449 Google’s Free Cash Flow Went Negative For The First Time. Does it matter with $242 billion in cash? | The Pirate Street Journal

0:00Thanks for pressing play and welcome to this very special episode of the Pirate Street Journal. My name is Christopher Lochhead and yes, I am also the host of Follow Your Different. And what you're about to hear is something that I've been dreaming of for quite some time and we got a lot of feedback that people wanted us to do it, so we're doing it. And so what the it is, is a regular look at kind of relevant business news through the category design lens. it's predicated on the crazy idea that, you know, the Wall Street Journal doesn't know how business works. And as outrageous as that sounds, it's true in the context of most business press is focused on companies, maybe products and technologies, but almost never market categories.

0:49And so what the Pirate Street Journal is, is we take three important business topics of the day. And Eddie, Bree, and I look at those topics through the category design lens and share them with you and in and out in 30 minutes. It's the Pirate Street Journal. It's a very different look at business, and I sure hope you enjoy it. And we're going to be releasing PSJs on a regular basis for the foreseeable future and drop our regular follow your difference that are either one-on-one with me or a conversation with a legendary guest. So without any further ado, this is the Pirate Street Journal on Folly or Different.

1:25Hey-ho, let's go.

1:43Christopher Lochhead: Today's first topic, Alphabet just posted a blowout quarter and the stock fell anyway because free cash flow went negative for the first time in company history. We're going to show you why the journal's one great chart is totally missing the point. Topic two, the lawyer who built Kirkland and Ellis into the biggest, most profitable law firm on earth just co-founded the AI startup that could shrink it. And topic three, CEO James Sill grew M &F Bank stock, a Black-owned bank, over 12x in five years. This is the power of charitable investing over charitable giving. We're recording on Friday, July 31st.

2:17Christopher Lochhead: Hey-ho, let's go. Topic one, Alphabet. Second quarter revenue,$119.8 billion, up 24 % year over year. Cloud revenue up 82 % with a backlog that hit$514 billion, up from$460 billion just one quarter ago. Net income up nearly 300 % to$112 billion, a blowout quarter by every normal measure. But the stock fell anyway. For the first time in company history, Alphabet's free cash flow went negative, about negative$6 billion for the quarter. CapEx hit$44.9 billion, double last year. And Alphabet raised its full-year CapEx guidance from$195 to$205 billion, blowing past the$200 billion line one analyst called the markets do not cross number.

3:06Christopher Lochhead: One truest analyst said 2027 capex could hit 270 to 280 billion the wall street journal ran a chart one great chart they called it alphabet's cash flow falling off a cliff into negative territory the journal says it is worrying except the same feeling that produced it shows alphabet sitting on 242 billion in cash and marketable securities so the question isn't whether alphabet is spending too much it's whether the journal understood what it was looking at or is it lying with the truth so eddie is negative free cash flow the market's new red flag? It all depends on what you think big is, right?

3:44I mean, minus$6 billion sounds like a lot. But as you said, Bree, in the context of$42 billion in cash, it's not a lot. And in the context of operating cash flow growing like gangbusters, what are we really talking about here, right? And so this is the part when it comes to the Pirate Street Journal, what we're trying to do is we highlight, hey, when the Wall Street Journal, which we all, you know, we like it, we subscribe to it. You can't put out one great chart to try to make a point for a company this complex and this, you know, what it's going through from a category design perspective. It's going from a historic advertising-based monopoly to taking the 76 % of the economics that it has in search to a new category in AI that they're using this massive amount of cash flow to get to.

4:31And so what is kind of striking, in addition to some of the numbers that, you know, Bree, that you shared, was that, you know, search is still a monster business. It's not going anywhere. And in fact, they're using AI to improve it. That's what happens when gross margins expand and operating profits percentage expands as well too. But what was really kind of striking to me is that search added about$8.3 billion of incremental revenue. Cloud, at a smaller base, added$11 billion of incremental revenue. So I think for the first time that I can remember, the cloud part of Google is growing faster than the search part of Google on not a percentage basis.

