# Finding Value Investments with Patient Capital's Samantha McLemore

An episode of [Masters in Business](https://invisiblenetwork.ai/podcast/730188152), 19 Dec 2025, 51 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/4e4cd910-40a1-4619-a5f3-ae2b0012ffff/1da81d50-dee7-4b69-a5dd-b3b8015681b6/audio.mp3?utm_source=Podcast&in_playlist=5873a3cb-298f-40bc-b71f-ae2b0013000d

Barry sits down with Samantha McLemore, founder and CIO of Patient Capital Management. They discussed investing in crypto, and the AI revolution. They also discussed long-term investing and the ways her firm is using AI. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Masters in
[0:11] Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
[0:16] Speaker 2: This week on the podcast an extra special Masters in
[0:20] Speaker 2: Business Live from the Phillips Collection in Washington, d C.
[0:25] Speaker 2: I sit down with Samantha maclamore of Patient Capital. She's
[0:29] Speaker 2: known as really the protege of Bill Miller, who she's
[0:33] Speaker 2: worked with for the past twenty years, first at leg Mason,
[0:36] Speaker 2: then at Miller Value. She runs Patient Capital and it's
[0:41] Speaker 2: taken over the opportunity equity funds from Miller Value. Her
[0:46] Speaker 2: firm now runs it. I thought the conversation was fascinating
[0:50] Speaker 2: and I think you will also with no further ado,
[0:53] Speaker 2: my live conversation with Patient Capitals. Samantha Macklamore, all right,
[1:08] Speaker 2: let me look at my notes, which says I'm Barry Ridholtz.
[1:13] Speaker 2: I'm the host of Masters in Business, a podcast that's
[1:17] Speaker 2: been on Bloomberg for the past eleven years, the first
[1:22] Speaker 2: Bloomberg podcast. Now there are dozens, many, many award winning podcasts.
[1:27] Speaker 2: Forgot to button my shirt after the ran the backup mic,
[1:32] Speaker 2: so let's get that taken care of.
[1:33] Speaker 3: Since we're on TV, so most of you have some idea.
[1:37] Speaker 2: Who I am, sam Why don't you tell people who
[1:41] Speaker 2: you are?
[1:42] Speaker 4: My name is Samantha Maclamore. I'm the founder and CIO
[1:45] Speaker 4: of Patient Capital Management. I started my career many many
[1:50] Speaker 4: years ago. Now I don't know how it's been so long,
[1:52] Speaker 4: as an analyst at leg Mason working for Bill Miller,
[1:55] Speaker 4: who is a very well known value manager.
[2:00] Speaker 2: I want to talk a little bit about your time
[2:01] Speaker 2: with Bill Miller. But before we get to that, let's
[2:05] Speaker 2: start in college Magna cum laude from Washington and Lee.
[2:10] Speaker 2: Originally chemistry, but eventually changes to accounting and business. What
[2:17] Speaker 2: was the original career plan.
[2:19] Speaker 4: Well, I didn't have so much a plan when I
[2:22] Speaker 4: first decided to major in chemistry. I took chemistry in
[2:25] Speaker 4: high school and thought I was really good at it.
[2:26] Speaker 4: And then I got to so I was like, hell,
[2:28] Speaker 4: major in this. I like to be good at things.
[2:30] Speaker 4: And I got to college and that first class, I
[2:33] Speaker 4: quickly realized I was not so good at it. You know,
[2:35] Speaker 4: I'd never worked so hard for a bee, and so
[2:38] Speaker 4: I was like, you know, some of my friends were,
[2:40] Speaker 4: you know, doing much better. So I was like, nah,
[2:42] Speaker 4: that's not We're going to have to re examine this
[2:44] Speaker 4: whole thing. So I wound up in the business school
[2:47] Speaker 4: because I was analytical and that was a much better fit.
[2:50] Speaker 2: So accounting and business, not necessarily finance and investing.
[2:54] Speaker 3: When when did that spark light?
[2:56] Speaker 2: Oh?
[2:57] Speaker 4: Well it was they didn't have a finance degree at
[3:00] Speaker 4: the business school. So again I was very good at accounting.
[3:03] Speaker 4: It just came naturally. I don't know what that says
[3:05] Speaker 4: about my brain, but and I got involved with the
[3:08] Speaker 4: investment club. I've had some investing experience with my dad,
[3:11] Speaker 4: who tried to get me interested in markets in high school.
[3:15] Speaker 4: You know, in the late nineties, it was a roaring
[3:17] Speaker 4: tech bull market, much like we're seeing today, although I
[3:21] Speaker 4: don't think we're peak bubble. And he bought Dell, and
[3:25] Speaker 4: I had some funds that were for college, so he
[3:28] Speaker 4: had invested those and tried to get me engaged. I'd
[3:31] Speaker 4: had a little bit of experience in high school, and
[3:34] Speaker 4: then I joined the investment club and I just liked that.
[3:38] Speaker 2: So how did you find your way over to leg Mason?
[3:41] Speaker 2: Was that your first job right out of college?
[3:43] Speaker 4: That was? And I like to say I won the
[3:44] Speaker 4: job lottery because it was the fall of two thousand
[3:48] Speaker 4: and one. So now we were in the tech market crash.
[3:51] Speaker 4: It wasn't a great job market. Fortunately, you know, there
[3:55] Speaker 4: were a lot of investment banks recruiting from my alma mater,
[3:59] Speaker 4: so my plan was to go there. I was ready
[4:00] Speaker 4: to do the all nighters in New York. And Bill,
[4:03] Speaker 4: who also went to Washington le happened to come back,
[4:06] Speaker 4: you know, the fall of my senior year. He did
[4:09] Speaker 4: some speaking, he met with the investment club, and I
[4:12] Speaker 4: got very lucky. I asked him if I could send
[4:14] Speaker 4: him my resume, and he said sure. So I sent
[4:16] Speaker 4: him my resume and joined him as a junior analyst
[4:21] Speaker 4: right out of college.
[4:22] Speaker 2: So I imagine Bill Miller comes to an investment club
[4:26] Speaker 2: at his alma mata and every person is handing him
[4:29] Speaker 2: a resume.
[4:30] Speaker 3: Is that accurate or were people a little more.
[4:34] Speaker 4: You would think? I mean, if I have advice to
[4:36] Speaker 4: young people, it's.
[4:37] Speaker 3: Like, give Bill Miller your resume, Give.
[4:39] Speaker 4: Anyone your resume, go after it, go for the job.
[4:42] Speaker 4: Everyone said there's no way you can get a job
[4:44] Speaker 4: in investment management, and so I just think people thought, Okay,
[4:47] Speaker 4: this isn't what you know. I'll go do banking. I'm
[4:50] Speaker 4: not going to try. So actually I think I was
[4:52] Speaker 4: the only the only one that sent.
[4:53] Speaker 3: In my real life.
[4:55] Speaker 4: Yeah, that's it, the only one that asked to do that.
[4:57] Speaker 2: There's a lesson in that. So you start as an
[5:00] Speaker 2: unlisted leg mason. How long did you do that? When
[5:04] Speaker 2: did you transition to a portfolio manager?
[5:06] Speaker 4: I was an analyst for a few years. So I
[5:09] Speaker 4: started in two thousand and two and became the assistant
[5:11] Speaker 4: portfolio manager of the Opportunity Trust, which is the mutual
[5:14] Speaker 4: fund that Bill and I worked on for many years
[5:16] Speaker 4: together that I now run in two thousand and eight.
[5:19] Speaker 4: In August of two thousand and eight, right, good time, Yeah,
[5:22] Speaker 4: right before the markets fell apart during the.
[5:25] Speaker 3: Financial The next month was all help broke.
[5:28] Speaker 4: Yeah.
[5:28] Speaker 2: We'll talk about that a bit. But you spend twenty
[5:31] Speaker 2: years working pretty much shoulder with Bill Miller.
[5:36] Speaker 3: What was that like?
[5:38] Speaker 2: What did you take away from that experience?
[5:40] Speaker 4: I mean, it was amazing. I can't express how lucky
[5:43] Speaker 4: I was. I was just so lucky, you know, I
[5:46] Speaker 4: think it's an apprenticeship business. So I really my desk
[5:49] Speaker 4: was always right beside Bills, and he liked to teach,
[5:53] Speaker 4: and so I would go in his office. We would
[5:56] Speaker 4: look at the Bloomberg and you know, look at stock charts,
[6:00] Speaker 4: and I got to attend a lot of meetings with
[6:03] Speaker 4: great CEOs. Jeff Bezos spoke at our investment conference in
[6:06] Speaker 4: two thousand and three of the year after I joined,
[6:09] Speaker 4: and I got to hear his speech and be in
[6:11] Speaker 4: some meetings with him, And so I couldn't have been
[6:14] Speaker 4: luckier in terms of what I was exposed to and
[6:16] Speaker 4: that learning opportunity.
