Episode #292: Tom Barton, White Rock Capital, “I Just Thought, Well, This Is The Dumbest Short Of All-Time”

Episode #292: Tom Barton, White Rock Capital, “I Just Thought, Well, This Is The Dumbest Short Of All-Time”

 

 

 

 

 

Guest: Tom Barton is the Founder, President, and General Partner of White Rock Capital. He helped build the first multibillion-dollar short-selling hedge fund at Feshbach Brothers in the 1980s, where he exposed dozens of stock frauds. Then he became an early-stage investor, going long on health foods and satellite TV. Now he runs White Rock Capital, where much of his focus is on investments in gene-therapy firms.

Date Recorded: 2/26/2021     |     Run-Time: 1:36:09


Summary: In today’s episode, we start with taking a look back at one of Tom’s tweets from September, which said that GameStop was a misunderstood short, and hear why he thought so back then. We also touch on the differences between shorting based on valuation versus because the company is a fraud. Then we turn to what he mostly focuses on these days: biotech and gene-therapy companies. We hear about his brutal two-year experience as an activist and what he learned from the experience.

As we wind down, Tom walks us through some companies he likes in the biotech space, and even shares a SPAC that looks attractive to him at the moment.


Sponsor: AcreTrader


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Transcript of Episode 292:

Welcome Message: Welcome to the “Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

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Meb: What’s up, friends? We have a great episode for you today with one of our all-time favorite guests. He is the founder and president of White Rock Capital, and previously helped build one of the first multi-billion-dollar short-selling hedge funds at Feshbach Brothers, where he exposed dozens of stock frauds. And today’s episode we start by taking a look back at one of our guest’s tweets this past fall in September, which said that GameStop was a misunderstood short, and hear why he thought so back then. We also touch on the difference between shorting based on valuation versus because the company is a fraud. We then turn to what our guest is mostly focused on these days, investing in early stage biotech and gene therapy companies. We hear about his brutal two-year experience as an activist, and what he learned from that ongoing ordeal. As we wind down, our guest walks us through some of the companies he likes in the biotech space, and even shares a SPAC that looks attractive to him at this moment. Please enjoy this episode with White Rock Capital’s Tom Barton.

Tom, welcome to the show.

Tom: Hey, man. How are you? How you been? It’s been two years.

Meb: I can’t believe it. You’ve been one of our most requested guest to bring back. Nothing’s happened in between last time we talked, a little pandemic, not so much. You look good, though, you survived. That’s a positive.

Tom: Well, I don’t know why anybody would want me back. But I’ll take it as a compliment, you know, either way. Thank you very much. It’s been a crazy two years. But it almost seems like every two years is kind of crazy to some way, right? This one’s a little different. I’ve actually had a baby since then. I have a nine month old baby. So…

Meb: Wow, nothing says pandemic like mixing it up by adding some more headcount. You got a pretty wide spectrum, right? What’s the oldest?

Tom: I got a spectrum that spans 32 years. How’s that? I like being a father. So people who like being a father, they can be a father, people who don’t like it shouldn’t be a father, but I love being a father. So it’s been a little interesting for that too. You know, I’m a little bit younger, I can now get down on the floor and crawl around and do this kind of thing. So I’ve taken some years off my life on parts of body, and it put some years on my life on parts of the body.

Meb: I’ll tell you a funny story. I was going on TV yesterday. Well, the modern equivalent TV, which was like the Yahoo streaming show. And for years, just to sort of entertain myself, anytime I’d go on CNBC or Bloomberg, I’d ask my friends, I’d say, “All right, give me a word to work into the interview, just to make it a little more interesting.” And they would come up with the most preposterous words. And then as I have son who’s now almost four, I transition just to asking him. And so the word for the interview yesterday was tattoo, which I managed to work in no sweat. I was laughing because I tweeted at the other three that he’s asking me to do. The first one was blah, blah, blah. The second one was Beyblade, which is some like kid’s toy. I have no idea. I couldn’t do that one. And fart. Fart didn’t make it in, sadly. I really thought I could do it, but I couldn’t.

Tom: I don’t think we should use the words. Let’s use a phrase. And I think the phrase we’ll use is, “You didn’t really say that, did you?” I’ll tell you, honestly, right after I did the show, I took this flight to San Francisco. I’m not shooting at San Francisco because I spent half my time in California. I got to San Francisco, stay there a day, get on a flight, come back, and catch an infection that was one of the rarest infections anyone’s seen. Took them 30 days to actually treat it. I literally almost died and I’m not stretching it. Almost died from infection I caught in San Francisco. So for all you folks that like to roam the streets of San Francisco, you better take some antibiotics. And I’m not shooting at San Francisco, but let me tell you, really, I almost died and it was some kind of experience. I had to use some of my biotech skills to work my way out of it.

Meb: That’s what I was to say, we’re going to talk about biotech and healthcare a lot during the show today. You spent, man, a better part of the last decade at least deep in the weeds there. But for someone who lived in San Francisco for a few years in Chinatown above the Broadway Tunnel that is not remotely surprising to me. Well, glad you made it out the other end. I thought you were going to say you got Corona. I thought I had it. I know like everyone’s convinced they had it.

Tom: Listen, I’m going to tell you because I have a friend of mine who has the patents for, but if you take a combination of Singulair, which is an asthma drug, and Sani-Sol, which is over the counter, that it down regulates aisle six. And the guy’s been doing trials. He’s really brilliant guy. He ran trauma at UCLA for a while. And he’s expert in sepsis and all these kinds of rare events that you don’t want to be part of. But in essence, if you take those two drugs together, it’s showing that if you catch Corona, your symptoms are almost negligible. It’s just two drugs. One of them is an Rx, one is over the counter. I had taken it for a year, and I don’t get colds, I don’t get flus, I don’t get Corona. So we’ll see. The super pills. I took one Moderna shot, scared the hell out of me because we don’t know long-term results. But I did do it. Second one’s next week. So we’ll see how it does.

Meb: We can’t start this podcast, Tom, without talking a little bit about your old background relevant to what has been going on in the past, I don’t know three, six months. You had a tweet, I’m going to read this tweet, because this tweet was in September 2020, listeners, so last year. Feels like a lifetime ago. Says, “Look, I’ve been a short seller all my life, thousands of companies,” and you talk about short interest and you start talking about GameStop. This is back in September. And it says, you’re talking about short interest, you said, “Look, if these high short interest numbers are true, the shorts are dead. They misplayed this thinking of bankruptcy is coming. It’s not. And if some fund that is big starts buying GM, it’s going to go up to 50.” And so this was back last year. Tom, walk us a little bit about it. Because for someone…there’s been so much misinformation and nonsense, the media, it’s hard to spell all the things that got tossed around the past six months. But you were ahead of this by a long shot and talking about these ideas. Short seller who has been doing this, tell us kind of how this whole situation played out and any thoughts.

Tom: I mean, when I first saw the symbol, I thought it was a tracking stock for GM EDS, which has always confused me that GME was EDS. Remember that? That’s how old we are, right? It’s a Dallas company. And it’s got that feeling of Blockbuster Video, but it’s not Blockbuster Video, but you can’t entirely knock out the hardware side of the business. Obviously, they had significant problems and still do in being a brick and mortar location. So the issue becomes really, is there anyone who could turn this thing around. And when I looked at the board that they put on, and I looked at the fact that they were…they had a lot of interest from this guy who had started basically PetSmart and then Chewy, I’m thinking, “Well, you know, someone thinks that they can take this from brick and mortar to more online.” And then I learned they had 70 million end users they had addresses and like for. So they had a big customer base.

I’ve never done that. I’ve never gone from brick and mortar to online internet sales. But for the group, that was in their head, so you look at that, you go, “What’s the odds that they can pull this thing off?” And you got to figure that their odds are at least 50-50 they can, or if you want to say 30-70. Whatever it is, they got a good chance of getting some value. So I got a look at a balance sheet. And frankly, the balance sheet was fine. I mean, everyone said it was going bankrupt, but they weren’t going bankrupt in the next two years. And that’s plenty of time to turn it around. And I looked at the short interest. Now this is what surprised me more than anything. I made a lot of calls on the short interest to people in the business. And I’m not talking about other short sellers, didn’t care about the short sellers. I was more interested in guys that loan out stock. So I called stock loan department, someone I’m familiar with. And I went to Goldman Sachs, who were our prime broker through BTIG. They’re our prime broker. I started asking these questions.

And the stock was easy to borrow and I couldn’t understand how do you have 70 million shares out, 70 million shares short that’s easy to borrow, you shouldn’t be able to borrow the stock. And of course, then they started explaining that there’s a multiplier effect, you can borrow a stock more than once. We all know that short sellers, there’s 70 million shares out and there’s 70 million shares short, that really means there’s 140 million out now. There’s 140 million that are actually owned, 70 million shorts. So we understand the basics map. But I’ve just heard the story, just made no sense to me. Made no sense to me how there could be a shortage that’s this large. And I probably talked to maybe eight different experts on it now who go, “Oh yeah, you can borrow. It’s not that big of a deal. Do you want to loan us some stock because we had a pretty decent long position.” And I go, “No, I don’t want to loan you the stock.”

