Thomas Russo (00:03:10):
And Warren just talked about the things that were important to him as he placed money. And at the time that had become a more important question than it would’ve been 10 or 15 years ago. Because in those earlier episodes, Warren might have talked quite a considerable amount about coming up with net current value and liquidating value and then measuring the price against those measures. And the margin of safety if we were together 15 years earlier would’ve been deemed a discount between the price paid and the value of those collective assets within a business. But they would’ve been finite and they would’ve been based on the measure to which you received more than what you paid.

Thomas Russo (00:03:52):
The next steps would’ve tried to release those trapped dollars and the trap money and have it come back to you and then you could redo, play it again and have it come back and redo, play it again and have it come back. In each of those, you calculated the intrinsic value roughly the same way, added everything up, and then divide by the number of shares. And if the discount was wide enough, you buy it and then you just wait until some force comes along to close that discount. And what happened is that it turns out to be difficult to manage large pools of money. And so he sort of grew to the point where it’s harder to deploy capital that way and you don’t develop any skill of business judgment, which was the next chapter.

Thomas Russo (00:04:28):
And we actually were in a class where the lecture happened about the time, if he was moving to that next chapter, he had bought See’s Chocolate, several years before our session and they had paid $30 million plus or minus for the brand and for all that came with it. And what they discovered is owning that powerful brand, they had something which they hadn’t adhered to before, which was called economic goodwill. It’s called arises from the fact that the purchaser of that chocolate doesn’t believe there to be an adequate substitute. And without the sense of an adequate substitute, they will bear price increases begrudgingly, in some cases willingly and even enthusiastically because in some measure the price paid is part of the bargain because the recipients of a gift of that chocolate knows that somebody stepped up and paid a little bit more.

Thomas Russo (00:05:22):
And so, when they bought the business, Warren, I gather this to be true, took on the responsibility for pricing chocolate because once he realized that the price paid is part of the benefit received, he wanted to make sure that the price was always confidently raised and recognizing that if he kept his side of the bargain, that the consumer would take that on.Now, his side of the bargain included something else, which is very interesting. It’s more strategic, which is that there are lots of chocolate companies like See’s Chocolate back in those days, and they all fought for market share. And so they cut prices, which of course was exactly the opposite approach that Warren took, which was to raise the quality of the chocolate, raise the price, and then have that feedback loop keep their clients lawfully.

Thomas Russo (00:06:07):
The other trick is he realized, and this became very important later in my life, he realized, so he said that in order to make a good return for year investment with See’s, you have to be willing to suffer and be willing to not earn a good return for eight months of the year because you really only make money during the four pillar holidays of Easter, Valentine’s Day and Christmas and Thanksgiving. And the rest of the time you’re lucky to break even.

Thomas Russo (00:06:34):
But it’s only because you suffer through that, that you end up being the chocolate of choice at the higher price when it called upon to serve. Now, where that would evidence important features that if you’re just lucky enough to just buy that See’s, the typical buyer would command a team of analysts who’d come in and they’d come back and say, “Eureka, I see what’s going on here. You’re not doing anything eight months of the year. You should really put in ice cream during the summer and hearty soup during the cold of winter and really get the full leverage off of those assets, sweat those assets more.” And of course it’s exactly the wrong step.

Thomas Russo (00:07:09):
And that was the beauty of Warren’s insight is that he didn’t have to deliver profits every month, every quarter, every four months, whatever public companies often have to suffer from the expectations of a place upon them by Wall Street. He figured out that he’s much better off by maintaining the structure, shutting down for the months when there’s no activity by just maintaining a skeletal crew, being always there for someone who needed the product and charging a lot for that. And I took from that, the strength, the brands, the notion of being willing to show losses even when you’re building well.

William Green (00:07:45):
And I think he wrote a few years ago in the annual report that $30 or $35 million investment has made them over $2 billion, something like that over the decades?

Thomas Russo (00:07:54):
Yes.

William Green (00:07:55):
So it’s a beautiful example of the power of a brand, a really great brand that you can write for decades, which has become a fundamental theme in your career.

Thomas Russo (00:08:05):
And I’ll say there’s another piece to what you just brought up, which was that he feels as a Chief Executive of the enterprise, Berkshire Hathaway, he treats it like a partnership and he wants to make sure that his partners know the value of what they have. Now, he’s not going to tell them the value of what they have because, I guess he must think that’s part of the fun of the game, or it’s his competitive advantage to know his own intrinsic value on a per share basis. But when he wrote that in the annual report, he did so around the time that he was beginning for the first time ever to meaningfully consider sharing purchase. And a part of his expressed need for preparation for engaging in that activity, is he had to come to terms with the inevitable sense of being at odds with your partner because you’re going to be buying from your partner those shares that you know exactly what they’re worth as the CEO of the company and the seller can only approximate what they’re worth.

Thomas Russo (00:09:08):
And he felt deeply enough that he thought it was important at that early stage to describe the bounty that was delivered by See’s. He talked about the extraordinary bounty that was delivered by GEICO, since they bought full control of that. And each time he says he just wanted to make sure that the components that one would want to look at, and most recently he went to those five pillars, the approach where he had his equities, his operating companies, and the other assets that collect form Berkshire’s valuation. And so he’s struggled with that in a way that makes me feel more comfortable as a partner of his and Berkshire Hathaway, which is that he’s thinking about how to make sure that we don’t make a bad trade to his advantage.

William Green (00:09:53):
A couple of really foundational principles that I think came up in that first meeting with him back around 40 years ago, I remember you describing to me, and when we talked about this a few years ago, I think when I first interviewed you probably about seven, eight years ago, one of them is related to what you just said, that he’s looking out for your best interests as a shareholder, treating you as a partner. And you quoted to me, him saying at the time, “You can’t make a good deal with a bad person.”

Thomas Russo (00:10:18):
Yes.

William Green (00:10:18):
And I wondered if you could talk about that because you said that, I was reading one of your recent shareholder letters and you said, “It’s my belief that Berkshire has the least amount of agency cost of any company I follow.” And this is such an important idea and it’s a piece of jargon that it’s easy for us not to understand. Can you talk about-

Thomas Russo (00:10:36):
Yes.

William Green (00:10:37):
That sense of treating people decently, not taking advantage of your partners and reducing agency costs, which turns out to be one of the greatest risks facing all investors?

Thomas Russo (00:10:47):
Yes, I completely agree on the final point there. And it really is the tendency of someone to try to make another person’s assets to which they’re hired to supervise and to maintain and to develop and grow. But rather than hold those truths to be fully self-evident as the proper objective, they let slip in along the way, a few here for me, a few here for me, and I was thinking about it one day, not that long ago. I was looking out to the neighbor’s house, the outline was planted with raspberries in this lady who was in her late 80s, I didn’t get around very much anymore. And I stopped by and I see, she said, “I miss a lot.” She said, “But what I really miss is all those fresh raspberries, we used to see a lot of them.”

Thomas Russo (00:11:28):
And I was looking out one afternoon to her lawning crew who were charged with a task of maintaining a decent looking lawn. They came around the corner was out of anyone’s view, and they just dropped everything and ran to that raspberry bush and just ate it clean, and therein lay her a problem which was they were still producing, but her agents decided to take them for themselves rather than to allow her to enjoy them as she once did. And it’s not a corporate story, but I think conveys the principle, which is that in business you have structures where you have options, plans that are based on certain criteria. And Mr. Buffett will say this, is that one of the most critical jobs that they have at Berkshire is calculating appropriate compensation systems. And I recall him saying years back that he had something north of 140 different executive comp packages with his senior most teams, each one separately struck and each one commanding about three pages.

Thomas Russo (00:12:28):
Now, if you ever looked at a comp book for the public market counterpart of the book that Warren drafted in three pages, you realize it’s several hundred pages long and it doesn’t necessarily incent what you really want to incent, but it’s more protective than it is collaborative. And we deal with that reality. And mostly the compensation that’s used today has a substantial component that’s equity linked. And so that equity link invites into the operations and the expectations and the deliberations of a company. It invites in the presence of Wall Street, because if it’s going to be equity linked, they will have all sorts of reasons to explain to you why if you do the following seven things, you’ll hit the target, they’ll make their numbers. If they make the numbers, the shares will trade up and you’ll have an overweight for that particular thing. And you go from being underweight to overweight.

Thomas Russo (00:13:20):
And I think I just read quarterly results that came in last week, and it had to do with the brewer. And the brewer was committing to making some substantial investments. And in the process of doing it, it disrupted their reported profit schedule and the Wall Street voice was unanimous. They missed their numbers, you probably want to look somewhere else to play those cash because they missed their numbers. And of course we celebrate that because if they missed their numbers, because they’re expanding and developing in a thoughtful way in the first place, we’d like to have them miss their numbers by even broader margin if it meant that they’re investing up front with more vigor. And that’s really the trade off.

Thomas Russo (00:14:02):
I’d say we’re on the other side, on Wall Street there’s a very standard parlance called, Cash Flow Conversion Ratio, which is a common language and a common expectation that is often commanded. And basically it wants you to give back almost all the cash that you earn, give it back to the investors and a 100% cash flow conversion ratios, you’re giving it all back. And our goal is to have it stay put in the company. We chose the company to invest in because they had the prospects with the capacity to reinvest and not all companies do, and so the last thing we want to do with the business is that we most esteem would be to take them out of that reinvestment model. And that’s where the mischief takes place as it relates to agency costs, is that your compensation will be set largely by the stock market recognition of what Wall Street allows them to think is the level which they’re optimizing their responsibilities of the company.

