MI Rewind: Is FAANG the New Value? w/ John Huber

24:31And so Copart works with insurance companies to sell these salvage vehicles to dismantlers and other dealers. And in some cases, the general public that might want to buy these cars. And oftentimes, these cars get shipped overseas to different buyers, and they get repaired and they go back on the road. But Copart is a great business because it owns the land. And so there's economies of scale because it can spread its growing revenue over a fixed cost of the land. And that leads to attractive unit economics that increase over time as the business grows. And it also has a network effect of buyers and sellers.

25:04And insurance companies go there because it has the most buyers and buyers go there because there's the most sellers. And then most importantly, I think with Copart is the barrier to entry. And that's because no one wants another junkyard in their backyard, right? So it's sort of a NIMBY, not my backyard concept there. And it's very difficult for a competitor to develop the relationships. It's not just the fact that no one wants it in their backyard, it's very difficult to get the zoning permits to set up, even if you wanted to, to set this up. And so Copart has, I think, some natural advantages there.

25:37And it's a business that enjoys relatively low competition. There's one other main competitor, but it's not a business that gets a lot of attention from VCs. There's not a lot of people that want to go into the junkyard business. And so there's just some natural advantages that I think a business like Copart enjoys. And so those are three things that I spent a lot of time thinking about. And I think the fourth thing on the checklist of durability would be just the adaptability to change. And so this is sort of a softer, more subjective feature. And culture has become sort of a buzzword. But again, like hard work, it's like the concept of hard work.

26:12Everybody talks about hard work, but it doesn't mean that hard work is less valuable or not valuable. Everybody talks about culture, but it doesn't mean that culture isn't valuable. So if you have a human capital, all of those things are critical to a company's competitive advantage, especially in a day where we live in such a fast-changing world where I think adaptability to change is a critical variable. It's crucial to be adaptable. And a lot of that has to do with management and the foresight that they have and the flexibility that they have and the talent that the company has. So I think all of those four areas are what I try to think about when it comes to durability.

26:51Could you talk a little bit about how you manage new capital that's coming into your fund? Do you continue to just invest in your best ideas or are you looking at the opportunity costs of all of your ideas and allocating that way? Yeah, it's the latter, Clay. It's the opportunity costs. So that's the easiest way for me to think about cost of capital. I have a general hurdle rate in mind when I'm thinking about new investments. I have a general return on capital that I'm looking to achieve over the very long run with stocks in general. But from a practical standpoint, the way to, I think, make proper decisions, if you think about a decision tree, is just take your best idea and just use that as a guidepost when you're thinking about adding to a new stock or buying a new stock or adding to an existing stock, weighted against your best idea.

27:44Obviously, within the confines of a portfolio and some common sense rules where you're not going to have 100 % of your portfolio in one stock. So there's a practical limitation there. But the way I think about it is, I have my best idea and I have the second or third or fourth best idea. And if the fifth, sixth, seventh, eighth, as you go down the list, you're waiting. If I have 10 stocks, do I want to buy an 11th stock that I'm looking at? Or does this 11th stock, would it be better to add this incremental capital to one of the other 10. And so that's a common sense way to think about portfolio management.

28:17That's my own personal method. As I've studied many great investors over the years that are buying whole types, they often mention that one of their biggest mistakes has been from selling one of their best ideas because they felt like there's better opportunities elsewhere. Do you ever sell some of your best ideas if you feel that they're trading far above their intrinsic value? I do. Yeah. I think the reality of running a fixed portfolio, and it's not necessarily fixed because there's inflows and outflows. And ideally, there's inflows as the business grows. And so if you're fortunate enough to have continuous cashflow, one of the advantages that individual investors have is they essentially have what Warren Buffett has at Berkshire, which is assuming that you have net surplus.

29:06So if you have a job and you have income coming in that exceeds your monthly expenses, then you have surplus cash. And you can decide on what to do with that cash. You can put it in the bank. You can invest it in stocks or in a real estate or in anything else. But the nice thing about having residual cash flow is you don't necessarily have to sell your holdings. You can let your cash build up and then you can slowly add to a new idea or to an existing position. And it's a great advantage to have. If you have a fixed amount of capital, then this comes back to the opportunity cost idea where When I think about selling a stock, yes, I'm selling stocks if they reach a certain level where I think my going forward return is going to be mediocre.