So I just came to the conclusion that the company was not going to go away. And that I always believe in this. You control risk by your entry price. Now it doesn’t matter whether it’s on the long side of the short side. But that’s costing me a lot of money because I can’t buy Tesla at 400, but I could buy it at 50 because my risk profile is what do I pay when I get in on the long side. And my risk profile on the short side is what I get in on the short side. I mean, it’s got to be so obvious on the long side, it’s costing a lot of money, incidentally, not to be able to try to go from a value to a growth investor, but the purchase price is the issue to me. And at $4, it was like, okay, the downside is maybe $2 over the next couple years.

Meb: Downside’s 4 bucks.

Tom: But it wasn’t really 4 bucks, because it wasn’t going to go straight to zero. And the upside was an enormous number, but also start looking at what the multiple might be on revenue. What if they’re able to turn this thing around? What could it possibly take on a revenue basis? That’s why I came to some of those numbers, and I just thought, “Well, this is the dumbest short of all time.” And then the other thing that surprised me was, it was so vocal on the short side, which I thought was really weird, because why you’re vocal on something that’s a $4 stock when the market’s flying. You can make $4 a day doing anything, you can buy anything September through maybe yesterday, okay, and make $4 a day. It just didn’t make any sense. Right?

The risk reward on the short side sucks. I’ll just use the S word. It just absolutely sucks. So on the short side, you have to be 100% correct. You have to be because it’s not that you can lose infinity. Yeah, you can. But you know, the point is, if you’re going to be short 10 stocks, you can just do the math, you need to be right on 7, you have to be right on 7, because the other 3 could carry you out. I didn’t really get until recently, last year, that on a long side, you don’t have to be right on seven, you just need to be right on three. And you can be wrong on seven, but if those other three had these enormous upside to them, they’ll cover up the other losses on the seven, right. And you can figure that out. As long as you did 10%, 10%, 10%, you can lose 7, you could lose $7, and your 3 could go up 40 times, it’s 120 minus 7, I think I got the numbers right. You’d still make 133 bucks, 133 on the original 10. So the bottom line is the upside, you don’t have to be as exact on the long side as you do on the short side.

I just couldn’t get it. And I got no reasonable answer. So I figured I would tweet out that, “Hey, this is going to turn out to be a disaster. And you should own this thing. Because you’re going to get it on the upside. Gaming is not getting weaker, is getting incredibly stronger.” They had good relationships on the product side. And so it was a pretty simple thing. And so we bought it. And I would love to tell you that I sold it at 355. But you would know that I would be lying because, you know, there’s no way I can hold it to 355. So we didn’t sell it, but we made a very good multiple on our money on this. And to me, it was just that easy risk reward. You see those all the time on the long side, and you see them all the time on the short side.

Oh, and incidentally, we did do our normal kind of work. We did call, we did talk to management, they weren’t particularly helpful. We did look at the new guys that were on the board that got from Nintendo America going on the board. We did look at that. And we just said, “What are the odds it’s going to fail anytime soon?” “Zero.” “What are the odds that they can turn this thing around?” “I don’t know, 30%, 50%, you pick it.” And so it was kind of an easy investment.

Meb: I don’t know if it’s on the Mount Rushmore of short squeezes, maybe in the top 20 of most dramatic and most interests, you know, you had Volkswagen, which was probably an order of magnitude bigger as far as market cap size. But when you get this massive short interest, and in general, at least the quant literature shows that the higher shortages companies do poorly, the problem is that when you get the short interest so high, if the shorts have to cover, that is like kindling. If they get forced into a position more they have to buy back in, it just adds a ton of pressure to the upside. And we saw that, which is the hand was forced and that sucker went exponentially up to the upside.

Tom: Well, we got squeezed years and years, the worst I’ve ever been involved in. We were squeezed on press tech. I think we were shorted about 20. And I was just not going to cover it. I just was not going to have it, she’s not going to cover it. And they took it to 170 during a period when nothing trended in hundreds, and we stayed in it to 170. And then, of course, it blew up and it went back. And I think after all that aggravation, I either lost a little money of broke even. We did not make money on that. But I was not going to toss that one in. And I think that’s what happens on something like a GameStop is that it’s $4, it goes to $8, and no one’s tossing it in. And it goes to $15 and no one tosses it in. And before you know it, it gets absolutely out of hand.

How it got out of hand the way that it did, I think it’s pretty obvious, even though a lot of people think it’s a mystery. And that is that a bunch of people started buying it, and a bunch of people started covering it. And for some reason, the media is very upset that retail guys bought the stock. I don’t know why. Why are they so upset? Maybe guys that lost money at 355 bucks, hopefully they didn’t lose their life savings. Most of these people that were probably buying it were fairly young, maybe they learned something. There’s nothing wrong with learning something in the process. A momentum trading is totally allowed. We know a lot of funds that own stock situated over 1000 that effectively are going to earn $3 a share. That’s momentum investing. Why is that legit? Because the company’s considered great. But this is not legit because the company’s considered iffy.

I just thought that the whole attack on retail guys was insane. Had it been Goldman Sachs saying this is the greatest company in the world, and it had gone off like that, people would’ve said, “Well, yeah, it’s Goldman Sachs.” But Goldman Sachs doesn’t have that kind of pull. No one has the kind of pull to get that to 355. Agree? No one could tweet anything else and make that go to 355. This happen to be a unique situation. It is unique, and it is not going away. It’s absolutely not going to go away.

Meb: I think it’s useful. You mentioned a couple of things. I mean, the first is that, look, whether you made or lost money, I mean, if you did lose money, particularly if you’re young, count it as a blessing, as a lesson. I mean, most of us that are older have not just one scar or two, but an entire body full of scars on positions where things went the wrong way that you end up learning from. And I think what the most instructive takeaway, I think from a situation like this, for people who hadn’t really experienced it on either side is you get to come in to something on all of your positions in your book with having a plan and at least understanding what’s possible for a position. And so one way to manage that, of course, on the short side is position sizing. If you’re short something with 20% of your book, and it goes up 10x, that’s that. I was going to say the story’s over until yesterday, and then it starts getting jiggy again. So who knows?

Tom: Well, you know, they fired the CFO, that’s always a great sign. I’ll tell you the most fun we had doing those couple of days of after the close, going out and buying KOSS and buying that at a low price and selling it the same day within a couple of hours for 40 bucks, and just going, “Now what the hell did those guys do?” Now, we didn’t use much capital to do it. But I’m sure that hedge funds, family offices, everybody attempted to do this. Everybody saw it and they said…well, Warren Buffett didn’t, Charlie Munger didn’t, but everybody else said, “Well, if they’re going to run one from 4 to 40, I’d like to own some. So we did that. And then AMC. I thought AMC was American Motor Corp still. And it may be the Gremlin was now an EV. And that thing took off. I go, “Wow. You know, they got an EV.” And then it’s no, it’s not the old AMC, right.

We did some of that, it helped our performance significantly for the year. But I don’t consider that a terrific way to invest. But I do have a bunch of young people work for the fund. And I’ve told them, “You better find me the next one,” because I want to own them. If they’re going to do it again, I want to own it. I don’t want to ban it. I just want to own it. And I don’t want to be short anything that’s going to be in that kind of group. I think that we just let it go. And this way of investing will run its course. They usually run its course. And right now, every 14 to 22 year old person in the country wants an account. They want to trade this stuff and they’re all geniuses. Well, when the market starts going down, they’re going to learn a big lesson.

Meb: This was me in the ’90s except it wasn’t Robinhood, it was eTrade. And it even cost a little more to trade then in commissions. It’s funny because I see myself in a lot of what’s going on. Talk to me, before we move on, a little bit about short selling. It’s funny because the media, it sort of oscillates on their mood, depending on where we are in the cycle. Sometimes the shorts are the heroes, when you uncover Enron or some of the things going on in ’08, sometimes they’re the villains. And it seems like short sellers are almost extinct at this point, if you look at the number of funds, and the ones that are still around. For someone who’s been doing it since the ’80s, any general thoughts on short selling in general here in 2021?

Tom: Well, there’s good. I always say there are good short sellers and bad short sellers, the good guys on the long side, the bad guys on the long side. This is not surprising. I’ve never been a fan of shorting an overpriced stock. It just isn’t for me, number one. Number two, I absolutely am against spreading rumors to hurt a company. I’m absolutely against that. And I’m absolutely against innuendos to hurt a company. And so if you take that out of the short selling community, everything that’s left is kind of okay. But the problem is that the vocal shorts are the ones who get the most attention, right.

