Stig Brodersen (2:57)

So, Clay, I feel like almost going to come out here of your very first question and say, I don't know, of course I sort of do. But I have this rule that I only look at my portfolio returns once a year, and that's typically in January, where I look back at the previous year and it might seem a little off why I would do that. But I do it to force myself to be inactive, because the more I look at my returns, whether there's been good or bad, the more I worry I would talk myself into portfolio activity, which is the last thing I want to do. And so with that being said, it's not like I don't know what I invested in. It's not because I don't check stock market quotes at all throughout the year. I certainly do. But for whatever reason, not knowing the exact percentage of how the last year has gone, it's just been quite helpful for me. And so here in the show notes, I'll make sure to link to my portfolio. I update it once a year, typically together with a letter to the listeners of we study billionaires and then everyone can track it or completely ignore it. That's perfectly fine too. And so I do provide updates here on the show throughout the year. It's typically together with you or in the mastermind discussions I have with our friends Toby and Hari. But it's a track record that's been public and so far since 2014, whenever we started the podcast where I just disclose all my public investments and typically type up a bit about what I've been up to. And so far I achieved a 29% CAGR. But I'll be the first to say that it's more luck than skill. And I think that ask me in 10 years, I think it will be significantly worse and luck has to turn eventually. This is going to sound like a terrible disclaimer, but I've entered now a phase in my life where I'm focusing a bit more on wealth preservation, growth perhaps, and so that just takes greater priority than absolute return. So a core position of mine is Berkshire Hathaway. And so, yeah, I do think Berkshire Hathaway is going to marginally outperform the S&P 500 moving forward, but there's just no way it's going to return to 29% K or it's just not how the numbers work. And so with all of that being said, it's been a busy year. I bought and sold one stock, so it's certainly busier than I would have liked. But I've been happy with the decision so far.

Clay Fink (5:11)

You mentioned to me that for the most part, you sort of have your investment framework in place. You figure out what works for you, what you want to stick with for the long run. You're a very long term investor. You've held Berkshire for something like a decade or more. I'm curious if you've picked up any new mental models or frameworks this year in 2025?

Stig Brodersen (5:31)

Yeah, it's a great question, Clay. It was so exciting whenever Preston and I started the podcast and we were talking to all of these different investors, reading all of these books about investing and figuring out what should our investment framework be. And then at some point in time, as I'm sure you also experienced, you sort of get your own mints and models and you sort of like have an idea of how to build a portfolio. Not necessarily because that is the quote unquote truth, but because that is sort of like what works for you. And then at some point in time there is also a marginally lower return of picking up yet another investment book and listening to yet another podcast, even though I hope people still continue to listen to us. But there's certainly been podcasts where I used to listen to every single episode and now I'm like, yeah, if the topic is exciting, I'll tune in, but I'm really not going to order them. So I think that there was something to be said about being on a learning curve and then a lot of things are happening and then at some point in time it's more about staying the course. And so I don't know if I came up with any new mental models, but I want to say that I probably started to take operational leverage more seriously this year. And I kind of feel bad about saying it because what kind of investors shouldn't take operational leverage seriously, like all the time? But you know, one of the investments we're going to talk a bit more about here today, Clay, is my investment in Uber. And I think, just think that's a very good example of the framework, because if you quickly look over the numbers, it looks quite expensive. But then if you factor in operational leverage, you see a different Picture. So what is it? Well, if you imagine a textile factory, it needs a certain amount of material labor and some fixed cost needs to be covered, for example, from building and maintaining the factory. But in this new digital world, for a company like Uber, you have the same thing, but just on a much bigger scale. You need a tremendous amount of digital infrastructure. You also need a lot of capital because you're running this massive two sided marketplace. But then once it's up and running, you have a lot of operational leverage. So this is incremental revenue that really flows through the income statement and down to the bottom line because there is just so little new incremental cost to generate that revenue. And so all of this is of course on the spectrum and sometimes the market recognizes it too, but sometimes it doesn't and sometimes the market becomes surprised. So another stock that we perhaps also want to talk about today is Alphabet, which has been another core holding many has been for good reason be concerned about the cost of AI queries and how it would change the cost structure to the detriment of shareholders. And so there was, you know, this speculation out a few years ago just that it might be five times as expensive to do that. And now it looks like, you know, with the way the chips has fallen that perhaps it's twice as expensive. And that makes a big impact whenever you have a business model like Google search. And so yes, gross margins have gone from like 9 to 86% but it's still pretty good whenever you're considering that their AI mode and AI overview now have increased the search tam. So whenever you look at that and then you also factor in that AI search, they've been able to monetize that as well as their legacy business, which I would be the first to say I really wasn't sure about that. That's just another example of that.

Clay Fink (8:50)

You make some great points on operational leverage. Spotify is another one I've been keeping my eye on. And it's also in your portfolio. You know, when a business like Spotify isn't quite profitable yet and they've been unprofitable for several years, I think the market can have a hard time judging what normalized earnings will be. When is the company going to start pulling that profit lever? And back in 2022, Spotify traded for a market cap of around $15 billion. And now in the trailing 12 months, free cash flow minus stock based comp is over 2 billion. So that's brought the market cap to over $120 billion today. So had the company been profitable at that time, the market likely would have had a much easier time estimating the intrinsic value. It's also interesting to consider that companies like Spotify and Uber, they built their user bases during a period of near zero interest rates. You know, the capital is very cheap and startups today just don't have that same luxury, which can really widen the moat of those who have already built the platform, you know, rather than starting from scratch. So here in 2025, you added one stock to the portfolio. That's Uber. Then you sold one of the stocks in your portfolio. That's Evolution ab. Evolution is a stock that's entered many value investors portfolios, including mine in the past and has disappointed many of us so far, at least when judging the stock price. I ended up exiting my position in October of last year and this was a stock after I added it, it just kept taking up more and more of my mind space with all the news flow and drama related to it. So talk about why you sold your position in Evolution.

Stig Brodersen (10:33)

