22 June 2024

In this episode, William Green chats with Bob Robotti, a great investor who’s crushed the S&P 500 over the last 40 years. Bob, the President & Chief Investment Officer of Robotti & Co, explains why he believes we’re in a “new golden age” for active, value-oriented investors (not index funds); why he expects persistently high inflation; why he’s betting heavily on the resurgence of Old Economy businesses; & how he’s positioned to profit from “the first truly global energy crisis.”

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  • How Bob Robotti lucked into the ideal job for an aspiring investor. 
  • How working for Mario Gabelli was like a one-on-one MBA.
  • Why Bob thinks we’re in a new golden age for savvy stockpickers. 
  • Why he’s betting heavily on a “metamorphosis of the Old Economy.”
  • How globalization is evolving as China loses its edge.
  • Why energy-intensive US companies have a long-term advantage.
  • How value investing has changed.
  • Why owning the “Magnificent Seven” looks like a risky bet.
  • What an era of persistently high inflation means for investors.
  • How Bob is positioned for “the first truly global energy crisis.”
  • How his life has been enriched by helping young people.
  • What he learned from his wife and father about facing adversity.


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:03] William Green: Hi there. It’s great to be back with you on the Richer, Wiser, Happier podcast. Our guest today is a superb investor named Bob Robotti, who’s one of the most eminent value investors in the business. Bob is the President and Chief Investment Officer of a firm called Robotti and Co, which is based in New York City.

[00:00:21] William Green: He’s quietly built an extraordinary long term record, beating the market by an enormous margin over the last 40 years. He’s such a modest and unassuming person that it’s easy to overlook just how successful he’s been. It’s always worth paying close attention to vastly experienced investors like Bob who’ve managed to navigate many different cycles in the market over many decades.

[00:00:47] William Green: His investment approach is built on some timeless principles that all of us would do well to understand, but he also has an unusual ability to adapt when the investment environment changes and requires a different approach. As you’ll hear, Bob believes that some dramatic changes are already underway.

[00:01:07] William Green: Bringing a new set of risks and opportunities that we need to be aware of. For a start, he thinks we should expect a period of persistently high inflation and should abandon any hope of returning to the good old days of low inflation and depressed interest rates. He also thinks we’re now facing a global energy crisis with massive demand for everything from fossil fuels to renewables.

[00:01:32] William Green: At the same time, he’s seeing a major evolution in the process of globalization, as China loses its edge and the competitive advantage shifts to India and Southeast Asia. What does all of this mean for investors? Well, as Bob sees it, we need to recognize that the strategies that worked best over the last decade are not likely to work so well over the next decade.

[00:01:57] William Green: For example, he thinks that passive investing in index funds and ETFs may turn out to be a path to decidedly mediocre returns. Similarly, we shouldn’t expect to make a killing by betting blindly on dominant US tech stocks like the Magnificent Seven. Given the risk posed by their somewhat elevated valuations.

[00:02:18] William Green: As Bob explains, he believes that we’ve now entered a new golden age for active investors who can identify individual stocks that are undervalued. He argues that many of the most enticing opportunities are in unfashionable areas of the market that had long been ignored or dismissed, for example, old economy businesses in really unsexy industries like chemicals that are used in fertilizer.

[00:02:46] William Green: He’s also betting very aggressively on an array of energy related companies, which is interesting because this is a sector that he’s studied very deeply since way back in the 1970s. This conversation is a reminder that the pendulum inevitably swings back and forth in financial markets. So the most popular investment strategies eventually get overdone and cease to work, and the most fashionable stocks eventually get overvalued and fall out of favor.

[00:03:17] William Green: Warren Buffett’s teacher, Ben Graham, wrote about this phenomenon in his famous book, Security Analysis. Which begins with a classic quote from the ancient Roman poet, Horace, who said, many shall be restored that now are fallen, and many shall fall that now are in honor. It’s important to listen to battle tested investors like Bob Robotti, who’ve played this game for decades because they have this invaluable ability to identify these recurring patterns and to provide a kind of early warning when the pendulum may be starting to swing in a different direction. In any case, I hope you enjoy our conversation. Thanks so much for joining us.

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[00:04:04] Intro: You’re listening to the Richer, Wiser, Happier podcast, where your host, William Green, interviews the world’s greatest investors and explores how to win in markets and life.

[00:04:24] William Green: Hi, everyone. It’s a great pleasure to be here today with Bob Robotti. Bob is the President and Chief Investment Officer of Robotti and Company. And he’s beaten the market by an enormous margin over the last 40 years. It’s great to see you, Bob. Thanks so much for joining us.

[00:04:40] William Green: Thanks so much for having me here and it’s so good to be seen.

[00:04:44] William Green: Great to see you. I wanted to start by chatting with you about your childhood in Queens in New York City. And I know you were born in 1953, and you grew up with two older sisters and a younger brother and I read somewhere that you lived in an apartment above a dry goods store called Robotti’s Department Store that your grandmother had operated.

[00:05:05] William Green: And that then later your, I think when you were about one, your father, Edward, launched a property and casualty insurance brokerage firm, also out of your home. And so I wanted to get a sense of what it was like growing up in that kind of environment where you really were surrounded by business.

[00:05:25] Bob Robotti: Well, it’s more modest than that, and my grandmother’s, so, my grandfather did own the building, we owned the building, and the store was downstairs, we lived upstairs, and, the department store didn’t do a lot of business, because, it had been put out of business, with people in the neighborhood wanted to go to Macy’s, it was easy enough to get on the subway and go, so, back decades before, it really was probably a business that was Critical to the community, but really wasn’t that so it was not a thriving business, but it was more an opportunity for me when we played stickball up the block.

[00:05:52] Bob Robotti: We lost the Spalding. I would get the Spalding from my grandmother’s store. So therefore, I was a source for getting things out of my grandmother’s store. And then my dad started it, kind of upstairs. Originally, the living room started an insurance brokerage business. And I guess when he was 17, he had gotten some kind of a disease that actually blinded him and for most of his life, actually, he was, had significant eyesight problems.

[00:06:13] Bob Robotti: So eventually he’d been probably with my grandparents helped start that business. And so before he started that brokerage business in our house and that I did see kind of grow from the inception and. As a kid, I worked in a business with him and help some, not that much. I was not an early kind of like pitching in, doing a whole bunch of things, but I do think that it was interesting because it really did give me a sense as I, I would say joke, I understood the property cash to the business because my father was a broker.

[00:06:42] Bob Robotti: He did underwriting. So, as I say, when the Paganos across the street wanted insurance, that’s the guys who ran the numbers and got arrested every so often for making book. So, they came in, they went with this insurance company, but the Veterosos up the block where they came in, they tipped the car, didn’t go any place, it’s really pristine.

[00:07:00] Bob Robotti: He put it with his top rated company, so he was effectively underwriting, knowing which ones have exposure to loss here, which ones don’t. So, how that works and how the insurance business works. I had a ground floor opportunity to understand a business. That’s a strange business property casual insurance is its own little industry with its nuance. So, it was interesting.

[00:07:21] William Green: And am I right in thinking your family, at least half of it came from Italy, right? I think I had read somewhere that your father, who had this wonderful name, which I don’t know if I’m pronouncing right, which was Baptist or Baptiste Robotti, actually helped to build the Empire State Building when he came to America?

[00:07:37] Bob Robotti: So my grandfather, who is Baptiste Robotti, ended up, we lived in Long Island city. There was a stone company down the block called Gillies and Sons and Gillies and Sons had been in business for many years. And fortunately his good fortune, the original chief draftsman was the son of the owner.

[00:07:53] Bob Robotti: And the son in a major building forgot there were four sides to the building, and he only bid for three sides to the building. So when they lost an awful lot of money, he lost his job, and my grandfather got promoted. And the company did a lot of work with limestone, and it was a critical change in construction, right?

[00:08:10] Bob Robotti: So the right, the Chrysler building was one of the two buildings that fought with 20 exchange place for the tallest building. It’s the last brick building that was built. It’s the tallest brick building in America and the world. And then of course, when you built the empire state building, you went to limestone so you can steal girders.

[00:08:25] Bob Robotti: You could slap pieces of limestone on it. So there was an extremely efficient way to do that. And that was the company that my grandfather had worked for. So he was the cheap draftsman. And so we have in our conference room, we have a couple of blueprints from, I have it from the 47th floor of the Rockefeller Center. After they did the Empire state building, depression came and Rockefeller Center was built and it’s all limestone. So he didn’t work on that. He worked on St. John divine. So he was fortunate, happened to be at the right place at the right time. And, ended up with a phenomenal job during depression.

[00:08:57] Bob Robotti: And so therefore really did pretty well and accumulated some money. And so we own some real estate. Like that was down the block from the neighborhood we grew up in. And so therefore that gave. The family, definitely, a good sounding, place to start from.

[00:09:10] William Green: And so you went off to quite an old and distinguished Jesuit high school, I think, and then went to Bucknell University.

[00:09:18] William Green: And I remember hearing that you had graduated, you said, with a C as an accounting major and that you didn’t apply yourself, you, you weren’t a good student. Is that right? You just were not hugely driven or ambitious as a youngster?

[00:09:31] William Green: Well, I was driven and ambitious, but not for studies. And so therefore in high school, I did reasonably well, each progressively zone grammar school, I was the valedictorian of my class, but then in high school I did okay.

[00:09:44] Bob Robotti: So I was the top third, but you know, I, I was busy trying to play football and do other things and occasionally did some studies, but that’s what I did do. I spent my junior, senior year figuring out where I was going to go to college. Cause I knew I was going to goof off. I knew I was going to get a C.

[00:09:59] Bob Robotti: And I figured the better the school I can get into, well, then the better to see from that university. So as it turned out, Bucknell, Lafayette, Lehigh, Colgate were the companies that schools that I identified that I thought were in the tier that I could get to. And of course, that was also what I applied as a major because my verbal score is 490.

[00:10:17] Bob Robotti: So, like, I’m a kid from Queens. I can’t speak. I can’t write English. So, but I did get a seven, 10 math. So therefore, when I applied to Bucknell, they have a really good engineering school, but I’m not going to apply there because it’d be harder to get in, but they have a business school that at the time nobody applied to, so it was mathematically oriented and therefore I could hopefully skied in when I shouldn’t have gotten into the school.

[00:10:37] Bob Robotti: And I ended up, I got into Bucknell and I graduated with my C. So I got exactly what I thought would happen. I did, I fulfilled my, expectations, my disappointment, probably in aggregate. From that, so yes, that was and of course, I attribute large part by success to the fact that I got that seat and the fact that so when I got to Bucknell, the question was, what major do I have?

[00:10:59] Bob Robotti: There’s a management major and there’s a county major. So here I am with football team. So talking to all the football players and say, okay, so which is the easier major management or accounting? And they say, oh, the accounting professors are guts, become an accounting major. So that’s how I selected accounting as my major.

[00:11:13] Bob Robotti: So I got in through, the business school, which is the easier part of Bucknell at the time. And then I became an accountant because it was the accounting program was easy. And so when I graduate with a C, well, I’m not going to get a job with the big eight accounting firms. So four, there were not four, but eight of them, but still, it wasn’t and in New York, there were 25 large accounting firms, but you know, none of them could I get a job with. So therefore it ended up the job I did get was a much, my father’s childhood friend was a guy named Fred Puglisi. And he had a small accounting for Pastagrino Puglisi. January, in my last year, he gave me an internship.

[00:11:48] Bob Robotti: I didn’t make a fool of myself. So therefore, he thought, okay, maybe the guy just didn’t apply himself and is smart enough. And so I started working for Pastagrino Puglisi. And I fell into the right place that therefore opened up all these opportunities that formed my life.

[00:12:02] William Green: Yeah, Anthony Pasterino turns out to have been an incredibly important figure in your life. And I was reading about him the other day, cause he also was a professor to Mario Gabelli as well, who we’ll discuss later, who became an important figure in your life. And so, and actually I think you and Mario ended up endowing the Anthony Pastorino Distinguished Professorship in Accounting, so tell us about him and what he did that kind of set you on this extraordinarily fortunate path by the way. Directing you to places like Tweedy Brown and Mario Gabelli’s nascent firm.

[00:12:38] Bob Robotti: So that’s what happened. So now when I get the job for them, I also realized accounting is a profession that there’s a right answer and a wrong answer. It’s not like, what do you think and give me your views. This is right and wrong.

[00:12:49] Bob Robotti: So I did start my MBA at Pace University four days after I graduated Bucknell and I went four nights a week. And I went for three hours in the evening and spent the weekend studying. And of course that ended up being like a great experience. So the combination of working for a smaller accounting firm, where I spent time in audit, spent time in tax and moved around to 25 person firm.

[00:13:09] Bob Robotti: So therefore you’re applying during the day and that’s the night you’re learning the concepts of accounting. And therefore the concepts become easy when you actually apply it. So accounting is a boring major, boring subject for many people, but of course it wasn’t, it was. I can see it live and in action and the information it gave you about companies.

[00:13:25] Bob Robotti: And as that was it, the business of Pastorino had 2 pieces. 1, I would do daycare center audits in the worst neighborhoods in New York. And so this is 1975, right? New York City is about ready to go bankrupt. There’s been an urban flight out of New York businesses and individuals. So therefore it was a tough time and I would go to very tough neighborhoods.