So there’s one short that was on GME that I have a lot of respect for his ability. He’s proven great at uncovering frauds, and he’s well known. We don’t need to mention his name because I’m actually out after him, per se. But he comes out on the air because he has that kind of credibility, says, “I’m going to tell you why.” This is where the whole thing blew up on the outside. “I’m going to tell you why tomorrow why this stock is going to basically go into the 20s.” It was, I think, 50. It had started to move, right? Well, that’s not kosher. Because he didn’t have a reason to tell you. Ultimately, when he told us two days later, the next day he didn’t tell us because he said, “Well, the inauguration, I don’t want to interfere with that.” That’s just total horse crap. And the next day put out five reasons that were a total joke. But the guy’s credible enough that he can go on the air and say, “Tomorrow, I’m going to tell you why it’s going to collapse.” Well, the stock’s going to collapse, for God’s sakes.

Now that’s wrong. And in particularly, if you’ve got five reasons, just spit them out. They only took him like 30 seconds. That kind of short selling innuendo…because short sellers, you don’t know whether it’s overpriced, or whether it’s a fraud. It’s a big ass difference. So you get somebody like me talking about a short, I need to tell you this up front, is it overpriced or a fraud? If it’s a fraud, you don’t want to own it if I’m short. If it’s over price, pick your poison, right. So short sellers have created some situations. And I’ve been on the other side of some shorts, some longs where a situation has been created that were totally false, and it hurts for a period of time. And I think those short sellers should be brought forward in front of the SEC, and they should be sanctioned. And any other things you do for attempted manipulation.

The problem is the law kind of lets them do it. So if you’re not going to change the law, you’re just going to have short sellers that will do that from time to time. By and large, short sellers are pretty damn good. They do great work. By and large. Well, you can’t make money with the short selling fund. I know everyone who’s ever run one. I think, you know, one of the biggest names is Chanos and this could be wrong. But I think I read recently that his return on the shorts, from the beginning of time, is minus 3% or minus 6%. That’s annualized. So give a guy a million dollars, he’s just losing money every single year. You can’t make money on the short side, you cannot do it year after year, it’s impossible to do. So what happens is people pick their spots, and then they try to make a killing on something, and then they’re associated with a fraud. And then they want to do an innuendo on something that’s maybe overpriced. That’s not cool.

This is the way it was in the ’80s. They hated shorts, and they hated me in the ’80s. But all I did was uncover frauds. I never shorted a company doing the fraud, never. I don’t want to be put on a pedestal. But I should have been put on a pedestal like, “This guy’s helping clean up the financial market. A lot of the things he’s short the mob’s involved in and some of the worst investment bankers,” if you can even call them, they weren’t even really investment bankers, but they were some of the worst that ever lived. And we’re just exposing them and they’re going away. Those short sellers, that’s a total benefit right? The short seller who is trying to create his story, that’s a bad short seller. So you know, the problem is someone wins, someone loses, so shorts, you are going to get slaughtered. But there’s only certain environments you could be short, the general market anyway.

Meb: The challenge is you hear stuff in the media like shorts should be banned. And I said, first of all, the short selling, A, already a thankless task, like my God. All the short sellers I know, it’s so hard. And the good ones, let’s ignore the bad apples. Because, believe me, there’s a gazillion bad apples on the long side too, particularly the ones that are just like pushing, a lot like the bankers, like pushing a lot of product that they know is garbage. But I said, “Imagine a world without short sellers or people exposing these frauds. You think the government’s going to uncover it, you think that the auditors half the time are going to uncover it? They’re not.”

Tom: What is an actual short sell when it takes place? It’s just the guy selling the stock. He’s selling it. There’s a buyer. The buyer doesn’t know whether it’s going to short or not. Really, in theory, it shouldn’t affect anything really, in theory. Where it affects it is if particularly short wants to use volume to create fear. So if you want to use volume and you go, it trades 100,000 a day, and I’m going to short 5 million shares, I’m going to short it as hard as I can and create fear, that’s a different story. But if you’re just shorting it, you’re just a seller. So you should ban all sellers? Effectively, that’s correct, right?

Meb: You get the weird suggestions like this. I got into a little Twitter discussion with Elon a few years ago where he was, of course, saying the same things. I said look, “The shorts, in my opinion, don’t affect the outcome.” I said, “If you have a killer company that builds amazing products and has great earnings and revenue, it may affect a little bit in the short term, but in general, it’s not going to affect the outcome. So you ignore them and good news is, if things go up, they’re going to have to buy back there.” You should love the shorts, they’re eventual buyers of your stock.

Tom: Listen, I got to be straightforward on this. I hate short sellers that are short the stocks that I’m long. And I’m a short seller. It’s like, “Oh, they’re spreading this rumor, they wrote this report. This is incorrect.” And I’m on the long side, I hate short sellers, okay, when I’m longing. So I can understand how the public in general would hate short seller, because I don’t like them. You know, I have got people that have been short Ziopharm when I’ve been longing it, and I hate those guys that are short sellers. Let’s be honest, you don’t like people betting against you. You know, you don’t mind a guy selling something because he doesn’t want to own it anymore. But when he’s bet against you, it doesn’t feel as good. So I understand it. But shorts are really important, but there aren’t going to be any professional shorts left. There’s just not going to be. It’s just going to be a new generation that’s going to have to come up. And most of the money that’s going to be made on the short side’s a way it always is, when the whole market collapse.

Meb: Hard to time on that too.

Tom: Yeah, well, there’s no more Feshbach Brothers, Chanos can’t do it, difficult time, you know, for Caruthers, who’s a super smart short seller. It’s just difficult time when you’re in a market where people don’t care what prices are. There’s a couple of shorts that have been out recently that were just incredible frauds, and they just trade up on the news. That’s a good time not to be short.

Meb: Let’s start to pivot into kind of what you’ve been up to over the past decade. We talked about this a little on the last podcast. Walk us through just kind of a quick summary, again, of your sort of transition into healthcare. I mean, we talked about a number of securities, and we’ll focus on one or two in depth here. But tell us how you kind of pivoted into healthcare and specifically some of the names, and we’ll dive deep on a couple of them.

Tom: Okay. Well, you know that before we talk about that part, healthcare is only a percentage of our portfolio. I’m long Farfetch that is not a healthcare company. So it just so happens to be that we’ve had some really good luck. And I always use the term luck. It’s luck and skill on some private healthcare companies that went public. And we did very, very well on.

Meb: What is Farfetch, this is a retailer?

Tom: It’s an online luxury retailer, and basically what they’ve been able to do…and they’re absolutely the best in the business. It’s not particularly cheap. When I bought it, it was very cheap. It’s not particularly cheap, got about $20-something billion market cap. What they’ve done is they’ve gone to the largest luxury guys on the planet, it’s all the names of people you would know, Gucci, Burberry, on and on and on. Those companies have a difficult time in online sales. First of all, try to go buy some online Burberry, it’s a total pain in the ass. You got to give them all your data on shipping and stuff. So what Farfetch has done is Farfetch allows Gucci to post on their site. So they post everything on their site. So you can go to Farfetch and you can go to Gucci, you can look up everything there is some Gucci.

And then Gucci, you can buy directly, you end up buying directly from Gucci, but you’re basically paying Farfetch. And all your information is there, and then that product is shipped to you directly from a Gucci location anywhere in the world. So I buy things from Gucci that are in boutiques in Croatia, for instance. You would never see them in U.S. But they built a phenomenal business. And they’re the largest, and they’ve never lost a brand. And they’ve also bought as opposed to just repping other brands. And they probably don’t like using the term repping. But that’s basically what they do. They bought some interesting brands recently, Off-White, which I think they paid 600 million for, which is really the number one brand name in the world now. I don’t know if you’ve ever heard of it. Tell me in LA you’ve heard of Off-White, not going to Neiman’s and Barneys. Do they still have Barneys open in LA?

Meb: I think so. I think all the retail is back open. They got a couple of those sprinkled throughout town.

Tom: Anyway, to the original question. And actually what I really want to talk to you today is the pain in the ass year I’ve had, becoming an activist, which we finally won in total yesterday. As opposed to just give you a lot of ideas because you can get ideas from anybody at any time. I’ll give you my ideas, but those will be quick. But I want to talk about what I learned being an activist, because it’s different than anything I’ve thought about Wall Street. I think there’s some value there.

But you know, effectively, I started off as a short seller and did it for 10 years, and shorted only frauds and had great luck doing that. Because when you’re shorting only the frauds, you’re going to win 100% of the time, assuming you can find frauds. And in the ’80s, you could do it because the dynamics in the market are different. The information flow is different. The filing K’s and Q’s are different. The SEC reach was different. The FBI reach was different. So there were just a lot of frauds in the ’80s, really hundreds and hundreds and hundreds. In the 80s you couldn’t even get the stock symbol of a company. It would take you three days someone would call and go, you need to be short XYZ. It took us three days to find a symbol. Can you imagine that? He wouldn’t even know the symbol. He couldn’t even find this symbol. It was a different time. It was a very disciplined approach to short selling and it worked perfectly because we shorted only frauds, and we basically never missed in the fraud game.

