Beating the S&P For Generations with Davis Funds Chairman Chris Davis

28:57And I think there's, you know, the idea of wanting – well, look, Barry, let's – I mean, if you look at the greater world, there's a lot of fear. And fear can be a motivator. But God, is it a weight to – you know, people live, you know, one operation away from bankruptcy or, you know, a layoff away from being foreclosed on. And that is it. I mean, if you as a parent can put a safety net, if our society doesn't, if you as a parent can do that for your kids. And my grandfather did that. And my father did that. There was I don't think we ever grew up with the feeling that there wasn't a safety net.

29:36And so the freedom from that fear is a huge gift you give your kids. It was a huge gift that was given to me. And that's what gives you the confidence to be able to try anything. Right. Because you're not worried that, you know, especially when you start having kids and you think, my God, if, you know, I can't, I can't take this risk. I can't leave State Street. You know, it's, it's like, it never occurred to me that I couldn't leave. And, and, and so I, but I think their view was, you know, if you raise your kids with, you know, the fortunate thing was both my dad and my grandfather were very frugal.

30:16And so we didn't live in hardship, but we certainly didn't go to Southampton and Palm Beach and Aspen. And, you know, that was all, you know, they had a very sort of puritanical sense of that. Interesting. You know, that sort of view that, you know, we went out to Fire Island and we had a house on stilts that I still have a house out there, you know, and it's in a swamp. And, you know, it's one storm away from the end and there's no cars. You take a little ferry out there and, you know, I always think of it as the anti-Hamptons. Oh, very much is. Yeah. And so, and that's what I love. And, you know, my parents had a place in Maine, but it was just, you know, it was not a fancy deal.

31:03Like a little cabin, not a bunk port. They had a nice house, but it wasn't a Newport mansion. And they had it because, you know, they used to call them in the 20s, people like my grandparents were called rusticators. Isn't that a funny word? And it was people that were wealthy but would go and live very simply in the summer, you know, very – and that – it's very much just sort of a Scandinavian ethic. And I think it developed in especially in the late 19th century. There was a movement called the Chautauqua Movement that I'm still a supporter of, which basically said as the bourgeoisie and wealth was being created, there was this one branch of wealth creators that decided they wanted to be English aristocrats.

31:49And they built mansions in Newport and they had yachts. And then there was another branch that sort of said that's not the American way. And they – and in many ways – I mean Rockefeller in many ways embodied a certain amount of that, that sense of stewardship. Some were even more extreme in terms of restraint. But the Chautauqua movement sprung up and said they created these – there's still one left. It's in upstate New York. But where you would go with your family for self-improvement. And you would live simply and there would be lectures. There would be you would improve your mind. You'd improve your soul and you'd improve your health.

32:31And you bring your kids and there would be sort of day camp for the kids and there'd be church on Sunday. But it was a non-denominational church that was about service. And and then there was, you know, there were lectures. It's where Salman Rushdie was stabbed. If you remember a couple of years ago, he was in Chautauqua. He was lecturing at this place that still exists. where people go for a week or two weeks every year. So that's what the place I go on Fire Island was part of that Chautauqua movement. But the ethos of it, I think, is something my parents and grandparents really subscribe to.

33:05Huh, really, really fascinating. Coming up, we continue our conversation with Chris Davis, chairman and portfolio manager at Davis Advisors, discussing how he developed his philosophy and investment process at Davis. I'm Barry Rickholz. You're listening to Masters in Business on Bloomberg Radio.

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36:33I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. Chris Davis is my extra special guest. He is the chairman of Davis Advisors in 2005. He was named Morningstar's Portfolio Manager of the Year. He helps to oversee$20 billion in client assets, a healthy chunk of which is he and his colleagues. We briefly mentioned Buffett earlier. Later on, I get to ask people who their mentors were, but I have to bring this to this part of the conversation. Warren Buffett and Charlie Munger were your mentors? Is this remotely true? It just seems insane. Oh, I mean, it started in, I want to say it was 19.

37:27it might have been 1990. So he's already a well-known investing rock star at that point. Well, the way it really started was with Charlie. I met Charlie long before Warren. Oh, really? But the reason was I was trying to sell a business. My grandfather, as I started going through his accounts and going in there on the weekends, he had a business called Securities Lending. And I don't know how well you know that business. And - Anytime you're going to short a stock, you got to borrow it from somebody. And that's going to cost you a little margin. It's going to cost you a little margin. So my grandfather's view was he had a portfolio of appreciated stocks that he was never going to sell.

38:08And he said, if somebody wants to short the stock - Knock yourself out. And pay me to borrow it, fine. And the number one borrowed stock in those days was Berkshire. Berkshire Hathaway. Of course. Because you couldn't borrow it anywhere because everybody had their certificates. and, you know, they weren't - Literally had the paper sales. Yeah, there was no, there was very little Berkshire that was in street name. It was an individual P, and therefore you couldn't borrow it. It was locked away and safe. Yeah, so he had a big holding and he had a broker dealer. Shelby Colm Davis was a registered broker dealer.

38:44And so he could lend out the shares and make a couple hundred basis points a year extra return on top of the Berkshire return. So that's how he started. in the securities lending business. But gradually, the guy who was doing it for him and administering it said, well, you know, we can also help. We've got all these people that want to short all sorts of different securities and we can act as what was called a broker finder. We'll go out and find the securities for these people to short and we'll make a little spread as they go through. Well, this business grew and grew and grew And soon there were, you know, 17 employees in the securities lending business.

39:27And it was a big operation. And my grandfather by then was, you know, probably in his 80s and was nervous because, you know, as I went through the list of counterparties with him, there were firms we had never heard of. There was this one called LTCM. And I said, what is this LTCM? We've got like, you know, five,$800 million lent out to them. Oh, that's long-term capital management. So we talked about it. He said, yeah, I think we've got to get rid of this thing. It reminds me, by the way, of what Jerry signed. So wait, did he hold on to that business or did they spin it out? So I said to him, like, you know, we've got to get rid of this thing.

40:13And he said, fine, well, see if you can find somebody to take it over because we do have 17 employees and they've made their careers here. We're not going to fire everybody. So we started calling around and I thought, what characteristics do we need? We need a lot of excess capital, ideally an appreciated portfolio of securities, sort of a AAA type balance sheet and somebody they can understand. So I thought, well, Berkshire. So a wonderful friend in those days named Bob Lenzner, who was a reporter at Forbes, but was very - I recall I had lunch with him at, I want to say, the Harvard Club. Yeah.

