This guy made billions from just 3 stocks (Here's how)

Transcript

Sam, we've been doing it all wrong. This whole business thing, this building thing, we've been doing it all wrong. See, we thought you have to build a product, that product has to do something, has to add value, solve a problem. Here, I will read you this tweet. This is from Next2TV. They say dopamine websites are the new trend in South Korea. These services let users endlessly browse food delivery menus, read reviews, fill their shopping carts, and even track their shipment. But the only catch, none of it's real. You're not really placing an order for anything. There are also virtual smoke breaks, where you can join anonymous people in chat rooms to recreate the feeling of taking a smoke break without having to smoke a cigarette. The idea is simple, give people the familiar dopamine hit without them having to actually spend any money, leave the house, smoke, or do anything else along those habits. And these are becoming incredibly popular in South Korea, apparently. [SPEAKER_01] Is this the same country that's having a massive birth rate issue? [SPEAKER_00] It's unrelated. [SPEAKER_00] It checks out if they're going to create virtual smoke rooms and fake buy stuff. [SPEAKER_00] What the heck, guys? [SPEAKER_00] So the trend started this year, and it's basically Korean Gen Z. They realized that a lot of the fun in online shopping is just browsing. It's just putting things in the cart, it's hitting checkout. Getting the actual product is, sure, maybe that adds some value, but there's a lot of fun in just the other side of it. And so you can see here, I can pull one of them up. Let me open. And so this is an app called Food Never Comes. [SPEAKER_02] And all right, so check this out. [SPEAKER_02] So you open up the app, and you can select rabbit or turtle delivery, so fast or slow. [SPEAKER_01] I guess we should pay for fast. [SPEAKER_01] I want to get it. [SPEAKER_01] I want to get my fix quickly. [SPEAKER_02] Let's treat ourselves. [SPEAKER_02] Okay, so now there's a fried chicken restaurant, so we can have the half and half crispy chicken, the cheese balls, got to go with the cheese balls. Maybe the soy glazed chicken will go spicy. We'll add a cola, add to cart, and then we can go ahead, we could check out, we put in our info here, and then we could watch this delivery make its way to our house, never actually come. And that's it. It's the blue balls of entrepreneurship, Sam. Are you in or are you out? [SPEAKER_01] Dude, how can this group of people who have brought us such amazing things, like the Kia Telluride or Samsung... [SPEAKER_00] K-pop demon hunters. [SPEAKER_00] Yeah, and do something so stupid. [SPEAKER_00] The Koreans, you guys really are the barbell strategy of life. [SPEAKER_00] They're bringing us such amazing, wonderful goodness and such silliness. [SPEAKER_01] I guess I don't get this. [SPEAKER_01] Why are people doing this? On behalf of our huge, I'm sure, South Korean followership, I will defend this by posting a picture of the White House this weekend where there was a giant motorcycle, a motorcycle doing a backflip in front of the White House in preparation for UFC 250 to celebrate the birth of America. Two dudes in their underwear beating each other up on the White House lawn. [SPEAKER_00] Yeah, you don't think that a fist fight on the White House lawn is appropriate? [SPEAKER_00] An organized fist fight? [SPEAKER_02] Where a Frenchman beats up a Brazilian? [SPEAKER_00] Yeah. Dude, look, I didn't say that we both can't be stupid. [SPEAKER_01] I'm just saying that this is wild. [SPEAKER_01] Are these things actually popular? No, I can't tell. So obviously this makes for an amazing headline. There's also a reason that I opened up the show with it because it's just funny to talk about and make fun of. [SPEAKER_01] But there's not a lot of Korean people on Twitter, so we can't exactly refute this. [SPEAKER_01] It feels like Japan and America have separate internets. [SPEAKER_01] Like, have you ever gone to a Japanese website? [SPEAKER_01] When I, it's challenging to use, obviously, just even if it's just translated, it's still totally separate and it's quite hard. [SPEAKER_01] And so, are there any proper Korean people on Twitter to refute this story? [SPEAKER_01] Or can we just make up falsehoods about... I think we just make it up. It's the good version of the Hunter Biden laptop story is the South Korean fake DoorDash story. [SPEAKER_02] Have you ever studied Eastern internet? [SPEAKER_02] You know how people study Eastern philosophy? [SPEAKER_02] Have you ever studied Eastern internet? [SPEAKER_01] Yeah. [SPEAKER_01] Like Masa Sun from SoftBank. [SPEAKER_01] I believe he's a Korean guy who lives in Japan or is he Japanese who lives in Korea? [SPEAKER_01] Anyway, yeah, I've studied him. [SPEAKER_01] And then I've studied some of the Chinese websites or the super apps. They're so mega that it's quite hard to understand what they're about. [SPEAKER_02] Yeah, there's so many crazy apps and sites. [SPEAKER_02] So just for example, I remember when we were looking into live streaming. So my first company that sold Bebo, it was in the live streaming space. We sold Twitch, which is the big American player. But live streaming is far more advanced in Asia than it is in the West. And if you go look at yy.com or whatever. There was a whole bunch of these where you would see somebody on video and then horizontally from right to left streaming across the screen would just be the entire chat. And it was the most bizarre experience ever because you would see that 7,000 people So my first company that sold Bebo, it was the live streaming space. We sold Twitch, which is the big American player. But live streaming is far more advanced in Asia than it is in the West. And if you go look at yy.com or whatever, there was a whole bunch of these where you would see somebody on video and then horizontally from right to left streaming across the screen would just be the entire chat. And it was the most bizarre experience ever because you would see that 7,000 people are watching this girl eat noodles while text flies across the screen and people are spending thousands of dollars sending her virtual roses. And we were looking at this studying it, when you study a tribe and you're like, so they just eat it? And they're just like, yeah, this is exactly what they do. And then we tried to recreate as many of those variables as we could because these sites were incredibly popular. [SPEAKER_01] Isn't there one where it's fat people eating? It's bang bang or isn't this—Muckbang. They don't need to be fat. [SPEAKER_01] Oh, I thought there was one guy named Nikocado Avocado or something like that. Yeah, yeah. He got really fat doing it. [SPEAKER_02] And then he lost a lot of weight and came back. He was a weird guy. But yeah, Muckbang is watching other people eat. Just like you watch other people play video games. You watch other people play basketball. Turns out people want to watch other people eat and they like having that high definition sound, watching them slurp and chomp on their food. [SPEAKER_01] I get joy from that, by the way. I always buy candy and sweets that I want to eat for other people. And I just, I'll hand it to them. [SPEAKER_01] For other people? [SPEAKER_01] Yeah, I'll hand it to them. [SPEAKER_00] I'm like, eat it. Tell me how it feels. I definitely can get secondhand sugar highs from other people. [SPEAKER_02] Okay, so you're in. So we started out and now you're in. Dude, there's this whole genre of Indian barbers who shave people's heads who have dandruff. And you could, it's the oddly satisfying of, oh, we found it. Let's wipe it off the head. [SPEAKER_00] We found it. Yeah, the oddly satisfying stuff is crazy. There's other sites that I think are the current trend of what's big in the east that's not yet big in the west. So before there was live streaming, that was obviously a huge one. Mobile gaming. So internationally, the biggest, the most popular games were all on your phone. They weren't Xbox, PlayStation. They really didn't have big console or PC culture. And so games like Free Fire or PUBG Mobile were huge. And then Fortnite became the version of that in the US soon after. And so you could see these trends moving over. Live shopping has been huge in Asia for a long time. Now, What Not is the US equivalent of live shopping worth $10 billion. And so you can look for these products that are over there and try to see when and how will they translate. And so right now, the big one is, we've talked about this before, but the short drama. So serial drama. So basically it's Netflix, but you watch on your phone vertically. Each episode is 30 to 60 seconds. And it's basically soap operas of all different types of genres that people get incredibly addicted to. Huge in Asia. So huge in the China, Japan, Korea area. Now getting big in India. Only a matter of time till it's also just as big in the US, is my guess. [SPEAKER_01] I just pulled up these notes that I have from, I think, 2016. So there's this guy named Kevin Ryan. He's been on the podcast, friend of the pod. And he founded a bunch of companies. The biggest one being MongoDB, multi tens of billions of dollars company. But he also famously was the co-founder of Business Insider. And so I called him one time and he gave me some tips on how to start a media company. Because I didn't know anything. And I emailed him so many times that he relented. And I have these notes and something always stuck with me on this framework. So he said, on this show, we have spent hours talking to some of the best investors alive. Well, lucky for you, the team at HubSpot, they have pulled out the principles that matter most and turned it into a very simple, easy to read wealth guide. It's 35 principles from the top investors. We're talking guys who have been on the pod like Howard Marks, Manish Pabrai, Morgan Housel, Kathy Wood and a ton others. So these are all their frameworks, their mental models, their rules, how to play the long game and how to avoid ruin. You can get it in the link below. He didn't use all these exact words. This is me typing. This is before Granola existed. So he goes, the Business Insider strategy is what Honda did in 1985 versus General Motors. He was like, he didn't say