Towards the end of ’89 and ’90, because of the size of this frauds were getting cleaned up, we started shorting things that were frauds and they were over-leveraged, but they weren’t necessarily zeros. And then the market basically ended in terms of being able to short frauds and make a living. That was really 1991. So it just wasn’t after doing it for eight years, there wasn’t a market there anymore to really short frauds only. I think, the kind of returns we had back then we had just phenomenal returns every year, that drove a lot of people into the short selling business. And that’s why they’re still probably even short sellers today, short-only funds, because it needs to work. It doesn’t work anymore, because the number of frauds…I mean, you can’t have a portfolio of 50 frauds, you can’t have it, but back then we could.

So we did that. And then we had to transfer out of that business, basically to make a living. And so we went to long and short probably being 80% or 90% long, 10% short, 20% short, and develop those skills. And then along the way, we developed the skills being a venture capitalist. We were one of the first investors in the company that became DirectTV. My brother and I started a company called Microtune. It was analogue to digital. And so we had to learn what’s the difference between, first of all, the discipline on the short side, but just put on the long side. They are completely different incidentally, as disciplines. And if you’re good at one, you could be terrible in the other and vice versa. Then the discipline of finding things on the private side and developing those in the companies that are valued to either be bought, or valued to go public, and how you actually do that.

We have always looked for unique opportunities. A unique opportunity could be something like blockchain. So the guys who figured out blockchain early, they made a fortune doing that. And so we’ve looked for areas all along. And that’s the only reason we got into biotech, because it’s synthetic biology, gene therapy. Ten years ago, it was talked about, but I think even Stanford didn’t have a gene therapy department. You can be sure they’ve got a building now, you know, for gene therapy. So we were just early there, and it was kind of easy pickings to do synthetic biology. It’s just kind of the matching of biotech science and technology.

And so now, we’re able to bring drugs to the market. We were there early, we made some really good investments of public and private. And the private ones turned out to be grand slams. We were the first, and I’m one of the founders of the AveXis and that was a $3 million deal that got sold for $9 billion. That was really good. We were the first investors in Agilis. Small amounts of money, ultimately only 27 million in, but it sold for probably a 1.02 billion, possibly 1.05 billion in pay-outs and stuff. These kinds of things really helped us understand the industry, start small. When I first started a short fund, I had a million dollars, I turned it into 15. That was a really good way to do it. Now guys start with $150 million, and turn it back into 15. Right?

So it’s just kind of the same thing. I mean, we weren’t big shots, we just started small amounts of capital, and just kind of learn the area and did it. It’s been very successful for us. We’re not biotech guys. Our background is not a biotech. Our background is business. But our background is finding the single best guys in the industry. So it really doesn’t matter whether it’s technology, or biotech, or any unique form of pharmacy. It’s just a matter of finding the best guys to do it. And that’s the reason we started in 2010 doing it. When you have two huge winners, that kind of carries your portfolio.

Meb: As I say, that’s the power laws. You talk about the long side where you have the potential 10,000, 100,000 baggers, you know, when you’re particularly starting from a smaller market cap size, whether it’s 10 million or 100 million, you have the potential to really moon-shot on some of these investments. By the way, I did the inverse Tom, where I was a biotech student in college. Actually worked in a gene therapy lab. This would have been in ’99, 2000. Have the most vivid memory of my thesis advisor showing me our prize virus and this was a gazillion years ago, and showing it to me up in the light, and then passing me the dish, and me immediately dropping it and spilling virus all over the entire lab, and having to decontaminate. Just his face when I did that probably hung over at that point. Twenty-one-year-old Meb, just 10 seconds of pause, and then having to decontaminate that lab for, I don’t know, 2 hours with whatever the bleach was. One of the saddest moments of my life. But anyway, a lot has changed since then in the biotech world.

Tom: This could also explain a lot of things that have happened to you since then.

Meb: Well, now I’m convinced I just have this gene therapy virus, it’s going to protect me against cardiovascular disease. I’m going to live to 200. And the funny thing about Virginia is they actually archive…to graduate from engineering you had to write a thesis which is rare for undergrads. Usually it’s only for PhD or master’s. But they archive them all. And so you can actually go back to any engineering student who’s written a thesis at Virginia, and they bury it in, they call them the stacks at the library. And there was a couple of hedge fund managers that had gone to Virginia that I went and dug up their old papers from like the ’80s, like on the old perforated dot matrix printers and stuff. Let’s just say they were not all A students. Won’t name any names, but we’ll move on.

All right, let’s talk about activism. It’s kind of like short selling in many ways, you’re getting involved, but a different skill set.

Tom: It’s exactly like it, but it’s different. I guess, if you look back at my career, I was always a short seller activist, because once I understood the story, I took it to the SEC, I took it to the Justice Department, I took it to the FBI. And I would take it to the press as well. But the activist aspect was actually going to the SEC not taking it to the press, right? I mean, take it to the press is nothing. But if you’ve got the data, and there’s something that’s really wrong, and you take it to someone who’s going to make a pure action on them, like the SEC, you’re an activist. But in that case, everybody’s on your team except for the company, but you don’t have to talk to the company. As a matter of fact, you never talk to the company. And so you’re actually doing what you should be doing with people who want you to do it. Go the other side and do it on the long side, and it is not what anybody thinks it is.

What I learned in the process is so eye opening, the next time I probably will just dump my position as oppose to being an activists. Some of the names that I have been on, almost since I was 30 years old, it seems, is Ziopharm. And Ziopharm, I’m going to stay on because I’m totally convinced with the work we’ve done, I just feel like I’m going to be right with a 99% probability that they’re going to have the best solid tumor treatment. It’s going to be worth for the patient, it’s going to be inexpensive, and it’s going to be easy to deliver. If you’ve got something that you think is a multiple of 100 times, you don’t want to walk away from a bad management or a bad board. And I’ll try to make it more about the process as opposed to about the company. Because in general, I’ll just tell you this, I love Ziopharm, the new management, the new board we have in there is excellent. We’re going to prove this year that we’ve got a drug really work. So it’s going to stand on its own two feet. So there’s my pitch on Ziopharm. Okay?

But let me give you the pitch about the back part. And the back part, you could say has more to do with individuals. But I think it has to do with a very broken Wall Street, it has to do with a very broken set of logs relative to board of directors. Going through a Ziopharm, we had to separate from Intrexon, which was a terrible situation, where there was a joint venture with the company. And it wasn’t really a partnership, it was a matter of Intrexon trying to basically steal the market cap, or steal the equity aspect of Ziopharm. So we had to break away from that. That was a very painful thing. And you’ve seen companies in partnerships and they break up. So it’s not particularly interesting to talk about that. The characters involved would be interesting, but I’m not going to do that.

So we formed a new company, in essence, Ziopharm, and we put a new board on. And I started to realize that the new board is really not that focused on the company, doesn’t know anything about the company, but they know a lot about how to pay themselves. So they’re failing to bring business to science. And I’ll tell you on biotech, forget the friggin science, it’s the business. I want to board up another company right now, 99% of the discussion is the business of biotech, how to do the trials, the size of the trials, the toxicity studies, how much you can spin, how much you can go after. It is not the science part, because the science part has usually been figured out, most of it figured out. It’s the business part.

So we figure out that the business part is really being left pretty much to the current CEO business scientists. And we’re spending money, we’re missing every goal, and the company’s making claims and they’re not meeting claims. And basically I just should have been short the damn thing. The guys that were short were right. But you know, they were shorted at six or seven. Yeah, it went to $1.60 and crashed, but everything did. But effectively they’ve had a chance to go from six to seven, or let’s say two or three. Big deal. That’s not a great short.

So the investors in this, and I’m going to get to the legal part which I think is a lot more interesting and people are going to go, “The legal’s interesting?” It’s like yeah, the legal’s really interesting. The investor group is A++. It’s us. We’re really good in biotech. It was MSD, Michael Dell’s group, really good investors. Bill Miller, one of the smartest guys on the planet. And three or four other investors that are all billionaires that have made their own money. And we’re writing checks to company left and right. We were supporting everything we could possibly do. And we’re offering suggestions to guys to put on the board. They couldn’t really get the guys on board, and they turned us down, over and over and over.

Meb: From a company’s standpoint, I never understood why you wouldn’t want to form partnerships with people that are incentivized investors and cheerleaders in your company. It seems like so many boards and companies are really reluctant to have listened to, at least on a constructive level, shareholders.

Tom: Well, they love to listen until you ask the difficult question. Like if they say they’re going to do something in three months, and in three months they haven’t done it, you ask a difficult question, all of a sudden, you can become the bad guy. In this case, if you think about the investors, the investors in this company were more successful than anyone on the board. All the investors, the top eight investors are more successful. And in particularly good guys like Dell, those are really smart, great investors to have, really smart, great investors to have. We go to the board, and we tell the board that, “Hey, we want you to change the board. Why don’t you put some investors and the like?” Now this is a board that owns no stock. Did you get that? They own no stock.

