[REPLAY] Jonathan Tepper - Variant Perception of Capitalism (Capital Allocators, EP.110)

22:30He's saying there's a fatal flaw in capitalism and returns to capital are going to get bigger and bigger, and eventually it'll end capitalism. And I just thought this doesn't make any sense at all. Like if returns on capital get higher, let's say you have a great business, then I'm going to want to compete with your business. And that'll drive down the returns on capital, and so it's a naturally self-correcting mechanism. And then I thought, well, maybe these two questions are related because if the competition can't come in and compete, if you can't drive down the returns on capital, then yes, you would end up with a persistence of very high corporate profit margins, low wage capture, low increase in wages, and maybe that's what's going on.

23:06So I didn't have a predetermined thesis before I started writing the book. What I really wanted to do is to figure out why this was happening. And I started doing a lot of research on competition. And the key paper that I read that I highly recommend, and I'm pretty sure there's a link to it on the website, mythofcapitalism.com. It's by Gustavo Grullion, who's a professor at Rice. And he wrote that with two colleagues. And it's called, Our Industry is Becoming More Concentrated. And the issue was he was trying to look at for the median industry, are there fewer competitors? Is there less competition at the national level today versus 10, 20 years ago?

23:42And the answer is for about two-thirds of industries, the answer is there's a lot less competition. So that paper itself started tied the high profit margins to competition and pointed out that it's not because these firms are just that much better and more efficient. They're getting a higher return on assets and it comes from scale. Rather, they end up with pricing power, which, of course, is what Buffett talks about. So you end up with power over the consumer. And then also you end up with power over the worker. You don't have to pay your workers as much because there's not much competition.

24:13All right. Right. So the book's called The Myth of Capitalism. And how would you describe if somebody said, okay, what is the myth of capitalism? So the myth of capitalism was one that I picked because I thought everyone's critiquing capitalism saying it has these horrible flaws and it's terrible. And I think that what we're seeing right now is not true capitalism in the sense that capitalism involves one, private property, but two, also involves competition, meaning that supply and demand can set prices. And ultimately, when you look at supply, it's sort of constricted. You're not really dealing with a multitude of players.

24:46You're dealing with very few. And they often use government to keep competitors out. So these aren't just sort of natural monopolies that might emerge due to industry structure, whether that's network effects. You know, for example, like Visa, it makes sense to have one payment system or a huge scale where you end up with four very large planes like Boeing or Airbus. But there are just many industries where there's absolutely no reason why they should be a duopoly or an oligopoly. And a lot of this comes down to regulation. And so the myth of capitalism, in my mind, is that we're not really looking at a true capitalist system because there isn't competition.

25:17So how come this is a problem? So if you wanted to talk about it at a broad theoretical level, clearly there are some economic arguments that you could offer, and then you can drill down to why the average person might care. On the economic angle, while there are efficiencies to scale in some industries, beyond a certain point, Those go down to zero and if not, then become diseconomies of scale. So you end up with problems of productivity, problems, harms to innovation. You find that primarily, I would argue, on the digital side, that it certainly happens in other industries. You end up with fewer jobs and less economic vitality.

25:52Churning and creation of new companies and competition is an important part. Even if you think about the traditional disruptor literature, you don't know which startups are going to be the good ones or succeed and a lot will fail. but you have to have that going on. So you end up with more anemic economic growth, but you also end up with a lot more inequality. So if companies are able to extract economic rents and they're able to squeeze workers, then what's going to happen is that in many industries across the US, these companies work as very efficient means of transferring money from the middle and lower class to people who own shares.

26:27The average person doesn't really own shares in any meaningful way. And therefore what Piketty talked about certainly does happen, which is that you end up with an increase in inequality. And it doesn't come because there's a fatal flaw in capitalism. It comes because essentially there's not enough competition. Capitalism itself is not functioning properly. It's not true capitalism. We're going to take a quick break in the action to tell you about SRS Aquium. Want to make sure your M &A processes aren't stuck in the past? Partner with a company that's been defining the future of dealmaking for nearly two decades instead.