[6:18] Speaker 2: So it's kind of interesting. You work with a legendary
[6:22] Speaker 2: value investor who is doesn't really fit the mold of
[6:25] Speaker 2: a traditional value investor. How much of his philosophy did
[6:31] Speaker 2: you make your own? How similar or different you to
[6:35] Speaker 2: the Bill Miller style of investing.
[6:37] Speaker 4: Well, we have a lot of similarities. I think that's
[6:39] Speaker 4: one of the reasons we hit it off. And you know,
[6:42] Speaker 4: I would say, at my core, I'm a contrarian value investor.
[6:45] Speaker 4: I didn't grow up with a lot of money. I
[6:47] Speaker 4: had to make money go far. I looked at the markets.
[6:50] Speaker 4: I like stuff that was down, that was generating cash.
[6:53] Speaker 4: Bill and I, you know, when I first applied, talked
[6:55] Speaker 4: about Eastman Kodak, which ended up being one of our
[6:58] Speaker 4: biggest mistakes, both of us. So we kind of bonded
[7:00] Speaker 4: over that and what was much more, you know, transformational
[7:05] Speaker 4: to me was Bill's view, and he was He was
[7:07] Speaker 4: criticized when I joined him as not a true value
[7:09] Speaker 4: manager because he had invested in names like Amazon, you know,
[7:14] Speaker 4: in the early two thousands, and people said, you can't
[7:16] Speaker 4: possibly be a value manager if you're investing in these
[7:19] Speaker 4: very high multiple stocks. And you know, Bill used to
[7:22] Speaker 4: joke that he liked to hire people young so he
[7:24] Speaker 4: could imprint them, like the baby bird that whatever the
[7:27] Speaker 4: first thing it sees, it thinks is its mother. So
[7:30] Speaker 4: I was definitely imprinted. But when Bill made the point, listen,
[7:34] Speaker 4: we don't know what the best values in the market
[7:35] Speaker 4: are today because it depends on the future, and the
[7:38] Speaker 4: future is unknowable, so no one knows what they are.
[7:40] Speaker 4: But we do know if we look back over long
[7:42] Speaker 4: periods of time, what the best values are, because we
[7:44] Speaker 4: have hindsight biased and we can look back and say, well,
[7:46] Speaker 4: what went up the most clearly that was the most
[7:48] Speaker 4: the best value. And if you look, it's always names
[7:51] Speaker 4: that can grow and compound value over long periods of time,
[7:55] Speaker 4: and those types of companies, because their prospects are so promising,
[7:58] Speaker 4: they don't tend to trade at low multiple. So he said,
[8:01] Speaker 4: as a value manager, why would you have a process
[8:03] Speaker 4: where you explicitly exclude what you know are the best
[8:06] Speaker 4: values in the market. That doesn't make sense. And I thought, well, yeah,
[8:09] Speaker 4: that just doesn't make sense now to a contrarian type investor.
[8:13] Speaker 4: You know, it's not easy to because it depends on
[8:16] Speaker 4: a future that's unknowable. It always does, and so where
[8:19] Speaker 4: can you get that conviction? That can be challenging, But
[8:22] Speaker 4: I think that had a, you know, certainly a big
[8:24] Speaker 4: impact on me, and it's a core part of our
[8:26] Speaker 4: process to look at a mix of different types of
[8:28] Speaker 4: opportunities in the portfolio.
[8:30] Speaker 2: So you use the word conviction a couple of times.
[8:33] Speaker 2: Opportunity Equity has always been a high conviction fund, somewhat
[8:38] Speaker 2: idiosyncratic strategy. Tell us a little bit about the funds
[8:42] Speaker 2: philosophy and what makes it so unique amongst I don't
[8:46] Speaker 2: want to say value funds, but funds that look at
[8:51] Speaker 2: reasonable purchase prices for equities.
[8:54] Speaker 4: Yeah. Well, I think we are unconventional and we've always
[8:57] Speaker 4: been unconventional. And Bill started the Opportunity Trust in nineteen
[9:00] Speaker 4: ninety nine at the peak of that tech bubble. And
[9:03] Speaker 4: the idea was, let's create a fund with the maximum
[9:06] Speaker 4: flexibility possible to go wherever it wants. And again, there's
[9:10] Speaker 4: lots of structures in the business that make that hard
[9:13] Speaker 4: because style boxes don't like that. People allocators want to
[9:16] Speaker 4: put you in a box, and so it hurts demand
[9:19] Speaker 4: for your fund when you're like, no, I'm just going
[9:20] Speaker 4: to go wherever the best values are. But the idea
[9:23] Speaker 4: is over time that should allow you to earn better
[9:25] Speaker 4: returns if executed properly. So I think the fund has
[9:29] Speaker 4: migrated around over time. It has had a different mix
[9:33] Speaker 4: of you know, what we call attractively valued compounders like
[9:36] Speaker 4: Amazon and Alphabet, which we own more classic value names
[9:40] Speaker 4: that everyone would recognize as value like City Group and
[9:43] Speaker 4: General Motors. And then we like to look at companies
[9:46] Speaker 4: early in their life because they're more likely to be misunderstood.
[9:49] Speaker 4: There's a wider range of potential future outcomes, and you know,
[9:53] Speaker 4: a lot of people don't feel comfortable, especially in the
[9:56] Speaker 4: value invest in community, where I think it's it's a
[9:59] Speaker 4: more risk averse group who want to see the value
[10:01] Speaker 4: today there what's today's value and what's today's price. And again,
[10:06] Speaker 4: you know, growth people tend to look further out in
[10:08] Speaker 4: the future. But we we like to have a mix,
[10:10] Speaker 4: and I think that helps the fund do well in
[10:11] Speaker 4: different environments.
[10:12] Speaker 2: And let me put a little flesh on those bones,
[10:14] Speaker 2: because this morning, the first thing I did was, Hey,
[10:18] Speaker 2: let's see how Opportunity is done year Today it has
[10:23] Speaker 2: beaten its benchmark year to date, one year, three year,
[10:26] Speaker 2: and since inception. So it's not just like this is
[10:30] Speaker 2: a theoretical stock picking approach. It's done better than average.
[10:36] Speaker 2: Is that a fair way to describe it without getting
[10:38] Speaker 2: you into trouble with the compliance department?
[10:40] Speaker 4: Now you're going to get me in trouble with compliance,
[10:42] Speaker 4: But well, I said it, not you. So we have
[10:44] Speaker 4: had a good track record, especially relative to value managers,
[10:48] Speaker 4: which have recently, you know, struggled in a very you know,
[10:51] Speaker 4: growthy sort of market.
[10:53] Speaker 2: Since the financial So since you went there, since the
[10:56] Speaker 2: financial crisis, value has been a pretty ugly lagger compared
[11:03] Speaker 2: to growth. We've been in a very strong ear for growth,
[11:08] Speaker 2: especially since the end of the pandemic. What sort of
[11:11] Speaker 2: challenges does that create to someone that's labeled a value manager?
[11:17] Speaker 4: Oh? Well, I mean I think it creates a lot
[11:18] Speaker 4: of value in terms of some people say, oh, your value,
[11:21] Speaker 4: we only want to talk to you. So my colleagues
[11:23] Speaker 4: hereously had a conversation the other day and they're like,
[11:25] Speaker 4: we just don't have any demand for value. No one cares.
[11:27] Speaker 4: We're like, but we've done really well and we're beating
[11:29] Speaker 4: the market every year since Sam took over. And it's like,
[11:31] Speaker 4: it doesn't matter. So I think it does. You know.
[11:35] Speaker 4: My view is our primary job is to deliver for
[11:38] Speaker 4: our clients, and so if we do that, everything else
[11:42] Speaker 4: will work out. I've seen this in this business time
[11:44] Speaker 4: and time again. If you deliver a result, everything else
[11:47] Speaker 4: will work itself out. And so and I strongly believe
[11:51] Speaker 4: value will have it stay in the sun again, but
[11:55] Speaker 4: it might take an ugly market, so I'm not hoping
[11:57] Speaker 4: for that.
[11:58] Speaker 2: So I've always tried to figure out way to more
[12:01] Speaker 2: appropriately describe what you do what Bill Miller does. Is
[12:06] Speaker 2: it growth at a reasonable price? Is it value and growth? Like,
[12:09] Speaker 2: how do you sum it up in an elevator pitch?