I owned, at the time, just under 10% of the company. No, a little bit less than that. There were some diluted within. So let’s say 8% of the company. And several others 7%, 8%, 9%, 10% of company, which is enough to make changes. And they basically go, “Screw you guys. We’re not listening to you at all.” And they have no one on the board who owns a single share. Now, most of this is the fault of the lead director, the chairman Scott Tarriff. He runs this company called Eagle Pharmaceuticals. And you learn about this stuff as you go. Well, he used to work for Par. So he’s really clever. He does Par, then I guess Birdie, then Eagle, right? But at Par he got terminated because they made up the numbers. So this guy gets put on the board by another guy. Now he’s basically the lead director and he’s still running Eagle Pharmaceutical. So he loves to board up with his buddies. One buddy who set another buddy, blah, blah, blah.

Now just think about this. And this is where I think the story will get interesting. A company where shareholders are brilliant, and exclude me, send me out of the category. There’s the other shareholders, they’re brilliant. They have deep pockets, and they are committed. You have guys on the board who own no shares, and you have a company, and they’ve raised money from this group before, only this group before, and the company is failing. And as it fails, the board ups there ante. In other words, they are getting more stock, they’re getting more cash, and they’re paying the management an outrageous amount. And they’re saying in their minutes…well, their proxy, they’re hitting 100% of their targets. Okay? As an investor, you should have a voice, but you don’t have a voice. You do not have a voice. It doesn’t matter what percent you own, you do not have a voice.

So we go to them, we tell them we’re going to do X, Y, Z, there’s a proxy, and there’s a proxy vote. When a proxy vote comes, three people are voted off the board. But guess what, and this is where you start to learn how screwed up boards are. They’re voted off, but the board can reappoint. You ever heard of anything like that before? Here’s the thing. Regardless of the size of company, when you follow a 13D, you follow 13D, or you follow a 13G. If you own 5% whether it’s Apple, or Ziopharm, we follow 13D. There are no consistent rules for boards. The SEC has no consistent rules for boards, so the boards can set it up so you essentially cannot get them out. To put up a new slide of boards at Ziopharm, you have to give them a 180 days’ notice. A hundred and eighty days’ notice, okay?

And then once they lost on their proxy vote, they just reappointed themselves. I don’t know if you can even imagine that. But if you’ve got a bunch of cronies on there that own no stock, and they’re making a couple hundred thousand a year. Now think about it, it’s $250,000 a year and how many days are they spending, 2 a year? They’re not doing anything, right? And you’ve got a group of people that own 70% of the company vote against them, and they won’t leave, and you can’t get them out. You didn’t know that existed, did you?

Meb: It is such a weird personality trait in my mind, because I get why they may want to stay but I don’t get why they want to stay. It’s like it sounds like the weirdest situation. If everyone wanted me out of a company voted me out, it takes a weird personality just be like, “No, I’m going to sit here where I’m unwanted.” I’m out of here, like fine, goodbye.

Tom: This is what you do. You go and you do the proxy vote, they lose the proxy vote, and they reappoint themselves. So now we get back to zero. Then they actually hire a national search firm. And they remove one of the directors and put his boss on. But they hire a national search firm to do that. What do you do? How do you change management? How do you change a board? You could put 10 people in the room that own 60% of the company, how do you do that? You got to do a proxy, you got to do shareholder solicitation. You know what that is? It’s shareholder solicitation. So you have to go through this process which is totally rigged against the shareholders, where you have to go and you have to get more than 51% of the vote to get rid of these guys. Okay? And you have to pay for it yourself. And then during this process these clowns at Ziopharm that were on the board, particularly Scott Tarriff, and the ex-CEO who’s gone as of yesterday, ultimately, we toss five guys and CEO. It took us two years of our life to do it and a lot of money to do it.

Effectively, you have to do a proxy solicitation, which is an expensive thing. And then you hire all these attorneys and the like. And then ultimately, you have this vote. And by the time we had the vote, that of course, they lost, and a bunch of guys would call SOP and put new guys on. And then the new guys get to go over there and dump the CEO. Here’s the point. So you go, “This all sounds kind of boring. It’s about one story.”

Meb: Even when I was particularly younger, these activist sort of situations are endlessly fascinating. I mean, I think back…look, I grew up partially in Winston-Salem, North Carolina. So the old barbarians and the gate, the Marvel story with Icon. There’s a great book on the topic called “Comic Wars.” There’s so much intrigue, and it’s fascinating because it’s often very complicated with many different interested parties. I was laughing as you were talking about proxies, because we had to do a proxy a couple years ago when my partner passed away. And it is the most antiquated process on the planet. Stupidly expensive. And all we were doing was just like getting approval for the funds to continue running. My hack, by the way, was that we found a calling farm that we could record my voice calling you and be like, “Look, hi, this is Meb. I’m sure you didn’t open into your mail on proxies, because I don’t open them. But we need you to vote because this is important to keep the funds.” And so the other firms were like it’s a couple 100 grand to send out these mailers. And I’m like, “I’m a cheap bastard, we got to find a better way to do this. I can’t bankrupt my company trying to do this proxy.” By the way, listeners if you got my spam call, which I’m sure you did, because we have almost I think 100,000 investors, I’m sorry, apologize.

Tom: You said something earlier that was perfect, which is if you have 50% of the company or more that wants you out, let’s say in this case, you had really about 80% that want you out, wouldn’t you as a director resign? I mean, I would. If I had 80% of the people who didn’t want me to serve, and I had no shares and weren’t a founder, I would resign, right?

Meb: I don’t get the own no shares part. It’s weird. In my mind, like everything in life, this is like a Charlie Munger sort of mentality, everything is driven by incentives. In every area of finance, you want to be either it’s a legal mandate that you have to be on the same side, or have people that are incentivized and want the same outcome as you. And so ownership and having that, to me, it’s so weird not to have that skin in the game. There’s a terrible stat on mutual fund managers, like half the fund managers don’t own any of their own fund. It’s like why would you ever invest with that person?

Tom: Why are you not listening to the advice of MSD or Bill Miller or us on, not science, on business? And it’s 100%, because you will run across these guys. And Scott Tariff is one. That this whole basis, as far as I can tell, this will be my opinion, but see, these actions would be, “I just want to win, I just want to win the proxy thing. I don’t care about the company. I don’t care about the shareholders, F the shareholders. You’re not taking away my $250,000. And I have four of my buddies on it. We don’t have to go to meetings.” I mean, imagine what you pay these guys on an annual basis on a per hour basis. They don’t do anything.

Meb: It’s like a messy divorce. It’s not even about a good outcome, which is, by the way, my favorite domain is one-click divorce, where I want someone to build this business is like, “Look, we just want to get out of this. The minimal cost, we’re reasonable humans. Let’s not spend $50,000 on this.” But people, when money gets involved, they lose their mind. Like you said, it’s about winning. It’s not about happiness, outcome, anything.

Tom: Well, they spent $5 million of our money hiding behind D&O insurance making claims. The SEC would very much want me to take everything I knew about a few of these board members to them. And I know that they would, okay, let’s just put it that way. I know that they would and tell the story so they could go after them because this is what the SEC has a difficult time with, management discussion and analysis. Now MD&A, that truck company that had an EV truck that forgot to put a motor in it. Know that little company? That was management, discussion and analysis. The SEC should have hammered him, management discussion and analysis, and guy should be serving a little bit of time for that. But the SEC, that’s a really difficult battle for them. And they’re short staffed. The people there work very hard, but they’re short staffed. But if you have a board of directors do anything about this, they can respond to proxy votes by saying that our company is the leader in the industry and our stock has outperformed all our competitors, and your stock is $2, you’re not outperforming anybody, you’re just lying. Right?

And so everything that took place within Ziopharm, going back on the board, I could go to the SEC, and I believe the SEC would be very interested in that case. I know that they would be. Some of the activity’s criminal, but criminal in the way that they conducted themselves during this part. But again, criminal means that the FBI, the Justice Department wants to get involved. Otherwise it’s not criminal. That’s the definition of criminal, right? Ultimately, an agency decides that they want to make a criminal case. What you find out is, regardless of the number of votes that you have, a company can ignore, work its way around, and it wasted two years of my life to do this. And we have some of the smartest people as investors, none of us knew how to be activists. None of us knew how to do it. We had hired these law firms to teach us. It cost us a fortune to be able to figure this thing out. It cost us a lot to battle them.

But the message that people hear in this podcast is that if you have a board that’s a bad board, you don’t want to own the stock, because you’re not going to get them to change. If a board reports that they voted on something unanimous, did they vote on it unanimously? No. Did you know that? I didn’t know that. What the board says is any vote that passes by majority, we’re going to report as unanimous. Well, that’s fraud really, isn’t it? I mean, in a certain way, it is, right? “Oh, we have half the board, or 40% of board opposes, but we’re going to say they didn’t.” So all you need is four of seven cronies, and anything and everything can get done and get presented as unanimous. We didn’t know that.