5:09We knew that. On a dollar, absolute dollar basis. And that's remarkable. And what that says is that That is one of the greatest achievements in modern tech history right there. Sorry to interrupt you, Eddie. Say what you just said again about their revenue. Yeah, for the first time, not from a percentage, but an absolute dollar amount. The cloud's incremental growth, their share of growth was$11 billion. search was only 8.3 billion only 8.3 billion and search was at the time the greatest category king position you could have in the internet if you go back you know what one of the most models ever the fact that a category king in such a dominant space could actually achieve a category, excuse me, dominating position in a new category cloud is shocking.

6:04This hardly ever happens. What Google has achieved is mind blowing. And there was a long time where I didn't think they would be able to do it. They are doing it. Look, Wall Street is mental, okay? The journal, here's the thing we all have to understand about the Wall Street Journal. And I love the Wall Street Journal. And I remember when I moved to the United States and I could get the journal delivered to my house. Oh my God, was the Lord himself. Anyway, we love the journal. However, we got to remember these people are in the business of selling shock and awe. If it bleeds, it leads, right?

6:41And so they're not really in the business of educating. They're in the business of shocking so that you click. So that's part of it. The other part of it is there's a whole bunch of day traders who make decisions based on trying to, you know, make a little money in the short term. I say, fuck all those people. What Google is doing here is nothing short of extraordinary. 24%. Are you insane? Now look, on the losing money part, it's also nuts because how much cash do they have on the negative cash flow issue? How much cash do they have? $142 billion. Okay. And then I just checked. This is somewhat reminiscent, Bree, of back in the day with Amazon.

7:22When Amazon was first growing, everybody was saying, well, yeah, they're growing. They're the fastest growing company in history, but look at how much money they're losing. And so I just went back and took a quick look. And the company was, Amazon was incorporated in 94, and they didn't have a full year of profitability until 2003. And look, back then, people were losing their minds about all this stuff. And I asked the AIs the following question, And this is the question that matters. How much is Amazon stock up since its IPO? 300 ,000%. So the question always in these situations is, do you think Google is worth more in 10 years than it is today?

8:10That's the question. The other issue that's going on here is there is a massive CapEx buildout happening in tech, like one that's never been seen before. And so the aggregate CapEx guidance for the MAG-7 for this year is somewhere between 700 and 750 billion. And so the other thing that's going on here is there's a CapEx arms race going on because the stakes are that high. And what drives the stakes? Category potential. AI is showing the greatest category potential, aka growth potential, ever exhibited, ever. And so nobody wants to get caught. And so, look, you can not like the strategy. You could think that they're effing up.

9:01That's fine. But the reality is there is a method to Google's madness. They're sitting on one of the largest stockpiles of cash in history. They have more cash than the GDP of a lot of countries. and they're investing in the future. And what does the Wall Street Journal and the stock market do? Freak out like donkeys. Yeah, I mean, this is one of those things where you just have to look at the numbers holistically and you really, I mean, unless it's an amazing chart, one great chart can't explain it because what you're looking at is the quarter actually suggests not looking at the quarter. When a company announces earnings and they drop their 10Q, the journal, they look at the quarter.

9:43What you really ought to look at is take that quarter, the last 12 trailing months. That tells you the full picture, right? And you want to look at it not just on the cashflow statement. You want to look at the income statement and you want to look at the balance sheet. All of those things have to be seen together in conjunction. And when you have a 12-month trailing view like that, what you see is that the 12-month trailing revenue for Alphabet slash Google, $446 billion. dollars. 12 months trailing. And it's growing. What do you want from these people? Are you not entertained? They're going to go hit a trillion dollars of revenue at some point.

10:20They're going to hit a trillion dollars of revenue. Yes, those Google guys are fucking this thing up. Operating cash flow is$186 billion. So they got money to spend. Yes, they've cut dividends or they've cut buybacks for sure. Good. Right. Listen, a stock buyback. They've made out of debt. That's good as well too, because they're adding firepower to their war chest so that they can build out and be on the early side of the S curve with this. That's the whole point that's going on. Yes. And a stock buyback is an omission of the following thing. We have run out of ideas. We don't know how to grow.