Yeah, it's funny that you should say that. You sold out in October 2024. I looked over my notes and this was actually the time whenever I entered, which I shouldn't have. So I bought Evolution at an average price of 865Swedish kroner and I sold it at an average price of 676. So that's a loss of 21.8%. It's painful for several reasons. You know, one thing, it's just painful in itself to realize a loss whenever a position is down. You know, we can talk ourselves to all kinds of excuses. Is going to turn soon. Mr. Market doesn't know what he's doing. But then whenever we realize a loss, we sort of like have to think a little bit differently about it. Is real dollars that you can't buy new shares for, pay rent or whatever you need to do. And another thing, why it was a bit painful was that I really felt at 676 that was selling an undervalued stock. And I should say for the record, at the time of recording, the stock has continued to slide. So who knows? But anyways, I wouldn't be surprised if Evolution would generate a 15% CAGR over the next decade. I think my conviction is that it's just lower, perhaps materially lower than it was just a few months ago. But I really wouldn't be surprised. The main reason why I sold Evolution was just that I found something better. And we already. Or what I think is better, we already talked about it. There was Uber. And we're going to talk more about it. So let's see what happens. But I'll be the first to say that the world is full of value investors who think that their falling knives are undervalued whenever they're not. Perhaps evolution is that. And I have this rule where I need to take a hard look at any stock 24 months after I bought it, and then to see if the thesis had played out or not. And if the thesis hadn't played out, I have to say or ask myself, should I just say sell out now? Has it just been wrong all along? And so some of you might be listening to this and you said, well, didn't you say that you built it in October 2024? That's not 24 months ago. And so I don't like to break my own investing rules. But I think in life, and this sound like I'm such a hypocrite, but there should always be a rule to count, another rule. And so if the thesis, if the core thesis breaks, which is there's certain element of that, I still think you need to break your own rules. But you know, if I can just quickly talk a bit about evolution, I really like that it offers an 8% shareholder yield. And by that I mean dividends and net buybacks. And it's important not to be too confused here and rely on what the management or public companies are saying that the shareholder yield is. For example, you might hear that amendment of saying we returned equivalent of 4% back to shareholders, but then through buyback. But then the same management then issues 4% in management compensation and you're like, wait, net nothing has happened. So whenever they're saying 4%, oh, we returned $12 billion, whatever kind of generic number perhaps there's still the exact number of shares and nothing has really happened. So the world just isn't always that kind that you can just take everything management say and say, oh, this is money that lands in your pocket. That's just not how it works. But I also want to say, for the record, that is not the issue with evolution. I generally think that they treat the shareholders really well. Whereas for example, a stock like Alphabet, there's just much more stock based dilution. But then you also have to think about the business just so good that you still receive a great return despite it. So you're sort of like, it's simple but not easy. But I would also say that the thesis with evolution was never to achieve a 50% growth that you saw during COVID that was really an outlier. But it does seem completely plausible to me as a now previous shareholders that you might see an 8% shareholder yield from dividend buybacks and then still see double digit again growth. And I just have a significant lower conviction in that happening right now because of the opportunity cost. And like I was getting at before Clay, it is ironic that I entered the stock just as you were selling it. I definitely should have followed your lead. I sometimes feel like we as value investors, we're just our own worst enemy. The best investors, they have this strong conviction that they're right even when the world's telling them they're not. And that can be very, very profit. And if you are right, you can feel good about yourself and perhaps someone will make a movie about you or write a book or do both, whatever. And I certainly know that I have this trait in me where I feel like I'm not doing the same thing as the pack. And that feels good. I'm perfectly fine with that. I felt like an outsider in so many walks of life. And so for me, it's a very comfortable role to be in. And the other thing is that I tend to believe that if you do the same thing as everyone else, you also end up with the same things as everyone else. And so you have to sort of like think about that. But at the same time, there's often a reason why the crowd is doing one thing. And so whenever there's a fire, the crowd runs for the exit. That's typically for a good reason. And so knowing when to go with the crowd or go against the crowd is just not that easy. And I'm not shy to admit that you've just been so much smarter than that. I've been about evolution, so it isn't the first time, and I strongly expect it won't be the last.

Clay Fink (15:53)

You're far too kind. I was taking a look at their most recent earnings report and the company had, I believe, their first ever revenue and earnings decline. And had you told me when I bought the stock just two years prior that they would have an earnings decline this year, I would have said that you're totally crazy. But that's exactly what happened. And I think that's a lesson for me that, you know, we're just going to be wrong with some of our picks. And that's, you know, just one of the realities of picking stocks because we just don't always know what the future has in store for us. And after being accustomed to watching, you know, the multiple of many great companies expand up until 2025. You know, this year has also been just a lesson of, you know, how brutal the market can be in terms of re rating a company's multiple. I think evolution's just one of many examples. Maybe it's because the growth is actually decelerating, the business maybe isn't as strong as investors thought, or simply it can just be due to sentiment changing and you know, the market today has priced evolution as if, you know it's never going to grow again, which you know is a very dramatic change from just two or three years ago. And, you know, just a reminder of how quickly things can change for a company and for us as investors because the market's always pricing in its expectation of the future. But on the other hand, when we look at Uber, their growth has just remained robust throughout the economic cycle. Talk to us about your thesis on Uber and it being the only stock you added this year.

Stig Brodersen (17:27)

Yeah, thank you for the handoff, Clay. So some of the listeners might know I started a position in Uber. The reason why I say that is because I talk about all the stocks I have on the mastermind discussions, which I do once a quarter. Again, I'll make sure to link to all of it so you can go back and sort of like real time and see, you know, this is my amazing stock pitch for Evolution and why it's going to go to the moon. And then you can sort of like point live today and be like, no, that just didn't happen at all. Anyways, everything that's publicly traded, I include my portfolio and sort of like you can see the bull and bear case on that. But going back to your original question, yes, I added or bought Uber and I work with a watch list of roughly 50 stocks that I feel I understand to varying degrees. And so before I make a startup position and start a position is like roughly 1% position for me. I think a reasonable need to understand the company and the derivative of that what is roughly the intrinsic value. And so at that point in time, whenever I make a startup position, it's not really the most extensive research. I would look at say three years of earnings call the most recent 10K understanding proxy, perhaps some of the previous proxies. Just a bit of skull butt too. It's really just the standard stuff. And I've learned from bitter experience that I'm not smart enough to really understand the business before I own it. So no matter how much research I do, it's more about getting the process started. So for example, after learning about Uber, I am Perhaps not as excited about the membership program as I originally was. I'm still pretty excited, but in the beginning, I was like, this is the best thing since sliced bread. Now I'm a bit more hesitant about some of the things, but perhaps we can get back to that later. Apparently, it's just more now. Whenever I read about the membership program or whatever it is about Uber, I process a little bit differently because all of a sudden, now you think like an owner. And I just know from experience I'm a slow learner, and I would love to scale up to a full position, which is 10% for me, but it's just too risky to do that right off the bat. But even with a company like Evolution that we talked about before, I did the same thing, and I took my 1% startup position, and then I doubled down, and then I was completely wrong. And so it's not because the process is necessarily bulletproof. Not at all. And so I really can't tell you why, Clay. But, for example, whenever I read about Uber's cooperation with Delta Airlines, and this was before I made my regional position, I was super excited. And then you start owning it. You're studying some of the partnership a bit more, and what is disclosed or what's not being. And it's just fascinating to me just how your brain just process things differently. And so it's kind of like this weird situation where you have the most confirmation bias whenever you own it, but you're also the most critical. So it's a bit more extreme owning the stock, at least in my experience. So it's just a. It's really just a part of the process to start with. Well, a startup position. Let's take a quick break and hear from today's sponsors.

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Stig Brodersen (23:55)

All right, back to the show.

Clay Fink (23:57)

Uber's been an interesting one for me because I think there's so much bias and baggage that every person brings when they first start looking at this stock. I can just use myself as an example. I was Sean and Daniel on the Intrinsic Value Show. They pitched Uber and Initially, I was just pretty skeptical. Obviously, I know that as you do too. I watch a lot of 13 Fs and look at what a lot of super investors are owning. And Bill Ackman took a major stake in Uber earlier this year. And I think everyone, for whatever reason, naturally assumes that autonomous vehicles would wreck their business model since they have all these drivers, they pay these drivers to implement the service that people are using, going onto the platform and whatnot. And then I can really see where you and Sean are coming from and taking a position in Uber. I've just been so eager to learn more about it. You know, I talked a bit about it with Sean here a few weeks back, and then I'm very curious to learn more from you here today. So you started with a 1% position on Uber. How has that changed over time?