The bottom line is, after going through a lot of grief, and making me look very stupid with the company underperforming, on the business standpoint of me supporting the company. And also if you go back and look at my tweet pattern, it’s actually embarrassing what I had to do for a year attacking these guys and laying out what the story was, which I did every single day. The tweets that I did, what I had to say, and catching the CEO on his bicycle, you know, looking at Strava apps and stuff, and being a short seller. It was really kind of embarrassing, but it’s what it took to get rid of these guys, as a result of making management changes. We have a great management in there. We have a new executive chairman, James Huang. James was at Kleiner Perkins, Asia, their healthcare, absolute business genius. And we’re not going to spend the money we were spending and do all those kinds of things.

You can see the science now be pushed by the business. I will tell you that I wasted…I didn’t waste because we own our position. But I lost friends over it. I had people yelling and screaming at me that I’ve never had before. You know, I had Twitter fights, which I pretty much ignored. All of this to be an activist. And ultimately, in the end, I was not the guy who ran proxy solicitation. Another guy who did a phenomenal job, Bob Postma did. But it’s something that you pretty much want to avoid if there are people on the board that are cronies, and you can figure it out if they’re cronies.

Meb: It illustrates a lot of people, I feel like, underestimate the importance of a board. This discussion we talk a lot about over the past few years, you know, when the politicians start railing about buybacks, and they’re railing about how much the CEOs get paid, or buybacks. I said, “Look, this is a board issue.” And so many times it’s the board getting to decide these things, because they say, “We want to ban buybacks.” And I say, “Well, you know, it’s funny, because as these things go through cycles, 100 years ago, the U.S. government actually wanted the companies to distribute the cash and try to figure out legal ways to do that, because they thought the companies were just empire building and paying themselves too much.” So they said, “We need you to get rid of the cash because we don’t trust you to hold it.” And here 100 years later, they’re saying, “No, no, no, we want you to keep the cash.” I’m like, “My God, if you want a bad incentive, it’s to give a bunch of CEOs more money.” All the history of the market shows that’s the worst idea. The board’s important.

Tom: Listen, if you’re Apple, and you’re doing buybacks, it’s pretty hard to buy something that’s going to move the business. But if you’re a $500 million market cap company, and you have $200 million in the bank, and you’re doing buybacks, you then question whether the management has any skill to the sense of why aren’t they acquiring something, why aren’t they doing something, why aren’t they investing the way the rest of us are investing. And in that case, you know what they’re doing, they’re just supporting their stock. Incidentally, it’s kind of weird, because I mentioned Eagle Pharmaceutical. That’s what they done under Scott Tarriff the last three years or however, so they bought back a couple hundred approximately, somewhere in that range, stock to keep their stock price hot. And you have to say if you’re a biotech guy, you can’t find anything. I think that the government should stay out of the business of capitalism. If a company wants to buy back, they can. Anyway.

Meb: Well, I mean, it just goes, the opposite is like what can you do about issuance because like, that’s the number one way most of these big tech boards, you know, will issue the CEO and executives a ton of stock. And so usually the buybacks are just to mop that up. So all of a sudden, you’re not doing buybacks, you’re just continuing to issue all these shares. And you got me on a politician rant which is never good for anyone.

Tom: The bottom line of this story, which maybe is interesting, I find it interesting. But the interesting part, so some of the things I don’t want to say, because it’s just too personal, and I don’t want to do much personal attacks. The really interesting thing is to be a public company, you should have a board and all the boards should have to respond the same. People should know what the laws are, or the board. They should know that, you know, the board can’t entrench themselves. Why is it that it’s so difficult to understand how boards operate, how people are elected, how people are opposed? Why can’t it be consistent? Because it will work for Ziopharm the same way it would work for Apple. It’s a consistent way of putting people on the board, a consistent way of removing people from the board.

It shouldn’t be something that halfway through the process Ziopharm we rewrite their bylaws and change it to protect themselves. So I think the SEC needs to take a really hard look at how boards are designed. And they need to bring them into line somewhat. Ninety percent of all boards should operate the same. I can understand maybe some cases. You know, if a guy owns 50% of the board, then he’s voting for himself, right. And he can control it. But he gets to do that by a law. But I think this is something that really, truly needs to be addressed. Because shareholders pay for directors’ and officers’ liability. And so they can screw you left and right, and you’re paying for their insurance. And it’s a cronies club. It’s always been a cronies club, and it needs to be changed. And if I was a short seller, and I could make some law changes, this is what I would do.

Meb: So you mentioned CEO, new CEO, or was old CEO out yesterday, what’s the future look like? What’s the runway now? Where do we stand with this company in the store?

Tom: Well, the runway now is that we’ve got guys who know how to operate efficiently. So where Ziopharm is built this enormous business down at MD Anderson enormous business, enormous office, full of stuff, it’s very expensive. But we have partners in Asia who can do it for pennies on the dollar, and can do it quickly, can do it under the same rigorous standards that the FDA requires. You can get all the preliminary data, because most of these biotech companies are not at the last stage. Most of these biotech companies you hear or read about, they’re in their first or second stage, or their third…well, they’re not even in their third stage. In other words, you’re trying to do the first trials on humans, the first trials. They’re trying to figure out if it’s safe, if there’s any efficacy at all, they got to go to the safety thing. You don’t have to do that in the United States, not to do it… MD Anderson, incidentally, is phenomenal. And they’re one of Ziopharm’s partners, but there’s only X amount you can spend. So you’ve got to figure out where are you going to conduct the initial trials.

They’re going to figure that out. And I bet there’s going to be a lot of it in Asia. You also have to figure out how many trials you want to be in. Do you want to be in eight different trials, or you want to be in one or two or three. And they’ve been wasting all this money in Aisle 12, which is worth a lot of money. But they’ve been doing in a glioblastoma, brain tumor. And it’s just a really small market and very difficult to get results out of. And it’s not something that they should be doing. It’s too small to even be in that market. So you cut your spending, you focus on solid tumors where they’ve got great experience. You get trials completed, you save capital, you’re doing it, and you’re smart in how you design your trials. And you have business people to turn on what trials you can do, science people run them. You know, let science people decide what to do.

And so now we’ve got a completely different board, which is full of investors, surprise, surprise. All guys that I’ve known a long time, just by chance, two of the three I’ve known a long time. And you focus your capital and your capital raises in the correct way. You can’t just go to the market. We have 225 million shares outstanding. That’s already ridiculous for a small company, right? So you’ve got to do business deals so that you’re not diluting, and you’ve got an advanced program so you get stock prices up. In other words, all I’m really talking about on Ziopharm from the time we started until now is how you can screw up the business, and screw up the board, and have the wrong CEO there, and have absolutely spectacular science, and what happens? Nothing happens. But you can have great business people and pretty good science, and you get some great drugs out. I mean, obviously OrbiMed, Perceptive, they get it right. They understand that. But the basic investor, biotech investor probably doesn’t understand how important the business part is over the other. So Ziopharm is in great shape. I don’t want to beat dead horse. It’s not dead anymore.

Meb: What’s the next sort of waypoint we’re looking at? Is it a phase trial concluding, and data being unmasked?

Tom: Well, we’re going to be getting…they’ve got a R&D day on March 11th. Then on the R&D day, we may get some human data, I’m not certain, out of Asia on some patients we’re treating on a compassionate basis. That will be very interesting. We’re having Steve Rosenberg from the NCI who is the number one guy on the planet for gene therapy invention, gene therapy. He would be considered the number one guy, at least that area of the NCI. Then we got Carl June there who is the pioneer in the space. So on March 11th, now we’re going to talk about the technology. We got 35 million shares short in Ziopharm. I’m going to give you the GME warning. They better wake up because they got a chance to make a buck or two on the downside, and they’re going to get slaughtered on the upside. Now, I will say that I’ve said this before. Okay. But this is another case of a really bad short, you might make a couple points on the downside, you might be able to make the trade. But on the upside is so… I look at it this way. Three points on the downside, 100 points on the upside.

Meb: It’s like options selling, you know, in my mind, it’s like the old pennies in front of a steamroller.

Tom: Also, you’re not betting on Ziopharm, now you’re betting on James. James as an investor…last thing I saw was investing in 21 businesses at Kleiner Perkins, and 15 were already those at exit to it. Guy’s a really, really good businessman. That’s a long pitch about being an activist.

Meb: Sounds like you got a book in you.