40:56I think he was an alum. It could have been. His kids, our kids were - I could be wrong, but - Our kids were in the same elementary school, and I got to know him just watching basketball games with third graders or something. And I heard his name around, and he said, he mentioned casually in the conversation that he had met this brilliant guy, Charlie Munger. And I said, well, I know who Charlie is, but I'm dying to meet him. And so Bob arranged for us to have breakfast. And Charlie was in New York. And I went down, it was at the Millennium Hotel down by the World Trade Center. And I went down and I sat down and introduced Mr.

41:39Munger. Pleased to meet to you. I'm Chris Davis. And I said, you know, I'm working with my grandfather, Shelby Cullen Davis, a company, and have I got a business for you? And I pitched our securities lending business and Charlie put up his hand after about four minutes. And he said, I have no intention of buying a business run by seven guys named Vinny. And Barry, it was the perfect description. I mean, We had Vinny, Tony, Mikey, Nicky, you know. And so we did end up finding a buyer eventually. Just not Berkshire. Yeah. And it wasn't really a buyer. We just did sort of an earn out. We just wanted everybody.

42:18We just wanted them to have jobs. And so they all got a job at a broker dealer. So beyond the pitch to Munger, how did your relationship with that? Well, so the pitch ended in four and a half minutes. And so I said, well, I'm sorry I wasted your time. And I got up to leave. And he said, where are you going? And I said, well, don't leave. I'm only just getting to know you. I'm not interested in your business, but tell me about you and tell me. And we got talking about, you know, a few things. But what really happened was I started listening. And as you can tell, I like to talk around Charlie. I just listened as much as I could.

42:56And we sat at that table till lunchtime. And Charlie said, I have to go to a lunch. but if you find yourself in Los Angeles, give me a call and I'll make time for you. And so of course I started going to Los Angeles pretty regularly. And so that was a huge gift in my life. And it was a gift professionally, but my God, it was a gift personally. I mean, he helped me through some hard times in my personal life. I mean, he was just a wonderful mentor in every dimension. So there is a lot of things that all of us have learned from Warren and Charlie through the letters, through the annual meetings, through just all sorts of stuff.

43:42I'm curious, what did you learn from Charlie that none of us can find in the public materials?

43:54Well. Good question, right? I think most deeply I learned about integrity in the traditional sense, meaning wholeness. Charlie was a whole person. He, the alignment, what he thought, what he said, what he did, they were all the same thing. And his sense of his own code of being was so disciplined, but was filled with this sort of, you know, his reputation as a curmudgeon may have been cultivated. I never saw it. He was a truth speaker, but he was also in a very profound way, a very loving person, very cheerful, very committed, profoundly loyal. And so it was, you know, I used to sort of joke that if I did a Venn diagram of the things that I admire about my father and the things I admire about Charlie Munger, there's surprisingly little overlap.

45:02They were both frugal. But Charlie was an incredibly broad thinker. My father was just single-minded about investing. Charlie was curious in everything. Charlie was very sort of committed to relationship continuity, to breadth. My father is very sort of specialized, very narrow. My father is incredibly physically fit and remains to this day very vigorous. You know, Charlie was willfully sedentary. You know, my father is very nomadic. And Charlie went to the same island in Minnesota. and lived in the same house his whole life. You know, it's very, you know, very much a creature of habit. And so they were very different that way.

45:55Just imagine if Charlie exercised, how much longer he could have left. I don't know, 99 and three quarters is pretty good. That's one of the things he said. He said, I'm not sure I see the alignment. So let's talk a little bit about the returns and about the philosophy. Back of the envelope, I calculated Davis Advisors has been compounding shareholder wealth at greater than 10 % annually since 1969. Does that sound remotely accurate? That sounds right. We're still ahead of the market from the beginning. Starting out in 1969, so you're early days of a horrific bear market. You have managed money through – well, you're in grad school but your dad during the 87 crash.

46:43You're involved during the dot-com implosion, during the financial crisis, during the pandemic. I mean you have seen lots and lots of cycles across all of these decades and all of these different environments. What key investment principles stand out as absolutely core, non-negotiable? This is the heart of what we do. Well, the entire investment process boils down to these two questions. What sort of businesses do we want to own and how much do we pay for them? And the types of business characteristics that we focus – and the interplay – I should say before I go on that the interplay between those two is part of the nuance of investing.

47:29You may own a slightly lower quality business because the price is so extreme. But the characteristics that we look for in every business have to do with the durability because we buy businesses thinking we will – our goal is to own it forever. Our goal is for the return to be driven by the earnings yield on the business over time, not by some change in the valuation and finding an exit strategy. And so those sorts of characteristics are exactly the characteristics you would look for if I said you've got to put a business away for your kids or your grandkids. So, you know, the nature of the business, the returns on capital, the competitive modes, the nature of the balance sheet, the risk, and very importantly, the character of the people running it.

48:19We spend a lot of time on management evaluation in this land of AI. You know, I just came back from the Markel annual meeting. You know, character will not show up efficiently, I don't think, in the AI world. And boy, does it matter when you think about navigating an unpredictable future. Just that ability to be resilient, to adapt, but always to be investing the money as if it's your own. And there are CEOs that do that. So those are the nature of the business. And then the valuation discipline is sort of the securities analysis part of what we do. If the first part is business research, then it's the securities analysis.

48:58It's adjusting the income statement. That's where the accounting training comes in. And it is understanding the incremental returns on capital. And it's adjusting the balance sheet, every account on the balance sheet. Because, of course, gap earnings is a convention, but it may or may not reflect reality. And so, you know, you put those two things together and we build an IRR, an internal rate of return forecast. We work on this concept of owner earnings in each business. And then we focus on the quality and the durability of the business. I can't help but point out that you talk about buying or owning businesses, not buying stocks.

49:43That seems to be like a very fundamental distinction compared to most fund managers. It's so profoundly important. You know, it is we view ourselves as business owners. We view the management as our partners. In most cases, we view the signs of short-termism as dangerous. It's one of the reasons we feel that the activist movement has completely lost the thread and should be greatly resisted, whereas it was very useful when it started. And we can talk about that later. But absolutely, we're owning businesses and we're trying to own businesses that are compounding machines, right? I watched what it meant for my grandfather to own businesses for 20, 30, 40 years.