Stig Brodersen (25:02)

Yeah, so it's currently at 7% of my investable assets. It's purchased at an average price of $95.45. And one of the things that's really interesting whenever you invest in a stock is how you start learning about the competition. And I'll be the first to say, like everyone else, Tesla, that's the one thing everyone wants to talk about. And whether or not it was a major threat to Uber. And I wonder if I was too. Well, the jury is still out. I went into my analysis thinking Tesla probably isn't too big of a risk. And then I started it more. And now I actually think that Tesla is even less of a risk than why retail started, which probably sounds completely off because people listening to this would be like, no, no, no, no. That's the big one. That's the one you have to look out for. I guess I just see all the risk. Who knows, I might just be ignorant. It might be the confirmation bias that I'm susceptible to. But you know, most people look at Uber as a right hailing company, and delivery is already half of gross bookings, and they're growing faster than ride hailing, or Mobility, as this segment is also called. And so I wonder if even if Mobility, they have competitors that are better positioned than Tesla to compete with Uber. I think that's one thing time will tell if I'm right. But I have to invoke the terrible evolution investment once again and rub my nose in it. As you can tell, I'm far from always being right. And I also want to say that if you dare to log into my share site account, you check. I would be surprised if my batting average were higher than 60%. And even I would say that if you define a winner as something that outperforms The S&P 500, I would say that it's probably lower, perhaps by a significant margin. And I think that's very interesting. Whenever you go into the track record of the so called super investors, what you would find is that it's dollar weighted, it should be dollar weighted, where if you make a 1% position, it carries a one tenth of the full weight of a 10% position, for example. And so it's very important whenever you are making your investments that you have high conviction in what you invest more in. I know it sounds very simple, but it's actually at least to me it took me years to figure that out, how to size things, and I probably still haven't figured it out just yet. So I think looking at super investors portfolios and I kind of feel like I don't really answer your question at all, I think that's so important and you're seeing like, are they right or are they wrong and are they right and wrong with the, with the biggest bets? I think that's something to consider. So anyways, let me throw it back over to you, Clay.

Clay Fink (27:35)

Yeah, you're certainly right that betting bigger on your higher conviction bets makes a lot of sense, makes a huge difference because the great opportunities that seem obvious are quite rare. And the other thing that's difficult with betting big on these big mispricings is, you know, figuring out how to fund that position. Right. If you look at, you know, the tariff tantrum earlier this year, a stock you're looking at might be falling by 20, 30%. But the your other holdings are probably falling as well. On the other hand, not too many people have the confidence to hold a lot of cash to wait for those opportunities either. And I feel like you've struck, I think, a good balance with this holding some ETFs in your portfolio. Because you know, if you look at some of the ETFs you hold, it's very likely that they didn't fall near as much as say an Uber would fall during a time like that, when Uber might fall by 30%, maybe a world value ETF would fall by 10%, something like that. Just using generic numbers. And when I look at Uber's financials, it's easy to see why one can appreciate their level of operating leverage. This is a business that generated nearly 50 billion in revenue in the trailing 12 months. 16 billion in net income. And in the meantime, their CapEx line item is only $300 million. So every incremental ride that they generate is directly generating more profits for shareholders. Whereas in years past, each ride would only add to the negative side of the income statement, as Uber had to dilute shareholders and do things to figure out how to pay for all these rides. And since it has so little capex to keep the business running, this allows them to also repurchase a significant number of shares. When you look at their three major segments, they've seen strong growth, at least in the big two. You have the mobility and delivery that's the majority of their business, and then they have the freight revenue as well. And as I've learned more about these tech businesses, I've come to just better appreciate the value of owning the platform. So you look at Amazon, for example. They own the Rails by which E commerce flows. Regardless of different trends, different fads, they benefit from the continued growth of E commerce and they don't take the risk that many companies are taking by risking going out of fashion or a competitor just eating their lunch. Now, in the case of Uber, one could say that they own the Rails for ride hailing. And in your case also looking at delivery as well in many countries, which tends to be this winner take all dynamic where the biggest player establishes a network effect that's essentially impossible for other players to dislodge. Which helps explain why they have consistently had around 75% market share here in the US and is looks to be significantly more profitable than their main competitor, Lyft. And if we assume that Uber won't be disrupted by autonomous vehicles, how do you think about just their core drivers of growth going forward? As they've seen just significant growth in recent years, what do you think that looks like going forward?

Stig Brodersen (30:39)

Yeah, it's such a great question, Clay. And I just want to say for the record that I do think there will be a disruption of autonomous vehicles, but I think it would take long before it happens. Let's say in the States, that's very much at the frontier, perhaps aside from China, but even in the States it was still just very, very far from it to be a standard mode of transportation. And then the other thing is, perhaps I'm sidetracking way too much here, but I do think that whenever EVs are going to be more the norm, at least significant, more significant than today's. I think one of the biggest corporate beneficiaries would actually be Uber. But much of the growth I think you will see from Uber is just from higher frequency. And you know, you mentioned Amazon before thinking about Amazon. We all used it for a very long time. Just think a decade back compared to today and a decade ago. I can't speak for you, Clayback. I certainly thought of Amazon as a very established player and then think about how much you use it today. And so whenever it comes to Uber, I think we're just in the very early stages and Uber will in the future be even better at matching the delivery of people and goods at your convenience with a much wider selection. So while they're certainly entering new markets both with mobility and delivery, it's just, I think frequency is going to be the major growth lever.

Clay Fink (31:56)

Yeah, as I mentioned with Uber, we all come to this stock with our own biases and I'm based in the US and the US is a major part of their business. Today you're based in Denmark and interestingly, you actually don't own a car. So I'm not sure how often you use Uber, whether it's every day, once a week or not. What's the use look like for you? I'm just curious.

Stig Brodersen (32:17)

Yeah, I think I probably use once or twice a month, but I don't think I'm the best representative. So I have a bit of motor sickness, so I don't mind walking for an hour and I know to a lot of people it probably sounds absolutely ridiculous, but I love audiobooks, I love podcasts. So if I'm going somewhere and it's like 5km away or whatnot, I'll just walk and then listen to, I don't know, you, someone else. So I don't know. But it is sort of like, you know, especially if you live in a city area, it's not too uncommon not to have a car here. It's kind of just the landscape, I think, you know, for whenever I'm in the States, I can sort of like, I can see many places. Why it would be, I don't know, outright dangerous because there are no sidewalks or whatnot. Like everything just looks a little bit different. And you visited Clay. It's a little bit different here. So I don't have a car and I'm perfectly happy with Uber, so that's my mode of transportation, I guess.

Clay Fink (33:10)

It is certainly interesting. The city you live in is very walkable, so you could easily go walk and get coffee, go walk and get groceries. So it's not really a big deal. Where I'm based in Nebraska here having a car is a non negotiable. Like if you don't have a car, you're kind of crazy. But you know, when you look at Uber, investors quickly find that the biggest cities capture a lot of these Uber rides. You know, if I lived in London, for example, example, owning a car would probably be a big headache. And I could see why in many of these cities, people would use Uber to commute to work or use Uber to Uber Eats to get lunch and whatnot. So there's a lot of nuance in looking at a stock like this, as always, and on earnings calls. Uber's management team has also talked about their continued reinvestment and innovation to expand their offering to users. Which brings me to mention Uber One. So Uber One's their paid subscription service that combines the benefits for both rides and deliveries. A Standard membership is $9.99 per month or $96 per year. And many of these big tech companies are turning into the subscription model. You look at Amazon, Netflix, YouTube, for example. With Uber 1, members get discounts and credits on rides, $0 delivery fees on eligible Uber Eats orders, priority service, and just more exclusive perks. And for those who utilize their ride hailing service often, it just seems like a no brainer to pay for this membership. And for Uber, it really allows them to lock in customers who might otherwise explore different apps such as Lyft from time to time and also incentivize them to utilize the offerings that they're paying for. Similar to how, you know, we're all incentivized to order off Amazon or visit Costco because of the monthly or annual fee we're paying. Of their 189 million monthly active users, it's estimated around 15 to 20% of customers are Uber One members. And an Uber One member spends around three and a half times more money than non Uber One members. And I think they're doing a pretty good job of converting many of their users to Uber 1. I actually booked an Uber just the other day, and as I was booking the ride, they offered 6% cash back with a free trial of Uber One asking me to join, essentially. What do you think of this membership program of Uber 1?