[12:12] Speaker 4: Well, you know, again, I think it's value because if
[12:15] Speaker 4: you look at every name in the portfolio, we think
[12:18] Speaker 4: they're all undervalued. But the value of any business is
[12:21] Speaker 4: the present value of the future free cash flows and
[12:23] Speaker 4: growth is a very very important input into you know,
[12:27] Speaker 4: that calculation, and so we are valuing businesses. But I
[12:32] Speaker 4: also think it's important to have diversification between different types
[12:36] Speaker 4: of names in the portfolio, and so, you know, I
[12:39] Speaker 4: wouldn't feel comfortable being fully invested in this market and
[12:42] Speaker 4: all the growthiest stuff that has higher valuations. You know,
[12:46] Speaker 4: I like having some cheaper names in there that are
[12:50] Speaker 4: likely to perform well in a different sort of environment.
[12:52] Speaker 4: And there's really attractive values in the value area that
[12:55] Speaker 4: have just been left for dead. So we'll be patient
[12:58] Speaker 4: waiting for the market to close those gaps.
[13:00] Speaker 2: So since Patients was brought up, let's talk about Patient Capital.
[13:04] Speaker 2: What inspired you to launch the firm and tell us
[13:07] Speaker 2: a little bit of the thinking behind the name.
[13:11] Speaker 4: Yeah, so I think, I mean, I've always been pretty
[13:13] Speaker 4: driven and I've always had entrepreneurial interests, and so when
[13:17] Speaker 4: I became the co manager with Bill on the Opportunity
[13:19] Speaker 4: Fund in twenty fourteen, I was also interested in developing
[13:23] Speaker 4: my own independent track record. So Bill gave me some
[13:25] Speaker 4: of his personal money to run independently and be the
[13:29] Speaker 4: sole decision maker. So at the end of twenty nineteen
[13:32] Speaker 4: that had a really good track record. We didn't have
[13:35] Speaker 4: an institutional business at Miller Value Partners. We head back
[13:38] Speaker 4: in the day at LEG but Bill was more optimizing
[13:40] Speaker 4: for the kind of life you wanted to live. He
[13:42] Speaker 4: didn't want to grow and build a business. So I said, hey,
[13:45] Speaker 4: let me go after this institutional business. And there was
[13:48] Speaker 4: at least stated interest in women and minority led opportunities there,
[13:52] Speaker 4: so I said, it looks like there might be interest
[13:54] Speaker 4: in the marketplace for this. It was important to me
[13:56] Speaker 4: to have. I think it's a great profession for women.
[13:59] Speaker 4: I think I've read a lot of research on the
[14:01] Speaker 4: importance of role models in the industry. So you know,
[14:05] Speaker 4: that was, you know, part of my decision. So we
[14:08] Speaker 4: decided to turn it into a private fund like a
[14:11] Speaker 4: hedge fund structure, and we did. We made the decision
[14:14] Speaker 4: in twenty nineteen, and then we actually launched it in
[14:16] Speaker 4: twenty twenty right in COVID, which was not the best time.
[14:19] Speaker 3: It's not a good time to launch it.
[14:21] Speaker 4: Whenever I made these big decisions, the market, you know,
[14:24] Speaker 4: goes a little wonky.
[14:25] Speaker 3: Right.
[14:26] Speaker 2: So, since you've become the sole manager of the opportunity
[14:30] Speaker 2: equity strategy is it run the same way it was.
[14:33] Speaker 2: How has it changed since Bill has retired from being
[14:37] Speaker 2: co manager there?
[14:38] Speaker 4: Yeah, so the philosophy and process is exactly the same
[14:41] Speaker 4: as what we've always done. And you know, the decision
[14:44] Speaker 4: making is different because it used to be a co
[14:46] Speaker 4: decision making structure. When I first became co manager with Bill,
[14:49] Speaker 4: he said, okay, great, you're co manager, but I'm not
[14:52] Speaker 4: going to let some thirty something year old tell me
[14:53] Speaker 4: what to do on my fund. And I said, I
[14:55] Speaker 4: got it. I got to you know, I have to
[14:56] Speaker 4: convince you. And so over time, you know, it became
[15:00] Speaker 4: came more equal co and then I took it over
[15:03] Speaker 4: obviously when he stepped off at the end of twenty
[15:05] Speaker 4: twenty two.
[15:06] Speaker 2: And Patient Capital has acquired this, it's now a wholly
[15:10] Speaker 2: owned subsidiary.
[15:11] Speaker 3: Is that right now?
[15:12] Speaker 4: Patient Capital is, you know, the Opportunity Trust mutual fund
[15:16] Speaker 4: business and the institutional business that I started under Patient
[15:19] Speaker 4: And so all the team and the structure.
[15:21] Speaker 2: How did they differ aside from a mutual fund has
[15:23] Speaker 2: its own rules, regulations, and well.
[15:26] Speaker 4: That's the primary way again for me. I like to
[15:29] Speaker 4: think one philosophy, one process, one team, and we're just
[15:32] Speaker 4: looking for the best ideas in the market, and then
[15:34] Speaker 4: if it's appropriate for the strategy. The mutual fund has
[15:37] Speaker 4: more restrictions on what it can do, even though it
[15:39] Speaker 4: has the widest latitude possible for a mutual fund. So
[15:44] Speaker 4: you know, we owned bitcoin starting at twenty twenty in
[15:47] Speaker 4: the private fund, but we couldn't in the mutual fund.
[15:49] Speaker 4: Now we owned the bitcoin ets, but it would be
[15:51] Speaker 4: differences like that.
[15:53] Speaker 2: Coming up, we continue our conversation with Samantha maclamore, chief
[15:57] Speaker 2: investment officer and founder of Patient Capital, talking about the
[16:02] Speaker 2: state of the economy today. I'm Bury Results. You're listening
[16:06] Speaker 2: to Masters in Business on Bloomberg Radio. I'm Bury Results.
[16:27] Speaker 2: You're listening to Masters in Business on Bloomberg Radio. Let's
[16:31] Speaker 2: return to my previously recorded conversation live at the Phillips
[16:36] Speaker 2: Collection in Washington, d C. With Patient Capitals. Samantha macklamore.
[16:42] Speaker 2: So that one doesn't think of bitcoin as a value trade,
[16:47] Speaker 2: tell us what you're thinking was there?
[16:49] Speaker 4: Yeah, Well, my thinking was I really screwed that one
[16:51] Speaker 4: up because Bill got involved in bitcoin when it was
[16:53] Speaker 4: like one hundred dollars a coin, and I was like, oh,
[16:57] Speaker 4: this is another one of those things that's going to
[16:59] Speaker 4: go to zero, as Bill said, you know it could
[17:01] Speaker 4: go to zero or but if it goes up, it's
[17:03] Speaker 4: going to go up a lot. And I was like,
[17:05] Speaker 4: I don't need another thing going to zero. Big, big,
[17:08] Speaker 4: big mistake. But you know, then it had its run.
[17:11] Speaker 4: It made it almost to twenty twenty eighteen. You know,
[17:15] Speaker 4: I again was telling Bill when it got to three thousand, Bill,
[17:19] Speaker 4: you should he had it fun and I was like,
[17:20] Speaker 4: it was a huge position. I was like, you should
[17:22] Speaker 4: cut it back. You know, this is you know, has
[17:25] Speaker 4: some risk. And it went to twenty and then it
[17:27] Speaker 4: did crash, but back to three thousand. So that was
[17:29] Speaker 4: another good lesson. But by twenty twenty, again I thought
[17:32] Speaker 4: that there was you know, potential inflation risk given all
[17:35] Speaker 4: the you know, monetary and fiscal stimulus. And by that time,
[17:40] Speaker 4: you know, Bill was on the phone every day with
[17:42] Speaker 4: institutions and you know, big individuals that wanted to get
[17:47] Speaker 4: up to speed. And there was a bulcase early on
[17:49] Speaker 4: about it being digital gold, but I thought it was
[17:51] Speaker 4: very unlikely because there's one gold and it has a
[17:53] Speaker 4: special psychological space in the investment universe. But by twenty
[17:58] Speaker 4: twenty I thought it was much more likely and it
[18:00] Speaker 4: was developing along the path. And usually after you have
[18:03] Speaker 4: these crashes, things don't keep coming back. And so I
[18:07] Speaker 4: bought it in the fund there on the belief that
[18:09] Speaker 4: it was digital gold, which I could actually analyze. And
[18:13] Speaker 4: you can look at the market cap of gold and
[18:15] Speaker 4: look at you know, the younger generations are much more
[18:18] Speaker 4: inclined to digital assets. So if this is a proxy
[18:20] Speaker 4: for the long term potential here, what's the upside? And
[18:23] Speaker 4: if you do that math today, you know bitcoin could
[18:26] Speaker 4: be worth one point three to one point four million
[18:28] Speaker 4: dollars to share or a coin sometime in the future.
[18:32] Speaker 4: And so again I still believe that to be the case.