10:54So we're going to buy our stock back to artificially grow it. That's what a stock buyback is ultimately about. We've run out of ideas. So with Google, they're doing what you want them to do. They are, listen, there's two kinds of companies, right? Those that are prosecuting a forward potential opportunity and those that are milking a category king position or an existing category, right? And so what these guys are doing is extraordinary. And we've never seen this before. We're seeing this in the MAG-7 and we're seeing this elsewhere in tech, where category kings from the old world are successfully pioneering into the new categories.

11:35This is an unusual thing that we're seeing here. And interestingly enough, if you look at most of the companies doing this, you know, they are either A, founder-led still, like NVIDIA, or B, they have a CEO who acts like a founder, like in Microsoft's case with Satya Nadella. Or with Sergey coming back into the business after being on the beach. Well, and the interesting thing about Sergey coming back is, you know, what we're not hearing is a power play, a drama, a soap opera going on at the top at Google. Now, maybe it is going on. I don't know. But it appears to be that the founders and the current CEO are actually getting along and getting on with the business.

12:25There's a lot to be done. And listen, if I'm Sundar, if I believe we have a great CEO who knows how to run the business, I'm stoked. I get to partner with this executive who's a real leader. And I get to say, where do you, where can I help? And I go and work with product teams and I go and I do my thing and all this stuff. And, and I, and listen, a legendary founder with a great CEO who partners with that CEO can be unstoppable. It's very unusual, but so far, I'm impressed. One other thing on Google. Google is a sleeper in the following way. We all know there will be a new mega agent, mega application for consumers that ties everything together.

13:12Our schedule, our emails, our messages, our socials, all this thing that aggregates it all in one, and that we can wake up in the morning, talk to our phone and say, hey, what's up? And it's going to be our true life partner, okay? Google is best positioned to pull that thing off. And the company that pulls that off will become a huge part of what you might call the experience layer in AI. And that experience layer in AI is how we're going to interact with technology. And because of Gmail and all their other assets and because of the trust they have, they could be that company. Apple could be that company too.

13:53Those are the two that could be the one. What Google has that Apple does not is YouTube as well, right? Because you have their Gmail, calendar, all your personal information. And then what you have in YouTube is an unstoppable flywheel of what you might call the world's Harvard, Stanford, a thousand times X, where all the world's knowledge is being concentrated into YouTube. And that the moment that their Gemini or their version of AI is able to tap into and do inference learning on YouTube, it's game over at that point. And so we think we were bullish on Google from the get-go when we did the six-layer AI cake part that they control a lot of the bingo board there.

14:33To Christopher's point, they have the consumer, right, with the YouTube as well as Gmail. And the lastly is that they have, alongside Microsoft, they have successfully refuted the innovator's dilemma. They are not going to be disrupted. it. They are not going away anytime soon. And in fact, it is because of their size is their ability to win an AI because of the massive amount of investments. Like when they take on 40, 50 billion dollars of debt, you might think that's a big number. Their total equity in the balance sheet is like five, six hundred billion dollars. It's a rounding error. And as a side note, if you want to understand how remarkable what Microsoft and Google and Apple are doing right now, all you have to do.

15:13Look at IBM's most recent quarter. Terrible, horrible run company.

15:23Christopher Lochhead: Topic two, David Fox spent two decades at Skadden, came its most senior partner, and then shocked the legal world in 2009 by jumping to Kirkland and Ellis, a firm with barely any M &A practice at the time. He rebuilt the playbook. By last year, Kirkland became the first law firm in history to cross$10 billion in annual revenue. Fox is 68 now. He just co-founded Irving Technology, the software powering a new AI-based law firm called Irving. Fewer than 10 people, a mix of lawyers and engineers already advising on real deals while running in stealth. Its AI is built to perform like a high-level senior associate.

15:59Christopher Lochhead: He's not alone. Kirkland set aside$500 million for its own AI platform. Freshfield's partnered with Anthropic, and clearly Goatlieb bought an AI legal tech firm outright. Two more AI native firms backed by Bain Capital, Blackstone, and General Catalyst are already live and hiring senior lawyers away from the big firms. He wrote the growth playbook for the most profitable law firm on the planet. Now he's building the machine that could shrink it. His own words, do I need 5 ,000 people who are really talented or can I do it with 20? So, Christopher, is this the future of every professional services category?