Thomas Russo (00:14:57):
And our view of that is that they’re taking a very long view and they’re pouring substantial money into building out the infrastructures that will reward people 10 years from now. But they’ll do so as a result of the successful deployment of the capital into expansion. And unfortunately, when you embark upon a plan like that, it’s going to weigh adversely on near term results because you’ll be funneling your investment spending and it will mean that you’re operating at less than full capacity, and there’s disruption in general trying to keep workplaces in order and all the rest. So when you’re investing for the future, you’re burdening the present. And we’re perfectly comfortable with that trade off because we’re interested in more gain paying today for more gain tomorrow.

William Green (00:15:44):
So it’s a totally different mindset with Warren and Charlie, right? They’re paying themselves, I think a $100,000 a year each, and so probably in that stack of compensation documents, they’re the ones who get paid the least. And so they’re making money with you, not off you, and then at the same-

Thomas Russo (00:16:01):
And we have the right to participate.

William Green (00:16:02):
Yeah. And you’ve participated to an extraordinary degree, right? I think you first invested around 1982 and you must, when the stock was around 900 or something and now-

Thomas Russo (00:16:12):
It’s about 900, yeah.

William Green (00:16:15):
$445,000.

Thomas Russo (00:16:15):
Yeah.

William Green (00:16:15):
And you must have invested these days, what? Somewhere between a billion and a billion and half $2 billion in Berkshire Hathaway, so this is a huge bet for you-

Thomas Russo (00:16:25):
No, so it would be our firm.

William Green (00:16:27):
No, that’s what I mean-

Thomas Russo (00:16:28):
To say oversee.

William Green (00:16:29):
Yeah.

Thomas Russo (00:16:30):
I think it’s closer to, probably about a billion, $4 billion, $3 billion, four. And we’re delighted to have the ability to have those assets. And then people often say at some time of criticism, “Why would I want to hire you to buy what I could buy for myself? Or that I could buy it myself with?” And what people don’t realize is there is an extraordinarily high benefit that comes from the structure in which all of the activities take place at Berkshire. It’s not just a matter of, it’s not an old fashioned conglomerate where you have some vision that everything will work smoothly with one another and create this synergistic thought.

Thomas Russo (00:17:09):
Rather, it’s some ways different, it’s to send it back to Omaha story that I think is what is at the heart of what makes Berkshire unique and interesting, which is that when you have a family business, call it the TTI, which is run by a guy named Paul Danforth, I think his name was and Alex… Take a look, but anyways. And Warren bought that business 15 years ago and it grew, it’s operating margin 15% per year for the entire period that he had held, and it was up threefold in 10 years. And all along the way, he gated himself on the cycle of reinvestment, but he would make investments, it was an electrical contractor, distributor business. And the killer application there is that they have everything under one roof from all the different manufacturers in the world of these different products.

Thomas Russo (00:17:57):
And so if you’re trying to run a lean manufacturer company, you might be inclined to work with TTI because with just one call, they can composite the order, send it to you by eight o’clock the next day in your in business and it requires deep inventory to find a huge warehouse and a commitment to customer service that means you’ll never let them down. And the people who run that, those companies begin to think that they can’t do without the services of TTI. And we’re always in the marketplace looking for businesses where the consumer can’t live without the product that our businesses offered.

Thomas Russo (00:18:31):
Now, he was an interesting case because he was able to deploy the money internally, but many people are really great managers of the electrical wholesaling distributor business like this, are fabulous managing their team, projecting out when the next in capacity and a host of other features they’re excellent at it. But many of them, once they end up with a pile of money at the end of the year, they really don’t have a need for it. And in that case it goes to Omaha and it fills the pot. And now there’s $140 billion of that money waiting for someone within Berkshire’s family to have a project that they themselves want to jumpstart.

Thomas Russo (00:19:08):
And I heard about this sort of anecdotally through Kevin Clayton at one point, and I said, “What’s life like for you after Berkshire required you?” And he said, “Well, we stopped having to worry about capital.” And it’s a two-sided worry. It’s that we have to worry about deploying it when we have no good ideas or that we want to give it to someone else so they can deploy it. But ideally they’ll have something to grow organically. But if they don’t, the forced requirement that they do something smart with money that they face as often as a public company gets them in trouble.

Thomas Russo (00:19:37):
In Kevin Clayton’s case, he says that for him at least, the thing that changed by joining Berkshire was that he would have an opportunity to call Warren up, the best strategic consultant of the world and ask him what to do as he considered an investment. And he said that Warren would fly him up in the indefensible at the time, and they’d sit down and Warren would say, “What’s on your mind?” And then Kevin would give the first question, the second question. And he said that by the time he had heard halfway through the second question, he began to have a sense of the answer. And by the end of the third question, he knew exactly what to be done. And the power of it was that he also owned the idea because by virtue of answering the questions that Warren asked, he ended up having what ought to have been done, revealed.

Thomas Russo (00:20:22):
And now I think one of the really big values within Berkshire has been the success rate of their investments and measured in some ways by the mistakes not made as a result of those three questions against many different scenarios, the mistakes not made and those that should be made are made with full gusto, no questions about how much money to spend. But funnily all of this activity under one approach is that if you have money, you don’t have an idea where it should go, send it to Omaha. If you have a project, you have to fund it, go to Omaha and get the money. And it’s all based on one-offs and not some kind of conglomerate magic. But it’s one of reasons why we’re so enamored by that company is that consultative role that’s been played so well.

William Green (00:21:08):
And Tom, when you look at the next generation of Greg Abel and Ajit Jain and Todd Combs and Ted Weschler. I know it’s an awkward question to answer publicly and you’re probably inclined to be polite, but how do you assess this question of whether they have the right stuff, whether Warren’s irreplaceable, whether they can safeguard the culture? Because obviously a huge amount of your own assets are writing on there. I think when I looked last, you had about 18% of your portfolio still in Berkshire?

Thomas Russo (00:21:34):
Yes, I think it’s really more like 15. And I don’t know, Berkshire may have come down a little bit. It was quite a bit higher for part of this year as the story about the buyback sort ripple through, but in any case, it’s still in mid teens, let’s say. And again, there are so few who are set up in the way that Berkshire is set up that it gives them an advantage. I think of all the different big investments that they made, the public equity put options that they, in a sense, underwrote was the form of insurance, $5 billion of premium, $30 billion of assets that needed to stay at that level, 10 or 15 years out and nobody else could bid on it. So in a situation like that, this extraordinary advantage that there will be periods of time as Warren has taught us by showing us a table at one of the annual meetings was showed the premiums written, the combined ratio and the amount of premium that they have.

Thomas Russo (00:22:32):
And Berkshire would not write for half a dozen years in a row, nothing. And then over that time the cycle rolls through and then all of a sudden it turns south and you can’t make any money in insurance underwriting then you can’t make any money, but you’re going to lose your fortune. And it’s even worse still. And it’s only until it’s even worse still that suddenly Berkshire shows up again and starts to underwrite at a time when others wouldn’t because the capital in the industry had been impaired because of the losses. And Berkshire had all the capital in the world to deploy with extraordinary favorable terms. And so I think their discipline, their patience means that they’re able to see better opportunities before they swing. As he said, “Proverbially swing for the big fat pitch.” I think that’s the case where the big fat pitch was percolating along In the case of the put options, no one else would bid on that in a sense because you had to pass the movements through the equity market valuation shifts to market accounting.

Thomas Russo (00:23:35):
And so after they received their premium and began on this long journey together, over the course of the first five years, I think they passed through income, $10 billion worth of losses and very few insurance companies would be willing to take on that naked exposure. At the same time, the insured had the comfort all along, even as those losses mounted that Berkshire was good for it because they have a $100 billion worth of cash and their Fort Knox and they promote the fact that they are Fort Knox. And so they’re the last place that you can go and you really, really need insurance.

Thomas Russo (00:24:11):
And I think that they will continue to have the ability not to act. And so I often say that Warren’s blessings in some ways is that he’s willing to do anything and he’s capable of doing nothing. In that scenario, he did no underwriting for the seven years plus or minus that he showed us with zero premiums written. And then when the terms were indescribably attractive, he started to write like, “Man, for about four years at least shut it off.” And so, I think [inaudible 00:24:45] was his partner, I understand in all of those big risks, and I can’t imagine someone whose instincts would be better served for that time than I eats. And so I assume that he’ll find someone else to share the thoughts with as [inaudible 00:25:00] and more in theory, reportedly share their-

Thomas Russo (00:25:03):
…in theory, reportedly share their analysis together, and he’ll go forth for as long as he’s able and well. He’s of a generation of course older than Todd, midway between Ted, I guess, and Todd. And Ted would be midway between the two. And it just presumes good health and the case of this ability to continue. And Greg Abel has, I think, as I’ve seen him operate only through the annual meetings, I’ve spent very little time with him if outside that open forum. But he has a very ensuring manner and seems like someone who can take on an enormous amount of responsibility. I do know, I’ve heard Todd at home speak in many occasions over the course of the last year, and I get a sense that he’s been invaluable in both the portfolios that he and Ted manage, are both terrific. And then the assistants that they both start to give in the form of those questions.

Thomas Russo (00:25:57):
And in one case for Todd, it meant that he even move on to GEICO land, wherever that is, and became responsible for managing GEICO in this, as it conducted a revision of how they assess risk proactively and used technology. Interestingly enough, used technology to replace what had always kept them out of trouble just fine, using the analog and pre-digital type tools that they found created alignments that they could use to anticipate where risks might lurk, based on history, not necessarily the modeling. They’re mixing it up a bit now, as they found that the industry moved on and those who are tooled with technology as an aid seemed to have jumped a march on them. And so I think that’s all under undergoing some change.