29:46Through significant, painful learning experiences, I've learned that if you have a strategy where you own quality companies, I think you're better off keeping those companies. I've sold stocks too soon. I've sold stocks that I've watched continue to rise and that can lead to a significant opportunity cost. Oftentimes, you know the company that you own a lot better than the stock that you're about to buy. And I've made that mistake as well. So I think over time, I've learned through empirical observation and my own mistakes that it's better to hang on to these quality companies and let them compound unless you have a really great idea.

30:23And so it has to... My own general mental model here is it has to be significantly better. It has to be like pound the table better than the existing idea. And so when I get an idea that's significantly better than the stock that I own, then I would consider trading those two. But if you own a business that's producing, say, 15 % returns on equity, even if the stock gets a little ahead of itself, so to speak, that's still a pretty attractive rate of return. If the business is still compounding value over time, you're almost always better off holding that business and letting that value continuing to compound for you, rather than replacing with cash, which, as we know, earns very little in today's world.

31:02So that's my general philosophy on that. I've become more reluctant to sell a stock unless I have a better idea. And I tend to be fully invested most of the time because you're better off owning a business that's compounding at 15 % than owning cash that yields 2%. Obviously, there's exceptions to that as we've learned that in recent years with some of the exorbitant prices that we've seen. So I certainly would sell a stock if it got significantly above fair value, but those times are generally, I think, rare. Yeah, it just brings me back to Nick's sleep and Warren Buffett. Nick's known for holding Berkshire Hathaway, Amazon, and Costco for many years and having very concentrated positions in those.

31:38And then Buffett, very concentrated in his Apple position. He bought it in 2016 at a great price. And I believe you bought it around the same time as well. And to my knowledge, he hasn't really sold any of his position. And in reading a piece of your work, I noticed that you purchased Apple at call it a 10X free cashflow and scaled out of it at 30X free cashflow. So it's pretty obvious today that Apple was much closer to a fair value. And in retrospect, it's pretty obvious that it was a bargain back then. Yeah. I think if you think about your returns, just think about in very common sense terms, your return in a stock as an investor, your return in a stock is the product of a few very simple factors.

32:21It's three simple factors, really. It's the earnings growth during the time that you own a stock. It's the change in the PE multiple during the time that you own the stock. And it's the change in the shares outstanding during the time that you own the stock. So if you own a stock for 10 years, and the stock goes from, let's say, 15 times earnings to 30 times earnings, then you get a 2x return from the multiple, right? The multiple goes from 15 to 30, that's 2x. And if the earnings double, if they grow 7 % a year over 10 years, that's a double. And so you get a 2x on the earnings growth. And so 2 times 2 is 4.

32:54So you get a 4x right there. And then if the company bought back half of its shares, then you might get another 2x on the reduction in the share count. And so you could earn an 8x return in that simple example, just through a combination of those three factors. And so the trick with investing is getting those three engines to be working in your favor. And that's why valuation is sometimes ignored in real rampant bull markets. But it's always critical to think about if you're a long term investor, because the price you pay today is going to have a direct linkage between the price you pay today and your ultimate return over the course of the time that you own the stock.

33:30And I can give you a simple example. I was looking at Domino's Pizza recently, and it's not a stock that I own, but it's one that's on the watch list. And that stock has grown its earnings at 5X over the last 10 years. And it's one of the best stocks of the last decade. And so it's an interesting case study, but I think the stock has returned about 12x, even after a recent decline, it's returned about 12x over the last 10 years. And so that's north of 30 % a year. It's just been a phenomenal stock. And if you think about those three factors, you can easily see that if you bought the stock 10 years ago, you paid 20 times earnings.

34:04Now it's 30 times earnings. So you got a 1.5x there. The earnings went up fivefold. It went from 100 million to 500 million. So you got a 5x there. 5X times 1.5 is about 7.5. And then the rest of your return came from the fact that they bought back 40 % of their shares. And so there's 60 % of their outstanding stock left now that there was 10 years ago. And one divided by 0.6 is about 1.6. And so you get a 1.6 multiplier on the buyback, which simply means you have a 60 % greater ownership of each share that you own as 60 % greater share of earnings. Those three simple factors, 5 times 1.5 times 1.6 is about 12x.