16:39Pretty much, yeah. I think so. And here's the thing that's happening here. The model is inverted. And what I mean by that is what most people are doing is saying, how do we bolt AI on to our current business? That's what most law firms are doing. And there's, you know, that's a smart thing to do. However, that is more in the incremental domain. What we're hearing here is more in the exponential domain, right? So rather than making thousands of people more productive, can we make 20 superhumans? And that's the experiment. And look, we actually need to find out. And so can a group of 20 with AI produce the results of 200 or 2 ,000 or 200 ,000?

17:32We'll see. I think most people would say if we're not at the 10x developer now, we're certainly close. I've heard some people say we're beyond the 10x developer. If the three of us think about our personal productivity and what we're able to do as a team with AI on the team, I don't know. I think we operate more like maybe not a 30-person company, but we certainly operate more like a 10-person company than a three-person company. So it is a, look, it's the experiment that needs to get run. And here's the thing. You want to be one of the 20 with the AI. And the way to do that is to make AI the co-founder of your career and or company.

18:16That's the way to do it, which is what this startup effectively is. What he's saying, and whether he realizes it or not, is traditional law firms were founded with people at the core, and now we're bolting AI on. I'm going to do this experiment called I'm going to found a law firm with AI at the core, and I'm going to bolt people on. And so you want to be one of those people. And so who are those people? Well, the people who thrive in AI are the ones that make the shift from being a knowledge worker. I acquire high-end valuable knowledge, and I apply that knowledge to affect an outcome. Now you move to becoming a creator capitalist.

18:52It's not about the application of existing knowledge. It's about the ability to create net new things with AI. And so is creativity in the law an oxymoron? Probably not. And we're about to find out. I think to Christopher's point, what Fox is really proving out is what I've long believed is that, you know, I hate to say it, the senior partners in any professional firm have most of the value. it's just kind of how it is and it's not that they're smarter even though many of them are but it's just they have something they have outcomes and they have not just the knowledge they have the battle scars and the experience that tells them what to do in what situation it's called context and they have decades of it and Fox has proven it you know he's not a one hit wonder you know he's gone from one firm to another firm and built them into massive you know billing machines and smartly what's really interesting about Fox is that he has the wherewithal to do exactly what you said, Christopher.

19:49I'm not going to reinvent AI in the existing structure. I need to do it outside of it. And that's the key part of it is that anyone that I've ever talked to who's been a senior partner, whether it's, you know, the law, accounting, consulting, you know, banking, whatever, it's an apprenticeship. It's not just about what you learn. It's the come alongside, let me show you how it's done. And the apprenticeship happens when you're a 1L in law school, when you're a first-year associate to a junior partner, to a senior partner, to an ultimate rainmaker. There's different steps along the way. And Christopher, we've talked about it as you go from the Padawan, the Luke Skywalker, to Obi-Wan, to Yoda.

20:26And you know what? When we would elect new partners at Cambridge, one of my longtime mentors, you know what he would say? He wouldn't say, what was their revenue track record? What was their, you know, articles they've written? You know, have they created new, you know, intellectual capital? He would say, do they have the force? Yes or no? And it would drive me nuts. I'm like, what are you talking about? He's like, do they have the force? And you just kind of know it was unquantifiable and they had it or they didn't have it. And so this is the part that, you know, there's no amount of AI, in my opinion, that can really reverse engineer that.

21:00And that's why, and David Fox has to teach that through an apprenticeship model. He cannot just write it down because he's probably unconsciously competent about it. And therefore him going to an AI-based law firm from the get-go is the best way. I would actually suggest that he build Adelphi and a David Fox bot like we have a Christopher bot and an Eddie bot. But the reality is there's so much kind of stuff in the force that Yoda has more than Obi-Wan has, more than Luke and the Padawans have. And that's the magic that needs to be captured in AI. And it can only be done not in an existing model, but in a new model.