Thomas Russo (00:26:45):
And you’d have to say that Todd earns his stripe as he comes home with the outcome that will arise from there. And then Ted, I understand has had a huge role in several of the biggest positions. Not overly heralded, I don’t … He’s also been seconded off to closing transactions on behalf of Berkshire when Warren has, as he said in the annual report, this is his disclosure that when there’s times when he just can’t do something, he’s had Ted go out and do that and it’s been terrific.

William Green (00:27:15):
Another-

Thomas Russo (00:27:16):
Standing in his stead.

William Green (00:27:17):
Another important investor who a lot of our listeners probably won’t remember, but who played a really important formative role in your life, I think you worked for him from about 1984 to 1988, is Bill Ruane, who I wrote about briefly in my book, and who I was lucky enough to interview 20 or so years ago. Can you talk bit about him? Because he’s such a remarkable figure and people seem to have forgotten him, to some degree. And just to fill in our listeners, he’s famous partly because when Warren closed his limited partnerships in I think 1969 and people still wanted to invest, he said, “Well, maybe you should invest with this friend of mine, Bill Ruane, who’s extraordinary.”

Thomas Russo (00:27:53):
Yes.

William Green (00:27:53):
And Bill proceeded to beat the market by thousands of percentage points, before his death in 2005.

Thomas Russo (00:27:59):
Yeah. Even with holding 50% cash for the two or three years when I was there, there was this cash bubble that just didn’t get deployed because in some measure, that was ’83 through ’89, and the period, call it ’78 to ’83, offered them such attractive opportunities to invest money at steep rates, that they had become a bit spoiled and were less interested in coming back with capital if it was released to a position during my period of time for the capital bill. And then ultimately, they were crowded along and off they went and they continued to add enormous amount return for investors. And a couple of things about Bill is, he is not at all surprising that he is, as you said, that people may not realize or may soon forget. The fact is, he applied very [inaudible 00:28:50] during the process, and so he didn’t have a need for people to say, “There’s Bill Ruane.” He was perfectly content to be extremely thought leading investor.

Thomas Russo (00:29:01):
And a couple of things about Bill Ruane really stand out from my relatively limited time there, but nonetheless, one that I cherished and I felt extremely fortunate to participate in. One thing that was clear with Bill is that he had a terrific sense of humor. And at the same time, he had a very secure, tight group of friends who shared the extraordinary talents and ability, with a sense of humor. So as you know, they went away as a group once a year, and they went to retreats and they talked about investments included all this, Sandy Gottesman was there, and Bill Ruane, Warren Buffet, Munger Tolles where, Charlie was there and Tolls was there and David Dodd and Ben Graham, I mean, just to celebrate a group. And they talked on subjects that had to do with accounting and investing, but they also were playful and didn’t let this process of trying to find investment, nirvana, overwhelm their balance into their lives.

Thomas Russo (00:30:03):
And I tend to think of that as the post World War II generation. Mostly all of his closest colleagues had some role or another during the war. At the same time, at some point, he had an involvement in a startup company. So this is back in the ’60s and, I guess the lineation between the strict value and startup companies and the equivalent of early versions of private equity, there was a lot of stuff happening in the early ’60s as you know. And Bill participated in some of it through a technology offering that took place. And so I was impressed to see that reference to some kind of data processing company.

William Green (00:30:47):
There were a couple of other things I remember when I interviewed him really struck me, where he said that he was so declarative about it, that it was like, “Oh, I don’t need to think about that anymore.” He said, “Nobody knows what the market will do.” And he said, “This is my firm conviction, I just don’t believe anybody knows what the market will do.” So he just said, “The key is just to buy something cheap.” And he said, “When you find something that’s really cheap, you should load up on it.” And that reminds me of you as well, his willingness to concentrate in a few really good ideas and then hold them for a long time.

Thomas Russo (00:31:16):
Yeah. It’s a very good point. And he was super concentrated, though. He would have 20-plus, 30-plus percent in a specific holding, and would have three or four holdings in a portfolio. So this very important point, and you don’t know which way the markets are going to go, and so you’re going to have that market risk. And so he would’ve had plenty of times when the market was not conducive to near-term performance. But anyways, obviously, he reigned supreme over time, by virtue of being more right than wrong on those companies that he felt most conviction towards.

Thomas Russo (00:31:48):
Now, the other thing is, at the same time, he had good instincts on how to manage risk. I remember one of the positions when I really started out there was called John Blair. And John Blair was a media rep company, and it had to do with the fact that TV agency, advertising agency, was starting to place advertisement more broadly into users’ hands who didn’t know the user, the broadcaster. And this group came up called Media Consultants, let’s just say, who helped, placed all that stuff. And there was a company called John Blair, and they owned a big piece of the company, they were very close to the management, all the rest. But by the time I arrived, which was 1984, they were worried because the big position and the dynamics within the ad agency were changing. And so they wanted to make sure that they wouldn’t be left behind, as that change took place. And so they did some deep dive research as a team. People clustered together, deep dive research, and they realized the business was at risk.

Thomas Russo (00:32:49):
And so once realized, they had this sad misfortune of realizing it was at risk as it was eroding in the public market. So it was at 42 when I showed up, it was 39, then it was 36 and then 31, you’re doing the work increasingly uncomfortable with what you’re learning about. And at some point, on trajectory downwards, Bill then said, “Okay,” to the trader, “sell. Sell.” And, “At what price?” “Just sell.” And the point was, Bill had resolved that the business’ better times were behind them. And he didn’t fall prey to this unbelievably typical feeling in Wall Street, which is to say, “Yeah, it’s true, it’s impaired. As soon as it gets back to the recent highs, I’ll let go and sell it, and then we’ll put the capital somewhere else.” But of course, it never gets back to the most recent highs. It’s a trap. And so he did not suffer that. He finished the thoughts. The thoughts suggested something that is no longer as what it once was, and time to sell, and then sell.

Thomas Russo (00:33:53):
And so I think that’s one of the more important lessons that I’ve carried from that training. And I’d say that, as I think of my own pluses and minuses, one minus would be that I probably am less decisive as was Bill, on that notion of, “then sell,” and fall prey to that human instinct, which is, “then sell, but a little higher.”

William Green (00:34:16):
It was interesting though, I could see when you changed your mind about something like Altria or Wells Fargo, you were pretty ruthless when it actually came to pulling the trigger and getting rid of them.

Thomas Russo (00:34:27):
Yeah.

William Green (00:34:27):
Can you talk about that?

Thomas Russo (00:34:28):
Yeah.

William Green (00:34:28):
Because as we’ll get to, you owned a lot of stocks for 30, 40 years, and yet, when you saw something like Wells Fargo or Altria shift away from what you liked, you dumped them instantly, almost, it seemed.

Thomas Russo (00:34:42):
Yes. Well, that’s what I’m supposed to, that’s what we’re supposed to, that’s what Bill, that’s what I was just suggesting. Bill did so well. And you picked two important examples. Altria had every reason to think that they had the quite glorious future. They were what was left standing from the company, Kraft, and so they had the domestic tobacco business and they had a host of other related businesses, and the shares were modestly priced. They had every opportunity to big share buybacks increase, but for some reason, and it’s most likely found in the executive compensation package, because you can’t make sense of it otherwise, out of the clear blue, one day, this business, which was thoughtfully put together, domestic cigarettes, the brand leaders, Marlboro, they have 51% of the market, and even though the business is declining, will continue to accelerate on the decline. It all penciled out being a fruitful and likely to be rewarding investment.

Thomas Russo (00:35:40):
But on top of that, it wasn’t capturing the exciting prospects to what might shift it from being considered dull in value, to being a hot fire. And so they stepped across the way and bought into a position for $35 billion on a reduced-risk product to help smokers quit smoking, and they came upon, at the same time, for $11 billion, I think the number was, a cannabis company that would express their cannabis products through joints and through candies and all the other stuff. And they bought that. So in one fell swoop, they had massively leveraged up their balance sheet. And one of the things-

William Green (00:36:19):
One of them was Juul, right? Which is controversial.

Thomas Russo (00:36:22):
The Juul.

William Green (00:36:22):
Juul was the big one.

Thomas Russo (00:36:26):
Yeah. Juul cost them $34.5 billion from the time they bought it to the time they just recently wrote off some of the final bits. It turns out to be about $34 billion of capital destruction. And anyways, when they bought that, and both of those, we knew that there was trouble, and it made no sense, given their willingness to leverage up so much and compromise what they, as Warren has, over the years, Warren has often been asked, “Why do people do really stupid things?” And this would be one of them. And Warren said, “You never really know why.” But he said, ” There is this situation where very smart people, for some reason or other want what they …” Let’s see, “They’re willing to risk what they have and they need, for that which they can’t have and don’t need.” And so that was clearly a case, if you thought about the macro risks you’re picking up by making those moves as they did, it was in some ways a form of suicidal psychology in some sort.

Thomas Russo (00:37:26):
And then the same sort of thing with the cannabis, but just a slower fuse. The trouble, why I go to such colorful lengths with Juul, the real issue there was, they found themselves with this product that they marketed to younger users than they’re legally are allowed to. And it hit that particular age group and it created a real roar among parents, and many well-positioned parents, and the whole process really became one of punishment. And we didn’t want to stick around, so we sold it. And that was perfectly reasonable. We never looked back on that. The other one, what was the other?