[18:35] Speaker 2: I would would not have guessed that. That's a fairly
[18:38] Speaker 2: contrriant perspective for a so called value investor. Let's talk
[18:43] Speaker 2: about some other fairly contrarian approaches. You were an aspiring
[18:49] Speaker 2: innkeeper in Vermont. I have to ask about that because
[18:54] Speaker 2: it's just so off what I know of You tell
[18:58] Speaker 2: us about adventures in innkeeping.
[19:01] Speaker 4: Well, I was an innkeeper, for I'm not the actual innkeeper,
[19:04] Speaker 4: but yes, I like to learn lessons a hard way. That's,
[19:07] Speaker 4: you know, part of my unfortunate line life. And you know,
[19:10] Speaker 4: so twenty eleven, we'd gone through the financial crisis. You know,
[19:15] Speaker 4: Bill was this genius. We'd had a really poor performance.
[19:18] Speaker 4: He spent all his time working. I just had my
[19:20] Speaker 4: first daughter, which totally rearranged everything in my life and
[19:25] Speaker 4: my priorities. And I was like, you know, do I
[19:28] Speaker 4: want to work that hard and do that or you know,
[19:32] Speaker 4: now I have this daughter and she's so important to me.
[19:34] Speaker 4: So I was considering a whole bunch of things, and
[19:38] Speaker 4: you know, innkeeper was one of them, as crazy as
[19:40] Speaker 4: that sounds because it's so not my thing, like, but
[19:45] Speaker 4: and then it was the real estate obviously bubble and crash,
[19:49] Speaker 4: and so, you know, I think I had mentioned this
[19:51] Speaker 4: to my family. They live in Vermont. My dad was like, oh,
[19:55] Speaker 4: the Vermont inn is going up for auction. And I
[19:57] Speaker 4: was like, oh, this is very interesting. It's a sign
[19:59] Speaker 4: of our times. Let me go to this auction. So
[20:02] Speaker 4: my husband and I went to the auction. You know,
[20:05] Speaker 4: I did work on what I thought the end was
[20:07] Speaker 4: worth before going into that, and you know, there was
[20:11] Speaker 4: a first bid for the end, and then we bid
[20:14] Speaker 4: the second bid and then I'm like, what are you doing?
[20:15] Speaker 4: That was crazy, Like, don't do that again, but that
[20:18] Speaker 4: was it. It was over there. There were no more bids,
[20:21] Speaker 4: and so you know, we ended up with an inn
[20:24] Speaker 4: that was closed down because it had gone through foreclosure.
[20:27] Speaker 4: Fortunately my family was all there. So then I made
[20:29] Speaker 4: I compounded the air by getting my brother in law's
[20:32] Speaker 4: sister involved to run the inn. So got family involved
[20:36] Speaker 4: in an absentee business. And you know, we also were
[20:39] Speaker 4: on a reality show. We won't go into that.
[20:41] Speaker 3: Did you do a reality show?
[20:43] Speaker 4: We did a reality show because I'm not going to
[20:45] Speaker 4: tell you the name because I don't want you to
[20:46] Speaker 4: go watch it. But I needed someone to help me
[20:49] Speaker 4: figure out how I was going to run this in.
[20:50] Speaker 4: But we got it open. So the the auction was
[20:53] Speaker 4: in October. I wanted to get it open by the
[20:57] Speaker 4: holidays because that's obviously the big ski season there.
[20:59] Speaker 3: Which we did. Did we did that?
[21:02] Speaker 4: Yeah, my dad, my husband's dad, We got everyone involved
[21:05] Speaker 4: in getting the n reopen and we had to figure
[21:07] Speaker 4: out how to get people to come. And so it
[21:09] Speaker 4: was it was not for me. I quickly figured that out,
[21:13] Speaker 4: but you know, we kind of got the business running
[21:15] Speaker 4: and then sold it.
[21:16] Speaker 2: So and what was the lesson we learned? The lesson
[21:20] Speaker 2: was don't scratch your nose at a Yeah.
[21:22] Speaker 4: The lesson was, I like markets. I can sit at
[21:25] Speaker 4: my desk and make a lot of money doing very little,
[21:28] Speaker 4: versus managing a chef who has you know, a lot
[21:30] Speaker 4: of issues on when I tell him the food's not
[21:34] Speaker 4: so good and he thinks he's an artist, and you know,
[21:37] Speaker 4: I was like, this is not for me. And the
[21:39] Speaker 4: maximum amount you could make on it, and like that
[21:41] Speaker 4: was not that.
[21:42] Speaker 3: Much, so not a lot of business money.
[21:44] Speaker 4: We did make some money, so it was okay, but
[21:46] Speaker 4: it was a lot of work for you know how
[21:48] Speaker 4: much you could make.
[21:49] Speaker 3: Yes, and you were working full time.
[21:52] Speaker 4: I was working. Yeah, I was working full time, so
[21:55] Speaker 4: you know I wasn't on site again, I had people
[21:58] Speaker 4: there working.
[21:59] Speaker 2: That's an amazing story. Let's talk a little bit about philosophy.
[22:04] Speaker 2: You have talked about Buddhism and Stoicism as related to
[22:09] Speaker 2: finance and investing. Tell us a little bit about that. Yeah.
[22:13] Speaker 4: Well, I think in investing in market and markets, having
[22:17] Speaker 4: the right mindset is probably the most important thing. And
[22:22] Speaker 4: you know, it's a mixture of art and science, and
[22:24] Speaker 4: a lot of people think the scientific part is more important,
[22:27] Speaker 4: but I think the art part is more important because
[22:31] Speaker 4: you know, there's a lot of data on how much
[22:33] Speaker 4: more you can make in equity markets over time. And
[22:36] Speaker 4: so the reason that you can make more is because
[22:38] Speaker 4: you have these periodic losses. And you know, I liken
[22:41] Speaker 4: it to dieting. It's like people don't fail at dieting
[22:45] Speaker 4: because they don't know they shouldn't eat the cookie, right,
[22:47] Speaker 4: Like you know you shouldn't eat the cookie. It's because
[22:49] Speaker 4: it's too tempting. And people know you shouldn't sell when
[22:52] Speaker 4: the markets are down mostly, but it's hard to do
[22:57] Speaker 4: that because you feel like you're you know you're well
[23:00] Speaker 4: is at risk. And so I think having tools that
[23:02] Speaker 4: help you have the right structure for how you think
[23:05] Speaker 4: about things and how you behave are really important. I mean,
[23:09] Speaker 4: some people are naturally wired that way and different people,
[23:12] Speaker 4: you know, you have different abilities, but I think having
[23:15] Speaker 4: certain tools and mindsets can help anyone be better. And
[23:18] Speaker 4: so you know, staying calm, understanding that there's only certain
[23:22] Speaker 4: things that are within your control and that's what you
[23:25] Speaker 4: can focus on, and then understanding that there will be
[23:28] Speaker 4: times when you lose money, but over time. If again
[23:32] Speaker 4: it's so sensitive to time horizon, if you have a
[23:35] Speaker 4: long time horizon, and you can put your money away
[23:37] Speaker 4: for a long time. There's almost nothing safer if you
[23:40] Speaker 4: have a twenty or twenty five year time horizon. You know,
[23:43] Speaker 4: equities have never been down over that time, ye US equities, Yes,
[23:49] Speaker 4: And so I meditate regularly, and you know, I keep
[23:52] Speaker 4: a journal. And I remember during the COVID pandemic, you know,
[23:56] Speaker 4: we were all locked away, but I was emailing with
[23:59] Speaker 4: Bill and he was stoicism and that kind of got
[24:01] Speaker 4: me interested, and we were you know, he was sharing quotes,
[24:04] Speaker 4: and so I think it can really help you in
[24:07] Speaker 4: the moment to make better decisions.
[24:08] Speaker 2: If you have these tools recognizing what is and is
[24:12] Speaker 2: not within your control, and a sense of calm, it
[24:15] Speaker 2: turns out to be useful in the markets.
[24:17] Speaker 4: Yeah, yeah, imagine that.
[24:20] Speaker 2: Whoever would have guessed that? And yet most people don't
[24:23] Speaker 2: reach that conclusion. They go the other direction. So let's
[24:27] Speaker 2: talk a little bit about where we are in the
[24:29] Speaker 2: state of the market today. I'm watching real time transcription,
[24:36] Speaker 2: which five years ago would have been magic. There's been
[24:40] Speaker 2: dictation software for decades. It's always been pretty terrible. It's
[24:45] Speaker 2: amazing how good this is in real time. So let's
[24:49] Speaker 2: talk a little bit about artificial intelligence.
[24:51] Speaker 3: What are your thoughts?
[24:52] Speaker 2: How does this affect how you're looking at overall markets
[24:56] Speaker 2: and how you're looking at individual companies.