50:34I look at our own portfolio. I look at companies like American Express or Wells Fargo or JP Morgan in the financial world. I look at more recently at companies like Amazon, Texas Instruments. You look at what a business can do compound over 20, 30 years. I mentioned Markel. You know, when I first met the now CEO of Markel, we met in Omaha at the Orpheum Theater at a Berkshire annual meeting in like 1990. The stock was at like 19 or 20 and it's at 2000 now. You know, and by the way, they have an activist idiotically saying they should split up the company. It's like a company's doing fine and it's a company that is being built to last.

51:15And the idea of getting a quick sugar fix because you could sell some part to private equity at a premium, that doesn't serve capitalism and it really won't serve the long-term shareholders of that business. You mentioned a number of financials in that list. I'm kind of curious because financials have had some pretty good years. They've had some pretty rough years. Obviously, the financial crisis was devastating. Although my pet theory about JPMorgan Chase is when they had their subprime problem, it predated everybody by five years and there was still a bid when they had to get out. So they got a little lucky and they happen to have a particularly talented CEO.

52:02But this concentration of financials, I'm curious what led to it, and I'm curious of the relationship between what some people describe as high conviction investing and concentration in a particular sector like financials. Well, I think high conviction investing is exactly the right description. And if we end up with a focus on a particular sector, it's not necessarily because of a view of the sector. It's because the individual companies. Financials is one of the most misleading sectors there is because to me, what creates a correlation risk is when businesses are tied to the same macroeconomic variables.

52:46Financials is a massively broad category. There are financials that have risk if the wind blows in certain parts of the world. There are financials that have risk if interest rates change. Financials that have risk that have to do with recession, some to capital markets. They are all different. And I'll give you a really powerful example. I started our financial fund, I don't know, in something like 1990. That fund from then to today has outperformed the S &P 500. And it has outperformed the S &P 500 quite meaningfully when you compound it out. At the time we started it, I didn't even know there was a financials index.

53:27But it was founded with this belief that one of the – and my grandfather, of course, specialized in financials. I started as a financials analyst. And he had a phrase that he loved, which is, in financials, you can find growth stocks in disguise. And he said, the reason is, is that you have businesses, industries that are huge, where companies can grow for a long period of time by simply growing. Just this year, Progressive finally passed State Farm. Progressive has probably compounded in the high teens for 30 years. and it still is just, just became maybe the largest insurance company in personal auto.

54:07So you have these massive industries where you can compound for a long time without outgrowing your sector. Second advantage, the business model doesn't really go obsolete, right? Making a spread on money is about the oldest business there is. Maybe, maybe the second oldest, right? Thank you. What else? It's an industry where you have huge dispersion of outcomes but relatively homogenous valuations. So you, I mentioned progressive. I mean, you have companies that have grown Capital One. You look at Capital One's growth record from 1987 today, and yet it's trading at nine or 10 times earnings because it's a financial.

54:48I'm like, it looks like a growth stock to me, right? I've got, it's still run by the founder. It's a fintech company. It's a data science company. It's in the top 10 of all holders of AI and machine learning patents, but it trades at 9.8 times earnings and 1.2 times book value, liquidating value, with a mid-teens return on equity. It seems just nuts to me, but whatever. We love it. So that's the idea of growth stocks in disguise. And the last advantage of financials is that culture is a defining and sustainable difference. This is a theme I have heard from so many really savvy the executors, CEOs, as well as investors.

55:30How do you as an investor wrap your arms around culture? It feels like you almost have to be in it to see it. Like, is it something that as an outside investor, you get access to? How do you identify quality culture? Well, it's a perfect question, but I'll give you the punchline for the differentiation. Last year, our financial fund, which is 95 % in large cap financials, outperformed the S &P Financials Index and the XLF, the largest financials ETF, by 1 ,200 basis points. Not too shabby. Right? So, I mean, it was a great year for us. But the point is that they're in large cap financials. We're in large cap financials.

56:18How can you get such dispersion? Right? But the same is true. Because they own everything and you own the better companies. But they're very concentrated. They're concentrated in the mega cap banks by and large and Visa and MasterCard. But we're fairly concentrated too. We only have 20, 25 names. And 20 or 25 names are probably 80 % of the index. Does the gap come from the stock selection or the screening out of what you don't like? Well, it really goes back to the culture question. So to bring it full circle to your question about culture, what it is is that within financials, we are looking for the companies that we feel can be compounding machines.

57:02And we're looking for the companies where their culture creates a durable advantage. The reason culture can create an advantage in financials is because in most cases, your cost of goods sold is an estimate. And if you have an aggressive management, they can use accounting to upfront earnings that you'll pay the piper three, five, excuse me, 10 years from now. So they can look good for a long time. Whereas if you do the opposite, if you have a good culture, you're understating the near term, but you're building cushion for the long term. And so when the times go rough, when the tide goes out and you see who's swimming without a bathing suit, that's where the culture really matters.

57:49Now, you mentioned all of the crises that I've seen over my career. I've seen a lot of these management teams and these companies go through crises, and you see who's wearing a bathing suit. So we just went through an interest rate crisis, right? 2022, 500 base points. And we used to get questions from clients all the time. Why don't you own First Republic? In October, my colleague, Pierce Crosby, wrote a research report, just internal, just for his own, saying he's just startled by the amount of risk Silicon Valley and First Republic are taking. He said, it's sort of amazing. Look at the duration on their assets.

58:27They're assuming that their liabilities, their deposits are gonna be with them for eight, 10, 12 years and that they're uncorrelated. So, you know, we used to get questions. Why don't you own them? They've had such great growth records. And our view was, well, it's been a mistake not to own them in terms of they've outperformed, but we are not going to own the companies that are optimized to the upcycle, right? And that's a different culture. They had a growth culture, but it blew them up. And so we instead looked at companies like, well, J.P. Morgan was an outstanding example. Wells Fargo was, Capital One, where they didn't reach for the easy money of taking that extra risk on the interest rates.

59:10They could have – Jamie Dimon stood up at an analyst meeting and said, I could add a billion or$2 billion to my profits with a phone call, and I'm not going to do it. Because of the risk. Because of the risk. You guys want, you know, I could put out my money for five, seven years and he didn't do it. So when you could see that, so some of it is quantitative. You identify culture by accounting choices. Look at how accident year reserves develop at insurance companies. Look how credit loss developed. Look at the duration in the asset portfolio of a bank. Look at the mark to market risks that an investment bank is taking, so on.

59:49So you can identify culture quantitatively in financials. That's a big advantage. But then the next part is qualitative. And there, I think Warren put it best. He said, in a complex financial, the CEO has to be the chief risk officer. And you can have somebody with that title. But if the CEO doesn't understand the nature and the complexity of the risks, they should not be the CEO of a financial company. So not only am I hearing a lot of Warren's voice in things you say, I'm also hearing a lot of similar companies, Coca-Cola, Amex, Wells Fargo. Coincidence? Well, I mean, it would be strange if we ended up different.