William Green (00:38:05):
Well, Wells Fargo, which also-

Thomas Russo (00:38:06):
Wells Fargo, yeah.

William Green (00:38:06):
… got into reputational risk territory.

Thomas Russo (00:38:09):
Exactly. And again, why ever would they risk what they had? And then, I have a spin on that whole saga, which is slightly different. And I think that part of the lack of supervision, part of the lack of culture as it related to self-policing those who were in a position to make bad decisions, the self-policing process that would’ve been there since Richard Kovacevich, I think his last name was, he was the CEO for decades, and other prior managers, they were all distracted because of the acquisition that Wells Fargo made of Norwest, at the end of the collapse of 1999, I guess it was. When the banking crisis hit such a hard wall. No, excuse me, it’s the Lehman Brothers collapse, which created this outcome.

Thomas Russo (00:39:01):
If you can imagine this, at Wells Fargo, I think management from Wells Fargo went home that Friday night thinking that they were going to be acquired by Morgan Stanley, and the froth that existed over that extraordinary weekend ended up that, they ended up instead buying Norwest Bank were. Two cultures never really melded, and they were just extraordinarily different. One was West Coast based, one was based in Charlotte, and they didn’t share values and they were very different banks. I think that left an awful lot of pockets unsupervised. And rather than go back and unravel the trouble, my decision reflected my belief that the trouble was going to endure for a very long time. Because there was a very, very strong political tone to the solution, the many billions of dollars that were paid in penalties buy Wells, and none of those had any suggestion that they were sufficient. There was just a sense that this would go on for a very long time. And in fact, even today, they’re still paying out large penalty payments from that conduct that took place during the period of collapse of Lehman, and misbehavior that followed.

Thomas Russo (00:40:14):
In that case, we had a position that we felt could provide us with much the same kind of exposure, run by a person who we quite esteemed named Jamie Dimon, and it was JP Morgan. So we came out of Wells in light of the political challenges that we knew that they would face, believed that they would face, for the coming decades, and found Jamie to have his … His shares were equally lower, as were Wells’ as at the times, so we made a swap, and had a position since then, in JP Morgan.

William Green (00:40:46):
A lot of your reputation has been built on these very long-term investments in great consumer companies like Nestle, which I think is probably your second largest position, which you’ve owned since I think-

Thomas Russo (00:40:58):
It is.

William Green (00:40:58):
… about 1986, Brown-Forman, which owns Jack Daniel’s, which I think you’ve owned since 1987.

Thomas Russo (00:41:04):
Eight. Yeah. Same thing.

William Green (00:41:06):
Heineken, which is what, late ’80s, early ’90s, something like that?

Thomas Russo (00:41:09):
’86. ’86.

William Green (00:41:11):
Amazing. So these companies-

Thomas Russo (00:41:13):[crosstalk].

William Green (00:41:13):
Yeah. So these companies that you’ve owned for 36 or so years already, can you talk about what these businesses embody, in terms of the two great principles really, that are at the heart of what you do, this capacity to reinvest and the capacity to suffer? Because I think it’s such a profoundly important idea, such a great insight, about what makes a company durable over decades.

Thomas Russo (00:41:37):
Yes. Yeah. Yeah.

William Green (00:41:39):
So take your pick, Heineken, Brown-Forman, whichever you want to talk about, Tom.

Thomas Russo (00:41:43):
I think they have really, so much the same. You start with products that, with strong brands, with strong enough brands, the consumer doesn’t believe there could be an adequate substitute for. That’s what we start with when assessing the potential merit of any investment. And is that going to be an enduring reason, or is it something that can be wasted and fritted away, or is it one that could be competed away? And the people who you grow up with, go back 30 years later and they’re still having their same cars or whatever it is that might define who they tell other people they are by what they have, remain enduring. And that notion that brands, which is at the heart of what tend to specialize in, brands are valuable because they help people shorthand describe who they are by what they have.

Thomas Russo (00:42:33):
If you wear an Izod shirt, if you wear a Ferragamo tie, if you wear this, Hermes bag for $6,000, they’re all laid with the confirmation of what and who you are. And I think that’s such a high order of need states that I had to think of as more enduring than most people do. Most people would say, for example, “We own a position in Richemont, and Richemont owns in turn, Van Cleef, and they own in turn Cartier, which are two really titan of the luxury goods industry. And people say, “Yeah, but that’s cyclical, because in a downturn, people would stop.” I say, “Will they stop giving out wedding bands? Will they stop wedding rings? Will they stop the Rolex watch, which in certain countries, when a young woman turns 25, she gets Rolex watch?” Things like that, my belief is that they’re not nearly as discretionary as people think they are.

Thomas Russo (00:43:29):
And the best example of that at all is Apple. Apple Macintosh laptops. If you think that that’s a discretionary purchase, then you don’t have a teenage daughter, or son. I don’t want to assume. But anyways, because you go home and deliver to them your reasonably-priced Hitachi desktop, and watch your child fall apart immediately in front of you, because it just won’t do. They need the sense of belonging that comes with that glowing Apple, and it’s a fabulous part of that business, which is the stickiness, the unwillingness to switch, the high switching cost, I guess you call it. And so that brand is what we really find. And in the case of Richemont, their total addressable market is jewelry, global, and of that market, only 10% of that market’s branded. The balance, 90%, is the addressable market, which we have in front of us as shareholders. It’s the two most powerful jewelry brands in the world.

Thomas Russo (00:44:35):
And so that’s a position which allows us to then reinvest into making sure that they have the right locations, pricing goods at the right price, coming up with the right innovations, because you don’t want to seem overly innovative, because it’s at all about conditions. And so we see there the kind of business that I would like to own 100% myself, if I had the choice or the ability to. But we don’t, and so we then find it to exist in this example in the public company. Now, then the question is, what about Yohan Rupert? He’s the family heir to the fortune that controls the Richemont. Will he invest the right amount of money or will he cut corners? Will he do, even lacking a big Wall Street package for compensation, will he nonetheless do the same thing as unreviewable head of the business? And our answer to that is no, that they do think of us when they make decisions. This is my belief. I’ve met him. I do believe that he thinks about the outside shareholders and the duty that he has to them. And so that checks off the agency cost.

Thomas Russo (00:45:39):
The capacity to reinvest is checked off because you’re converting 10% to 90% of the market that’s not branded. That same story, by the way, is true of selling beer, Heineken, in Africa. At the same time I bought the Richemont position, we bought the Heineken position, and that belief was that they had the leading beer, and they had cash flow from around the world, especially from markets where the growth rates had slowed. And so they had capital and they had presence, they had presence, longstanding presence, much like Altria and Richemont. They had presence in markets that are 100 years old. And so the trick is, of the 400 million barrels of beer-like liquids consumed each day in Africa, only 100 of that is bottled, brewed traditionally with the equipment of the west, it’s pasteurized, it’s bottled, it’s taxed, it’s marketed. So one third, actually one fourth of the market, is western style, and the three quarters that await are total of addressable market.

Thomas Russo (00:46:46):
The investment case will be made by the mature cash flows that come from the west. Now, that’s the way Heineken set up in 1986, and so it played its way through the day. It kept growing by new countries, kept growing by different brands. They came up with Heineken 0.0 recently, which is an alcohol-free Heineken, which is number one alcohol-free beer in the country, and all the things that made them succeed. To just last year, when they had the great fortune of winning 20 percentage points of the Indian market through the transactions that took place during the pandemic, where they were the best positioned to buy it because they were partners with that business for the prior 25 years. So when they bought it, they now had 60-plus percent of the business, and they can begin to do what we’ve long wanted India to do, which is to develop a bottled beer, tax beer, attractively-priced beer, that’s now under Heineken’s watch, so it has all of the management, insight and capability of the world’s leading brewer, and they’re going to deliver that to a nation of thirsty drinkers.

William Green (00:47:55):
I was amazed, Tom, I had been reading your shareholder letters for the last few years, and I was telling my wife over dinner last night this amazing statistic from one of your letters, which is that I think 20 million Indians per year advanced to legal drinking age. So over the next five years, we’re going to have this new market of 100 million people that a Heineken can deliver. And that seems very emblematic of what it is you that you are doing.

Thomas Russo (00:48:18):
It’s exactly it.

William Green (00:48:19):
You’re hitting this expansion-

Thomas Russo (00:48:21):
That’s exactly it.

William Green (00:48:21):
… into emerging and developing markets.

Thomas Russo (00:48:24):
And I met too, I was with Heineken management earlier this week, and we were talking about their priorities of where will they reinvest going forward. And they have, as I said, India, and they’re extraordinarily charged up. I think it’s unusual, the opportunity. And by measurement, the Indians today consume 1.5 liters of beer per year. They like it. Their consumer disposable income is growing as a nation, and they have a fondness for Kingfisher Beer, which is the brand that is at the heart of the company. So I am ecstatic. They will have the capacity to spend hundreds and hundreds of millions of dollars building from a market that has one-and-a-half liters. By contrast, China is 38 liters per capita. The US is 66, Germany is 99. The Czech Republic is 142 liters per capita. Heineken has presence in all those markets. 142, the Czech market, they have a presence there.