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27:54So you wrote something about that. What's your take on that perspective of where monopolies are a problem or become a problem with the tech giants? What's interesting is almost any interview that I do about the book always starts with the tech giants is the first question. So it's a great thing, meaning that people might not be talking about monopolies right now if the tech giants hadn't raised this issue. And there's certainly a lot of other hidden monopolies. So to the extent that monopoly is now becoming a common word and vocabulary again, I think it's a wonderful thing. So Google and Facebook essentially are an ad duopoly in terms of the ad market.

28:30Google is a monopoly when it comes to search with roughly about 90 % market share globally. Facebook on the social side is a little over 80%. On the social side, you obviously have Twitter, Snapchat, and so on. But basically, they have monopolies in their respective fields, and then they have a duopoly when it comes to online ads. And the big problem here essentially is that while there are very strong feedback loops, Google is essentially like a two-sided market between searchers and advertisers. And then Facebook essentially has very strong network effects. You want to be on the social network where all your friends are.

29:01One of the big problems here is that they're able to use their platform to their own benefit. So Google is not just serving you every single search result according to their page rank. They actually can favor Google-related businesses. They're able to make sure that Google reviews and other Google services pop up before competitor services. And so you can tilt the playing field to your advantage. Facebook effectively killed off fine by preventing that from being shared, which was Twitter's video platform. Facebook wanted to own video. So you can use the platform essentially from a competitive standpoint.

29:36It's a problem. And then the regulators have essentially, I would say, been asleep at the wheel, but that's too benign. Macon Delrahim, for example, is the attorney general for antitrust in the US. He was Google's lobbyist for the DoubleClick acquisition. The recent settlement that was reached between Facebook and the FTC. Facebook's lead lawyer essentially worked for the head of the FTC. And this agreement has now immunized them from all private claims. There's no even revolving door that implies some separation. You basically have people working for industry, backing government, then negotiating with their former partners.

30:07And so there's no real effort to, one, prevent mergers. So Google was able to basically buy DoubleClick. Facebook was able to buy Instagram. And so the laws as written and intended are not enforced. And then you end up obviously with even more of a winner take all dynamic when it comes to these tech companies. But at least it's shined a spotlight into the problem of concentration. In addition to the tech giants, I'm just going to ramble off a laundry list of some of the sectors that you discuss in the book, and maybe we'll pick one or two and talk about them. So this isn't just tech giants, it's insurance, paper, agriculture, hospitals, cable, airlines, beer, milk, funerals, payments, dialysis, glasses, tax preparation, credit bureaus, banks, meat and poultry, PBMs, medical care, and title insurance as a subset.

30:56So is there a commonality in those sectors and subsectors? Yes. You could broadly put those different industries into two separate categories. One would be what you could call natural monopolies. Economists tend to refer to natural monopolies as industries like electrical utilities. It doesn't make sense to lay down copper wires to every home in Manhattan. You get one and then you just regulate it to make sure that they're not gouging people and they get a return on assets and so on. But I use the term a little more broadly where the delivery of the product dictates there not be many, many players.

31:28And earlier I referenced network effects and things like that. You then have another broad set of companies that are what I call unnatural monopolies. absent regulation or legislation, there would be multiple competitors and you would not have two companies dominating the US beer industry. For example, the idea that Burger King or McDonald's might achieve a duopoly in the restaurant industry is insane. Basically, you and I could go get a kitchen and a cook and start competing. The question why this doesn't happen when it comes to alcohol is because even though there has been an explosion of craft breweries, most craft breweries don't really ship their beer beyond county lines.

32:04This is essentially a legislative and regulatory problem where going back to the ending of prohibition, what happened was it was all devolved down to the states and to the counties. It's very difficult for companies to get national distribution. So those who do have it have a pretty big advantage. And then through a series of mergers, because the regulators don't honestly care, you've ended up with two companies having over 75 % market share, but effectively controlling around 90 % market share. So you have a duopoly in terms of production and volume and sales, and then you have an oligopoly in terms of distribution.