this, but this is my notes. Start with poor quality and get traffic to our website and improve. Poor quality, but we'll improve. So he said it in his all hands, inspiring all of his employees. He didn't say it that way, but he was like, we—I, he said, Honda in 1985 versus GM. Honda was considered a joke. GM cars were these big, heavy duty vehicles that made a big sound when you shut the door and Hondas were rinky dink. [SPEAKER_01] He was like, he didn't say this, but this is my notes. [SPEAKER_01] Start with shitty quality and get traffic to our website and improve. Shit quality, but we'll improve. [SPEAKER_02] He said it in his all hands, inspiring all of his employees. He didn't say it that way, but he was like, we're, I, I, he said, like Honda in 1985 versus GM. Honda was considered a joke. [SPEAKER_01] GM cars were these big, heavy duty vehicles that made a big funk when you shut the door and Hondas were rinky dink. But the difference is, is that, with Honda as well as with business insider, the quality of car that they were making increased, but their cost, they stayed the same, which is why Honda eventually won. And business insider, we make content a lot cheaper than wall street journal, but we think that our quality is just going to continue to rise. And that was his whole strategy. And I always thought that was really interesting. I thought that was a really cool analogy, which is you can start and just slowly get better while keeping your costs the same. And he always referenced, he referenced in our call, he was like Honda did this, Toyota did this. [SPEAKER_01] And I started thinking about this and I've always thought about this strategy that a lot of Asian companies did. [SPEAKER_01] If you remember, do you know TCL TVs? [SPEAKER_01] I've never even heard of that now. [SPEAKER_01] So TCL, if you were to go on Amazon six years ago and buy a TCL TV, they were the worst. [SPEAKER_01] They were pretty junky TVs, maybe 10 years ago, but you get a 65 inch flat screen TV for literally $200. [SPEAKER_01] And I'm a gadget nerd. And so over time, TCL is now a baller TV company and you can still get a 65 inch highest def fanciest TV for $200. It's actually, I don't even know how this is possible. And I've always thought about this strategy of like Asian businesses that I've noticed. I don't know if it's particularly an Asian thing or because he referred to Asian car companies now, I always think of it that way. They'll offer something where the quality is so-so, but just good enough. But over time, it's like Hyundai or Kia or Genesis, like particularly, you know, Asian car companies, that's how I think of them is they're crappy at first, but they just get so much better. And then the prices stay the same. [SPEAKER_02] What I like about this is it's the opposite of the normal white guy referencing Asian culture thing. [SPEAKER_02] Where normally we take these amazing Zen practices where the Japanese use the word Kaizen for the continuous pursuit of perfection. And that's what we do here at our company. Or it's like Wabi Sabi, the beauty in imperfection. It's always like these high and mighty things that we're borrowing. And he's like, we use the term hondification where you start with shit and it stays shit for quite a while, but eventually the shit becomes a little less shitty. And that's what we do. It's the first honest white guy. We give him a word for it, he's doing all of the tone and the hand gestures, but he's just saying the truth. [SPEAKER_00] And we didn't stop there. [SPEAKER_00] We took the shit that we had and the year after just a little bit less shitty. [SPEAKER_00] Because they don't know the difference. [SPEAKER_00] And we told our kids to the Marquis. There should just be a whole service, just like honest business translation, you know, like Google translate, but just corporate translation. It's like, take any company, put their mission values and earnings calls into this generator and it just tells you the truth. [SPEAKER_00] Yeah. [SPEAKER_00] That's so funny. [SPEAKER_00] One of the greats, Kevin Ryan. [SPEAKER_00] Probably no longer a fan of the pod. [SPEAKER_00] No longer a friend of the pod. Former friend of the pod, Kevin Ryan. Yeah. Don't do that in confidence, Sam. [SPEAKER_00] There was a statue of limitations on notes, by the way. [SPEAKER_00] Once it's been 10 years, I can talk about it. [SPEAKER_00] So anything that happened from pre-2016, I'm allowed to bring it up. All right. So I was nerding out on something kind of related. So I'll segue to that. So you were talking about how for the TVs thing, they're charging 200 bucks and at first it's kind of a shitty TV, but eventually it's kind of a great TV, but still for 200 bucks. Yeah. Which is different than I would say most companies, which assume, you know, over time, the goal is to raise our prices, increase our margins, increase our profits. [SPEAKER_02] So I was studying this investor called Nick Sleep and- [SPEAKER_02] Oh man, dude. [SPEAKER_02] The short version for those who weren't there. [SPEAKER_01] Ever since you brought him up, I've been on him. [SPEAKER_02] Yeah. [SPEAKER_02] So his story in short is he was an investor, basically raised money, was an investor about 15 years, average more than 20% compounding, billions of dollars. [SPEAKER_02] He won the game, shut down the fund and moved on. [SPEAKER_02] And most of the fund was concentrated in three positions, Costco, Amazon, and Berkshire Hathaway. For the longest period of time, he was just holding those. And so the interesting part isn't, oh, well, here's a guy who picked right. You know, it's kind of like, oh, I'm interviewing a lottery winner to ask how they guess the numbers. This is his daughter's birthday. It's not really that. It's if you ask, what is Nick Sleep's philosophy, his core investing strategy? He had this idea of consumer surplus. So his main realization was, look, there's many ways to invest. [SPEAKER_02] You could do what Buffett and Ben Graham are trying to do, which is buy a company that's trading for less than it's worth. [SPEAKER_02] Or you could look at some of these companies that today look overvalued, like Amazon at that time and, you know, the 2000s is like, wow, this thing's got a crazy price to earnings ratio. [SPEAKER_02] This is his daughter's birthday. [SPEAKER_02] It's not really that. [SPEAKER_02] It's if you ask, what is Nick Sleep's philosophy, his core investing strategy? [SPEAKER_02] He had this idea of consumer surplus. [SPEAKER_02] So his main realization was, look, there's many ways to invest. [SPEAKER_02] You could do what Buffett and Ben Graham are trying to do, which is buy a company that's trading for less than it's worth. [SPEAKER_02] Or you could look at some of these companies that today look overvalued, like Amazon at that time, and the 2000s is like, wow, this thing's a crazy price to earnings ratio. [SPEAKER_02] And he realized that the best predictor of long-term value for him was something that he called shared scale economies. All right. So what do those mean? [SPEAKER_02] So scale economies is usually when, let's say you're Amazon, you have a large customer base, you're able to open warehouses in a bunch of different places, and you get what's called economies of scale, which is that over time, your cost to serve each additional customer goes down because you're serving so many customers. [SPEAKER_02] You're able to almost amortize the investment costs across a large customer base. [SPEAKER_02] Now, what he, what Nick Sleep identified was called shared economy scales. [SPEAKER_01] Was that a word that he, did he make this up? [SPEAKER_02] Yeah. So he, I don't know if he made it, if he invented it, but he was the one who really bet on it and he really made it the foundation of his investing strategy. So he realized let's say Costco. So Costco's goal is to basically get economies of scale, meaning they buy in bulk, they have tons of locations. So they have a lot of pricing power. They're able to buy things in bulk at cheap prices. And instead of what most retailers do, which is they buy wholesale, sell retail, right? They buy cheap and they sell it at a markup. Costco's goal was to make the markup as small as it could and pass all of the savings of buying in bulk to the customer. So he did the math and he realized like, okay, let's say that a Costco membership costs $100. Let's just use round numbers, right? And he realized that if for the average person who shops groceries at Costco, they're going to save on their grocery bill, let's call it $1,000 a year on just by buying Costco, because Costco is passing on all those savings of buying in bulk to the customer. So the customer saves $1,000, they spend $100. And so the surplus that they've generated, this $1,000 surplus, and then they're only charging $100 for it. It's a no-brainer proposition. And they basically take the... So what happens is instead of increasing their prices and increasing their profits and increasing the money to the shareholders, they pass the profits to the customer, which makes a juicier value proposition, which attracts more customers, which gives them more scale, which allows them to create even more surplus. And so what he realized was that the companies that would do this, that would start early on and pass on the savings to the customer, they would run away from the competition because they would have such a juicy value proposition. They would build so much trust with customers and have such an incredible offer to the customers that they would pick up all the customers. And so Costco, for example, they make no money essentially on any of the food that they sell. They make all their money on the membership, which is pure profit is the membership cost. [SPEAKER_01] How much... [SPEAKER_01] I'm just looking this up. [SPEAKER_01] I knew that it was a baller stock. [SPEAKER_01] It does $300 billion a year in sales. [SPEAKER_01] How much in the membership sales? [SPEAKER_01] Do you know? [SPEAKER_01] $5 billion. $5 billion, yeah. So what he realized at that time was he said, wow, everybody just looks at... Let's just say it was a billion dollars at that time. [SPEAKER_02] It's when a traditional analyst will look at this company, they'll just see a billion dollars of profit. [SPEAKER_02] But what I see is $5 billion of surplus that