
00:20:54,760 --> 00:20:57,360
normalized inventory, which I 
think the inventory turns to 

387
00:20:57,360 --> 00:20:59,440
drop to two. 
And they would have been 3 1/2 

388
00:21:00,000 --> 00:21:02,560
before. 
And so if you just took their 

389
00:21:02,560 --> 00:21:05,480
inventories back to 3 1/2, you 
were paying like three times 

390
00:21:05,480 --> 00:21:08,680
earnings. 
But I think we lacked, I mean, 

391
00:21:08,680 --> 00:21:10,080
we thought it was a decent 
business. 

392
00:21:10,080 --> 00:21:12,240
We've always skeptical of 
retail, although that's been a 

393
00:21:12,240 --> 00:21:13,640
place we've done a lot of 
things. 

394
00:21:14,240 --> 00:21:16,720
We didn't have one in Birmingham
yet at that point. 

395
00:21:16,720 --> 00:21:20,720
We visited some in Tennessee and
Nebraska and a few other places.

396
00:21:20,720 --> 00:21:23,720
But we lacked, shame on us, a 
good lesson. 

397
00:21:23,720 --> 00:21:27,360
We lacked an understanding that 
this was a very good standalone 

398
00:21:27,360 --> 00:21:29,800
format. 
They could be near a Walmart or 

399
00:21:29,800 --> 00:21:31,800
near Home Depot. 
It could be just fine. 

400
00:21:32,240 --> 00:21:34,960
I think we were worried about 
their skews getting competed 

401
00:21:34,960 --> 00:21:39,000
away from them by the big boxes 
and that was unwarranted. 

402
00:21:39,200 --> 00:21:42,600
They wound up their biggest 
competitor went bankrupt. 

403
00:21:42,680 --> 00:21:44,120
They bought a hundred of their 
big competitor. 

404
00:21:44,120 --> 00:21:48,040
They they had about right around
300 stores at the time. 

405
00:21:48,040 --> 00:21:50,920
They bought the cherry pick, the
best hundred stores from one of 

406
00:21:50,920 --> 00:21:54,560
the competitors and converted 
them to their format and went on

407
00:21:54,560 --> 00:21:56,920
to have a ton of success. 
I mean, obviously it's been a 

408
00:21:56,920 --> 00:21:59,840
tremendous success story. 
I wish we had been a long I wish

409
00:21:59,840 --> 00:22:04,240
we'd stayed with the ride 
because we know kind of red 

410
00:22:04,240 --> 00:22:09,240
stick redneck companies, Tractor
Supply, really it was is a store

411
00:22:09,240 --> 00:22:12,800
for people that pretend to be 
farmers and and you. 

412
00:22:13,040 --> 00:22:15,720
Know I had to go in for my dog 
or I had to go there for my dog.

413
00:22:16,880 --> 00:22:19,320
Yeah. 
And so truck boxes and fence 

414
00:22:19,320 --> 00:22:21,680
posts and some of the things, I 
mean, it's definitely, you know,

415
00:22:21,680 --> 00:22:24,880
but my mother certainly 
resembles that and I do too, is 

416
00:22:24,880 --> 00:22:27,040
someone that likes to be in the 
country. 

417
00:22:27,560 --> 00:22:29,600
And so it's a business we should
have been able to understand 

418
00:22:29,600 --> 00:22:31,160
really well. 
I think we understood it well 

419
00:22:31,840 --> 00:22:34,040
and we lost a lot of money 
because we didn't understand it,

420
00:22:34,400 --> 00:22:35,800
didn't understand their offer 
better. 

421
00:22:36,760 --> 00:22:40,400
Do you think that has anything 
to do with, I perceive what you 

422
00:22:40,400 --> 00:22:43,440
saw was a balance sheet issue 
and then it's sort of 

423
00:22:43,440 --> 00:22:46,400
transitioned to growth earnings 
power machine. 

424
00:22:47,240 --> 00:22:49,720
Do you think some of that was 
because you were focused so much

425
00:22:49,720 --> 00:22:52,680
on the inventory sort of 
normalizing and once that sort 

426
00:22:52,680 --> 00:22:55,240
of played out, it was like, OK, 
well, now it's close to fair 

427
00:22:55,240 --> 00:22:58,320
value. 
So we're we're sort of done 

428
00:22:58,320 --> 00:22:59,240
here. 
Yeah. 

429
00:22:59,240 --> 00:23:01,280
I mean, I think we felt like 
we'd made the easy money and 

430
00:23:01,280 --> 00:23:04,240
that it was going to get harder 
for them because retail is hard.

431
00:23:04,480 --> 00:23:08,400
And we were worried that at that
point, Walmart and Home Depot 

432
00:23:08,400 --> 00:23:10,320
and Lowe's were still growing 
pretty rapidly. 

433
00:23:10,680 --> 00:23:14,280
And we thought as they grew that
that would, I guess we did. 

434
00:23:14,280 --> 00:23:18,960
We lacked the imagination to see
how big the white space was for 

435
00:23:18,960 --> 00:23:21,880
tax black company. 
And and in our defense, we were 

436
00:23:21,960 --> 00:23:25,400
23 at the time, but we were 
still learning, investing. 

437
00:23:25,400 --> 00:23:30,320
But if you have a retailer that 
has a pretty fast payback period

438
00:23:30,320 --> 00:23:33,840
for opening a new store, 2 
years, 2 1/2 years and they 

439
00:23:33,840 --> 00:23:37,600
have, I think they thought their
estimate at the time was they 

440
00:23:37,600 --> 00:23:40,640
thought they had room for like 
800 stores by the country. 

441
00:23:40,960 --> 00:23:42,160
They have way more than that 
now. 

442
00:23:42,160 --> 00:23:44,000
So they were too conservative in
that number. 

443
00:23:44,000 --> 00:23:46,160
And I think we probably trusted 
that. 

444
00:23:46,160 --> 00:23:48,640
I don't know why we trusted it 
per SE, but we lacked the 

445
00:23:48,640 --> 00:23:52,080
imagination to see how big it 
could be. 

446
00:23:52,120 --> 00:23:56,360
They also we're very focused on 
the sort of upper income rural 

447
00:23:56,360 --> 00:23:58,360
areas. 
You know, they were like horse. 

448
00:23:58,360 --> 00:24:01,240
The count of horses was an 
important number for them for 

449
00:24:01,240 --> 00:24:04,000
locating a store because that's 
going to locate gentlemen 

450
00:24:04,000 --> 00:24:06,200
farmers. 
But it turns out that stores 

451
00:24:06,200 --> 00:24:08,720
work pretty well if it's, you 
know, cattle. 

452
00:24:08,720 --> 00:24:10,240
It's not just where you don't 
have a lot of horses. 

453
00:24:10,240 --> 00:24:13,040
Interesting. 
Yeah, it works pretty well and 

454
00:24:13,480 --> 00:24:16,560
the less sort of gentrified 
country areas as well. 

455
00:24:16,720 --> 00:24:19,360
And I'm not sure they do that 
yet, but they look, they did a 

456
00:24:19,360 --> 00:24:23,320
fantastic job of managing the 
business and and growing it. 

457
00:24:23,320 --> 00:24:28,480
And so I give them a lot of 
credit and I wish we'd have been

458
00:24:28,520 --> 00:24:29,880
stayed on them for the ride 
longer. 

459
00:24:29,880 --> 00:24:33,400
But maybe, I don't know, maybe 
if we'd spent more time in 

460
00:24:33,400 --> 00:24:34,680
Tennessee, we could have figured
that out. 

461
00:24:34,680 --> 00:24:36,600
Maybe if they'd had a store 
here, we could have figured that

462
00:24:36,600 --> 00:24:39,800
out. 
Or maybe we were just too mature

463
00:24:39,800 --> 00:24:43,960
as investors to figure that out.
But a lot of good from a success

464
00:24:43,960 --> 00:24:46,120
for us, a lot of good lessons. 
But it was fun. 

465
00:24:46,120 --> 00:24:49,080
I'm glad. 
I mean, certainly happy we had 

466
00:24:49,080 --> 00:24:51,120
the result we did. 
That was very helpful to the for

467
00:24:51,120 --> 00:24:53,320
our business growing at the 
beginning. 

468
00:24:53,720 --> 00:24:56,160
I'm just thinking about, OK, 
well, even if you'd held Tractor

469
00:24:56,160 --> 00:25:00,640
Supply Company, what would that 
have been like in O 8, which 

470
00:25:00,640 --> 00:25:04,880
gets me to what was that period 
generally like to manage for you

471
00:25:04,880 --> 00:25:08,280
and and where were you focused 
at the time as a portfolio? 

472
00:25:08,560 --> 00:25:10,680
Yeah. 
So we actually did a little 

473
00:25:10,680 --> 00:25:16,280
better than average in O 8, 
which I credit to not any sort 

474
00:25:16,280 --> 00:25:18,920
of just because we tend to own 
higher quality businesses. 

475
00:25:19,360 --> 00:25:21,520
We tend to own businesses that 
are less cyclical. 

476
00:25:22,080 --> 00:25:26,200
And also I'd say an important 
thing in that period is that we 

477
00:25:26,200 --> 00:25:29,840
got net new money from our 
investors family that is our 

478
00:25:29,840 --> 00:25:34,040
largest investor now added money
to us in the fourth quarter of 

479
00:25:34,040 --> 00:25:37,440
O8, the first quarter of O 9. 
So that's really I can't Seth 

480
00:25:37,440 --> 00:25:40,440
Klarman talks about how 
important it is to have good 

481
00:25:40,440 --> 00:25:44,160
investors, to be a good manager 
and I think that is understated 

482
00:25:44,160 --> 00:25:47,320
under less under understood. 
It's more important than people 

483
00:25:47,320 --> 00:25:50,280
realize. 
And so we've had having the 

484
00:25:50,280 --> 00:25:54,800
confidence and support of 
investors that think like 

485
00:25:54,800 --> 00:26:00,360
business owners and that see 
down drafts as opportunities is 

486
00:26:00,360 --> 00:26:03,000
really enabling. 
I reflect on that period. 

487
00:26:03,000 --> 00:26:06,000
My wife and I agreed to not give
each other Christmas presents 

488
00:26:06,080 --> 00:26:08,880
that year and because we want to
get every dollar we could into 

489
00:26:08,880 --> 00:26:10,840
the market. 
I mean, I think we, we 

490
00:26:10,840 --> 00:26:13,680
understood in real time, Dow and
I did that this was a 

491
00:26:13,680 --> 00:26:17,160
generational opportunity and the
valuations were really stupid 

492
00:26:17,600 --> 00:26:19,840
and that you could find 
businesses that we're not going 

493
00:26:19,840 --> 00:26:21,840
to go under because of the 
financial crisis and you could 

494
00:26:21,840 --> 00:26:24,920
buy them very attractive, very 
attractive. 

495
00:26:25,000 --> 00:26:28,280
And so we worked really hard to 
get our capital into things and 

496
00:26:28,280 --> 00:26:31,520
we did have a a very good period
of nine as well. 

497
00:26:31,520 --> 00:26:33,680
So we did kind of over that 
whole cycle was a very good 

498
00:26:33,680 --> 00:26:37,680
period for us, but on a relative
basis and not bad on an absolute

499
00:26:37,680 --> 00:26:39,440
basis. 
And we made over that period we 

500
00:26:39,440 --> 00:26:42,880
did well. 
We, my regrets, I think we wrote

501
00:26:42,880 --> 00:26:46,840
a letter at the end of O 9 where
we talked about our mistakes and

502
00:26:46,880 --> 00:26:51,120
despite having a really good 
year and I think about the 

503
00:26:51,120 --> 00:26:55,200
things that we thought were very
cheap that we hadn't done enough

504
00:26:55,200 --> 00:26:58,560
work on yet and to have the 
information adequacy that we 

505
00:26:58,560 --> 00:27:02,880
needed, I think about. 
And so one of our lessons of 

506
00:27:02,880 --> 00:27:06,600
that was keep stockpiling things
that you've done the work on. 

507
00:27:06,880 --> 00:27:08,440
You don't know when they're 
going to get cheap. 

508
00:27:08,560 --> 00:27:09,560
You don't know because it 
happens. 

509
00:27:09,560 --> 00:27:12,840
What happened that period was 
fairly short period and we did 

510
00:27:12,840 --> 00:27:14,440
the best we could. 
We got our money into things 

511
00:27:14,440 --> 00:27:16,560
that we we're not going to 
invest in things we don't know 

512
00:27:16,560 --> 00:27:19,120
well. 
And we had a good result, so I'm

513
00:27:19,120 --> 00:27:21,920
not. 
But there were other things we 

514
00:27:21,920 --> 00:27:24,680
thought were almost certainly 
going to be really good that we 

515
00:27:24,680 --> 00:27:27,040
didn't put our money in because 
we hadn't done enough work. 

516
00:27:27,040 --> 00:27:29,880
We hadn't been like, for 
example, there were a few 

517
00:27:29,880 --> 00:27:32,360
companies in Chile that we 
wanted to buy, but we hadn't 

518
00:27:32,360 --> 00:27:34,360
been there yet. 
But we've been there 10 times 

519
00:27:34,360 --> 00:27:39,120
since because we did want to be 
prepared for the next time there

520
00:27:39,120 --> 00:27:41,560
was a downdraft like that. 
We wanted to be able to do those

521
00:27:41,560 --> 00:27:43,920
things. 
And so we keep building our 

522
00:27:43,920 --> 00:27:48,040
watch list and of companies that
we can get up to speed on very 

523
00:27:48,040 --> 00:27:51,240
quickly even if we're not 
following them every single day 

524
00:27:51,640 --> 00:27:54,840
because we want to be. 
If there is a panic or I think 

525
00:27:55,280 --> 00:27:58,360
our best performing physician in
the last couple years is one 

526
00:27:58,360 --> 00:28:01,840
that we first met with more than
a decade ago like 12-14 years 

527
00:28:01,840 --> 00:28:04,760
ago and it went from 30 
something times earnings to 

528
00:28:04,760 --> 00:28:08,600
seven and then we bought it and 
but we talked to them several 

529
00:28:08,600 --> 00:28:11,560
times along the way. 
We visited them and you see just

530
00:28:11,560 --> 00:28:17,320
never quite know when something 
is going to become attractive. 

531
00:28:17,520 --> 00:28:20,880
But if the business has got good
characteristics, we could throw 

532
00:28:20,880 --> 00:28:24,200
it in our watch list, we can put
alerts on it relative to 

533
00:28:24,200 --> 00:28:27,280
multiples and different things. 
And hopefully it will, they will

534
00:28:27,280 --> 00:28:29,840
bubble back and that, that's the
cumulative part of this game. 

535
00:28:29,880 --> 00:28:33,520
What kind of underlying series 
of events has a stock moved from

536
00:28:33,520 --> 00:28:36,760
30 times earnings to seven? 
Yeah. 

537
00:28:36,760 --> 00:28:38,800
Maybe that's a theme that we 
look for sometimes. 

538
00:28:39,120 --> 00:28:41,080
So the company is based in 
Turkey. 

539
00:28:41,640 --> 00:28:44,680
And so Turkey went from a place 
that everyone was very excited 

540
00:28:44,680 --> 00:28:49,440
about the prospects of Turkey to
total panic about and 

541
00:28:49,440 --> 00:28:53,080
legitimately so about Erdogan 
and the consolidation of power 

542
00:28:53,080 --> 00:28:55,320
and the hyperinflation and 
different things are going on 

543
00:28:55,320 --> 00:28:58,480
there. 
But one lesson we had learned in

544
00:28:58,480 --> 00:29:01,120
a different situation that we 
kind of model that we look for 

545
00:29:01,120 --> 00:29:04,520
is if you have a business that's
domiciled somewhere, trade 

546
00:29:04,520 --> 00:29:07,720
somewhere, but a majority of the
businesses outside of that 

547
00:29:07,720 --> 00:29:12,320
country, then it could be an 
interesting place to when 

548
00:29:12,320 --> 00:29:16,440
there's panic or a little bad 
perceptions of the economy or 

549
00:29:16,440 --> 00:29:19,280
the country or the valuations or
whatever you could buy, you 

550
00:29:19,280 --> 00:29:22,760
could pick off a company where 
you're, you feel like I'm buying

551
00:29:22,760 --> 00:29:26,920
the international business, even
if it goes to 0 here, I got 

552
00:29:26,920 --> 00:29:29,800
protection in the case of this 
company, all those international

553
00:29:29,800 --> 00:29:32,480
subsidiaries roll up to Dutch 
subsidiaries. 

