The Smead Book List - Fall 2025

0:02You're listening to A Book With Legs, a podcast presented by Smeed Capital Management. At Smead Capital Management, we advise investors who play the long game. You can learn more at SmeadCap.com or by calling your financial advisor.

0:21Welcome to A Book With Legs podcast. I'm Cole Smead, CEO and Portfolio Manager here at Smead Capital Management. At our firm, we are readers and we believe in the power of books to help shape informed investors. In this podcast, we speak to great authors about their writings. The late, great Charlie Munger prescribed using multiple mental models and analysis. We analyze their work through the lens of business, markets, and people. Today's date is September 29th, 2025. This is our quarterly book list where we talk about books, books, and yes, more books. Hosting this with me is our founder, chairman, and chief investment officer, Bill Smead.

0:58Dan, thanks for joining me today. Great to be with you. So let's start out like we usually do. We'll talk about what we've recently read. I'll kick it over to you, Bill. Yeah. What I wanted to do is I wanted to crawl back in a couple of different time periods that I felt were the most analogous to today. We've had a tremendous success story in investing with eBay. And I went back and read the book about what happened in 1997 through 99 as they were funded by Benchmark Capital. It's really – the book is about benchmark capital, but it really is wrapped around the story of the public offering of eBay and the process that went into it.

1:42And what's the book title and author? E-Boys by Randall Strauss. And so that dovetails with the one I'm reading now, which is Brooks Golganka. Well, we're not going to go into that yet. But anyway, so – but the two of those cover a time period that I felt I had to understand more because of the way it relates to today. Let's see. For my books that I recently read, let's see. And some of these were on the podcast. So I'll just mention a couple of these in passing, but I want to comment on some of them. Meltdown by Duncan Maven was a great read. Obviously, he's written a lot for named publications.

2:25It's the story of Credit Suisse. Um, bad banking is always fashionable. That would be like my very big takeaway from that. Um, let's see anointed by Toby Stewart. I, I'd never thought about this, you know, we, I, as I hinted at Munger in our opening, like I usually do, um, like we always talk about like incentive structures and Munger talked a lot about incentives, right? Incentives drive everything that caused you to get up in the morning or not. Um, what I hadn't thought about, and I think this is so good. so we think about like let's say in society there are celebrities okay and people be like well it's not good that we look at those celebrities and want to do things they do but he actually made the best economic an argument for that in that people you watch or what he calls the anointed in his book um uh are people that actually save you time in making decisions because if they weren't people you followed, what would you know to go shop for?

3:27Right. Well, you'd actually have to make more decisions. So for example, he gave the example of Coco Chanel and the idea of like the little black dress. Every woman has a little black dress nowadays. Why? Because Coco Chanel made that fashionable. And what that does is it makes your decision quicker. and so now it makes someone to go into a down the question of like well what what's the difference between a fad and something that's timeless that's a whole nother discussion because there are things that you might do in a season that becomes a fad that it's not timeless but the more timeless things that show up in this you could see where someone says well i need this because in that occasion i need this and things like that like for example i wear a seersucker because that's a timeless thing and someone else I saw did that, and therefore it's one thing I don't have to go out and decide on.

4:19And so he really presents the idea of efficiencies among the anointed as being a dominant driver for you to decide what you do day to day and in your decision-making, which I thought was a very interesting way because it saves time, is really what he argues. It probably speaks some to leadership also. In other words - Well, no, no, because it's more so that we have to anoint something. It has little to do with leadership, but like every sector of the economy needs to have an anointing in some way, shape or form. And it happens like, um, you know, and he even takes it into like a biblical context, uh, a couple of times in the book where it's like, everything's got an anointing.

4:58And the, I think it's weird to actually think if we, if there's a group of people or, uh, you know, call it a part of business that's not anointed, that would actually be the oddity. And that's really the case he makes in the book. Let's see a couple others. The Money Trap by Alok Sama. Alok was at SoftBank. He's a former banker. Very enjoyable book. Also, again, to your point, thinking about the kind of season we're in. Alok, we had him on the podcast. We talked a lot about does this all make sense or how he had to adapt coming from the banking world. Other books, I'll just mention Plato and the Tyrant.