[00:13:45] Bob Robotti: So that was the one part of the practice but the other part of the practice was there were all these investment advisors that were the clients of, of Costa Rita police. And one of them was Tweedy Brown and so that’s what it was for four years that I was there. I worked on the audit of Tweedy for two, three, four months of the year.

[00:14:01] Bob Robotti: And so that was a formative experience at a formative time, right? Cause as I mentioned, the timing of that could not have been more opportune for me, it’s 1975. So you have. 73, 74, the market correction market down 50%. One decision stocks, right? Didn’t matter what price you paid for them. You bought them, you owned them because you absolutely always make money at them.

[00:14:25] Bob Robotti: Potentially arrived to where we are today in certain ways had come and corrected. And therefore it was, as I said, the starting gun for Value investing. So Tweedy became an overnight success after being in business for decades, because what they did and how they did it with something that was at the right place at the right time, they own the right kind of company.

[00:14:46] Bob Robotti: So them in Mike price, mutual shares, the belly. Ruane, even Buffett became well known around that time because value investing stocks really substantially outperformed. And so therefore I happened to walk in and then at Tweedy, right. Who was there? Well, when Graham Newman closed up shop next door, neighbor was Tweedy Brown.

[00:15:09] Bob Robotti: And so Tom Knapp walked next door and then Walter Schloss next walk next door. And they were in the office when I was there. Ed Anderson was recruited from Charlie Munger to come in to run Tweedy cause Chris was too young to run it at the time. So John Spiers had just started working there. So, all these people were at, and they sat around the trading desk and it’s at an office in some place.

[00:15:29] Bob Robotti: And I knew what Tweedy owned, what they bought, why they owned it. And then one of the retired partners was a guy named Joe Riley. He’s originally Tweedy brand and Riley was in every day. That’s where the auditor sat with him. And at 6:30, we talk about investing. And so I saw what Tweety did.

[00:15:44] Bob Robotti: I saw what they owned. Joe worked with me. Went through the investment process. So, it was a great introduction to investing. And as a result, I never was a finance major. I didn’t know the market was efficient. So I didn’t understand that nuance. Instead, I thought it was pretty inefficient because you could pick stocks that were substantially undervalued.

[00:16:02] William Green: And Tweedy Brown for our listeners who don’t have a sense of it was such an extraordinary firm. I talked to, podcast for people who want to go back and listen to that episode. But literally this is the place where Buffett bought the bulk of his shares in Berkshire Hathaway. He wrote about the company in his famous essay from 1984, super investors of Graham and Doddsville.

[00:16:25] William Green: So these guys were real stars, but this was at a time when no one really wanted to do value investing, right? I mean, they were mainly looking at these tiny stocks on the pink sheets and the like, right? Can you give us a sense of the opportunity that existed where you started to see, oh, if you actually look at small companies and particularly undervalued companies that are sort of off people’s radar. There’s a tremendous opportunity there. cause it seems like in a way they established a kind of template in certain ways for your career of looking at very cheap undervalued stuff that was off everybody else’s radar.

[00:17:01] Bob Robotti: Well in the first John train book, the chapter on Tweedy is called the Pawn Brokers because Tweedy Specialty was making markets in all of these pink sheet stocks and pink sheet stocks.

[00:17:11] Bob Robotti: At the time, there were a lot of them cause what those were securities that were. Companies that were created before 33 and 34. So before you had 33 and 34, the registration that came from that, you had companies that had gone public in a way, therefore weren’t subject to the sec reporting requirements.

[00:17:28] Bob Robotti: And so there was a significant number of these companies. And that was originally tweets differentiator, and they bought networking capital in a time when you could do that because these companies were also a little bit, definitely more obscure and then out of favor. And then even the bakeries of the market, probably somewhat similar today.

[00:17:46] Bob Robotti: There is not a universe that people were looking to invest in. They were looking at the Nifty 50. That’s where capital flow to that would make sense. That’s where we made money. You didn’t make money. So they were obscure companies that were neglected. Dead. And therefore had valuations that were extremely discounted.

[00:18:00] Bob Robotti: So I’m a CPA, right? So therefore I can calculate net working capital, right? So this was not a sophisticated business and it wasn’t technology that I had to understand. This was looking at a balance sheet and doing an analysis and finding companies that were trading for far less than what the liquidation value of the business was.

[00:18:16] Bob Robotti: And Tweedy, he had grown successful and therefore, eventually when I started my own firm, we did a lot of pink sheet stocks also, because we couldn’t put capital to work into the deficiently, they were doing a lot less in it, and so therefore it opened up the opportunity and that was easy work to do was to be able to buy cheap stocks and that’s what we initially did.

[00:18:37] William Green: So there are a couple of things I’d just like to highlight initially as we keep going through this story. Right? So, so as we start to think, draw lessons that are relevant for our listeners from your early career, the first of them is you had real skills. I mean, the fact that you had this hard accounting background gave you some kind of competitive advantage.

[00:18:57] William Green: The fact that you were looking. In an area where other people weren’t looking for the most part was a tremendous advantage the other thing I think there was key is those that sort of older generation that you were seeing of Joe Riley and I think you mentioned Walter Schloss who kind of camped out in that office just in a corner and you knew Irving Kahn as well who I wrote about in The Great Minds of Investing who famously lived to 109 and was another of these great old investors.

[00:19:25] William Green: They had kind of internalized these very timeless principles from Ben Graham that you were indoctrinated with early on. And so I wanted to get a sense from you, when you think of the most important tenets, the principles that you came out of that period of four years at Tweedy Brown, what would they be?

[00:19:45] Bob Robotti: I guess the most important things are the foundational emotional things. Markets are inefficient. And there is opportunity and that inefficiency provides huge opportunities. And so I’ve never thought the market’s efficient. I think, and of course today I think that the market is like less efficient, especially in a timeline.

[00:20:03] Bob Robotti: If you look at a three to five year basis, there’s a whole bunch of mistakes that investors in markets are making today and providing great opportunity. So the other experience that I had was. The very first thing I have ever for security ever bought was, in 1975, I did buy New York city housing and priority bonds.

[00:20:19] Bob Robotti: So the city was going to go bankrupt. And so the housing bonds traded at 33 cents and a dollar. And so I thought. Maybe it doesn’t go back until I buy a dollar for 33 cents. Again, that’s a value easy to do the calculation to see. I can see how there’s value in that. And as it turned out, of course, the city didn’t go bankrupt.

[00:20:37] Bob Robotti: Then my housing authority bond paid off at par and I collected significant interest in the short term. So the very first security I happened to buy was a troubled, financially distressed situation. And the other thing is I have the rule. I don’t know, I don’t know, sell stocks. I tend to like own things forever.

[00:20:59] Bob Robotti: And so therefore, and eventually things to fork out and potentially like huge opportunities come from things that have been. Abandon exhausted and depressed because the valuation only goes down when you disappoint and so therefore the spread between what the value might be and what the price in the marketplace gets wider and the opportunity for gets greater and greater.

[00:21:20] William Green: There was a very nice quote that I read in one of your shareholder letters that I thought really summed up nicely. The core of what you do where you said the price you pay is the most critical element in all investing, no matter what is happening in the world, no matter how crazy it is, the price you pay is the one lever you can always control.

[00:21:40] William Green: Can you talk a little bit more about that? Because it seems like such a fundamental tenet that a lot of people who’ve got carried away with these kind of, the nifty 50 stocks of our own era seem to be forgetting.

[00:21:54] Bob Robotti: Well, today’s world valuation is particularly important, right? And it’s something that, people have kind of forgotten, and I think it is a critical element.

[00:22:02] Bob Robotti: Of course, it frequently is not the real determinants of the value we pay initially, because we frequently find that in the interim, once we buy it, as with many value investors, we buy it too soon and the value becomes troubled. But as I said, I don’t sell and so therefore, as it becomes more troubled, either the situation and or the price step or discounts more.

[00:22:22] Bob Robotti: Then I have a recurring pattern of I buy more. And so I do say that the stocks that we made the most amount of money in overtime are ones that initially after our purchase disappointed and traded down. So the idea that, somebody has rule of thumb that, you know, down 20%, I’m out of stock. I move on instead of the.

[00:22:40] Bob Robotti: That’s not existed in our conversations. And now of course, the corollary to that is, the Buffett’s of course, famous for saying the first rule of investing is don’t lose money. The second rule of investing is don’t forget the first rule. Well, we forget that rule all the time. So we will buy things that are troubled and financially stressed.

[00:22:58] Bob Robotti: And have risks to them, including the solvency of the business. And we’ve done that and we’ve been too soon and they have gone bankrupt, but the opportunity in that business and that industry persists in a different form. And therefore we make sure we follow the next, the buyer. So in manufactured housing, when that happened in the early 2000s.

[00:23:19] Bob Robotti: When Fleetwood went bankrupt and Palm Harbor went bankrupt, and both of those successively were bought by CAFCO. Well, we bought CAFCO. So we continue to do that. Or when Tidewater went bankrupt, I bought Tidewater out of the bankruptcy again and leather loaded up on it. So I continue to, the opportunity continues to persist, even if the company doesn’t.

[00:23:38] Bob Robotti: And the opportunities become substantially greater when that stress is happening. And the economic response to stressful situations in poor economics and industries.

[00:23:50] William Green: Before we move on from the Tweedy Brown portion of your career, can you just tell us if there were any particularly memorable moments, for example, in 1987, for example, where you saw the reaction of these old timers, the Joe Reilly types? Or the Irving Kahn’s and you saw how they dealt with extreme volatility.

[00:24:10] Bob Robotti: Well, so in 1987 was particularly interesting time, right? So, it wasn’t long after I had started the business. I didn’t really have much of a business yet. Market corrects, as much as it did. I thought about my grandmother’s farm upstate New York, still in the family.

[00:24:25] Bob Robotti: I said, well, maybe I’ll go farm my grandparents farm. But what happened was one of the big investments we had was in a company called Phil Corp. And Phil Corp was the recapitalization of the old one, United and had been in bankruptcy had come out of bankruptcy and Lucadia national Joe Steinberg and Ian Cummings had identified it, got acquired control of the company.

[00:24:48] Bob Robotti: And so therefore, it was a focal point of what we were doing in 1987. So, sock traded at 5 dollars a share. And one of the things they had was they had a surplus note in an insurance company in New York called empire insurance. Now, my dad wrote insurance business for Empire, and so I had met the CEO of the company at, a broker’s dinner one night, and so therefore called him up and met with the CFO to say, gee, you’re in the process of demutualizing, and that’s what it was, the demutualization process was a year and a half in the way, underway, and what was going to happen was the equity was going to be distributed in return for the surplus note, so they were going to own 75 percent of the company.

[00:25:28] Bob Robotti: The company of the year before had earned 18 million, so they’re going to earn 13 million. There’s 13 million shares. That’s daily. So there’s a dollar of earnings that will pop up out of nowhere. It’s a 5 stock. What Lucadia Steinberg and company had done through the year that he controlled it, where they were selling off assets.

[00:25:47] Bob Robotti: And in raising cash, eliminating all the debt, accumulating cash. In the meantime, they said, oh, if it was, we sold it at a loss that took it through the income statement. So the earnings looked terrible. In the meantime, they said, if it was a gain, well, we had intended to sell it and under quasi reorganization accounting.

[00:26:05] Bob Robotti: We’re going to book that directly into stockholders equity. So we’re not going to take that through the income statement. So they’re putting all these losses through the income statement. They’re, not reporting the gains, accumulating cash. And this insurance company is going to pop out of nowhere.

[00:26:17] Bob Robotti: So I’m like, I’m excited. This is this 5 stock’s worth two, three, four times that. And it has a huge NOL and the use it as a mechanism. Then the crash comes. Well, of course, everything goes down with the stock market crash. So it goes from five to three. And so then what happened was. Lucidia in 1987, 1988 created a huge amount of value.

[00:26:39] Bob Robotti: Bill Corp, Bray Corp, the demutualization of empire insurance. They eventually then took a private at a fractional what that business was worth. So those things gravitated my interest and the value was so clear and compelling at the time that it was like, this is a great opportunity and confirmation that Lucidia knew that because they proposed all these transactions, but they would.

[00:27:02] Bob Robotti: Try to buy the whole company, buy the whole thing and take advantage of the fact that the market wasn’t efficient and they understood what the values were here and they were far away from what the intrinsic values were and were opportunistic. And so it’s easy to be opportunistic and invest when somebody that’s really smart, that really knows the situation much better than you do is investing their own capital. And if I could go alongside that’s a great opportunity. So that was an opportunity based on a fact pattern and situation that was critical and informative.

[00:27:30] William Green: It seems like one of the major evolutions that you went through in terms of your investing style was that you started to understand the power of aligning yourself with these owner operators like Joe Steinberger, Lucadia or more recently Christian CM at sub C7 or the Gottwald family at Ethel Corporation or the child family at Westlake, where you could see that there were really smart capital allocators who So you weren’t just buying cheap stocks, something shifted in you. Can you talk about that? Because it seems like such an important part of your own evolution as an investor.

[00:28:06] Bob Robotti: So that’s what it is. So we bought cheap stocks originally and cheap stocks frequently, sometimes they deserve to be cheap because they’re really not good businesses. But certain times they are controlled by someone who is a great capital allocator, who also sees the same opportunity and it’s buying in and it’s using it as a vehicle.

[00:28:21] Bob Robotti: And so therefore the, how they think about that and what they do and how that really changes the opportunity set. And then of course, that’s frequently in businesses that are cyclically depressed, that are going through difficult times. So therefore someone who has a longer term vision. So that’s what it is over time.