554
00:29:32,960 --> 00:29:36,960
So even if they were to totally 
steal the Turkish business from 

555
00:29:36,960 --> 00:29:40,880
us, which I don't think that's 
likely, by the way, but we still

556
00:29:40,880 --> 00:29:43,960
thought it was very cheap. 
And so we wind up paying six or 

557
00:29:43,960 --> 00:29:46,960
seven times earnings for a 
company that's growing, probably

558
00:29:46,960 --> 00:29:50,080
going to grow underlying volumes
and the mid to high single 

559
00:29:50,080 --> 00:29:53,440
digits for a long time and 
probably to go profits in the 

560
00:29:53,640 --> 00:29:57,760
high single digits to low double
digits for a couple decades. 

561
00:29:58,440 --> 00:30:01,960
And well run, good controlling 
shareholders, good governance. 

562
00:30:03,280 --> 00:30:07,880
And people loved it because of 
those fundamentals and then they

563
00:30:07,880 --> 00:30:11,560
hated it because they just 
wanted to sell everything after 

564
00:30:11,560 --> 00:30:12,960
an election. 
And then all the way back to the

565
00:30:12,960 --> 00:30:18,280
top of our conversation, I think
there is frequently too much 

566
00:30:18,280 --> 00:30:24,960
focus on elections and sort of 
macro ETF trading double 

567
00:30:24,960 --> 00:30:28,040
country. 
And then maybe another thing 

568
00:30:28,040 --> 00:30:31,040
that we've seen is that when 
there's an election that move 

569
00:30:31,040 --> 00:30:33,440
that's more socialist leaning, 
that is a favorite head, 

570
00:30:33,440 --> 00:30:35,480
particularly Latin America where
we've done a lot of things, 

571
00:30:35,760 --> 00:30:38,600
that's a favorite headline. 
The English speaking press will 

572
00:30:38,880 --> 00:30:43,760
run and sort of tell a Castro 
narratives and overlay that on 

573
00:30:43,760 --> 00:30:47,160
any given country. 
And then when it doesn't really 

574
00:30:47,160 --> 00:30:49,840
work out because the country and
there and there's big 

575
00:30:49,840 --> 00:30:51,520
differences between countries in
Latin America. 

576
00:30:51,920 --> 00:30:54,520
But if the country is actually 
kind of capitalist and it's root

577
00:30:54,520 --> 00:30:58,440
in terms of the what the what 
the voters want and that 

578
00:30:58,600 --> 00:30:59,880
government becomes very 
unpopular. 

579
00:30:59,880 --> 00:31:02,280
They don't actually and 
institutions are somewhat strong

580
00:31:02,280 --> 00:31:05,120
and they don't actually 
implement a lot of socialism. 

581
00:31:05,120 --> 00:31:08,040
I mean, the economy does OK. 
Nobody goes back and writes the 

582
00:31:08,040 --> 00:31:11,240
story. 
It's it's there in the local 

583
00:31:11,240 --> 00:31:15,200
press, but it's there in Spanish
in that case, but it's not in, 

584
00:31:15,680 --> 00:31:18,080
it never comes back in the 
English press and investors 

585
00:31:18,080 --> 00:31:22,480
don't come back until like the 
next election when they turn 

586
00:31:22,480 --> 00:31:26,640
back to the to the right and 
then and then money will flood 

587
00:31:26,640 --> 00:31:29,160
in. 
So. 

588
00:31:29,640 --> 00:31:32,360
This is what a friend of the 
pod, Ian Bisic, was talking 

589
00:31:32,360 --> 00:31:34,480
about with Colombia. 
He was like, look, everybody 

590
00:31:34,480 --> 00:31:39,600
thinks that, that this president
is, is a big lefty, but if you 

591
00:31:39,600 --> 00:31:42,080
look, he's lost the support of 
our country. 

592
00:31:42,640 --> 00:31:44,680
So he can't really do that much 
anymore. 

593
00:31:44,920 --> 00:31:47,000
And, and he can mess up some 
things. 

594
00:31:47,040 --> 00:31:50,440
I, I noticed their, their EMP 
company or whatever, they're 

595
00:31:50,440 --> 00:31:55,240
kind of driving some policy from
the top to make them more ESG or

596
00:31:55,240 --> 00:31:57,480
whatever. 
But that's, that's not a long 

597
00:31:57,480 --> 00:32:00,080
term issue, right? 
That's maybe another year and a 

598
00:32:00,080 --> 00:32:02,720
half issue. 
So what does the next 10 to 20 

599
00:32:02,720 --> 00:32:04,640
look like Is probably a more 
important question. 

600
00:32:05,600 --> 00:32:07,640
Yeah, I've seen this story a 
bunch of times. 

601
00:32:07,840 --> 00:32:09,680
I would stop short of predicting
what's going to happen in 

602
00:32:09,680 --> 00:32:12,680
Colombia because I'm not quite 
as close to that one, but I 

603
00:32:13,040 --> 00:32:16,400
definitely have seen that theme.
I mean, if you look at COVID, I 

604
00:32:16,400 --> 00:32:20,520
mean, the country, the large 
country that had the smallest 

605
00:32:20,520 --> 00:32:23,160
amount of deficit spending in 
order to deal with the COVID 

606
00:32:23,160 --> 00:32:28,920
crisis was probably Mexico. 
So AMLO, the socialist was more 

607
00:32:29,080 --> 00:32:32,600
fiscally responsible than Trump 
or any other government you can 

608
00:32:32,600 --> 00:32:35,280
find essentially in a large 
country. 

609
00:32:35,760 --> 00:32:38,160
And because he was obsessed with
protecting the peso. 

610
00:32:38,720 --> 00:32:42,920
And so that was really, there is
a kind of thread of in Latin 

611
00:32:42,920 --> 00:32:47,440
America, the thread of socialist
leaders that will reference 

612
00:32:48,240 --> 00:32:51,960
communism, socialism, 
Bolivarianism, but they will be 

613
00:32:51,960 --> 00:32:57,920
governed by some practicality. 
And, and I certainly think AMLO 

614
00:32:57,920 --> 00:32:59,920
just said some things that they 
were very bad for Mexico. 

615
00:32:59,920 --> 00:33:03,560
I certainly wouldn't endorse 
them, but not necessarily 

616
00:33:03,560 --> 00:33:06,760
terrible for business and and 
and terrible for the people of 

617
00:33:06,760 --> 00:33:09,920
Mexico. 
If you have sort of as anchor, 

618
00:33:10,320 --> 00:33:12,240
I'm going to keep the peso from 
falling apart. 

619
00:33:12,640 --> 00:33:14,920
Do you think that's because 
they've seen other Latin 

620
00:33:14,920 --> 00:33:17,440
American countries lose their 
currency? 

621
00:33:17,520 --> 00:33:20,640
So it's sort of front and 
center. 

622
00:33:21,560 --> 00:33:23,000
Yeah. 
I mean, the Latin American debt 

623
00:33:23,000 --> 00:33:26,800
crisis is still in the minds of 
people that are over 50 in Latin

624
00:33:26,800 --> 00:33:30,680
America and they they certainly 
are conscious of that. 

625
00:33:31,320 --> 00:33:34,520
That's the question. 
And the countries and the 

626
00:33:34,520 --> 00:33:38,600
companies are much more so than 
then to the extent that they 

627
00:33:38,600 --> 00:33:40,760
have leverage, it's, it's in 
local currency. 

628
00:33:40,760 --> 00:33:43,200
They're not, they'll have a 
whole bunch of dollarized debt 

629
00:33:43,800 --> 00:33:46,600
in general. 
And so they're better protected 

630
00:33:46,600 --> 00:33:50,480
from those outcomes. 
You also these countries, some 

631
00:33:50,480 --> 00:33:55,320
of these countries have 40 to 
50% debt to GDP and which is not

632
00:33:55,320 --> 00:33:58,560
nothing, but it's a lot lower 
than most of any of the Western 

633
00:33:58,560 --> 00:34:01,840
company countries. 
So I don't know. 

634
00:34:01,840 --> 00:34:07,400
I, I, I, I think it's good that 
they, if the currency is a check

635
00:34:07,560 --> 00:34:10,800
on deficit spending, I think 
that's a really good thing for 

636
00:34:10,800 --> 00:34:13,480
the people in those countries 
and for the economies and, and 

637
00:34:13,480 --> 00:34:16,120
ultimately the businesses that 
we, that we look at. 

638
00:34:16,199 --> 00:34:19,679
Yeah, interesting. 
Is it fair to say you specialize

639
00:34:19,679 --> 00:34:24,280
in bottlers or is that not? 
Well, it's certainly a, well, 

640
00:34:24,280 --> 00:34:26,719
it's an important part of our 
portfolio now, but it's an 

641
00:34:26,719 --> 00:34:30,560
industry that we've been 
involved with since 2006. 

642
00:34:30,679 --> 00:34:33,400
It's a big part of our portfolio
now and one hopefully we have 

643
00:34:33,400 --> 00:34:37,440
some expertise. 
I think you do, but I I didn't 

644
00:34:37,440 --> 00:34:39,239
know if I should say that you 
specialize in it. 

645
00:34:39,239 --> 00:34:41,960
That might be a little bit too 
narrow of a word to assign. 

646
00:34:43,360 --> 00:34:48,520
Yes, I think specialize is too. 
I would, I would stop short of 

647
00:34:48,520 --> 00:34:51,440
saying we specialize because I 
do like a lot of the 

648
00:34:51,440 --> 00:34:55,040
characteristics of it, but I 
also can imagine a future where 

649
00:34:55,040 --> 00:34:58,360
their valuations don't support 
our having maybe any position at

650
00:34:58,360 --> 00:34:59,640
all. 
So. 

651
00:34:59,920 --> 00:35:04,560
What do you like so much about 
those businesses or, or I mean 

652
00:35:04,560 --> 00:35:06,280
what do you like about the 
characteristics of it? 

653
00:35:06,280 --> 00:35:08,920
I shouldn't say so much, but 
when we talked about it once, I 

654
00:35:08,920 --> 00:35:11,680
thought it was very interesting,
like you're, you're in the weeds

655
00:35:11,680 --> 00:35:13,200
on it and it's fun to talk 
about. 

656
00:35:14,320 --> 00:35:16,880
Well, we are in the weeds, so 
keep me from going too deep and 

657
00:35:16,880 --> 00:35:22,280
and boring your listeners. 
But I think one thing in general

658
00:35:22,360 --> 00:35:26,720
in emerging markets, Coca-Cola 
has a higher brand equity than 

659
00:35:26,760 --> 00:35:29,200
relative to competitors that it 
does in the US. 

660
00:35:29,800 --> 00:35:33,920
So you have to think about Pepsi
as a bee brand in Latin America 

661
00:35:34,000 --> 00:35:37,560
and frequently at a 10 to 25% 
price discount. 

662
00:35:37,840 --> 00:35:41,120
I thought about you a lot, Not 
in a weird way, but I was in 

663
00:35:41,120 --> 00:35:44,280
Costa Rica and I was talking to 
the people down there and they 

664
00:35:44,360 --> 00:35:46,400
they think Pepsi's like dirt 
water. 

665
00:35:47,240 --> 00:35:50,880
Yeah, it's very different. 
I mean, I mean, I'm in Alabama, 

666
00:35:50,880 --> 00:35:54,040
which is a course close to 
Atlanta and where Coca-Cola 

667
00:35:54,040 --> 00:35:56,440
bread equity is relatively 
higher than if you were in New 

668
00:35:56,440 --> 00:35:58,880
York or somewhere where Pepsi's 
got more of a following or 

669
00:35:59,000 --> 00:36:01,040
Texas, where Doctor Pepper's got
more of a following. 

670
00:36:01,640 --> 00:36:05,200
But the bread equity difference 
is bigger in Latin America. 

671
00:36:05,200 --> 00:36:07,280
It was wild. 
I I went into the little mom and

672
00:36:07,280 --> 00:36:09,720
pops. 
I only saw one little Pepsi 

673
00:36:09,720 --> 00:36:11,880
stand and it wasn't even as you 
drink a coke. 

674
00:36:11,880 --> 00:36:14,920
I like it And and the Pepsi 
wasn't even refrigerate 

675
00:36:14,920 --> 00:36:16,600
refrigerated. 
It was just standing there in 

676
00:36:16,600 --> 00:36:18,880
the middle of the store. 
Yeah. 

677
00:36:18,880 --> 00:36:22,360
So I would say the other insight
that we stumbled upon back in 

678
00:36:22,360 --> 00:36:27,040
our first trip to Mexico was 
that the mom and pops, the 

679
00:36:27,120 --> 00:36:31,600
informal market is, is a 
majority of the sales of Coke, 

680
00:36:31,640 --> 00:36:33,280
of the Coke system in Latin 
America. 

681
00:36:33,440 --> 00:36:36,600
That's true. 
I think in almost if not maybe 

682
00:36:36,680 --> 00:36:38,880
not every country, but virtually
every country of Latin America. 

683
00:36:39,320 --> 00:36:41,160
It's also true in other parts of
the world. 

684
00:36:41,680 --> 00:36:46,760
So that was really interesting 
that, but do you have 7075% 

685
00:36:46,760 --> 00:36:50,600
market share, which is not 
uncommon and you have this very 

686
00:36:50,600 --> 00:36:54,240
fragmented route to market? 
So I think at the time the 

687
00:36:54,240 --> 00:36:57,240
numbers we were working with was
that Coke was selling about 

688
00:36:57,240 --> 00:37:02,160
$7500 per point of sale. 
And if Pepsi were, which was 

689
00:37:02,160 --> 00:37:06,120
like 15% market share, if they 
were to sell to all of those 

690
00:37:06,120 --> 00:37:10,480
points of sale, they'd be sub 
$1000 or around $1000 per point 

691
00:37:10,480 --> 00:37:13,280
of sale. 
So that math doesn't let them 

692
00:37:13,280 --> 00:37:15,120
get to all of those points of 
sale. 

693
00:37:15,120 --> 00:37:19,320
So you have a lot of smaller mom
and pops where there is no Pepsi

694
00:37:19,320 --> 00:37:21,960
available. 
You get to a mid size mom and 

695
00:37:21,960 --> 00:37:26,120
pop and Coke is put a cooler in 
as you witnessed, and they had 

696
00:37:26,120 --> 00:37:29,960
their product cold in first 
position and they typically have

697
00:37:29,960 --> 00:37:34,240
a hot replacement shelf next to 
it with their products. 

698
00:37:34,240 --> 00:37:37,640
They're taking second position. 
And then Pepsi, if they have a 

699
00:37:37,640 --> 00:37:40,600
cooler, it's in third position, 
but frequently they won't have a

700
00:37:40,600 --> 00:37:43,160
cooler in that in that second, 
that third position. 

701
00:37:43,640 --> 00:37:46,440
So now I'm competing with cold 
Coke versus hot Pepsi. 

702
00:37:47,160 --> 00:37:49,760
And then if I get to a large 
amount on top, the Pepsi is 

703
00:37:49,760 --> 00:37:51,360
going to be there in a cooler 
for sure. 

704
00:37:51,680 --> 00:37:53,360
But like I said, I'm in first 
position. 

705
00:37:53,360 --> 00:37:55,480
I'm I'm confronting the 
customers that come in. 

706
00:37:55,920 --> 00:38:00,120
The other piece of it is we're 
doing, you know, a third, let's 

707
00:38:00,120 --> 00:38:02,360
say in Mexico, something like a 
third of the business is 

708
00:38:02,360 --> 00:38:05,880
returnables. 
So I can reuse that bottle 20 to

709
00:38:05,880 --> 00:38:08,280
30 times. 
So it allows me to price 

710
00:38:08,280 --> 00:38:11,200
discriminate. 
You know, if Bill comes in, he's

711
00:38:11,200 --> 00:38:13,720
not worried, he's not work 
looking about to save a quarter.

712
00:38:14,000 --> 00:38:16,640
He's going to buy the non 
returnable and walk out of there

713
00:38:16,880 --> 00:38:18,760
and not worry about where he's 
going with it. 

714
00:38:18,760 --> 00:38:22,280
But if I'm, if I'm four guys on 
a construction crew and we're 

715
00:38:22,280 --> 00:38:24,920
having lunch and we're are very 
price conscious, I'm going to 

716
00:38:24,920 --> 00:38:26,280
pick up the two liter 
returnable. 