1:00:34Of course, I always like it when we owned it first. So, for example, we were, I think, the largest shareholder of General Rhee. before Berkshire bought it. And so, and by the way, our research was not so good on that one. Oh, really? No. And as you see subsequently, Jen Reed did not perform very well for many years. It was, and I think Warren would say, I mean, I think he has said publicly, I won't put words, I think he said that that was, well, I'll put it this way. Not his favorite pick. Yeah, well, I'll tell you what Charlie's. Charlie came to visit us and we have a wall of mistakes where we frame the stock certificates of our biggest mistakes.

1:01:17Is that what that is? Yeah, and Charlie was looking through it and he said, where the hell's your Genry? And I said, Genry wasn't a mistake. We got Berkshire stock for Genry. That was fantastic. Did you have anything to do with the transaction or they just went out and bought it and you happened to be a big holder? No, and we were big Geico shareholders. So, no, it was – and we overlapped in Amex. But no, I mean we're much more diversified. We never owned Apple. There's huge differences. I mean starting with the fact that Warren has outperformed all investment advisors for 50 years. And so – but you'd be crazy not to study, you know, when Warren owns something or to study Berkshire itself.

1:02:09That makes a lot of sense. There's another distinction between the two of you. You say that you are neither deep value nor go-go growth. So what does that leave you? Do you growth at a reasonable price somewhere, something adjacent? Don't you love growth at a reasonable price? Because what are the other guys? Who doesn't want growth at a reasonable price? Yeah, growth at unreasonable prices? Or unreasonable non-growth. Growth at silly prices? No growth at a reasonable price. I think what we would say is it's obvious to us that growth is a component of value, right? Growth is a component of value.

1:02:47A company that grows profitably is more valuable than one that doesn't grow, right? I mean, again, think of the business, right? A business that grows profitably is more valuable. A business that can redeploy its capital at high incremental rates of return is way more valuable than one that it can or one that's capital intensive and shrinking and so on. So growth is a component of value. And the difference between us and a typical growth manager is we tend to believe more deeply based on experience that high rates of growth attract competition. Competition lowers returns. And so we believe in capitalism and we believe that growth is hard and maintaining growth is hard.

1:03:35So we tend to be more skeptical than the average go-go growth investor. But we tend to be more open to paying a fair price for a company that can grow profitably than the typical value investor. So, so much of our research is about the durability of the growth, the competitive advantages that a business has. has. So our portfolio currently trades in aggregate. If you took all of our companies at something like 14 times earnings, while the market as a whole is at 20 or 21, the value index is at 19 times. And yet we have a portfolio of companies that has grown their earnings over the last five years at something like 14 % a year.

1:04:23So we feel we have what my dad used to call the value investor's dream, right? And that's what we - Low cost, fast growth. Low valuation and durable, sustainable growth. Really, really fascinating. So before we jump too deep into the current state of affairs, I have to ask you about a quote of yours that I really like. As human beings, we don't welcome fear and panic, but as investors, we welcome the bargain prices that those emotions tend to produce. Discuss. Well, you know, obviously, the market is, of course, a voting machine in the short term. It reflects psychology, a long-term weighing machine.

1:05:09Hold on. That's a great quote. I'm going to write that down. Yeah. And so psychology helps shape prices. And what happens, we find, is that risk is, you know, there's always risk. What varies is people's perception of it. And I think today we're in a time when people are underestimating risks. And therefore, prices are generally high. It's one of the reasons I find it so amazing that our portfolio is trading at 14 times earnings. I'm like, you know, the market scares me at 21, 22 times earnings. But our portfolio feels like this is below longtime averages. So I feel this disconnect where I'm simultaneously pessimistic about the market because of the euphoria.

1:06:01There's no skepticism. There's no fear in prices. and at the same time feel very comfortable with our portfolio. So let me push back a little bit just to hear your reaction. We keep hearing artificial intelligence and NVIDIA and all the semis being compared to the dot-com era. And every time I hear that, aside from the fact that many of those companies forget profits, didn't even have revenues, And this is a giant revenue, giant profit era. Markets today are trading at 20, 22 times. We finished the 90s at 32 times. Theoretically, there's a ton of upside from here, especially if earnings growth continues.

1:06:54is is it the contrarian take that hey this market could go another five or ten years before things get really stupid well what i'd say is right now is as i look out there i see two types of of of you know end investor right one is this sort of belief that we're on a plateau of permanent prosperity this time is different a permanently high plateau yes yes and and uh and they are all in on the momentum trade, which has worked so well. Now, I believe that momentum investing, even though it's worked so well, to me is crazy because it's not common sense. It works until it stops. It works until it stops.

1:07:41And when it stops, you really feel foolish that the fact that you were paying an ever higher price you thought was a good thing. Why does price matter? If it's going up, buy it. If it stops going up, sell it. Exactly. And so that's one group of investors. And they're taking a lot of risk because they tend to be in the highest multiple parts of the market and the parts of the market where there is the most presumption that high margins and high growth rates are sustainable. And the data is over, I think fewer than 3 % of companies can maintain a growth rate in revenue of 20 % for more than a decade, like fewer than 3%.

1:08:25I mean, that's a huge growth rate for a long period of time. And there are a lot of valuations today that have that baked in. You get these analysts reports. And there's even fewer, less than I think it's five-tenths of 1%. But you could check me. It's either might be three tenths, but it's a low fraction of a percent that are able to maintain 50 percent margins for more than a decade. Those are very high margins. But again, they're in a lot of models right now. Right. So I think there's risk on that. Now, the other side of people taking risk are the ones that are huddled in cash saying it's the end of the world.

1:09:03Everything that's happening, AI is going to swallow our children. The world is falling apart. at everything that's happening in Washington. And they're sitting in cash. Which is risky as well. Really risky. I mean, just since 2000, the purchasing power of a dollar is down something like 55%, right? In my grandmother's lifetime, I think the purchasing power of a dollar felt like 94, 95%. So they're taking a lot. If you sat in dollars for 90 years. So I think these huge crowded sides of the market, the people sitting in cash and the people at the, assuming the extreme growth are both taking a lot of risk.