Thomas Russo (00:49:33):
Anyways, we couldn’t be happier. We’re in a position now where one of our longest-standing investments is about to rebirth itself. One other area that they succeeded in amazingly, through a lot of interesting steps and turns, is Brazil, where they sell more Heineken, and in glass bottles, than in any other market in the world. There’s a nuance in investing in the beverage industry, which is that if you’re large enough in one of the developing emerging markets, you will have the ability to serve that market using-

Thomas Russo (00:50:03):
You will have the ability to serve that market using recyclable, returnable glass bottles. And as you think about a 30 cent bottle as a part of a six pack that goes out and never comes back, that’s a $1.80 of packaging costs in that six pack. If the bottles come back, instead of 30 cents a bottle, it’s 3 cents a bottle, and you take six of those it’s 18 cents instead of a $1.80. And so they will have some substantial competitive advantage. They will be building fast Greenfield route to market and brewing. Then they’ll have the benefit of that extra marketing that comes from the returnable glass bottles. And they have 60 plus percent of the marketplace. And so mature market cash flows come to support the build out. They have a high rate of return on that spending, which is great because otherwise the money, they’d struggle with how to place it if they didn’t have this thirsty engine kicking in. And so we have a very long term feel.

Thomas Russo (00:51:01):
But I will spend most of my time over the coming month, because some of this is just coming to fruition, just assessing how big the capacity is for them to redeploy capital, and how will it secure their belief among the consumers in the end, that there’s no other product that to beat, or can’t do without. If you were right on that $20 million, that’s an amazing number.

William Green (00:51:24):
That’s a great example of this importance of the capacity to reinvest. I wonder if you could just quickly run us through an example of something like Nestlé investing in Nespresso, or Berkshire investing in Geico, as an example of this other really central theme of yours, which is the capacity to suffer.

Thomas Russo (00:51:42):
Yes, well, it is. Perfect example of it is Nespresso, which as you can imagine, that some degree of hostility when even proposed, that it was proposed to be Nespresso was going to be a premium home delivered premium individual coffee serving kit, where there’s a cartridge that’s so fresh in its release that it will feel like you have it from a real barista. But it’s actually coming from your kitchen on a little device that sits next to your orange juice press. Anyways, they saw the opportunity. It’s very hard. I don’t know if any of you have tried to brew home espresso, it’s hard to do it because it’s some European trick that they get, we don’t. And this is a great equalizer because it’s a great cup that comes out. But it costs them. And they did not break even for 15 years on this. And the product was canceled by the chairman several times along the way.

Thomas Russo (00:52:37):
And zealot, messianic people buried inside Hein and Nestle pulled it to the side and said, “We’re not going to let you die.” And they kept it going. And then it passed some more hurdles that went a little longer. But today it’s a $5 billion platform. So 3.5 billion in capsules, which are quite profitable. And the other 1.5 is in machinery, which they pass through, which has some marginal profits. But they really make the money with the disposable cartridge. And that’s a good example. Another good example would be, I’ll share this one with you because it’s domestic. The beauty about Nestlé again is just like Heineken, just like others that we’ve spoken about. My goal is to tap into the places in the world where the populations are still growing, consumer disposal income is still advancing. So we tend to look for that redeployment of capital, especially closely when it goes into new markets, especially those new markets where we know that there’s been a history of interactivity with the brands, but the market’s just waiting for more spending power and more capacity to deliver inside that market.

Thomas Russo (00:53:39):
And that requires the investment. And so we love it when companies say that they’re making sizable investments to expand it into their capacity to serve a market, which has proved to be thirsty for their products. Then just a different story has to do with E.W. Scripps, which is a newspaper company founded by the Scripps family, it had a hundred papers around the country. They’re all more profitable than the other one. And it’s a business, the newspaper business, daily newspaper business, monopoly town businesses has been one which consumers cannot do without for decades. If you needed to know that, just think back on any of the houses or homes you’ve lived in when you were growing up and ask yourself whether or not it was the case that the richest family in any given town you’re in was the newspaper family. I don’t know if that’s the case, but it typically is because they had such an extraordinary monopoly on local stories.

Thomas Russo (00:54:31):
And so people had to read those. Who was drunk, who was the quarterback of the high school football team, who scored the goal, all that stuff that you got to have to be a member of a [inaudible 00:54:42]. So now what they didn’t do is they didn’t make the turn to the internet and they fell flat footed on solutions that were truly local, but didn’t have the ability to cross over it and cure them from most of their other newspapers. But there was a professional there who sold the Scripps companies’ radio stations, and had proceeds from it. And he had an idea that he’d like to do. And he went to the family that controlled the board. As a quick aside, I haven’t yet described one of the key components of the model that we try to apply, is that the companies that execute bets on our behalf tend to be still run by founding family members.

Thomas Russo (00:55:23):
If we think that we can attach ourselves to their long term desire to grow their wealth slowly but securely, and to be mindful of not having to pay taxes along the way. And so E.W. Scripps publishing company, as they were approached by one of their key executives who’d sold out the business of radio, had money and petitioned to them that they permit him to spend it on a new advertising supported cable company that would embrace both the house and the garden. He thought it might be called the HG TV, Home Garden TV Network. And the family looked it over and realized that they had capacity. They had a musical station band that played background music for all of the different… They had 12 or 14 different TV stations. So they had television ad salespeople, they had mixing equipment, the graphics equipments, everything you needed to power up at a TV station they had.

Thomas Russo (00:56:18):
So Home and Garden TV Network would borrow from some of those internal capacities. And the family said, “We’ll dedicate those internal capacities to trying to make this work. And you have $150 million, that’s it. You can spend that, but when you’re done with that, you’re done with it.” And so they hired two people the first year, seven the next, 15 the next and 40 the next. The next year, they’re up to 70 and they’re ready to go to market. And they lost exactly $150 million along that path and so the last day before they switched it on, they passed through their income statement, the last money in that 150. And it opened to great fanfare of success and fast forward, the newspaper business that suffered through that construction process underwrote the investment. Their newspaper business, the TV business, all went awry because of the internet. But this digital broadcast network thrived, and they ended up selling it for just somewhere under 10 billion on a business that harnessed all the power of their various media related assets.

Thomas Russo (00:57:23):
But in order to deliver that product, they had to suffer through the investment spending pressure on earnings that took place. Understand that their other businesses were earning money along the way. But as those operating losses from the build out mounted, it looked like the company’s reported net income was going down sharply. It wasn’t. It still had the base business and they had losses reported on top of the base business. But at the end of the day, that beginning profitability that was concealed within HGTV ended up being a torrent. And it was an extraordinarily high utility, and people who liked the Home and Garden couldn’t do without that network. And the viewership today is still extraordinary. And it was built with the money that came from having the capacity to reinvest, had the people, they had the talent, they had the equipment and a board who gave the management team a capacity to look really bad.

Thomas Russo (00:58:23):
And why that matters is that he has to report to the public company. He has to report. And he will go to the public company and say, “We had a great quarter, but the numbers don’t look that interesting.” And he says that for about three quarters in a row, and he’s going to have an activist knocking on his door. And that activist knows that all of those investment spendings that have burdened the income, and if they just turned off this spigot, they would show a big jump in profitability. It would destroy the asset value of what they built, but they could show more near term earnings. And it’s that trade off that takes place between what a family controlled company would do for their own wealth and what a wall street council company might do for a quarterly boost to reported profits.

William Green (00:59:07):
I think you’ll-

Thomas Russo (00:59:07):
See the difference?

William Green (00:59:08):
Yeah. I think you’re getting at something really profoundly important, Tom, that we’ve talked about in the past, which is in a sense there are these two mentalities. There’s the short term mentality that’s embodied by a lot of Wall Street, which is hyperactive, impatient, not aligned in terms of interest. It’s looking out for its own interests. And then there’s this other slower, more patient, more thoughtful mindset that you embody with your own investment, but with your own investment style.

Thomas Russo (00:59:35):
We strive to, yes.

William Green (00:59:37):
Yeah. It’s all about delayed gratification in a sense, because instead of going for the quick hit or looking good in the short term, it’s trying to do things that are wise in the long term. And I wondered if you could unpack that a little for us, because it seems to me, this is one of those master principles in life that when you’re in a world that’s becoming increasingly short term, the real prize goes to the people who are thinking more long term.

Thomas Russo (01:00:03):
Right, but they can’t act long term unless they have the governance and the board support that protects against the visit from an activist, or even a takeover person who feels that… Who often know that what looks like it’s declining as it was a case in Scripps’ newspapers, that old business looked like it was declining at an accelerating rate. They can easily figure out, as can we, as there’s no miracle on this, that the investments betting is really why the decline was taking place. And the other business was actually quite flourishing and thank you very much. I’d say I think the Scripps’ example is a pretty good one. The other one is this one with Berkshire Hathaway taking $5 billion of premium to underwrite for someone who very easily, possibly for the wrong reason had to show that $35 billion of equity index values still added up to the number that they had to show during the course of that 15 year period, they had to maintain that level.

Thomas Russo (01:01:07):
And so when Warren said that he’d protect them against the clients at that level, he committed his whole balance sheet to making up for the shortfalls because as I said, the end of each year, there was a mark to market that described what decline in value was for those four stock exchanges that Berkshire insured would collectively remain over 35 billion in value. And it cost his reported earnings for those years. And his balance had a huge hole in it that said payables under insurance recovery, which meant that if at any time they wanted to close it out, they would have to settle up without a cap amount. Of course, the story ended well. The global markets recovered, Berkshire, you never get to reverse those negative reports back. But in fact, they didn’t end up losing any money. They’re better off for having the structure that allowed that all to take place, and for them to be allowed to invest in something that has upfront optics that are troubling when there’s a sense that the long term is pretty secure.

Thomas Russo (01:02:09):
That trade off is what really gives power to somebody who’s bidding against a person who thinks that it’s just a really tight spread and they’d be lucky to get by.