34:43And so that's what you want to think about when you're thinking about investing is, if you pay 30 times earnings, is it going to go to 60? Probably not. Most likely, if you're paying 30 times earnings, maybe it stays at 30 if it's a great business. And that was the logic I had with Apple. At 10 times earnings, I thought it was the business that should trade at 30 times earnings. I talked about this in letters six years ago that it didn't make sense to me that Apple wouldn't trade at a multiple like a Starbucks or like a Nike. It's the world's greatest consumer brand. It should trade at a P multiple in line with some of the world's greatest consumer brands.

35:16And it's got an incredible business and a very sticky ecosystem and all of that. And so trading at 10 times earnings didn't make a lot of sense. Now that it trades at 30 times earnings, it's a different story. And the interesting thing about Apple is the earnings growth during the time that I owned it was not significant as you might think. The majority of the return came from the 3x that I got the multiple expansion. And I think the earnings went up about 50%. So you got another 1.5x there. And then you got another maybe 1.3x on the buyback factor, if you think of that in terms of a multiplier.

35:47And so that's how you get 6x. And so it's interesting. If you pay a cheap enough price, you can earn 40 % returns over a six-year period in a stock like Apple that is huge and not growing all that fast. So going forward, Apple's a business that at 30 times earnings, I think it probably falls into that bucket of still a great business. I don't think it's overvalued, but it's probably more fairly valued at this level. It's pretty exciting that as a retail investor myself, I'm able to find some of these great deals. The FANG companies, for example, many of those are considered more value plays today.

36:22But since the 2008 financial crisis, we've seen the emergence of these massive companies. Everyone knows about them. But a decade or so ago, they were considered these overvalued growth companies in many ways. So I'm curious what your thoughts are on how these companies emerged from being overvalued growth companies to reasonable value plays for many of these Warren Buffett style type investors. Value is not what a company earned last year. So the PE multiple has nothing to do with value. it can be used as a guidepost. I mean, we were just talking about PE multiple. The change in that multiple is one of the three factors that will turn in a stock.

37:02But the value of a business is what it will earn going forward. So if you go out and you buy an apartment building, it doesn't matter what that apartment building earned last year, because that's what the other guy earned. All you care about is what that thing is going to produce in cash going forward. And that's where you derive value. And so when it comes to the FANG stocks, or any of these stocks that appear overvalued that have had these great runs. I think it's just simply that the market and people in general, myself included for many of these stocks, underestimated the growth and the durability and the sustainability of these business models, the longevity that they've had.

37:37And so all of these companies, the common denominator is they have huge competitive advantages and they have huge markets. And the value of a business is probably going to correspond to those two factors, the moat that the company has and the size and potential of the market that it operates in. And when you have a great competitively advantaged business in a massive market, you're going to be able to grow for many, many years. And that's why I think that's one of the reasons why these stocks have done so well. And I think the other thing that I've noticed with stocks like Google and Facebook, for example, in digital advertising, I think many people looked at Google.

38:13I remember back in 2004, when Google IPO'd, people were talking about comparing the size. There were some sort of pundits that were talking about like the newspaper advertising industry as whatever it was, 20 billion or something, as if that was the market that Google competed in. And so I think very quickly, people realized that Google was creating a new market, right? Google was sort of mobilizing this army of small businesses that could now advertise because they could never afford to take out a full page ad in the newspaper, but they could certainly afford to spend$50 on Google keywords. And so Google and Facebook created a huge amount of advertisers that did not exist before those two companies were started.

38:57And Facebook has 10 million small businesses as advertisers. And I would bet the vast majority of those small businesses were not advertisers before Facebook. And the value proposition that these big platforms have provided these small is significant. And so I think when you have great value proposition, great economics, great competitive advantage, and a big market, the result is what we witnessed over the last 10, 15, 20 years. These companies have continued to defy base rate expectations. Robert Leonard Yeah. With regards to just the moat and the network effects of these companies, it's like, you can't deny just the power that they have and the durability they have in their cash flows.