32:35And all of this is really legislative. I mean, American beer in general is just pretty terrible for the big brands, and they'd probably be losing even more market share if a lot of the craft brewers could actually get more trade beyond the counties. Are there other notable examples where regulation created an unnatural monopoly? In Alabama, there were some monks who thought that to help the monastery, they might sell coffins made of wood, and these were beautiful coffins. And of course, the local funeral homes went after them and sued them. And then the state of Alabama went after them for providing wooden coffins.

33:08For centuries, we've all managed to die and decompose without a problem in wooden coffins. But what's ended up happening in many states is that you have local monopolies where mergers are allowed. And so Service Corporation is the biggest. They've ended up with like a monopoly in a town in a given radius. But to help maintain this, often there are restrictions in terms of who can sell caskets and in terms of where can these funeral homes be provided and what kind of criteria they have to meet. And it's only done essentially to prevent competition and to exclude others. The insurance industry is one that basically should be a lot more competitive and you should essentially have competition across state lines, but you don't.

33:49the McCarran-Ferguson Act essentially devolved regulation down to the state level, which meant that the state insurance commissioners are the ones who decide things. So you essentially have a duopoly or three players in almost all states when it comes to health insurance. And then states mandate that you buy title insurance on your house, even though the General Accounting Office and the New York Times have called it a scam. You know, in the 21st century where records are almost all digital, why should you have to be forced to buy insurance for your title? So there's all sorts of industries that essentially exist purely due to legislation and regulation.

34:22You then have some other ones that are much less obvious, which are, for example, local airports, right? Cities generally, besides New York or London, don't really have room for two or three airports, there's just not enough traffic. And so if you have the airport concession, you have a captive audience every day that's growing a little faster than GDP spending money while they wait for their flight. And so that's like a small local monopoly. And those are just like two examples. But there are loads of hidden niches that people don't really look at and realize that generate significantly higher returns than the average stock.

34:56And some of these are well-behaved, meaning they provide a great service to the user. They don't gouge the user. My problem with monopolies is generally where they behave anti-competitively and gouge users. A classic one that hedge funds love and that I think is horrific is Transdime. Basically, there's not competition because to get an FAA part approved takes a very long time. And so you and I can go and provide seatbelts cheaper than Transdime. And anytime they buy a company, they're basically a roll-up. They hike prices by 500, 600, 700%. And they're being looked into by the Department of Defense because the Department of Defense is being gouged, right?

35:31And is society better off because all these small cost panels or seatbelts are much higher? No, it just basically enriches the CEO and a few shareholders. I don't know if you've compared that to sort of the Valiant story. The concept of Transline was always that these are very low-priced parts compared to a plane or something like that. So how do you think about that price dynamic where how much does a seatbelt cost? Oh, yeah, you could raise the price of a seatbelt. That's an argument that some smart hedge fund investors have. And there's like a class of companies that are low-priced in terms of the relation to the whole.

36:04And therefore, it gives you some pricing power. And you often find this with drugs where the pharma industry says, well, drugs are only about 10 % of US spending. They're the largest part of the spending that employers pay and the consumers pay out of pocket. And if you look at some of these drugs, while it might be a total part of the whole, gouging a customer and getting, there was Wilson's disease was the classic with Valiant, where absent regulation, they would not be able to charge 300 grand a year for a life-threatening drug that really should cost pennies, right? And so to me, that's just price gouging with no aggregate benefit.

36:37Like there's no benefit that you're deriving or that society is deriving from these companies providing it. There's basically just a lack of competition from legal and regulatory reasons, and then people are gouged. It's that simple. One of my favorites was always the eyeglasses industry, and it was stunning to learn that it's really one company or two. Yes. So Luxottica is a Italian company. They've recently merged with Essilor, which is a French company. So they've vertically integrated it. So Luxottica basically does the frames, Essilor does the lenses, and they argue that they're not that high when it comes to glasses for the entire world.

37:13They have close to a monopoly when it comes to the branded glasses. And then they've also been buying up where people think that there's a choice between lens crafters and others, or you go to these chains. These are all actually owned by Luxottica. And so you can just go through the dozens of brands that they actually own under different labels. So you think you're shopping around and doing price comparison. In In fact, you're all buying from the same company. And in industry after industry, what's happened is that the DOJ and the FTC over the years, the level at which they will scrutinize mergers has sort of gone up and up.