717
00:38:26,720 --> 00:38:29,280
We're going to split it with 
cops over lunch and then I'm 

718
00:38:29,280 --> 00:38:32,480
going to take it back and get my
deposit back or turn it in to 

719
00:38:32,480 --> 00:38:36,480
get the next bottle. 
And so that ability to price 

720
00:38:36,480 --> 00:38:39,120
discriminate. 
I think they have about 20 skews

721
00:38:39,120 --> 00:38:44,640
of Coca-Cola, just red Coke, 
regular sugar Coke in Juarez, 

722
00:38:44,640 --> 00:38:47,040
Mexico, for example, which is 
one of the top, maybe the top 

723
00:38:47,040 --> 00:38:48,920
market in the world, Dados, 
necros. 

724
00:38:48,920 --> 00:38:50,960
I think it's actually the number
one city in the world for per 

725
00:38:50,960 --> 00:38:53,800
capita consumption. 
So that that return, that 

726
00:38:53,800 --> 00:38:57,240
ability to run a returnable 
offering and have that be a big 

727
00:38:57,240 --> 00:39:00,120
part of your volume. 
I can now sell that two liter 

728
00:39:00,120 --> 00:39:03,400
returnable at the same price 
point as the non returnable 

729
00:39:03,400 --> 00:39:07,520
Pepsi, but I got a lot more 
margin in or I could sell a 1 

730
00:39:07,520 --> 00:39:09,160
1/2 liter at the same price 
point. 

731
00:39:09,720 --> 00:39:13,200
And for the consumer that is, 
but it's not worried about or 

732
00:39:13,200 --> 00:39:14,680
need for that use case or 
whatever it is. 

733
00:39:14,680 --> 00:39:15,920
They don't. 
They can't handle the returnable

734
00:39:15,920 --> 00:39:18,600
for that use case. 
And so now if I'm a consumer and

735
00:39:18,600 --> 00:39:24,080
I walk in, I can say 25 pesos 
get a 2 liter Coke returnable or

736
00:39:24,080 --> 00:39:27,240
I can get a 2 liter non 
returnable Pepsi, which I don't 

737
00:39:27,240 --> 00:39:30,400
like as much, or I can get a 1 
1/2 liter non returnable Coke 

738
00:39:30,680 --> 00:39:33,160
depending on what my needs are. 
I'm sort of bracketed that 

739
00:39:33,160 --> 00:39:37,280
consumer's decision and I can 
keep people in the brand and I 

740
00:39:37,280 --> 00:39:40,960
can reinforce this volume, 
volume dominance, which allows 

741
00:39:40,960 --> 00:39:44,040
me to continue to control this 
point of sale. 

742
00:39:44,400 --> 00:39:48,320
So what we've found is this 
execution at the point of sale 

743
00:39:48,840 --> 00:39:54,040
for the top business of the top 
brands is a reinforcing. 

744
00:39:54,040 --> 00:39:58,080
And that's why you see such high
market share in a few categories

745
00:39:59,120 --> 00:40:01,680
across Latin America and really 
across a lot of emerging markets

746
00:40:01,680 --> 00:40:04,200
in the world that have this 
large and formal economy. 

747
00:40:05,280 --> 00:40:08,920
And so we like that about the 
bottling system and that it has 

748
00:40:08,960 --> 00:40:11,600
the kind of a secondary Moat 
beyond the brand equity. 

749
00:40:12,240 --> 00:40:17,240
That is reinforcing because 
their ability to sell through to

750
00:40:17,240 --> 00:40:21,040
this fragmented offering. 
Well, you write, you often write

751
00:40:21,040 --> 00:40:24,880
about focusing like I don't, I 
don't want to put words in your 

752
00:40:24,880 --> 00:40:27,680
mouth, but I'm pretty sure these
are accurate focusing on the 

753
00:40:27,680 --> 00:40:29,520
Moat from the customer's point 
of view. 

754
00:40:29,560 --> 00:40:33,240
And as I'm hearing you talk, the
interesting thing is the mom and

755
00:40:33,240 --> 00:40:38,240
pop gets the refrigerated 
offering that that they don't 

756
00:40:38,240 --> 00:40:40,520
have to worry about coming out 
of pocket for. 

757
00:40:40,960 --> 00:40:45,040
And then because of that, you 
are able to or not because of 

758
00:40:45,040 --> 00:40:49,240
that, but because of the scale 
of the bottler, you're able to 

759
00:40:49,520 --> 00:40:55,120
serve the end user as well in 
more interesting ways, right? 

760
00:40:55,120 --> 00:40:59,200
To to allow them to have more 
choice. 

761
00:40:59,720 --> 00:41:04,760
And as that sort of wheel 
reinforces itself, the the 

762
00:41:04,760 --> 00:41:07,400
secondary offering just kind of 
gets left further and further 

763
00:41:07,400 --> 00:41:11,600
behind unless they're willing to
just lose money to try to 

764
00:41:11,600 --> 00:41:15,560
capture market share. 
But if if you're asking people 

765
00:41:16,000 --> 00:41:18,940
about the brand and they're 
telling you it's basically a non

766
00:41:18,940 --> 00:41:22,360
existent thing in their head, 
then how many years do you have 

767
00:41:22,360 --> 00:41:24,080
to lose money in order to catch 
up? 

768
00:41:24,080 --> 00:41:25,840
And is it worth it to even try 
I? 

769
00:41:28,080 --> 00:41:31,760
Mean it's not worth it. 
And so and then I think the 

770
00:41:31,760 --> 00:41:35,880
interesting dynamic is that 
there are typically, you know, 

771
00:41:35,880 --> 00:41:39,680
three to five companies that 
have the scale to distribute to 

772
00:41:39,680 --> 00:41:44,680
the point to the mom and pops in
a country, the Brewer or two and

773
00:41:44,680 --> 00:41:46,800
the cook bottler. 
And then typically there's a 

774
00:41:46,800 --> 00:41:50,840
couple more group of bimbos is a
good one in Mexico, Nutresa and 

775
00:41:50,840 --> 00:41:56,000
Colombia or Ali Corp and Peru. 
And they'll come to market with 

776
00:41:56,000 --> 00:41:58,360
a maybe a whole basket of 
different products. 

777
00:41:58,840 --> 00:42:02,680
So then if I'm trying to get to 
market and I am not at one of 

778
00:42:02,680 --> 00:42:05,240
those companies, I got to pay 
them, you know, and try to hitch

779
00:42:05,240 --> 00:42:07,240
a ride on their truck. 
But then I don't get the same 

780
00:42:07,240 --> 00:42:10,400
level of attention. 
I don't get the same displays. 

781
00:42:10,400 --> 00:42:14,240
It's so frequently you're seeing
Pepsi get to market on someone 

782
00:42:14,240 --> 00:42:17,360
else's truck. 
And but then that interesting 

783
00:42:17,360 --> 00:42:22,080
question is, OK, now I have the 
Coke truck or I have the NBEV 

784
00:42:22,080 --> 00:42:25,360
truck or or whatever. 
What else can I put on my truck?

785
00:42:25,920 --> 00:42:28,320
And the bottlers in more parts 
of the world are starting to 

786
00:42:28,320 --> 00:42:31,520
distribute beer, particularly in
Latin America where the 

787
00:42:31,520 --> 00:42:33,480
countries are largely Catholic. 
You don't have any kind of 

788
00:42:33,480 --> 00:42:35,160
sensitivity about alcohol 
distribution. 

789
00:42:35,760 --> 00:42:38,760
You're seeing other products try
to get to market that way. 

790
00:42:38,880 --> 00:42:41,520
And you're also seeing right now
I got this relationship with 

791
00:42:41,520 --> 00:42:45,680
this customer. 
Our bottler in Mexico has a has 

792
00:42:45,680 --> 00:42:48,200
put point of sale machines in 
these mom and pops. 

793
00:42:48,600 --> 00:42:50,800
So they have tablets and they're
scanning goods and they're 

794
00:42:50,800 --> 00:42:51,960
keeping track of their 
inventory. 

795
00:42:51,960 --> 00:42:55,080
But we also have real time 
information now of everything 

796
00:42:55,080 --> 00:42:58,280
that's being sold at that store,
including our competitors goods.

797
00:42:58,280 --> 00:43:02,000
And hey, what problems can we 
solve for this mom and pop? 

798
00:43:02,360 --> 00:43:04,840
Wait, they'll bring a white 
truck and deliver other goods 

799
00:43:04,840 --> 00:43:06,680
for them? 
Or can we, you know what? 

800
00:43:07,040 --> 00:43:12,080
Can we help them allow their mom
and pop to be access point for 

801
00:43:12,080 --> 00:43:16,240
the unbanked so that if they 
need to top up their SIM card or

802
00:43:16,240 --> 00:43:19,760
they need to pay their utility 
bill and they have cash, can we 

803
00:43:19,760 --> 00:43:22,760
help provide some of the 
services for them to help 

804
00:43:23,120 --> 00:43:25,720
maintain this mom and pop? 
Because this mom and pop 

805
00:43:25,720 --> 00:43:30,160
ecosystem, of course, it's got 
tension with the more formalized

806
00:43:30,160 --> 00:43:33,880
retail and but since it is a 
part of our Moat, there's good 

807
00:43:33,880 --> 00:43:37,360
reasons why we want to protect 
it and help it thrive. 

808
00:43:37,360 --> 00:43:41,040
So thinking about ways that we 
can deepen that relationship and

809
00:43:41,040 --> 00:43:46,520
make that customer more money so
they'll continue to favor us and

810
00:43:46,520 --> 00:43:49,440
we can get access to their 
consumers is, you know, it's 

811
00:43:49,560 --> 00:43:51,560
there's a lot of pieces of this 
and of course, these people are 

812
00:43:51,560 --> 00:43:53,880
really good. 
I mean, it's this outstanding 

813
00:43:53,880 --> 00:43:55,640
management team and they're 
thinking about these things all 

814
00:43:55,640 --> 00:43:58,560
the time. 
Well, I have no idea if Mexico 

815
00:43:58,560 --> 00:44:02,280
is similar to what the, what I 
visited in Costa Rica, but I, I 

816
00:44:02,280 --> 00:44:05,600
thought what was interesting was
the guy said we were on sort of 

817
00:44:05,600 --> 00:44:08,560
a, a tour and he pulled over and
he said this is a typical Costa 

818
00:44:08,560 --> 00:44:11,240
Rican town. 
And he said we put like a, a 

819
00:44:11,320 --> 00:44:14,360
soccer field in the middle. 
Then you've got your houses and 

820
00:44:14,360 --> 00:44:16,440
he says there's a church and 
then there's a bar and then 

821
00:44:16,440 --> 00:44:21,160
there's like this store. 
And to your point, if you are 

822
00:44:21,160 --> 00:44:24,920
the, the point of contact for 
the store and then you can get 

823
00:44:24,920 --> 00:44:27,760
these insights into, I mean, 
you, you almost become like 

824
00:44:27,760 --> 00:44:30,200
integral to the town growing up,
right? 

825
00:44:30,200 --> 00:44:35,920
And and if it's possible to help
them succeed, it's hard to think

826
00:44:35,920 --> 00:44:38,760
that they would want to tear you
out of their ecosystem. 

827
00:44:40,160 --> 00:44:41,560
No. 
And frequently the Bob and Pops 

828
00:44:41,560 --> 00:44:44,280
are of course won by a respected
member of the community in that 

829
00:44:44,280 --> 00:44:45,720
neighborhood. 
And it's usually somebody in the

830
00:44:45,720 --> 00:44:46,920
neighborhood that's running the 
store. 

831
00:44:46,920 --> 00:44:50,240
It's not like it's somebody 
across town or someone that no 

832
00:44:50,240 --> 00:44:52,760
one knows. 
And we they're, you know, part 

833
00:44:52,760 --> 00:44:55,560
of the data gathering that 
you're getting from this now is 

834
00:44:55,840 --> 00:44:58,600
when you think about a mom and 
pop, what is the proximity of 

835
00:44:58,600 --> 00:45:00,520
that mom and pop to the soccer 
field? 

836
00:45:01,520 --> 00:45:03,440
Is that determined? 
Yeah. 

837
00:45:03,440 --> 00:45:06,040
If it is, then we need to have 
some more of our Powerade in 

838
00:45:06,040 --> 00:45:07,720
that store. 
That makes sense. 

839
00:45:07,720 --> 00:45:10,400
That's the mix. 
If we're close to a school, we'd

840
00:45:10,400 --> 00:45:13,160
have more of a certain mix. 
If we're close to a church, if 

841
00:45:13,160 --> 00:45:15,840
we know there's going to be a 
big community event, the 

842
00:45:15,840 --> 00:45:19,160
concert, a football, big 
football match, we know we need 

843
00:45:19,160 --> 00:45:20,800
more inventory in that store 
before it. 

844
00:45:20,800 --> 00:45:25,080
So every time we're out of stock
of something in the store that's

845
00:45:25,080 --> 00:45:27,560
lost sales and every time we 
don't have the product that the 

846
00:45:27,560 --> 00:45:30,520
consumer at that store, what's 
the income level of that 

847
00:45:30,520 --> 00:45:32,520
neighborhood? 
Is it close to a bus stop, 

848
00:45:32,520 --> 00:45:34,600
whatever, then we're losing 
sales. 

849
00:45:34,600 --> 00:45:39,520
So how do we have the data to 
predict what would work best at 

850
00:45:39,520 --> 00:45:42,480
that store? 
And then how can we show that to

851
00:45:42,480 --> 00:45:44,320
that customer? 
Because all of all of the 

852
00:45:44,320 --> 00:45:48,760
inventory is cash on delivery. 
So I got to convince that that 

853
00:45:48,760 --> 00:45:51,880
store owner that custody, we 
call him the customer that hey, 

854
00:45:51,880 --> 00:45:55,040
you, if you added energy drinks 
here or if you added some other 

855
00:45:55,040 --> 00:45:57,920
product that's maybe it's 
slightly down the, the one or 

856
00:45:57,920 --> 00:46:00,960
two percent product. 
We, we, we think it'll be worth 

857
00:46:00,960 --> 00:46:02,320
it for you. 
We think you'll make profits. 

858
00:46:02,440 --> 00:46:04,720
And so it's, they got it. 
You got to build that trust with

859
00:46:04,720 --> 00:46:06,880
them. 
And then, but if you can gather 

860
00:46:06,880 --> 00:46:09,040
the data and and optimize that, 
you could. 

861
00:46:09,040 --> 00:46:11,080
There's more and more 
opportunities that way, too. 

862
00:46:11,200 --> 00:46:13,360
The other thing that we, that we
talked about that I thought was 

863
00:46:13,360 --> 00:46:16,240
pretty fascinating was, and I'm,
I'm going to ask you, you may 

864
00:46:16,240 --> 00:46:19,160
not have this off the top of 
your head, but when does a 

865
00:46:19,160 --> 00:46:21,880
country start to consume soft 
drinks? 

866
00:46:21,880 --> 00:46:25,520
Like what's the per capita GDP 
before people start to drink 

867
00:46:25,720 --> 00:46:28,160
soft drinks? 
Well, let's maybe let's defy it 

868
00:46:28,160 --> 00:46:30,600
as ready to drink, which is 
basically anything that's 

869
00:46:30,600 --> 00:46:35,800
bottled or canned or as opposed 
to brewing tea out of the tap or

870
00:46:35,800 --> 00:46:40,240
something. 
And somewhere around 4 or $5000 

871
00:46:40,240 --> 00:46:43,920
is when we see per capita GDP is
when we see people really start 

872
00:46:43,920 --> 00:46:47,440
to adopt ready to drink. 
Before that, it's too big of a 

873
00:46:47,440 --> 00:46:50,880
price point for most people. 
As long as you're not in a place

874
00:46:50,880 --> 00:46:53,200
with really bad water quality or
something. 

875
00:46:53,600 --> 00:46:57,280
And then that accelerates really
to about $20,000 in per capita 

876
00:46:57,280 --> 00:46:59,440
GDP. 
And then it starts to taper off.

877
00:46:59,640 --> 00:47:01,200
And then you're not going to 
like you're not going to see a 

878
00:47:01,200 --> 00:47:04,560
lot of volume growth in the 
United States in ready to drink.

879
00:47:04,840 --> 00:47:07,640
People can afford to drink ready
to drink, all kind of 

880
00:47:07,640 --> 00:47:10,400
categories. 
And so with the goal then is to 

881
00:47:10,400 --> 00:47:13,480
premiumize them. 
Yeah, you know, and Starbucks 

882
00:47:13,480 --> 00:47:16,120
has done a splendid job of that 
of not necessarily in the ready 

883
00:47:16,120 --> 00:47:18,960
to drink category, but who knew 
that everyone needed $5.00 

884
00:47:18,960 --> 00:47:21,320
coffee? 
Everyone may not, everyone may 

885
00:47:21,360 --> 00:47:22,400
not. 
We'll find out. 