[00:28:36] Bob Robotti: That’s what we’ve done is we’ve identified these opportunities that are from. Aligning with the right people who can be opportunistic, who are, they have the capability and have the ability to do that from an intellectual point of view, to capture those opportunities to go along with that. So that has been critical that what worked.

[00:28:55] Bob Robotti: Who do align with, who do we invest with and what situations, because sometimes it’s not just the people and it’s not just aligning. It is a business that is substantially discounted and opportune. And so, one or two of the building related companies were not based on, it was a better management.

[00:29:12] Bob Robotti: It was a better business that was in a consolidating industry that was extremely well positioned. So there’s a combination of factors. I do say investing is a mosaic. There’s a lot of things you look for and you don’t necessarily have to have all of those pieces for it to be a compelling investment opportunity.

[00:29:28] William Green: When you’re trying to assess the management. And you’re looking at the qualities of these people, whether it’s a Christian CM, or a Bruce Gottwald, or a Joe Steinberg, or the Chao family, or whoever, like, what are you looking for that’s a good indication that this is someone you want to align with, and what are you looking for, also, inversely, that makes you think, God, I’m staying away from these people?

[00:29:51] Bob Robotti: No, I don’t stay away from it. So, so in 1987, 1988, with Lucadia being opportunistic, right? We were shareholders in Phil core. Actually, I remember Alan Khan connecting me with Chuck Royce and going to visit him and Whitney Tilson and saying, you should buy Phil core. And a year later, Whitney Tilson calling me up and said, why’d you tell me to buy?

[00:30:10] Bob Robotti: So why didn’t you tell me to buy Lucadia? That’s where the values is being transferred to your, this stock’s cheap and in New Cadia, well, I just saw what they were doing and I saw the opportune situations and the discounts and what they were. So, so I lived through New Cadia. I didn’t know New Cadia and have kind of the history of it, as opposed to Christian scene.

[00:30:29] Bob Robotti: When I came across him, he had already had a record of being successful in acquiring assets in the press business at an opportune time, capitalizing that. Converting the company, merging it into someone. So he had already other people as life has gone on the gut walls of people who clearly have a long term decade long record before I came across them to say, these are moneymakers who think about capital application because they own a lot of stock themselves and understand the businesses and not only control it.

[00:30:55] Bob Robotti: But understand how do you allocate capital, therefore maximize the opportunity for investing. So, so it’s kind of different in those situations because it was in 1987, 1988 with Acadia, I didn’t sue them three times. So initially when I started in business. And you’re buying small companies that potentially have a huge disparity between price and value controlled by a really shrewd guy.

[00:31:18] Bob Robotti: Well, one of the things that really shrewd people do in situations like that, it’s take advantage of that market disparity and therefore they start to do things that they can. And so therefore part of that outcome is, gee, as the little minority shareholder, I used to be like, see, that’s not fair or equitable.

[00:31:34] Bob Robotti: And so therefore I would do, I was the name plaintiff with 25 class action laws. And three of them were in 87, 88 against, Lucadia. So, there is risk in it. And, even today, even actually today I was having a chat with Alan Khan and we were talking about, It’s CM industries and Christian CM and his concern about what’s going to happen with CM industries.

[00:31:54] Bob Robotti: And I said, I don’t know what’s going to happen there, and you’re at risk that the asset value is different than clearly the trading price in stock. And, there may be a movement, the value that doesn’t get equally dispersed, as I say, in these situations, when there’s a guy who controls the company, you deal the deck one, one for you, one for me, one for you, two for me, one for you, three for me, one for you, four for me.

[00:32:17] Bob Robotti: So that’s a risk. But if you buy it at a big enough discount, if you end up getting half of what it’s worth, then that’s probably a really good rate of return. And so, that’s part of the equation that you have to do that calculation. And what is this thing worth and what is the opportunity? And therefore, if I don’t get full value, do I still make a good? A great annualized rate of return on that investment.

[00:32:39] William Green: I wanted to go back in time a little to after you graduated from Pace Business School in, I think 1978. And you got a job also through your professor Pastorino working with Mario Gabelli.

[00:32:52] William Green: And you were there from 1980 to 1983 at a time where Mario wasn’t well known at all. And I was wondering, you spent three years there and you’ve said before that you would listen every day, even though you were the CFO, you would listen to him talking about his favorite investment idea every day. Can you talk about those experiences and what you learned from Mario, who’s the CEO? Very, very, sharp. And I mean, I’ve interviewed Mario a bunch of times and I’ve told my friends who worked with him that he was not an easy man to work with, but clearly very sharp and full of bombast and a great researcher. And what was that experience like for you?

[00:33:27] Bob Robotti: Well, of course we already, we knew who he was and actually Alan Abelson had already discovered Mario.

[00:33:34] Bob Robotti: And so therefore his business didn’t in any way match what his persona, personality, and reputation were. And of course, when I started working for him in 1980, he started the firm in 77. And so when I started, there were 12 people who worked there. He managed 7 million. The main part of the business was he was originally an institutional analyst on the south side when it, before mayday rates happened.

[00:33:59] Bob Robotti: And therefore that was a lucrative business and that business from, 72 to 77. Disappeared and then it ended up, that’s what happened. William Weaver, where he was at got bought by Drexel Burnham. He spent three weeks at Drexel Burnham and decided this is not what he wanted to do. So he went out and started his own firm.

[00:34:15] Bob Robotti: So his main business at the time that I was there was doing institutional brokerage business. And so that was the economic driver of the business. And only, so it wasn’t 7 million is what he managed when I first started to work for him. And so that was only beginning. Now, of course, the amount of capital he had, how much he had the fact that one of the industries that he was very active in was the cable industry and entertainment, and then business was in the process of exploding.

[00:34:41] Bob Robotti: So, it was a combination of factors and he is very quotable, very, has a persona that Alan Abelson then loved and therefore broadcast that. So those things all kind of helped Mario leapfrog. And so when I left. That’s what it was. It was, he only managed an 83, 77 million. So it was still a very modest amount of money, but that’s what it was.

[00:35:02] Bob Robotti: So every day he had his morning meeting because it was this brokerage business that talked to the four salespeople to go out to sell the idea yet. And he’d go through his investment thesis. That’s what I say. I had an executive MBA program taught to me almost one on one by Mario Gabelli for three years, where he went through his favorite investment thesis and what it was and what the company was.

[00:35:21] Bob Robotti: And he paid me to attend the class. I didn’t pay him to him. So it was a phenomenal opportunity and it was a 12 person firm. And so I was the chief financial officer, chief operating officer. And that was when I first started to work from 1980, we used to clear through patient company and that’s the 1980s, the silver, the hunt family, the silver implosion, and the base is going to go out of business.

[00:35:45] Bob Robotti: And so, and we’re a broken dealer. So therefore our money is now protected. So Cabela is about in the process of potentially losing all its capital. And so therefore we had a scurry around and go over and move the business and get that out of the way. So therefore, so, so things happen that were really interesting.

[00:36:00] Bob Robotti: And I worked with Mario intensively on a one on one basis that entire time. So, he’s a great businessman, in addition to being a great investor. So therefore that experience was again, couldn’t have asked for a better opportunity.

[00:36:11] William Green: What stuck with you in terms of how you analyze investments, how you talk about investments, but also how you run your own business, because he was, he’s shrewd, I mean, he’s a not, I, it struck me when, I think it was the last time I interviewed him, he said to me, no, I don’t read any books, I never read a book, why would I waste time reading a book, I read all these journals every day, I’m just an information junkie, an information hound.

[00:36:35] William Green: And I, so he’s got a very distinctive personality, this sort of voracious appetite for information, for getting an edge. Was there stuff that just by watching him operate, you think has actually stuck with you, or are you very different?

[00:36:48] Bob Robotti: Well, personalities are very different. Cause he is, he’s taskmaster, he’s hard to work for, he’s demanding person has high expectations and, doesn’t let you know sometimes if you don’t meet those expectations.

[00:37:00] Bob Robotti: So, he’s a different person than I am. I think in terms of interesting curiosity, I hate to say it on air, but I don’t read books either. I hate that at the end of interviews, but people always say to you, what’s your favorite book, what have you read? And I’m like, I feel like I’m an idiot now because you don’t read any books.

[00:37:17] Bob Robotti: And that’s what it is. I read annual reports. I read through, letters, journals, I read all these other things. So I have an interest in stuff, but I, don’t read books and so, so there’s a similarity. Of course, we really do have between us in that way. So interest in businesses and how they work and how they operate.

[00:37:33] Bob Robotti: And I think that’s been a critical thing is understanding the latent earnings of businesses that are not earning something today. So, that’s a phrase that comes up a lot. Of course, when you do value investing and you do asset based companies, you talk about value traps. Okay. And so, I think that value traps are in what time frame are you talking about?

[00:37:51] Bob Robotti: Because recently I hosted a dinner about a month ago, so I had about 10 of us there and I invited a bunch of people who are still in value investing, active management, managing much less money than they used to. Including people who don’t do it anymore because they converted to a family office because they’ve given up and they’ve given back the money and don’t want to do that anymore.

[00:38:12] Bob Robotti: And the nature of my dinner was, I called it the restoration of the fallen, right? Using the line from Horace that, Graham has at the beginning of security analysis. And that’s what I think. I think the next decade is going to belong to stockbrokers. And I don’t care if that’s technology companies, growth companies, industrials, financials.

[00:38:32] Bob Robotti: All of those have reasons to pick stocks and not the index and the indexes will not outperform selecting stocks and the ability to identify, do research, select companies that are well positioned and have valuations that are attractive. That is something that can be done today. And there are many fewer people doing that.

[00:38:54] Bob Robotti: That is not a productive effort out there today. And therefore, that means the competitive landscape is extremely limited. And that’s where the differentiation is going to be. It’s not going to be an only an index, it’s going to be owning stocks. And so that’s what I’m saying. It’s the restoration of the fall of stock pickers, active managers in the next decade, I think have a bright future and I think would be, I’ll be shocked that they don’t outperform in seats.

[00:39:20] William Green: Let’s unpack this in more detail because it’s such an important idea, this idea that we’re going to see the revenge of the stock picker. I saw you recently, you said we’re entering a new golden age for value investing, stock picking and active management. So as we’re trying to understand why that could be, can you explain this totally anomalous, weird period of distortion that we went through after 2008 that in some way has set people up to believe something to believe certain principles that may not turn out to be permanently true.

[00:39:54] Bob Robotti: And so, two years ago in my letter, I talked about financial brigadoon. And so that’s, I think the world in which we live today. And so brigadoon, As I’m sure it’s the Lerner and Lowe play from the 40s, and it’s about two gentlemen on a trip to Scotland, wandering across the moors and coming across a little town, Brigadoon, it’s an idyllic little town, everything about it is just lovely.

[00:40:15] Bob Robotti: And so they leave and they come back the next day, only to find the town’s not there anymore. And they ask someone, what happened with Brigadoon? And the guy says, Brigadoon only shows up one day a year, every hundred years. It’s gone. And that’s what we have today. We have post a financial crisis and extremely anonymous, anomalistic period of time.

[00:40:34] Bob Robotti: And extended extremely anomalous period of time. And the fact that it exists for as long as it did convinces people, it was the new norm. And so therefore the distortions of people’s thought process and capital is making the opportunities. And that’s what people, today they say, well, gee, these opportunities and they’ll say, but they perform poorly.

[00:40:54] Bob Robotti: Yes, the performance is what sets the stage for the opportunity. The valuation and the pricing is giving you these opportunities because nobody believes that’s the case. So there’s a line from Bernard Baruch, and that is data and information is no substitute for thinking. And so that’s a particularly critical thing today, because I think the underlying economic environment from a world of Very low inflation for an extended amount of time, depressed interest rates, low, no negative interest rates, people got to believe that was the norm and people, it’s not an anybody who graduated and lived in that.

[00:41:34] Bob Robotti: Decade long period. And that’s what it is a decade long. It’s not like two or three years. Then you would say, Oh, no. You haven’t lived long enough. You don’t know you live the long time. That’s the way the world works. And then even for people in business, I do think there’s been a gravitation that, well, maybe I am wrong in the world has evolved.

[00:41:49] Bob Robotti: So I really think that it’s not only people with 10, 15 years experiences that are only lived through one world. I think that’s the norm. Everybody else is going to believe that. And that’s what everybody believes is we’re going to go back to that environment again, and therefore that capital stays where it is.

[00:42:04] Bob Robotti: Because we’re going to get back to that. And I’m saying, no, that, that was an anomalistic period of time. It’s not going to return. And therefore you have to be prepared and invested on who are the economic beneficiaries in the next decade. And they’re going to be very different than who would the beneficiaries of an anomalistic economic environment.

[00:42:23] William Green: You had a very interesting chart that you showed in one of your, in one of your letters to shareholders that was called Decade Winners, where you show how the world’s biggest companies by market cap change from decade to decade. So in the 1970s, these were energy companies driven by very high oil prices.

[00:42:42] William Green: In the 1980s, there were Japanese companies that dominated the global economy. Then you show how in the two thousands Chinese companies came to the fore. Then in the 2000 and tens companies that benefited from low interest rates and the recovery from the global financial crisis. So when you think about it in terms of these kind of this kind of passing of the baton in a way like these different periods, how does that help to inform your sense that it’s really dangerous to have this kind of recency bias where you’re like, Oh, well, whatever happened in the last decade is bound to continue because that’s what I’ve seen.