Stig Brodersen (35:33)

No, I love it, Clay. And I also just want to say for the record that, so I'm working from home now. So for that reason and so many other reasons, I don't take an Uber for work, but I actually used to take a cab for work most days. And it probably sounds extravagant to some, but it's. I think it also really depends on where you live and taxes and a bunch of other stuff. And certainly in some cities, you know, buying a parking spot, it's almost like buying A condo. It's just so ridiculously expensive that it's just unbelievable. So there was actually a time whenever it wasn't Uber, for the record, but it might as well have been Uber, where I more or less used a subscription service to bring me back from work. But anyways, I think Uber 1 is wonderful. And I would generally say that everything they do to have a somewhat recurring revenue and increased frequency of use, it just makes a lot of sense. I know that's probably not the most detailed feedback I can give. I'll try to be a bit more specific. But, you know, sometimes whenever you're looking at a business and you sort of, like, take a step back, there's something very powerful about thinking this really makes sense. Like, can you, as a user and shareholder, say this makes sense? And so before we hit record, you know, Clay was asking me what was going on. And of course, nothing is going on in my life. I do have someone from the Tip Team that's visiting me here over the weekend, and so I set her up with an Uber account. So it's tied to my account. So whenever she's navigating here in the city, she would do an Uber. Camille, from our team, whenever she was doing the event together with you guys in New York City, she was on a similar arrangement where, you know, she would just book an Uber and then she would just go with a company account. So I know that having a company subscription like Uber didn't invent that. So that's not what I'm saying. What I'm saying is that Uber is doing a really good job, whether it's in the Uber one membership or not, to make it very easy for you to use their service in the way that's most suitable for you. And it's very easy for me to see how they discriminate on the different service. And I don't mean discriminate like any kind of negative way, but it's so intuitive in terms of, okay, you're going to the airport, you probably should have the reserve function. Does it make sense for you in whatever kind of life situation you have, that you now have the team function? Does it more make sense for you to have the chef? All of it just makes a lot of sense. And Uber 1 also makes a lot of sense. It's more than a billion dollar Runway and more than 60% year on year growth. And it's kind of like interesting that you compared it to Costco's membership. I think that's a good point. The margins of the memberships are great, but then also to what you said before, some of that would come out of the margins of the core product, let's say the 6% cash back there. But anyways, they're really, really good at driving that frequency. And it's just a major win both for delivery and for ride hailing. I don't know if I'm just talking up my own biases, but we use delivery all the time. And I don't know if it's just me, but I have all these intentions of I'm going to do more home cooked meals and then I always find myself ordering in. It's just very powerful in terms of increasing frequency. It's a bit like, I don't know if I should even make this comparison, but you know, the gym membership I used to pay for, but I never used, so. But anyways, the membership program, Uber 1 has historically been geared towards delivery, but we see it now lean more into ride hailing or the mobility segment. And I think that's a very powerful combination. Back in 2018, the CEO said that ride hailing was like books for Amazon and he described Uber's ambition as being the everything transportation store. So this was the analogy to Amazon being the everything store. I'd say that even as a shareholder, I don't think I completely share his enthusiasm, but I think I'm directionally in the same camp. I do think that Uber can include new vehicles, but comparing it to Amazon prime is probably a bit of a stretch. I guess. He's talking his own book and I don't fault him for that. And then the other thing I would say, because I think I was doing a bit of a knock there on Uber 1 previously, I think that it also sort of makes sense. You have these partnerships and they don't really disclose the results, but they're setting up a lot of partnerships right now. We talk about Delta Kruger comes to mind. It was not too long ago. And so it's not 30 million members who deliberately chose to pay for that membership. A lot of that is baked into those partnerships where people are getting it whether they want it or not. And it's not disclosed whether or not in their numbers that includes those memberships. I strongly expect that they do because they're talking their book. It's one of those things by. Okay, we just now start to look more into details like that.

Clay Fink (40:10)

What also really intrigued me about Uber and really caught me by surprise is that this is an advertising business too. They have an advertising segment that generates north of a billion dollars in Revenue. And if we correlate Uber to Amazon again, Amazon can make little to no money from their retail business, but still be hugely profitable thanks to things like their membership of Amazon prime or advertising. And I just can't help but see the similarities here with Uber as well, which really illustrates the power of optionality with a company like Uber where you do own the platform and you have these other avenues of monetizing that platform. And with their Uber One membership, I wouldn't be surprised if they can continue to spin up new ways to create new business segments in the future.

Stig Brodersen (40:59)

Yeah, that is certainly a part of the thesis. You see that with Spotify too. You know, they just started with music and then they added podcasting and then audiobooks here more recently. So you might expect some cannibalization, but really you just see more usage and engagement per user. So that has actually grown in total. I think Uber would do it even better than Spotify. Ride hailing, delivery, just the cannibalization risk is just less, I guess. And also they complement each other really well and really lean into Uber's core service. And just matching on that last mile is just much more complicated than what it looks like. But really to your point, what you want, whether you're Amazon, you're Spotify, Uber, is that you want people to engage on your platform and then once you use the platform, you can collect data and you can monetize them. And so one example that comes to mind is this is a brand new business unit, they make very little money, so let's see what happens. But Uber are seeing themselves as a platform for gig workers. So whenever you're a driver and let's say you're not doing ride hailing or delivery, that second you can do something else like AI labeling or whatever on your phone while you're waiting. So you can always make money on the consumer side, Uber just has so much data on you that they can use to deliver targeted advertising. And right now it's a billion dollar revenue business, but it's growing fast. And so it might seem like it's a small part of the overall business, but again, we're very much in the early innings and way earlier than for mobility and delivery in general, which again, I'm biased, but also think we're in the early innings of that. And so just to throw some numbers at you, Clay, for delivery they make 1.6%. And then overall for Uber's business, it's 0.9% of gross booking and they want to get to 2% overall. Let's see if that happens. But keep in mind that advertising typically offers margins of 70 to 80%. So a dollar is not really a dollar. And just to give you something to compare it to, for mobility, there's a take rate of gross booking of 30% and 20% on delivery.

Clay Fink (43:02)

Let's talk about what you refer to as the elephant in the room for Uber, it's autonomous vehicles. And I wanted to present a thought experiment to you that isn't meant to serve as the bull case for Tesla or avs or the bear case for Uber, but more so an exercise of destination analysis here. Elon Musk, as you know, has made countless predictions, some much more accurate than others. And regardless of the predictions he's made, what he's done in terms of producing vehicles, to me is pretty amazing. So over a 10 year period from 2013 to 2023, their total vehicle deliveries went from 20,000 to 1.8 million. So I don't think it's a stretch to say that there's at least a possibility of them rolling out a substantial number of robo taxis in the future, not necessarily in 2026, perhaps in 2030 or later. And Musk's trillion dollar pay package, part of the incentive structure is producing a million plus robo taxis. And if Tesla, or any company for that matter, were rolling out many of these robo taxis and providing the mobility service that Uber is providing, and doing so at a much lower cost, or it became clear that a player was on their way to doing that, how would you think about your investment in Uber and how it's going to impact their business?