39:38With that, my biggest question with many these fang companies, is there ever a point where they just become too big and the regulation side is the biggest concern for me? What's the government going to do when they get so big that they just essentially have a monopoly on the markets they're in? Yeah, they are monopolies for the most part, at least in certain aspects of their business. And they all will point to... I always think of the famous Peter Thiel quote where monopolies will always tell you they're not monopolies. They will always point to how competitive they are. Google is always, whenever they're dragging in front of Congress, they're always saying, our competition is a click away.

40:15Amazon's always talking about the fact that they're a 2 % share of a global retail market. So they're always understating their competitive position because they're monopolies. And of course, it's the opposite with companies that don't have monopolies. They're always talking about how great they are and how competitively advantaged they are and so forth. So these companies are monopolies, perhaps not necessarily by the technical definition in each of their businesses, but they have monopoly-like... They're certainly extracting monopoly like rents. And yeah, I think that's the biggest risk is some sort of legislation that comes out that ends up handicapping either the growth rate or the way that they do business.

40:49So whether it's being forced to open up the app store, if you're Apple and you're no longer allowed to charge 30 % or you're forced to open it up to competing app stores, that's going to chip away at the monopoly that is the app store, which is a phenomenal business. there's potential risks there. But I think these companies, and you could go through each one of the companies and there are different risks and there are different advantages, but they all, I think they've proven to be successful at navigating some of these challenges thus far. And the other thing about regulation that's interesting is you could look at something like GDPR in Europe, which has really entrenched some of the advantages that a company like Google enjoys or Facebook.

41:29It makes it harder for smaller competitors. And that's, we saw the same thing in the banking industry where the large banks were much more able to deal with regulation than the small banks. And so after the financial crisis, right now, everybody's focused on tech. 10 years ago, everybody was focused on the banking industry. We have to regulate the banks. They should be regulated utilities. They're too big to fail. And so the regulators instituted a suite of regulations and legislations that certainly had enormous impact on the banking industry. But what it did is essentially entrenched the large banks, J.P.

42:01Morgan's, the Bank of America's of the world to the detriment of the smaller banks, which were forced to either see much lower returns on equity trying to compete, or in many cases, they ended up being forced to sell out to some of the larger competitors that can deal with the costs of the regulation. So it'll be very interesting to see, but yes, that is a risk. I think that's the number one risk to any of these companies is what does regulation look like going forward. Let's take a quick break and hear from today's sponsors. Hey, it's Sean O'Malley, just popping in with a quick message. If you like this podcast, well, I've got great news for you.

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45:43That's theinvestorspodcast.com slash tip-finance. All right, back to the show. I noticed that your allocation to Amazon over the past year went from 0 % to your biggest position. Could you talk about what led you to making this drastic shift in your portfolio? Yeah, I think Amazon is one that I spent some time. So I've owned Facebook for a number of years. And I'm always studying the digital advertising industry. And so I'm always trying to talk to people who are advertisers. I'm always doing a bunch of research, just whether it's talking to advertisers, whether it's talking to people who work at ad agencies.

46:25I just like to stay up to speed with what's happening in the advertising market generally. One of the things I was thinking about last summer is... I happened going to be talking to someone who was talking about how a lot of the dollars at this particular firm was shifting from Google to Amazon. And so Amazon, in this case, was with this particular customer was taking share, essentially. And so if you think about Amazon, if you are a merchant, or you're selling something, a product, you can advertise on Google, you can advertise on Facebook, or you can advertise on Amazon. But Amazon is such a great place to advertise because the only reason people are really going to Amazon is to search for something that they want to buy.

47:06So they have specific intent. And so it's a very high return on ad spend business for advertisers, because if you can get your product in front of a customer, the conversion rate is going to be higher, perhaps, than you might find for the same type of product on Facebook or Google. Although both of those platforms are very valid sources of return on investment, return on ad spend as well. But Amazon, I think for that particular use case is probably the best. And they are taking share. I think over 50 % of the product searches begin on Amazon. And so as I started to do more research, just started to think about that specific situation, Amazon taking share from Google in product-related search advertising, it got me thinking how valuable the digital real estate that Amazon owns is.