they're passing on. [SPEAKER_02] And they passed on $4 billion last year, $5 billion this year. [SPEAKER_02] It'll be $7 billion next year, $10 billion the next year. [SPEAKER_02] And they're just going to keep passing on so much surplus that it's going to run away from the competition. [SPEAKER_02] And it'll create so much trust and so much loyalty that they'll never have any problems attracting customers. [SPEAKER_02] And so he's, that's an invisible metric that doesn't show up on the balance sheet. [SPEAKER_02] It doesn't show up on the P&L. [SPEAKER_02] You have to manually calculate the shared economies of scale, how much of the surplus they're giving to the customers. [SPEAKER_02] And if you track the growth rate of that, what you want is companies where that growth rate is increasing. [SPEAKER_02] He said Amazon was the same way. [SPEAKER_02] For 20 years, Bezos basically did not try to extract profits. [SPEAKER_02] He just reinvested all the capital to give people wider selection, faster shipping and lower prices. [SPEAKER_02] And he realized that every year they're investing more money in giving people wider selection, faster shipping and lower prices. [SPEAKER_02] The three things that consumers care about the most. [SPEAKER_02] And they have the Prime membership, just like the Costco membership. [SPEAKER_02] And so he invested heavily in that. [SPEAKER_02] And I just thought, oh wow, this is a pretty brilliant insight, a way of looking at businesses that I've never thought about. Yeah, that's actually, it sounds stupid, but that's a groundbreaking stat. You know, that's actually very interesting. I've never ever heard of a company that measures that. Just how much savings we are passing on to you. That's pretty interesting. But who else does that? You have to do it with a company that's huge and where mass appeal or mass. And then you need a membership, right? A prime thing. [SPEAKER_02] Well, it doesn't have to necessarily be a membership. [SPEAKER_02] There's other ways to do it. But the two biggest examples he did was the membership, because it's the beautiful way to monetize, right? [SPEAKER_02] It's, I'm going to give you so much value in the thing you're buying, that giving me a recurring revenue membership is a no brainer for you. That's pretty interesting. But who else does that? You have to do it with a company that's huge and where mass appeal or mass. And then you need a membership, right? Like a prime thing. [SPEAKER_02] Well, it doesn't have to necessarily be a membership. [SPEAKER_02] There's other ways to do it. [SPEAKER_02] But the two biggest examples he did was the membership, because it's the beautiful way to monetize, right? [SPEAKER_02] It's like, I'm going to give you so much value in the thing you're buying, that giving me a recurring revenue membership is a no brainer for you. [SPEAKER_02] And that's what prime is. [SPEAKER_02] That's what the Costco membership is. [SPEAKER_02] And so it worked out beautifully for those two cases. [SPEAKER_02] But it's not necessary to be that. [SPEAKER_02] It's just that. [SPEAKER_02] So for example, I was talking to AI today and I was trying to say, well, what other study other companies, if there's these thousand companies, which other companies would Nick Sleep see as having a high surplus? [SPEAKER_02] And how would he look at it? [SPEAKER_02] And so AI is not great at doing analysis like this, but one of the examples it brought up was SpaceX. [SPEAKER_02] And basically it's like, look, SpaceX is going to lower, has been, it has already lowered the cost to orbit by a hundred X. [SPEAKER_02] So it's reduced its cost by a hundred X, but it didn't keep the same prices to the government or anybody else. [SPEAKER_02] It also lowered the, it passed on the savings to the government, which is why it now takes like 80% of all payloads. [SPEAKER_02] It took all of the business. [SPEAKER_02] It took all the market share by doing that. [SPEAKER_02] And they're trying to reduce another hundred X and they're putting up all these satellites and they're trying to, again, pass the savings on to the subscribers for Starlink internet. [SPEAKER_02] And so here you're going to have again, recurring annual membership, a no brainer value proposition to a mass market of people, everybody on earth wants the internet. [SPEAKER_02] And they are getting economies of scale because as they improve their launch costs and their launch rates, they're not going to raise prices. [SPEAKER_02] They're going to pass it on and they're going to create a membership. [SPEAKER_02] So it's like SpaceX would be in a weird way like again, same thing as Amazon today looked at as highly overvalued, but potentially undervalued. [SPEAKER_02] If you could figure out how to measure the surplus and see that the rate of the surplus was growing every year, it might look like one of those businesses. [SPEAKER_02] Now I'm not again, I'm a noob at this stuff. [SPEAKER_02] So I'm just sharing my learnings with this, just with you. [SPEAKER_02] I'm not saying that this is or is not the case, not financial advice or anything like that. [SPEAKER_02] But I do find this idea to be pretty interesting. [SPEAKER_02] It's an idea I hadn't really heard popularized before. This guy is so interesting to me. [SPEAKER_01] He's got everything that I want. [SPEAKER_01] Does he have long hair, nice calves? [SPEAKER_00] Yeah. [SPEAKER_01] If you Google his name. [SPEAKER_01] Is he alive? [SPEAKER_01] He's got a beautiful set of hair and only one photo. [SPEAKER_01] If you Google him, it's the same headshot used for everything. Nick Sleep, come on the podcast. How many times are you going to let me podcast, make out with you before you just finally get on here? Okay. [SPEAKER_01] Yeah. [SPEAKER_01] Do you want to break decades of being anonymous? [SPEAKER_01] Come on the pod. [SPEAKER_01] There's literally only one photo of them. [SPEAKER_01] I'm just for real. [SPEAKER_02] I got to this hotel and I paid a disgusting amount about a buddy, but they had free snacks when I walked in and I was like, honestly, love this place. [SPEAKER_02] Great value. They gave me cake pops for free when we walked in. This is incredible. My kids are so happy. And I feel like that's our pitch to Nick Sleep. [SPEAKER_02] It's like, yes, you've been anonymous for 20 years and you value your privacy and you've turned down every opportunity under the sun, but we got peanuts and snacks. [SPEAKER_02] If you want to come on our pod, it'll be great. [SPEAKER_01] Yeah. [SPEAKER_01] He's 58 years old. [SPEAKER_01] He's not old. [SPEAKER_01] This guy's cool. [SPEAKER_01] There's an article called how to retire at 45 and it's about him. [SPEAKER_01] So I guess he's taking it easy, but I would love to have this guy on. [SPEAKER_01] That would be so fascinating. [SPEAKER_01] Him and Paul Graham. [SPEAKER_01] It's just, there's something so mysterious about people who claim I've had enough and they opt out. [SPEAKER_01] I think that's interesting. Well, one of the other takeaways real quick is you only need one or two secrets in the Peter Thiel terms, right? You only really need to understand one or two secrets in your lifetime to become fabulously rich. And this is one of them. For example, this is a good example of one. I think Peter Thiel did this with network effect businesses. So understanding, you know, PayPal, Facebook early on, and just understanding the power of a network effect and how unbreakable those monopolies become. And then another example is Buffett, for example, he doesn't invest in network effect tech companies or anything like this. What he looks at is what's not going to change. And he's basically the moat, which is the pricing power. So he gives an example of, I don't know if you saw this exchange, but Elon was talking about how lame moats are. He's like, oh, I don't like the idea of moats. [SPEAKER_02] If you need a moat, that's lame. of a network effect and how unbreakable those monopolies become. And then the other example is Buffett, for example, he doesn't invest in network effect tech companies or anything like this. What he looks at is what's not going to change. And he's basically talking about the moat, which is the pricing power. So he gives an example of, I don't know if you saw this exchange, but Elon was talking about how lame moats are. He's like, oh, I don't like the idea of moats. If you need a moat, that's lame. You should be innovating faster than everybody else. That's how you win. If you think a moat is going to protect you. Yeah. That's not what protects you. Fast innovation is protection. This is Elon saying this. [SPEAKER_01] You're like, Elon, I don't think the word moat means what you think it means. [SPEAKER_01] Because you definitely have a moat. Well, Buffett replied and he was like, let's say you go to a corner store and you ask for a Snickers and they say, hey, I got a Musk bar for 10 cents less. He goes, I don't think anyone's buying the Musk bar. And he's like, in fact, if you go test this, if one place doesn't have a Snickers and they have an unbranded, unlabeled chocolate bar with peanuts in it, but the place across the street has a Snickers bar, the customer will just walk across the street and go buy a Snickers. And he's like, so yeah. He's like, I look for Coca-Cola, Snickers, Gillette, American Express. I look for these brands and French Apple. I look for these brands and franchises where you'd have to pay someone to switch. And even then they wouldn't want to. That was his core insight of finding these great American franchises and investing in them. [SPEAKER_01] Did you see, I want to bring up a person who we talked about somewhat recently, but we didn't dive into, but really quick, did you listen to the Lloyd Blankfein interview that I did with him, and he talked about his family finances and stuff like that? No, I only wish I listened to the first five minutes, but I'm on vacation. So I hadn't had time to get my phone and listen to it. What did he say about his family? [SPEAKER_02] So by the way, did you know this guy before? Am I dumb? I never heard of this person. And then you were all about this guy suddenly. [SPEAKER_01] Well, when you and I were younger, probably in high school, that was his peak prime. [SPEAKER_01] And so during the wall... So you knew him back then or only