37:43And then effectively, they've blocked almost no mergers and scrutinized almost no mergers. Why is it that the regulators haven't scrutinized some of these mergers if it's creating this absence of competition? So one is ideological. I think many of them actually do think that monopolies are better. So the history of the U.S. monopoly movement in a few sentences basically is you had a huge move to regulate the trust. The monopolies in the 1880s wasn't very well enforced. You ended up with the Clayton Act in 1914. That was after Standard Oil was broken up. And antitrust wasn't really enforced until the 1930s under FDR.

38:18So you had like a merger wave in the 1920s. And then after FDR, basically there was quite a lot of antitrust enforcement. And then it became the consensus. And so Republicans and Democrats blocked mergers. Eisenhower talked about it in his State of the Union. And this was widely accepted. And it became so ingrained that it was very difficult for almost any competitors to merge. And so there was a famous case, some grocery stores in Los Angeles that were going to merge and achieve 7 % market share. And that was blocked. And so some of the economists thought, you know what, we've gone too far. And they were probably right in the 1960s.

38:49Back then you had the conglomerate wave. And part of that was if you couldn't buy your competitor, you'd buy some random company. So you ended up with a Hollywood studio owned by an oil company, which also owned a ball-bearing company and a cigar factory. And those all got broken up, but you just couldn't buy your competitors. And so these economists, particularly from the University of Chicago, you had Milton Friedman, George Stigler, and then you had Robert Bork on the legal side who wrote The Antitrust Paradox, basically argued that mergers were good. They would create efficiencies. Those would get passed on to consumers.

39:20And price was the only thing that mattered. And if you ignored Price, then basically it was just demagoguery. And so even though none of these ideas are present in the Sherman Antitrust Act or in the Clayton Act, this basically was the thinking and the ideology that they had. And when Reagan came to power, he appointed Baxter to the Justice Department, and then they changed the merger guidelines in 1982. And so ever since, what we've had is a merger wave after merger wave. And at first, it didn't make that much of a big deal. But, I mean, you can remember, like, the movie Wall Street. it was about mergers and tips.

39:50And you had the book, Den of Thieves by James Stewart. And that was a big thing. And now we've gotten so used to it that no one bats an eye when they're mergers. But when you have four decades of mergers one after the other, you basically are in a situation like the World Cup or the Sweet 16, where you start with 16 teams and you go down to eight and then to four. And so the damage is not done in a single year, but over a 40-year period, many industries have gone from being highly competitive to now essentially being in the hands of two or three players. So you mentioned the notion of price, which is, I know when I was studying bad antitrust, it was, are the consumers hurt because prices are artificially high?

40:29What are the alternatives to that metric as a means of trying to determine whether a merger should or shouldn't be able to go through? Firstly, if they did focus on price, I would be thrilled. I think the problem is that they say that they care about price, but then they allow tons of mergers to go through where prices actually go up. So I would say it's just a complete absence of enforcement of their own standard. It reminds me of what Gandhi said. They once asked Gandhi what he thought of Western civilization. He said he thought it would be a good idea. The sort of consumer welfare standard about price, I think, would be a good idea if it was actually practiced.

40:59There's extensive evidence that mergers, particularly under six players, lead to higher prices. But even moving beyond price, so in the case of the digital giants, Facebook's free, Google's free. So like, who's complaining? There's no harm. The arguments there are, one, the anti-competitive effects, which is, i.e., that they are discriminating against other people. And there are cases in the 19th century, for example, where railroads had the only bridge going across the Mississippi. And if you have the only bridge, the law stated that you had to provide sort of open and non-discriminatory access to your competitors, right?

41:32Just because you have it doesn't mean that you can't allow your competitors to use it. And I would argue that if these businesses are in the business of providing search results, then they shouldn't be favoring their own. Or if Amazon's in the business of providing sort of a third-party delivery of goods, they can't ultimately be favoring their own goods, screwing their suppliers, essentially using advertising as a tax for the competitors to show up in the search results. But then you also have harms to innovation, meaning that if these platforms don't want competitors and have access to whether it's APIs and they can shut them out, you end up with what you could call edge innovation, right, where you have harms to innovation that happen.