William Green (01:02:18):
I think what’s fascinating, Tom, is that this idea of going against the short term and deferring gratification, that it applies not only in business and investing, but in life. And I remember after we discussed this once several years ago.

Thomas Russo (01:02:31):
Yes.

William Green (01:02:32):
You emailed me because I’d been asking you for examples of this in books and you were like, “Well, less jam today for more jam tomorrow. The three little piggies, et cetera.” And childhood tales that inculcate thoughtful people with the message of deferred gratification. Society has not-

Thomas Russo (01:02:46):
Is that what I sent you?

William Green (01:02:47):
Yeah, you emailed me. And after that you said society has, however, created endless reasons why decision makers mistakenly prefer more jam today, even at the expense of jam tomorrow. And you said much investment opportunity arises from being able to take the other side of the short term-ism bet. That seems to me a really profoundly important insight, that as the world becomes more and more short term, both because of the pressure of Wall Street, political pressure, which makes societies do stupid stuff in terms of their energy consumption and the like, but also in our own lives where we have these constant dopamine hits from our phones and our Twitter feeds and the like. What you really want to do in life is push against those short term temptations. Does that resonate with you?

Thomas Russo (01:03:34):
I think so. And then how do you implement it and how do you live it, are both extraordinarily hard challenges. And so I observe it, and I recount it, and have gone through E.W. Scripps. We own those shares. They delivered a terrific result to us as they went down the path, which took advantage of the fact that they knew that their viewers would probably stay put. And they could absorb the burden on the reported profits near term, that the proper amount of spending would certainly generate because they had in their pocket, the votes from a board that was family controlled, and that was interested in long term gains. Now all of this at some level, going very back to the start of this afternoon’s conversation, one of the other things that Warren said to that class in ’82 was that you want to never forget that the only break you get as the investors is the non-taxation of unrealized gains.

Thomas Russo (01:04:31):
So you should take advantage of that and make sure that what you invest in, as Warren said, allows you to be right once. You come up with a business that’s correct, it has the capacity to reinvest, has management that’s long term minded, that’s protected by boards that are often family controlled, and they just set about creating something that’s disruptively advancing their long term net asset value on a per share basis, which is how we settle everything up. It could be advancing that tremendously, even while reporting trouble in the execution, which is inevitable.

William Green (01:05:04):
So your whole life, in a way, has been the opposite of short term. We talked before about your biggest holdings, like Berkshire, Nestle, Heineken, Brown-Forman. These are things you’ve owned 35 to 40 years. So I’m wondering in a world where everyone is getting more short term, how have you managed to set yourself up so that you can tune out a lot of the noise, so that you can move slowly and delay decisions that there must be a lot of pressure to do something now. I remember you saying, “Don’t just do something, sit there.” How do you manage to maintain that mindset, which is totally counter cultural?

Thomas Russo (01:05:45):
That’s a good one. It’s just what I’ve said. I believe in, I illustrate those beliefs by examples, which I hope convey the plot in some ways. And then I spend time letting my investors know that these are core principles that we intend to stick to. And there will be times when we’re out of favor, there’ll be times where we’re in favor, and please remember that when we’re vastly out of favor, that we’re never as stupid as they think we are. And that when we’re terribly in favor, sadly, we’re never as smart as we think we are. I do think that it’s a deeply held belief. We look for investors who have a similar point of view. That’s the number one way to make sure that you have a fighting chance to take advantage of opportunities where near term gain results in long term pain, and take advantage of the opposite currents.

Thomas Russo (01:06:36):
In our case, you just have to make sure that that’s what your investors know that that’s what you’re setting out to do. And along the way, we’ll get it wrong. In which case we’ll have to part companies with something. You have to make sure that we guard against the temptation to mis-think that just because we said we were going to stay long term focused means that we have to stay long term. Because there’ll be times when we make a mistake and we’re supposed to head for the hills immediately. That wouldn’t have been the case with Wells Fargo because we’d owned it for a very long time. But we sold fairly soon after the contagion that came about as a result of their acquisition and Norwest became the parent. We moved with this batch, with Altria, the same thought process. It just was different and it showed a different aspect and we were prepared to move.

William Green (01:07:21):
We’ve come through this period, Tom, where obviously in some ways you were out of favor for a few years, because for about a decade, people could just roll the dice on any hot tech stock in the US and they would make lots of money without any real consideration for price and valuation and the like. And you’re very disciplined about these things and also very global in your approach. And then the bubble burst recently, and obviously we’ve seen all of these great tech leaders come crashing down to earth. And I noticed that you’ve been looking through the rubble. I was reading in one of your recent investor letters-

Thomas Russo (01:07:53):
Yes.

William Green (01:07:54):
… That you’ve been looking through the rubble. And one thing you got excited about of all of these former darlings was Netflix. Can you talk a bit about why, of all of the hot tech stocks that have crashed, Netflix fits your parameters?

Thomas Russo (01:08:09):
Well, it is one of a couple. I mean we had a position which we started during the turmoil in Alibaba. In Alibaba, the thinking there is they are absolutely positioned in a way that the Chinese consumer cannot do without them, in terms of the extensiveness of their command over the e-commerce. And in fact, our Western companies who wish to sell their products to Chinese consumers cannot do without Alibaba. If you’re Johnny Walker, your Jameson’s, your Heineken, whatever number of Cartier for sure. That Cartier is so enamored with Alibaba, that they have crossed share holdings in some of the e-commerce platforms. And they also co-owned pieces of Farfetch, which is one of the auction houses in China. So both of them had come down sharply in price. We hadn’t owned any of them, as you suggest, up until November of last year, when we put a small position on it in Alibaba.

Thomas Russo (01:09:10):
And we said at the time, we understand that the biggest risk here is one of agency costs, and it’s a whole nation that serves as your agent in some ways, and their proclivity to pull from you what ought to be yours, was just vastly more profound than we had feared. We marked the position with a be-careful stamp because we weren’t sure. And that’s something that we’ve learned is even more entrenched in the difficulty of keeping what you create. There’s also been in China particularly, there’s been massive, massive distractions as a result of real estate, which was built to bust in some ways, as is so often the way. In that case that means that the people who build it make an awful lot of money, but the banks that fund it end up socially distributing out the cost more broadly. And I think we’re about to go through one of those in China. They’re maybe already going through it.

William Green (01:10:06):
With Alibaba, Tom, which I mean I probably should have disclosed before, I own Berkshire, which I intend to own for many years. But I also have a small position in Alibaba, which continues to get smaller because it’s been cut in half. And a couple of our listeners, who we have lots of people send questions in over Twitter, and a couple of people. One is called Matt Cummins who said, “If a stock price gets cut in half, what’s Tom’s criteria for when to buy more and possibly double the position in that scenario?” And a guy called Chill Daily said, “How do you know when to sell a position?” And I was thinking with something like Alibaba, where clearly you and I and Charlie Munger, and many smarter people than me have been wrong so far, how do you decide whether to cash out, whether you were just wrong, whether China’s too risky? Or whether to stick to the position or add to it?

Thomas Russo (01:10:58):
Well, it’s been from almost the first day, and financial was the catalyst that caused the drop initially that we were able to put a small position on at the same time in Alibaba. And that was a fairly substantial reorientation of financial service venture that Alibaba profited mightily from. And it promised to have far less profits for them ever since really we entered the investment. That direction was suggested, but it wasn’t sure. And it’s become more clear and sure over the holding period, which is about a year and a half, I guess for us. But it’s quite possible, it’s our belief that the valuation has come down along with the share price. And the certainty with which we believe some of the businesses would grow and contribute has raised. And so for example, that is the cloud business, and the politicization of the cloud business.

Thomas Russo (01:11:55):
I gather from one of my colleagues that TikTok had… I think it’s the case that they had been a user of their cloud, Alibaba’s cloud business, but would not be allowed to going forward for a variety of reasons. And then more recently, the dual listing question. The Hong Kong listing versus the requirement of changed accountings. That last one is what gave me this sense of Warren’s comment, which is, you don’t get extra points for degrees of difficulty. And the degrees of difficulty that have surfaced by watching the Chinese government treat capital across a host of different areas, whether it’s educational testing, whether it’s the casino business, whether at the board level, whether it’s the way that the financial service business has been treated. There’s so many areas. And lastly, the cloud business with its intrusions. It’s just so many areas that define complexity that I realized that we probably took on more need-to-know decisions that we have to make every day we hold the shares, than I realized at the start. And I would say in part, because the situation worsened over the course of the holding period, it’s a far more complicated investment.

William Green (01:13:12):
When you look, Tom, at China and the increasing risk, presumably that China invades Taiwan, the increasing regulatory risk-

Thomas Russo (01:13:22):
It’s not far that we invade Taiwan with the current situation of the day, but go on.

William Green (01:13:26):
I mean, increasing risks geopolitically, increasing conflict between the US and China, all of these human rights issues. Someone wrote to me last week and said to me, “It’s a moral issue. You just shouldn’t be invested in China. It doesn’t mean you can’t make money, but why put your money there?” And I initially dismissed it, and then I was looking at it and I was like, “Actually, it’s quite possible that he’s right.” Why do I need the complication? Why do I need the headache? Why should I be supporting the persecution of Uyghurs and Tibetans?

Thomas Russo (01:13:58):
Yeah, it’s a horrible thing.

William Green (01:14:00):
What do you think? How do you play this out in your own mind?