1:09:43That's a terrible barbell you've just described. Yes. Like the extremes are either, either inflation is going to kill them or speculation is going to kill. And where I would say, you know, we land in the middle is with this idea that there are durable, overlooked businesses right now. And they're, as I say, we have a portfolio of 25 companies trading at an aggregate portfolio 14 and a half times. By the way, that includes owning some Amazon. It includes owning some Google, but also owning some Capital One, owning some Tyson Foods, some MGM. Which portfolio is this? This is our flagship portfolio.

1:10:21So this is the Davis-Fework Venture Fund. But really, the way people are finding us increasingly, 10 years ago, Barry, we launched our ETFs. We were alone for nine years. It's like, no, we're the only true active manager running a value ETF. I think our value ETF, which is called DUSA, DUSA is the number one active or passive value ETF for three years, but nobody really cares. It's just, you know, it's, but that's all right. Although the past year or two, we have seen a lot of flows. Hey, most of the money are going to the passive indexes, but the things that the third or a quarter that's not going there, active.

1:11:03Exactly. So they're finding our way. And I'm proud that we were so early. I don't mind being early, you know. And so but what I'd say is that that the the optimistic case you lay out, I think the three elements of change in the civilization that are increasing risk today is we certainly have a change in the monetary world order. Right. We, you and I spent our entire careers in a world of falling interest rates, approaching zero, falling inflation, all of the things that fed into that, you know, low wage pressure, deunionization, globalization, all of that stuff. All of that has stunningly and permanently, I believe, come to an end.

1:11:48We are in a state where, you know, we are printing so much money relative to what the interest rates are. I think there's a lot of risk, but certainly we're not going back to zero probably ever again. That was a once in history phenomena, free money. The second big change is geopolitics. There's no question that for our entire career, we were in a world of globalization. We're in a world of functional peace. We are in a world of stability. We're in a world where the wall fell and markets doubled. All of these things, that is also absolutely come to an end. And that increases risk. So those first two things increase risk.

1:12:28And what's the third? AI. There's this massive technological change that increases risk. It increases the risk of all different types of businesses. And it increases opportunity, but increases risk. So when you have three fundamental shifts going on, all of which have unpredictable outcomes, and yet you have valuations not at all-time highs, but elevated highs, certainly relative to the direction of travel of interest rates over time, then I'd say, you know, I like where we are with our 14-year-old, you know, solid growth rate in the businesses, durability, AI as a lens, globalization as a lens, inflation as a lens.

1:13:11put those things together. We sit with 25 companies with these great characteristics in our ETF or in our funds or SMA or however the advisor finds us. Really interesting. Coming up, we continue our conversation with Chris Davis, Portfolio Manager at Davis Advisors, discussing the current market environment. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. Thank you.

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1:16:58I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. Chris Davis is my extra special guest. He is the chairman and portfolio manager of Davis Advisors. So I'm glad you mentioned artificial intelligence as one of those three big shifts that are taking place. How do you as an analyst and a fund manager separate what is a transformative technology and potentially a transformative source of value creation from just the rampant speculative excess that rears its head on a regular basis? What we're seeing is Amaro's law in full bloom. And Amaro's law states that transformative technologies are overestimated in the short term.

1:17:50They're underestimated in the long term. We're in the overestimation hype phase. And what I would say we do is we recognize it as a transformative technology. That is absolutely a baseline assumption. Our other baseline assumption at this stage is that we don't see it as a winner-take-all. So we see it more a little bit like railroads or something where – or electricity where the users maybe end up making more money than the builders. And so we will talk about hedging that bet. But we do think it increases the risk environment in terms of terrorism. It increases the risk of obsolescence in certain businesses.

1:18:32But we start with this idea that it's real. Then what we do is as we do our research, we found every company we look at falls into one of five categories. It's the emerging winners. That's where all the heat is, all the speculation. And there, there's real danger. You and I started very early talking about Cisco and remembering, well, the three obvious winners of the internet were AOL, Yahoo, and Cisco. You know, two don't exist and one's a fraction of what it was. And so picking the emerging winners in the early hype phase is risky. But we'd say if you want to look in that space, focus on the businesses that have a real shot at being emerging winners but do not have to constantly raise capital, have proven business models, proven leaders, and businesses that are accreted by the investments that they're making so that they earn more money by making these investments even if it takes longer than we think.

1:19:25So not the hyperscalers. Not the hyperscalers. I think that that is – and so for us, that's where we've sat with a little bit of Google. We still have Meta and Amazon. We've trimmed the first two because they were huge holdings for us because we bought them when they were so out of favor. But if you're going to play in the emerging winners, that's the first. Second category is, okay, who are the enablers of this technology, right? That's the picks and shovels mindset. They're the ones that are going to benefit from the spending wave but will not be penalized if the return on the spending is very low.

1:19:59So semiconductors? So, yeah, I would say there for us, it's been analog chips, Texas instruments. It's been semiconductor capital equipment. We are a big shareholder of Samsung, you know, which did nothing, nothing, nothing, and then went up fourfold in a year. They're driving the entire KOSPI in Korea. It's amazing. Amazing. So, but, you know, again, we viewed those as enablers. But any of the enablers, I would also include things like natural gas and copper, right? They are big, big beneficiaries. So we own, you know, Katerra, which is now Devin, ConocoPhillips, Tourmaline. You know, our focus is on natural gas and copper.

1:20:40Okay, so those are the enablers. The users, who are going to be the beneficiaries? Well, there you've got to think that financials is a great example. Anything where you have a big amount of laptop class workers, right? It's what Elon called the laptop class. That, you know, it's likely that AI will do to the laptop class what globalization did to blue collar workers. Meaning very much hollow it out? Hollow it out. Hollow it out. The best will still have work. The best will be more valuable. They'll be more productive. But there's going to be a lot of unemployed second year lawyers and things like that.

1:21:16And so that and so health care, you know, claims processing, compliance functions, things like that. So there we focus on the banks that have the scale, the tech stack, and the management to do it. So Capital One, number one. I keep Wells Fargo on that list. I think U.S. Bank gets over that, crosses that chasm. So those, but also - J.P. Morgan Chase is part of that group? J.P. Morgan Chase has done such a great job, but the valuation has gotten so high. And how do you put the Amexes and MasterCard visas of the world? We don't own Visa or MasterCard, and we have a very small position in Amex. And essentially the reason is we just think that that is an area where there is a big spread.

1:21:59They may be on the other side, but boy, there are a lot of people, especially merchants, that would like to figure out some way to bypass that. That 3 % big is a big number. It's a big number. This is the first time in my lifetime I have started noticing cash and credit card prices on restaurant menus. Yeah, absolutely. This was never a thing before. And you really see it when you travel. Yeah. And so I, that we, and again, those are, they're so highly valued at 30 times earnings for visa. You know, it just seems to us, there's too much risk there. I'll own the capital one at nine times. So those are the users, right?