21:38And that, you know, when Kirkland Analysis set aside$500 million to build out AI, that's great. I think they're going to light their money on fire, frankly. They should set aside as a war chest to do tuck-in acquisitions, or frankly, they should be seeding Fox's thing to see if they can do it. Because the reality is all the value is going to be in the senior partner that has all the force, that context, battle scars, and knowledge, plus some 20-year-old kid who's an AI native who's, you know, vide coding, you know, up the wazoo and able to do that. That's the layer. It's the middle layers, which ironically is the Achilles heel of the professional services firm because the middle layer of associates, you know, kind of managers, you know, manager of managers, they don't have value in the new system.

22:26They have value in the old system, which is predicated on a pyramid. You need a staffing pyramid so that all those people at the bottom level are high margin people that pay the people at the top, but they don't have value in the new system. And that's the hard part of it is that you have to feed the middle to keep the continuing business going. You don't have to do that in a new structure. And that's what David Fox is doing. And that's why I think, you know, I would bet on that. And if I were an attorney at one of these ding-dong law firms, I would be thinking much more like a VC than I would be thinking that I, as an attorney who's used to managing risk and delivering, you know, generally speaking, what are zero-sum outcomes, that I can create something that's a new category.

23:06I would just be very skeptical that they have the wherewithal do that. Here's what's happening. When the movie camera was first invented, what did they do? video tape plays. And then one day, category designer discovered some Mary Jane and had a little bit of bourbon and said, huh, what if rather than taping plays, we actually made entertainment purpose built for these cameras? Ah, ta-da, movies. Right now, most law firms and And most S &P 500 companies are videotaping the play. Now, with David Fox and what he's doing in AI law, what's really kind of fascinating about this is if you take a step back, what is the problem that they're trying to solve for?

23:54It's the billable hour, right? Is that most of these attorneys, they charge by the hour. And if you've ever worked with an attorney, what do you do? You watch your own clock because you don't want to be charged for stuff that you don't actually need. So if you're working with an attorney and then talking about stuff that doesn't remain to you or making small talk, you want to make sure that you're not being charged for that, right? And I've been on the other end of that and it doesn't feel good. And the reason why these law firms have really scaled over the years is that the average billing rate per hour has skyrocketed.

24:22It's gone higher and higher and higher to an amount that seems pretty obscene where the top senior partners can charge thousands of dollars an hour and, you know, people pay for it because they have expertise. The reality of what David Fox is doing is that he was able to be successful in that model with an escalating billable hour. But with AI, what he's actually going to do is grow abundance by decreasing the billable hour, right? Because what's actually going to happen is if you take all the force that's in his head and you put it into AI, and that he might be able to charge, you know, who knows what, thousands and thousands of dollars per hour.

24:56The reality is you get David Fox at scale. You get senior partners like him at scale that can be available to people who want a super ding-dong attorney but can't afford him, but you can get the AI version of him at scale. Just like you can get the Christopher version, his AI bot at scale without having to pay what you would normally pay for consulting, the same with me. And the reality of all of this is that it might be a little messy in the transition, but what Fox and AI and others like him are actually going to do is make 1 ,000 Foxes available at much lower billing rates. And guess what's going to happen is that the law category as a whole, the pie is going to get bigger.

25:37More people will get access to greater, the best attorneys to make sure that the law is served the right way for them. And that's all good. The category of justice should go up. The category of legal should go up. It should be made more available to more people. That's all abundance that's coming. Now, if you are stuck in the old way of I make money by charging an escalating billable hour, that's not going to be great for you. But if you're kind of fixated on the number of people who should be using attorneys should grow. The number of people who can access great attorneys should grow. And if that is the case, the number of correct outcomes from the legal system should increase.

26:16That's something that we should all feel great about. And two quick things. Number one, all professional services are moving to outcomes. You heard it here on the Pirate Street Journal. McKinsey is now 25 % outcome-based, not time-based. Nobody cares how much time it takes. No one cares. What they care about is results. And so professional services charging for time is a dying category. Professional services charging for outcome is the future. And here's what the future of the law is. You ready? My AI bot sues your AI bot and an AI bot judge decides who wins.