[24:58] Speaker 4: No, well, I think it's h you know, anyone who
[25:01] Speaker 4: knows anything about technology. I have not heard anyone who's
[25:04] Speaker 4: knowledgeable about this space not say that it's completely transformational.
[25:08] Speaker 4: And you know, more important, you know, I think you
[25:13] Speaker 4: know the Capital One CEO, you know, he claims to
[25:17] Speaker 4: have the first fintech at Capital one because they were
[25:19] Speaker 4: very into data. But he said it's bigger than the
[25:22] Speaker 4: agricultural revolution that you know, invention of fire, the industrial revolution,
[25:26] Speaker 4: the digital revolution, and I haven't really heard anyone dispute that.
[25:31] Speaker 4: So there's lots of questions about how long does it take,
[25:33] Speaker 4: what exactly does it do? Are companies overvalued now? But
[25:37] Speaker 4: I think, you know, anyone who knows anything believes that
[25:41] Speaker 4: the impact of this is just going to be huge.
[25:44] Speaker 4: And so when you're in that sort of situation in
[25:46] Speaker 4: the markets, you obviously need to be aware and try
[25:50] Speaker 4: to learn, you know, everything you can. I think we
[25:52] Speaker 4: bought Nvidia in January of twenty twenty four. The interesting
[25:56] Speaker 4: thing about this is I love markets because they're so interesting,
[26:00] Speaker 4: and they're complex adaptive systems, which make them very very
[26:03] Speaker 4: difficult to outperform. They're extremely difficult, but they adapt. And
[26:07] Speaker 4: so what's interesting to me is that we have this
[26:11] Speaker 4: AI bubble, you know, hysteria basically where everyone it's all
[26:17] Speaker 4: you read all the time. And that makes sense given
[26:21] Speaker 4: that we've had, you know, the tech bubble, we had
[26:24] Speaker 4: the housing bubble, We've had some of these bubbles. But
[26:27] Speaker 4: I think and it's possible that you know, there will
[26:30] Speaker 4: be something negative here, but you're not seeing valuations at
[26:34] Speaker 4: all in line with what we saw in the tech bubble.
[26:36] Speaker 4: And the companies that are spending these enormous amounts of money,
[26:39] Speaker 4: which they are very large sums of money, they're basically
[26:43] Speaker 4: the best companies that ever existed in the history of
[26:45] Speaker 4: the world if you look at their returns on capital,
[26:47] Speaker 4: their free cash flow margin, you know, their revenue growth
[26:50] Speaker 4: rates and so so I like that there's all this
[26:53] Speaker 4: AI bubble talk because it keeps a lid on the valuations.
[26:56] Speaker 4: I think it actually makes it more sustainable that they're
[27:00] Speaker 4: you know, I would have concern in some of the
[27:03] Speaker 4: companies like open Ai, which you know, had under four
[27:06] Speaker 4: billion in revenues last year and has committed to one
[27:09] Speaker 4: point four trillion dollars and spent. So we're watching that
[27:12] Speaker 4: very closely. And I think for me, I have children,
[27:14] Speaker 4: and I'm thinking, what does this mean for the future
[27:17] Speaker 4: of employment, and is you know, what can I advise
[27:20] Speaker 4: them to go into? Which I think that's a much
[27:22] Speaker 4: tougher question now.
[27:23] Speaker 2: Than so, so I'm glad you went over there because
[27:26] Speaker 2: I wanted to ask. You've talked about the value of mentorship,
[27:30] Speaker 2: about training young people, whether analysts or fund managers, what
[27:34] Speaker 2: have you. If you look at the unemployment rate today
[27:38] Speaker 2: at four three four four, and then you look at
[27:41] Speaker 2: the college graduate under thirty unemployment, it's more than double that.
[27:45] Speaker 3: It's in the nines.
[27:47] Speaker 2: What does a I do for that demographic learning to
[27:53] Speaker 2: being mentored, learning a trade, being able to get a
[27:57] Speaker 2: job at an entry level when their competition seems to
[28:00] Speaker 2: be software.
[28:02] Speaker 4: Yeah, I mean it's a great question. I'm not sure
[28:04] Speaker 4: I have the answer to that. I mean, what we
[28:06] Speaker 4: know is you can look at industries adopting AI and
[28:09] Speaker 4: those that haven't, and there's clearly an impact on junior hires.
[28:13] Speaker 4: So it is having an impact, and uh, you know,
[28:16] Speaker 4: Dario Amide, the CEO of Anthropic, has said he believes
[28:19] Speaker 4: that the white collar unemployment rate will be you know,
[28:24] Speaker 4: five to twenty five percent in one to five years,
[28:28] Speaker 4: so huge impact, and so I think it. You know,
[28:32] Speaker 4: that's why I'm thinking, like, what do you advise young
[28:35] Speaker 4: people to do? I think I asked people at my
[28:38] Speaker 4: you know college that I went to where I'm on
[28:40] Speaker 4: the board. The professors there, they're trying, you know, they've
[28:43] Speaker 4: worked hard to set up an AI program and help
[28:45] Speaker 4: students be literate and you know, well versed in this.
[28:48] Speaker 4: I think if you can use it as a tool
[28:50] Speaker 4: to your advantage, you still need humans to do this work,
[28:53] Speaker 4: and so you know, being capable in that is really important.
[28:59] Speaker 2: You know.
[28:59] Speaker 4: I was at a Santa Fe Institute meeting a couple
[29:03] Speaker 4: weeks ago, you know, that was on AI, and they
[29:06] Speaker 4: talked about how what the models aren't good at, which
[29:08] Speaker 4: I thought was really interesting, is complex problem solving and creativity.
[29:14] Speaker 4: So those see more unique human endeavors. So leaning into
[29:18] Speaker 4: areas where you know, those are critical skills I think
[29:21] Speaker 4: are important. But areas like law or you know, obviously
[29:25] Speaker 4: customer service coding, some of these areas are getting quite disrupted.
[29:30] Speaker 2: And you're saying complex problem solving and creativity. AI is
[29:34] Speaker 2: not great at These.
[29:35] Speaker 4: Models cannot do it. Now will they get there? I
[29:37] Speaker 4: don't know, But I think what's useful is to have
[29:39] Speaker 4: a human who is well versed and can think critically
[29:43] Speaker 4: about Because these models hallucinate, they'll make up lies, they'll
[29:46] Speaker 4: tell you incorrect information. They're getting better at that. But
[29:49] Speaker 4: having someone who knows how to check facts, use different
[29:52] Speaker 4: models in different situations, you know, that's going to be
[29:56] Speaker 4: very valuable. I think who can figure stuff out that
[29:59] Speaker 4: you haven't been to go and solve real problems in
[30:02] Speaker 4: the real world, I think is also valuable.
[30:06] Speaker 2: So every time we see a back test that's based
[30:09] Speaker 2: on historical data, it always looks great and built into
[30:13] Speaker 2: the back test of the assumption the future is going
[30:16] Speaker 2: to look.
[30:16] Speaker 3: Like the past.
[30:18] Speaker 2: How much of what we're seeing in artificial intelligence is
[30:21] Speaker 2: sort of paralleling that. Hey, we're working off the corpus
[30:25] Speaker 2: of all these documents that have been previously written. If
[30:28] Speaker 2: you want to do something that's not going to get
[30:30] Speaker 2: replaced by AI, you have to go in a different direction.
[30:34] Speaker 4: Yeah. No, I think that's a great point. I mean
[30:35] Speaker 4: what the models do is they look at all of
[30:37] Speaker 4: the information that's out there and they can you know,
[30:40] Speaker 4: do things with it instantaneously. And so I think there's
[30:44] Speaker 4: a belief in the technology community that they will eventually
[30:49] Speaker 4: have a breakthrough where they can have novel ideas. You know,
[30:52] Speaker 4: that's unclear if and when that'll happen. You know, it
[30:57] Speaker 4: hasn't happened yet. And so you know, if you can
[31:01] Speaker 4: do that, if you can use ideas in an innovative way,
[31:05] Speaker 4: if you can certainly, I think in the investment business
[31:07] Speaker 4: for long term investors, what you've seen is machine learning
[31:10] Speaker 4: in large large language models have already been used to
[31:15] Speaker 4: optimize short term trading models. And again we don't compete
[31:19] Speaker 4: there because I think it's extremely difficult, you know.
[31:22] Speaker 3: To compete.
[31:23] Speaker 4: But I think long term, you know, those models have
[31:26] Speaker 4: not been used to think about long term investments. We
[31:30] Speaker 4: talk about time, arbitrage and patience, and you know, what
[31:34] Speaker 4: do we think the world's going to look like in five, ten,
[31:36] Speaker 4: fifteen years. The future is uncertain, No one knows. So
[31:40] Speaker 4: I don't see how the models are going to you know,
[31:42] Speaker 4: get an edge there. I mean, if they become smarter
[31:45] Speaker 4: than all humans at some point, maybe, but you know,
[31:48] Speaker 4: it'll be one of the last things.