1:22:35Then the next category are what, what Jeff Bezos, we call him the, the, the indifferent or the protected, right? So what Jeff Bezos, when he said, people ask me what's going to change, they all ask me what's not going to change. That's a very important question. So there, what do we, you know, Tyson Foods, right? Chicken's not going to change. Right. Wait, chicken's not going to lose their jobs? Yeah, yeah, chicken's in good shape. And, you know, but here you have to be careful because you don't have high growth rates. So you don't want to overpay. And they're cyclical businesses. So you don't want to pay at the top of a cycle.

1:23:06So Tyson, I think, has a low multiple on cyclically depressed earnings. What else does? MGM. I think owning, you know, 50 % of the Las Vegas Strip and, you know, 20 or 30 % of Macau and 100 % of the only legal gambling in Japan and Osaka when it opens, 2029. That's very valuable. I don't think that gets disintermediated by AI. So call those the protected, the what won't change. The last category is the walking dead. And there, you mentioned Visa and MasterCard. I don't know, title insurance. I don't know. There are all sorts of things where it is really amazing how much money is made for something that you should be able to get around.

1:23:46We've seen some of the pressure in the SaaS companies And so that's the lens that we look at for all of our companies. We put them through this lens of this fast changing. We want to stay nimble. And Barry, one of the things I think is really important is I think this is a world where taking liquidity risk is really dangerous because there's so much flux. So I think that's some of the pressure we're seeing in private equity, private credit. I think people are saying, why did I lock up my money? For seven years. For seven years, if you're lucky. Yeah. It's going to be longer, I think. So I think that wheels are coming off that.

1:24:20I think that indexes, remember Kodak, you ready for a number? 10 million digital cameras had been sold when Kodak was still in the top third of the S &P 500. That's amazing. Isn't that amazing? And it's like 10 million people knew they would never buy a roll of film again. It was dead. And so the advantage, you know, when Japan peaked in the 80s, every active manager in international investing outperformed for the next 10 years by just saying, oh, Japan's going down, I'm out. And so the index got killed because it had to sort of go down with the ship. So I think nimbleness, liquidity, flexibility, and this sort of research lens are going to actually become more valuable.

1:25:05So I think we could see some of the time-tested things that worked in the last decade, dividend darlings, momentum, private equity, indexing. I think all of those things could be challenged given this fast-changing world. So I'm glad you brought up a few things there because when you look at some of the fallout from low-cost indexing, the Vanguard effect, BlackRock, whatever you want to call it, they have all put the fund industry under a lot of pressure. There's fee compression. There's been a move to not just indexing but to ETFs generally. so when your own business you're you're looking at businesses with moats and businesses with defendable um processes and and a good culture you're running a business with a lot of employees and a lot of clients how do you respond to this external pressure how do you manage not the investments but the business of investing when it's just becoming more competitive and more challenging than ever.

1:26:12Well, we're, we're lucky because we're one, we're a very, we, we charge low fees, right? So we, it, you know, if you charge two and 20, you know, you're, if only I could, I know I'm just, I mean, emotion, intellectually, I have a problem with that, but part of me is like, nice work. If you, I know, I know. I spoke to a guy that charged two and 20 years ago and I said, why two and 20? What's the business model? He said, I can't get three and 30. So we've always, we've always just run with this idea. You know, Charlie once said to me, Charlie Munger, you know, what's wrong with giving people a bargain, right?

1:26:50Or at least a fair price. Right. And it makes it easier for you to outperform over time. So, so I feel one, we, two, we're a frugal place. You know, I, I work with seven colleagues. We've been together on average 20 years, 25 years average experience. And we would do this with no outside money, right? Because of the inside money. So we run it with what I would call a real family office mindset with our own money alongside in a very low cost operation. But we like, and the last thing, Barry, is we are in a lasting game. What I can tell you is if 90 % of the market was passive, the remaining 10 % of active would make a fortune.

1:27:33I've said that exact thing. Hey, if indexing is taking over, doesn't that create all sorts of inefficiencies for a savvy active manager? Absolutely. And I, you know, I don't think it's a coincidence that we started outperforming the S. I mean, we've outperformed the value index for all periods, but we, but we lagged the S &P in this momentum market, but that changed about four years ago and nobody's talking about it. Coming out of the pandemic. But basically, yeah, we've been grinding an advantage over the S &P for the last three, three and a half years. I mean, and this is with less than half the weight in technology that the index has.

1:28:13So we are underweighted the hottest sector, but yet we've been grinding out an advantage for three or four years. Why? And I think it's just because there's way more money indexed than is thought of. there's way more money in momentum than is. And when I say there's more in indexing, it's because there's so much closet indexing. So I don't think it's impossible that we're already at 70 % functionally indexed. So that will really help us. So we're in a lasting game. We got the balance sheet to do it. We're going to be on the other side. That's really fascinating. You mentioned you guys would just do this without outside money, But let's put some flesh on those bones.

1:28:57Davis Advisors, the company, the Family Foundation, you and your partners, the employees, you collectively have more than a few billion dollars in the fund. So you are not only aligned with your clients, I almost feel like skin in the game has become a cliche. But the question I want to ask is being invested that way alongside the clients, how does that affect your decision making process? And what does that do when you're going through one of those periodic crises that we've seen so much over the past 25 years? Dot coms, GFC, pandemic. how does having skin in the game affect your decisions? Well, I think it makes us much more rational and much more long-term.

1:29:47It means that, you know, I once had a colleague that we had to part ways because he said that, you know, I was so unimpressed by things like momentum, even if they worked. And he said, look, if I had a blind monkey in my office pointing to the newspaper every day at a stock, and every single day that stock went up that it pointed to. Whatever stock it pointed to went up every day. He said, you could watch that monkey for six months. You could watch it for a year. You could watch it for two years and you still wouldn't invest with the monkey. And I said, of course I wouldn't. It's a blind monkey, right?

1:30:23This is my money. This is my client's life savings. You think I'm going to say, oh, the blind monkey pointed at the paper? So when we're in an environment where the market is on a tear and people are saying, oh, you're dinosaurs, were able to hold our discipline. In 2007, we had our financial fund had lagged all other financial funds, not all, but most other financial funds, because we were underweighted in real estate. And we didn't own any Fannie. We didn't own any Freddie. We didn't own any Countrywide. We didn't own Bear Stearns. We didn't own Wamuu. And people would say, wow, you're like a dinosaur.