Tom: I lost basically my best friend over Ziopharm because he was an investor and just figured it out it was just total… Well, my second best friend but my college roommate, so that goes back. He and I were really good friends for 40 something years. Ultimately, it goes up, I’m going to get his money back that he lost, and I’m sure we’ll be friends again. But yeah, this one’s a really a really painful. Other things that are interesting to us, and I think these are all new development kind of businesses. There’s a Canadian company Burcon, BUROF. It is plant-based protein. It needs to be uplisted onto the NASDAQ before it’s really that easy to trade. When this uplisted, I think that its profile is going to be much, much higher. We own it in here. Plant-based protein is obviously in the very beginning of the cycle, beyond the…and we all understand about this. But from what we gather, Burcon may have the best plant-based protein, and the market cap is still small. They cut a deal with Nestle. Incidentally, I woke up last night and I go, “N-E-S-T-L-E-S, Nestle is the very best chocolate.” Remember that? Every company used to have a slogan…not a slogan, but a little song, little rhyme. I woke up last night singing the Nestle one. And I was just thinking, I’d start writing those. How many companies have a jingle?

Meb: Having a three year old now and thinking back to being a child and my breakfast being Fruit Loops and Frosted Flakes, and like all of these just absolutely atrocious. But the marketing was on point, Tony the Tiger, and all the hearables cereals. My god, I can’t even imagine eating those now. Good marketing though.

Tom: … I thought Nestle. I thought, “N-E-S-T-L-E, Nestle is the very best,” and they’ve got a partnership with them. And I thought, you know, “Let’s just start writing them.” So I started writing jingles. So I came with, “Z-I-O-P is the best, actually its board is nothing but mess.” And so I started writing all these jingles, and now I got jingles for all my investments. We can do a jingle show next week, if you want to do it.

Meb: That’s a good way to get a little Zen about these situations, is do little haikus and jingles. It’s funny about the veggie protein. My approach to the private investing, I think I’m over 200 companies at this point, and it’s mostly kind of start-ups, but for the later stage for me, it’s like the old Peter Lynch style. Is it like a company product I love and I kind of ignore valuation, which for me, I’m a value guy. I’m a cheap bastard. So this is like diversifying a little bit. And there’s only been three or four that I’ve invested in. One was HotelTonight, which got acquired by Airbnb. One was Lyft. And then the one that I really loved was Impossible Foods because the same thing, I was like, it actually tastes good in my mind. I think Beyond is much worse. But people like it. The sausage is apparently great. But I was like, “I don’t understand how this is not a $50 billion company eventually.” And so that entire space. Is Burcon kind of doing the building blocks, are they making the underlying ingredients, are they launching their own foods?

Tom: It’s scientists that came with ingredients. They partnered with Merit to build a plant. And this is a science group that’s going to be getting royalties. They own part of the plant. But my understanding is, last thing I heard was they had signed 240 CDAs, NDAs, whichever term you want to use, non-disclosures with companies because Frito-Lay needs plant protein in its Doritos. Now I don’t know if they’ll do anything with Frito-Lay or not. I just tossed it out. But they’ve signed a large number of deals. And basically from what I understand is that it is tasteless and it is a plant protein, and it provides all the fat, the fat substance feel that meat does. So it’s very much like the Impossible Burger. So we’ll see.

I like the fact that they’re small and I like the fact that they’ve already got a partner that says it’s the best, Nestle says it’s the best plant protein available. So that’s good for me. And you know what it reminds me of? It reminds me of, in the old days, when we got on Hain Food became Hain Celestial. So at one time, we owned 20-something percent of Hain, and it had a $25 million market cap. We owned $8 million of $25 million. And I remember looking at it thinking, “Well, natural food, this is obvious. Right? This is going to go and go and go.” Unfortunately, I didn’t buy Whole Foods and everything else to follow. But the first, I think, three acquisitions we did, I introduced them to the company, did the acquisition, I introduced them to Wall Street, it became a really large company aimed at…You know, interesting, it was organic, natural food, but it really wasn’t better for you. Because their taro chips are great. Eat taro chips, you can get really fat.

Meb: They’re so good, though.

Tom: I know they’re great. But this is not healthy food. (The Chairman) is now out running the guy who’s the chairman. He’s out running a cannabis company. Right? You know, as far as good for you. We’ll see how this goes. But I think that the plant protein is very much…that movement is very much, but I think it’s going to be a much, much bigger movement. Burcon falls into the category of buy at the right price. Buy at the right price. I don’t want to have to figure out whether it’s the best. I’ll let Nestle do it. So if Nestle says it’s the best, that’s kind of good enough for me on it. The balance sheet’s fine. They got money from the Canadian government. It’s a simple story.

Another simple story is PLx Pharma. So PLx Pharma is one of these cases that you will never have to do a shareholder solicitation on because they got a board, they got a great management. The PLxP is a small market cap, again, under $100 million market cap. We’re just under 10%, we file on that. so that’s not anything of news. But they have an aspirin, they have a liquid aspirin. And it is a better aspirin for GI. Because you know, GI is a huge issue. Take an aspirin. Who has to take an aspirin? Anyone with a stroke, anyone with a heart attack, anyone who has clotting issues, and they’re on aspirin and on aspirin for life. Diabetics are on aspirin. And aspirin can cause enormous GI issues, number one. And number two, the absorption of aspirin that I’ve learned, it’s been lots of huge studies about this, incidentally, the absorption of aspirin can change a lot, depending upon the coating you put on.

So you think you’re taking an 81, but they coat these for the GI and you don’t get 81. So it’s very inconsistent. And there’s a scientific reason why you want to take an 81. But what they did was they got the 325 approved, because effectively if you have a stroke or a heart attack, you take 325 for a month, and then you take 81 for each day after that. Why it’s 81? It’s just the science behind it. They got the 325 approved, and that would be an Rx drug. And then they went to get the 81 approved, but the problem was they had major manufacturing issues with the 81, producing 81. It cost them two years, which is why, I say it again, the business versus the science, it’s always a business, it cost them two years. They now have it resolved. And they are waiting for approval, which could be any minute, any day now for the 81. And they’ll be able to launch this better aspirin.

Now, why is this interesting? Because the management group are the guys who did Mucinex. And they took Mucinex from zero, and the business got sold for 2.6 billion. And if you look at the management, the CEO, down, you go, “Whoa, these are guys that have done it before.” And they know exactly how to go to the doctors. They know exactly how to go to CVS, Walgreens and the like. And they know exactly how to market it. I was in a store the other day and Mucinex is like eight rows out stuff. You can Mucinex for anything, right?

Meb: It’s the next deodorant, almost.

Tom: Exactly. So if you can get the guys who actually did it before and they’re going to be able to launch this in the market for a better aspirin. And this is absolutely a better aspirin because it’s actually better for plotting, and I already mentioned the absorption, the GI aspect of it. It’ll be more expensive but you’re still only talking $300 or $400 a year to take it. It’s great because the doctor can go in and put you on some, write your prescription for the 325, he can move you into the 81 over the counter. And I’ll bet you, when it gets approved, their backlog is going to be huge and like. So this is a product that is going to take 5%, 10%, or 15% on the low side of the aspirin market. Aspirin market in the U.S., I think is 12 billion. And incidentally, I think the risk of the FDA not approving the 81 now, since they’ve already approved the 325, I think the risk is 2%. I don’t think it’s 20. But okay, the only issue, the only reason everybody …doesn’t own millions of shares, it’s thinly traded, this is an issue. I mean, I guess if we all went out, and we tried deploy ARK, we could probably run it to 100. I think you know what I mean, when I say ARK.

Meb: Yeah, course. There’s two comments. One is that, you know, I think this illustrates a great point when you’re looking at management. And there’s an old phrase, quote called “success leaves traces.” And so betting on these management teams that have done it, demonstrate a good behavior, that’s some of the best ways to go about. I mean, it’s always not successful based on products or whatever, but is a great way to have a framework. And the opposite, of course, where you have the sort of habitual consistent frauds, bad guys, terrible, just sort of…I don’t know how they end up continuing to… And you see this a little bit in SPAC land. And so reputation and kind of a good approach towards everyone, shareholders and customers is important in a lot of these situations, because it repeats most of the time.

Tom: If I happened to learn anything in this process, I actually think that this is a fairly simple 20 timer. And I don’t know that there’s a downside to it, because we’ve got cash. And this is just a matter of getting the 81 where they can manufacture it. And they can now manufacture it, because they wouldn’t be going in front of the FDA again to get approval, they couldn’t, because they don’t make that kind of mistake. The FDA may ask another question or two, you know, that’s why I say 2%, maybe it’s 10% chance. No, it’s not 10%. It’s 5% chance. This is great upside. And this is a matter of being able to buy something, right, this is the risk part of it. But after the 81 had manufacturing issues, I took them a great business to put in that they could have bought for $20 million, that could have held them over for 2 years. You know what their response was? “No, thank you. We have a Grand Slam here. We’re just going to figure out the manufacturing and do it.” Pretty interesting. The very, very disciplined thing.