5:34If you like the classics, I would highly recommend you go into that. uh imperial standard by graham taylor uh if you want to learn about like the origins of things like steam assisted gravity drainage um which is what you see in like the the the oil sands for example uh you'll see uh that in the book it's just great history of canada um and then the you know probably one of the more controversial books of the last six months uh the once and future world Order by Amitav Acharya, he makes the case that the world as we know it will not be dominated like the former world order of the past. And I'm not saying he hasn't made that case before.

6:16If you look at his other writing, he's made that before. But he really argues that the US dominance structure is going to end. Now, he's not necessarily pointing to the fact that that means the United States will end as a power. but he presents this idea of other structures and i think he also critically says like do you really want china as part of that structure and have they done that well over centuries um so it's really interesting way of looking at it from another picture um and kind of outside of what i'll call like financial markets and the idea of dollar dominance and and whatnot um so let's pivot what are you currently reading well this once in golganka uh it kind of dovetails with that book i I read a while back that told about the Florida land bust.

7:01And who writes the book? This book is John Brooks. And what I wanted to do is I wanted to step back into the late 90s investment market-wise with something that's not directly related to our common stock picking, but to understand the emotion and the attitudes that people took in the excitement of the dot-com era. And now I want to go back into the 20s because we know that there was a terrible land bust in Florida, but the stock market crash of 29 gets a lot of credit for ushering in the depression. And all I want to do is get as much feel as possible for how much the current mania for various aspects of the stock market are going to impact what you'd want to be doing and not want to be doing.

7:57Sure. What else you got on your list? We're all reading Pilgrim's Progress, which is a great book, by the way, that one that Cole had to do probably what grade in school? Many years ago. Many years ago. And then my wife and I have been doing the audio book of the book of Psalms, which just walks you through three or four of the Psalms each day to kind of get your thought process is heading in the right direction. Yeah. To your point, what I like about Pilgrim's Progress is it's so timeless. Yeah. You know, the timelessness of the book and what people go through and what, whether it yourself or other people, et cetera, the doubts and the problems that come with it are, you know, again, very timeless.

8:40It's, and, you know, just to give people a feel, I think the book, the book was written in the 17th century. Obviously, the Protestant Reformation took place in the 16th century, 1517, if I remember correctly. And so it's just interesting to think about to read a book from 16-whatever and 400 years later, roughly speaking. It's very appropriate. Still pertinent. Very pertinent. I kind of consider Pilgrim's Progress a pillar of Western thought because it's already made it 400 years and it seems to be pretty applicable to 2025. 25. Let's see. The book I'm reading is called – another book I'm reading is called Inflation, A Guide for Users and Losers by Niccolo Fraccaroli and Mark Blythe.

9:28This is a book I came across in Wall Street Journal. And it's interesting. They're really trying to paint inflation as a multi-factor model, which I think we would all agree it would. And their main question that they attack, which I think is different, is who are the losers and who are the winners? Which I think is an excellent question because as I think back, and they talk a lot about the post-pandemic, someone said, who are the losers in the post-pandemic world? I'd say, well, the losers were capital for the first two or three years, right? The inflation-adjusted returns were low, and the winners were labor.

10:08Okay? The winners were labor. So that was the loser in the prior episode of, you know, it heightened deflation. And I think it's an interesting thing to think about who are winners and losers. A, because of the environment. B, look at the average age of investors. It's pretty old. You know, it's more likely a gray-haired person. And so it really makes you think about, on one level, someone could say, well, you're kind of debating class warfare. And it's like, well, yes, but it's not uniform. Not everyone's affected in the same way. But there are winners and losers in every episode. Like if you have low inflation, many people would argue during low inflationary periods, labor lost big time.

10:49Now, we could debate the finer points of that. But again, I think you just asked the question of for every – it's like Newton's third law. For every action, there's an equal and an opposite reaction. And the question is, who is the opposite reaction of inflation? Yeah. Well, governments that have borrowed money are a big winner. in inflation because they pay back the money that they're actually paying back way less than they borrowed. In other words, a billion dollars that depreciates by 50 percent over 20 years is, is. Well, yeah, if you have long term debt, if you got to refinance it at short term rates, you could get screwed.