[00:43:19] Bob Robotti: Of course, it is recency bias, but It’s easy to believe it’s not recency bias when it’s been 10 years, you think, Oh no. If it was one year, that would be recency bias, but I have conviction. It’s not recency bias because it’s happened for 10 years. So I think it’s Jim, I’ll attribute it to Jim Grant.

[00:43:35] Bob Robotti: There’s a line that says that in science and an engineering knowledge is cumulative and in financing cyclical and given extended cyclical periods, the idea that people think, they forget. Past performance is not a predictor of future results. And so therefore, what has worked isn’t necessarily what’s going to work.

[00:43:55] Bob Robotti: And it’s all the more reason why there are rotations, there are cycles. And that’s the phrase I have now. It’s No, I’m stealing the phrase from Clinton when he beat Bush for president. It’s the economy, stupid. What’s the economic environment? Which companies are going to benefit from the economic environment and therefore do extremely well economically, those are the stocks that are going to perform well.

[00:44:16] Bob Robotti: And so to think about what companies, what industries are well positioned today, and for a combination of well positioned excellent growth. And evaluations that also are heavily discounted because they haven’t performed. And the conviction is they won’t perform, or I know that business and that business is a cyclical crappy business.

[00:44:39] Bob Robotti: Businesses change. That’s what I talk about too. I talk about not the revenge of the old economy. I talk about the metamorphosis of the old economy for industries that have done poorly for a long time, our capital. The pride have consolidated, have restructured, and maybe the underlying economic environment is different where they’ve gone from being disadvantaged.

[00:44:59] Bob Robotti: The potentially very advantaged today, and I think that there are many examples of that pattern of both the poor performance consolidation restructuring and yet underlying economic environment totally changing now and therefore being extremely well positioned.

[00:45:16] William Green: So you’re looking at quite unfashionable old economy industries like chemicals and building products and lumber and energy services and the like why what are you seeing there and maybe you could give us a couple of examples we don’t really we’re not that specific about stocks because I prefer these interviews to be fairly timeless, but if you could explain how these North American companies like LSB Industries or Westlake In illustrate this kind of theme that you’re seeing where these old economy industries that had been largely dismissed by everyone who is excited about Microsoft and Apple and Amazon and Alphabet and the like are suddenly actually extremely attractive and maybe where the action is.

[00:45:59] Bob Robotti: So again, here we are bottom up stock pickers and we’ll value investors. That’s we’ve always been. And the fact that matter is the last 2 to 3, 4 years, I realized that actually, I’m not that. So, in many cases of a macro top down investor and I’m not a value investor. I’m really looking for businesses because of cyclical changes in structural changes.

[00:46:19] Bob Robotti: Have a significant amount of growth in front of them. So I’m really looking for businesses that have significant growth opportunities and yet valuations to the depressed. And why did that happen? And how did that happen? The economics one on one really does work. Capital does get pulled out of things and therefore things are different.

[00:46:37] Bob Robotti: So the two major themes that we think are structural changes that we think are decade, two decade long, kind of. Opportunities that will dictate who the winners are. I don’t care who the losers are so that I’m not going to short anything. So I’m not going to go through that part, but who the winners are.

[00:46:51] Bob Robotti: And so those two things are, one of them is it, anybody uses the phrase, de globalization really just doesn’t understand what’s happening and what’s happening is of course, it’s the evolution of globalization and therefore things change. Different countries, companies, industries become advantaged and that moves over time.

[00:47:11] Bob Robotti: And so therefore, and of course, we kind of know that if you think back long enough in history, right post World War II, there was a period of time where Japan had its recovery and therefore had a significant positive period of time. And then what happened was it got to a cost level where the opportunity migrated to South Korea.

[00:47:28] Bob Robotti: And South Korea then had a significant period of time where he grew and had all these advantages. And then over time that moved to China because China had all the advantages, including the scale of the population of the country. And so, therefore, that did really well. And what’s happening, been happening in China for, so Isaac Schwartz is a young colleague of mine who, when he graduated, Wharton back in 2005, took a trip to Asians and thought we need to invest in Asia.

[00:47:53] Bob Robotti: And she’s Isaac. I’m a kid from Queens. I don’t speak English. I, well, I’m not going to learn a foreign language. How do I invest overseas? But he took me to Thailand in January of 07, which is almost 10 years after the Asian financial crisis, which was the Thai bot devaluation was a critical element to that.

[00:48:10] Bob Robotti: And these stocks were extremely cheap. Strong balance sheets, generating free cashflow, paying dividends, 7 percent dividends. And so therefore, I didn’t have to speak Thai to understand that these businesses are substantially discounted an opportunity. So he got me to invest, think about the world as it is.

[00:48:28] Bob Robotti: And so with him, I’ve traveled throughout Asia. We visited 500 public companies over. The number of years he lived in Asia and, and that process, so I remember talking to the Korean company 15 years ago, that no longer making garments in South Korea, where they started to do it when South Korea had a lower wage rate than North Korea, because it was competitively advantaged over time, of course it wasn’t.

[00:48:47] Bob Robotti: So they said, well, let’s go make it in China. And they weren’t making things in China anymore. They had already gone to Bangladesh and Vietnam. So businesses have been gravitating out of China at some point for a long time. That process, I think, is in the, going to accelerate. So therefore, I think it’s the evolution of globalization.

[00:49:03] Bob Robotti: And the evolution of globalization is, well, it’s kind of, it moves south and it moves west. And so the next places it’s going to is Southeast Asia. With 650 million people, and India with 1.42 billion people that are in the process of replicating some of what China did 40 years ago. And so that, that globalization process and the evolution means huge amount of infrastructure build out, huge amount of changes, huge amount of energy consumption.

[00:49:30] Bob Robotti: Because as you start that economic ladder, Japan, Korea, China, per capita consumption of energy significantly increases. So you’re going to see 2 billion people in the world start to raise their income level. So I think that’s a critical factor. The other fact part of globalization about evolution is people say reshoring, which again is the misnomer, not reshoring.

[00:49:52] Bob Robotti: It is North America is competitively advantaged in any energy intensive business. And so energy fossil fuels is something I’ve invested 50 years. I think I have a really good understanding as to how those businesses work. Not that I know where the commodity price is going to be in six months. I have no idea where the price will be in six months, but how those businesses, but North America, because it has an abundance of North of natural gas that you can’t export has an energy cost that’s disconnected from the rest of the world.

[00:50:22] Bob Robotti: And that is a persistent long term advantage. And if you’re doing something energy intensive, doing it in North America is a competitively advantaged place. So when I got out of college 50 years ago, we were competitively disadvantaged. Today, we’re competitively advantaged in a large portion of the world’s economy.

[00:50:41] Bob Robotti: And so therefore, it’s European businesses more than Asian businesses, but also Asian businesses that are coming to North America to take advantage of that long dated opportunity for excess profits and returns because of the low cost environment for energy. Which will be persistent. So that’s again, a critical thing that I think, and therefore, if you are an industrial business in North America, frequently there’s three of them left.

[00:51:05] Bob Robotti: And there’s an oligopoly that has the lowest cost and therefore it’s competitively advantaged against the rest of the world because labor is not a big component. It’s the inputs and the inputs in many cases, to the extent that you make a chemical and you use. The raw materials, natural gas, and your energy is, supplied by either natural gas or a lower cost of electricity.

[00:51:25] Bob Robotti: You’re competitively advantaged. Do you get to make ammonia fertilizers chemicals in North America? You’re competitively, you’re going to make steel in North America because you’re in the end market that demands it. You got the iron ore that’s domestic, you got the coal that’s domestic, you got low cost energy, and you have an industry that produces steel for substantially less CO2 per ton than the rest of the world does.

[00:51:48] Bob Robotti: So, so environmentally, we’re competitively advantaged also. So these things are very different. That’s why I say the metamorphosis of the old economy, because these are fundamentally, structurally different businesses than they’ve ever been. And in a period of time, where Activity in North America, given things like the inflation reduction act and all of those other advantages as we build out renewables mean the demand is growing exponentially and therefore, you’re extremely well positioned for high growth and yet valuations are extremely modest because all I know that business is a cyclical crappy business. It changed. It isn’t what it used to be. It’s a butterfly today. It’s not a cat dog.

[00:52:28] William Green: So in a way, as you’ve mentioned before, it’s analogous to when Buffett looked at something like the railroad industry and said, actually, this thing that was always a terrible industry is no longer a terrible industry.

[00:52:43] Bob Robotti: That’s right. That’s what I always do, Joe, because 1975, I got out of college. That’s what I say is when I got out of college, there was a great business called the Wall Street Journal because there was no across the street from the Wall Street Journal. And it was a I interviewed with a railroad company and said, this is a horrible business.

[00:52:56] Bob Robotti: Capital intensive costs are too high. The thing just loses money like crazy. Why would you want to be it? The fact of the matter is. Railroads are inherently a monopoly business to the extent that you have a rail line that goes from this place to that place. You are the low cost transporter of anything and everything, and no one’s going to build a new one of them.

[00:53:14] Bob Robotti: So therefore there’s a barrier to entry, and therefore you have that advantage. So structurally, it was a business that has those positive attributes. And of course, today, the Wall Street Journal is a vanity thing for people who can afford to lose a lot of money and can’t make any money anymore. So things change, and people Have the perspective of, oh, there are cycles. There are things that happen. And what is true today is not necessarily true tomorrow.

[00:53:38] William Green: I remember Bill Miller many years ago. I think when I was following him around back in about 2000 to write a profile or 2001 to write a profile of him for fortune said to me, the biggest problem in markets is that things change.

[00:53:49] William Green: And it seems to me such an interesting thing that in the last few years, even among many value investors, it became almost an orthodoxy that you should own higher quality companies. And that even the value investors became kind of almost like nifty fifty kind of investors, right, like, like, and I was wondering how you dealt with that issue because that did become almost the dominant way to win within your community.

[00:54:16] Bob Robotti: No, that’s so there’s 2 types of value investors in my mind, right? There’s the value investor, like me, who owns hard asset kind of businesses. And so maybe that’s also Curtis Jensen, who joined this a number of years ago, 3rd Avenue, Marty Whitman’s firm, right? Or there’s a lot of examples of firms that.

[00:54:32] Bob Robotti: Where that and of course, they had the misfortune of being very successful and raising a lot of money. And so, therefore, back in 06, they had billions and billions of dollars. And so, therefore, those businesses then have imploded substantially. The other value investor who did, who was smart enough, who did buy Apple, Microsoft, you name the company when it was a cheap stock and it was a value stock.

[00:54:56] Bob Robotti: And therefore they had the good fortune not to sell that thing over time too, right? Because they would have truncated their opportunity for profits. And so those who’ve grown to be very successful. Investments that they’re kind of stuck in today. So the value guys who performed well, the guys who held on to those stocks and probably have bought in a little bit more to the idea, like, gee, there is maybe better businesses are worthwhile to pay a higher price for. And again, you hear Warren Buffett say that. And therefore you apply that to every situation. Oh, it’s a better business that pay a higher price. And when do you start to confuse yourself as to what’s a better business and when do businesses change over time? And it was a better business, but there’s a change and it doesn’t continue to have that.

[00:55:34] Bob Robotti: So value investors have gone two different ways. They’ve either imploded because they bought hard assets. And therefore those things have been out of favor and we’re fortunate because we didn’t manage a lot of money. And the money that we have is from people who are really long term and have been with us for a long time that we’ve made returns for.

[00:55:50] Bob Robotti: And so, therefore, I’ve had, because that’s a critical piece. If my capital wasn’t aligned with me, then I couldn’t do what I have done because they wouldn’t have stayed with me through the whole process. To the lean years. And there were definitely a bunch of lean years to the point where, we’ve done really well the last number of years, and I think we’re extremely well positioned today.

[00:56:08] Bob Robotti: So, so that’s the two pieces of value investors and how they’ve kind of changed over time and the ones that have adapted have money, but I think also have valuation issues that they have in their portfolios and businesses that have done well and could do well. And again, that’s why I say it’s a stock picker is decade because, even the Magnuson seven, I heard the Bloomberg.

[00:56:27] Bob Robotti: Yeah, they say the magnificent six. So they’ve already they identified when, and that’s what’ll happen is it’s the same thing that happened with the nifty fifties. Some of these businesses are, they are phenomenal businesses. And the reasons that stocks have gone up is because the economics have been strong.

[00:56:41] Bob Robotti: And so it’s not like, it’s not what it was in the Dot com era where this valuations or things made no sense in their businesses that weren’t worth anything. These are real businesses that have had significant economic returns in them still. So, but some of them won’t do well. And I don’t know which ones those are. And if you pick the right ones, you’ll do it. And if you pick the wrong ones. You have clearly valuation risk in those securities.

[00:57:07] William Green: When you look at investors who’ve bought into the idea of just owning, Microsoft and Apple and Amazon Alphabet and Meta and Visa and J& J and J. P. Morgan, these kind of super successful U.S. companies that benefited from that period of low interest rates and the recovery from the financial crisis. Is there something in particular that they’re forgetting that you, not in terms of wagging the finger, but if, as someone who’s been in this business for 50 years, if you could just give people some sort of sage perspective, because I think often we look back on periods where it seems obvious in retrospect and things were sort of inevitable, and I’m always like, why didn’t I listen to Howard Marks at the time, or why didn’t I listen to Buffett at the time, or whatever. Can you put into perspective what it is that people ought to be thinking about as they’re framing companies like that have been so successful?