886
00:47:22,520 --> 00:47:27,400
Well, see if the new CEO, yeah, 
OK, ignoring the last, you know,

887
00:47:27,400 --> 00:47:30,240
couple years, it's been a 
remarkable story in the last 25 

888
00:47:30,240 --> 00:47:33,320
years. 
And so how do you premiumize? 

889
00:47:33,480 --> 00:47:36,640
And of course, the liquor makers
are trying to do that, the wine 

890
00:47:36,640 --> 00:47:38,920
makers are trying to do that, 
the beer makers are trying to do

891
00:47:38,920 --> 00:47:41,000
that. 
But there's they're not, there's

892
00:47:41,000 --> 00:47:43,600
only so much liquid that humans 
are going to put in their 

893
00:47:43,600 --> 00:47:45,800
stomach. 
So how big of a percentage of 

894
00:47:45,800 --> 00:47:49,120
that can you be profitably and 
how profitable can you be at it?

895
00:47:49,480 --> 00:47:53,400
So we look for that. 
They're different kind of S 

896
00:47:53,400 --> 00:47:55,280
curves like that for different 
products. 

897
00:47:55,280 --> 00:47:58,160
I mean, different cultures have 
different answers to that. 

898
00:47:58,480 --> 00:48:01,480
But that's something we look for
if we're going to get involved 

899
00:48:01,480 --> 00:48:05,320
in a business and we're 
expecting growth and volume. 

900
00:48:05,840 --> 00:48:08,800
Where is this country and what 
is their car level of 

901
00:48:08,800 --> 00:48:12,000
consumption of that product, 
what is sort of possible. 

902
00:48:12,440 --> 00:48:16,720
And so that's definitely a part 
of our our analysis where we 

903
00:48:16,720 --> 00:48:21,360
also bottle Cokes and Pakistan 
and Bangladesh and per capita 

904
00:48:21,360 --> 00:48:24,760
consumption there is for in 
America, we're a little over 

905
00:48:24,760 --> 00:48:27,720
400. 
So the average American is 

906
00:48:27,720 --> 00:48:31,480
drinking a little bit more than 
1/8 ounce Coca-Cola Company 

907
00:48:31,480 --> 00:48:35,200
product per day. 
And and Piedos Negros Mexico, 

908
00:48:35,200 --> 00:48:38,400
the last number I remember is 
about 1000 and obviously they're

909
00:48:38,400 --> 00:48:40,400
poorer than us, but they're have
about 1000. 

910
00:48:40,400 --> 00:48:43,240
So that's like, I guess what's 
possible. 

911
00:48:43,240 --> 00:48:44,800
Wow. 
Why is that? 

912
00:48:45,040 --> 00:48:48,080
Because the water is not good. 
Well, part of it's, yeah, part 

913
00:48:48,080 --> 00:48:49,560
of it's the water is not 
trusted. 

914
00:48:49,720 --> 00:48:52,240
That's part of it. 
But also just culturally. 

915
00:48:52,680 --> 00:48:54,280
But if you go to dinner, and I 
don't know if you saw this in 

916
00:48:54,280 --> 00:48:56,680
Costa Rica, but if you go to 
dinner in Mexico with Mexicans, 

917
00:48:56,960 --> 00:48:59,280
they will put wine and Coke on 
the table next to each other. 

918
00:49:00,160 --> 00:49:03,960
It's like it's just a culturally
they think about, it's a 

919
00:49:04,280 --> 00:49:07,400
aspirational good still. 
It's absolutely embedded in what

920
00:49:07,400 --> 00:49:12,600
people do in a way that maybe 
espresso drinking is in, in, in,

921
00:49:12,840 --> 00:49:15,320
in Italy or something. 
But if you look at like per 

922
00:49:15,320 --> 00:49:19,240
capita consumption, just to kind
of think about this, but I'll 

923
00:49:19,240 --> 00:49:23,640
give you a couple. 
Pakistan is is like 36. 

924
00:49:24,160 --> 00:49:28,200
Bangladesh is like 20. 
So long run, so there is. 

925
00:49:28,840 --> 00:49:32,080
Long runways and those are 
countries that were there's not 

926
00:49:32,080 --> 00:49:34,960
a lot of alcohol consumption 
either because they're Muslim. 

927
00:49:34,960 --> 00:49:38,360
So there's even when water 
quality is not always reliable, 

928
00:49:38,360 --> 00:49:41,600
they're hot places. 
So you certainly can imagine a 

929
00:49:41,600 --> 00:49:46,000
really long runway, first just 
to grow volume and then second, 

930
00:49:46,000 --> 00:49:49,600
hopefully it's good to countries
continue to grow economically 

931
00:49:49,600 --> 00:49:52,760
and then there's opportunity to 
premise them along the way as 

932
00:49:52,760 --> 00:49:55,600
well. 
So when, when you think about, I

933
00:49:55,600 --> 00:49:58,360
mean, in some of your letters, 
you've talked about intrinsic 

934
00:49:58,360 --> 00:50:02,880
value and, and how much company 
that can the durability of a 

935
00:50:02,880 --> 00:50:06,960
company impacts intrinsic value.
How much more are you willing 

936
00:50:06,960 --> 00:50:10,680
to, to, and I, this one's going 
to be impossible to answer, but 

937
00:50:10,680 --> 00:50:13,520
just directionally speaking, how
much more are you willing to pay

938
00:50:13,520 --> 00:50:17,160
for a company that you feel like
you have that much line of sight

939
00:50:17,640 --> 00:50:23,080
into future earnings potential 
versus one that you don't? 

940
00:50:23,280 --> 00:50:26,560
And I, I don't mean to ask a 
leading question, but I'm a, I'm

941
00:50:26,560 --> 00:50:27,800
a stop it there and see where 
you go. 

942
00:50:27,800 --> 00:50:30,600
And then I may have a follow up.
OK. 

943
00:50:30,600 --> 00:50:32,880
Well I'm anxious for the follow 
up because I can't really give 

944
00:50:32,880 --> 00:50:34,680
you a number. 
I mean the math is math. 

945
00:50:35,360 --> 00:50:40,280
I would say as a general rule, 
we, we believe capitalism is 

946
00:50:40,280 --> 00:50:44,320
more relentless at destroying 
outsize returns on capital than 

947
00:50:44,320 --> 00:50:46,360
people expect. 
You can think about some 

948
00:50:46,360 --> 00:50:49,640
businesses. 
We'll go back to the 99 period 

949
00:50:49,640 --> 00:50:53,400
where you had like people making
fiber optic cable and making 

950
00:50:53,400 --> 00:50:56,640
basic switches and stuff, stuff 
that was pretty repeatable where

951
00:50:56,640 --> 00:50:58,440
there wasn't a huge 
technological advantage. 

952
00:50:58,440 --> 00:51:02,440
But because there was no, there 
wasn't enough supply, they made 

953
00:51:02,440 --> 00:51:05,240
very high returns on capital, 
but that wasn't durable. 

954
00:51:05,640 --> 00:51:08,640
And so they, some of those 
businesses have worked out just 

955
00:51:08,640 --> 00:51:12,400
fine, but they were trading at 
huge multiples that didn't make 

956
00:51:12,400 --> 00:51:16,640
sense. 
So it's very if a company is 

957
00:51:16,640 --> 00:51:19,920
making an outsides return on 
capital, the world is coming for

958
00:51:19,920 --> 00:51:22,120
them. 
Absolutely the world is coming 

959
00:51:22,120 --> 00:51:25,360
for them and they're trying to 
steal those profits and less the

960
00:51:25,360 --> 00:51:27,560
government is somehow preventing
competition. 

961
00:51:28,040 --> 00:51:33,200
So if you have that company with
that, with that situation, how 

962
00:51:33,200 --> 00:51:34,680
do you handicap how durable that
is? 

963
00:51:34,720 --> 00:51:36,880
And if it's if they're going to 
make an outsize return on 

964
00:51:36,880 --> 00:51:40,400
capital for five years and then 
they're going to decay or even 

965
00:51:40,400 --> 00:51:42,840
be replaced, they're not worth 
that much. 

966
00:51:42,880 --> 00:51:45,840
Maybe they're worth 7 times or 
anything, they're worth 10 times

967
00:51:45,840 --> 00:51:48,960
earnings or something. 
But if they're, do you think 

968
00:51:48,960 --> 00:51:51,720
they can reliably earn an 
outsized return on capital and 

969
00:51:51,720 --> 00:51:55,160
grow their business for, you 
know, the next three decades, 

970
00:51:55,600 --> 00:51:58,240
then they very well may be worth
20 times earnings. 

971
00:51:58,760 --> 00:52:02,640
So I can't, you know, without 
what's the growth rate? 

972
00:52:02,640 --> 00:52:04,200
Yeah. 
What's the return housing, 

973
00:52:04,200 --> 00:52:08,000
house, all those things. 
You can't quite answer it just 

974
00:52:08,240 --> 00:52:10,480
just hypothetically, but it's 
really important. 

975
00:52:10,600 --> 00:52:11,480
Yeah. 
And. 

976
00:52:11,600 --> 00:52:14,680
What's the leverage? 
And all of those things, I 

977
00:52:14,840 --> 00:52:17,440
remember we were talking to Dow 
and I were down talking to some 

978
00:52:17,440 --> 00:52:19,760
students in Alabama. 
They have a we give them a plug.

979
00:52:19,760 --> 00:52:23,200
But John Heinz and Culver House 
Investment Management group is 

980
00:52:23,200 --> 00:52:25,360
something that Dow and I were 
involved with since this 

981
00:52:25,360 --> 00:52:27,840
beginning and CT Fitzpatrick 
created it. 

982
00:52:27,840 --> 00:52:31,640
But it's been fantastic to watch
the growth of that and how a 

983
00:52:31,640 --> 00:52:34,280
great job the students are doing
there and how much it's improved

984
00:52:34,280 --> 00:52:37,000
and how comes. 
And it's really a first class 

985
00:52:37,360 --> 00:52:41,120
group, but I remember they were 
presenting to us one time pretty

986
00:52:41,120 --> 00:52:44,880
standard model of we're going to
project the next five years of 

987
00:52:44,880 --> 00:52:47,200
earnings and then we're going to
put a terminal multiple on it. 

988
00:52:47,920 --> 00:52:51,160
And well, 76% of the value of 
the intrinsic value of the 

989
00:52:51,160 --> 00:52:53,680
business that they were 
estimating was in this terminal 

990
00:52:53,680 --> 00:52:56,960
multiple. 
And our bias is to be explicit 

991
00:52:56,960 --> 00:53:01,560
about that actually forecast all
of the years with the assumption

992
00:53:01,560 --> 00:53:04,600
that earnings are going to 
decay, that the outside's 

993
00:53:04,600 --> 00:53:07,280
returns are going to capital are
going to decay 1st and then 

994
00:53:07,280 --> 00:53:08,920
ultimately the earnings are 
going to decay. 

995
00:53:09,120 --> 00:53:12,840
And so if we're if that's not 
our base case, we need to really

996
00:53:12,840 --> 00:53:14,320
have a lot of confidence in a 
Moat. 

997
00:53:15,040 --> 00:53:18,080
And I think that you start 
playing with that math and start

998
00:53:18,240 --> 00:53:20,160
thinking about the world that 
way. 

999
00:53:20,200 --> 00:53:24,800
And it gets harder and harder to
pay 20 plus times earnings for a

1000
00:53:24,800 --> 00:53:28,080
lot of businesses and you have a
lot of growth or that you need 

1001
00:53:28,080 --> 00:53:31,960
to have a lot of confidence in 
the durability of their of their

1002
00:53:31,960 --> 00:53:33,840
cash flows. 
Tough thing about that 

1003
00:53:33,840 --> 00:53:37,160
conclusion is it hasn't been the
right conclusion looking 

1004
00:53:37,160 --> 00:53:39,040
backwards over the past decade, 
right? 

1005
00:53:40,680 --> 00:53:45,160
No question about it, no. 
So well, I I wish those students

1006
00:53:45,160 --> 00:53:48,360
well, and I tell them all War 
Eagle, but that is neither here 

1007
00:53:48,360 --> 00:53:49,080
nor. 
There, it's odd. 

1008
00:53:51,400 --> 00:53:52,960
No, my follow up was going to be
my. 

1009
00:53:52,960 --> 00:53:57,880
My sense is you probably just 
avoid the the latter scenario of

1010
00:53:57,880 --> 00:54:00,040
a company that you don't feel 
like you can forecast but. 

1011
00:54:00,240 --> 00:54:01,560
Yeah. 
I mean, what that's ultimately 

1012
00:54:01,560 --> 00:54:05,160
what happened usually the 
market, look, there are a lot of

1013
00:54:05,160 --> 00:54:08,480
businesses that we can forecast 
24 months out, but they rarely 

1014
00:54:08,480 --> 00:54:12,800
trade at two times earnings. 
So if we're paying 15 times 

1015
00:54:12,800 --> 00:54:15,200
earnings, we're implicitly 
saying that we know something 

1016
00:54:15,200 --> 00:54:19,600
about the next 10/12/15 years of
results of that business. 

1017
00:54:20,120 --> 00:54:23,520
So I'd like for us to know, be 
able to say that This is why we 

1018
00:54:23,520 --> 00:54:27,200
think this business is going to 
do roughly this over the next 15

1019
00:54:27,200 --> 00:54:29,280
years, not over the next two, 
because like, how are we getting

1020
00:54:29,280 --> 00:54:31,440
our capital back? 
And then once we get our capital

1021
00:54:31,440 --> 00:54:32,960
back, how are we getting a 
return? 

1022
00:54:33,520 --> 00:54:36,920
So I think the net effect is 
when you don't have that 

1023
00:54:36,920 --> 00:54:39,800
visibility and other people may,
I mean, there's lots of 

1024
00:54:39,800 --> 00:54:43,120
businesses where someone else 
may have an expertise that 

1025
00:54:43,120 --> 00:54:46,280
allows them to see much farther 
in the future than we can. 

1026
00:54:46,800 --> 00:54:49,400
But we need to be able to. 
I want to see all our money 

1027
00:54:49,400 --> 00:54:52,240
coming back and then I want to 
see the profits on the other 

1028
00:54:52,240 --> 00:54:56,840
side of that before we invest. 
And that's, that's how we think 

1029
00:54:56,840 --> 00:54:58,760
about, I mean, that's how we 
think about buying a private 

1030
00:54:58,760 --> 00:55:00,960
business or some real estate or 
something else. 

1031
00:55:00,960 --> 00:55:03,240
And so that's, I think that's 
the intelligent way to think 

1032
00:55:03,240 --> 00:55:05,440
about public investing, public 
equity investing. 

1033
00:55:05,880 --> 00:55:08,600
I mean, it's a very high bar and
it should be, right? 

1034
00:55:08,720 --> 00:55:10,840
You wouldn't you wouldn't walk 
around buying every business you

1035
00:55:10,840 --> 00:55:13,160
were offered. 
So you should probably treat 

1036
00:55:13,160 --> 00:55:17,360
public markets in the same way. 
What it it One thing that I, I 

1037
00:55:17,360 --> 00:55:21,760
thought was an interesting 
letter that you or an action 

1038
00:55:21,760 --> 00:55:26,000
that you mentioned in a letter 
was when you sold craft and my 

1039
00:55:26,000 --> 00:55:30,080
perception was that you didn't 
like the financial engineering 

1040
00:55:30,560 --> 00:55:32,680
decision to separate them. 
And Mondelez. 

1041
00:55:33,200 --> 00:55:35,840
The the kind of counter that I 
had in my head was like, well, 

1042
00:55:35,840 --> 00:55:38,640
it was kind of a financially 
engineered organization to begin

1043
00:55:38,640 --> 00:55:42,320
with. 
So what what about the the spin 

1044
00:55:42,320 --> 00:55:45,920
off transaction or the 
separation offended you a little

1045
00:55:45,920 --> 00:55:49,680
bit more than the sort of 
levered return aspect of that 

1046
00:55:49,680 --> 00:55:51,800
business? 
I didn't like that. 

1047
00:55:51,800 --> 00:55:54,640
I never like it when a company's
doing a transaction that's 

1048
00:55:54,640 --> 00:55:59,160
raising their costs because they
because they did, they increased

1049
00:55:59,160 --> 00:56:02,120
their cost structure just 
because basically one part of 

1050
00:56:02,120 --> 00:56:04,440
the management team didn't want 
to own the slow growth piece. 

1051
00:56:04,880 --> 00:56:07,000
We don't see any numbers on 
Duracell anymore, but Procter 

1052
00:56:07,000 --> 00:56:11,360
and Gamble, you know, basically 
gave that business to Berkshire 

1053
00:56:11,360 --> 00:56:13,880
in exchange for a bunch of stock
and because they didn't want to 

1054
00:56:13,880 --> 00:56:15,320
own a business that was 
shrinking slowly. 