26:59Christopher Lochhead: Topic 3. Optus Bank in South Carolina founded in 1921. M &F Bank in North Carolina founded in 1907, the second oldest Black-owned bank in the country. The two of them just announced a merger. Combined, they become the largest African-American-owned financial institution in the United States, 10 locations across the Carolinas,$1.27 billion in combined assets, a deal worth more than $105 million. M &F CEO James Sills became CEO of the combined bank when the deal closes in the fourth quarter. And M &F stock tells its own story. Five years ago, right before Christopher and Eddie wrote about this bank in the Harvard Business Review, it was trading under$4 a share.

27:42Christopher Lochhead: Today, it's nearly$48. That's more than a 12x return and a bank most of Wall Street has never heard of. Two institutions that survived Jim Crow, the Great Depression, and a century of being locked out of the traditional banking system just got bigger by choice, not by distress. So, Eddie, is this proof of the power of charitable investing? Oh, 100%. And the fun part of this is that I actually got a chance to talk to James Sill like six years ago, just kind of on a lark. So, Christopher, when we were working on the whole justice deposits thing that we wrote about in HBR in December of 2020, you know, it was really around this whole idea of, hey, surely there's a way to address some of the systemic inequality in the system that comes from, you know, the average African-American household net worth, much lower than the average norm for the American and what's the issue.

28:31And we know that there's been a history of redlining and other, you know, horrible lending practices that have been really detrimental to the African-American community. And the simple answer was, it's not that you need the legacy banks to change, you need some other banks that are minority deposit institutions or MDIs or black-owned banks to kind of be a credit and an alternative source of funding for mortgages, small business loans, and whatnot. And that model has generally worked well. The challenge has been the black-owned banks have been subscale and they've needed to grow to get the economies of scale because that's what really what retail banking is.

29:05And so we wrote the article in HBR about justice deposits, which was just a lovely solution. It was not charity. It was, hey, companies that hold, you know, they have a treasury department, they keep cash on the books, you know, just for working capital purposes. Could you put that in a minority, an MDI or black-owned bank? And that's kind of where the effort started. We got churches and other organizations and clients to move on that, and that was all great. The next level of investing from a charitable investment standpoint was to actually invest and own some of these companies. And so in part, I was doing research and I cold called James Silb and I kind of froze for a second because I called and I got his voicemail and I was like, I haven't left a voicemail for anybody in like two decades.

29:51So I left the voicemail. He calls me back and he says, I haven't gotten a voicemail from anybody in decades. And I figured I better call this guy back because he went through the trouble of actually tracking me down and leaving the voicemail. We had a lovely conversation and I just walked away thinking like, this guy, he's a great operator. He has a vision. He's keeping it simple, which is great. And so what was kind of funny was for my kids' investments accounts, I think it was for Audrey, we actually put some money into M &F. And the stock went up and we sold it. We thought, hey, that was a good thing that worked out.

30:22Turns out we should have held it because when we wrote the article on HBR. Didn't Warren Buffett say, what's my time horizon if it's a good company? Forever. Yes, yes. And that was exactly right. And it was just one of those. It was under$4 a share. The transaction closed at$48 a share. And what he's done, it's just kind of good old-fashioned execution and strategy, right? He got other organizations to put money into the balance sheet for M &F Bank, which was great. He managed costs, managing overhead. He updated operations and cut non-interest expenses. You know, he originated new revenue through SBA loan, which is all great.

31:02And guess what? He bought back shares, which boosts earnings per share, which boosts the stock and all that kind of good stuff. And so, you know, congrats to CEO Sills for not only kind of engineering the merger, but really doing a bang-up job in kind of shareholder value, right? Just kind of really delivering great returns. And I think that's the real point of this is that we should have a higher bar for not just charitable giving, but charitable investing. This is a mini book that we're writing about that's coming out shortly. But this idea that you can do good and make money at the same time.

31:36And it's absolutely true. They are not contraindicated and they are not, it's the Venn diagram can and should overlap. And CEO Sills is proof positive of that. So there's lots to love here. First, from a pure category design perspective, and I'm blanking on her name, so I apologize, but I had one of the co-founders and COO of one of the large black banks on the podcast when we did this. And one of the conversations we had was this whole idea of, should we category design as a, quote, black bank? Like, what the hell's a black bank? And we had a conversation about that. Well, it turns out... Pardon me?