Thomas Russo (01:14:04):
Well, it’s just one of those things that I just said. Warren, as so often is the case, he has given us the answer, and that is you get no extra credit for degrees of difficulty in investing. So for example, we have a position in Google. Google has one of the absolute, most fabulous cloud businesses. And I’ve held this ongoing position in a small position versus a four or five times larger position in Google, but I’ve held the small position in part because of the possibility that Baba would get us into the Chinese cloud business. But it’s not clear. That’s become politicized as well, just recently because of this TikTok move by the government. And so, so many of the things that we are bought with seem to degrade down to a political outcome, and those political outcomes seem to break largely in the favor of the domestic participants. In which case, I go back to what Warren said is you don’t get any extra credit points for degrees of difficulty and indeed we can-

Thomas Russo (01:15:03):
We don’t get any extra credit points for degrees of difficulty. And indeed we can take advantage of that insight and keep our capital and find something else that’s more promising. And we’re prepared to do that.

William Green (01:15:11):
More broadly, when you think about these issues of morality and investing, it’s complex this, and I’m not trying to be judgmental or moralistic about it… I worry about this stuff a lot myself, but obviously you own Philip Morris. It’s a big position. You own Heineken, Pernod Ricard, Brown-Forman, these big alcohol and tobacco sellers. Not to mention food companies that full of sugar and the like. How do you think about these questions of where to draw the line morally? I mean, are there things like weapons manufacturers or casinos or polluters, massive polluters where you’ll draw a line, you’ll say, “No, I don’t accept that.” How do you think through this issue yourself?

Thomas Russo (01:15:52):
As you identify, I like strong brands. And it just so happens that among the strongest brands are in what areas you just described. And so, I am led there by my sense that those businesses are good, offer a very certain reinvestment rate. They’re strong businesses. As far as society’s demands from them, I sort of let society make those demands. There’s a host of things I probably wouldn’t invest in, but I’m sure I invest in things that others wouldn’t. For example, energy, Exxon, we don’t own it on behalf of clients. What we’ve realized as a world that the fervor with which issues relating to the environment have crept up, have run straight into the messiness of European energy requirements. And so, I think right at this time we’re having some exposure to how complicated the world is. Especially on the part of all of us who in different areas have causes that we just as soon mandate be treated differently.

Thomas Russo (01:16:55):
And I would say for example, energy right now is one. But it’s very complicated. And Warren’s purchase of $62 billion worth of energy shares squarely presents that question because… I haven’t bought energy shares, but you think about, well whether you can or you should. And Warren, I think, has clearly said he can and acted with that assurance. And I have a feeling it has to do with the reality that we may wish it weren’t so but will be with oil for a very long time. And especially Warren will be because of his mid-American energy activities and because of Burlington Northern and a host of other areas. They’ll just be confronting energy as a cost of goods sold going forward. I think the world will end up probably a little more nuanced than it would’ve been, for example, on the issue of energy just a year ago. Because the stridency bumps up against the political reality, and the world’s not going to be happy if Germany freezes.

William Green (01:17:51):
I was very struck, Tom, when I was reading through your last, I think, 10 investor letters, how there’s a very consistent thread of focus on the environment in your writing. And there’s a terrific line that I’ll quote where you said, “Our companies have long realized that the environment is not only to be included in their deliberations, but actually should be worshiped.” And then you said, “Companies whose pollution gives businesses bad names are actually not representative of thoughtful businesses. Waste leftover from organizations that call themselves business minded actually detract from business results.” And I was very interested by the detail that you went into in talking about how Heineken and Nestle in particular-

Thomas Russo (01:18:32):
Yes, because they’re that interesting. Yeah.

William Green (01:18:33):
… have become these good corporate citizens. Can you talk about, just very quickly a couple of things that they’re doing? Because it seems to me, for example with Nestle, this goes way beyond just whitewashing and trying to make themselves look good. There’s something actually quite dynamic and profound going on.

Thomas Russo (01:18:49):
Oh yes, Mark Schneider is all in on sustainability in most of the platforms that you would measure best practices by in terms of the environment. And then it’s a question of pacing and what you ought to put out as the audacious goals for actually the blank capital and getting to work. So I think they put out $5 billion worth of plans for their plastic bottles for Perier. Just go right down the old fashioned packaging for food, the investment in plant-based protein, which they now have a billion dollars worth of business doing. Now many of those check off sort of familiar, comfortable boxes, but they are, I think, truly and deeply felt up and down the organization of… 340,000 people work for Nestle. And so I spend a fair amount of time with them and I come away feeling like that the management level all the way down to the associate level, that they are mindful and also desirous of outcomes that allow them to continue to run their businesses.

Thomas Russo (01:19:53):
And as I said in that write up, waste is waste. And when you start with that mindset, you then seek solutions where you can take the waste and then crack it and derive it. So for example, I was with senior management from AB InBev Budweiser yesterday. They now have I think some $2 million of revenue that’s involved with their processing of the spent barley, malt and oats that go into beer. And it’s a commercially viable business. And before it was just poured out into the sewer or fed to animals. But they’re applying techniques to understand what it is that they once called waste so they can extract from it something that’s no longer called waste.

William Green (01:20:37):
It was interesting to me, Tom, you pointed out in one of your letters that Heineken has shifted using these glass bottles that are reusable something like 40 times. And I think had halved the amount of waste water they use over the years.

Thomas Russo (01:20:49):
Yes.

William Green (01:20:49):
Or maybe it was they’d reduced the water it takes to produce a liter of beer by half over decades.

Thomas Russo (01:20:56):
Absolutely.

William Green (01:20:57):
It made me think… I’m not trying to say that these businesses are particularly pious and holy and all of that, but it strikes me that innovation is going to play such an important role in the actual real world efforts to reduce carbon emissions and the like.

Thomas Russo (01:21:11):
Yes.

William Green (01:21:12):
Likewise with Philip Morris, right? I mean Philip Morris developing less dangerous cigarettes. I think Philip Morris is a pretty reprehensible company in many ways and has a terrible history.

Thomas Russo (01:21:20):
Yes.

William Green (01:21:20):
But actually it may have more benefit for humankind by developing less dangerous cigarettes than a lot of the charities that are around. I don’t know, what do you think?

Thomas Russo (01:21:29):
I ran late this afternoon for our discussion as I was with the CEO of Philip Morris. It’s the first trip back to the United States since Covid and the extent to which that company has transformed itself. Thirty percent of its customers do not smoke cigarettes. The movement towards a oral pouch or for a non burning unit, which is called a IQOS, heat not burn, means that they’re delivering to consumers who want nicotine, an adjustable dose of that product independent of combustion. And combustion is the source of harm. And they believe that by 2030 they’ll be 50/50 and by 2040 there’ll be essentially no more cigarettes coming from them. And already 30% of their consumers do not smoke cigarettes. It’s a transformation that’s been extraordinary. They spend $12 billion on this along with $4 billion of acquisitions in the last month to make sure that they are in the position that they activate on the future that they see.

William Green (01:22:36):
It really makes me think. It’s kind of like when I think back politically about someone like Lyndon Johnson who in some ways was an awful human being but did some remarkable stuff in terms of civil rights. Sometimes we tend to look at companies and think, “Oh capitalism, it’s terrible. And companies do awful things.” These companies, maybe they’ve spoiled the environment and killed lots of people with their products and stuff, but we’re so dependent on them to get better. I’m not articulating this well, but can you explain? What are your thoughts on this?

Thomas Russo (01:23:07):
From where I sit, and you’re right. I mean I own spirits companies and beer company. I have a cigarette company. The conversations that we have, the actions that they’re taking, to have 7% of Heineken’s beer now and something called 0.0 no alcohol beer. And to celebrate that as an option. Choice is what increasingly is being offered. And I think with choice you go down the list and you have a chance to choose what you own. And I would venture to say that if you join me on a visit with the managers of companies that we do own, you’d feel as do I, that they’re marching down a path that’s quite different than 30 years ago. and I think it’s a predecessor to what will be the next 20 years. We won’t slip back on this stuff, at best I can tell. I must say this last line of investigation is an important one.

Thomas Russo (01:23:57):
And it’s amazing, honestly, to see how the ESG expectations and expressions of goals and desires run square into the world that we now confront in a very different way than it did even just a year ago. A year ago we had all sorts of companies stating their intentions to have drastic changes underway. And in the face of the Russian Ukraine war, food sourcing, reliability of food is going to become an issue. Gas and oil and everything else will become an issue as we enter the harder periods of the year. And it’s going to push back on the resolve of people who are normally bought into the virtues of sustaining our world because it is a primary question that we have to get right.

Thomas Russo (01:24:46):
But it’s compromised at this moment by virtue of the harsh conduct that the world’s going through with Covid and with the war. At some level with inflation reprioritizing where people are spending money. And I do hope that we come back out of this period that we’re going through more sober about what demands we should have and then more focus on how we go about making the changes that we’ll benefit from as a nation, as a world.

William Green (01:25:13):
When you look at these various risks like inflation or conflict with China or Covid or the war in Russia, I remember you writing recently that you said basically, “We haven’t been through a period like this.” You said, “We today live through what to my mind is the most unusual collection of worries that investors have had to grapple with in my 40 year long investment journey.” What do you worry about most as you look towards the next 2, 3, 5 years?

Thomas Russo (01:25:42):
Well, I mean I think probably the most has to be both the Ukraine and Taiwan because they both provoke very complicated individuals who ultimately oversee nuclear warheads. In some fashion, sort of aware of one another and their mutual positions up against the broader world. It’s really the scariest aspect. And then beyond that, I guess my comment about how odd it is to have the issues that do come up in this context it would be to make sure that we don’t fall back on and expect easier terms from those who have the right to produce. But still demand from them as much as we have been.