1:30:58And it's because it's our money. And so we don't mind if it takes a while for the reality for that weighing machine to work. What we look at every year is, did the companies get stronger? Did they get heavier? Did they get more valuable? And if so, we view our research as working. And sometimes the stocks don't go up. Sometimes they do, but we're focused on the businesses. On the process and not just what's going up that day. You know, the blind monkey reminds me of a fascinating quote from Ken French of Dartmouth. Michael Moebison has written a lot about the separation between skill and luck.

1:31:38And French, a former French, had said, you know, it's very challenging to tell the difference between skill and luck with fund managers. And to really have a data set where you can make an informed decision takes about 20 years. So if you're going to wait for that blind monkey, you got to wait 20 years. And you're starting out with a blind monkey. I think we have to assume that it's luck and not skill. Well, and look, Barry, your clients come to you. You could say that it's because of your performance. And performance matters. Oh, I don't think my clients come to me. Well, I was going to say what really matters is trust, right, and conviction.

1:32:20And so one of the things that, you know, we have clients that say, hey, you went through a period of underperformance. You were out of sync with the market. We weren't worried. You're building wealth for us every year. We don't care. Oh, this index went here. The index went there. We're with you because we have conviction that you'll get us to our retirement. You'll get us to our kids' college funding. You'll help us achieve our goals. And maintaining, that's something you do with your own money. You don't chase the hot dot. But if you're an investment manager and all of your value comes from the assets under management, you have to chase the hot dot.

1:32:55So trust is an undervalued part of the promise and the value that an investment manager can give to their clients. If your clients trust you, they will get a better return even if you underperform an index if their trust is able to keep them invested through the ups and downs. Really, really fascinating. All right, last question before I get to my favorites that I ask all my guests. What do you think investors are not generally talking about, thinking about, but perhaps should be? Could be a topic, a geography, an asset class. What important issue is kind of getting overlooked these days? Well, I think these three big transitions in the economy are going to turn a lot of what's become conventional wisdom about investing upside down for a while.

1:33:53So I think what hasn't worked? Active management hasn't worked. What hasn't worked? Value, price discipline hasn't worked. I think you're seeing that. What has worked? Oh, you know, alternatives. You know, illiquidity. That's been great. What, you know, has worked that I think is dangerous? You know, dividend aristocrats. Oh, really? Absolutely. I think that any— You think dividend aristocrats are dangerous because— Because they're looking in the rearview mirror, and they are not factoring in these big three changes that we talked about. Well, isn't that the problem with all models? Yeah. Kodak was a dividend aristocrat.

1:34:35You know, Xerox was a dividend aristocrat. aristocrat, Polaroid was a dividend. And that's fine unless there is systemic change, right? And when you have a big change like you had coming out of the 70s, you know, and the change into the 80s, 90s, you know, you have these big changes. And then everything that worked, you know, everything that helped you survive the crash and the depression in 1948, you could say, I'm not greedy. I just want to own bonds. Stocks are too dangerous. And you were wiped out in a generation. And bonds became certificates of confiscation. So I think people are underestimating how much these conventional strategies, alternatives, the backward-looking models, including even momentum, indexing versus active.

1:35:26And I would even maybe add international. International had underperformed for so long. Just the past two years, starting to look pretty good. Just starting to look pretty good. So you like international. I like international. We run an international ETF, D-I-N-T, and it's just like us. It's all stock picking. It's run by my partner, Danton. You know, and our family probably has, you know, always keeps probably 15, 20 % of our assets in international. And that looked really stupid until two years ago, and it's looking a little better. So I think those conventional things are being likely to turn upside down.

1:36:01What's the old joke? Being diversified means there's always something to apologize for in your portfolio. All right. So let me jump to my favorite questions. I ask all my guests, even though I would love to stay here and keep you chatting for another three hours. I know you have places to go and people to see. And the first question I always ask, I kind of know the answer, but I'm going to give you another opportunity, another swing at it. who were your mentors who helped shape your career? And I kind of see four people already. Well, you certainly got my dad, my grandfather, and Mark and Charlie.

1:36:40I think if I was going to add another one, I would add Tom Gaynor, the CEO of Markel. I just think, you know, that sort of principled stewardship leadership, that servant leadership, a company that is built with an enormous durability and culture of stewardship in mind, And, you know, we've served on boards together. He's helped me through difficult times. I've done my best to help him through difficult times. It's a great thing to go through life surrounded by people you admire. And, of course, I get to work with people I admire, and that's a big plus. Really, really interesting. Let's talk about – I know you're a fellow reader.

1:37:19What are some of your favorite books? What are you reading currently? Well, I have too many favorite books to list. Give us three. By the way, people always tell me, oh, that's my favorite question. I'm always looking for something new to read. Well, I'll give you the most recent one I read that I think is a good antidote to the AI phenomena or the AI hysteria or the AI, the obsession. That's a better word. And it's a book called Alchemy. The author is Rory Sutherland. Yeah, I think that's a very useful book to read right now. On marketing and advertising. It's really on ways in which we maybe fetishize, if I said that right, rationality.

1:38:03And that when you look at human behavior, it's very irrational, but it's often irrational in predictable ways. And the more we say, what's the rational solution to a problem and expect people to obey that, the more we're going to keep getting crazy outcomes. People react in ways that, you know, people react to placebos, but we don't study placebos, right? The example he gives that I love is if you wanted to create a really spectacular competitor to Coca-Cola and you hired McKinsey, they would say, well, you should make something that tastes good, sell it a little cheaper and make it ubiquitous.

1:38:43What you wouldn't say is make it more expensive, make it taste bad and put it in a smaller can. And that's Red Bull. And so there's a lot to study in a case like that. How has that worked so well? So I think alchemy is a useful one now. You know, I think everybody should read themselves and then have their kids read Morgan Housel's two best books, which should be read as a single book. The Psychology of Money and the Art of Spending. They go together. I said one is like the sequel to The Godfather. It's The Godfather 2. It's not a different movie. Just continuation. It's the culmination in a way.

1:39:25And you can skip three. Okay. My Father Three just doesn't. Oh, I agree. Not as good as the first two. I agree. I agree. And then for a third book, you know, just the one that immediately comes to mind at the moment is Americana. It's a book by, there's two books by the same name. I know because Charlie had told. 400 years. Of American capitalism. I love that book. I had him on the podcast years ago. Oh, Srivastava. Yes. Spectacular. Spectacular. And it's just – Really just – I think people are just so unaware of the history of American capitalism. And that book just does a fantastic job laying out the success.