42:08And all of these, I think, do make sense and are beyond price. But ultimately, the Sherman Act and the Clayton Act were much more political than purely economic, meaning that there was a decision that we don't want to live in a society where one or two people control entire industries. And so I think that to focus exclusively on price without actually realizing the reasoning behind why we have these laws, you know, is missing the forest for the trees. Somewhere behind the curtain in D.C., there are people who are the ones who are deciding whether or not a merger goes through or what the impact of that is.

42:44And as you said earlier, there is this revolving door in D.C. where someone who's a lobbyist works in the government and then they make more money in the private sector. What's the alternative to get good people in government who can't then go into private industry? So right now, a lot of the people who work in antitrust and the DOJ and FTC, many of them are fine people, but they do tend to come from the K Street law firms or from the two consulting groups that do almost all the research arguing that mergers are wonderful and that there's not a problem, which is Compass Lexicon and Charles Rivers Associates.

43:18And so I think that if you're dealing with a broad field such as it is, you can clearly cast a wider net when you're looking at people who should be serving in the DOJ and the FTC and not necessarily going and hiring people who would have to recuse themselves when the cases come up or who certainly don't want to see any impediments to future mergers that might harm them when they're on the way out. I wrote a piece for the American Conservative about this. I think they titled it Why Regulators Went Soft on Monopolies. And I went through a dozen revolvers. And some of them have been doing it now for 40 years.

43:49So the idea that they're representing you or me or the consumer makes no sense. What they're ultimately doing is it's what Nassim Taleb called the retrospective bribe, where it's not like someone's giving them a suitcase of cash, but rather they're very aware and conscious that if they're going to go back to their law firm, they want to make sure that they made the right choices. And so the evidence is overwhelming on a case-by-case basis when you go through and look at their careers. The regulators essentially are fully captured. When you read through the book, you get this sense that it's very much a haves and have-nots.

44:24And if you're part of one of these companies, you're probably, particularly if you're an owner, in a pretty good spot. So if you're on this mission through the book of trying to figure out, like, we have a problem, we've identified a problem, we need to foster better competition. as an individual. What do you do about it? So I started out just to, at first it was a little disorganized. I had like a, just one tab in a spreadsheet and I just kept on dropping notes in. And then I started organizing it more and then I organized it more and more. And then eventually ended up with this extraordinarily organized, highly detailed map of the U.S.

44:56And then I thought, okay, well, if I've got it for the U.S., I should do this abroad. And I started doing it for abroad. So basically I have a extremely detailed industry map of highly concentrated industries with all the companies and players laid out. And then I've classified them by whether they're natural or unnatural and sort of the source of the monopoly or oligopoly. And it was quite clear as I started doing that, I was finding Buffett behind loads of them, right? And in the first chapter of the book talks about Buffett and Thiel. And I think they're both slightly different. So Buffett tends to like what I call the unnatural monopolies, right?

45:31So he's an owner of Moody's. That only exists because it was an act of Congress which created the NRSRO designation. And it's easier to raise an armed militia in the US than it is to start a rating agency. Thiel praised monopolies. But interestingly, if you read his book, the only examples he gives of monopolies are essentially ones that have very strong network effects, you know, and feedback loops where you do end up with a winner-take-all dynamic. He never talks about the drugstore duopoly with CVS and Walgreens. That's purely down to regulation, essentially. So Thiel praises the monopoly, but ultimately is really looking at the natural monopolies.

46:05So when I was building this database, I realized this essentially is like a roadmap for Buffett. So obviously, it's quite useful on the investing side. And I think that Buffett himself, he is a progressive. He's a Democrat. Ultimately, he's not doing very much to change the status quo. And he's certainly not encouraging any reform of Moody's. He loves his checks. I would love one day to be an enlightened robber baron and give the money to good causes and to end monopolies. So I probably will be doing something ultimately with this database. So if you can't beat them, join them, I guess. Yeah, I think you have to be a Robin Hood of sorts.