[00:58:00] Bob Robotti: But I think a critical thing is valuation. So I regularly quote in the 2011 letter, Buffett made a point of talking about fixed income and, he Referred to Shelby Cole and Davis’s famous line that, bonds were a return free risk.

[00:58:18] Bob Robotti: That was in 2011. That was a long time ago. And for that entire time, that didn’t come home to roost. But of course, What’s my risk free rate of return? And so, therefore, I start a risk free rate of return. I actually think for, go back 2,3 years ago, it’s like, how do you figure a risk free rate of return?

[00:58:35] Bob Robotti: Because if you figure the 10 year treasury, but the 10 year treasury was, like, lower than what the inflation rate was. So, the real return on the 10 year treasury was negative. So if your risk free rate of return is negative, and then I got to put the premium on top of that, well, what’s the premium on top of that?

[00:58:51] Bob Robotti: And where do I start? So it seemed to me that the foundation was in the wrong place, because if nothing else, there was no margin of safety in assuming that was your risk free rate of return. And yet, in real estate, capitalization rates were all predicated on those low returns. And so therefore, so the real risks in my mind, because I do think, I think capital today is substantially misallocated.

[00:59:16] Bob Robotti: Right. It’s been allocated based on an environment of free money and the presumption that’s the norm. And the fact that, and of course we talk about public markets, but the other market, we haven’t specifically references the private market. So private markets, I think there’s a huge amount of risk and more capital goes there, and it’s allocated to private markets and kind of, and private markets valuations move slowly.

[00:59:40] Bob Robotti: And what’s the right rate of return? And the right rate of return is the right rate of return is going to be determined by the dog and not the tail. The tail is the Fed and the dog is inflation. The dog determines interest rates. The tail, the Fed does not determine interest rates. And people think that’s the case.

[01:00:02] Bob Robotti: If I hear one more time on the radio, four times on TV, like what’s the Fed going to do next? And I get a raise rates. I’m like, oh, would you get a life and figure something that you is relevant? Because the Fed is going to be forced to respond to what inflation is. And the Fed can’t control inflation.

[01:00:21] Bob Robotti: And so that’s the critical element and valuations. All real estate in my mind has risks of coming down in valuation because cap rates are going to change. Because where does inflation moderate out at? We’ll determine what the right interest rate is, and then we’ll fix where capitalization rates are. And the private markets are things that, I recently saw a study Cambridge gave to us, us being one of the things I do is I chair the Pace University endowment.

[01:00:51] Bob Robotti: And they said, yeah, the multiples have come down. So they went from 10 to 11 to 12, 12. And now they’re down to 11. And I’m like, wait a second. They went from 12 to 11. And interest rates with one and a half or four and a half, I somehow that doesn’t seem like the right adjustment that numbers like raw.

[01:01:12] Bob Robotti: And so I think private markets, which are levered and real estate, which is levered the nature of those assets. Are you always leverage those assets? Because they’re very leverage. And if you start to change multiples, because inflation is higher and the interest rate is different, your risk free rate of return is different.

[01:01:29] Bob Robotti: And that just takes time because those markets don’t reprice quickly. So I think the risk is not necessarily in the public market so much, even with the higher valuation stocks, there are these other markets that Mark to a model and therefore, are less volatile. Of course, we all know the answer to that is no.

[01:01:46] Bob Robotti: I invest in a business, right? That’s in the public markets. And the stock price may be volatile, but the risk and the volatility in that business is no different than the one that’s sold in the profit market. So our risk didn’t largely or they’re not that dissimilar. And yet one goes like this in price and the other one like this in price. And in a period of time when interest rates have changed radically and therefore discount rates should be changing radically and one’s not changing.

[01:02:11] William Green: But for people who are not, who are listening rather than watching, there was a vivid movement of a hand going up and in, in a, in another case of a hand going in a more moderate way.

[01:02:23] William Green: In structural terms, it feels like something has really shifted that I’m sure you’re seeing a lot when you’re, Advising endowments and the like, right? That the people who are making asset allocations. I’m thinking very differently than you are about the value of indexing and the importance of private markets and the like what’s happened to value investors given the rise of passive investment the rise of algorithmic trading the importance of short term information and the like what’s happened there and what opportunity has that created for people who actually do care about valuation.

[01:03:01] Bob Robotti: The opportunity I think is huge, right? So, and in the last 22 was interesting, 2022, right? Cause it said, one, two, one thing that happened that year was both bonds and stocks were down more than 10 percent and everybody says, oh, that never happens. And I’m like, whoa, when you have one and a half percent and you treasure it.

[01:03:20] Bob Robotti: And if one and a half then goes to three, well, what do you think happens to a bond? What do you think happens to a stock? How would, how did you say that? Like, who would have thought that would happen? You would have thought about it. Of course you would think that, and you should have thought about it.

[01:03:33] Bob Robotti: Cause that’s the margin of safety. There was no margin of safety, that pricing, that assumption set the pricing for both of those markets, and that if you change that basic premise, obviously so 22 happened and bonds and stocks had. Terrible performance. Somehow people forgotten that they relegated that to like, that was a mistake.

[01:03:53] Bob Robotti: And of course the critical element that happened, there was inflation happened. And therefore, where did that come from and what caused it? And, where of the camp again, so there’s a, one of my, colleagues working with many years has this concept of grassroots macroeconomics. And so that’s why I said, we’re a macroeconomic investor.

[01:04:10] Bob Robotti: We’re not a bottom up stock picker who think we’re agnostic on the macros. Because when you understand a business and you understand the industry and you understand industrials that are a component of the business and industry, you understand, I think the drivers and we see all these things that are really inflationary.

[01:04:28] Bob Robotti: And so the globalization and the movement of globalization, when you move to the rest of Southeast Asia, and you move to India, it cannot be as efficient as where the Chinese economy is today. Yet costs in China are different than where they are today. Also, so therefore, it’s not the same place with the same cost structure it had.

[01:04:45] Bob Robotti: So I would submit that China, of course, that’s what’s really happened, right? Post definite. So again, I’ll come back to this concept. I think the Fed is at the margin. It has no ability to influence the really big things in life. And so, and I don’t think Volcker cured inflation. I think China cured inflation because what we did over 40, 50 years was industries, disappeared in the rest of the world and they all moved to China because China had all these cost advantages and can do these things and make all these things for much less than we could.

[01:05:13] Bob Robotti: And what that did was we bought stuff for the same thing we paid 20, 30 years early. So therefore inflation was sucked out, so it wasn’t as Ross Perot said, the giant sucking sound wasn’t Mexico stealing things from North America in 1992, giant sucking sounds been going on for 40, 50 years. And therefore it’s moved to China because they could do everything cheap, but the cost in China now have risen because now they become a net importer.

[01:05:36] Bob Robotti: So when it comes to making steel, Suddenly the risk of being the high cost producer because they have to import iron ore, that increase met coal, they have to increase energy. So the critical variable costs, they’re high on the cost curve. Labor is a small component of making steel. It’s not a labor intensive business.

[01:05:53] Bob Robotti: Who cares? She got cheaper labor. And so therefore, and now. When they started that process, they had all of those things internally, and they, of course, they were advantaged. They had an end market that was, had the demand and they could supply everything internally. Now they’ve got to import all these things.

[01:06:07] Bob Robotti: And then the high cost import. So that’s a radically different place. So I think China is least done and probably feeds inflation in. And as you move to someplace else, it can’t be as efficient given the, when Microsoft or sorry, when Apple thinks about, okay, we’re going to set up a line in India.

[01:06:23] Bob Robotti: It’s going to be higher cost than what it is in China. You can’t replicate the efficiency that you have and scale that you have. And so therefore, I think, and then the other thing is energy. So we’ve been fossil fuel investors from day one. Energy transition is obviously something that’s going to continue to accelerate.

[01:06:38] Bob Robotti: And energy transition is going to be something that is going to be inflationary because the build out of the infrastructure that you need the call on materials that are already in tight supply mean all those material inputs are going to cost more money. And so therefore you’re going to have recurring commodity cost pressures as you build out.

[01:07:02] Bob Robotti: The method is when you build out renewables, you need steel, cement, and you need all these basic materials that are. We’re in tight supply today. And so therefore we think inflationary situations and energy too, is the same thing. Those are inflationary and therefore inflation is going to be more persistent at the higher level.

[01:07:19] Bob Robotti: And when financial bring a dune happens, people give up, that’s not going back to bring a dune and interest rates adjust to the right rate where inflation levels out at, it’s either going to be at higher or potentially reasonably higher than where we are today. And people will give up and say, it’s not going back.

[01:07:36] Bob Robotti: And I can’t. I can’t spec you. I can’t invest based on the whole that we’re going back to a two, two and a half percent inflation rate, because that’s a hope that seems to me to be hard to get the genie back in the bottle. And therefore you’re not going back to that rate. And therefore you have to reprice what you owe based on. That risk free rate of return, the risk associated with that investment, especially if it’s incremental inflation, that’s going to affect your business.

[01:08:01] William Green: I wanted to focus a little more on energy because it’s obviously a hugely important area for you. And I was looking at, I think it was the April 30th, 2024, statement for Ravenswood investment company, which is a limited partnership that you’ve run with great success for decades.

[01:08:18] William Green: And if I was really right, you had something like 62 percent of the portfolio in energy holdings. So it’s a massive area for you. And you’ve also, as you mentioned, been investing in energy since the seventies. So this is a, you’re putting your money where your mouth is here. When you look at this huge structural trend in energy.

[01:08:40] William Green: Can you explain why there’s such a massive overweighting in energy in your portfolio, but also how companies like Tidewater or Technic FMC or Subsea or whatever other big positions you choose to mention, how they illustrate your way of positioning yourself to take advantage of what you see happening in the world of energy over the coming years?

[01:09:04] Bob Robotti: It’s individual stock selection. I don’t buy am not buying energy broadly and it’s valuation, right? So it’s easy. It’s simple. It’s really not that complicated. So valuation part is, in certain parts of the oil and gas industry, the service parts of the business for the picks and shovels parts of it, right?

[01:09:22] Bob Robotti: There’s a, what I would say, there’s a true north. The true north is what’s the replacement cost of that asset. And of course it’s predicated on the concept that, that asset will be one that will be in supply demand balance or, in tight supply, and therefore that means the economics will be determined by what it costs to build that asset because you’re going to need more assets.

[01:09:44] Bob Robotti: And so where is that? And that shows you the earnings potential of the business. And that shows you the value of that business. And, what’s happened of course, is. But the focus of what I do in energy, a lot of it really does tend to be offshore related in service fixes and shovels. So that means in 1917, energy had a really good run, but it was all onshore and it was all shale.

[01:10:08] Bob Robotti: And I did nothing in those years and I did not participate in it. So therefore, again, it’s stock selection. And, in that case, I underperformed because I didn’t own the right energy stocks. And of course, what’s happened more recently is, oh, no. The onshore has its place, the North Shore has its place, and that place has finally come to what the underlying economics are and what the opportunities that is and what the size and scale opportunity with that business is.

[01:10:34] Bob Robotti: So, it is the realization of something that I’ve invested in all along and that the market couldn’t care less about 4 years ago when I went to, I could go through the litany of really smart, Value investors who do cyclical energy kind of investment. So it is the kind of thing they would invest in.

[01:10:53] Bob Robotti: It’s not like, oh, I don’t invest in that thing. No, this is what I’m saying. No. I’m going to have no interest in that. And at the meantime, tidewater it’s boats. That’s what I, a year ago, it’s at a conference that I said, okay, the stock pickup I’m going to have today is I’m going to talk to you about a real estate company, and the real estate company is one in which the real estate’s been converted, shut down, ripped down the, there’s no new supply.

[01:11:16] Bob Robotti: The demand for that real estate is suddenly coming to tight supply. You have 90 percent utilization and therefore the rental rates going through the roof. And so therefore, the rental rate goes through the roof. It all falls to the bottom. And so therefore, and the value of that is, well, when you get to the point where you need to buy new real estate, build new real estate, what’s the cost of that real estate.

[01:11:38] Bob Robotti: And so that’s a pretty easy to identify number. And if I can buy something for 10, that costs 50. And I’m buying it for right. 20 percent of its replacement costs. Now, when do the economics get it to the point where it’s worth 50? That’s the uncertainty that people aren’t willing to invest it because I don’t believe it.

[01:11:57] Bob Robotti: I don’t know what’s going to happen in the meantime. We invested it because I have a strong conviction that it’s not that long a time horizon. And when I started 10 and I’m going to 50, that’s a really good return. So therefore the time period becomes less significant in it. Now, of course the company disappoints, I’m holding up my hands.

[01:12:13] Bob Robotti: So I got one high, I got one low. And what happens is as it disappoints, which inevitably will, because the situation is not conducive to the supply demand, there’s only one place for the stock to go, goes down. It doesn’t matter that you buy in a dollar for 20 cents, it goes to 10 cents. And if it continues to disappoint, it goes to 5 cents.

[01:12:33] Bob Robotti: So the opportunity gets larger and larger. Probably, the opportunity gets closer to realization because the timeline is changing because the supply is dwindling. And so therefore, the demand returning is an uncertainty. So that’s what it is. Is we look at these businesses and understand in certain cases, that disparity.