1055
00:56:16,080 --> 00:56:18,800
And I just don't like that. 
I think you ought to be able to,

1056
00:56:18,800 --> 00:56:21,080
I mean, I think a good manager 
ought to be able to manage the 

1057
00:56:21,080 --> 00:56:23,400
business is growing and 
shrinking both. 

1058
00:56:23,920 --> 00:56:26,400
And I think if they're in 
roughly the same industry, which

1059
00:56:26,400 --> 00:56:29,720
was the case with Kraft and 
Mondelez, you ought to be able 

1060
00:56:29,720 --> 00:56:33,440
to manage those together. 
I mean, like having more clout 

1061
00:56:33,440 --> 00:56:36,600
with the with the grocery store 
chains to the supermarket chains

1062
00:56:36,800 --> 00:56:40,240
should be a positive even if you
have Folgers next to Oreos and 

1063
00:56:40,640 --> 00:56:42,640
one of them is shrinking and one
of them is growing. 

1064
00:56:42,680 --> 00:56:45,560
So I don't think it improved the
focus of the businesses. 

1065
00:56:45,560 --> 00:56:49,720
I don't think I just didn't 
really buy this was completely 

1066
00:56:49,720 --> 00:56:51,960
engineered by an investor banker
that said, hey, we can get this 

1067
00:56:51,960 --> 00:56:54,600
big multiple and the piece of 
this is growing and it's got 

1068
00:56:54,600 --> 00:56:58,640
more emerging market exposure. 
But I think that the the 

1069
00:56:58,680 --> 00:57:02,000
underlying businesses were more 
or less in the same industry and

1070
00:57:02,000 --> 00:57:04,600
there was plenty of 
opportunities for them to cross 

1071
00:57:04,600 --> 00:57:06,320
pollinate. 
If they were intelligent about 

1072
00:57:06,320 --> 00:57:09,280
the way they did their comp 
structure in the way that they 

1073
00:57:09,320 --> 00:57:13,000
did, they managed success. 
So they may be that Folgers 

1074
00:57:13,000 --> 00:57:16,120
dying slowly was was the best 
outcome the one could hope for. 

1075
00:57:16,600 --> 00:57:19,440
But that's worth fighting for. 
I mean, you certainly how long 

1076
00:57:19,440 --> 00:57:21,480
can you keep a business 
profitable without injecting 

1077
00:57:21,480 --> 00:57:24,000
more capital into it? 
I mean, like that's, that's a 

1078
00:57:24,160 --> 00:57:28,400
noble goal and that's obviously 
worth less, but there's 

1079
00:57:28,400 --> 00:57:30,800
something wrong with that. 
And I, I just this sort of 

1080
00:57:30,800 --> 00:57:34,120
obsession with growth for growth
sake or hey, we're going to get 

1081
00:57:34,120 --> 00:57:36,760
rid of this particular division 
because it doesn't show growth. 

1082
00:57:37,400 --> 00:57:39,600
I I really doesn't. 
I don't like that. 

1083
00:57:40,040 --> 00:57:44,040
Well, I'm sure internally or or 
at least the pitch was Mondelez 

1084
00:57:44,040 --> 00:57:48,320
will have a lower cost of 
capital and the aggregate will 

1085
00:57:48,320 --> 00:57:50,640
be worth more. 
But I don't know. 

1086
00:57:51,560 --> 00:57:54,280
I, I don't know that it's turned
out to be a very good decision. 

1087
00:57:54,480 --> 00:57:57,960
I I haven't really checked. 
Yeah, I don't know either 

1088
00:57:57,960 --> 00:57:59,920
actually. 
And maybe we should run a little

1089
00:57:59,920 --> 00:58:01,880
post board on that. 
We made some money on that 

1090
00:58:01,880 --> 00:58:06,560
investment obviously, but we 
sold both of them at the time, 

1091
00:58:06,560 --> 00:58:09,600
same time actually. 
And we certainly interact with 

1092
00:58:09,600 --> 00:58:11,480
Mondelez. 
When I do it, when I'm visiting 

1093
00:58:11,480 --> 00:58:14,680
mom and pops around the world, I
see a lot of Mondelez products 

1094
00:58:14,680 --> 00:58:17,880
and then they are it is a Oreos 
in particular a nice product. 

1095
00:58:18,760 --> 00:58:20,400
Yes, they are. 
They're delicious. 

1096
00:58:20,400 --> 00:58:24,000
Yeah, they are delicious and I 
would I often argue to my kids 

1097
00:58:24,000 --> 00:58:27,000
that Oreo is better than the 
finest dessert at the finest 

1098
00:58:27,000 --> 00:58:29,800
restaurants. 
Yeah, I, I mean, I tell you what

1099
00:58:29,800 --> 00:58:33,400
I've been on lately is the 
Doritos, the Cool Ranch have 

1100
00:58:33,400 --> 00:58:36,080
entered my house. 
I wish they never did. 

1101
00:58:36,840 --> 00:58:38,920
That's like crack. 
Yeah, I mean that, you know, I 

1102
00:58:38,920 --> 00:58:42,600
know it's a different company. 
I'm just saying those two, those

1103
00:58:42,600 --> 00:58:46,800
two are the perfect snack foods.
Yeah, say it. 

1104
00:58:46,920 --> 00:58:48,920
Yes, they I can't argue with 
that. 

1105
00:58:48,920 --> 00:58:50,400
I kind of. 
I do keep them out of my house, 

1106
00:58:50,400 --> 00:58:51,440
hopefully. 
I have to because. 

1107
00:58:51,640 --> 00:58:52,920
I can't stop. 
You can't stop. 

1108
00:58:52,920 --> 00:58:55,360
You can't stop. 
Well, Pringles might kind of get

1109
00:58:55,360 --> 00:58:57,280
us in trouble for that, but I 
agree with you. 

1110
00:58:57,280 --> 00:59:00,120
You can't stop. 
I guess we never said you pop. 

1111
00:59:00,120 --> 00:59:01,800
So anyway, that's neither here 
nor there. 

1112
00:59:01,800 --> 00:59:04,480
OK. 
So something I find kind of 

1113
00:59:04,480 --> 00:59:08,240
interesting you have disclosed 
and it's that you know anyone 

1114
00:59:08,240 --> 00:59:13,240
can look you have an investment 
in ABM Bev and you had the craft

1115
00:59:13,240 --> 00:59:17,080
investment. 
I think the narrative on 3G is 

1116
00:59:17,080 --> 00:59:20,280
that they cut to the bone and 
maybe aren't so customer focused

1117
00:59:20,280 --> 00:59:22,240
and you're somebody that's very 
customer focused. 

1118
00:59:22,240 --> 00:59:27,160
So I'm kind of curious to hear 
how they how, why you're 

1119
00:59:27,160 --> 00:59:30,120
comfortable going against the 
grain in that scenario? 

1120
00:59:30,520 --> 00:59:32,520
Well, maybe I would revolve a 
craft of monies. 

1121
00:59:32,520 --> 00:59:36,240
I think before 3G was involved, 
OK, so but with and I was about 

1122
00:59:36,280 --> 00:59:38,280
but we certainly have not 
covered ourselves in glory with 

1123
00:59:38,280 --> 00:59:40,600
that investment. 
We're we're close to break even 

1124
00:59:40,600 --> 00:59:42,120
on that. 
So that has not been a winner 

1125
00:59:42,480 --> 00:59:45,240
for us. 
So I I think what we do see 

1126
00:59:45,800 --> 00:59:48,560
outside the US and outside of 
Europe in particular is that 

1127
00:59:48,560 --> 00:59:52,320
they have a similar dominant 
position with the mom and pops. 

1128
00:59:52,680 --> 00:59:55,600
For example, in Colombia, they 
have like 95% market share. 

1129
00:59:55,960 --> 00:59:58,680
So they have some really 
dominant positions that are 

1130
00:59:58,680 --> 01:00:01,040
really valuable and some really 
entrenched moats. 

1131
01:00:01,520 --> 01:00:04,440
I think that they. 
With the exception of the Bud 

1132
01:00:04,440 --> 01:00:06,840
Light fiasco, which hopefully we
can skip over. 

1133
01:00:07,080 --> 01:00:09,720
I think they have done a pretty 
good job with their customers, 

1134
01:00:09,840 --> 01:00:13,240
with their consumers actually. 
They've innovative a lot of when

1135
01:00:13,240 --> 01:00:15,800
they saw the craft beer thing 
happening in the United States 

1136
01:00:16,640 --> 01:00:19,640
doesn't really can't really 
happen in Latin America in the 

1137
01:00:19,640 --> 01:00:21,400
same way because of the route to
market. 

1138
01:00:21,880 --> 01:00:25,880
They start innovating beer with 
more flavor and created a bunch 

1139
01:00:25,880 --> 01:00:27,680
of products in a bunch of their 
markets have been very 

1140
01:00:27,680 --> 01:00:31,520
successful in the sort of 
premium space for the customer 

1141
01:00:31,520 --> 01:00:33,920
that wanted a different type of 
beer. 

1142
01:00:34,000 --> 01:00:37,600
And I think they satisfied that 
consumer intelligently and well 

1143
01:00:37,600 --> 01:00:41,440
and prevented competition that 
way, but not leaving crumbs out 

1144
01:00:41,440 --> 01:00:43,320
there. 
I think one of the big things 

1145
01:00:43,320 --> 01:00:46,320
they got wrong in the stock 
price and why, you know, part of

1146
01:00:46,320 --> 01:00:50,120
the reason for our result is 
that they thought they were 

1147
01:00:50,120 --> 01:00:55,520
saving money by borrowing. 
They noticed that the euro was 

1148
01:00:55,520 --> 01:00:57,720
correlated to emerging market 
currencies relative to the 

1149
01:00:57,720 --> 01:00:59,880
dollar. 
So they borrowed a lot of money 

1150
01:00:59,880 --> 01:01:01,400
in euro. 
They had a leveraged balance 

1151
01:01:01,400 --> 01:01:05,120
sheet when they bought SAB 
obviously, and they borrowed in 

1152
01:01:05,120 --> 01:01:07,840
euro. 
And I think they assumed that 

1153
01:01:07,840 --> 01:01:11,080
that because it was historically
had been correlated with the 

1154
01:01:11,120 --> 01:01:14,320
currencies in Latin America that
that would work out OK. 

1155
01:01:14,320 --> 01:01:17,960
But then that correlation broke 
down and the euro strengthened a

1156
01:01:17,960 --> 01:01:20,760
lot against the currencies of 
Latin America where they had, 

1157
01:01:20,760 --> 01:01:22,440
they were actually earning most 
of their profits. 

1158
01:01:22,880 --> 01:01:28,080
And so they were effectively 
very short the dollar, both on 

1159
01:01:28,080 --> 01:01:30,840
the leverage side, they were 
shorted on their COG side and 

1160
01:01:30,840 --> 01:01:33,920
they were shorted on their sales
when they got pulled back into 

1161
01:01:33,920 --> 01:01:37,480
U.S. dollars. 
So they're all three ways they 

1162
01:01:37,480 --> 01:01:41,120
were really leveraged short the 
dollar and the dollar rallied a 

1163
01:01:41,120 --> 01:01:44,160
lot. 
And I think that execution 

1164
01:01:44,160 --> 01:01:46,200
hasn't been perfect, although I 
think it's been pretty good. 

1165
01:01:46,320 --> 01:01:49,160
I think they actually executed 
their way through COVID better 

1166
01:01:49,160 --> 01:01:50,520
than any of the other big 
Brewers. 

1167
01:01:51,080 --> 01:01:54,840
And I think that they have 
really terrific notes in a lot 

1168
01:01:54,840 --> 01:01:58,200
of their markets that are quite 
durable and are really valuable.

1169
01:01:58,800 --> 01:02:03,080
I dream one day of the coke 
bottlers and the and the Brewers

1170
01:02:03,080 --> 01:02:06,040
getting together in more mergers
because then you'd have sort of 

1171
01:02:06,080 --> 01:02:09,280
50% share and and these mom and 
pops and you could eliminate a 

1172
01:02:09,280 --> 01:02:11,760
bunch of costs. 
So I think there are a lot of 

1173
01:02:11,760 --> 01:02:16,520
opportunities, but they're being
very levered and levered short 

1174
01:02:16,560 --> 01:02:20,120
with a mismatch on the currency,
effectively short the dollar in 

1175
01:02:20,120 --> 01:02:21,720
a period when the dollar really 
rallied. 

1176
01:02:22,120 --> 01:02:26,160
I think that really hurt them. 
And when perhaps some of the 3G 

1177
01:02:26,160 --> 01:02:30,680
success was less maybe than it 
was reported been part because 

1178
01:02:30,680 --> 01:02:34,480
they were levered. 
They were also at the time kind 

1179
01:02:34,480 --> 01:02:36,560
of leverage short the dollar 
when the dollar didn't do well. 

1180
01:02:37,440 --> 01:02:40,800
And so I think that's sort of 
carry trade currency piece of it

1181
01:02:40,800 --> 01:02:43,360
is maybe was a bigger part of 
their success initially and 

1182
01:02:43,440 --> 01:02:45,600
bigger headwind to their success
more recently. 

1183
01:02:46,360 --> 01:02:47,680
Then it's interesting to think 
about. 

1184
01:02:47,680 --> 01:02:50,200
Well understood. 
My perception was that they just

1185
01:02:50,200 --> 01:02:55,560
kind of got to the a couple N + 
1 acquisitions that just got too

1186
01:02:55,560 --> 01:02:57,240
big. 
Like if they could own Corona in

1187
01:02:57,240 --> 01:03:00,480
the US and they didn't have to 
sell that, that would be huge. 

1188
01:03:00,640 --> 01:03:04,280
And then they had to divest to 
so many brands and they bought 

1189
01:03:04,320 --> 01:03:08,240
SAB that, which is kind of and 
then and then you're buying 

1190
01:03:08,240 --> 01:03:10,600
something at a premium and 
everybody knows you're a for 

1191
01:03:10,600 --> 01:03:12,400
seller. 
And especially with Corona, 

1192
01:03:12,400 --> 01:03:15,440
there was only like really one 
logical player to sell it to. 

1193
01:03:15,920 --> 01:03:19,280
The story would be way different
if they own Corona in the US. 

1194
01:03:19,920 --> 01:03:22,560
Way different. 
It'd be better if they'd hold 

1195
01:03:22,560 --> 01:03:24,600
on, held on Corona Modelo and 
sold by life. 

1196
01:03:25,000 --> 01:03:28,040
But that was not obvious at the 
time that we years ago on 

1197
01:03:28,040 --> 01:03:32,040
Modelo, Grupo Modelo back when 
it would when I was a virgin had

1198
01:03:32,040 --> 01:03:34,040
a stake in it. 
But it was a standalone company 

1199
01:03:34,560 --> 01:03:36,960
and part of the thesis of our 
buying it was the growth of 

1200
01:03:36,960 --> 01:03:39,800
Corona, particularly at the time
in the United States. 

1201
01:03:39,800 --> 01:03:43,560
This is man who's six or 
something so unbelievable that 

1202
01:03:43,560 --> 01:03:46,720
Modelo is now the number one 
beer in the US That's a crazy 

1203
01:03:47,240 --> 01:03:49,160
outcome. 
That's a good beer, though, so 

1204
01:03:49,160 --> 01:03:52,680
and I endorse everyone drinking 
it whenever they're outside the 

1205
01:03:52,680 --> 01:03:54,120
United States. 
But. 

1206
01:03:55,120 --> 01:03:58,680
But here? 
Here by Bud Light or some random

1207
01:03:58,680 --> 01:04:00,880
regional craft beer that ABM had
bought. 

1208
01:04:01,720 --> 01:04:04,560
Yes, exactly. 
But we didn't buy it till after 

1209
01:04:04,560 --> 01:04:09,400
that transaction. 
But we anyway, I look, it's, 

1210
01:04:09,440 --> 01:04:11,680
it's been not one that we cover 
ourselves to glory, but I think 

1211
01:04:11,680 --> 01:04:14,720
that most of the money that we 
lost and we're kind of break 

1212
01:04:14,720 --> 01:04:17,480
even, but most of the money that
we should have made has been a 

1213
01:04:17,480 --> 01:04:20,160
result of the dollar 
strengthening so much and 

1214
01:04:20,160 --> 01:04:22,640
they're being kind of leveraged 
short at three different. 