[31:49] Speaker 3: Hopefully, So are you using AI in your firm?
[31:54] Speaker 4: And if so, have we are and we talk about
[31:59] Speaker 4: AI all the time, and so I you know, tell
[32:01] Speaker 4: the employees all the time, like you have to be
[32:03] Speaker 4: all over this and learn how to use these models
[32:05] Speaker 4: because you know they're going to displace you if you know,
[32:08] Speaker 4: not you specifically, but all of us if we don't.
[32:11] Speaker 4: And so, you know, it's still so early. So I
[32:14] Speaker 4: think a lot of what's going on now is more experimentation,
[32:18] Speaker 4: both at big companies and small companies. There was an
[32:21] Speaker 4: article in the journal yesterday about how small businesses have had,
[32:25] Speaker 4: uh you know, have been transformed by this because they
[32:27] Speaker 4: can do so many things, Like I used one to
[32:29] Speaker 4: create a profit sharing plan and I just went back
[32:32] Speaker 4: and forth with chat GPT like no, I don't want this,
[32:34] Speaker 4: no I want that, Like what is this model? And
[32:36] Speaker 4: it like created it for me, you know, with the
[32:39] Speaker 4: back and forth, and I sent it to the lawyers
[32:40] Speaker 4: and it was good to go. I mean, it was good.
[32:43] Speaker 4: It needed no changes. And so I'd been you know,
[32:46] Speaker 4: I've been wanting to do that for a long time
[32:48] Speaker 4: and the team was busy with all sorts of stuff
[32:49] Speaker 4: so I finally just did it, and it probably took
[32:51] Speaker 4: me like an hour to do that, but we try it.
[32:53] Speaker 4: We try tools on the investment side, uh you know
[32:56] Speaker 4: that are both specialized and more generalized. I use chat,
[32:58] Speaker 4: GPT all the time for you know, everything in terms
[33:02] Speaker 4: of doing research, and uh, you know, it's really you know,
[33:06] Speaker 4: quite amazing. And we have you know, we have a
[33:09] Speaker 4: new tech person that we hired who has played around
[33:12] Speaker 4: with automating and using agents to do certain tasks that
[33:16] Speaker 4: people did. So I do think it is going to
[33:18] Speaker 4: you know, replace some work now. I don't think we'll
[33:20] Speaker 4: have less jobs. People will just be able to do
[33:23] Speaker 4: you know, more higher level work.
[33:26] Speaker 3: Makes sense.
[33:27] Speaker 2: You earlier compared this to the dot COM's What are
[33:31] Speaker 2: the parallels that are a fair comparison to the late
[33:35] Speaker 2: nineties tech and telecom bubble? And what do you think
[33:39] Speaker 2: is really separating this era from the late nineteen nineties.
[33:45] Speaker 4: Well, I think the clearest uh you know parallel is
[33:48] Speaker 4: the market valuation overall is at high levels that we
[33:52] Speaker 4: haven't seen since then. So I think the market's at
[33:54] Speaker 4: twenty two times you know the next twelve months earnings,
[33:57] Speaker 4: and it peaked at like twenty five times then, so
[33:59] Speaker 4: we're you know, after the financial crisis, we were at
[34:01] Speaker 4: very low levels and we've spent you know, the past
[34:04] Speaker 4: sixteen years, you know, having great markets, some of the
[34:08] Speaker 4: best markets we've ever had, and the valuations have risen,
[34:11] Speaker 4: so I you know, again as value managers, that makes
[34:14] Speaker 4: us you know, on alert for signs that things might
[34:18] Speaker 4: be going around. But there's many more, i think, more
[34:20] Speaker 4: significant differences. So during that there was you know, I
[34:26] Speaker 4: think technology hit fifty times earnings as a sector, and
[34:31] Speaker 4: a lot of the technology companies were losing a ton
[34:33] Speaker 4: of money and there was a lot of you know,
[34:35] Speaker 4: debt financing. So there's a lot of unsustainable things. The
[34:38] Speaker 4: build out of you know, the fiber networks, they were
[34:41] Speaker 4: building for future demand that wasn't yet there. So that's
[34:46] Speaker 4: very different than today. We have this you know, big
[34:49] Speaker 4: infrastructure build out, but you know, there's still shortages of demand.
[34:54] Speaker 4: They can't meet the demand that already exists. That's a
[34:56] Speaker 4: very different situation. And the companies that are building them,
[35:01] Speaker 4: you know, building this infrastructure out for the most part,
[35:04] Speaker 4: are you know, extremely the hyperscalers are extremely well capitalized,
[35:08] Speaker 4: with great balance sheets, high free cash flow margins, so
[35:11] Speaker 4: you know, the risk that sort of risk doesn't exist.
[35:14] Speaker 4: And also at the end of the tech bubble, everyone
[35:16] Speaker 4: was piled into you know, Bill recognized the peak and
[35:19] Speaker 4: actually got out of those names. And what made him
[35:22] Speaker 4: recognize it was that, you know, I think in the
[35:24] Speaker 4: first quarter of two thousand, you know, the a very
[35:28] Speaker 4: high percent, like seventy five percent of money managers outperformed
[35:31] Speaker 4: and only two sectors outperformed, tech and telcom, And so
[35:35] Speaker 4: everyone was piled into a very narrow area of the
[35:38] Speaker 4: market that is not at all you know what you're
[35:40] Speaker 4: seeing now, and so I just now, you know, I
[35:44] Speaker 4: think the bare case would be that for some reason,
[35:48] Speaker 4: you know, the demand doesn't exist and you know, the
[35:51] Speaker 4: spend rolls over again. I still think it would be
[35:54] Speaker 4: a much more modest, uh, you know, pullback just because
[35:59] Speaker 4: of those under lying you know, fundamental business factors. There
[36:02] Speaker 4: are other areas of the market, like quantum computing and
[36:06] Speaker 4: nuclear fission that are much more speculative that have already
[36:08] Speaker 4: pulled back fifty percent actually just in this decline. So
[36:12] Speaker 4: that also is a good thing. I think it keeps
[36:13] Speaker 4: the market healthier longer.
[36:16] Speaker 2: So you don't explicitly talk about economic cycles, but every
[36:20] Speaker 2: now and then I hear you drifting over to unemployment
[36:25] Speaker 2: and growth and infrastructure and economist type speaks.
[36:30] Speaker 3: How often do.
[36:31] Speaker 2: You use what's going on in the broader economy is
[36:35] Speaker 2: part of your process? Do you think about that or
[36:38] Speaker 2: economic cycles significant to your process? Or is the economy
[36:44] Speaker 2: going to do what it's going to do and it
[36:45] Speaker 2: doesn't interfere with your approach.
[36:47] Speaker 4: Well, we definitely try to understand what's going on in
[36:49] Speaker 4: the economy because it can have you know, big impacts
[36:52] Speaker 4: on you know, investments. You know, there's a lot of
[36:56] Speaker 4: no one can forecast the economy. You know, there's a
[36:58] Speaker 4: lot of good evidence that no one does. Economists don't
[37:00] Speaker 4: do it, investors don't do it. So it's a feudal efforts.
[37:04] Speaker 4: A lot of people claim that they have some view
[37:05] Speaker 4: about the.
[37:06] Speaker 2: Future forecast in the world, but what do we see
[37:08] Speaker 2: in a recession forecast exactly every year for the past
[37:12] Speaker 2: three or four years.
[37:13] Speaker 3: They'll get it right eventually.
[37:15] Speaker 4: Right, and so you know, the best strategy is just
[37:19] Speaker 4: you know, if you have a long time horizon to
[37:21] Speaker 4: stay invested. But we want to be aware of risks
[37:24] Speaker 4: and the impact. I mean, our whole process is analyzing
[37:27] Speaker 4: the fundamentals of businesses and looking at what the intrinsic
[37:30] Speaker 4: value looks like. And that's a distribution of outcomes because
[37:32] Speaker 4: the future is uncertain, so we're doing different scenarios and
[37:35] Speaker 4: then we compare it to market expectations. And so we
[37:39] Speaker 4: like a clear gap in those two things, and we like,
[37:43] Speaker 4: you know, better risk rewards. But there's a lot that
[37:46] Speaker 4: goes into both both of those things. You know, sentiment
[37:49] Speaker 4: goes into the market expectations. You know where people are positioned,
[37:54] Speaker 4: and you know, obviously the economic cycle for certain businesses
[37:57] Speaker 4: has a big impact. It's very sensitive to your time horizon.
[38:01] Speaker 4: You know just how much it matters, and the longer
[38:03] Speaker 4: your time horizon, the lesson matters.