47:51And then I started just thinking more about... And this coincided with a decline in the stock price. The stock price going down makes the company more valuable. It doesn't make the company more valuable, it makes the stock more attractive. Thinking about the value of the digital real estate that the company has, the enormous growth runway, and the potential for growth in advertising. And being very familiar with digital advertising, it's a great business. It's very profitable. It's very high margin. And then coupling that with just the enormous amount of infrastructure spending that the company has engaged in over the last two years, I think they've doubled the size of their square footage and their fulfillment network in just the last two years.

48:30And so if you think about back to the economies of scale, the infrastructure that Amazon possesses is essentially impossible to recreate, because it's not just the capital that would be required, which is north of 100 billion, but it's the operational expertise that the company has. So the ability to couple the software with the infrastructure, robots running around in these warehouses now, and just the operational expertise that that company possesses, the human capital combined with the physical capital, and the infrastructure that it owns, creates a very durable, very valuable mode. And to me, I think it makes it very predictable that you can look out 10, 20 years and that company is still going to be providing the services and the products that they are today.

49:15I think it's a very predictable business. It's durable. And there's a huge amount of growth in some of these higher margin businesses, whether it's the enterprise software business, AWS, whether it's the advertising business, whether it's third-party logistics, whether it's video games. There's so many businesses tucked inside of Amazon that make it a very interesting business. And then couple that again with the increased earning power and the decline in the stock price is essentially the reason why I decided to make it a big position. I think it's one of those stocks that offers attractive risk reward with very low downside over time.

49:46It doesn't mean the stock can't go lower, the stocks can go anywhere in the near term, but I think there's very low risk of losing money in a stock like that over the long run. Very valid points. I pulled up the digital advertising revenue for Amazon. And it was sitting at$10 billion in 2019. And it's projected to be $31 billion in 2022 this year, and then$39 billion in 2023. So that's just one of their revenue streams that is just growing very fast. AWS is another revenue stream that's growing very fast. And the stock is still trading about where it was in the middle of 2020, so nearly two years ago.

50:19So very compelling case for Amazon, I think. Yeah. And there is a huge growth runway for all of those businesses. And what Amazon does is it turns its costs into revenue stream. They have 100 jets now, cargo jets. And what they're essentially going to do is turn that into a business that they'll have excess space on their trucks for whether it's Target or I don't know if Walmart will want to use Amazon's fulfillment network, but they'll be able to provide third-party services on the excess capacity that they've invested, whether it's warehouse space, whether it's space on the jet or the trucks.

50:54And they'll turn that into very high margin revenue that in turn gets reinvested into further growth and further capex. And the great thing about Amazon is they can take money from the retail business and invest it into more servers. So it builds out AWS and they can take AWS cashflow and put it into logistics and put it into content. And there's all different... There's almost an unlimited appetite for that company to soak up its immense earning power into high return on capital investments that lead to further growth. And these are, again, building this flywheel, which is the buzzword that everyone talks about when they talk about Amazon.

51:29But it really is just another... It's a buzzword that refers to economies of scale. And Amazon, like Costco, is famous for sharing those scale advantages with either their vendors or their customers. And that leads to growth over time. And yeah, it's a great company. And I think there's still a long runway ahead. If you think about, and this is what Amazon would tell you is, again, 2 % market share. They did about 500 billion or so in GMS, which is the volume that runs through the retail store and that includes third-party retail. If you think about the size of the global retail market at 25 trillion, and that's growing at 6 % a year or so in nominal terms, which is the one way to think about it is the global retail market is adding 1.5 trillion in new volume every single year, which is like three Amazons.

52:15And so there is, in theory, a huge potential for Amazon to continue to grow for many, many years ahead. I mean, this is a business that could, in theory, be doing two or three or$4 trillion in GMS and still have all these other businesses that it owns. So I do think there's a long runway for Amazon going forward. Now you do own some of these FANG companies in your portfolio, and you also own what I would call maybe the potential next list of FANG companies. Are there any up and coming companies that you would like to chat about for our audience? There's a few that I'm looking at right now, which I'll probably keep under wraps for now.