1:40:08And it will help you as an investor if you think in chapters of that book. If you think about, OK, AI is unfolding. You know, he talks about the interstate highways being built. Well, the interstate highways were built. You know, who made money, right? McDonald's, Wendy's, right? The railroads were built. Who made money? It wasn't the railroads, right? It was the factories, the ability to distribute. And who, too, were the dead men walking, you know, when the car was developed? But there were 3 ,000 car companies, right? There were 271 publicly traded internet companies. You know, that's why picking the emerging winners in the early stages is tricky.

1:40:50But think of the chapter. Think of that whole arc. And that's a terrific book. What are you streaming these days? What's keeping you entertained? Either Netflix, podcast, whatever. Well, anybody who knows me knows that I watch almost nothing. And I particularly don't watch sports. I don't know a lot about sports with one exception. I love ice hockey. And I love ice hockey in part because we had a lot of family history. My mom's family helped start the NHL and founded the Boston Bruins. Wait, what? Yes. Your mom's family helped start? The NHL. Okay. And founded the Bruins, and we owned the Bruins through my childhood.

1:41:35Can you imagine? Come on. What a deal that my father, who's probably been to eight hockey games in his life, has his name carved on the Stanley Cup twice. because he was, Shelby Davis was the treasurer of the Boston Bruins. And so they won the cup twice. He got his day on choice. But I think one of the things that I love about it is that my grandfather, in explaining his love for it to me, he said, you know, every sport handicaps the athletes. You know, you can't use your hands. You can't use your feet. You have to dribble, whatever it is. He said, hockey accentuates every human ability. Between the skates and the stick.

1:42:16The skates, the stick, the pads, the oval rink, the ice. I mean, it's just an amazing accelerator of human ability. And I guess the reason I think of it right at this moment, of course, we're moving into the Stanley Cup playoffs. We were in the last two rounds. But it's also because I think there's a way to look at AI as accentuating human ability. It's an accelerator for sure. It's an accelerator. And what that could mean for healthcare, what that could mean for healthcare inflation going negative. I mean, there are all sorts of – We're already finding so many new molecules. If anything is going to find a cure to a lot of cancers, it's going to be this.

1:42:58And, you know, and again, we have to recognize that, of course, like every technology, there are going to be negatives. There are going to be delays. And as people get disillusioned, we could get a big swing the other way. So equanimity. But again, going back to Americana and tying it to ice hockey, think of those long chapters. All right. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in investing? Well, I would say learn everything you can about business and ideally work in business. You know, I met a guy down at Markel had their reunion just yesterday.

1:43:40I just flew back from Richmond yesterday. Their reunion is a great event. I recommend everybody go. Just buy a share of Markel, go to the reunion. You'll see something a lot, you know, a lot, it was compared to Berkshire. But I just, I love the value system there. But I met a guy who was an engineer at Altria, which is headquartered in Richmond. He owned a lot of Altria. He owned a lot of PMI. But he started investing for himself about 20, 25 years ago. He showed me his portfolio, including his cost basis. He's built a wonderful record as an investor. And so, you know, I think I don't love all these kids going to the Goldman Sachs and to private equity.

1:44:22I think private equity is it was a wonderful business to begin with. And I think it is absolutely lost the thread. Well, the size, it's just ramped up. And they're all selling to themselves. Right. And they're trying to get the widows and orphans in there so that they can have some final sale, just like they did with MLPs and the oil and gas partnerships in the 80s. And I really hate it. There are people within the world of private equity that I admire that have built stunning records. But most of what's happening at this scale is just stealing money from pension plans. 401ks. 401ks, and it's going into penthouses and Ferraris.

1:45:08You know, where are the customers' yachts? Look at the returns over the last 10 years of the average state pension plan. Then look at the breakdown of assets, and you realize that all of the drag on their returns is alternatives. Amazing. Final question. What do you know about the world of investing today? might have been useful back in the late 80s, early 90s when you were first getting started? Well, every investor, if they're honest, will say that their biggest mistakes were what they sold. And so, you know, I would say that I've always put all my money in the funds. And I think that's the right alignment.

1:45:51But I realize now, which I didn't realize then, that there's some real differences, which is that, you know, in the funds, we have to really think about diversification. If each time I bought a stock in the funds, I bought it in my own name instead of putting my money in the funds and buying, I probably would have just left it alone for the last 30 years and it would have done very well. So, you know, all of the, you know, I first bought Amazon in 2002. Good timing. You know, yeah, but I sold it in 2004. Bad sale. Thank you. I could tell you the same story with Apple. It was$15 with 13 cash. Tripled my money.

1:46:31I was a genius. That was like 10 ,000 % ago. I know. We did the same thing in Apple. And we viewed it as a real estate plate. We said, if you mark the real estate to market and add it to the cash, it was an 80 cent dollar. And then when it went to$2, we were like, oh, too rich for our blood. So I do think that I'm trying to really learn and think about how can I improve results over the next 20 years by being more willing to hold. And what does that mean in terms of position size? What does it mean in terms of volatility? What does it mean in terms of client expectation? Would I feel the same if a client has$25 ,000 with us that I would if it was just my own money?

1:47:19Because I can absorb a bigger loss and I can absorb more volatility. So that's something I'm still trying to process. But God, I love the business. And like my grandfather, if I could die at my desk at a very old age, I do have the best job on earth. I get to study success. I get to work with people I admire. I go and visit companies to focus on that elusive idea of culture. I get to meet the incredible people that have built our society, that have built businesses. And we have a country that loves to tear down the heroes. So we admire the guy on the way up, but once they succeed, we somehow decide they're a villain.

1:48:00I don't think that's constructive. I think it's a strange thing for us to admire athletes and not admire Jeff Bezos for what he created and how it has served all of us every day. We all use Amazon and it serves us. You know, every day we delight in seeing our kids on Instagram or using Google Maps. And, you know, the idea that we continue to vilify our heroes instead of judging people by their biggest accomplishment, not their weakest moment. Chris, thank you so much for being so generous with your time. This has been absolutely delightful. We have been speaking with Chris Davis. He is the chairman and portfolio manager at Davis Advisors.

1:48:43If you enjoy this conversation, well, check out any of the 641 we've done over the past 12 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you get your favorite podcasts. I would be remiss if I didn't thank the crack team that helps put these conversations together. Each week, Alexis Noriega is my video producer. Sean Russo is my researcher. Anna Luke is my podcast producer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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