[01:12:52] Bob Robotti: And therefore continue to invest is that opportunity potentially gets wider as it doesn’t happen in the short term. And so therefore that’s, as I say, that’s where we’ve made the most money in the short term it worked against us. And then we invested more money when the opportunity became closer to realization and the valuation further discounted.

[01:13:09] William Green: So you look in a fairly granular way at a company like Tidewater that’s been a huge investment for you and you say, okay, so these guys have 200 and something vessels. These are all these crew boats and tugboats and like that are used to service global offshore energy companies that are exploring producing and then you’re like, how much would it actually cost to replace these vessels?

[01:13:30] William Green: And then you’re looking at it and saying, and who the hell wants to invest in servicing energy exploration and production companies offshore given the kind of ESG concerns, right? So is that the sort of analysis you’re doing here?

[01:13:45] Bob Robotti: But it is, and that’s what happened was, I was down in New Orleans. We went on a field trip to go see Methanex that owns methanol plants. They were relocating a methanol plant from Chile to the Geyser, Louisiana. So it was a field trip to Geyser. And we’re in New Orleans. As long as I’m there, I’m in town that who’s who else to visit with? And I said, hide water.

[01:14:06] Bob Robotti: I hate the boat business. It’s such a crappy business. But I had nothing to do. So I went to go see Jeff, CEO of Tidewater and hadn’t looked at it and said, hey, chief, maybe it’s different than what I thought, but they’ve done with the fleet, they’ve upgraded the fleet is newer, but it’s still problematic and whatever else.

[01:14:20] Bob Robotti: And so initially I didn’t even want to invest in it because I, I’ve been around the business 50 years and so therefore, it’s not a business that inherently pulled me in, but of course it was, wait a second. Now, suddenly I, it’s gone through bankruptcy and I have a balance sheet no net debt.

[01:14:37] Bob Robotti: And a position company that’s breaking even at the bottom cycle, and I can buy assets for 20 cents a dollar, this is going to make really good returns. And so therefore, we started to invest. And then the other thing that I’ve learned from investing in businesses that have no identifiable earning stream, and therefore the assets are hard to value, and therefore you can buy them for far less than what it was to build those assets would be as the thesis ends up being right in the supply demand comes in balance and the thing starts to manifest.

[01:15:05] Bob Robotti: Transcribed When the stock doubles, it’s probably a better buy than where it was when it didn’t because what’s happening is the supply demand has come and right sided the economics are now starting to manifest. The earnings will be there. The valuation replacement cost becomes relevant and the identical timeline suddenly now appears.

[01:15:26] Bob Robotti: And so therefore to put more capital to work. Even though it’s appreciated. And that’s what we’ve done in Tidewater over the last couple of years at various points, I continue to add at higher prices because the price, the value was still substantially discounted. So when it got to 30 cents and a dollar, and I can now identify in the next two to three years, it was going to a dollar.

[01:15:48] Bob Robotti: And so therefore the opportunity now was right. And so therefore to put capital to work. And as a result of that, you end up having a really big investment in something that is really, well, I guess monger is, has the phrase that, there are very few things in life that really work out well and when you have 1 of those, you take full advantage of it. So, therefore, when these things manifest and the opportunity then comes to fruition, the investment thesis we had. Now manifest, there’s an opportunity to put Apple work at a really great risk.

[01:16:18] William Green: So I was looking at Tidewater recently, and it looked like you had over 300 million in the company. Is that about, right?

[01:16:26] Bob Robotti: No, I have a big investment in Tidewater.

[01:16:29] William Green: Yeah.

[01:16:29] Bob Robotti: Now, it should be told, right? So therefore, if you do look through my public filing, as you It’s the, in the last month I have sold some stock. And so therefore, in spite of the fact that I say when I come, investing is really more predicated on our price to value equation.

[01:16:42] Bob Robotti: It’s not necessarily I’m putting together a portfolio and portfolio risk and sector allocations and all. I’ll say, yeah, I’m not. I’m not looking to offer you a diversified investment portfolio. I’m looking to identify situations that they price the value of substantially mispriced. And therefore, there’s a great opportunity.

[01:16:59] Bob Robotti: You have to figure out how to allocate your own capital that, you’ve got things in different pockets, but I’m not looking to do that. I’m not looking to replicate that. Instead, I’m looking to identify things that I think there’s a huge investment opportunity in it and put my own capital and yours alongside me to work in those things.

[01:17:17] William Green: And we’re not really proposing any of the well, I’m not anyway using this podcast as ways to sort of propose buying individual particular individual stocks. It’s more to illustrate Bob’s way of thinking about businesses and about how to invest and where to find opportunities and taking advantage of some of these bigger trends that we’re seeing.

[01:17:37] William Green: One of the trends that you’ve been talking about a lot, you quoted the head of the International Energy Agency saying that we’re in the first truly global energy crisis. And as someone who’s invested in this area for 50 years, can you give us a sense of what that actually means? What we are seeing in terms of demand, not only for fossil fuels, but for renewables?

[01:18:00] Bob Robotti: So again, having invested in energy is, so the first thing is, I’m still in college in the seventies, but in 1974 I went out to New Orleans for Mardi Gras, for Mardi Gras. And on the way down. We almost didn’t make it because, there was gasoline rationing on either.

[01:18:18] Bob Robotti: And so, 73 was the 1st event that happened when oil went in 6 months from 3 to 12. And so, I had lived through that experience. And then, of course, that decade. And of course, that’s what I said. The 70s, the stocks that were energy stocks, oil stocks, because they owned an asset. That was in high demand.

[01:18:35] Bob Robotti: They had a high profit. Therefore, money follows profits. And so, therefore, they didn’t buy oil stocks because they wanted to own oil stocks. They own oil stocks, but they were making a lot of money. And so, therefore, that’s where the capital went. Of course, what happened was then in 1979 is the shuffles in Iran.

[01:18:50] Bob Robotti: So, you’ve got a second event. And so, oil ends up going to 40, sort of started three, the decade, it’s now 40. But of course there wasn’t a supply response. And therefore places like Mexico, North Sea, all these new places were economic. And if we’re new production came online, supply came online. So the supply demand balance was met.

[01:19:08] Bob Robotti: And actually the Shah’s fall in 79 exacerbated the problem because the price went even higher, even though the world could with the production that had could easily supply the demand. The band was weighing because the price was high. So then you have a period of time in the mid-eighties. Where the world could produce 75 million barrels a day, and it consumed 55 million barrels a day and the 20 million barrel excess.

[01:19:31] Bob Robotti: All right. And over time, of course, where we are today is we now consume a hundred million barrels a day, not 5 million barrels a day and the excess supply. I don’t think it’s more than two or 3 million barrels. And so therefore never have you had anywhere near that type of supply. Now we’ve been fortunate the last three, four years, you really gain the impact of the fact that if you lost.

[01:19:53] Bob Robotti: 5 million barrels of oil. I don’t know what we do because it just isn’t there. And again, I emphasize, I thought a year and a half ago when the Saudis first announced their ramp up in spending, right? They said, we’re going to increase spending 60 percent and we’re going to hold that for five years. And at the end of five years, we’re going to go from 12 million barrels a day to 13 million barrels a day.

[01:20:12] Bob Robotti: Well, how do you not interpret that to be Saudi Arabia is a place in which it’s a mature oil. When you spend money that aggressively and you don’t move the meter, you’re on a treadmill and you’re running awful hard. And so therefore, not only is that supply demand really tight, it’s not, the rest of the world probably thinks of Saudis can like, oh, they can increase production and huge numbers.

[01:20:34] Bob Robotti: They can’t. So we’re in a very tight supply demand balance in oil today, which I don’t think is recognized at all in pricing. And yet is an important backdrop. The other thing is of course, the, still an increasing demand for energy. And of course, there’s a bunch of, the concern about the environment, you’d rather not have the case.

[01:20:52] Bob Robotti: Natural gas is clearly the bridge fuel that will facilitate how quickly we can build up renewables to be able to supply enough energy from renewables or battery storage or all of those things, which will take demand steel and all kinds of materials and copper. And therefore, the build out, that’s what I say, the build out of renewables has a really high cost.

[01:21:13] Bob Robotti: Of energy of materials, consumption materials that are already in tight supply. And so, in, in our mind, I just can’t see how 10 years from now, the demand for copper is substantially larger than our ability to produce copper. And so that’s an inevitability. Now, when that happens and how that happens and how it plays out, I don’t, I don’t know the answer to that, but if we’re electrifying everything and we want to do all these things, we want to have all these renewables and we want to have EDS, you got to have a whole bunch more copper to reproduce today.

[01:21:42] Bob Robotti: And you see that, right? Cause that’s, what’s going on in the copper markets. The people in the business identify the coming height supply, short supply, and they’re buying each other. So I don’t want to start a new line. Cause the timeline on that is very expensive, uncertain, and the economics today don’t necessarily justify it, but I can’t turn it on a dime.

[01:22:05] Bob Robotti: And so in the meantime, I want to buy the guy who has the copper. So therefore I supplemented. So, BHP is bid to buy Anglo. It was not efficiencies, synergies, or anything else. It’s I want to own more copper. How do I do that? I had a big copper producer. So we think the coal on materials is a really interesting, Opportunity or like long dated up investments today. That’s probably not the question you started.

[01:22:28] William Green: Well, it’s an important point that you make. And just to clarify, sorry, in one of your shareholder letters, you said that electric vehicles need four times the amount of copper as a gasoline car. And likewise, things like wind turbines consume lots of copper.

[01:22:43] William Green: So part of what we’re dealing with here is this tremendous demand. For lots of different materials, right? Like steel and copper and nickel and lithium and cobalt and all of these things part of what we’re dealing. So there’s sort of increasing demand for all of these scarce natural resources. And then at the same time, there’s mounting pressure to protect the environment.

[01:23:04] William Green: And I wonder if you could put that in a sort of mature, reasonable context, because I think there’s so much to it. Ignorance and dogma about when it comes to these questions of the environment versus fossil fuels and the like, and as someone who’s really actually having to position yourself so that you’re able to kind of navigate this tension between environmental needs and economic realities. How do you think about this whole question?

[01:23:36] Bob Robotti: It’s inflationary. So last September, I was down in Chile. And so, Finney is the largest Caterpillar dealer in the world. And so they had a field trip. And so, we would spend three days with them going through their facilities.

[01:23:52] Bob Robotti: And at the end of it, we actually Copper mine when, of course, the scale of these things that will have like no appreciation for it, like you have a copper thing at home. You don’t think much of it, so first off is that I’m sure everyone’s seen a picture of one of those large Caterpillar dump trucks that holds 100 tons, like the wheels are 8 ft high and each one of them cost 250, 000 trucks.

[01:24:14] Bob Robotti: Just a behemoth. And you stand next to it, go up at this 40 feet. I know. Oh my God. Then you go to the open pit vine and you see 50 of them like little ants running around the mind and they get loaded up with rock and now they have to go up to serpentine Hill to get to the top of the mind.

[01:24:34] Bob Robotti: And they move at a pace of about two miles an hour, burning huge amounts of energy, diesel, to be able to move that rock to get to the point. And then eventually you take that rock and you process it and you come up with 20 or 30 percent copper. And then you ship that to China, probably, who then refines it to make 99 percent copper, who then ships it to someone else who then incorporates copper into their wire or whatever else.

[01:25:01] Bob Robotti: So the scale and the interrelationship of this and the role of China in that process is like amazing. At the same time for the copper mine, when I’m talking to them, they say, yeah, we have this copper mine and we’re doing this expansion. And fortunately, we have a water desalination program. And because you can’t use ground wood ready and desalinated water is 10 times the cost ground water.

[01:25:26] Bob Robotti: And it also means the energy consumption is 33 percent higher or that operation because of the desalination. And because we have the desalination, there’s a guy who has a copper discovery not far from us. And he thinks he’s going to develop that copper mine. He’s never going to be able to do that because he doesn’t have the infrastructure.

[01:25:46] Bob Robotti: He doesn’t have the desalination capacity. So the fact that we have all those things, but it’s going to cost us more money. And then lithium, which is another big product that, comes from Chile, the government of Chile says, any new lithium projects, we’re going to own part of the economics in that project.

[01:26:03] Bob Robotti: And you’re going to do these things. And Indonesia in report background is copper discovery. They have in development. They were planning on taking the copper someplace else to have refined. Indonesia said, no. You’re going to build a smelter here in Indonesia. We’re going to capture more value in that process.

[01:26:20] Bob Robotti: And therefore, you’re not just going to take that mineral and run away with it. So we’re going to take the second bite at that apple. And we’re going to build out our economy. So what I think is. The demand for incremental new resource, these countries are in a different position than they were 50 years ago.

[01:26:35] Bob Robotti: When you came in, you paid them some money stuff and you ran away. No. So what’s the environmental impact going to have to do things that are going to minimize the environmental impact, which means a lot more money and a lot longer time to develop these materials that are going to go in.

[01:26:49] Bob Robotti: So life is a trade-off. It’s not like you did this thing and it’s only good. It’s kind of like you do this thing and it’s good. But you got to do this to get that. And so therefore, I think we’re ignoring the idea that this, but you got to do this to get that. And so therefore, there’s an extra process involved, there’s an extra burden on the environment, an extra concern about that.