now? [SPEAKER_01] I knew him as a famous figure. He was the face of banking. [SPEAKER_01] He was the Jamie Dimon of '08, particularly when Occupy Wall Street was a thing. [SPEAKER_01] He was the face of evil because the name Goldman... and there was this funny line that he told me where he was like, yeah, they protested outside of my house and everything. [SPEAKER_01] And I was like, how does that feel? [SPEAKER_01] He's like, well, two things. One, go and try to get a mortgage from Goldman. [SPEAKER_01] You can't. So I didn't cause the mortgage crisis. [SPEAKER_01] So I don't know why they were so angry at me. [SPEAKER_01] And second of all, they were camping outside of my house protesting, but that's what doormen are for. [SPEAKER_01] He's like, I shouted out from the window on the fifth balcony in my house. We wouldn't give you a mortgage even if you tried. That didn't seem to help. [SPEAKER_00] No, dude, he was super likable. [SPEAKER_01] He was so charming and charismatic. Lloyd is, you could look up his career earnings at Goldman because when Goldman went public, he was 43 years old. [SPEAKER_01] And I think at the time he told me his shares were worth about one hundred and sixty million dollars. [SPEAKER_01] And this was when he was 42. He's 72, I think now. [SPEAKER_01] So 30 years ago. [SPEAKER_01] And then the course of his earnings are all public while it was public. [SPEAKER_01] And it was many, many, many hundreds of millions of dollars a year. [SPEAKER_01] And so presumably I would have to imagine he's worth two billion plus. [SPEAKER_01] But he grew up in a poor Brooklyn family. [SPEAKER_01] And he's very self-deprecating. [SPEAKER_01] His father was a post office worker. [SPEAKER_01] His mother, I think, was a stay at home mom. [SPEAKER_01] He calls himself the blue collar CEO. [SPEAKER_01] And he was like, I wasn't even that smart, but somehow I got into Harvard and they paid for my school. [SPEAKER_01] And he's like, one time when I went to Harvard, I had to go to the office or whatever they call it, the financial aid. [SPEAKER_01] He was like, I don't have any money to eat. Can I please have money? And they gave me five hundred dollars back then. And it changed my life because I had food. And so he goes to Harvard and he gets a job as a lawyer. He's like, this sucks. I don't want to do this. And so he gets a job at a ragtag subsidiary of Goldman. And he's like, I don't even know what Goldman is. I don't know what banking is. [SPEAKER_01] But they thought that I was this hard nose, blue collar guy who went to Harvard. [SPEAKER_01] And they're like, you check the boxes because he was a commodities trader at this little ragtag group, [SPEAKER_01] which at the time was considered a very lowbrow thing. [SPEAKER_01] And so he slowly over the course of many years worked his way up to eventually become partner [SPEAKER_01] and then CEO of Goldman. [SPEAKER_01] And when he was in my office, he had this very blue collar vibe where I could tell that it felt very authentic. [SPEAKER_01] He looked me in the eye and knew how to riff on silly stuff. [SPEAKER_01] But also I'm like, dude, you're acquaintances with Putin. [SPEAKER_01] And he's like, I could see. [SPEAKER_01] He saved in your phone as pootie, pootie call. [SPEAKER_01] Yeah. [SPEAKER_01] Yeah. [SPEAKER_01] I could see how this guy is charming and how he worked his way to the top. [SPEAKER_01] And can you imagine being the shark in the sharks? [SPEAKER_01] How insane it is to work your way up at Goldman amongst all the sharks and become the CEO? [SPEAKER_01] He looked me in the eye and knew how to riff on silly stuff. [SPEAKER_01] But also I'm like, dude, you're acquaintances with Putin. [SPEAKER_01] He's got him saved in your phone as pootie, pootie call. [SPEAKER_01] Yeah. [SPEAKER_01] Yeah. [SPEAKER_01] I could see how this guy is charming and how he worked his way to the top. [SPEAKER_01] And can you imagine being the shark in the sharks? [SPEAKER_01] How insane it is to work your way up at Goldman amongst all the sharks and become the CEO? [SPEAKER_01] Can you imagine what that even takes? [SPEAKER_01] That's a mind-boggling level of difficulty. [SPEAKER_00] I know people that have made more money just building a company, but that's actually not as hard as playing the corporate game inside Goldman and rising up amongst all those corporate sharks. He is wild, but he came off. During the podcast, I told him, man, you are making Goldman seem likable, which is not easy. You're making it seem relatable and likable. That's a very hard thing to do. And for some reason, after talking to you, I'm like, oh, I can do this, even though obviously I can't. He told the story. I asked him about personal finances. I was like, hey, how does your personal finances work? Because he told the story about how he grew up poor and he's still cheap. He was like, I buy the cheaper tier of Netflix that has ads? He's like, I won't even pay for that. I do the cheap one because there's something about it that bothers me because I grew up poor. He said, I think he said 80% of his net worth is in public equities of which 90% of that 80%, something like that. He still day trades. And he was like, I day trade. I'm obsessed with it. [SPEAKER_01] I love the game so much. [SPEAKER_01] And I want to check my phone all the time. [SPEAKER_01] But when I do research on different stocks, I'll get to a Bloomberg publication or Wall Street Journal or something like that. [SPEAKER_01] And I don't buy the subscriptions because it hurts me to pay for it. [SPEAKER_01] And I just thought that was incredibly fascinating to hear how a billionaire manages their finances. [SPEAKER_01] How a billionaire mismanages his finances is what I heard. [SPEAKER_01] He did the right thing. [SPEAKER_01] None of that makes any sense. [SPEAKER_01] The top. [SPEAKER_01] I wasn't there so I could talk shit. [SPEAKER_01] If I was there, I would also be blushing and saying how great he is. But just hearing it from the outside, to be the outsider for a second. You're day trading a billion dollars while not paying for Netflix because you're cheap. I don't even understand what you're talking about. You don't pay for premium news. [SPEAKER_00] The point being, it's not a logical thing. But he was saying, here's all how I'm messed up, just the average Joe. And it was so fascinating. And at the end of the interview, did I tell you what I tried to do with him? I was like, hey, I have this Instagram. Do you want me to do this handshake? [SPEAKER_01] Well, I was like, I have an idea. [SPEAKER_01] I can act like I'm reviewing your book and I'll just be like, ah, screw it. [SPEAKER_01] I'll just bring Lloyd in. [SPEAKER_01] Lloyd, just tell him what your book's about, will you? [SPEAKER_01] And he was like, I'm too old for that stuff. [SPEAKER_01] I'm not acting cute on Instagram. [SPEAKER_01] That's the most likable thing you've said so far about him. [SPEAKER_01] I was like, oh, Lloyd, it's not cute. [SPEAKER_01] None of the billionaires, they're just us. [SPEAKER_01] But just that, I'm not going to do that. [SPEAKER_00] I was like, I wouldn't describe it as cute. [SPEAKER_00] I mean, it is cute, but it's more fun. You don't like fun. He goes, that's too cute, dude. I'm not doing that. And I was like, yes, sir. [SPEAKER_00] I'll walk you to the elevator. [SPEAKER_00] It was pretty good, but he was fascinating. [SPEAKER_00] And then another guy who we had on, a guy named Barry, who talked about David Rubenstein. [SPEAKER_00] Had you ever heard of him before David or Barry told you about him? [SPEAKER_01] From Carlisle Group? [SPEAKER_00] Yeah. [SPEAKER_01] Do you know anything about this guy? [SPEAKER_01] Only surface level stuff. [SPEAKER_01] Yeah. I want to fill you in on a little bit about a story [SPEAKER_01] because I've actually always been a fan of his, [SPEAKER_01] but I mostly knew him as an author of history books, not particularly as a business guy. [SPEAKER_02] And I was researching him. [SPEAKER_02] It's pretty fascinating. And he's my new man crush. We got his foot in the door [SPEAKER_01] because when he was in his twenties and thirties, he was a lawyer, but he quit being a lawyer because he wanted to work for the Jimmy Carter administration. And he made a joke where he was like, when I joined Jimmy Carter, he was up by 31 points. [SPEAKER_01] And then he eventually won by one point. [SPEAKER_01] And Jimmy Carter went to David and was like, [SPEAKER_01] so what contributions did you make? [SPEAKER_01] And he has this funny, self-deprecating humor, but he worked for Jimmy Carter. And eventually, Jimmy Carter was a one-term president. He doesn't get reelected. So David Rubenstein, he's 31 years old. He's like, well, what do I do now? And there was this amazing article that I found [SPEAKER_01] written by Michael Lewis. [SPEAKER_01] You know, Michael Lewis, the famous author. [SPEAKER_01] He wrote this amazing article in 1993 called "The Access Capitalist." [SPEAKER_01] And it's about a 10-page article written about David. [SPEAKER_01] And it's from a while ago. [SPEAKER_01] And I love that. [SPEAKER_01] And he said, David got his start using what people are calling [SPEAKER_01] the great Eskimo tax scam of 1987. [SPEAKER_01] Tell me you are. [SPEAKER_01] So David Rubenstein, he's 31 years old. He's thinking, what do I do now? And there was this amazing article that I found written by Michael Lewis, the famous author. He wrote this amazing article in 1993 called The Access Capitalist. And it's a 10 page or so article written about David. And it's from a while ago. And I love that. And he said, David got his start using what people are calling the great Eskimo tax scam of 1987. Tell me you are. So the story is David had this amazing Rolodex. He was really well connected in Washington, D.C. He was known as being likable and a really good networker and reliable. And so he just knew a little bit of everyone. And so he's out of work at the age of 31. He's thinking, what do I do now? And he hears about this weird tax loophole where if you were a native of Alaska, you were given a certain amount of tax losses automatically. I don't know why. I think it was to incentivize people to live there. And so what he did is he organized a bunch of buyers and sellers, meaning if you wanted, you could sell $10 million in tax