32:21Terry Williams. Terry Williams. Yes. Her and her husband started off small, I think, community bank, maybe in Boston, if my memory is correct. It was a couple of bourbons ago. But yeah, incredibly impressive. Anyway, here's the interesting thing from a category design perspective, and we probably don't talk enough about this. There are certain companies that their category design is predicated on who the super is when the super is a highly identifiable person. You know, recently we talked about Black Rifle Coffee. Well, their category design is around this sort of very particular kind of uber American patriot, pro-military, et cetera, et cetera.

33:05Well, a black person in that sense is a super consumer that you're niching down on. Now, it's a massive niche, but that's what it is. It's a specialization, right? Okay, so it worked. Niching down on the characteristics of your super can work if you commit to it powerfully and if it is truly different. So there's that. The second thing is two things can be true. If you look at the data, it's hard to argue, and I know this is really like freaks people out. It's hard to argue that the United States isn't the least racist, that is to say most inclusive country on the planet. And the data shows it without walking through all that data.

33:51However, that can be true. And we are also not dumb. There are still problems. There are still racists. There are still issues. And so one of the things that I object to with things like DEI is sort of the government forcing the finger down on the scale. However, private individuals can put the thumb down on the scale whenever they want. And I was just checking as we were talking. Major companies got behind justice deposits. So Netflix, 2 % of global cash holdings over$100 million. Alphabet,$500 million. uh block did it paypal did it 500 million dollars jp morgan bank of america wells fargo state street moody's all bought um stock and did deposits um costco dick sporting goods aflac etc etc and so here's the reality when a group of people wake up and go you know what we don't want the government mandating quotas to us but there has been an injustice in banking committed to black people, and we need to unfuck it.

35:04And one of the most powerful ways to do that is to support legendary black banks. Now, the legendary bank part of it is the most important part because Netflix isn't giving anybody$500 million unless they think they're a legendary bank, okay? So that's the other piece that needs to be underscored here. These are great businesses run by great people who are producing value for their customers and their shareholders. And the combination of that plus an acknowledgement of injustices in the past and some injustices today means we are harnessing the power of the free markets to fix societal problems.

35:44And that's what I love. This is a category design story, and it's a triumph in that regard by focusing on good business practices coupled with trying to do the right thing. Yeah, I mean, the key part to all of this is that I think what it means is that for a couple things, if you are inclined to charitably give, then we're just asking you to work a little harder with this, right? because you want to look for opportunities where everybody's interests align. You can do good and make good money as well too, right? And that this has happened a couple of times. We partnered our family with Rick Guzman, a good friend of ours who started the Neighbor Project in a lower income area near us called in Aurora.

36:29We bought a two flat house and, you know, what was amazing was he and the Neighbor Project took it over and they rented it out to folks who were either refugees or kind of low-income families. But the requirement was you had to pay market rents, which they collected, and they had to actually, rather than pocket the money from that standpoint, they saved it up. And when they were done with their tenure, you know, 12, 18 months in the home, going through programs about, you know, understanding their finances, kind of clearing out debts and whatnot, they handed them back a$10 ,000 savings that was the accumulation of their market rents that they paid that they went up to use to buy their own home.

37:08with that. And we did that for a while. We weren't charging rents with it. And, you know, we had maybe a dozen or so families cycling it out. House value double. So we made money. We sold the house back to them. They were able to help families out there. These models exist. They require, guess what, category design to kind of figure out how to do it. But if we told you that, yes, you can do good and you can make money at the same time, who wouldn't want to do that? And that, ironically, by putting a financial incentive on doing the right thing, guess what's going to happen? More people are going to do it.

37:43And whether or not it comes from a good place or not doesn't really matter. If you're going to do the right thing because there's a financial incentive or not, who cares? Like the more of the right thing is going to happen. Harness capitalism to do good things in society. It works. This is proof.

38:00Christopher Lochhead: We'll see you next week, Pirates.