11:24Well, well, no, but but, you know, we have we have a huge amount of federal government debt to pay off. And if inflation goes up 5 % a year for the next 15 years, you're going to pay that money back, but those dollars are going to be worth 40 % of what they are today. So you get a bargain. Inflation is the bargain of the person that borrowed the money. Let's pivot to books you've had recommended to you. Well, this guy Spire's book, a very successful portfolio manager, The Education of a Value Investor has been recommended. Let's see. I have a couple. I'll mention also just to make sure I don't misquote him on this.

12:11But Superfan Steve sent me across some books that he's been in. And one of them is actually one I had on my list too. But he's got Mannix, Panics, and Crashes by Charles Kindleberger, who we did the book about Kindleberger, which is a very fun read. He also has The Warrior, Rafael Nadal and His Kingdom of Clay by Christopher Clary is another book I see here. His other book that I actually have on my list too is Born to be Wired by John Malone, which is his biography that he's published, his autobiography he's published about his career and story. And those have been out there. It's kind of big talked about books.

12:53Let's see two other books. And these are – they have nothing to do with each other as you'll probably gain. They all came to Barney's by Gene Pressman. um i like we like studying the history of businesses and whatnot and so just understanding what made barney's yeah um just as an example uh you know we own may search they own a property down the street here called fashion square it's the it's the big mall of arizona if you will and there used to be a barney's there there's now an apple and so think about what made barney's tick what made that work what made it decline um i think those are really good questions to ask so I saw that book title out there, made me want to look at it.

13:29The other book, Amy Coney Barrett has published a book that just came out last week called Listening to the Law. And so just another book that caught my attention and looking at. Let me pivot. So we always ask a couple questions towards the end of our book list that I want to bring out. So these would be kind of too open-ended. This is a question we get a lot of, I think. How do we look at the CapEx spending of AI that is currently going on? What would be your take and view of that, Bill? Well, it's a space race is the way I like to think of it. And back when we were in a space race with Russia, it's amazing to think about how much that influenced our attitudes, but it also caused a lot of interesting technology to get developed.

14:30The willingness of two countries to just pour massive resources into that for only really to say that they were the one that did it. I mean, later on, we participated together with them on some space-related stuff. And so that's where I'm at. Okay. So I think the things that jump out to me on the question, and we're doing some work on this. This is for a talk I'm doing this week, but it's a talk that I'm going to do at our investor waste, this is my plan for kind of a bigger talk on this, is we look back at, and there was some data, Paul Kodrosky out online had posted some of this, so I appreciate him sharing this information, but he had showed what the CapEx to GDP was of the railroads in the 1880s.

15:27So I was like, okay, that's a good data point. We then, there's a couple other studies that look back at the CapEx tied to telecoms in the late 1990s. And what I find really interesting, and this is like, This might be the game, just so everybody's aware. I think this might be the game. But we're right now, if you look at the level of CapEx among the AI hyperscalers, it's at the same level as the telecoms were in the late 1990s. And obviously, as you watch Zuckerberg sit down with the president, he's like 600 billion. And then he turns the president and says, I didn't know which number you wanted.

15:59So I say that because – Lucent was the – Let me finish. Let me finish. So we're right now at the level of CapEx that has been historically significant is what I think about. And so, again, I'm going to throw out some props to some various research groups out there. So in the 1880s saga, if you go look, Barini Associates, they provided some interesting work on the oldest stock index out there that people reference is what they call the Cowles Index. It goes back prior to the creation of the Dow or even the S &P 500. And the Calus Index is expected from 1870 on. And they tracked – Barini did some work on tracking the railroads from 1870 to 2000 off of this work.

16:46And it kind of reminds me of like the stocks to the long-run argument where Siegel was like, see, if you bought at the top of the 50-50, you almost outperformed the stock market the following 25 years. And it's like that's cool if I'm an academic, but you're in my job. I'm like, we can't do that because we'll get fired. So if someone walked in in 1870 and said, listen, there's going to be a boom in railroads. We're going to do – railroads are going to be so important to America. And 130 years later, you're almost going to beat the average stock. It's like 130 years later. Yeah, well, so – So that's – it's historically significant.