Stig Brodersen (44:27)

Yeah, it's certainly a risk factor and I hope it didn't come across like I don't think it is. Perhaps in my book it's a little bit smaller than a lot of investors look, but who knows? I think the first thing I want to do is to challenge the premise a bit. Whenever I look at 2030 and certainly further into the future, I think delivery will be more important than ride hailing for Uber. So that's just one thing. Delivery is so much harder to automate than ride hailing, because people are, well, people, they have eyes and they can move around and walk into a building and walk out again. And some of those things are just really hard for robots. Aside from some minor pockets, such as select college campuses, it's just very hard to automate delivery of various goods. And so if you look at, let's say, shipment on a container ship from Asia to North America, it's very economical. To do that per container, per mile. Really picking up food from a restaurant and then opening the door, stepping over the doorstep, getting the attention of the staff of the restaurant, ensuring you have the right food, dropping off at a house two miles away, pretty basic stuff for a human. It is surprisingly complicated to fully automate and it's very difficult to do it economically. So you have, you know, the dumbness pizzas of the world who have shown that some of that can be automated. It's just not profitable on a wider scale. It's very, very complicated to do that. And delivery is such a rich topic. And the deeper you go down the rabbit hole, the more you see the power of Uber. For example, they created this wonderful two sided restaurant marketplace in cities all around the world. And as a restaurant, you can advertise and you can offer users different incentives to buy from you. And the more competition you have in the marketplace, the more the users benefit. And so the restaurant. And you can essentially replace restaurant with any goods or service that can be delivered by Uber. They bid through an auction system, not only through impressions of clicks, but also gifts for users like buy this meal and get another meal for free. And so implicitly you compare the marginal cost to the marginal revenue. And so if you see how effective that is on scale and you automate that and you have a lot of markets all around the world, it is exactly what Google is doing with their advertising business. The process is really the same. Every time that there is something called auctions, you should as a shareholder very much pay attention because you capture so much of that consumer surplus. And so it is very hard to compete in low margin businesses such as restaurants, which is your borderline commodities. And it's really difficult to make more money than your least disciplined competitors. But if you provide the tools to facilitate the competition, like Uber or like Google, you win either way. But really, to your point, Clay, what if someone can do ride hailing at a much lower cost than Uber? I make no allusions. That would definitely break a core part of my thesis and certainly disrupt what I would expect to be the second most important business unit for Uber. Because there are hardly any switching cost in choosing the imaginary Tesla network over Uber. You can basically just download a different app and then have your Tesla whatnot, robo taxi come to your door. And why would you not do that if it's cheaper than Uber? Whenever I look at the numbers, it's still very expensive to build AVs. And as people continue to compete with AVs, the salaries will be pushed down to stay Competitive, clearly not to zero. But globally there's a lot of room. I mean, capitalism is just that brutal. And Tesla also faces other headwinds. I'll be the first to say that US is friendlier than, let's say, Europe. Don't even get missed out on Europe. And US is probably aside from China where they're most friendly. But there's still a long way before the regulatory framework is in place. And so I'll be the first to say it's usually not good business to bet against Elon Musk, and I don't think this is any different. That said, I'm not sure if Tesla is really going to be the lowest cost provider here. I'm not really only talking about the cost of making EVs, but also the need for the best metric technology to keep utilization rate as high as possible, because that is really what's driving down cost. And yes, you also need cheap batteries and you need cheap materials in general, but utilization rate is really, really key. And so even Waymo, who are partnering some places with Uber but also competing with them in other cities, they get the best utilization rate with Uber's matching technology. And so if you look at Uber and I feel like I'm probably way too bullish and I'm way too biased, please take it for what it is. But they have famous taking stakes and competitors around the world where they could not compete with the locals grab in Southeast Asia comes to mind. Careem in the Middle East, Didi in China, and perhaps what gets a little less publicity is that they're really recycling these equity stakes and then putting them into various AV providers that work together with Uber. And someone, I don't know who, but definitely someone will emerge as the winner in the AV space. I don't know if that will be Tesla, but even if it's going to be Tesla who's going to win, I think I see a pretty strong case why teaming up with Uber is going to be a win win. Let's take a quick break and hear from today's sponsors.

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Clay Fink (52:58)

Billionaires for $1,000 off all right, back to the show in the off air. We've talked a bit about what we can call the layer below the biggest tech companies. Of course, everyone has their eyes on the Magnificent Seven, but there's also this layer below that we can call it think the Ubers, the Spotify, the Shopify of the world. And I also discussed this topic a little bit with Sean o' Malley on last week's episode. How about you talk to us about how you view this framework?

Stig Brodersen (53:30)

So you have this famous example in value investing circles about whenever gold was found in Sodom Mills, California back in 1848. And then you have the massive influx of miners the following year. So you have to name the 49ers. But anyways, really only a few gold diggers made a fortune. Most went broke. So the safer bet was really to be the one providing the picks and shovels. And many investors have naturally asked themselves, how can that be replicated in today's AI boom? And many have come to the logical conclusion that they must invest in Nvidias and TSMCs and ASMLs of the world, or perhaps the biggest cloud providers such as Amazon, Alphabet and Microsoft. With that in mind, I've been thinking about, are there other ways we can place our bets? And so to your point before, I think there is like a layer below companies such as Uber, Spotify, another example could be Netflix. They have a lot of valuable data. Now, they don't have the tech stack as the biggest players, but they can buy access to those resources. And then in their own niche, they can dominate it because they have the best data available. And so look at how Spotify collects data on you and how they in turn uses Google and Amazon's cloud to monetize that data on you as a user. And historically, and I'll say also today, they have this vast amount of data of how you use their service. So for example, if you stop a song, they might be figuring out why is it that you did that? But now they don't even have to guess anymore. Now there's actually a feature in Spotify where you can speak directly with them and tell you, hey, I love this song, but I was just making breakfast, whatever. So whenever you see here the power of AI, it's really about who has the best data and who can use that data the best possible way. Then they can customize the product for you and it gives you more pricing power. And so you're really doing that on steroids with that layer below with the new technology that becomes available. So you'd certainly have companies such as Alphabet and Amazon that wins simply by providing the cloud computing. But it's still hard for them to compete with Spotify, Uber and Netflix, who have more niche specific data. And it's even harder for Traditional businesses in the new world of abundant data and AI to compete with big tech and then what I call the layer below them. And so it took me a long time to catch up to that. And I had for the longest time is probably because of my background as a value investor. But I've been focusing heavily on those multiples. This is not my way of saying you shouldn't be looking at multiples. I think that's probably the worst piece of advice you can give. But I think we've all been surprised by how long some of those businesses can grow, how much they continue to reinvest in themselves, and how much you need to normalize those margins. And so for example, I bought Spotify back in 2020, I sold out again in 2021 and then I bought it back in late 2022. And I would be amiss if I didn't say it was an eight bagger cents. But then I'll be the first to say that I invested so little. So please don't be impressed. You should probably be disappointed in me that now that I talked about why you need to swing back, I certainly didn't. But anyways, one problem really just follows the next year because now I have much more conviction in the framework of picking winners in the layer beneath the biggest tech companies. Then at the same time I'm also starting to doubt whether my conviction is due to what is called resulting. Is that because the stock market is telling me that I'm right? Am I now coming up with excuses for continuing to investing in a really hot stock market? So time will tell, but I think it's important to not think too binary about investing. As in either you're right or you're wrong. Today I see this a bit more as a game of poker. In poker you play probabilities and you play human psychology. So if you play no limit hold' em and you would love to go all in against your opponent with aces versus kings before the flop, and if you have no idea what I'm talking about, that's completely fine. But that means that you're going to win 82% of the time, but you can still make the right decision, get all the chips in and then still lose because you're going to lose 18% of the time. And so you need to separate the signal from the noise. And you just can't control which cards the dealer is going to put on the board. And so investing everything is on this spectrum from 0 to 100%. And there are very few things that are either or it's always somewhere in between. And so you make your investment decision based on probabilities and then you size them accordingly because you can be wrong, you can be unlucky, and very often it's hard to tell whether you've been wrong or unlucky. Whether it's poker or investing in poker, I have to call this out. I found it ironic how my friends and I back in the day, if we had a losing session, we always told each other we've just been unlucky. And then whenever we had a winning session, it was always because we're fantastic poker players. And I found that framework to be quite useful to have in investing. Well, not the exact one, I should say. I tried to figure out if I've been right on an investment, have I really been right? Or is this an 80% probability that just due to resulting was actually a good decision. And so it's one of those where you have to stay humble if you're right, but also don't beat yourself up if you're wrong. It's all about probabilities at the end of the day, and that's the game we're playing.