52:53Maybe on the next podcast, we'll come back and we'll discuss some of those new ideas. But yeah, I'm always on the hunt for new emerging businesses. And when I say emerging, I don't tend to invest in companies that are... I tend to want some sort of size. So I want the company to exhibit a track record of success. But yeah, I'm always trying to look for companies that I think have the potential to become some of these next great long-term winners, whether it's maybe not to the extent that Fang has succeeded, because those are very rare birds. But yeah, companies like... We mentioned Copart, and I can use that as an example of a company that's smaller, a company like NVR, which is a home builder.

53:29The important thing to remember, I think, is although there are a lot of exciting companies in the technology space, there are also some great companies outside of the technology space that I would encourage your listeners to think about because sometimes you can find a very attractive company in a business that is sort of boring. And Peter Lynch used to talk about this in his books that some of the best winners of all time come from these really boring industries, like auto parts, O 'Reilly or AutoZone. In the case of Copart, it's like a junkyard. You mentioned Domino's. You think of like a Domino's pizza, right?

54:03One of the best stocks of all time and they sell pizza. So sometimes it's a business that for whatever reason is seeing declining competition. Sometimes it's an industry where people don't want to go into. So it could be like a company like Service Corp, which operates funeral homes. I do look for companies that have attractive economics. My rule of thumb is I want it to be durable. I want it to be a business that is quality, which I would define as high returns on capital and a business that has a growth mindset. So a business that thinks about, I like to think about like, where is this company headed over the next decade?

54:34And so it doesn't necessarily have to be a fast-growing company, but value is created through high returns on capital and some growth. You need growth, certainly to create value over time, and you need high returns on capital. And so the combination of those two things is what creates value over time. And those can come from... It could come from a technology company that's the next thing. It could come from some boring company that operates in an old-world industry that doesn't have a lot of competition. So there's a lot of opportunities out there. In times when the market is stressed, that's the time to be hunting.

55:04And I would consider this to be maybe one of those times. Yeah, I agree with you. Now, in studying Nick Sleep's work again, I'm going to mention him. He mentioned that one doesn't have to behave unethically to achieve spectacular success. With that said, I'm curious if you think about whether companies, what their impact is on society as a whole. For example, there are studies that Meta's platforms, Facebook, and Instagram have a negative impact on the mental health of younger people, especially children whose brains are still developing. Does the business's impact on society factor into your process at all?

55:42Yeah, absolutely. Yeah, it absolutely does, because I'm a big believer in the idea. And this predates the whole ESG movement, which has really picked up steam in the last few years. And I think the core of that movement, I think it has a lot of things right. I think unfortunately, a lot of it gets bogged down through marketing and through disingenuous motivations. But I do think that the idea in general is very valid. And I think the value of a business is going to be dependent on the ability of a company to satisfy all of the constituents. And so if you think about the different parties that touch a business's ecosystem, you have, obviously, you have customers, you have suppliers, you have employees, and you have shareholders.

56:22And maybe you have the community at large that the company operates in, right? Like those four or five different constituents all have competing motivations. And so the trick with a business is to sort of delicately balance those conflicts, those inherent conflicts of interest. And I think the best businesses do a good job at keeping employees happy, keeping customers happy. And over the long run, if they're able to do those two things, then they'll probably keep shareholders happy. And if a company is, you know, because you think about keeping customers happy is simply offering something of value.

56:54And so if you have your business with a great value proposition over time, you're likely going to be able to keep some of that value proposition for yourself. And so I think it's really important to think about all of those things. And I do try to think about how no business is perfect. And there are, like I said, conflicts of interest. Some businesses prioritize employees over shareholders. Some businesses prioritize perhaps customers over employees. Some businesses are focused purely on profit. And I think businesses that are focused purely on profit can lead to situations that degrade the competitive advantage if there is one over time.

57:28And I remember reading articles in 2004, 2005, you mentioned Nick Sleepy is famous for investing at Costco for many years. And Costco got a lot of criticism from shareholders early on, 20 years ago, for not exercising the pricing power that it had. So shareholders said, look, you guys have this enormous buying power, you're getting all of these economies of scale, keep some of it for us, right? Keep some of it for yourself. Jim Senegal, the founder, was famous for always keeping a certain fixed gross margin right at 14 % and not extracting anything extra because he knew that over time, passing those economies of scale on to the customer would lead to growth.