17:19I'll let you go on with what you were going to say a second ago because I'll come off of that. Yeah, so in 99, Lucent became the seventh largest cap company in the world. Yeah. And in the year 99, half their revenue was selling equipment for people to provide the internet of things. And because the internet was going to change our life, was borrowed from them. They provided credit. They provided credit on half of their revenue. and of course that collapsed and lucent collapsed yeah so so just think about it they went from being the seventh largest cap company in the world and and that brings me around to why i'm so interested in these two books to connect these two time periods uh here's my concern about today and i know i sound like an old fuddy-duddy to to to say this but but the stock market and the wealth that's owned and the behaviors of the people that own the common stocks in the United States is more powerful than any of those two prior junctures.

18:30In other words, it was one thing for the dot-com bubble. I just read the part where eBay stock has now gone from being priced at, say,$20 to $648 in two years. that was owned and participated in a narrow group of people. It wasn't widely dispersed through all the economy, but just the same, it caused the stock market to be a total disaster. But it's the closest analogous period to today. It's the closest analogous period to today. But the difference in 1929, only one and a half percent of the population of the United States owned a common stock. In 1999, lots of people owned common stocks, but nowhere near as well, importantly, and spread as wide as it is now with 401k plans.

19:24If you look at the household net worth by the St. Louis Fed, it's 5 % different as a percentage of net worth. The common stock? Yeah, the equities as a percentage of household financial assets, pardon me, it's 5 % higher than 99, which is the highest it's ever been. It's highest it's ever been, but more important, it will be more closely tied to the psyche of the consumer than it has been before. Well, Craig, consumer of the owner, which the owner is a boomer. Hi, I'm Cole Smead, CEO and Portfolio Manager here at Smead Capital Management and host of this podcast. If you enjoy this podcast, I'd like to invite you to check out SmeadCap.com.

20:06At our firm, we are stock market investors. We advise investors who play the long game with a discipline that has proven success over long periods of time. Learn more about our funds at SmeadCap.com. Past performance is not indicative of future results. Investing involves risks, including loss of principle. Please refer to the prospectus for important information about the investment company, including objectives, risks, charges, and expenses. Read and consider it carefully before investing. Smead Funds Distributed by Smead Funds Distributors, LLC, not affiliated. There's other things connected to it, though, that didn't exist in 99 and didn't exist in 1929.

20:46There was no passive index investing of any meaningful amount in 1999. Correct. Right? That's all come to pass by... Well, the original advocates of that were Motley Fool. They'd say, like, go buy the passive index. And Jack Bogle's development of the S &P 500 index for Vanguard. Well, today there is a whole religion around accepting that fact, providing participation at the lowest possible cost under the assumption that the market will never have a long enough period of doing lousy to punish people for doing that. And the problem is that 1929 to 1941 would have completely destroyed that. And 99 to 09 did a pretty good job of backing it off.

21:39And so it'll be interesting to see how far this one gets backed off. When you look at the concentration of the stock market, historically, again, you went from railroads in the late 19th century to industrials being the dominant feature of the stock market. So like what really got drubbed in the 20s would have been industrial style like the RCA is the world. Well, Ford was a glamour stock in the 20s. So I say that because like I don't think about it the same way because ultimately it's where is the problem? And the problem is actually not that broad. When I say if you look among the constituents, it's not very broad.

22:13There's a lot of losers among the constituents. To your point, the dollar-weighted nature is risky. Well, the multiplier effect on this spending is dramatically higher than the multiplier effect on normal spending. I don't necessarily agree with that. There's 10 cars parked at the brand new house being built in our neighborhood each morning. OK, and I can tell you that. But that's among, again, winners and losers. That's among wealthy people. But the 50 to 80 year olds have become wealthy in many cases. I agree, but they don't drive consumption in the economy, though. They are the least consumptive compared to – I say it because I'm 41 years old.

22:57I am the consumer. I'm roughly the consumer. I'm not a perfect picture of the consumer, but I'm the consumer from an age perspective. And yes, to your point, am I likely to – as an age group, is my age group likely to be involved in the stock market? Yes. At the same time, is this the first time we've had degenerate 40-year-olds gambling in the stock market? No, we had that in 1999. This, they picked on Reagan because he called it trickle-down economics. There's more trickling down than we've ever had. And it's my opinion that that will be a big problem at some point in time. because if the thing that, like you're using the CapEx with the AI, anything that breaks the back of those 10 or 20 largest cap companies is going to break the back of the S &P passive index for an extended period of time.