46:38You've identified that this is a problem. What would you suggest the country, if it's the appropriate entity, do about the problem? So the last chapter of the book, or I can't even remember if it's an epilogue or a chapter, but it has a series of proposals because I realized that if this book did catch on at all, it would end up getting read by regulators and legislators. And I've given up hope on the regulators. I don't actually think that any of them, one, agree or two, care. But the legislators, I think many of them do. And they have been getting in touch with me. So I have been speaking to senators and congressmen and even the staff of presidential candidates.

47:15And they do care deeply about this issue. And I think that the solutions and reform is going to come from the legislative side. So I thought I needed to have a blueprint essentially for reform. And you could broadly lay out a couple of simple proposals. One, you have to undo past mergers that are harmful. In the past, whether it's Standard Oil got broken up, AT &T got broken up, the world didn't end. It actually got much better. And I think that there are many mergers that should clearly be broken up and things would improve. But the main point going forward is that the merger guidelines every few years go higher and higher where they had to reach such a level of concentration that before getting blocked, one, you can dramatically reduce that and say that what they call the HHI index for concentration should be much lower to begin any scrutiny.

48:00And they should, I think, have a bright lines. So, for example, if an industry has six players or fewer, a merger shouldn't be allowed. We just know that prices go up when that happens. you end up with less competition. So mergers to duopoly should never be allowed. Mergers, even down to four players in general, I don't think should be allowed. And that's one of the main things. I think ending the revolving door is a key thing. So you want to make sure that when people are working at the DOJ FTC, they can't immediately go back to the private sector to then represent clients who want to get their mergers through.

48:29And then there are all sorts of other more particular things, industry by industry. Earlier, I talked about the insurance industry, right? Believe it or not, the insurance industry is exempt from antitrust supervision under McCarran Ferguson, right? Like this is truly insane. I would get rid of the entire act, but at a minimum, I would not make them exempt from antitrust supervision. So those are just some of the simple reform proposals. Sounds simple in concept. You're now from time to time having conversations with the people who are empowered to do something like that. What do you see about the practicality of some of these?

48:59So I think change takes time. And while I am hopeful that there is the beginning of change, I'm not overly optimistic about how quickly it will happen, but I think that people are becoming more aware of the need. And it's not just on the left. So the idea is that somehow there are these sort of crazy progressives out there who want to attack big companies. I think the conservatives are starting to realize that you could actually have much lower health care costs if you got rid of excessive regulation that prevents competition. You could end up with lower insurance and medical costs if we allowed, for example, insurance to be sold across state lines, or you allowed the importation of generic drugs from a similarly regulated country.

49:36Why shouldn't we be able to import generic drugs from Canada or from the EU or from Japan? So there are all sorts of things that could be done, and employers who are paying would like to have lower drug costs, would like to have lower insurance costs. And so left and right are recognizing that the current situation only benefits those who are capturing the economic rents. All right, let's turn to some closing questions. What's your favorite hobby or activity outside of work and family? It's probably changed over time. I think it was art and photography, but lately it's been writing. And I think I write to clarify my own thoughts, to answer questions, and I've written a couple books.

50:08I blog occasionally. And then I'm writing a memoir about growing up in San Blas called Shooting Up. And I'll probably have that done later this year. And it's a complete radical change in style. You know, writing nonfiction is one thing. Writing, even though a memoir is real, it's written in a fictional way in the sense that The voice is different. The way that you write is different. So that's been fun. When do you do your writing? I write in spurts. When I do write, whether it's the books like Myth or others, I tend to lock myself away for a week and work eight to 10 hours a day and then take a week or two off and then go back to it.

50:39So I work in intense spurts, but I don't understand that people can do like three hours consistently every day. But everyone has their own writing style. What's your biggest pet peeve? On a human level, probably loss of temper, saying nasty things. I've seen that. I think it happens a lot in the trading floors and other places. And in my entire life, I've never seen my parents raise their voice to anyone. And I think if you can't control yourself, it's going to be unlikely that you're going to control a business or even relations with other people well. And how about your biggest investment pet peeve?