write-offs to willing buyers for $7 million in cash. And thus the buyer got a reduced taxable income of $3 million. And David heard about this and he's thinking, that's interesting. And so him and a couple friends organized roughly $2 billion in transacting these tax losses. And after doing that for two or three years, they had made something like $20 million. And that's the money that they use three years later to eventually start Carlyle Group, which is now one of the largest PE firms in the world. I believe they have $500 billion in companies that they own. And David was thinking, I thought I had a pretty good IQ myself, but I was seeing a lot of people make a lot more money than I was who I thought maybe weren't as smart as me. And so I decided to try this PE firm. And so he raises a little bit of money, uses the money that they made from the tax saving scheme. Sorry. No longer. I guess he just canceled his booking with us. Never friend of the pod. I meant to say scheme. It was cold outside. I meant to say scheme. And he used this thing and he started in the PE business, which at the time in the 80s was just killing it. [SPEAKER_00] And it felt like that's when all the big PE firms were built because this idea of a leveraged buyout was brand new. And so he raised a little bit of money and he did a couple of deals. It didn't really particularly work that well. I think he said his first deal that they tried to buy was a Mexican restaurant called Chi Chi's. [SPEAKER_01] And he's thinking, yeah, it wasn't going so hot. It went from the Eskimo scam to Chi Chi's. All right. Yeah. He's thinking, not doing so hot. But then he had this idea where he was thinking, well, I know everyone in DC and I know that a lot of jobs in DC are pretty cyclical. [SPEAKER_00] Like after four years, you quit and you're thinking, what do I do? And I know a bunch of interesting people. And I know those interesting people know a bunch of interesting and powerful people. But you don't want to sell access to these people that would be borderline unethical and sometimes illegal. And he's thinking, what if I just got all of these powerful people who no longer have jobs in the government to come and work at this PE firm? And we start buying companies where it would help to have friends in government so you can get meetings with big, powerful companies. And so Carlyle eventually specializes in defense contract style companies. And so that is how it took off. But the more interesting part about all of this is what he's done while he was building the company. So he has five or six books, which is how I've met him or know of him. So he's got a book called American Stories about where he just interviews mass historians. He's got a book called How to Lead, The American Experiment, How to Invest, The Highest Calling, which is conversations about different presidents. He has a show on Bloomberg called the David Rubenstein Show. He's got. [SPEAKER_00] Yeah, that's what I've seen. His interviews are great. He's got all these amazing things. But listen to this. He owns all this amazing stuff. He owns one of the last privately owned copies of the Magna Carta, which is one of the most historical documents of all time for 21 million dollars. He bought it. He owns one of the last pieces of the Declaration of Independence. He owns a Lincoln signed Emancipation Proclamation. He funded the Washington Monument when it needed to get rebuilt. He funded the Lincoln Memorial when it needed to get rebuilt. He funds all these amazing things. So the Kennedy Center he helped do, he helped produce a lot of Ken Burns documentaries. He funds them. He's just this crazy guy that does all of this interesting stuff. And his side hustle is basically buying these documents, meeting the people who are around the documents, writing books about the documents, becoming on the board of the museum in which he loans the documents to. And he just has this crazy. [SPEAKER_00] That's fascinating. I mean, that's an epic charcuterie board career. You know what I mean? A little bit of this, a little bit of that. They work well together. You know, he's the white knight of Washington, D.C. [SPEAKER_02] I love it. You know, I always love people who are not one dimensional in the way they operate. You know, the one dimensional people I appreciate for their laser focus and obsession. And I take inspiration from it, but I don't take guidance from it. You know, I take more guidance from people like this who I think have a more interesting, varied career. Just a little bit of this, a little bit of that. They work well together. He's the white knight of Washington, D.C. [SPEAKER_02] I love it. [SPEAKER_02] I always love people who are not one dimensional in the way they operate. The one dimensional people I appreciate for their laser focus and obsession. And I take inspiration from it, but I don't take guidance from it. I take more guidance from people like this who I think have a more interesting, varied career. Personally, I find that really compelling. I love this guy. Google or go to his Wikipedia page and look at the things that he's contributed to. I mentioned just barely any of them. But it's David Beckham's wisdom teeth. He's playing a game. Two truths and a lie. Rubenstein's collectibles. [SPEAKER_01] Dude, it's so awesome what he does. [SPEAKER_01] And I just think that guys like this are really cool. And he's actually coming on the podcast in August. And sorry, David, I didn't mean to insult you if I got any details wrong. But he's coming on. Okay, I'm so excited now. [SPEAKER_01] That's amazing. [SPEAKER_01] Yeah, it's amazing. [SPEAKER_01] I think that he's been doing this baller giving philanthropic stuff and history stuff. [SPEAKER_01] I think he's been doing it along the way and not just at the end of his career, which I find really fascinating. [SPEAKER_01] And he makes this joke where he says my whole shtick is I love self-deprecating humor because it disarms people. And he's a self-deprecating guy, which makes him very likable. But he was like, I'm not really that good of an investor. [SPEAKER_01] I just work pretty hard and I know everyone and I'm pretty good at connecting people. [SPEAKER_01] And I also have really good business partners who helped me start Carlyle. And that's one of the reasons why it's the way it is. And I thought that was really fascinating. [SPEAKER_01] I like that a lot. [SPEAKER_01] It also sounds like he had a cool second act to his career, maybe a second and a third act to his career. [SPEAKER_01] Can I tell you about a business that I think is really cool that is someone's second act? [SPEAKER_01] And I think you know the person, but I don't know how much time you spent thinking about this business. [SPEAKER_01] And so the business is PSA. And PSA is if you ever want to go buy a rare Charizard, you'll want to know the PSA grade of that card. Dude, we got to get this guy on. Yeah. So Nat Turner bought this business and Nat Turner, I think his last company was in healthcare. Something he sold to Roche and he's always been a nerd, a collector. And he raised some money and he took private or he bought this company. I think it's called Collector's Universe or something like that. They own PSA. And I just found this category of business to be pretty fascinating. [SPEAKER_02] So let me tell you a little bit about this business. [SPEAKER_02] Here's one way of looking at it. [SPEAKER_02] So it's a business that controls something like 70% of its market. So absolutely dominant in its market. They have $400 million of orders just sitting in the queue. Haven't even got to it yet. How much? 400 million. What? If I'm wrong, we'll fire our researcher. [SPEAKER_02] But that's what we have here. [SPEAKER_02] What are you going to cancel your Claude subscription? Don't give Claude a nasty talking to. [SPEAKER_02] They've dominated this space of grading cards. [SPEAKER_02] And if you think about what that is, the broader category of problem that they solve is something called credence goods. [SPEAKER_02] And so I was nerding out on this. [SPEAKER_02] And what a credence good is basically, it's a good that even after you've consumed it, even after you have it, you still don't really know the quality of it. [SPEAKER_02] So medical care is a good example. [SPEAKER_02] You have surgery. [SPEAKER_02] How'd you like your surgeon? [SPEAKER_02] I don't know. [SPEAKER_02] I have no idea. [SPEAKER_02] I have no way to assess the efficacy of my surgeon. If they were terrible, I could probably tell. But I can't really tell the difference between good, great and world-class. [SPEAKER_02] And the same is true for collectibles. [SPEAKER_02] So let's say somebody had an original Sammy Sosa rookie card. [SPEAKER_02] And the big home run boom was happening when him and Mark McGuire were hitting a bunch of home runs and people were buying up these cards. [SPEAKER_02] And the problem without a trusted third party here is that one, the owner says it's in excellent condition. [SPEAKER_02] And then they show it to a buyer and the buyer says, I don't know, it seems fair. [SPEAKER_02] And then the buyer owns it. [SPEAKER_02] Then he says it's mint condition. [SPEAKER_02] And there's all this arguable, and you don't. And that's just the condition, let alone, is it even authentic? [SPEAKER_02] Is this real? [SPEAKER_02] Was this actually a first edition? [SPEAKER_02] Is this a second edition? [SPEAKER_02] Does this actually have this? [SPEAKER_02] Does it actually have that? [SPEAKER_02] And so you need third party trust in these systems where there was no structure. [SPEAKER_02] And so coins was like this, cards was like this, Pokemon cards, sports cards. [SPEAKER_02] And so there was this entire industry of collectors who were very passionate, but they had no structure and it needed third party trust. [SPEAKER_02] And this exists in many industries. [SPEAKER_02] So for example, if you ever go through an M&A process, you'll have to go get a QOE, or you'd have to get a third party audit. [SPEAKER_02] Deloitte, Ernst & Young, they built multi-billion dollar businesses just doing an attestation, just saying, yes, this company's financials are sound so that the seller and the buyer can do a trusted transaction because the buyer knows that they don't have to go and verify themselves that the company's