[38:06] Speaker 2: Coming up, we continue our conversation with Samantha Macklamore, chief
[38:10] Speaker 2: investment officer and founder of Patient's Capital, talking about the
[38:15] Speaker 2: state of the economy today.
[38:17] Speaker 3: I'm buried results.
[38:19] Speaker 2: You're listening to Masters in Business on Bloomberg Radio.
[38:36] Speaker 3: I'm bury redults.
[38:37] Speaker 2: You're listening to Masters in Business on Bloomberg Radio. Let's
[38:40] Speaker 2: return to my previously recorded conversation live at the Phillips
[38:45] Speaker 2: Collection in Washington, d C. With Patient Capitals Samantha macklamore.
[38:51] Speaker 2: So you mentioned sentiment. I'm trying to remember a moment
[38:55] Speaker 2: in history where collectively the investor, class, the punditcla as
[39:00] Speaker 2: the media, all in real time identified a major market
[39:04] Speaker 2: bubble at once. Is is it just too glib to say, Hey,
[39:09] Speaker 2: everybody's forecasting a bubble, therefore it can't be a bubble.
[39:13] Speaker 4: Well, I'm a contrarian, so you know, like that, that
[39:16] Speaker 4: kind of you know, thinking appeals to me. I think
[39:21] Speaker 4: it is true that usually what you know. Howard Marx
[39:23] Speaker 4: wrote a great memo on the whole tech space in January,
[39:28] Speaker 4: and you know, I thought the most important line in
[39:30] Speaker 4: that was, you know, a bubble is characterized by psychological extremness,
[39:36] Speaker 4: and so it is that psychological state. So we're not
[39:40] Speaker 4: when everyone's bemoaning a bubble and fearing a bubble and
[39:44] Speaker 4: claiming a bubble, that makes a bubble much less likely
[39:46] Speaker 4: because people are then not positioned in it. And usually
[39:49] Speaker 4: where the biggest risks are are not where you're focused on.
[39:51] Speaker 4: If you know there's a risk in a certain area,
[39:53] Speaker 4: you treat it much differently, you manage it much differently.
[39:55] Speaker 4: If everyone's doing that. You know, in Vidia you know.
[39:58] Speaker 4: So the risk would be in Ida's earnings are unsustainable
[40:01] Speaker 4: and they've had this huge run up and there they've
[40:05] Speaker 4: captured so far about ninety percent of the economic profits
[40:08] Speaker 4: in AI. Again, they're going to report tomorrow night. If
[40:12] Speaker 4: I are a betting man, which I'm not, I'm an
[40:14] Speaker 4: investing woman, but uh, you know, I would say they're
[40:16] Speaker 4: going to be and then the market might really like
[40:19] Speaker 4: that because it's coming into it, you know, over sold.
[40:22] Speaker 4: But I think the risk is there's something happens to earnings,
[40:27] Speaker 4: you know, and they have an earning cycle. Again, I
[40:30] Speaker 4: don't see that in the near term. But there's no
[40:32] Speaker 4: you know, valuation not you know, excesses are just not there.
[40:37] Speaker 4: Like these companies. If you look at and Videos growing
[40:40] Speaker 4: you know, forty plus percent this year, trading it twenty
[40:43] Speaker 4: eight times next year's earnings, that is not a bubble
[40:46] Speaker 4: at you know, that's not bubble valuations at all. It's
[40:48] Speaker 4: not what we see on the tech bubble. So again,
[40:51] Speaker 4: I think it is true that when everyone's worried about
[40:54] Speaker 4: a bubble, it's likely not a bubble.
[40:56] Speaker 2: So people have been talking about a CA shaped economy
[40:59] Speaker 2: that the upper arm is doing great, the lower arm
[41:01] Speaker 2: is doing poorly. Can you apply the same thing to
[41:04] Speaker 2: valuations with the market. If you take the top ten
[41:07] Speaker 2: or twenty stocks, they seem to be much more richly
[41:11] Speaker 2: valued than the rest of the whatever you want to use,
[41:15] Speaker 2: we'll shoot five thousand or s and P five hundred.
[41:18] Speaker 2: How do you think about that bifurcation?
[41:20] Speaker 4: Yeah, well, I think there are certain areas you know
[41:23] Speaker 4: in the market, like quality or like return on capital
[41:27] Speaker 4: where those again, if you have high quality, high return
[41:30] Speaker 4: on capital, high free cash fulw margins, those companies should
[41:33] Speaker 4: be valued at it, you know, overall a higher level.
[41:36] Speaker 4: But we've seen very wide gaps there. So I think
[41:39] Speaker 4: I have a huge respect for the market though, so
[41:41] Speaker 4: because we're every day we're doing the work on Okay,
[41:44] Speaker 4: this company might be attractive. Let's do the work on
[41:46] Speaker 4: that and see what the market's pricing in, and we'll
[41:48] Speaker 4: say what is the market telling us as business can do?
[41:51] Speaker 4: And usually the market's pretty good at like okay, yeah,
[41:53] Speaker 4: that's the easiest case to make and the market will
[41:57] Speaker 4: reflect that. So it's more anomalist to find areas where
[42:01] Speaker 4: that's wrong. Especially you know, the markets had a huge
[42:04] Speaker 4: move up, so the more it moves up the harder
[42:07] Speaker 4: it is, but we're still finding, you know, opportunities. I
[42:10] Speaker 4: think we added significantly to healthcare and small caps you
[42:14] Speaker 4: know earlier this year, and healthcare until recently it was
[42:17] Speaker 4: at a fifty year relative valuation low. And those are
[42:20] Speaker 4: good businesses with good returns on capital, and so, you know,
[42:23] Speaker 4: the market gets so hyper short term focused. You know,
[42:26] Speaker 4: so many people these days are focused on the next
[42:28] Speaker 4: quarter and they want to outperform every month and every quarter.
[42:32] Speaker 4: So again, if you can look out longer, I think
[42:34] Speaker 4: you do have opportunities. But the reason people don't is
[42:36] Speaker 4: because you sometimes have more downside in the short term
[42:39] Speaker 4: if you're buying into you know, weakness.
[42:42] Speaker 2: So how do you think overall about valuation and future
[42:46] Speaker 2: return expectations when generally the markets had a good run
[42:51] Speaker 2: and valuations are, if not bubb malicious, a little more
[42:55] Speaker 2: rich than average.
[42:57] Speaker 4: Yeah, I mean my view on valuations is the high
[43:00] Speaker 4: end of the historical range. So again that makes me
[43:03] Speaker 4: more alert, more cautious. I think if you look, you know,
[43:06] Speaker 4: at the underlying fundamentals and just the returns on capital
[43:10] Speaker 4: of businesses, the free cash flow margins, the balance sheets,
[43:13] Speaker 4: higher valuations are justified. But markets go through these cycles
[43:17] Speaker 4: of undervaluation, overvaluation, and then back again, and so that's
[43:21] Speaker 4: just part of markets. You know. Again, I don't think
[43:25] Speaker 4: we're at you know, levels that I'm extremely concerned. I
[43:27] Speaker 4: still think there are you know, attractive opportunities in markets,
[43:32] Speaker 4: but where we can add ballast to the portfolio, defensive
[43:35] Speaker 4: areas like healthcare. Again, I think that helps position the
[43:38] Speaker 4: portfolio for a variety of different sorts of environments. And
[43:43] Speaker 4: there's still plenty of cheap, you know, cheap cheap names
[43:46] Speaker 4: in the market.
[43:48] Speaker 2: So I have three of my favorite questions I always
[43:52] Speaker 2: ask guests, But before I get to that, I want
[43:54] Speaker 2: to throw a little bit of a curve ball at you.
[43:57] Speaker 2: What do you think investors are not talking about when
[44:00] Speaker 2: when they're not thinking.
[44:02] Speaker 3: About AI bubbles? What are they overlooking?
[44:05] Speaker 2: What topics or ideas or strategies are they just not
[44:10] Speaker 2: thinking about that perhaps they should be.
[44:12] Speaker 4: Yeah, well that's a really hard one because I think,
[44:15] Speaker 4: you know, there's so many investors out there thinking about
[44:19] Speaker 4: so many things. And now in today's day and age,
[44:21] Speaker 4: with great podcasts like yours and Twitter and X and
[44:24] Speaker 4: all the research online, you can get access to all
[44:27] Speaker 4: of the thinking. So you know, I'm not sure that
[44:30] Speaker 4: there's things people aren't thinking about that much, but I
[44:32] Speaker 4: would say, you know, one of my biggest lessons from
[44:35] Speaker 4: Bill was the big money are made in the big moves,
[44:38] Speaker 4: and so you need to be looking for those, and
[44:40] Speaker 4: you need to you know, hold those, and actually holding
[44:43] Speaker 4: them is even harder than looking for them. And so
[44:47] Speaker 4: I think people focus if you have a long time
[44:50] Speaker 4: horizon and you're interested in growing your wealth, which is
[44:54] Speaker 4: what we want to do. You know, that's our number
[44:56] Speaker 4: one objective is to make money. You know, I never
[45:00] Speaker 4: saw Bill get upset about a stock that went down
[45:04] Speaker 4: or you're losing money on us certain stock, because you
[45:06] Speaker 4: know that you know, in our business, you know, the
[45:08] Speaker 4: best investors are wrong about half the time, like half
[45:11] Speaker 4: the stocks go down, and that's just part of the business.