Clay Fink (58:58)

Technology has certainly enabled these mega winners in the Magnificent Seven to emerge. And I wouldn't be surprised if this new AI era enables the second layer of big tech to be a fruitful hunting ground. And in light of this discussion, it reminds me of something I've thought about in recent months and that's the opportunity costs of investing in smaller companies versus these larger companies that are in the US consumer facing and everyone sort of knows about. So the case for small caps or small companies can be that there might be more mispricings, they might be less discovered, and there might be more room to grow since they're smaller and you can oftentimes get pretty attractive valuations. But thanks to many of the people I've met in our Mastermind community, I've come around to putting a bit more focus on these larger, more well known companies like the Alphabets and Ubers of the world. Haven't been smart enough at least to add either of those to my portfolio. Although you've owned many types of companies in the past, I sense that you've gone through sort of maybe a bit similar evolution. I know we didn't talk one on one back in the early 2000s, mid 2000s, about some of the stocks you owned, but I hear stories about some obscure companies that you've owned. How about you talk about how you figure out what Pond do you want to fish in when it comes to investing in the market?

Stig Brodersen (60:23)

Yeah, it's a good question. So if we start with the size of the company, I don't think too much about that. I used to very much be thinking about if this is the biggest company, do they have scale advantages? If it's a small company, does that mean they have room to grow? I still think that's important consideration. But if you look at my portfolio, the smallest company I have has a market cap of less than 2 billion. And then I also have Alphabet, it's more than 3 trillion. So it really comes down to which companies I think I understand. Then to the investment thesis. And another thing I've increasingly been considering and that perhaps tilts me towards larger companies, everything else equal is that I tend to invest in businesses where I find them interesting and it's products that I use and Alphabet and Uber fits well into that bucket. And so whenever I started my value investing career, I would invest in this obscure offshore oil and gas equipment company. And I once invested in United Therapeutics because I felt I had this solid thesis about pulmonary arterial hypertension medication. I don't, it turned out. But not only was it just far top and shower comitism, but it wasn't a topic I really cared to study. And if it wasn't for my investment, I probably never would study it. But it also means that I don't really read up on it. And so that type of forced reading just hasn't worked out well for me. And I found myself studying the future of AVs and cloud computing. To me that's just interesting. I read about it before I invested in it because I found it to be interesting. And so I do think that that curiosity gives you an advantage because at some point in time you may be forced to sell or you want to sell. You need to have a lot of knowledge about the moving parts in the industry. And if you, or at least I probably just speak from my own painful experience. If you're entering into an area where you're not naturally curious, you would mainly be reading up about that specific company and not so much about the competitors. So you don't always get the same overview of what's going on. But again, back to your point about the size of companies, I also think it depends on what do we mean by that. So for example, in the last Mastermind discussion I was pitching remedily. So it's a $2.6 billion market cap company and so I think that they could become a large player in their Mittens space. And let's say you would take them to a $10 billion market cap. Is that a small or big company? Well, if it's in the remittance space, it's actually a large company. And then they said, oh, we want to expand these traditional business transfers. And in that case there might be a 30 billion market cap company, but then they're a small player in a much larger market. And some of you might be saying, well, does it really matter? And isn't like 30 billion better than 10 billion? Shouldn't we just be happy? And then we could take it one step further and say, well, what if they had to significantly dilute shareholders to get to that 30 billion market cap? You might get a much better return if they stayed in the remittance space and they organically grew to a $10 billion market cap while they're paying out dividends and buying back shares. And so I can't help but think of one of the companies in your portfolio, your consolation software, who are buying near monopolies in niche markets. And those markets might only be worth millions or tens of millions of dollars. But then if you have enough of them and you have a moat around them, all of a sudden you have a market cap worth tens of billions.

Clay Fink (63:49)

Of dollars transitioning to another one of your holdings. It's been a winner this year at least. It's Alphabet. It's up 54% year to date as of the time of recording. And Warren Buffett's Berkshire Hathaway joined the party by purchasing over $4 billion worth of stock in the most recent quarter. And as you've outlined many times in the past, Alphabet's a core position in your portfolio. And recently, as many know, Michael Burry hasn't been shy to call out the AI bubble and how big tech's overstating their earnings by understating depreciation. What's your take on just the AI race? Alphabet's role in the AI race? And how do you think about the never ending spend on capex? That a few of these big tech companies are in a race? Their capex is just ballooning to unprecedented levels. How do you think about this?

Stig Brodersen (64:41)