books are actually what they say they are. [SPEAKER_02] And so attestation, credentialing, these are huge businesses that are just some of the most [SPEAKER_02] And this exists in many industries. [SPEAKER_02] So for example, if you ever go through an M&A process, you'll have to go get a QOE, or you'd have to get a third party audit. [SPEAKER_02] Deloitte, Ernst & Young, they built multi-billion dollar businesses just doing an attestation, just saying, yes, this company's financials are sound so that the seller and the buyer can do a trusted transaction because the buyer knows that they don't have to go and verify themselves that the company's books are actually what they say they are. [SPEAKER_02] And so attestation, credentialing, these are huge businesses that are just some of the most beautiful business models because you become a trust tax on an entire industry. [SPEAKER_02] You don't have to be the best buyer or seller. [SPEAKER_02] You don't have to own anything. [SPEAKER_02] It's super capital light. [SPEAKER_02] All you have to do is become the trusted third party. [SPEAKER_02] And that's hard to do. [SPEAKER_02] But once you do it, it's an incredible position to be in. [SPEAKER_02] And I think what Nat Turner did buying this company is absolutely brilliant. [SPEAKER_02] I think they bought it for 800, 900 million. [SPEAKER_02] This is going to be a multi-billion dollar company because being the dominant market share, and there's a network effect, right? [SPEAKER_02] If I have a card that I think is valuable, am I going to go to the third rate grader because I can save a little bit on grading my card? [SPEAKER_02] No way. [SPEAKER_02] I'm going to go to PSA because if it's PSA certified, PSA 10, that makes my card more valuable. [SPEAKER_02] And so the trust compounds and it becomes the known unit of account on the street. [SPEAKER_02] You see everywhere you go, you're just going to keep seeing PSA, which means when you need to get your cards graded, PSA. [SPEAKER_02] And then they add it on top of grading. [SPEAKER_02] They have a vault. [SPEAKER_02] So they store a million cards in their vault because they're basically a hybrid. [SPEAKER_02] It's one part Moody's where they're grading an asset class. And on the other side, they're Fort Knox, where they have this giant vault storing a billion dollars worth of cards or whatever it is in their vaults. With this business. So I'm just looking it up. So it's called collectors.com now. It's a portfolio. I think they own the ones you mentioned, plus three or four other ones. [SPEAKER_02] And they have this cool Jackie Robinson card on their photos. And it's created by Topps, Topps cards. And I was like, I bought so many of those. And Topps is owned by Fanatics because it's not a regulated thing. It's not money or gold or anything like that. What's to stop Fanatics from making more? It's not a limited supply. Do you know what I mean? Incentives is what stops them. So yes, it is a limited supply. If Topps can't be trusted to not flood the market with more cards, people will stop buying Topps. The more supply there is, the less valuable each card is. So Topps has an incentive to control the supply tightly, to manipulate the supply artificially. [SPEAKER_02] That's in line with the incentives of the buyers and the holders, because they need scarcity for this to be valuable. [SPEAKER_02] And then PSA sits as a layer underneath both, which basically grades and authenticates that this is real. [SPEAKER_02] It's not a fake card and it's in good condition and it's valuable. [SPEAKER_02] And they also, because they see so many cards, they know the absolute scarcity. [SPEAKER_02] So they know how many of these cards really are out there circulating in the market. [SPEAKER_02] They know the liquidity of each card market. [SPEAKER_02] So there's a market cap for Charizards. [SPEAKER_02] There's a market cap for Jackie Robinson cards, because they know how much liquidity there is, how much circulating supply there is. [SPEAKER_02] They know the relative value of a card because they know, wow, this is in mint condition versus this is in good condition. And so they're all in cahoots with each other in a way that is symbiotic. It's like, have you ever seen how McDonald's does the Monopoly game? The way the Monopoly game works is there's only two or four winning pieces and they guard it crazy. Although they were scammed once. [SPEAKER_02] There was a documentary where one of their janitors on the inside— [SPEAKER_01] Yeah. [SPEAKER_01] They took them. [SPEAKER_01] And so it would be very interesting. [SPEAKER_01] They found the corner of the office where they kept them and they're like, you know, yoink, it's mine. I would have loved to know, when they're making these cards, they must know in advance which ones potentially might be valuable and how they place them in a pack. Because they're just in little bubblegum, five dollar or five card packs. I'd love to see that. Yeah. Dude, Nat Turner was 35 when he did this. So he had recently sold Flatiron Health. I think that's what it was called, for I think 2 billion in 2018. So he must have sold. [SPEAKER_02] So I think he sold one company for 40 million when he was 23. [SPEAKER_02] A media company. Yeah. [SPEAKER_01] It was an ad tech company. [SPEAKER_01] I forget what it was called, but it was cool, whatever. [SPEAKER_01] He sold it for 40, I think 40 billion to Google. [SPEAKER_01] Then he starts this cancer thing. [SPEAKER_01] Because someone in his family, I think, was sick and him and his partner, I think his partner is Zach. [SPEAKER_01] They're whip smart. [SPEAKER_01] You could just tell by the way, Zach is feisty online and he's very sharp with his words where you see guys talk like this. [SPEAKER_01] And you're like, that's not someone I want to argue with because not only is he sharp, he's argumentative and he won't back down. [SPEAKER_01] Yeah. [SPEAKER_01] He calls bullshit. [SPEAKER_01] Yeah. Then he starts this cancer thing. [SPEAKER_01] Cause someone in his family, I think, was sick and him and his partner, I think his partner is Zach. They're whip smart. You could just tell by the way, Zach is a feisty guy online and he's very sharp with his words where you see guys talk like this. [SPEAKER_01] And you're like, that's not someone I want to argue with because not only is he sharp, he's argumentative and he won't back down. Yeah. [SPEAKER_01] He calls bullshit. [SPEAKER_01] Yeah. [SPEAKER_01] And so this guy, Nat seems a little bit more of a nicer version of that, but still has it. He seems so smart and wise at a very young age. [SPEAKER_02] I've been very fascinated by him as well. [SPEAKER_02] And I also thought when he did this, I was like, huh? [SPEAKER_02] And then you go to the website and you're like, this is awesome. This is good for the soul. The math on the queue alone, right? 14 million cards in the queue. The cost to grade a single card is 20 bucks on low end, thousand plus on the high end, let's call it 30 bucks on average. [SPEAKER_00] So 14 million cards in the queue times 30 bucks is 400 million sitting in the queue. [SPEAKER_00] It's probably more if you think the average cost of the card is higher. [SPEAKER_02] And so that's just their backlog. [SPEAKER_02] And by the way, this is one of the reasons he bought it was because there was a one year [SPEAKER_02] wait to grade cards. [SPEAKER_02] He's like, dude, this is terrible. [SPEAKER_02] And so he bought it to try to modernize it with technology, with efficiency, with intensity. [SPEAKER_02] We have to be able to do better than that. [SPEAKER_02] And I'll take it public again. [SPEAKER_02] Once we've implemented a more tech forward approach to doing this, [SPEAKER_02] because you can't just have a multi-year backlog and cards waiting to be graded. [SPEAKER_02] If you go to his Instagram, it's called Nat Turner's Cards. [SPEAKER_02] And it's just photos of him showing off his card collection. [SPEAKER_02] He owns what looks like a Yao Ming rookie collection, a rookie card. [SPEAKER_02] And it's just him showing it off. [SPEAKER_02] This is so cool. [SPEAKER_02] I wonder what their office is like. This is awesome. The Yao Ming rookie card just for some reason got me. Yeah, I don't know. I don't know what their office is like. I don't know what any of it's like. I just think this is an amazing move. [SPEAKER_02] No, I've never met him. [SPEAKER_02] I'd love to have him on. [SPEAKER_02] I think this would be really fun. [SPEAKER_02] I also just think this is my sickness, my disease is anytime I discover a great business [SPEAKER_02] model, the envy in me is like, how do I have one? [SPEAKER_02] I want one. [SPEAKER_02] And so there's a question of where else are businesses like these? [SPEAKER_02] Or where could you build a business like these? [SPEAKER_02] And my brain goes into human capital. [SPEAKER_02] How do you create a PSA grading system for the top 1% of [SPEAKER_02] Ivy League graduates? [SPEAKER_02] Could I basically score them in some way? [SPEAKER_02] Could I do this for sports? [SPEAKER_02] Just like they do with the combine and the NFL or NBA. [SPEAKER_02] Could you do this with youth athletes? [SPEAKER_02] Basically where would there be an aligned set of incentives for the demand for it? [SPEAKER_02] They want to have structure and a scoring system that can be trusted by all parties. [SPEAKER_02] And where's the economy big enough? [SPEAKER_02] Collectibles was a big enough economy. [SPEAKER_02] I don't think it's whatever, 10 billion ish industry. [SPEAKER_02] It was big enough to support these types of revenues. [SPEAKER_02] And so I wonder where else you could build one of these third party trust, third party grading systems. [SPEAKER_02] Dude, but there's also, you're scratching the surface with different collectibles. [SPEAKER_02] So if you want to get really nerdy, I'm part of all these vintage denim communities online and people will post. [SPEAKER_02] Yeah. [SPEAKER_02] Look, if we're going to say this guy who's got an Instagram, who's 38 years old, dedicated to his magic cards. [SPEAKER_02] It was cool when he did it. [SPEAKER_02] Yeah. [SPEAKER_01] But when you said it, I felt differently. [SPEAKER_01] You can't make it. What do you even do? Is it a feel? Is it a smell? Is it a look? What do you even look at? What