1215
01:04:22,640 --> 01:04:26,200
Ways yeah well, I pitched it way
higher and thankfully I sold it 

1216
01:04:26,240 --> 01:04:29,800
a decent time I didn't get too 
killed on it but I, I, I, I like

1217
01:04:29,800 --> 01:04:33,000
the entity. 
I just one somebody said to me 

1218
01:04:33,760 --> 01:04:37,400
once about the the acquisition 
of craft brewing companies. 

1219
01:04:37,840 --> 01:04:40,360
He said the problem is it's kind
of like when and and I know that

1220
01:04:40,360 --> 01:04:43,280
phase is over, but he said it's 
kind of like when you buy a new 

1221
01:04:43,280 --> 01:04:47,680
car on the second that ABM bet 
buys a craft Brewer and kind of 

1222
01:04:47,680 --> 01:04:50,280
like tanks in value. 
Now I don't I'm sure the 

1223
01:04:50,280 --> 01:04:55,560
financials aren't this the same 
as the brand perception, but 

1224
01:04:55,960 --> 01:04:59,040
craft brewing's interesting. 
I've, I've found it's one of 

1225
01:04:59,040 --> 01:05:04,840
those those industries or 
products that there's like a 

1226
01:05:04,840 --> 01:05:09,840
really good scale and then they 
get too big and it's just really

1227
01:05:09,840 --> 01:05:12,920
hard to make good beer at scale.
I don't know. 

1228
01:05:12,920 --> 01:05:15,440
I don't know what it is. 
Maybe that's just my mind. 

1229
01:05:16,720 --> 01:05:19,880
Yeah, I would say several years 
ago I went to the craft beer 

1230
01:05:19,880 --> 01:05:24,840
conference in Denver and I sort 
of didn't shave for a few days 

1231
01:05:24,840 --> 01:05:26,440
and put on AT shirt and try to 
kind. 

1232
01:05:26,440 --> 01:05:29,960
Of I could see you, you could 
like pull it off if you were 

1233
01:05:29,960 --> 01:05:32,840
bearded. 
If I was beer, I tried to look 

1234
01:05:32,840 --> 01:05:35,320
like I was interested in 
starting a craft beer and 

1235
01:05:35,320 --> 01:05:36,640
basically just walked around the
convention. 

1236
01:05:36,640 --> 01:05:38,560
Floor like a Metallica shirt or 
something? 

1237
01:05:39,600 --> 01:05:43,000
I had a a local craft beer shirt
that friend that has a if I got 

1238
01:05:43,000 --> 01:05:45,480
to buy all the machinery, I got 
to buy hops, I got to buy 

1239
01:05:45,840 --> 01:05:48,880
barley, I got to how would I go 
about doing this and the yeast 

1240
01:05:48,880 --> 01:05:52,560
and you had all the different 
bees and talk to them and pretty

1241
01:05:52,560 --> 01:05:55,480
clear. 
I mean, craft beer a third, but 

1242
01:05:55,480 --> 01:05:59,520
probably 25% of American beer 
drinkers want to drink beer that

1243
01:05:59,520 --> 01:06:02,680
tastes like, you know, what I 
would call beer, like some sort 

1244
01:06:02,680 --> 01:06:06,000
of European version of beer that
has a lot of flavor that's maybe

1245
01:06:06,000 --> 01:06:07,640
it's a third or maybe it's a 
little less. 

1246
01:06:08,160 --> 01:06:11,760
And no one really was was 
answering that demand other than

1247
01:06:11,760 --> 01:06:14,440
imports. 
So there was an opportunity 

1248
01:06:14,440 --> 01:06:18,840
because systematically over the 
decades, Miller Lite, Coors 

1249
01:06:18,840 --> 01:06:22,200
Light, Bud Light, Budweiser had 
gotten more increasingly bland. 

1250
01:06:22,560 --> 01:06:24,760
That had been basically that 
they'd taken flavor out of the 

1251
01:06:24,760 --> 01:06:29,600
beer for 40 years each year. 
And so there was an opportunity 

1252
01:06:29,600 --> 01:06:31,960
there. 
It was unmet consumer demand. 

1253
01:06:32,520 --> 01:06:35,280
And then secondly, with the way 
the three tier distribution 

1254
01:06:35,280 --> 01:06:39,520
works in the US, everybody was 
able to piggyback off the scale 

1255
01:06:40,160 --> 01:06:41,840
of the big Brewers to get to 
market. 

1256
01:06:42,160 --> 01:06:46,560
And of course that doesn't work.
That's a, you know, accident of 

1257
01:06:46,560 --> 01:06:48,920
prohibition in the United 
States, that we were set up that

1258
01:06:48,920 --> 01:06:51,720
way in 49 states, but nowhere 
else in the world does that 

1259
01:06:51,720 --> 01:06:54,680
exist. 
So there's not, you can't create

1260
01:06:54,680 --> 01:06:59,360
a craft beer in Brazil and get 
the market on the on the Ambab 

1261
01:06:59,360 --> 01:07:02,080
truck or on the Heineken truck. 
You got to get the market 

1262
01:07:02,080 --> 01:07:06,880
yourself, which means you can't.
So you know, the craft beer was 

1263
01:07:06,880 --> 01:07:08,560
selling at a premium. 
This is very profitable 

1264
01:07:08,560 --> 01:07:11,480
initially for these distributors
and there wasn't much craft 

1265
01:07:11,480 --> 01:07:13,720
beer. 
So they were very happy to add 

1266
01:07:13,720 --> 01:07:15,640
to their trucks and, and go make
money on it. 

1267
01:07:16,080 --> 01:07:20,080
But then once there are a lot of
craft beer companies, then they 

1268
01:07:20,080 --> 01:07:23,120
were no longer able to demand 
the pricing from the 

1269
01:07:23,120 --> 01:07:25,600
distributors. 
And so basically they turned 

1270
01:07:25,600 --> 01:07:27,720
into rest of the restaurant 
business. 

1271
01:07:28,360 --> 01:07:30,640
And you can make money at your 
craft. 

1272
01:07:30,640 --> 01:07:32,720
You need to be able to make 
money at your. 

1273
01:07:33,200 --> 01:07:36,440
Brewery. 
Yep, as a bar, otherwise you 

1274
01:07:36,440 --> 01:07:41,080
can't make it. 
And, and so I think that's the 

1275
01:07:41,080 --> 01:07:42,840
future, which probably means 
there's less craft beers than 

1276
01:07:42,840 --> 01:07:45,520
they are now. 
But and but the cost difference 

1277
01:07:45,520 --> 01:07:49,400
is like I'm working off old 
numbers but I want to say it was

1278
01:07:49,400 --> 01:07:52,400
like 60. 
The large Brewers are like in 

1279
01:07:52,400 --> 01:07:55,960
the 6060 something cents per 
liter and the craft beer was 

1280
01:07:55,960 --> 01:07:57,960
$2.00. 
Yeah, well, the prices that you 

1281
01:07:58,040 --> 01:08:01,880
pay as a consumer show it. 
Yeah, I mean the but the but 

1282
01:08:01,880 --> 01:08:04,960
still I mean like the prices you
pay as a consumer are less 

1283
01:08:04,960 --> 01:08:07,280
different than the cost. 
Yeah, the margins are tighter, 

1284
01:08:07,280 --> 01:08:09,160
no doubt. 
On craft, yeah. 

1285
01:08:09,160 --> 01:08:10,920
So that makes it very, very 
hard. 

1286
01:08:10,960 --> 01:08:16,520
And so I think the other cheat 
is that, yeah, I think this is 

1287
01:08:16,520 --> 01:08:19,479
an interesting thing as as beer 
tastes are developing, it's much

1288
01:08:19,479 --> 01:08:22,080
harder to make a logger than it 
is to make an IPA. 

1289
01:08:22,120 --> 01:08:24,640
Oh interesting, that's why 
there's so many IPASI guess. 

1290
01:08:24,840 --> 01:08:27,640
That's why, yeah, I mean, with 
an IPA, it's sort of designed to

1291
01:08:27,640 --> 01:08:31,399
be able to survive in India, you
know, back at 150 years ago. 

1292
01:08:31,399 --> 01:08:35,040
So you throw a lot of hops in it
basically disguise whatever 

1293
01:08:35,040 --> 01:08:39,560
mistakes you make in the brewing
process and so and there are 

1294
01:08:39,560 --> 01:08:41,399
consumers that want. 
That I'm one of them. 

1295
01:08:41,399 --> 01:08:43,200
I just didn't realize that was 
why. 

1296
01:08:43,319 --> 01:08:46,319
Interesting. 
And so, but when you try to make

1297
01:08:46,359 --> 01:08:50,240
a logger, it's a much more 
careful about the temperatures 

1298
01:08:50,240 --> 01:08:52,160
and the yeast and all the 
different pieces that go into 

1299
01:08:52,160 --> 01:08:54,279
that. 
I'm not an expert, but much more

1300
01:08:54,279 --> 01:08:58,120
difficult to make a logger and 
keep it from being skunk or 

1301
01:08:58,120 --> 01:09:00,520
something because you can't 
really hide it if you do. 

1302
01:09:01,000 --> 01:09:05,880
So as this growing sort of craft
beer session beers that you're 

1303
01:09:05,880 --> 01:09:08,000
seeing, which it's harder to do 
that. 

1304
01:09:08,040 --> 01:09:11,120
And so it's more likely to me 
that someone like Modello who's 

1305
01:09:11,120 --> 01:09:14,000
doing that at scale is making a 
good session beer, is going to 

1306
01:09:14,760 --> 01:09:19,160
grab that share at the expense 
of the craft beer makers they're

1307
01:09:19,160 --> 01:09:22,040
just set up to be. 
You can't just like basically 

1308
01:09:22,040 --> 01:09:24,200
know how to make beer in the 
kitchen and make a good logger 

1309
01:09:24,439 --> 01:09:27,240
Pretty tough. 
Session beers are a good 

1310
01:09:27,240 --> 01:09:31,640
concept. 
I don't have to feel like I'm 

1311
01:09:31,640 --> 01:09:35,160
wimpy drinking it, but it's got 
like the right amount of alcohol

1312
01:09:35,160 --> 01:09:36,840
that I can drink it, not get 
bombed. 

1313
01:09:37,920 --> 01:09:40,479
Yeah, well, beer's a good, good,
good idea, period. 

1314
01:09:40,479 --> 01:09:43,240
Yeah, I tell you what, I'm kind 
of at the age where I can't 

1315
01:09:43,240 --> 01:09:45,640
handle it anymore. 
If nothing else, my belly just 

1316
01:09:45,640 --> 01:09:49,880
grows and grows. 
So, alas, opens up some 

1317
01:09:49,880 --> 01:09:54,440
potentially dangerous, you know,
can't go down a tequila path 

1318
01:09:54,440 --> 01:09:57,840
just 'cause I can't handle beer.
Otherwise things can get off the

1319
01:09:57,840 --> 01:09:59,000
rails. 
But that's neither here nor 

1320
01:09:59,000 --> 01:10:00,880
there. 
Can we talk about your, your 

1321
01:10:00,880 --> 01:10:04,760
investment in Jumbo and, and 
that business? 

1322
01:10:04,920 --> 01:10:07,240
And I wish, I wish that there 
was a way. 

1323
01:10:08,120 --> 01:10:10,520
I'll try to put a picture up or 
something. 

1324
01:10:10,520 --> 01:10:13,560
But the way that you described 
like when you're going up the 

1325
01:10:13,560 --> 01:10:16,320
escalator, how that that 
particular retailer has 

1326
01:10:16,320 --> 01:10:20,440
scattered tchotchkes all up and 
down the escalator to, to sort 

1327
01:10:20,440 --> 01:10:21,880
of like get your mind to impulse
buy. 

1328
01:10:21,880 --> 01:10:25,120
I love that that story of how 
you bought that business and 

1329
01:10:25,120 --> 01:10:28,080
then I'm pretty sure you exited.
But I I like that that 

1330
01:10:28,080 --> 01:10:30,120
investment quite a bit. 
Yeah. 

1331
01:10:30,120 --> 01:10:35,280
So when when, you know, when the
Greek crisis happened back in 

1332
01:10:35,280 --> 01:10:39,240
whether 2011 or 12, we I went to
Greece, met with a bunch of 

1333
01:10:39,240 --> 01:10:42,480
companies, try to figure out 
what there was anything here 

1334
01:10:42,480 --> 01:10:45,000
that was mispriced. 
And it might be interesting 

1335
01:10:45,000 --> 01:10:47,320
because the country was 
completely bombed out and there 

1336
01:10:47,320 --> 01:10:50,800
was good fears about a recession
and falling out of the euro and 

1337
01:10:50,800 --> 01:10:51,920
all of those things were 
happening. 

1338
01:10:52,320 --> 01:10:55,320
Jumbo was a business that we 
looked at then and admired. 

1339
01:10:55,360 --> 01:10:58,920
We admired the management team. 
The owner is is is fantastic. 

1340
01:10:58,920 --> 01:11:01,760
He's so awesome. 
And that's such an interesting 

1341
01:11:01,760 --> 01:11:04,000
manager. 
And they basically just buy 

1342
01:11:04,520 --> 01:11:06,800
their, they buy products in 
Asia. 

1343
01:11:07,000 --> 01:11:10,200
And that point was mostly China.
And they bring them back and put

1344
01:11:10,200 --> 01:11:12,680
them in a store they have. 
There's a toy store, but it's 

1345
01:11:12,680 --> 01:11:14,400
more than a toy store. 
We don't really have an 

1346
01:11:14,400 --> 01:11:17,160
equivalent to it in America, so 
I don't know exactly how to, but

1347
01:11:17,600 --> 01:11:19,920
seems like a really big. 
Well, merchandise. 

1348
01:11:19,960 --> 01:11:22,040
Dollar Tree, for lack of a 
better term. 

1349
01:11:22,360 --> 01:11:24,440
Yeah, I would say that's right. 
Yeah. 

1350
01:11:24,680 --> 01:11:28,040
I was in a similar format in the
UK last week that has something 

1351
01:11:28,040 --> 01:11:30,360
similar. 
It's like a large format Dollar 

1352
01:11:30,360 --> 01:11:34,240
Tree, Dollar General, Yeah, with
no food that that's fair. 

1353
01:11:34,680 --> 01:11:37,240
And yeah, and they have like 
escalator and they just put the 

1354
01:11:37,240 --> 01:11:38,840
stuff. 
I've actually seen the same 

1355
01:11:38,840 --> 01:11:41,000
technique in Shanghai when I was
there picking. 

1356
01:11:41,680 --> 01:11:44,200
Oh, wait, but they just there's 
you're on the escalator, you're 

1357
01:11:44,200 --> 01:11:46,560
stuck there. 
Why not put some things there 

1358
01:11:46,560 --> 01:11:47,640
that you can grab? 
Yeah. 

1359
01:11:47,880 --> 01:11:50,680
And and you got the kids with 
you and of course the kids going

1360
01:11:50,680 --> 01:11:52,840
to grab it and now what's the 
mom going to do? 

1361
01:11:52,840 --> 01:11:55,640
And so but they're. 
Yeah, you're not. 

1362
01:11:55,640 --> 01:11:58,960
You're not having your kid put 
down the dollar toy to have them

1363
01:11:58,960 --> 01:12:01,520
scream for the rest of the time 
that's not going to happen. 

1364
01:12:01,520 --> 01:12:03,880
Right. 
And, and the disorder of that is

1365
01:12:03,880 --> 01:12:05,680
actually part of the fun. 
I remember, like the original 

1366
01:12:05,680 --> 01:12:08,760
idea of Toys-R-Us is like, let's
let's put toys in the aisle and 

1367
01:12:08,760 --> 01:12:10,640
let's let them fall. 
The kids knock them over. 

1368
01:12:10,640 --> 01:12:13,560
That's like part of it. 
And so there's a certain aspect 

1369
01:12:13,560 --> 01:12:17,600
of that too as well. 
But I love how the management, 

1370
01:12:17,600 --> 01:12:20,840
the the the owner is so 
systematically conservative. 

1371
01:12:20,840 --> 01:12:24,320
He's like, well, we don't know 
what's going to happen down the 

1372
01:12:24,320 --> 01:12:26,320
road. 
We know this is working now. 

1373
01:12:26,320 --> 01:12:28,280
It could get worse. 
And then they're like 

1374
01:12:28,280 --> 01:12:32,000
consistently beat their kind of 
whatever they don't really give 

1375
01:12:32,000 --> 01:12:33,720
guidance, whatever kind of 
guidance they give you, they 

1376
01:12:33,720 --> 01:12:37,120
consistently beat it and they 
run with no leverage and they're

1377
01:12:37,120 --> 01:12:40,160
expanding in Romania and and 
they don't really have a lot of 

1378
01:12:40,160 --> 01:12:43,000
competition from Amazon in that 
part of the world. 