Definitely Alphabet looks well positioned together with Microsoft and Amazon to be the backbone of the AI revolution. There will certainly be other players joining the game. I don't see anyone competing with them. The big three right now. Who knows? We know that the mighty fall. If you look at the biggest companies in the world by market cap, in 1990, eight of them were Japanese. Today the biggest Japanese company is Toyota. It's place 54. Capitalism is brutal. And so fast forward, if we look at the biggest companies in the world in 2007, you find four of the all majors in the top 10, you will find zero today. Then some might say, well that's because all depletes and then data compounds and then argue that this time it's different and the AI titans will remain titans for a very long time. Perhaps that is the case. I think we're very susceptible to recency bias. I had a really hard time imagining ChatGPT or the iPhone before I started using the products and now I can't imagine life without them. And I don't make any illusions that the big three won't eventually be dethroned. I mean, I've said it before, capitalism is just that brutal. And so the question is, how long would it take before it happens? How much money will you make in the meantime? And if the money falls, can you exit your position before the market realizes it? And it's definitely easier said than done. But recency bias aside, it's not lost on me that it's very hard to compete with someone who provides you with a service that's customized specifically for you at a very low or no cost to you. Alphabet is an expert in that. And I would argue with the rise of AI it would be even more prevalent. I've been buying Alphabet since 2018, roughly a five bagger from my starting price and a four bagger from average price. Tying this to a question about the big to small cap stock question. You still see very high returns on your investment even with these massive companies. I've certainly been surprised by that. And again, it's not just about market cap growth, even though that has been impressive enough with Alphabet, but it's really and also in dividends and share buybacks. To your question about CapEx spend in 2015, the guidance they've given has been 91 to 93 billion dollars. And then for next year they said significant increase, but they haven't given the exact amount. And so one way is to ask how much of this is maintenance? Capex, how much of that is growth? And my best guess is that there's more growth than maintenance right now. You can for starters look at the trailing results and compare it to capex. At the same time, if Google wants to protect search and ads, it has to stay at the forefront. Unlike Microsoft. I should also say that rents Nvidia, Google is building their entire stack themselves. CPUs, data centers, modelers, and so on and so forth. So I'm inclined to say high rewards and perhaps high risks. Time will tell. I have a friend who buys companies for a living and he jokes with me and he says the worst line that he hears from brokers whenever he's looking for new companies to acquire is, look at all this high CapEx, it's going to give you a moat. And he's always like, ugh, this is just painful because high capex basically just means that you're going to have high replacement costs later and not something we like. But also think there is a nuance here. I'm not going to pretend that a lot of capex is awesome. That's not my intention at all. But at the scale that Alphabet and Microsoft and Amazon operates, the spending is so massive that it actually limits who can even show up to compete. Most companies simply can't afford to burn tens of billions a year. And so the moat isn't the capex itself. The moat is having a business strong enough to sustain that type of spend year after year. And so whenever it comes to AI, you can't really half compete. I don't know if I'm going to commit to that word. It's not like if you spend $5 billion instead of 50 billion or instead of 100, like oh, now you just have a smaller Google, you basically just become irrelevant. So it is an economies of scale game where the winner gets cheaper computing and better models and then the smaller players just get crushed. But then I also just want to preface that in saying it's of course only a mode if the spending is going to give you a return. And some would say that's still left to be seen.

Clay Fink (69:02)

You do make a good point that if Alphabet spends somewhere less than $90 billion on CapEx, it could be quite an expensive mistake. They don't really have the choice of half competing, as you say in AI. And believe it or not, when you look at Apple, their capex has remained relatively flat over the past five years, so they've deliberately stayed away from this AI arms race. And yeah, it'll be interesting to watch it continue to play out. And I was tuning into some of the other earnings calls for some of these big tech companies and they almost fear under investing despite how much they're looking to spend in 2026, which is just amazing to watch. And I've heard you talk about another one of your mental models which we can refer to as just simply having an unfair advantage. How about you talk more about this mental model and what it means when you're building out your portfolio.

Stig Brodersen (69:57)

Yeah, it's an interesting concept. I was speaking with a friend the other day, let me just take that one step back here. And he wasn't too happy with his day job so he asked me which business he could start. And I used the same mental model here of unfair advantages. So together we found his wife is a veteran so they could buy a house with no money down. His father in law is a contractor so they could get help and buy materials at cost, both him and his wife quite handy. So they can do a lot of the work themselves. And so if you add that and then you also add, they don't have kids, they are quite flexible, they can move around. If you live in your primary residence and you're based in America, you can fix it up and then sell it tax free after two years. And so they had all of those advantages. And so that is what I would call an unfair advantage. And I kind of feel like as I'm saying it, this is going to sound terrible because I don't want to make it sound like it's unfair. If you're patriotic and you've been serving your country, that's not my intention. But what I mean whenever I say unfair advantages is that it's hard to compete with if you don't have those advantages yourself. Like if you're going toe to toe to them, you're just going to lose. Similarly, whenever you build and manage your portfolio, you should really lean into your unfair advantages. So one of the things that I would say that might be unfair, I don't know, but I've met a lot of people, whenever they have money, that money is just burning a hole in their pocket. And I, for whatever reason don't feel the same way. And so I live on a relatively small part of my income. And so it makes some things a little bit easier in the sense of it allows me to be more long term focused. I don't have to rely on Mr. Market whenever I sell my stock. Well, indirectly I probably have to because I want a good valuation, but I'm not forced to sell. And so if you live within your means, you can argue that that is sort of like an unfair advantage if you like, because you have that advantage that you decide whenever you sell because you're not forced to do it. And so the framework of unfair advantages, sort of like a cousin of Peter Lynch's, invest in what you know. But it's certainly not the same. Being born in a stable doesn't make You a horse. And just let's say you go every day to Starbucks with your laptop, and because you know stuff about coffee, you can blind test whatever kind of blend they're using. And it's, yes, awesome. And that's great. If you can't read the financial statements of Starbucks and you don't know what it's worth, you probably shouldn't invest in it. And so you still need to find something you really understand really well to lean into those unfair advantages. And then sometimes it's just hiding in plain sight. Sometimes you have to dig a bit for it. We had a guest in the Mastermind community, and he was talking about how he didn't invest in luxury goods. And I kind of felt that he had an interesting point about he was just not interested in handbags. I completely understand what he means. I'm not interested in handbags. What I am interested in is why is it that someone is willing to pay tens of thousands of dollars for a handbag? And I should just say, for the record, I'm not invested in the luxury sector, but I find it deeply fascinating. And I think if you can look behind that and figure out why is it that some people are willing to pay that it doesn't really matter too much. Is the product a Ferrari? Is the product a handbag? If you understand consumer behavior, and more importantly, understand the changes in consumer behavior, you can still find your unfair advantage. And so identifying your unfair advantages may take a little time, but once you find it, it should be quite evident. It's also helpful if you can validate it with numbers. Bill Miller shared with us that there are three types of advantages. There are the information advantage, which is basically getting important information before others. That's hard today because news out there instantaneously. And of course, you have insider information, but that's illegal, so you probably shouldn't be doing that. Then there is analytical advantage, understanding public information better than the market. That's quite difficult to do. And then there's a temperamental advantage, basically having a better psychological profile than other investors. And I don't know if you remember this Clay, but just a few years ago, it was just my echo chamber. This was a framework a lot of value investors were talking about. And almost everyone, including yours truly, kind of had this idea that, oh, I have a better temperament than other people. And I'm hesitant to believe that is the case, including with myself, I should say, because it's difficult to measure. If you say, have an information advantage, the other person would be like, tell me about it. Show it. Or if you say analytical advantage. Okay, tell me how you read that 10k and why you understand it better than me. Most people don't really want to read a 10k. They want a good story. No, very few people actually want to tell you what they've written at their 10k. And so most people would say, I'm just more patient or I'm not susceptible to confirmation bias or whatever it is. And it's kind of a convenient thing because it's really difficult to measure. And so I think it's important whenever you're looking at your unfair advantage, that you can actually measure it. And that doesn't mean that you cannot have an advantage if it can't be measured. It just means that you should be a lot more suspicious whether or not it truly is an unfair advantage. Then I wanted to talk about something I call comparative advantage, which is not the same, but it's not too remote. For example, where I live and how I'm restricted, I pay less comparative tax on gold than I do on stocks. Starting going through all of Buffett's writings, I would have sworn never to invest in gold, of course, but I found gold to be significantly undervalued in 2022. At the time, I built a 6% position at 1842 per ounce. And again, I know that gold is like a no no in value investing circles, and I'm wondering if I'm touring my horn too much or I've just been lucky. But my point of saying this is that at the time, I felt perhaps I should add a bit more gold, because in many ways, gold is sort of like an insurance that something hits the fan, perhaps everything else equal. It would make sense for me to go a little deeper on that just because I have some text advantages here, a comparative unfair advantage, if you want. And so I think that the unfair advantage framework is so powerful in so many walks of life, and not only whenever it comes to traditional investing. You mentioned one of your podcast episodes that you're naturally a good saver, and so that gave you flexibility to join tip. And this is not going to reflect well on me, which I think it's only telling. But you took more than a 50% pay cut whenever you joined tip. That just wouldn't be possible if you live paycheck to paycheck like so many other people. And so that gives you a flexibility that gives you, let's call it an unfair advantage. I guess my point of that framework, and I know I've been all over the place here, is that capitalism is just very, very brutal and often have to lean into one of your unfair advantages to get ahead.