traits do we even evaluate? [SPEAKER_00] The premium, the best stuff, or the worst stuff? [SPEAKER_00] There's all types of terminology. [SPEAKER_00] You want to look at the honeycombs, which is the fading that's on the back of the knee. [SPEAKER_02] You want to look at the back patch near the butt. [SPEAKER_02] You want to see, does this patch make out of cardboard and paper, [SPEAKER_02] or is it made out of leather? [SPEAKER_02] And has it shrank a little bit or not? [SPEAKER_02] You want to look at, are the copper rivets just a little bit green, [SPEAKER_02] so you know it's real copper. [SPEAKER_02] Are they hidden or are they invisible? [SPEAKER_02] Is there a famous pair of jeans, like the Honus Wagner baseball card, or the rare Charizard? What is the most valuable collected denim? Yeah, so Levi Strauss was invented. Levi Strauss was a man. [SPEAKER_02] You want to look at the back patch near the butt. [SPEAKER_02] You want to see, does this patch, is it made out of cardboard and paper, or is it made out of leather? [SPEAKER_02] And has it shrank a little bit or not? [SPEAKER_02] You want to look at, are the copper rivets just a little bit green, so you know it's real copper. [SPEAKER_02] Are they hidden or are they invisible? [SPEAKER_02] Is there a famous pair of jeans, the Honus Wagner baseball card, or the rare Charizard? What is the most valuable collected denim? Yeah, so Levi Strauss was invented. Levi Strauss was a man. He invented it in the 1800s to help gold miners in San Francisco, so California and Nevada. And so if you can find, it's called buckle back, so where they have the buckle on the back to it's called a cinch. [SPEAKER_02] If you could find any of those in an old mine and assume that's, and you can date it to the 1800s, those could be worth 20 grand. [SPEAKER_02] And so collectors, particularly Japanese collectors, love them. [SPEAKER_02] But then there's this whole sub-genre of people who make reproductions. Predominantly Asian companies, Japanese companies, they're the ones who make the best ones. [SPEAKER_01] Japanese replicate American stuff so well. [SPEAKER_01] I'm wearing a pair right now of Levi's. Stand up, stand up. Let's see it. Let's see them. Look at this high rise. Give us a twirl. Give us a twirl. This high rise. Look at the roping. The roping. This is beautiful roping fades. That's what you're looking for. [SPEAKER_00] You're looking for that chain stitch hem. [SPEAKER_00] That's not made by a normal sewing machine. [SPEAKER_00] That's made by a union machine. [SPEAKER_00] They don't even make anymore. [SPEAKER_00] Oh my God. [SPEAKER_00] You've got to find these. [SPEAKER_00] Died hemming that. [SPEAKER_00] Yeah, you've got to find. [SPEAKER_00] That costs $70 to get hemmed, okay? [SPEAKER_00] You've got to find that good stuff. [SPEAKER_00] And it's actually quite challenging. [SPEAKER_00] And so a 19. [SPEAKER_00] What is the most expensive denim art piece you've bought? [SPEAKER_00] Are you a buyer or are you just a casual? [SPEAKER_00] No, I'm a voyeur. [SPEAKER_00] I'm a voyeur, but $500 for a vintage jacket. Have you considered, have you been tempted to be ooh, 15. [SPEAKER_01] Sarah, do we need that 15 grand? [SPEAKER_01] Do we need to go on vacation? [SPEAKER_01] I have. [SPEAKER_01] So there's a 1947 pair of Levi's that use the green for the pockets. [SPEAKER_02] Because back then we were provisioning out materials. [SPEAKER_02] And so every material was green for the war and getting some of those real deal, you know, the real deal Holyfield ones. [SPEAKER_01] Yeah, I want that stuff. But my point is, there's this whole subreddit dedicated to two things. One, looking at the fade of your denim. It's called Reddit Raw Fades. [SPEAKER_02] So it's raw denim that fades nicely. I swear to God, it's literally just photos. I don't think you're lying. It would be hard to make this up. It's beautiful. [SPEAKER_01] But I do know there's people who do this for other types of clothing, which are far more desirable, purses. [SPEAKER_01] So you're saying you could do niche PSA. Yeah. If you specialized in different clothing, you know, clothing and bags. Yeah. Denim is too niche. But maybe there's a long tail of things like denim. Yeah. Yeah. Well, particularly handbags. [SPEAKER_02] I've seen this all the time on handbags, on eBay and stuff. [SPEAKER_02] I've bought my wife a vintage one for two or three grand. And I'm just trusting the person's eBay profile that they have five out of five stars. But yeah, there's a bunch of cool collectible genres that are still really prime for some of this stuff. [SPEAKER_01] Hmm. [SPEAKER_01] Yeah. [SPEAKER_01] So by the way, I know it's amazing that a woman has decided to marry me, even though I'm still into this stuff, but we exist guys. [SPEAKER_01] Oh my God. [SPEAKER_01] Nat Turner. [SPEAKER_01] Obviously we're nerds as well. [SPEAKER_01] If you'd like to come on, we would love to have you. [SPEAKER_01] Rubenstein, Nat Turner. [SPEAKER_01] Come on the podcast guys. Don't we seem like a good hang? [SPEAKER_00] Look, we're not weird. [SPEAKER_01] We've insulted ourselves just as much as we've insulted you. [SPEAKER_01] So it's good. [SPEAKER_01] That's something you should wear, a white tank top more often. [SPEAKER_01] I think that it brings out something special in you. [SPEAKER_01] Should I just go skimpier and skimpier with each episode? [SPEAKER_01] I just saw the flex on the shoulders. Congratulations. It seems like, by the way, for the past two years, everyone is commenting about your body every single episode. Yeah. [SPEAKER_00] That's great. [SPEAKER_00] Love it. [SPEAKER_01] Yeah. [SPEAKER_01] All right. Keep it coming. [SPEAKER_01] Go to Spotify. [SPEAKER_01] My click farm in India, who is continuing to comment on how much better I look and how I'm getting in great shape and it shows. [SPEAKER_01] Keep it up. [SPEAKER_01] It's working. PSA is going to grade you. They're going to give you a fair condition. [SPEAKER_01] Fair condition. [SPEAKER_01] Yeah. [SPEAKER_01] It's fair. [SPEAKER_01] It's fair. All right. That's it. That's the pod. [SPEAKER_00] You're done. [SPEAKER_00] You're done. [SPEAKER_00] You're done. [SPEAKER_00] You're done. [SPEAKER_01] and how I'm getting in great shape and it shows. [SPEAKER_01] Keep it up. It's working. PSA is going to grade you. They're going to give you a, they're going to give you a, it's fine. [SPEAKER_01] Fair condition. [SPEAKER_01] Yeah. [SPEAKER_01] It's fair. [SPEAKER_01] It's fair. All right. That's it. That's the pod. [SPEAKER_00] You're done. [SPEAKER_00] You're done. [SPEAKER_00] You're done. [SPEAKER_00] You're done. [SPEAKER_00] You're done. [SPEAKER_00] You're done. [SPEAKER_00] You're done. themselves that the company's books are actually what they say they are. And so attestation, credentialing, these are huge businesses that are just some of the most beautiful business models because you become basically a trust tax on an entire industry. You don't have to be the best buyer or seller. You don't have to own anything. It's super capital light. All you have to do is become the trusted third party. And that's hard to do. But once you do it, it's an incredible position to be in. And I think what Nat Turner did buying this company is absolutely brilliant. I think they bought it for 800, 900 million. This is going to be a multi-billion dollar company because being the dominant market share, and there's a network effect, right? Like if I have a card that I think is valuable, am I going to go to the third rate grader because I can save a little bit on grading my card? No way. I'm going to go to PSA because if it's PSA certified, PSA 10, that makes my card more valuable. And so the trust sort of compounds and it becomes the known unit of account on the street. You see everywhere you go, you're just going to keep seeing PSA, which means when you need to get your cards graded, PSA. And then they add it on top of grading. They have a vault. So they store a million cards in their vault because they're basically like, you know, a hybrid. It's like, you know, one part Moody's where they're grading an asset class. And on the other side, they're Fort Knox, where they have this giant vault storing a billion dollars worth of cards or whatever it is in their, in their vaults. With this business. So I'm just looking it up. So like it's called collectors.com now. It's like a, it's like a portfolio. I think they own like, um, the ones you mentioned, plus like three or four other ones. And the, like they have this cool Jackie Robinson card, um, like, uh, on their photos. And it's created by tops tops cards. And I was like, you know, I bought so many of those. And tops is owned by fanatics because it's not like a regulated thing. It's not like money or gold or anything like that. What's to stop fanatics from making more like, it's not like a limited supply. Do you know what I mean? And it's not like, it's not like. Incentives is what stops them. So, so yeah, it is a limited supply. If, if tops can't be trusted to not flood the market with more cards, people will stop buying tops. The more supply there is, the less valuable each card is. So tops has an incentive to control the supply tightly, to manipulate the supply artificially. And so tops has an incentive to do that. That's in line with the incentives of the buyers and the holders, because they, we need, they need scarcity for this to be valuable. And then PSA sits as a layer underneath both, which basically grades and authenticates that this is, this is real. It's not a fake card and that it's, it's in good condition and it's valuable. And they also, because they see so many cards, they know the absolute scarcity. So they know how many of these cards really are out there circulating in the market. They know the liquidity of each card market. So there's like a, there's like a market cap for like Charizards. There's a market cap for, for Jackie Robinson cards, because they know how much, how much liquidity there is, how much circulating supply there is. They know the relative value of a card because they know, wow, this is in mint condition versus this is in good condition. And so they're all kind of in cahoots with each other and in a way that is symbiotic. It's sort of like, um, have you ever like seen how McDonald's does the, the like