[01:27:10] Bob Robotti: And that’s going to be mitigated in some way. And that’s going to cost you more money. So it clearly is. And now, of course, I’m a Pollyanna. I think everything, works. I see the, how everything works out well. In my mind, it’s really good because one of the arguments in the last two, three, four years is the South is short of resources and money, and the North has got all these advantages.

[01:27:31] Bob Robotti: Well, the Northern part of the hemisphere is going to need all the stuff that’s in the Southern part of the hemisphere. And the Southern part of the hemisphere is going to say, That’s fine, but these are the conditions in which you will take that resource from me, and this is what I want in return, and so I think that’s really good, because that means that value and that economics start to float to parts of the world that are, have had more difficulty, haven’t been able to capture the value of what they own, and what they own today is in Very high demand and increasing demand and the value capture was going to be significant and that means in the process It’s going to cost a lot more money to do the things we need to do to build out renewables.

[01:28:12] William Green: You mentioned this trip that you took to Chile and I think you were away for about a month going to Chile and Norway and Dubai and Turkey and the like and when you came back One of the things you wrote about was your increased conviction that the U.S. is structurally advantaged for years to come. Can you talk about that? Because I think for a lot of people who’ve been thinking for all these years that it’s time for the revenge of, foreign investments and that finally that will come good. What you’re saying seems to be, no, actually you really want to focus pretty heavily on the U.S.

[01:28:44] Bob Robotti: Well, I actually think both of those are true because I just went through an example where resources and materials are in the South. And those are emerging markets. And so I do think that emerging markets are going to have an emergence. And so therefore they are the, and they are the beneficiaries of the continued movement evolution of globalization out of China.

[01:29:02] Bob Robotti: So therefore I think emerging markets have really good growth in front of them because they going to pick up some of that, advantage from the movement out of China. At the same time, the appetite for materials are going to be things that also do well for them. At the same time, if we’re in North America and we have really low cost energy and we have that huge advantage, that means we’re building out all this infrastructure.

[01:29:25] Bob Robotti: We’re building out all this industrial capacity and therefore North America will do well in that process too. And, of course, a place that’s, I think, substantially, at risk is Europe because you’re right. It is more focused also on the environment. And the carbonization in many ways is the industrialization and therefore the movement of industry from Europe to America is definitely something that will continue to accelerate.

[01:29:52] Bob Robotti: I think. And so that creates a headwind. There’s probably other opportunities in Europe too. I wouldn’t be so sanguine about, it’s like, things look really bad there. So I actually see a world in which yes, North American markets. And I can’t help but think that also is a whole bunch of positives that ended up being for America.

[01:30:09] Bob Robotti: Now, at the same time, we have a whole bunch of debt that has not come home to roost and that continues to grow. And so therefore, there, there is, there’s a cloud out there too. This is, it’s not just funny, clear skies ahead. And again, that’s probably more like, do you pick the right industry and you pick the right company, because in spite of the fact that America may have other structural issues, these industries are going to be competitively advantaged and probably have pricing power and therefore have growth. And therefore good economics and make and then start out with low valuations to.

[01:30:44] William Green: So part of what you’re part of what you’ve been doing is we mentioned very briefly and passing before was investing in these chemical products. Companies like LSB industries that in ammonia and the likes of these companies that in some way embody the competitive advantage of old style US industrial businesses. Is that fair to say?

[01:31:08] Bob Robotti: Well, it is, but I’m looking for more. I’m greedy. I tell you, I’m greedy. So, so LSB, what they do is they, large part with the making fertilizers, cyclical business, depending on, crop prices and all those things. However, to make that they make ammonia. So this is part of the energy transition.

[01:31:27] Bob Robotti: So energy transition is something that is real. We’ll continue to gain momentum, and therefore Google call on capital. And part of the. Part of that process that call on resources means that’s an interesting dynamic, but ammonia is interesting from the point of view of, it has a couple, three different roles that logically in the next.

[01:31:46] Bob Robotti: Decade, it could now have huge increase in demand. The first one is as a marine fuel. So, shipping is a huge impact, a big carbon output. And therefore the is trying to figure out how to convert engines to burn something other than something that creates CO2. And so there are two identifiable options for that.

[01:32:09] Bob Robotti: And one of them is methanol and the other one is ammonia. So therefore, by burning ammonia, when you burn ammonia, you don’t produce any CO2 either produce other pollutants, but you don’t produce CO2. So there’s a movement of foot. There’s plenty of companies who have identified engine capacity, therefore, to burn ammonia to substitute.

[01:32:27] Bob Robotti: There’s also in Asia, they’re doing tests burn now to substitute in with coal ammonia, because when, again, when the ammonia is burned. You don’t have the CO2, you don’t have the other output, then noxious things that come out of burning coal. And so therefore Japan and South Korea are testing that process.

[01:32:46] Bob Robotti: And that could be a huge market for incremental ammonia plant. And then the third use of ammonia is it’s really hard to move hydrogen. And hydrogen is, kind of the. One of the holy grails of energy transition, if we can get to use hydrogen, but hydrogen is hard to store. It’s hard to transport, but ammonia is not as hard.

[01:33:06] Bob Robotti: It’s still got its own issues, but not as hard. And therefore, you can transport ammonia and convert it. So, therefore, it’s a bridge fuel to be able to use hydrogen. So these new uses are there. So that’s what I really think over the next 345 years. So the end market demand for the intermediate product they make ammonia is going to be substantially higher so there’s substantial growth with energy transition, so not only Does it have the attributes of with a positive situation where you’re going to make ammonia, you make it here in the U.S.

[01:33:38] Bob Robotti: Natural gas prices are 2 to 3 instead of 9 or when they were 60, they were 9 here. So you get this huge pricing differential and that’s your raw material input. So therefore you make it for less here. The pricing is set by the European or Asian producers. So that’s the pricing power. Their cost structure is such that they make a margin on it.

[01:33:57] Bob Robotti: The North American producers have a huge margin on that. And that’s a sustainable advantage because our energy costs are lower than there. So the business, the fundamental business as is, I think is one in which there’s substantial growth in terms of profitability in the business. Cause you’re in the right place producing with a lower cost structure.

[01:34:13] Bob Robotti: You’re a cost advantaged. But the other thing is there’s also an end market demand for the use of the product into me to make. That are in new uses that aren’t there. So huge growth opportunities. And as a result, further ammonia becomes part of the equation potentially. So you have seen, Exxon, mobile bought Danbury energy and Danbury owns a CO2.

[01:34:36] Bob Robotti: Pipeline that moves CO2 for carbon sequestration purposes. And so that’s why they get into the business. And so they’re going to be advancing carbon sequestration because they own the CO2 pipeline. So therefore Exxon is looking at, okay, so we’re not just an oil and gas company, that energy transition is going to put us into CO2 capture.

[01:34:55] Bob Robotti: It’s part of the business. Ammonia looks like it’s part of the business too. And so therefore, is there that kind of logic where the integration ammonia companies become something very different. And an opportunity for large oil companies to be part of the portfolio of energy and energy solutions.

[01:35:14] William Green: It seems like a nice example of what you do where you’re looking at a market that’s become kind of. Consolidated and that’s transformed and at a stock that’s cheap and something that’s off most people’s radar and something that is aligned with these sort of big macro forces, like the U S strength in, in energy, in energy, low cost energy and the like, it feels like it embodies a lot of what you do.

[01:35:40] Bob Robotti: But we think there’s a lot of ways to win. Right? And there’s an entry point of low valuation too.

[01:35:46] William Green: Yeah. When I asked people on, X, formerly known as Twitter, whether they had thoughts about questions I should ask you, one of the questions I liked most was from Joe Costa, who has this terrific, aggregation service where he sort of curates Lots of the best resources on value investing and he wrote to me.

[01:36:05] William Green: One of the things that always strikes me about Bob is how kind he is and how he exemplifies what Adam Grant calls a giver. From what I’ve seen, this is pretty widespread among both younger professionals and college students who come in contact with him. So I’d love to hear him discuss his views on giving back via his time and knowledge to younger generations and why it seems to be so important to him.

[01:36:25] William Green: And I had, when I looked at the philanthropic stuff that you and your wife Suzanne have done over the years, it’s really striking to me how much is related to kids and education and the like. And I wonder if you could just talk a little bit about what your, well, to comment on, on, on Joe’s, observation that the giving back is important to you and there seems to be something distinctive about the way that you think about it.

[01:36:50] Bob Robotti: Well, first off, full disclosure, I know Joe and I know Joe well, so this is a question from a friendly person too, so he’s just giving me an opportunity. He’s throwing me the fat. Bad softball here. Let’s see if I can, at least, get a ground ball. So I think it’s really interesting.

[01:37:05] Bob Robotti: I think, and of course it’s fulfilling for me, my experience, like when Isaac graduated college and said we should invest in Asia. And so I said, okay, let me go try that. So I would go with him and I, ended up for the next six years doing all these trips to Asian, visiting all these companies and the information that you get, as a Freeman said, the world’s flat.

[01:37:23] Bob Robotti: That’s why I say it’s not the globalization. It’s just the evolution of globalization that continues to move places. And so my appreciation for that was colored by the fact that. I listened to Isaac and said, okay, let me humor him. This is, maybe I learned something and of course I learned a lot.

[01:37:36] Bob Robotti: So therefore in the process of, talking to people, you do learn a lot because they ask different questions and they go different ways. They do different things. So therefore there’s a value to that clearly. And it’s also a value in terms of, giving someone who’s hardworking and, is looking to figure out how to advance their situations in life.

[01:37:55] Bob Robotti: Be able to help them in that process is, because it’s, opportunities and somewhat limited. So, the extent that you can give opportunities to people who are anxious to do things to improve. That does something and there’s a value to it may all go back a little bit. To so, when I was in 6th grade, 7th grade.

[01:38:13] Bob Robotti: Then, with the Catholic school. So the nuns used to raise money for the people in someplace in Central America. And so therefore there was a competition that they would fit, so therefore there were 46 kids in our class, right? Half girls, half boys. And they said, okay, who’s going to give more money to girls than the boys.

[01:38:28] Bob Robotti: And so Maureen Napolitano used to always give money, but I used to give money. So there was a competition they set up between us. And it was, and at the end of the day, my family came from a modest neighborhood. We actually had reasonable money. So I described my situation, growing up with the family and his.

[01:38:45] Bob Robotti: Nine of us in the house and there’s only one bathroom and live that. And so someone said to me, oh, so that’s why you’re successful. Cause you’re driven. Cause that was a difficult environment. I said, I loved my childhood. It was wonderful. We can’t afford the most. The idea that I could share that with people made me feel really good.

[01:39:02] William Green: No, that’s lovely. And I saw actually the, I think you’ve got a lifetime achievement award from pace the college where you went and they referenced that seventh grade competition and said that it kind of participating in that contest combined the joy of winning with the joy of giving to those who had greater needs than us.

[01:39:22] William Green: They were quoting you and talking about kids in central america needing food well I really didn’t need that extra pack of baseball cards. It’s it seemed also that one thing that was very powerful for you about giving to pace was the fact that as you put it a lot of the people came from these immigrant backgrounds and so it was more obvious that you were really benefiting people who you. I mean I guess I guess in some ways not dissimilar to your grandparents story right of your grandparents coming from Italy and having to make a life here.

[01:39:50] Bob Robotti: So and of course so my college is Bucknell and so I do give money to Bucknell because Bucknell didn’t give me. A loan and some money when I was there.

[01:40:00] Bob Robotti: So I owe them. And of course, everybody owes money to the schools they go to. Cause the reality of it is when you get charged for tuition is less than what it costs to educate you. So there really is a gap that you’ve been the beneficiary, but Bucknell also is a place that has a bigger endowment and educates generally people from a higher socioeconomic background, as opposed to pace is, it’s a different input group.

[01:40:21] Bob Robotti: And so. The people who go to Bucknell probably will do whatever they’re going to do in life. Anyway, you don’t change the direction of that too much. The fact of the matter is people who go to pacing and then get a college education, potentially you have impact. And of course, pace is a place that has harder numbers in terms of, what’s the graduation rate and where it isn’t as good as other universities.

[01:40:40] Bob Robotti: Of course, you start with a population that’s. Kind of a more disadvantaged. And so therefore, the likelihood that you’re going to come up with the same graduation rate of what Harvard’s going to come up with, of course, you’re not going to do that because that group inherently has all these advantages they come in with.

[01:40:53] Bob Robotti: That’s not the situation with base. And so that’s why I’m more, much more active in giving money to pace. Because it really changes people’s lives and it has impact as opposed to, yeah, now our endowment’s bigger than Colgate’s and that’s wonderful and whatever else, so.

[01:41:08] William Green: Another great rabbit hole that I fell down over the last couple of days while I was researching you was, I was studying this amazing not for profit that your wife Suzanne runs and that you’ve been very involved in helping to fund, which is called MedShadow.

[01:41:22] William Green: And it’s really kind of important and impressive and I wondered if you could. Give us a sense of what it is and, also what motivated her to do it because it’s kind of an amazing story of how she turned a very difficult situation into something where she’s really had a profound impact.

[01:41:40] Bob Robotti: Well, that’s what it is. So she’s had personal experiences that, put her in the position to therefore, think about this issue in many different ways. And so therefore to have the ability to have impact on it and potentially change things is, critical and positive. And that’s what we’re here for.