23:52The only problem is it doesn't line up with the labor because if you think about the average constituent, they're more likely to align with the labor, right? So like if you're working at some two-bit bank that's publicly traded, you know, wherever in the country, that's where more of the labor sits is in smaller businesses yes so and and their star for capital relative to these things but in other words like if let's say let's say the big things do poorly that doesn't hurt everyone and the dispersion of capital is actually what's needed for the average laborer well i i i'm glad you i'm glad you're an optimist but because we we need to be optimists What I'm saying is that if you look at history, there's never an uninterrupted – Here's an example.

24:37Nortel was part of the same Lucent game. They provided credit. If you look at the CapEx of telecoms, it went from$120 billion to less than$60 billion within two years. So again, to your point, the stock market is not very good at predicting CapEx. Future CapEx, they really suck at it. Sorry, Mr. Market. I'm here to offend you. They suck at predicting CapEx. nortel was bankrupt and closed within nine years so now did that matter no it didn't matter well when it's six when it's six trillion dollar companies it'll matter 180 billion dollar business then that was one that was one of the trillion dollar size companies i understand and with nine nine years it didn't matter it it will matter if it hit if it hits the magnificent seven it's going to matter immensely.

25:25So beyond that, what do you think the market has the most wrong on? Like outside of the AI, CapEx, big company thing, what do you think the market's most wrong on? Well, you and I agree on this. The inflation subject is the one that – I go to McDonald's with a grandchild, and what used to cost$12 is$25. And I don't know how they get the inflation statistics they're providing because that's as basic in our society as just about anything, what the fast food places are charging, which is a function of they have a hard time finding good labor. So they're having to pay more and more for good labor and they're passing that cost through to the customer.

26:10So that is – that's the other thing that makes it kind of interesting in relation to like say coming off the go-go 60s was the inflation caused people to want to pay a lot less for future earnings than it used to. Yeah. And like M2 is like hitting a new high right now. I agree on that. Here's what I think is the most interesting thing. I think the human – we all know the human bias is towards negativity just naturally, okay? And what I think is interesting – so like use 2025 as a year to date. Like I was doing some of this mental accounting, okay? So you're in the spring. Everyone is just like, holy crap.

26:52We got a deep recession on our hands. Now you come out and what's their bias now? Oh, the labor market is weakening and we got this economic problem. I actually think that parading around on economic weakness is a problem. And I say that because like to your point, it's like, oh, like when I hear it from people in the investment business, they're like, oh, you know, the marginal person and they're doing so badly. And it's like, OK, show me a single time in my career where someone's gone out and bragged about the low wage. It's never happened. It just it's never happened. So like hearing someone say, oh, the low wage is doing so poorly and they're right on the edge and all – that has been said every year for my 20, almost 20 years now in the business.

27:34That's chronological snobbery is what it is. They're easy to pick on because they're not on the upper end of income or wealth or whatever. OK? So – but here's the catch. I do know that person is getting more assistance than anyone because they're spending 7 percent of our GDP in deficit. And if I was going to go out and say like who's getting the most benefit right now that's in that lower end, it's actually a retired boomer who's in the low end collecting Social Security and getting Medicare, for example. That's who's actually getting the biggest fiscal benefit as we speak. And so I look at this all together, and I think preying on the economy to do poorly, it will not be the knock-on effect because, again, back to winners and losers.

28:19Let's say inflation perks. In the last bout of inflation, unexpectedly, labor won for two to three years. Labor won. Easily. Easily. And so it's like, okay, labor wins. The machinists. And we can't quit spending our money from a federal perspective. And it's very unpalatable on either side of the aisle. That does not add up to have this weak economy. Now, inflation, that's a whole separate subject. but weak economy while the stock market falls off and then to boot among people who are gonna get hurt that don't own any assets supposedly, that just doesn't all add up. I think the institutional bias is that it's like they like betting and talking negatively about people on the lower end of the income spectrum.

29:03Also political pundits will use it to their advantage of saying like, oh, you've never been bettered off or whatnot, that's not true. 93 % of those people go off to higher income thresholds in their life. And so I just think it's an easy whipping boy. It's easy to be negative on the economy. And if you think about it, let's say you invert it back to Munger's thinking. It's like our entire industry is made to sit around and try and figure out where recessions are coming from. Well. Rather than sitting down and saying, okay, recessions are going to come. But again, who are the winners and losers of the next recession?