Monopoly game? Like the way the Monopoly game works is there's only like four or two winning pieces and like, they guard it like kind of like crazy. Although they were scammed once. There was a total documentary where they were like one of their like janitors guys on the inside. Yeah. They like took, they like took them. And so it would be very interesting. Like they found the, like the corner of the office where they kept them and they're like, you know, yoink, it's mine. I would have loved to know, like, uh, when they're making these cards, they must know in advance which ones potentially might be valuable and how they place them in a pack. Cause they're just like in little like bubblegum, like $5 or a five card packs. I'd love to see that. Yeah. Dude, Nat Turner was 35 when he did this. So he had recently sold Flatiron Health. I think that's what it was called for, I think like $2 billion in 2018. So he must've sold. So I think he sold one company for $40 million when he was 23. Like a media company. Yeah. It was an ad tech company. I forget what it was called, but it was like a cool thing, whatever. He sold it for 40, I think 40 billion to Google. Then he starts this cancer thing. Cause someone in his family, I think, uh, was sick and him and his partner, I think his partner is Zach. They're like whip smart. Like you could, I could just tell by the way, Zach is like kind of a feisty guy online and he like, he's very sharp with his words where you see guys talk like this. And you're like, that's not someone I want to argue with because not only is he sharp, he's argumentative and he won't back down. Yeah. He calls bullshit. Yeah. Uh, and so this guy, Nat seems like a little bit more of a nicer version of that, but still has it. They, they, he seems so smart and wise at a very young age. I've been very fascinated by him as well. And I also thought when he did this, I was like, huh? Like it was like totally like, I don't like that's, and then you go to the website and you're like, this is, this is awesome. This is good for the soul. I mean, the, the math on the, there's just the queue alone, right? 14 million cards in the queue. Depri, the cost to grade a single card is, you know, 20 bucks on low end, thousand plus on the high end, let's call it like 30 bucks on average. So 14 million cards in the queue times 30 bucks is 400 million sitting in the queue. It's probably more if you, if you think the average cost of the card is higher. And so that's, if that's just their backlog. And by the way, this is one of the reasons he bought it was because there was a one year wait to grade cards. He's like, dude, this is terrible. And so he bought it to try to modernize it with technology, with efficiency, with just intensity. And so like, we have to be able to do better than that. And I'll take it public again. Once we've implemented like a more tech forward approach to doing this, because you can't just have like a multi-year backlog and cards waiting to be graded. If you go to his Instagram, it's called Nat Turner's Cards. And it's just photos of him showing off his card collection. Like he owns like what looks like a Yao Ming rookie collection, like a rookie card. And it's just him showing it off. This is so cool. I wonder what their office is like. This is awesome. The Yao Ming rookie card just for some reason got me. Um, yeah, I don't know. I don't know what their office is like. I don't know what their, I don't know what any of it's like. I just think this is kind of an amazing move. No, I've never met him. I'd love to have him on. I think this would be really fun to kind of. I also just think this is my, my sickness, my disease is anytime I discover a great business model, the, the envy in me is like, Ooh, how do I have one? I want one. And so there's a question of like, where else are businesses like these? Or where could you build a business like these? And, um, you know, my brain goes into like human capital. So like, how do you like, for example, could I create a PSA grading system for the top 1% of Ivy league graduates? Like, could I basically score them in some way? Could I do this for sports? Right. Just like they do with the combine and the NFL or NBA. Like, could you do this with youth athletes? Like basically where would there be an aligned set of incentives for the demand for it? They want to have structure and a sort of a scoring system that can be trusted by all parties. And where's the economy big enough? Like, you know, collectibles was a big enough economy. I don't think it's like a whatever, 10 billion ish industry. It was big enough to support, um, these types of revenues. And so I wonder where else you could build one of these like third party trust, third party grading systems. Dude, but there's also, I mean, you're, you're, you're just scratching the surface, which different collectibles. So if you want to get really nerdy, uh, I'm part of like all these like vintage denim communities online and people will post. Yeah. Look, if we're going to say this guy who's got an Instagram, who's 38 years old, dedicated to his magic cards. It was cool when he did it. Yeah. But when you said it, I felt differently. You can't make it. You just like fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy fancy What do you even do? Is it a feel? Is it a smell? Is it a look? What do you even look at? What traits do we even evaluate? The premium, the best stuff, or the worst stuff? There's all types of terminology. You want to look at the honeycombs, which is the fading that's on the back of the knee. You want to look at the back patch near the butt. You want to see, does this patch, is it made out of cardboard and paper, or is it made out of leather? And has it shrank a little bit or not? You want to look at, are the copper rivets just a little bit green, so you know it's real copper. Are they hidden or are they invisible? Is there a famous pair of jeans, like the Honus Wagner baseball card, or the rare Charizard? What is the most valuable collected denim? Yeah, so Levi Strauss was invented. Levi Strauss was a man. He invented it in the 1800s to help gold miners in San Francisco, so California and Nevada. And so if you can find, it's called buckle back, so where they have the buckle on the back to like, it's called like a cinch. If you could find any of those in an old mine and assume that's, and you can date it to the 1800s, those could be worth 20 grand. And so collectors, particularly Japanese collectors, love them. But then there's this whole sub-genre of people who make reproductions. Predominantly Asian companies, Japanese companies, they're the ones who make the best ones. Japanese replicate American shit so good. I'm wearing a pair right now of Levi's. Stand up, stand up. Let's see it. Let's see them. Look at this high rise. Give us a twirl. Give us a twirl. This high rise. Look at the roping. The roping. This is beautiful roping fades. That's what you're looking for. You're looking for that chain stitch hem. That's not made by a normal sewing machine. That's made by a union machine. They don't even make anymore. Oh my God. You've got to find these. Died hemming that. Yeah, you've got to find. That costs $70 to get hemmed, okay? You've got to find that good good. And it's actually quite challenging. And so like a 19. What is the most expensive denim art piece you've bought? Are you a buyer or are you just a casual? No, I'm a voyeur. I'm a voyeur, but like $500 for like a vintage jacket. Have you considered, have you been tempted to be like, ooh, 15. Sarah, do we need that 15 grand? Do we need to go on vacation? I have. So there's like, um, like a 19, a pair of 1947 Levi's that use like the green, uh, for the pockets. Because back then we were like provisioning out materials. And so every material was green for the war and getting some of those real deal, you know, the real deal Holyfield ones. Yeah, I want those stuff. But my point is, is that there's this whole subreddit dedicated to two things. One, looking at the fade of your denim. It's called, uh, Reddit Raw Fades is what it's called. So it's raw denim that fades nicely. I swear to God, it's literally just photos. I don't think you're lying. It would be hard to make this up. It's beautiful. But I do know there's people who do this for other types of clothings, which are far more desirable, like purses. So you're saying you could do niche PSA. Yeah. If you, if you, if you specialized in different, uh, clothing, you know, clothing and bags. Yeah. Denim is too niche. Uh, but like, uh. But maybe there's a long tail of things like denim. Yeah. Yeah. Well, particularly handbags. I've seen this all the time on handbags, uh, like on eBay and stuff. Like I've bought my wife, like a vintage one for like two or three grand. And I'm just trusting the person's eBay profile that they have like five out of five stars. But yeah, there's like a bunch of like cool collectible, like, uh, genres that are still really, uh, prime for some of this stuff. Hmm. Yeah. So by the way, like, I know it's amazing that like a woman has decided to marry me, even though I'm still into this stuff, but we exist guys. Oh my God. Nat Turner. Um, obviously we're nerds as well. If you'd like to come on, we would love to have you. Rubenstein, Nat Turner. Come on the podcast guys. Don't we seem like a good hang? Look, we're not weird. We've insulted ourselves just as much as we've insulted you. So it's like, we're good. Uh, um, that's something you should wear, um, a white tank top more often. I think that it brings out something special in you. Should I just go skimpier and skimpier with each episode? I just saw the flex on the shoulders. Congratulations. Um, it seems like, by the way, for the past two years, everyone is commenting about on your body every single episode. Yeah. That's great. Love it. Yeah. All right. Keep it coming. Go to Spotify. My click farm in India, who is continuing to comment on how, how, how much better I look and how I'm getting in great shape and it shows. Keep it up. Uh, it's working. PSA is going to grade you. They're going to give you a, they're going to give you a, uh, it's fine. Fair condition. Yeah. It's fair. It's fair. Um, all right. That's it. That's the pod. You're done. You're done. You're done. You're done. You're done. You're done. You're done.