Clay Fink (76:59)

Yeah, some advantages are certainly at least within reach, let's say saving more money, while others other advantages might just be as simple as being at the right place at the right time. Take Google Search or Uber's platform for example. If Uber started From scratch in 2022, we would likely be talking about Lyft or some other company. Inst Jumping to my next question here. We've been running our TIP Mastermind community for over two years now and it's just been a great avenue for connecting with several high quality people in our ecosystem. Talk to us about how the Mastermind community has contributed to your development as a person and as an investor.

Stig Brodersen (77:43)

Yeah, it has definitely been unexpected blessing and I know I can thank you and Kyle for making that happen. I mean what you created is just absolutely outstanding. Well, first of all, it's been interesting to reconnect with the guest of the show who sometimes join our calls and generate ideas for our portfolios. But also it can be quite a jungle to get that feedback online or live for that matter, on your portfolio. One of the things that I didn't expect was how the community is giving you believability weighted feedback. What does that mean? Well, for starters, Clay, I know that you vet all the members and so that in itself makes a big difference. But also from interacting with the members you learn who has an expertise in what. And so sometimes you listen to a podcast, whatever, someone can sound very assertive. But then whenever you run in the same circles, you quickly learn what everyone's true convictions are. You might even know the track record, what is in their portfolio. And so I definitely think that's part of it. And then another part of it is beyond pure stock investing. I just take immense joy in being around high quality people. That in itself is actually enough for me. But there have been so many interesting conversations and I know there'll be many more and I think respect is really the key word for me that we may not all agree on everything, certainly not. But there is an open mindedness that is just very hard to find anywhere else. And I don't know if this is a good metaphor, so please take it for what it is. But being born and raised Dane, I've been told all my life this is the best country, we have the best values, the world wants to be Danish, of course you then go abroad, no one knows what it is and they think that it's a cake or whatever. And so I've noticed that people who say that typically also not the people who spend time outside the country to validate their beliefs. And I think in the Mastermind community we have people from all walks of life who are eager to contribute and share their experience. So they don't come from a place of the claim to know the truth, but they strike that balance. Strong beliefs loosely held as they say. And so I really think that the best part is meeting people with similar values. At least for me. I find it hard to make new friends and starting with people who share values is just a really good place to start. And we do have a few live events. We have Omaha, we have New York City. And I'm not always good with lots crowds like you and Kyle are. So we might have 30 or 50 people at a dinner. But whenever I do travel, I try to meet up with members in a bit more of an intimate setting. Earlier this week I invited three of our Singapore based members to lunch because I'll be in their neck of the woods before too long. Perhaps one of the most unexpected blessings is this was very surprising. But I started that company with someone I met now, community. And I'm a bit hesitant to say this because I don't want anyone to feel like, oh, let me join the community and find a future business partner. I kind of feel like that's definitely not what we want to do with the community. But I think it's about the magic that happens whenever you start spending time with people online or in person. You share values, you know a lot of the same people and then just magic happens. And it reminds me a bit of whenever I met Preston more than a decade ago and we connected online first, then we met in person and then we decided to start a company together. And you really can't plan for these things. Sometimes the stars align and you get lucky. But then there's also something to be said about luck is when opportunity meets preparation.

Clay Fink (81:21)

Yeah, that is beautifully said. When you venture into our circles, I think serendipity can just be a beautiful thing. I think back just five years ago, if you told me that I would be talking with you on a call today, talking stocks, talking about our communities, I would have said that you're absolutely crazy. Yet here we are. So perhaps nothing would come out of a trip to Omaha or a trip to New York, but you just never know. And investing in even entrepreneurship, as you know, can be quite a lonely journey. Many of our members are have been eager to share their portfolios with the group. Perhaps do it in a smaller setting that's more private or even a one on one call or sometimes just with the broader group. And this actually led me to personally question some of my own investing beliefs, such as investing in bigger companies. It's easy to assume that there really isn't money to be made in a company like Alphabet. But this year, from low to high, the stock's up 100%. So you know, the community for me has been a great avenue for me to question my existing beliefs and just hear from a wide range of different perspectives and what has worked, what has not worked for other people. And yeah, stock investing is just a lonely journey. So it can just be so easy to get caught in a silo and have a specific way of thinking. Admittedly, the community has just given me exposure to people much smarter than I, so they oftentimes have much more experience than me. So a community like this can just be an excellent way to see what companies, other people like, how they go about portfolio management. And it's just been a great resource for me and adding more companies to my watch list, for example. So I think that just this community has just been an excellent tool for me personally to upgrade as an investor.

Stig Brodersen (83:12)

Yeah, I very much resonate with that Clay. And I think that as value investors, sometimes we tend to be investing in a silo, that problem that you referred to before. And I'll be the first to say I still spend most of my time in front of a screen or reading filings and I guess it's a force of habit mixed with just the way that I'm wired. But with the mastermind community, I think that there is a layer on top of that where I can do a reality check. And I also want to say for the record, it's not so much like which stock should I buy that is on you, but it's a bit more this is a sustainable business model. What are my blind spots with this bull thesis? And so to your point about upgrading as an investor, if you like, the group has really pushed me into different areas that I wouldn't explore on my own. We talked about luxury before. I still haven't pulled the trigger on that, but I'm still learning together a community about that sector. It could also be new software, very local businesses. Things are just perhaps a bit off the usual beaten path. So this definitely expanded my watch list. And most importantly to your point before, it gives you a lot of new mental models.

Clay Fink (84:19)

Excellent. Well, before we let the listeners go, I just wanted to let everyone know that we'll be hosting a few live events in Omaha the first weekend of May during the Berkshire Hathaway Shareholders Weekend. Since we're quickly approaching 2026, now is the time to start planning your trip to Omaha. Since you know, flights and hotels get booked rather quickly, we would love to have you join us if you're able to make it. We've included a link in the Show Notes that shares how you can get your credentials to go to the Berkshire meeting, and during that weekend there's some more information on some of the events that we'll be hosting for our tip mastermind community. We're expecting around 30 or so members of the community to be at our events, and we're also offering a handful of spots to listeners of the show who would like to join us in Omaha. Many people go to Omaha not really knowing anyone, so joining us at our events would give those in the audience who would like to join us in a structured way to just get connected with some wonderful people, help make the most of their time in Omaha, and get plugged into everything that's really happening throughout the weekend. This is actually going to be the seventh meeting I've attended and it's just been well worth the trip for me every year. And thankfully I'm much closer to Omaha than you are, Stig. But the energy during the weekend is just simply unmatched and you just can't be getting together with kindred spirits in person. So to join us in Omaha or learn more about the weekend, you can click the link in the show notes or reach out to me directly@clayinvestorspodcast.com so with that, I think we'll close it out there. Stig, thanks a lot for joining me.

Stig Brodersen (85:50)

Yeah, thanks for having me, Clay. It was a lot of fun.

Narrator (85:53)

Thank you for listening to tip. Make sure to follow we study billionaires on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theinvestorspodcast.com this show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.