[01:41:57] Bob Robotti: We can do good things in the process. That’s great. And that’s what it is. It’s a, it’s, our pharmaceuticals are, I think it’s number four, number five, in terms of, largest causes of death in Americans. And that’s not misuse of drugs, but those are prescription pharmaceuticals, right?

[01:42:12] Bob Robotti: That’s not a heroin that you got in the corner that you got an opiate dose and die. So, it is a problem. And therefore, thinking about, cause that’s what it is, right? We live in a world in which, we’re looking for the easy way out. And so that’s what, post the financial crisis, the government decided the easy way out was I’d make interest rates zero and therefore I’ll help everybody.

[01:42:30] Bob Robotti: It’s effectively the same as my wife’s situation is. Well, you kept giving them medicine, get them off the medicine. They need to get up, they need to exercise. They need to, diet and exercise are really the solution to many things. But yet, there’s times when you need medicine. So therefore, you need to do that.

[01:42:44] Bob Robotti: But you need to be cognizant of what’s my side effect of those things. And especially as you get older, there’s multiple medicines that you’re taking. And therefore, the impact of those and how they interrelate is kind of complicated. So. These are, but of course our situation is different, right?

[01:42:58] Bob Robotti: Or our mother took a drug that, therefore, cause her infertility. So therefore it’s a critical part of our life. And then when our nephew came to live with us, when he was 12, He didn’t come because you see the ideal child is a rambunctious 12 year old. Yeah. And rambunctious 12 year olds in a Catholic school don’t necessarily jive and suddenly like, well, Ritalin is the thing for him.

[01:43:19] Bob Robotti: So my wife went to go see the doctor and talked about Ritalin and said, well, what are the side effects? And they said, oh, there’s no side effects. If there were, we would know. And she didn’t feel very comfortable with that as an answer. He’s a prepubescent child. We’re going to give him a drug. He’s going to be on it for, an indefinite amount of time that has to have some kind of impact.

[01:43:35] Bob Robotti: So. He didn’t go on the drug, fortunate to be able to give a little money to the school and they said, okay, he doesn’t need to go on the drug. So, so she had that experience too with Dan and when he came to live with us. And so therefore, that’s another experience that she said, and from that shadow, she’s done other things too.

[01:43:52] Bob Robotti: So she’s involved with the FDA and she’s actually on advisory committees and therefore regularly called down as the drug safety component on hearings with the new drug applications in terms of what are the side effects. What are the medicine? Should we approve this? How does this all work? And so therefore, she has that kind of input and an additional value that I think.

[01:44:11] Bob Robotti: That a, she derives from that process, right? Cause all these things we do, we get benefit from it, right? And this is just to give things away. We see things, we hear things and we have appreciation for things and we learn stuff. So therefore there’s a lot of learning from that process and, learning those things are really critical, important, and potentially make us better at contributing and thank you. The world, not so bad.

[01:44:34] William Green: I listened to her on a podcast yesterday talking about, lifestyle choices and the like, and to deal with diabetes or prediabetes. And she’s a very remarkable woman. I mean, I don’t need to tell you, but I just wanted to. To sort of honor her, I mean, she took this very difficult situation where she’d been given, her mother had been given this medicine DES that was kind of, I guess it was like a synthetic estrogen drug that was supposed to help people avoid miscarriages but ended up having tremendous side effects for millions and millions of Americans.

[01:45:07] William Green: And she’s turned it into this amazing thing where, you know, so, so obviously there’s this not for profit Medshadow which focuses on this idea that medicines have this shadow that follows you around and so it’s just, it’s not nihilistic in any way or hokey, it’s like saying, no, you need to understand the side effects so that you can make mature, sensible decisions and so, I think it’s a really important subject as we look at things like Ozempic and stuff like that, which I keep thinking, God, should I be one day just giving up on controlling my diet and take Ozempic?

[01:45:41] William Green: So she’s great at highlighting that. And then as you say, she became the lone consumer representative on this FDA advisory committee on drug safety and risk management. And so that’s an extraordinarily important role. So this kind of made me think what you mentioned right at the start of the conversation you were talking about how your father dealt with a loss of eyesight and you’ve seen your wife Suzanne deal incredibly with the challenges she had with infertility and with your nephew and the like and I’m wondering, what perspective that’s given you on how to deal with adversity on how to deal kind of wisely in the course of a long life with the things that don’t go our way.

[01:46:21] Bob Robotti: So, it’s amazing. I always kind of, I realized that I’m not as introspective a person as I really should be. So, so for example, my dad.

[01:46:31] Bob Robotti: We never really appreciated the fact that his eyesight was so impaired. Now, my mother was a critical element in making that less transparent to all of us. So we were in a way, in many ways, almost sheltered while we lived with him, that he had these issues. So, we really kind of didn’t see it.

[01:46:49] Bob Robotti: And then we didn’t, and then there’s my shortcoming. They didn’t delve into it and say, dad, what are these things? And how do they really affect your life and everything? And so, I always regret that I have today that I didn’t have those conversations. So to a certain extent, the way, and there hasn’t been great adversity in our lives.

[01:47:04] Bob Robotti: I’d say we’ve been amazingly fortunate in so many ways. And so therefore, occasionally there’s a little bit of wrinkle here and there. And so yeah, deal with that, so those are opportunities. And so, as I joked, when my nephew came to live with us, when he was 12, I said, Sue, this is perfect. I said, he’s already had some issues here. So. Like it’s a win for us either, yeah, he’s got some issues with and he has and that’s difficult and we can say, well, it wasn’t us and if he turns out, okay.

[01:47:32] William Green: When you look back on your own life and you think about how successful you’ve been since you’ve got that C in your accounting major, how obvious do you think Is it that there were certain qualities that you had that helped you succeed?

[01:47:50] William Green: I remember Mario Giabelli talking about you and using his phrase about PhDs that he always looked for people who were poor, hungry, and I can’t remember what the D was. Driven. Driven, exactly. But he changed it in your case from, poor to passionate. And you’ve talked about passion as being the thing that you look for when you’re hiring. When you look back, what do you think it is that enabled you to outperform that’s kind of cloneable for the rest of us?

[01:48:17] Bob Robotti: So the successes we’ve had have been the ability to You know, the behavioral advantage of being able to tolerate a loss, so that’s, one of the famous things in value investing, investing psychological is always the concept that losing hurts twice as much as winning or, whatever the two times, three times differential.

[01:48:37] Bob Robotti: And the fact of the matter is the, the losing money doesn’t bother me and hasn’t bothered me somehow. And so the opportunity of being right, which is making money, but it’s not necessarily making money. It’s brilliant. I think more like being right. And so therefore looking at things and kind of getting a differentiated view and supporting that and coming to conclusions that are different than others is a, it’s a great puzzle.

[01:49:03] Bob Robotti: So it’s a, it’s a personal pursuit that happens to bring along with it, a bunch of money, if you do it right too, so that’s the outcome of it. But I don’t do it for the money. I do it for like the enjoyment of it and the fun of it and a process of I’d lose money in the meantime, of course, I have other people’s money that I’m losing too.

[01:49:21] Bob Robotti: And then, that is, difficult, but I’ve been fortunate, they say with me. And so therefore, at the end of the day, there’s a mark to market, but there’s not a loss in it. So it’s worked out well. And so I think the ability to tolerate disappointments with the idea, like, well, wait a second, what’s the idea is a concept in the investment thesis.

[01:49:39] Bob Robotti: Still there. It’s still correct. And if I’m right now, the fact that I was wrong, it’s even better. So those psychological things I think have been critical in terms of being able to stay with investments and things that over time have worked out extremely well because we bought them for a fraction of what those things were.

[01:49:58] William Green: So there’s a, as I see it, there’s a kind of emotional and psychological fortitude that’s been really key to you but it’s also combined with the fact that you got very lucky very early on in getting these really robust principles from that kind of graham school of investing and you had this really essential thing which is that you actually had the technical tools from your accounting background that you knew how to value stuff so when you were losing money on something You could actually see what it was worth.

[01:50:27] William Green: So you had something to kind of hold on to, which reminds me of Joe Greenblatt saying to me at one point, like most people just should be indexing or outsourcing to someone else because they just don’t actually have the tools to analyze something to know what a business is even worth.

[01:50:42] Bob Robotti: But again, the good fortune that I happened to fall into that job because I happened because I did get to see that I thought I was going to get.

[01:50:51] Bob Robotti: The opportunity at the time, it was those things who were that was really random and good fortune. That’s all that was. I could have been someplace else. I could have, I worked hard at Bucknell and got a B or an A and got a job for a big eight accounting firm and be on a very different path today than where I was.

[01:51:08] Bob Robotti: Another critical piece of the success has been the fact that when my wife and I married, she had a reasonably good job and I, I didn’t make money in the business for the first 10 years at all. And so therefore, we didn’t, but we didn’t spend money. So therefore, we had a very modest life that we lived in terms of how much we spent.

[01:51:23] Bob Robotti: And so therefore, I could work for a year, 10 years and not really make much money yet. Most people don’t have that capability and capacity. And so therefore, there are so many things that have happened in my life that have been good fortune.

[01:51:36] William Green: Do you feel in some way like you’ve been taken care of or do you feel like it was, I had this discussion with Bill Miller over dinner a few weeks ago and I said, do you feel when you look back and like you wound up, a leg mason with a particularly great mentor and stuff, do you feel like it was luck or you feel like you were being taken care of in some way by a greater force.

[01:51:55] William Green: And he sort of thought about it, he said something about, well, according to probability, there has to be a luckiest person and an unluckiest person, and his wife was nah, I tend to agree with you, William, that, maybe there was something more going on, and I wondered how you, like, just your personal sort of temperamental or philosophical or spiritual views, whether you feel in some way like it was all just random or whether you were kind of somehow blessed by this whole process.

[01:52:19] Bob Robotti: I’ve been blessed by knowing people that I’ve known.

[01:52:23] William Green: Yeah, that’s been a huge gift. I look back, I mean, it was amazing when I looked back on your career. And I thought even, your professor was here, Mr. Pasterino, like, like, if you removed one piece of the puzzle, Anthony Pasterino, the professor back at Pace, and like, if you removed one piece, the path could have been totally different.

[01:52:44] Bob Robotti: Well, that’s the way life is, right? All these things, one change would have been a different course in life. And, I had, had I married a different person and, one of the things is that we couldn’t have children. So the fact that we didn’t have children, that’s expensive.

[01:52:58] Bob Robotti: So to be able to not make money for 10 years’ time and to have children. Well, that’s a very different economic equation. So therefore my ability to have kind of persisted would have been very difficult, if not impossible. So does each one of those things is a random thing that all comes together. That kind of makes the outcome where you end up and, there are other outcomes. It probably would have been a good outcome too. But they would have been different outcomes for sure.

[01:53:23] William Green: Yeah, it’s kind of humbling. It fills you with a sense of wonder at just the complexity of it. And yeah, anyway, that’s a lovely note on which to end. And I just really enjoyed chatting with you. And I was amazed as I look back on your career at just how remarkable your results have been over a very long period and so I… [Crosstalk]

[01:53:41] Bob Robotti: Thank you.

[01:53:41] William Green: I’m happy to have people pay attention to you because I feel like, I don’t feel people have quite realized how extraordinary it is, what you’ve achieved, and you’ve done it in a quiet, low keyway without any bombast or braggadocio. So it’s been a pleasure to get to, to chat with you.

[01:53:58] Bob Robotti: William, it’s been great to have a conversation and just chat. It was a very relaxed environment. Thank you so much. And I enjoyed it. And I hope people weren’t too bored by the conversation.

[01:54:07] William Green: Ah no, it’s fascinating. And next time we’ll do it over a drink in New York City. I hope to see you again. Sounds great. Thanks so much. Stay well.

[01:54:15] Bob Robotti: My pleasure. Thank you.

[01:54:15] William Green: Thanks.

[01:54:16] William Green: Alright folks, thanks so much for listening to this conversation with Bob Robotti. If you’d like to learn more from Bob, you can find an array of useful resources on his company’s website. I’ll include a link in the show notes.

[01:54:29] William Green: I’d also really encourage you to check out his wife Suzanne’s health website, which is called MedShadow. It’s a really helpful resource if you’d like to get impartial information about the risks and benefits of various medications. Again, I’ll include a link in the show notes. I’ll be back very soon with some more terrific guests, including a rare in depth interview with a hugely successful investor for ultra rich families.

[01:54:54] William Green: This is someone who requires a minimum investment of a hundred million dollars to open an account. In the meantime, please feel free to follow me on X @WilliamGreen72 or connect with me on LinkedIn. And as always, do let me know how you’re liking the podcast. I’m always really happy to hear from you.

[01:55:13] William Green: Finally, I wanted just to pause and express my heartfelt gratitude, as always, to the production team in the Philippines that actually makes it possible for me to host this podcast, including Cyril, Camille, Kristine, Noelle, Ana, and of course, the fabulous Jedidiah, who always ensures that the sound quality of the podcast is good, despite my, technological challenges.

[01:55:36] William Green: As always, I’ve been juggling too many projects, so I have a habit of falling behind and missing my deadlines for the podcast, so I’m deeply grateful for the patience and generosity of spirit that the team in the Philippines always displays toward me. So, thank you all. In any case, until next time, take good care and stay well.

[01:55:57] Outro: Thank you for listening to TIP. Make sure to follow Richer, Wiser, Happier on your favorite podcast app, and never miss out on episodes to access our show notes, transcripts, or courses go to This show is for entertainment purposes only, before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.


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