1379
01:12:43,280 --> 01:12:44,560
That's something to pay 
attention to. 

1380
01:12:44,560 --> 01:12:48,960
But well, I guess 2022, the 
stock got backed down because 

1381
01:12:49,480 --> 01:12:52,440
there were fears about being 
with COVID, they're not be able 

1382
01:12:52,440 --> 01:12:54,760
to bring in the products from 
China that they were in in 

1383
01:12:54,760 --> 01:12:58,320
Southeast Asia that where they 
were getting them and the cost 

1384
01:12:58,320 --> 01:12:59,880
of bringing things in was going 
up. 

1385
01:12:59,880 --> 01:13:02,560
And they're all the models 
permanently damaged. 

1386
01:13:03,000 --> 01:13:06,600
So OK, well, they started a 
share buyback program, but this 

1387
01:13:06,600 --> 01:13:08,400
is a very conservative 
management team that only is 

1388
01:13:08,440 --> 01:13:10,560
only going to buy back stock 
because they think it's cheap, 

1389
01:13:10,960 --> 01:13:12,840
not one that's just running a 
share buyback program. 

1390
01:13:12,840 --> 01:13:14,000
That's what they're supposed to 
do. 

1391
01:13:14,480 --> 01:13:18,360
So we started picking off some 
shares kind of right at a right,

1392
01:13:18,360 --> 01:13:20,240
slightly above the share buyback
level. 

1393
01:13:20,600 --> 01:13:23,000
And then, you know, the model 
still worked and they sort of 

1394
01:13:23,000 --> 01:13:27,040
get out of the COVID inventory 
and supply chain issues. 

1395
01:13:27,040 --> 01:13:29,680
And the stock was up. 
I can't remember, I maybe I was 

1396
01:13:29,680 --> 01:13:34,280
up over 100% and we got to long 
term capital gain status and we 

1397
01:13:34,280 --> 01:13:35,760
exited. 
I mean, I don't, I do think 

1398
01:13:35,760 --> 01:13:39,640
there are some challenges. 
That's a lot of key man risk in 

1399
01:13:39,640 --> 01:13:43,240
that business. 
But you know, the, it is a nice 

1400
01:13:43,560 --> 01:13:45,920
niche business that works. 
It wouldn't, probably wouldn't 

1401
01:13:45,920 --> 01:13:49,120
work in the US, probably 
wouldn't work everywhere, but it

1402
01:13:49,120 --> 01:13:52,800
does work in there and they're 
reaching quite well and, and 

1403
01:13:52,800 --> 01:13:55,240
they're conservative about it 
and it's so really a nice 

1404
01:13:55,240 --> 01:13:59,080
business and maybe we'll get a 
chance again, you know, so. 

1405
01:13:59,080 --> 01:14:02,280
Yeah, you, when you sent me a, I
don't know, you'd tell me like 

1406
01:14:02,280 --> 01:14:03,800
you're right up. 
And then I started reading some 

1407
01:14:03,800 --> 01:14:05,760
transcripts. 
That guy that runs it is like a 

1408
01:14:05,760 --> 01:14:11,560
really cool person to read. 
Yeah, I just love it when you 

1409
01:14:11,560 --> 01:14:14,760
get that level of frankness. 
Yes, when they this is our 

1410
01:14:14,760 --> 01:14:18,320
problem, this is our challenge. 
We're not sure that how it's 

1411
01:14:18,320 --> 01:14:20,680
going to work out. 
Like that's makes me want at 

1412
01:14:20,680 --> 01:14:25,000
best, like that level of 
frankness from a manager is, is 

1413
01:14:25,000 --> 01:14:27,560
something that we'd love to see.
I mean, I almost want to just 

1414
01:14:27,560 --> 01:14:29,760
close my eyes, not even look at 
the price and want to buy it. 

1415
01:14:29,760 --> 01:14:31,280
But that's of course not what 
you do. 

1416
01:14:31,280 --> 01:14:33,680
You do have to. 
I have a number of companies on 

1417
01:14:33,680 --> 01:14:37,200
our watch list that I met with a
guy and I won't reveal the name 

1418
01:14:37,200 --> 01:14:38,720
because I do want to buy the 
stock at some point. 

1419
01:14:38,720 --> 01:14:42,600
But I met with him and he said, 
he said, do not buy my stock. 

1420
01:14:42,920 --> 01:14:45,320
It's too expensive right here. 
It's awesome. 

1421
01:14:46,480 --> 01:14:49,680
You know, I was supposed to meet
with the CFO and I, I walk in. 

1422
01:14:49,680 --> 01:14:51,280
He came in and introduced 
himself. 

1423
01:14:51,280 --> 01:14:53,560
I kind of missed his name when 
he walked in and he said, oh, 

1424
01:14:53,920 --> 01:14:56,200
I'm sorry, the CFO is sick. 
You'll have to meet with me. 

1425
01:14:56,760 --> 01:15:00,040
I didn't really fully understand
it was ACEO until about 5 

1426
01:15:00,040 --> 01:15:02,040
minutes in the conversation. 
This is the first meeting with 

1427
01:15:02,040 --> 01:15:04,520
the company. 
And he anyway, but he's like, 

1428
01:15:04,520 --> 01:15:05,600
yeah, you don't want to buy my 
stock. 

1429
01:15:06,080 --> 01:15:09,200
He's like large investment banks
are saying everything in Africa 

1430
01:15:09,200 --> 01:15:11,160
is cheap. 
Like that's nonsense. 

1431
01:15:11,160 --> 01:15:14,880
I've been operating in Africa 
for 40 years and you need to get

1432
01:15:14,880 --> 01:15:16,840
paid back quickly if you're 
investing in Africa. 

1433
01:15:16,840 --> 01:15:18,960
Oh, interesting. 
Yeah. 

1434
01:15:18,960 --> 01:15:21,760
So this is, I can't remember how
long ago that was 10 years ago 

1435
01:15:21,760 --> 01:15:23,640
or so. 
It's like, so don't buy my stock

1436
01:15:23,640 --> 01:15:25,600
now, it's too expensive. 
What's the stock done since? 

1437
01:15:26,480 --> 01:15:27,560
It hasn't done that well. 
There you go. 

1438
01:15:27,560 --> 01:15:29,800
He was right. 
I'm happy they've ably managed 

1439
01:15:29,800 --> 01:15:33,600
it, but the the macro headwinds 
and and South Africa and around 

1440
01:15:33,600 --> 01:15:35,480
their region where they were 
selling have been very tough. 

1441
01:15:35,560 --> 01:15:37,720
That's sort of his. 
He also said yeah. 

1442
01:15:37,720 --> 01:15:39,040
He also talked about the brain 
drains. 

1443
01:15:39,040 --> 01:15:41,840
Like I, I have good people, I 
send them the US to get an NBA 

1444
01:15:41,840 --> 01:15:43,840
and they never come back. 
Yeah. 

1445
01:15:43,840 --> 01:15:47,440
And that's really a that's a, 
that was like his biggest 

1446
01:15:47,440 --> 01:15:51,240
challenge was retaining talent 
in addition to the consumer, the

1447
01:15:51,240 --> 01:15:55,520
macro situation there. 
So, but I just, he didn't know. 

1448
01:15:55,560 --> 01:15:57,080
It's interesting. 
A lot of times when you meet a 

1449
01:15:57,080 --> 01:15:59,440
really good manager, they 
they'll reference some things 

1450
01:15:59,440 --> 01:16:02,080
that you and I would talk about.
But he didn't seem to know any 

1451
01:16:02,080 --> 01:16:03,080
of that. 
He just knew how to run a 

1452
01:16:03,080 --> 01:16:05,240
business. 
Like he, he had to learn that by

1453
01:16:05,240 --> 01:16:07,800
copying Warren Buffett or 
something. 

1454
01:16:07,800 --> 01:16:10,640
He just knew it and it just was 
coming out of him. 

1455
01:16:11,360 --> 01:16:14,160
And and and anyway, I regret 
that we've never owned it and 

1456
01:16:14,160 --> 01:16:15,560
that we've never made any money 
off that. 

1457
01:16:15,560 --> 01:16:19,240
But I every now and then you run
across a manager like that, 

1458
01:16:19,240 --> 01:16:21,920
that's, you know, what are you 
going to call it old school or 

1459
01:16:21,920 --> 01:16:25,720
just like they see their 
business the way that as an 

1460
01:16:25,720 --> 01:16:28,760
entrepreneur and not as the way 
they're supposed to package it 

1461
01:16:28,760 --> 01:16:33,160
for theoretically house some 
finance person expects to 

1462
01:16:33,160 --> 01:16:34,680
receive it. 
Well, I'll tell you what, what 

1463
01:16:34,680 --> 01:16:37,240
has messed me up is I used to be
the person that was like, oh, 

1464
01:16:37,240 --> 01:16:38,960
I'm looking for people that 
write like Buffett. 

1465
01:16:38,960 --> 01:16:41,400
Now if I see somebody that 
writes like Buffett, I'm like, 

1466
01:16:41,400 --> 01:16:43,160
ah, this is probably a promote. 
I don't know. 

1467
01:16:43,160 --> 01:16:46,040
I don't like this, which it's 
hard. 

1468
01:16:46,040 --> 01:16:48,840
It's kind of like this is either
somebody I really agree with and

1469
01:16:48,840 --> 01:16:51,480
I should listen, or it's 
somebody I think is totally full

1470
01:16:51,480 --> 01:16:55,160
of crap and I don't know. 
Yeah, I think you see people 

1471
01:16:55,160 --> 01:16:59,480
that quote Buffett but don't 
actually write like him. 

1472
01:17:00,240 --> 01:17:03,040
Like they're they're they're 
trying to tie themselves to that

1473
01:17:03,040 --> 01:17:06,120
brand, but they're not, they 
don't have the inside and they 

1474
01:17:06,120 --> 01:17:09,160
don't have the frankness and 
they don't have the sort of 

1475
01:17:09,480 --> 01:17:12,800
obvious honesty that comes 
through and Buffett's writing. 

1476
01:17:13,560 --> 01:17:16,160
And so that's what I'm trying to
hear when I read somewhat is, 

1477
01:17:16,760 --> 01:17:19,480
are they quoting these ideas 
because they they hurt them 

1478
01:17:19,480 --> 01:17:21,600
somewhere or do they, is it 
really in their bones? 

1479
01:17:22,200 --> 01:17:26,800
Is it who they are? 
Does your, your travels and how 

1480
01:17:26,800 --> 01:17:30,000
you, I, I mean, just like 
hearing you rattle off just in 

1481
01:17:30,000 --> 01:17:31,800
this conversation, how many 
places you've been? 

1482
01:17:31,800 --> 01:17:35,080
I mean, does putting eyes on 
somebody and talking to them, Is

1483
01:17:35,080 --> 01:17:37,960
that how you help yourself 
understand how they actually 

1484
01:17:37,960 --> 01:17:41,800
think and, and are they just 
sort of marketing or versus do 

1485
01:17:41,800 --> 01:17:42,960
they believe what they're 
saying? 

1486
01:17:43,240 --> 01:17:45,000
I don't know any other way to do
it. 

1487
01:17:45,000 --> 01:17:48,680
I mean, maybe I think you always
want to learn what the company 

1488
01:17:48,680 --> 01:17:51,120
says is happening. 
And then I think you want to 

1489
01:17:51,120 --> 01:17:54,080
find as many ways to 
independently verify that as 

1490
01:17:54,080 --> 01:17:57,320
possible. 
And so if a company says they're

1491
01:17:57,320 --> 01:17:59,680
doing something, they're doing 
X, well, we may not be able to 

1492
01:17:59,680 --> 01:18:02,880
test that, but if they're say 
they're doing Y, well, let's go 

1493
01:18:02,880 --> 01:18:05,280
test it. 
I can remember I was on one of 

1494
01:18:05,280 --> 01:18:09,320
these investor days in Eastern 
Europe and a company they set 

1495
01:18:09,320 --> 01:18:13,240
up, clearly set up four stores 
for all the analysts to go 

1496
01:18:13,240 --> 01:18:15,600
through. 
And, and I said, Oh, this is how

1497
01:18:15,600 --> 01:18:17,280
we do it. 
This is how we execute in these 

1498
01:18:17,280 --> 01:18:18,920
stores. 
And look at, look at this, this 

1499
01:18:18,920 --> 01:18:23,000
is great, you know, good. 
And then I went to, I went to 20

1500
01:18:23,000 --> 01:18:26,440
other stores and had totally 
different experience, actually 

1501
01:18:26,440 --> 01:18:27,680
didn't. 
I thought they were executing 

1502
01:18:27,680 --> 01:18:31,280
fine, but it was nothing like 
the stores that they clearly had

1503
01:18:31,280 --> 01:18:34,560
rigged for Analyst Day, which I 
don't know. 

1504
01:18:34,560 --> 01:18:37,480
That tells you something about, 
you know? 

1505
01:18:37,840 --> 01:18:39,360
Do you want to partner with 
that? 

1506
01:18:40,720 --> 01:18:43,720
Yeah, maybe they weren't even, 
you know, in that case, I I like

1507
01:18:43,720 --> 01:18:46,320
the Ceoi don't think they were 
kind of being explicitly 

1508
01:18:46,320 --> 01:18:50,480
dishonest, but it was definitely
like a razzle dazzle share. 

1509
01:18:50,640 --> 01:18:54,600
So we're we trust but verify or 
whatever. 

1510
01:18:55,560 --> 01:18:58,280
I'd like to go back and ask them
questions and maybe they have a 

1511
01:18:58,280 --> 01:19:01,160
good answer. 
You know, hey, the local guy got

1512
01:19:01,160 --> 01:19:04,280
a little carry away. 
He knew the CEO was coming and 

1513
01:19:04,280 --> 01:19:07,520
so he wanted to show off of the 
CEO and he got carried away. 

1514
01:19:07,520 --> 01:19:10,520
That really wasn't a dictate for
me, which is fair. 

1515
01:19:10,560 --> 01:19:13,720
But how, what do they say? 
How do they say it? 

1516
01:19:14,080 --> 01:19:16,200
How do they used to say it? 
I think that's something 

1517
01:19:16,200 --> 01:19:19,440
important is to look at way they
describe their business five 

1518
01:19:19,440 --> 01:19:21,480
years ago and what they thought 
the challenges were. 

1519
01:19:21,840 --> 01:19:24,680
And if it's roughly the same 
management team and it's not 

1520
01:19:24,680 --> 01:19:28,920
simple, but you're trying to get
at your level of confidence and 

1521
01:19:29,120 --> 01:19:32,880
and their ability to forecast. 
And then I'd like to ask them 

1522
01:19:32,880 --> 01:19:35,840
what are the things that if they
went against you could really 

1523
01:19:35,840 --> 01:19:37,920
hurt your business and what are 
the things that you're really 

1524
01:19:37,920 --> 01:19:41,840
worried about? 
And I think I heard anecdotally 

1525
01:19:41,840 --> 01:19:43,840
that Build a Way used to ask 
companies, you know, how would 

1526
01:19:43,840 --> 01:19:46,440
you go bankrupt? 
I used to ask that. 

1527
01:19:46,440 --> 01:19:48,800
I tried asking that for a little
while and I got so many blank 

1528
01:19:48,800 --> 01:19:50,600
stares. 
They were just confused by that.

1529
01:19:51,960 --> 01:19:55,160
I kind of thought maybe I was, I
can ask in a different way and 

1530
01:19:55,160 --> 01:19:57,600
without damaging and like kind 
of putting them on their heels 

1531
01:19:57,600 --> 01:20:01,880
so much. 
But yeah, it's, it's you got to 

1532
01:20:01,880 --> 01:20:04,840
go be there in person. 
You got to go into their 

1533
01:20:04,840 --> 01:20:06,720
marketplace. 
You got to talk to their 

1534
01:20:06,920 --> 01:20:08,880
customers and their suppliers 
and their. 

1535
01:20:09,440 --> 01:20:12,400
Their peers around the world, 
their competitors in their in 

1536
01:20:12,400 --> 01:20:16,280
their country and see if what 
they're saying that they're 

1537
01:20:16,280 --> 01:20:18,920
doing matches what you're able 
to observe. 

1538
01:20:19,160 --> 01:20:21,880
And frequently it doesn't, but 
sometimes it does. 