Thomas Russo (01:26:25):
But just understand that we’ll be privy and more nuanced as we go through this process because it’s not nearly so clean, as apparent as I think people felt it could have been 18, 24 months ago in terms of steps that you’d take to be absolutely rid of the problems of oil, for example. Well that’s probably, given what Germany would let you know, they’d like to have arranged for the coming winter. It’s probably more aspirational than implementable at this moment. And then just to make sure that we go through with a science based, outcomes based review of what it is that we want to accomplish in order of priority. And the first would be to somehow make sure that we get through these issues with these flash points like Taiwan and the Ukraine at moment.

William Green (01:27:13):
If I remember rightly, Tom, you must be about 67 at this point-

Thomas Russo (01:27:17):
Yes, exactly.

William Green (01:27:18):
… and I can see that you work like crazy. You’ve always have this intensity. You were rushing off to your next meeting, which I’ve had to force you to push back. I feel guilty about. How do you…

Thomas Russo (01:27:27):
Do not even think of it. Yeah.

William Green (01:27:29):
Thank you. How do you sustain this level of intensity and drive? I mean, what’s motivating you to keep working at this point when clearly you don’t need it financially? You built an immensely successful business. Why do you keep going? Why not hang up your spurs after 40 years of doing this?

Thomas Russo (01:27:44):
You know, it’s purely curiosity. And also sort of a desire to make a contribution. But curiosity is just something that is wired in me. And I heard from somebody who happened to visit with my fourth grade teacher back in Wisconsin where I grew up. And they’ve shared a moment about our times together and she said, “God, he was a pain. Always asking questions.” And I think there’s an element of that that’s just continues. I’m curious, and I think that’s something I give wide birth to because I’m just interested in a broad range of different… I’m sure much like you and others as well.

William Green (01:28:22):
It seems almost like you’re defining characteristic Tom, curiosity. Because I remember once years and years ago being at the Markel meeting and Tom Gayner had just finished talking and I was sort of nattering to Bill Brewster I think afterwards. And I look over and I see you in a corner of the room chatting with this group that was around the CEO of CarMax. And I just thought it was really interesting. I could see that you were hustling. Here you are-

Thomas Russo (01:28:47):
Yes.

William Green (01:28:48):
… in your sixties, a sort of grand figure in the investment community. And you were still hustling for information and for perspective and context.

Thomas Russo (01:28:56):
As described I feel the attachment to. And then also the contribution that comes from this. If we add value, we’re adding value to causes that are important and then we can also support things as well we can. I was told at some point by a person who described the path they took on a measured life as one that in your early years you learn it, your middle years you earn it, and then your later years you return it. And I sort of feel like I’m sort of moving down that path and will end up being supportive of needy causes and I think that’ll be a source of great satisfaction. But we should probably keep that quiet between ourselves to make those who might want to share in this fund work harder to find out that I have this interest.

William Green (01:29:41):
You were also in this interesting position where your son Christopher, who I think is about 39 now, joined your firm back in 2019 and is a senior research analyst and is obviously being groomed to play a major role in the firm’s future. And I wondered if we could just end by my asking if there’s anything in particular that you’re really trying to teach him in the same way that people like Buffet and Ruane and Jack McDonald who is your first great professor at Stanford, they taught you really key lessons. Is there anything that you’re teaching Christopher that we can benefit from?

Thomas Russo (01:30:13):
Well, I think I learned through being around Bill and the rest of the people you mentioned just a moment ago. And learned through hearing them in fact conduct themselves and then hearing after meetings how they would assess the character of the people with whom they met. That seemed to be the one thing that would be most likely to come out in each case is, “What do you think about this person? I don’t trust him, I don’t like him.” And it’s just that sizing up of the character because that’s a first, but it’s also defining the question to get right. And I would like that to make sure it conveys well to Chris and to Chris’ colleague that Timothy Quinn, who’s our director of research and who is the assistant portfolio manager to Semper Vic Partners, which is what is the heart of our business. And so Timothy has an extraordinarily important role to play and he and I and Christopher have that same kind of conversation and it has to do again with how do we feel as a result?

Thomas Russo (01:31:08):
It’s very interesting because many people might say, “What is this how do you feel about something?” And I’m reminded of it Charlie Munger story that took place at the annual meeting of Wesco some years back, many years back in fact. And Charlie talked about character and about judging character and how it works. He said he was reminded of a friend of his who had the largest private business in LA. And that person’s business had a sales director who had done the best job of any ever for the firm. And at the same time, the founder and the owner of the firm felt uncomfortable with the person. And it was a growing level of discomfort with the person. And he found that he was losing sleep and he wasn’t feeling good.

Thomas Russo (01:31:51):
And so he finally had to call the guy in at some point and he said to the guy, “I understand that you’ve done nothing but extraordinary things for our firm and we just couldn’t be happier with it.” And then he lowers the boom and says, “But there’s something about you that just leads me feeling awkward and uncomfortable. And I’ve struggled with this for a long time and I find I’m losing my appetite and sleeping less well and I’m too old and too rich to lose my appetite not to sleep well. And so I’ve decided I’m going to have to let you go. I’ll do so with the highest of recommendation and with a very large lump sum upon departure, but I just can’t put my arms on. I don’t know what it is. I thank you for all you’ve done, and I wish you well in what you will do.” And that was it.

Thomas Russo (01:32:32):
And the beauty of that story is that the man who was as successful as he was, listened to his stomach, listened to his gut. There is a whole nother layer to what we do in addition to the sort of the numbers and the caliber of the business franchise and all the rest. It’s about judging people. And I like the story that Charlie shared with us because you’re not going to get something quantitative about your assessment of a person. But if you spend your whole life reading, reading the great works of art, literature, all the stuff that you might do to try to program your mind to absorb and process important things, and then you have something as profound as he was going through, and you ignore it because it’s just a belief, you’re really short changing yourself for the kind of work that you do to protect yourself, quite frankly, for the long term.

Thomas Russo (01:33:22):
And so, I hold that as an interesting memory of what really very, very important people end up doing at some point, which is to make decisions based on uninformed facts and all the rest, and then with a decent component of belief.

William Green (01:33:35):
And it gets back to that really important comment that Buffet made to you all those years ago, back in like 1982 about-

Thomas Russo (01:33:41):
So much so.

William Green (01:33:42):
… how you can’t partner with a bad person. And I’ll leave you with one thought, Tom, or one story that you don’t know. Which is I asked a friend of mine the other day who’s been invested with you for probably 20 years or something about you. And my friend sent me… Well basically he told me this story explaining that at one point, this couple they decided to diversify more. They’d done incredibly well with you, obviously over many years. And they’re like, “Well, we should probably diversify a bit more.” And so they asked you this kind of awkward question, which is, “Can you recommend some other people that we ought to invest with?” Which is sort of insulting in some ways.

William Green (01:34:15):
And my friend showed me the letter that you sent in reply. And it was such a wonderfully gracious letter that you wrote where basically you offered three suggestions. You sent their contact details, you explained why you admired them, and then you said, and “Yeah, and I can write a message to these people introducing them to you.”

Thomas Russo (01:34:33):
Yes.

William Green (01:34:33):
And my friend wrote to me, and I’ll quote. “This gives you an idea of what a class act the man is. I mean, he’s so honorable and elegant. There are not many people who would so gladly have given me these suggestions, but Russo did.”

Thomas Russo (01:34:48):
Well, I thank you. Thank you very much. Yeah.

William Green (01:34:48):
So I just thought I’d leave you with that because it gives… And when I heard that, I sort of thought, “I’m much more excited to interview Tom even than I was before.” Because I know that you’re a terrific investor and you’re very thoughtful and that these ideas about the capacity to suffer and the capacity to reinvest are really profoundly important. But the fact that you also behave in that sort of way, I think that has an effect. And it just makes me feel better about the fact that I’ve got to spend all this time interviewing you over so many years. I feel like you’re a very high quality individual, so thank you.

Thomas Russo (01:35:16):
Thank you. Well, I couldn’t be more happy to have had the chance to spend more time with you. It’s been a terrific afternoon. And let’s make sure we don’t wait so long to do it again.

William Green (01:35:28):
I look forward to it. I’ll let you get to your next meeting. Tom, great to see you. Thank you so much.

Thomas Russo (01:35:32):
Thank you very much.

William Green (01:35:33):
Take care.

Thomas Russo (01:35:33):
Okay. Be well.

William Green (01:35:35):
Bye. All right folks, that’s it for today. I hope you enjoyed this conversation with the great Tom Russo. I think this theme we discussed of deferring gratification and thinking long term is hugely important. And I’m convinced that it’s really one of the keys to a happy and successful life. If you want to explore this subject further, you may want to check out chapter six of my book, Richer, Wiser, Happier, where I write about Nick Sleep, Qais Zakaria and Tom Russo, all of whom are grand masters of patient, long term investing.

William Green (01:36:04):
As I write in that chapter, “In a world that’s increasingly geared toward short-termism and instant gratification, a tremendous advantage can be gained by those who move consistently in the opposite direction.” In any case, I’ll be back with you again very soon with some terrific guests, including Matthew McClennan, Annie Duke, and the Nobel Prize winning economist Robert Shiller. In the meantime, please feel free to follow me on Twitter @WilliamGreen72. And do let me know how you’re enjoying the podcast. It’s always lovely to hear from you. Until next time, take care and stay well.

Intro (01:36:37):
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