Speaker unverified: belief

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…at some insane value and most people are high-fiving, “This is amazing! Our stock is trading two X where it should be. This is great, we're all rich.” The problem with that is that— It goes both ways. You've now pulled forward a ton of value and so all the people working at the company now are being overpaid because they didn't actually create this value. The stock gets this value and then the people who you're hiring, and those people are probably more likely to just cash out because they've just made too much money. You're robbing future employees to pay your current employees. Exactly. And then future employees now you have to give them stock options or RSUs at a stock price you don't really believe in. And so the stock is so volatile that you're actually not being paid as an employee based on value creation. You're being paid arbitrarily based upon multiples which have nothing to do with the true intrinsic value of the company. I think obviously it's bad to be undervalued as a company because then you're issuing stock to employees at too low of a value and then they don't appreciate it usually. But it's pretty bad to be overvalued, too. Because employees, if the stock doesn't go up, they will definitely come back to you and ask for more options. If the stock goes up way more than it should, they're not going to come back to you and be like, “Oh, you know what? Hey, I made too much money.” And so you end up having this asymmetric—I think it's really not a healthy dynamic to be a public company. Is there anything that should be changed about the public markets to make it better? So, for example, Robinhood got rid of commissions. Is zero the correct amount of friction for entering and exiting trades? This is hard. I had breakfast with Vlad this morning and I really like Vlad. I think that it's a moment in time. My view is that over the long term, stocks will go to intrinsic value. It's taken longer than I've expected for some of these things. I still believe it. I believe it. I can't tell you I have a lot of evidence that's the case, but that will happen. That doesn't necessarily help a company like Stripe if they go public and if eventually in five years it's in fair value, but in the meantime they're just kind of— Whips up and down. Yeah, whips up and down, that's bad. I'm not sure you can do anything to change markets. Markets are inherently volatile. You would think that in the current world, if I told you that we just have perfect information, everybody has all the information, it's at your fingertips. Everything should be more efficient. Wow. Stocks are going to be so correctly priced! Right—everyone has this access to the same information. It's actually gotten less efficient over time, for sure. And I don't know, I don't think you can just necessarily fix that. You mentioned starting your career as a banking analyst. How has the banking industry changed? en less efficient over time, for sure. And I don't know, I don't think you can just necessarily fix that. You mentioned starting your career as a banking analyst. How has the banking industry changed? Most of the banks tend to be very dominant in one geography. They're not like tech companies like Google or Meta where they're just dominant. JP Morgan is dominant in the US, but Europe… Same thing with the European banks. Up until now, I think the legacy banks have, more or less, in most geographies, been able to keep their market share. However, you increasingly are seeing banks like Nubank or Revolut that don't have the tech debt of mainframes and old code. And just offer better customer experiences. Don't have branches, iterate on product faster, have better engineers. I think that those banks are going to increasingly take market share. Neobanks have happened in Brazil with Nubank, have happened in Europe with Revolut and Monzo and people like that. Haven't happened in the US, really. And there's probably other geos where they have and haven't. Do you have a view on, will it happen in all markets? Are certain markets more impervious than others? I think that it depends on how good the incumbent bank is. I think JP Morgan is a very well-run bank and the big banks are well-run, but do I think that they are vulnerable to disruption? Definitely. But you still buy bank stocks, so how do you get comfortable? Then there's a more theoretical question of, okay, well if all these AI agents… Basically, Revolut and Nubank just hired the best engineers and so they were just naturally going to beat JP Morgan. But if AI agents make it so now everybody has the best engineers, because best engineers are actually not people, they're just agents. Maybe JP Morgan can be as good as some other companies. That's theoretical. It's probably not correct. In the US, I haven't seen someone come in and be that disruptive. But is that because of market structure reasons or just we haven't seen the great founder yet? It's a good question. I mean, look, banking is not, it's not like you have both sides. You need deposits, you need to provide credit, and you need a lot of scale. And a market like the US is much more difficult to penetrate because it's so big and the competitors have so much capital to invest. Whereas, smaller countries… Revolut has low single digit to mid digit market share in every country. I think that'll keep growing, but they don't actually provide credit. So I think we're in the early days of disruption. I think if you roll forward like 20 years, there's going to be some companies that didn't exist 10 years ago but are going to become enormously large banks. But I also think the incumbent banks are probably going to innovate enough that they're not going to go the way of JCPenney. Last question. If you're a youngster interested in investing, you have views on companies but you don't feel confident yet in how to underwrite and construct a model and things like that, what advice would you give them? Someone who's interested in this stuff but still getting their feet wet? you don't feel confident yet in how to underwrite and construct a model and things like that, what advice would you give them? Someone who's interested in this stuff but still getting their feet wet? I think that pretty much with anything you want to do in life, I just believe that reading incessantly is the way to get ahead. And investing is no different. Just read stock pitches over and over and over again and then watch those stocks, see how things play out. The market will be your mentor. But I think you need to just really… I learned by, there's a website called Value Investors Club and I just read everything that people pitched. You want to have some framework. I liked reading Buffett's books because he has some faults obviously, but he has a way of distilling down the complicated into very simple ideas. And so I would read a lot of Buffett books, I read a lot of stock pitches. Anything I could get my hands on with regard to what's happening in technology, what's happening in the economy. And to me it's just like the more you read, the better you are. Obviously the Buffett stuff is very worth reading. And there's the Cunningham book that takes all the letters and smushes them together— That's my favorite book. Exactly. Yeah. So that is a classic and a lot of people listening have probably read it. All the Berkshire letters. What I actually only read recently for the first time is if you go back and read the Buffett partnership letters, so this was the partnership he had with which he bought Berkshire Hathaway and turned it into—but this was a fund, more of a hedge fund than the C-corp that is Berkshire. What's interesting is I found it stylistically very different. This is the late fifties, early sixties, and it's before he got so polished. It's before he got so folksy and approachable and careful in what he said and a little more of the raw ambition is on display before he sanded that off. And I don’t know if you've gone back and read them. I haven't read them. Oh, it's awesome. I'll send you, it's really good reading. But the original Buffett partnership letters are kind of—I mean obviously it's Buffett, so it's similar in a way to the Berkshire letters but I actually think they're better in certain ways. Yeah, he is a brilliant guy but he actually does like to portray himself in a certain light. The Buffett partnership letters felt more authentically— They shine a light on who he truly is, but it's been good for his business to portray himself in that light. It makes sense. You can argue the results. Alright, Dan Daniel, thank you guys. Thank you.…

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