[45:13] Speaker 4: So you get really comfortable with being wrong. I never
[45:15] Speaker 4: saw him mad. I saw him mad when he identified
[45:19] Speaker 4: a stock Qualcom and an analyst said, no, this is
[45:23] Speaker 4: really bad investment, like don't buy it, and then it
[45:25] Speaker 4: went up ten times because he's like, you just don't
[45:27] Speaker 4: get the opportunity to make money. And most of those
[45:29] Speaker 4: type of errors, when something's not in your portfolio, you
[45:32] Speaker 4: don't see it, you don't notice it's not there, but
[45:34] Speaker 4: it has a huge impact on, you know, your ability
[45:38] Speaker 4: to grow well. So I think there's not enough discussion
[45:41] Speaker 4: about that. And you know, if you look at endowment returns,
[45:45] Speaker 4: I think for the last decade, they're like six point
[45:47] Speaker 4: eight percent on average, and so the US equity market's
[45:51] Speaker 4: up over thirteen percent. So that's a huge shortfall that
[45:56] Speaker 4: if you do the math on like thirty years of
[45:59] Speaker 4: thirteen versus six point eight, it's like you either you're
[46:04] Speaker 4: up seven times versus your up thirty plus times. I mean,
[46:08] Speaker 4: that compounding math is it's shocking, actually, even to me
[46:12] Speaker 4: who I'm in this business. I know patients, I'm all
[46:14] Speaker 4: about compounding, and I do the math and I'm like,
[46:16] Speaker 4: oh my goodness, the amount of wealth left on the table.
[46:19] Speaker 2: All right, So let's jump to our speed round, and
[46:22] Speaker 2: then afterwards we'll open it up for questions from the audience.
[46:26] Speaker 2: I always like to get book ideas from people. Tell
[46:29] Speaker 2: us what you're reading and what are some of your
[46:31] Speaker 2: favorite books.
[46:32] Speaker 4: Well, I'm not reading right now. What I'm reading is
[46:34] Speaker 4: nineteen twenty nine by Andrey Russwalker. So that's nothing new.
[46:36] Speaker 4: Everyone's reading that, but I think it's it's in.
[46:39] Speaker 3: The probably helping the bubble talk.
[46:41] Speaker 4: Well, it's you know, you have to be aware. And
[46:43] Speaker 4: I think studying history is really important. You know. I
[46:47] Speaker 4: think have you read The Comfort Crisis by Michael Eastern
[46:50] Speaker 4: That's a really good book. And uh, you know, my
[46:54] Speaker 4: kids get sick of me preaching, but it's all about how,
[46:57] Speaker 4: you know, we are in a society where you know,
[47:00] Speaker 4: it's all about comfort and the benefits of you know.
[47:04] Speaker 4: He has this thing Misogi where he goes into nature
[47:07] Speaker 4: and does really physically challenging things that are challenging enough
[47:10] Speaker 4: that he will and it's not his thing, it's actually
[47:12] Speaker 4: a Japanese thing, but that you are most likely to fail,
[47:15] Speaker 4: but you and make it challenging enough, just shy of
[47:19] Speaker 4: like maybe dying. So again, I'm not a proponent of
[47:22] Speaker 4: taking it to that level, but I am a proponent
[47:25] Speaker 4: of you know, if you listen to Jensen Wong at
[47:28] Speaker 4: NVIDIA and he talks about the value of pain and suffering,
[47:31] Speaker 4: and he's like, he talks about being a CEO, He's
[47:34] Speaker 4: like a lot of people want to be a CEO.
[47:36] Speaker 4: He's like, but the experience is not power and glory
[47:39] Speaker 4: it's pain and suffering and like all the hardest problems
[47:42] Speaker 4: come to you. So I think, you know, exposing yourself
[47:46] Speaker 4: to things out of your comfort zone where you have
[47:48] Speaker 4: the opportunity to grow and have some pain, you know,
[47:52] Speaker 4: I think that's kind of what makes life interesting. And
[47:56] Speaker 4: so that would be a book that I would recommend.
[47:58] Speaker 2: So final two questions, what sort of advice would you
[48:01] Speaker 2: give to a recent college grad interest in the career
[48:04] Speaker 2: in investing in finance?
[48:06] Speaker 4: Well, I mean, back to my experience, I would say
[48:08] Speaker 4: go for it and be persistent. I mean, we have
[48:11] Speaker 4: a few job postings now and so we're trying to
[48:14] Speaker 4: fill those postings. And it's amazing to me. You know
[48:17] Speaker 4: a lot of people will go on LinkedIn and they'll
[48:19] Speaker 4: blast out their resume everywhere and that they're putting very
[48:23] Speaker 4: little time and little thought into that. And we actually
[48:25] Speaker 4: have on our site you have to email it, and
[48:28] Speaker 4: we're paying attention to who's actually reading that instruction and
[48:31] Speaker 4: emailing it. But very few people follow up. I think
[48:34] Speaker 4: we had one candidate who followed up like three times.
[48:36] Speaker 4: And it makes a huge difference. You know, it demonstrates interest,
[48:40] Speaker 4: it demonstrates you know, you're paying attention to it. So
[48:43] Speaker 4: I would say in a tough job environment especially, it's
[48:48] Speaker 4: it's easier than you think to distinguish yourself if you're
[48:51] Speaker 4: actually interested in something, you know, perseverance, taking the time
[48:55] Speaker 4: to learn, really what the firm is, the person you're
[48:58] Speaker 4: talking to, who they are are, what they're trying to accomplish.
[49:01] Speaker 4: With this, it's amazing to me how little people actually
[49:06] Speaker 4: spend doing that.
[49:07] Speaker 3: Good good advice.
[49:08] Speaker 2: And our final question, what do you know about the
[49:11] Speaker 2: world of investing today? Would have been useful twenty five
[49:15] Speaker 2: years ago or so when you were first getting started.
[49:18] Speaker 4: Yeah, by Nvidia, I know, you told me I couldn't
[49:20] Speaker 4: do this, By Amazon, by bitcoin, don't miss you know.
[49:24] Speaker 4: But if there's a broader point, I mean, part of
[49:27] Speaker 4: it is like you know again, this kind of will
[49:31] Speaker 4: go full circle. But the power of patients and compounding. Again,
[49:34] Speaker 4: it's like teach what you need to learn. But Bill
[49:37] Speaker 4: used to tell me when I was young. I'd be like, Bill,
[49:39] Speaker 4: you know, I need to make more money, I need
[49:40] Speaker 4: to find more stocks. You need to give me more responsibilities.
[49:42] Speaker 4: And you're like, calm down, like be patient. I'm like, no,
[49:45] Speaker 4: I can't be patient. My friend who I graduated with
[49:47] Speaker 4: he's at Golden Sacks. He's making like ten million dollars
[49:49] Speaker 4: a year, and he's like, calm down, And you know,
[49:53] Speaker 4: now twenty years twenty five years later, it is amazing,
[49:57] Speaker 4: just the power of compounding. If you find a name
[49:59] Speaker 4: like Amazon or you know, and you invest and again
[50:02] Speaker 4: you're gonna have a couple, you know, number of big
[50:04] Speaker 4: draw ownds in those you know, stocks that go up
[50:06] Speaker 4: a black go down a lot, and that's just part
[50:08] Speaker 4: of the journey. But it's so easy to underestimate, you know,
[50:12] Speaker 4: just how powerful that can be.
[50:15] Speaker 2: That was my live conversation with Samantha maclamore, formerly of
[50:21] Speaker 2: leg Mason and Miller Value now with Patient Capital. I
[50:26] Speaker 2: have to thank the Crack team that helps put these
[50:28] Speaker 2: conversations together, especially the live event. Alexis Noriega and Elizabeth
[50:35] Speaker 2: Sedrin have been instrumental in making these sorts of things happen.
[50:39] Speaker 2: Sean Russo is my researcher, Ana Luke is my producer.
[50:44] Speaker 2: Sage Bauman is the head of podcasts at Bloomberg. I'm
[50:48] Speaker 2: Barry Ritoults. You've been listening to a special live edition
[50:52] Speaker 2: of Masters in Business on Bloomberg Radio.

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