58:08And so Costco is sort of the poster child for keeping employees happy. They've always had slightly above average wages. They certainly keep customers happy. And in the long run, they keep shareholders happy. So I think that's important. When it comes to things like meta, like Facebook, the problems that that company has, number one, I think, the way I think about that company specifically, and a lot of the companies in today's world fall into this, whether it's a social network or technology in general, there are a lot of issues with social networks. One thing I would say, I mean, I've spent a lot of time thinking about this as a shareholder of Facebook.

58:41And there are certain issues that I think are significant and the company should be addressing, should be working on these issues and should be addressing these issues. And in my talks with a variety of different engineers at Facebook, I've become convinced that the company is genuine. The people that work there are genuine. They do want to fix these problems, despite what you might read in the paper. And one thing about the newspaper, Wall Street Journal, the Facebook Files, and all, newspapers are direct competitors to Facebook. Facebook has devastated the newspaper industry in many ways. And so you have to sometimes have that, you have to be cognizant of that when you're reading these articles.

59:14It doesn't mean that the arguments that the newspaper is making are invalid, but you just want to be aware of these incentives. But I'm a big believer in the idea that communication in general is a net additive to stability. And so I think a lot of the attention on Facebook has been focused on the costs of these platforms and not the benefits. And so when you think about communication in general, it's always been a net positive for society, right? Communicating with your fellow man, communicating with people across borders, traveling. I think a lot of the ills in our society, whether it's racism or anything else, it's a whole different discussion.

59:50But a lot of the problems are often rooted in the idea that people that do things differently than the way we do it. I'm a big believer in the idea that traveling and talking to people and learning about different cultures. When you boil it down, it's another human being. We have more in common with people that are different than us than we might realize. And so I think communication is a way that solves some of those issues at a very general level. I think if you're a business that provides communication tools, I think in general, you have the opportunity to be a net contributor to stability, to peace, to economic growth, to all of the things that we all want in sort of a civilized Western society.

1:00:31And if you think about it, there's a reason why Putin doesn't want Facebook in Russia, right? There's a reason why China doesn't allow Facebook. Because Facebook and social networks in general lead to people communicating with each other. And communication leads to informed individuals. And informed individuals, that leads to a liberated society. And it sort of flies in the face of the agenda of an autocratic leadership. And so I think in general, Facebook has positives and negatives. But I think if you're analyzing a company with an unbiased lens, without putting aside any biases that you have toward the negative problems that the company certainly faces, and I'm not trying to dismiss those problems, there are problems.

1:01:14But I think it's important to look at the benefits as well as the cost, basically. Robert Leonard Yeah. So many good takeaways from what you mentioned there. I think it's important just to be mindful of the incentive structure. And it's just so good to find those businesses that have those positive feedback loops. Tying back to Costco, they provide low costs. They're able to build new Costco all across the US and the world. And those costs are distributed amongst more and more people as they build more and more stores. And it's just this positive feedback loop and flywheel that is really like a self-fulfilling prophecy where it's almost like an unstoppable force.

1:01:50So John, before I let you go, thank you so much for joining me today. I really, really enjoyed this conversation and I truly think the audience will as well. Before I let you go, I wanted to give you a handoff to let the audience know where they can find you and connect with you. Sure. Yeah. Well, you can find my company's website is sabercapitalmgt.com. And the name of my firm is Saber Capital Management. And so you can go to my website and find a lot of the historical writing or the archives that I've posted over the years. I'm on Twitter as well, John Huber, 72. And so yeah, those are the two places.

1:02:27You can find my email address on there as well and feel free to reach out. I would love to connect. Awesome. Thank you so much, John. Yeah. Thanks, Clay. Appreciate it. All right. I hope you enjoyed today's episode. Please go ahead and follow us on your favorite podcast app so you can get these episodes delivered automatically. If you've been enjoying the podcast, we would really appreciate it if you left us a rating or review on the podcast app you're on. This will really help us in the search algorithm so others can discover the show as well. And if you haven't already done so, be sure to check out our website, theinvestorspodcast.com.

1:03:01There you will find all of our episodes, some educational resources, as well as our TIP finance tool that Robert and I use to manage our own stock portfolios. And with that, we'll see you again next time. Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by the Investors Podcast Network. Every Wednesday, we teach you about Bitcoin and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional.

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