51:07Probably gold bugs, investing in bad industries. I mean, they're totally one irrational. There are some nice gold bugs. But in general, I find that this investment thesis is not amenable to logical discussion. And then even when I show them the historically poor returns from gold mines over time, it still doesn't dissuade them. And so it's really a religion. So does that flow through the pro arguments for Bitcoin? Bitcoin is another long topic, which I think fails on almost every front. If currency is a means of exchange, a unit of account, and a store of value, it fails on all three fronts. And so gold essentially could be a useful investment, given that it's the inverse of the real rate.

51:44So to the extent that real rates are negative, it might be a good investment. But gold mines themselves are terrible. and gold has a limited function in terms of a bet on negative real rates. That's it. And Bitcoin? Bitcoin, I think it's a pretty bad investment. All the smart people I know in Silicon Valley who made loads and loads of money bought early and sold early. And it was all the sort of dumb retail people who piled in late. What have you learned recently that's most struck you? So I thought of writing a book on the history of financial markets, and I may do that at one stage. And the thing that really struck me doing all this research was that we think that we live in new and interesting times.

52:15A lot of these problems have been looked at over time. And whether it's Romans creating essentially an early form of insurance called bottomry. And I found this amazing book written in 1688 by a Sephardic Jew. And the book's called Confusion of Confusions. And it's sort of a diary of a trader in the Amsterdam Stock Exchange. And so we sit around, you know, you and I chatting on this podcast as if we're rediscovering the world and the investing world. Like these things have been around for a very long time. And often they're created independently, whether it's in China or ancient Greece. And so in a way, these simultaneous discoveries are like the modern world needs the financial markets to function, whether it's insurance or stock markets.

52:52And a lot of the problems that we face today from a behavioral standpoint have been faced by people before us. And so that's one reason why I think education, sorry, history and learning is very important because it helps answer some of our problems today. But just seeing that in practice was extraordinary. What teaching from your parents has most stayed with you? I would hope and think that some of the moral values they would read to us every night at the dinner table and at breakfast in terms of they would have devotionals. They used to read St. Augustine's City of God to us, all that. But also, I think just the experience of learning and being homeschooled, I realized that you can teach yourself anything if you set your mind to it.

53:27And most of my friends growing up died of AIDS because they were sharing needles. And I used to go to the eighth floor in Ramon y Cajal, which is the main hospital in Madrid, where the infectious diseases ward was. But at the entrance to the hospital, Ramón y Cajal was a neuroscientist who was the first Spaniard to win a Nobel. And there's a quote from him, and it says, Todo hombre puede ser el escultor de su propio cerebro si se lo propone, which is, every man can become the sculptor of his own mind if he sets himself the task. And that was the quote that inspired me as a kid every time I went into the hospital.

53:57And I think that that quote by Ramón y Cajal really has been an inspiration to me, one of the things that my parents have given to me and my brothers. That's great. All right. Last one. What life lesson have you learned that you wish you knew a lot earlier in your life? I think that you just have to be bold and creative and go out and do things. And I think that quite often we self-censor or we don't think that we have the ability to go and do things. And it's interesting that going out and writing a book or starting a company or whatever it might be, it seems like a very bold move, but it can be tough doing it.

54:27But once you go out and do it, clients are interested in reading interesting stuff. If you can offer something that other people want to read or pay for, you can make a success of it. I worked at some jobs that I probably should have left earlier in my career. But I also do have a theory in life that there's a spectrum and some people psychologically have an extreme need for stability or what psychologists call belonging. Others have an extreme need for independence. And I think if you can figure out where you sit on that spectrum, it can then help inform your life choices. Not everyone should be an entrepreneur, particularly if you're on the sort of need for stability and belonging side of the spectrum.

54:57I know that I'm on the high independent side of the spectrum. And so you have to live your life choices that are consistent with where you are on the spectrum. Great. Well, Jonathan, thanks so much for taking the time and good luck. Well, thank you so much. Thanks for listening to this episode. I hope you found a nugget or two to take away and apply in your investing and your life. If you'd like what you heard, please tell a friend and maybe even write a review on iTunes. You'll help others discover the show and I thank you for it. Have a good one and see you next time.

55:29Thank you.