1539
01:20:22,120 --> 01:20:24,080
Yeah, sometimes they're lying 
and sometimes they're just 

1540
01:20:24,080 --> 01:20:27,040
fooling themselves. 
But the net result is the same 

1541
01:20:27,040 --> 01:20:31,200
for you as an investor. 
I like that that that should be 

1542
01:20:31,200 --> 01:20:33,640
a quote. 
We're, we're going to, we're 

1543
01:20:33,640 --> 01:20:37,440
going to put that up on a, on 
the YouTube thumbtail or 

1544
01:20:37,440 --> 01:20:39,520
whatever. 
When you said what you said 

1545
01:20:39,520 --> 01:20:44,440
about South Africa and Greece 
had the, the crisis and just 

1546
01:20:44,440 --> 01:20:48,000
what I experienced when I was in
Costa Rica, it just seemed very 

1547
01:20:48,360 --> 01:20:54,680
dependent upon tourism and sort 
of maybe a pro cyclical aspect 

1548
01:20:54,680 --> 01:20:58,640
to what what's going on. 
How do you think about the 

1549
01:21:00,320 --> 01:21:05,000
valuation disconnect between 
some of these emerging market 

1550
01:21:05,000 --> 01:21:09,320
countries and and some more 
developed countries and whether 

1551
01:21:09,520 --> 01:21:14,360
what's justified within that 
versus what's not justified? 

1552
01:21:14,640 --> 01:21:19,400
I mean, surely if you look at 
history, I think we're like at 

1553
01:21:19,400 --> 01:21:24,360
A50 year, you know, 50 year 
divergent evaluations between 11

1554
01:21:24,360 --> 01:21:27,000
metric I saw this week between 
emerging markets in the USI 

1555
01:21:27,680 --> 01:21:31,440
think you're 1015 years on 
different metrics. 

1556
01:21:31,440 --> 01:21:34,960
And we're we're not just against
emerging markets, but against 

1557
01:21:34,960 --> 01:21:37,600
the whole rest of the world. 
And I don't know that that's not

1558
01:21:37,600 --> 01:21:39,960
going to get bigger. 
I'm not making a forecast, but 

1559
01:21:40,480 --> 01:21:43,440
you need to have pretty rosy 
assumptions about growth in the 

1560
01:21:43,600 --> 01:21:46,960
US for it to outperform, you 
know, the rest of these places. 

1561
01:21:46,960 --> 01:21:50,440
But we're we're trying to find 
individual businesses in a back 

1562
01:21:50,440 --> 01:21:53,000
to owning, you know, 8 to 10 
companies at a time. 

1563
01:21:53,640 --> 01:21:57,640
I don't necessarily have to 
believe that coastal we don't, 

1564
01:21:57,800 --> 01:22:00,880
we actually own a small one of 
our businesses as a subsidiary 

1565
01:22:00,880 --> 01:22:02,680
in Costa Rica, but it's not that
important. 

1566
01:22:03,760 --> 01:22:06,600
But I don't necessarily have to 
believe that Costa Rica is going

1567
01:22:06,600 --> 01:22:09,280
to be really successful for us 
to make money. 

1568
01:22:09,280 --> 01:22:12,520
So it's kind of like with this 
individual business with their 

1569
01:22:12,520 --> 01:22:15,720
current level of profitability, 
what are the risks that it gets 

1570
01:22:15,720 --> 01:22:18,520
better or worse and what are 
those things and how likely are 

1571
01:22:18,520 --> 01:22:22,200
they to happen? 
And without buying at it four or

1572
01:22:22,200 --> 01:22:25,720
five times earnings, maybe 
there's a, there's a level of 

1573
01:22:25,720 --> 01:22:27,120
uncertainty I'm willing to 
tolerate. 

1574
01:22:27,120 --> 01:22:30,600
If I'm paying 15 or 20, I'm 
probably not willing to tolerate

1575
01:22:31,480 --> 01:22:33,520
that uncertainty. 
Will you hedge the currency 

1576
01:22:33,520 --> 01:22:35,320
exposure or are you fully 
unhedged? 

1577
01:22:36,400 --> 01:22:39,000
We are unhedged. 
We have the ability to hedge the

1578
01:22:39,000 --> 01:22:41,280
currency. 
We actually got a couple only a 

1579
01:22:41,280 --> 01:22:43,120
couple times. 
We really got close to doing 

1580
01:22:43,120 --> 01:22:46,000
that. 
But typically we a lot of our 

1581
01:22:46,000 --> 01:22:47,480
companies have hedges 
internally. 

1582
01:22:47,920 --> 01:22:51,440
A lot of companies have. 
We look at what percentage of 

1583
01:22:51,440 --> 01:22:54,480
their COGS are in local. 
We also look at how they're 

1584
01:22:54,480 --> 01:22:56,440
financed. 
Most of our companies have very 

1585
01:22:56,440 --> 01:23:00,360
little leverage or no leverage 
when that's important too. 

1586
01:23:00,360 --> 01:23:01,840
And then what is their pricing 
power? 

1587
01:23:02,680 --> 01:23:05,320
You look at our Turkish 
business, we've raised prices 

1588
01:23:05,360 --> 01:23:08,960
above inflation consistently 
over the last several years and 

1589
01:23:08,960 --> 01:23:10,640
we're making record profits in 
Turkey. 

1590
01:23:11,200 --> 01:23:15,400
So 70 plus percent inflation or 
whatever the latest numbers are 

1591
01:23:15,400 --> 01:23:18,800
in Turkey, we've been able to, 
we've been able to grow profits 

1592
01:23:18,800 --> 01:23:22,000
faster than that because we've 
raised revenue faster. 

1593
01:23:22,600 --> 01:23:25,600
So should we have hedged it? 
I mean it's almost basically 

1594
01:23:25,600 --> 01:23:27,320
impossible to hedge the Turkish 
lira. 

1595
01:23:27,720 --> 01:23:30,400
So I think the answer to that is
different for different 

1596
01:23:30,400 --> 01:23:33,840
businesses. 
And maybe if a business has got 

1597
01:23:33,840 --> 01:23:37,040
a bunch of leverage implicit in 
when they have a mismatch on 

1598
01:23:37,040 --> 01:23:39,560
their current on their leverage 
and on where they're where 

1599
01:23:39,560 --> 01:23:41,520
they're earning money and where 
they're paying debt or you 

1600
01:23:41,520 --> 01:23:43,960
probably we tend to not want to 
get involved. 

1601
01:23:44,480 --> 01:23:47,320
We prefer back to the 
controlling shareholder. 

1602
01:23:47,880 --> 01:23:50,360
Usually when the business has 
got controlling shareholders, 

1603
01:23:50,360 --> 01:23:54,600
there is not a lot of leverage 
in it because you know, if 

1604
01:23:54,600 --> 01:23:57,640
you're learning, if you're AI 
don't know a Mexican investor 

1605
01:23:57,920 --> 01:24:00,480
and you've made a lot of, you're
made a lot of money, you've seen

1606
01:24:00,480 --> 01:24:04,240
a lot of crises. 
And you don't want to, you want 

1607
01:24:04,240 --> 01:24:08,560
to, you want to go keep your 
seat, your chip in your chair. 

1608
01:24:09,000 --> 01:24:12,080
And if you have a bunch of 
leverage, you're a not able to 

1609
01:24:12,080 --> 01:24:14,760
survive the inevitable 
volatility that's going to 

1610
01:24:14,760 --> 01:24:17,680
happen, but also you're not able
to take advantage of that. 

1611
01:24:17,800 --> 01:24:22,520
And I would say that one theme 
that we have maybe is kind of 

1612
01:24:22,520 --> 01:24:25,880
thinking about being a counter 
cyclical investor and investing 

1613
01:24:25,880 --> 01:24:29,160
in businesses that have a 
mentality where they're thinking

1614
01:24:29,160 --> 01:24:32,480
about how to expand their 
business when things are bad. 

1615
01:24:32,960 --> 01:24:35,800
Peter Kaufman's been a 
tremendous mentor for us and he 

1616
01:24:35,800 --> 01:24:39,920
always talks about how he pays 
his bills faster when things 

1617
01:24:39,920 --> 01:24:43,200
slow down and he he wants to be 
the employer of choice for 

1618
01:24:43,200 --> 01:24:46,080
people that are thinking start 
to get nervous about their job 

1619
01:24:46,080 --> 01:24:48,520
at the competitors. 
Competitors, you know, when 

1620
01:24:48,520 --> 01:24:51,160
things slow down like and he 
like he can afford to, he'll 

1621
01:24:51,160 --> 01:24:55,360
make an order to be with a 
supplier to help that supplier 

1622
01:24:55,360 --> 01:24:58,280
in those situations because then
later when they really need the 

1623
01:24:58,280 --> 01:25:01,840
help with that supplier, they 
have a very loyal relationship. 

1624
01:25:02,000 --> 01:25:07,200
And so if you are able to the, 
if you have capital are able to 

1625
01:25:07,200 --> 01:25:10,360
deploy it when there is panic 
that can that's a that's a 

1626
01:25:10,360 --> 01:25:13,040
durable competitive advantage 
also and particularly in places 

1627
01:25:13,040 --> 01:25:18,320
that don't have the same sort of
central bank backstop that we're

1628
01:25:18,320 --> 01:25:21,480
used to in the United States. 
I like that. 

1629
01:25:22,280 --> 01:25:24,040
I went out to see Peter once. 
That was fun. 

1630
01:25:24,560 --> 01:25:25,800
I should, I should do that 
again. 

1631
01:25:26,320 --> 01:25:28,120
If I ever get invited. 
I don't know that he'll invite 

1632
01:25:28,120 --> 01:25:29,120
me back. 
We'll see. 

1633
01:25:29,120 --> 01:25:32,040
I pushed back on something once,
but it was it was it was a 

1634
01:25:32,040 --> 01:25:35,520
friendly debate that he won. 
He's a remarkable guy and very 

1635
01:25:35,520 --> 01:25:37,760
bald in a charity here in 
Alabama actually. 

1636
01:25:37,760 --> 01:25:40,840
And my mom's in town, but I've 
known him long before that, that

1637
01:25:40,840 --> 01:25:45,440
he's a really an amazing 
manager, an amazing, amazing at 

1638
01:25:45,440 --> 01:25:48,760
people and how to motivate them 
and how to make them feel loved 

1639
01:25:48,840 --> 01:25:52,760
and how to, you know, build 
teams and so many things to to 

1640
01:25:52,760 --> 01:25:53,560
learn from Peter. 
Yeah. 

1641
01:25:53,880 --> 01:25:57,000
How has building an investment 
firm been for you? 

1642
01:25:57,280 --> 01:26:01,880
You know, it's, it's an 
interesting pursuit and I, I got

1643
01:26:01,880 --> 01:26:04,760
to meet at least one, I think 
two of your team members at 

1644
01:26:04,760 --> 01:26:07,560
Markel, but definitely one just 
kind of curious. 

1645
01:26:07,560 --> 01:26:11,520
I, I just had Bruce Berkowitz on
and he mentioned that that was 

1646
01:26:11,520 --> 01:26:14,040
an area that he did not succeed 
in. 

1647
01:26:14,040 --> 01:26:17,200
And I'm just kind of curious how
you how you've worked on 

1648
01:26:17,200 --> 01:26:19,440
developing your team? 
Well, I guess I'll go all the 

1649
01:26:19,440 --> 01:26:21,160
way back to the maybe the 
beginning of the business. 

1650
01:26:21,160 --> 01:26:23,720
Dal Bynum and I moved home from 
New York. 

1651
01:26:23,800 --> 01:26:26,280
We got a three bedroom apartment
and we started the business in 

1652
01:26:26,280 --> 01:26:30,120
the third bedroom. 
So our mentality has always been

1653
01:26:30,240 --> 01:26:33,560
we're entrepreneurs and this is 
a startup and let's stay very 

1654
01:26:33,560 --> 01:26:35,520
hungry. 
Let's think about what our burn 

1655
01:26:35,520 --> 01:26:37,840
rate is. 
Let's see how how long we could 

1656
01:26:37,840 --> 01:26:40,160
stay in business if we were to 
lose our biggest customer, our 

1657
01:26:40,160 --> 01:26:41,520
two biggest customers or 
whatever. 

1658
01:26:41,520 --> 01:26:44,160
And let's be really careful 
about every dollar we spend, 

1659
01:26:44,160 --> 01:26:47,000
make sure we're getting a 
positive ROI on that. 

1660
01:26:47,080 --> 01:26:51,760
And we've been fortunate to have
wonderful people that came along

1661
01:26:51,760 --> 01:26:53,920
at the business with us at 
different points. 

1662
01:26:53,960 --> 01:26:56,840
And our first person that ever 
joined us is Len OS and she's 

1663
01:26:56,840 --> 01:27:00,520
still here and she's been a 
tremendous part of the team now 

1664
01:27:00,520 --> 01:27:04,080
for, I don't know, 15 or more 
years, right, Maybe 18 years now

1665
01:27:04,120 --> 01:27:08,240
just take it back. 
And but we are Dal and I would 

1666
01:27:08,240 --> 01:27:10,280
always, I think we even wrote 
about this one time, but we 

1667
01:27:10,280 --> 01:27:11,760
would always question each 
other. 

1668
01:27:11,960 --> 01:27:15,440
We started working on learning 
things together in elementary 

1669
01:27:15,440 --> 01:27:18,760
school, really and teaching each
other things and questioning 

1670
01:27:18,760 --> 01:27:20,240
each other and challenging each 
other. 

1671
01:27:20,280 --> 01:27:24,640
And we never had an argument, 
but we were always pushing each 

1672
01:27:24,640 --> 01:27:26,400
other and kind of looking at 
things. 

1673
01:27:26,400 --> 01:27:28,560
Oh, we could learn that and 
like, let's go. 

1674
01:27:28,560 --> 01:27:29,760
Do you really know that, 
Richard? 

1675
01:27:29,960 --> 01:27:34,040
And or you not know that? 
And so we started thinking about

1676
01:27:34,400 --> 01:27:36,560
institutionalizing that as a 
team. 

1677
01:27:37,000 --> 01:27:41,520
We wanted to have that in the 
culture, you know that that 

1678
01:27:41,600 --> 01:27:43,720
everybody have a very flat 
organization. 

1679
01:27:44,000 --> 01:27:47,440
Tell people why if you if you 
ask them to do something, have 

1680
01:27:47,440 --> 01:27:51,080
them give you feedback. 
And so I would say we've had 

1681
01:27:51,080 --> 01:27:54,120
been very fortunate to have work
with wonderful people throughout

1682
01:27:54,520 --> 01:27:57,720
the whole period here. 
So they've been very supportive 

1683
01:27:57,720 --> 01:28:00,800
to me and difficult personal 
times and in difficult work 

1684
01:28:00,800 --> 01:28:04,520
times, you want to hire smart 
people and you want to hire 

1685
01:28:04,520 --> 01:28:07,560
people that think like, I think 
like owners and the decisions 

1686
01:28:07,560 --> 01:28:11,720
they make, but also always put 
higher clients first. 

1687
01:28:11,800 --> 01:28:14,440
That we want them to always be 
thinking about what would the 

1688
01:28:14,920 --> 01:28:18,080
what's best for the client and 
how can we do this better for 

1689
01:28:18,080 --> 01:28:21,240
our clients. 
And so you have to ask some of 

1690
01:28:21,240 --> 01:28:23,440
them, I guess and to assess 
that. 

1691
01:28:23,440 --> 01:28:27,680
But hopefully, I mean, I feel 
very proud of the of the people 

1692
01:28:27,680 --> 01:28:29,760
that are here and the people 
that have made big contributions

1693
01:28:29,760 --> 01:28:32,840
here in the past. 
Very cool. 

1694
01:28:32,960 --> 01:28:35,320
Well I have enjoyed getting to 
know you. 

1695
01:28:35,320 --> 01:28:39,400
Shout out to our mutual friend 
David for the the introduction. 

1696
01:28:39,400 --> 01:28:43,160
And that's been fun, man. 
I hope that this was an 

1697
01:28:43,160 --> 01:28:45,680
enjoyable use of your time. 
I'm going to get you out of here

1698
01:28:45,680 --> 01:28:48,800
on time. 
And, you know, thank you very 

1699
01:28:48,800 --> 01:28:51,760
much for joining the show. 
Well, thank you. 

1700
01:28:51,760 --> 01:28:54,240
Thanks for what you're doing. 
Thanks to David who put this 

1701
01:28:54,240 --> 01:28:55,880
together, owe a lot to David for
sure. 

1702
01:28:56,600 --> 01:28:57,880
And I'm hope we can talk again 
soon all. 

1703
01:28:57,880 --> 01:28:59,080
Right, man, I look forward to 
it. 

1704
01:29:00,280 --> 01:29:01,560
All right, take care. 
Bye bye.