We own SPAC. SPACS, to me, are an amazing thing. There’s nothing inherently bad about a SPAC, you know, it’s fine. It’s just a pool of money. It’s as if I had a pool of money, I went out bought something, and I’m paying, you know, I get a big fee up front. But you know, that’s like sweat equity. And, you know, I don’t know how it’s going to work. But I do on the…basically the Goldman Sachs Acquisition Holding II, the GSAH. SPAC, it’s another one of those that it’s probably a two or three on the downside. They’re worth 750 million. It’s Goldman Sachs, they ought to be able to figure out how to do something really interesting now in the market. Maybe they won’t, but it’s a couple of points on the downside, maybe three. And a crash, it could go to anything, we know how it can trade below NAV. But it’s a couple points on downside. And if they put the right kind of SPAC in it, you can figure out what it could be on the upside. The $10 SPAC, so what is it? Is it going to be a 30? Is it going to be a 50 or 20? Anyway, there’s very, very little risk, and I’m going to put my faith in Goldman Sachs and put something in there decent, because I just can’t own something that trades for 1000 times. But I want something that’s got a decent upside.

Meb: You’re right, you hit the nail on the head about structures. I mean, almost any structure you could come up with that is good and is bad whether it’s ETF, SPAC, whatever you just see it happen to be in…or IPOs, direct listings, closing funds, whatever it is. You just see when there’s money to be made and people crowding in, you see the full spectrum of players that should or should not be involved. I don’t know. I’m not making any comments. If Alex Rodriguez should be getting involved, and Shaq and SPACs, maybe they will, maybe they’ll be amazing. They probably will be. I think Shaq did the Beachbody one. But SPACs are so interesting from an allocator standpoint, we’ve done a couple podcasts on this, because of the features you mentioned where if you invest in the early days, before the acquisition’s announced, there’s a floor that you get your cash back, yada yada, on and on. The challenge for a lot of them is the post IPO consummation, what happens after that, because then you just have a company stock.

Tom: If it’s raised to 20 or 30, I probably won’t own it anymore. You know, I own it because I have capital, it’s a good place to put it. Oh, incidentally, Alex Rodriguez I got a really big beef with. Alex, because he and I are both members of Dallas National. And I had the number three, membership three, because I’m one of the original founders of Dallas National. And when he joined, he said, “Barton, could you give me the number three because, you know, I am number three.” And I go, “Are you serious?” And I had to give up my number. I didn’t have to but I gave him my number, number three to him. And then he left the Raiders and goes to…what team, Yankees or something like that. And I got my three back. But Alex and I, we’re on bad terms over the membership number.

And then let me tell you one that’s run by one of the best managers you’ll ever find in the space. So there’s this company Evolus. Okay, I don’t know if you’ve seen it. EOLS is the symbol. Evolus gets a competing product to Botox. A guy who’s running Evolus ran the Botox group at Allergan, pretty damn good. And they go and they set up this other company Evolus. And then he brings in the correct CFO, the correct sales people, he hires all these salespeople. He knows how to run it. He knows every large user of Botox in the country. I’m not talking about the Dallas housewives. I’m talking about doctors, okay. So they know exactly where to go to make these sales. And they have a Botox that they can sell cheaper. Now, it’s going to be strictly for cosmetic. So they don’t have to worry about insurance reimbursement, they don’t bundle it. And they can go head to head against Allergan. And then also the biggest investors in the group are all doctors, and they’re all in kind of the dermatology space. And so they all want to use it. And he goes out and starts blowing the doors off, and he gets in a lawsuit. And he gets in a patent infringement lawsuit over not patent infringement, but over stealing the technology for patent infringement. And this all goes back to what took place in South Korea, where they licensed it before.

Anyway, it set the company back in terms of being able to do what it wanted to do for about a year and a half. And the stock has just been total crap. And it went to $3 recently. We bought some when it was lower. I should have bought every share that I could. Then ultimately, through some good negotiations, some good legal work, they were able to solve that. And they solved it, I think last week, and you see the stock popped back up. But effectively, you’ve got a company now that’s run by the guy who ran Botox. It’s a small market cap company still, 300 and something million. I hadn’t looked at it today. So my number could be off one digit. But it’s $300, $400 million market cap company. And they’re doing 20 something million a quarter. And that’s being held back and having Salesforce that new… Oh, incidentally, they originally lost their lawsuit in court the first time, and they were banned. And they were given a two-year period to sell it. But you can imagine if you can only sell your product for two years and you’re gone, then you don’t have a company and they still were able to get sales.

So you’re looking at something that is trading at I would call it three to four times revenue that has been held back. Now it’s resolved this lawsuit. It is a better Botox, they can sell it at a better price. Their sales people are motivated, and the guy who runs it, he ran Botox at Allergan, for God’s sakes. He knows the market right. Now, I’m very lucky in this sense. My daughter in law is in her last couple months for plastic surgery residency. And she knows a little bit about Botox. And from all that we can gather and everyone that we’ve spoken to that the Everest product is more durable, which is pretty dang important. This is a huge market, you’re not paying much of a multiple, it’s the kind of thing that if you own now, probably, if it didn’t go up probably in two years, you’d be paying probably one times revenue for it. And the margins are going to be great. But the management’s spectacular, the balance sheet’s totally fine. And it all cleaned up.

So very much like Ziopharm that had to clean up yesterday, just by chance they announced all their changes yesterday in the management. This company just finished their deal about a week or so ago, but a lawsuit was announced that they settled that. And then we’ve got on top of that PLx P that is just getting ready to be approved by the FDA. But they have given some really timely kind of things. And the rumor on the street is that GSAH is very close to the acquisition. Don’t sell your stock. That’s the rumor. I don’t know whether it’s true or not. But a lot of times more noise happens at the right time. So these things are, I think very, very timely. Farfetch not as timely, but Farfetch, this is really great.

And then, you know, we have played Novavax, we’ve owned Novavax, and we owned it when it was very inexpensive, and we don’t sell when it got to 280. It’s like 220 or something right now. They definitely have the best vaccine. There’s no question they have the best vaccine. If you can wait to develop vaccine, you should. It’ll be once a year. It’s easier to transport because they don’t have to do deep freeze. They recently got an order for billion one. I think Novavax will be the kind of shot that you’ll get once a year going forward. And I think that they will knock out the other guys. I think they’re the best. I’ve had a difficult time trading it ever since it went from 113, 280 basically overnight. We took most of our gains but I do think there’s a really good chance there on Novavax.

Meb: And Novavax is based in Gaithersburg, Maryland, which was my first job out of college working for a biotech fund. And it’s funny, you were talking about the FDA, because I used to go sit in on the meetings. I mean, this is serious nerd alert time. But I would go sit in just to kind of soak up and listen to these, all the different types of meetings. And it was actually fascinating, because you could see some of the companies that knew their data wasn’t going to get approved, because they would bring in a bunch of testimonials, you know, from people that were cured, whether it was just by happenstance, or placebo, or whatnot. But it would often be very emotional or dramatic, because again, these are like treatments targeting cancer, you know, heart disease, or whatever it was. Also, they could be incredibly boring. And this is before the days where you could just put in a podcast or a play on your iPhone, because they didn’t have them yet. So Gaithersburg, that just brings back some memories.

Tom: Let me tell you something interesting about actual the owning stock in this company. So I got really interested, I’ve been hearing some stories about it before, but when RA took a huge position, they put 400 million in it, you know they had signed an NDA before they did that product placement. That’s pretty damn good information. So when they did that, it was like, they got to see the information I’ve kind of wrote about. And I should own it. One of my friends that I played golf with actually ran the entire group that oversaw the development of this when it was owned by Pfizer. I called him and my advisor who gave this away to … basically all the technology, it’s my understanding, I haven’t done great research, this is what he tells him. And I called him I said, “What do you think about this?” He said, “Well, did you know that I would ran the whole division?” I go, “Yeah, I kind of knew that.” “Did you know we gave it to him?” I said, “No, I didn’t know that.” He said, “It’s not going to work.” I go, “It’s not going to work?” He goes, “No, it’s not going to work.”

So I got to the single best source you could possibly get to who said it wasn’t going to work. And then he went to the guy who developed it. And the guy said, “Oh, no friggin way. We did all the tests, it’s not going to work.” Okay. But RA had seen data. So I just said, “Forget it. I think it’s going to work.” And I bought it and right after that, then the government gave them what, 1.8 billion, it was off to the races. But I find it so interesting sometimes that you can get to the single best source, and you still don’t get the right answer in biotech. But if you find an investor who gets to see the data and signs an NDA, and puts a large amount of money in it, and they’re great investors, that’s going to be a great source, because they’re the latest look, see at the data, right? And so all you need to do is pay attention to that. If you pay attention to that, more than likely you’re going to make money on Novavax, because you’re not going to give a company $400 million and you see no data. It was kind of an interesting way about, you know, what’s the process, the thought process of going into that investment.

Meb: You talk a little bit about crypto too, Tom, on your Twitter thread. Everyone here needs to listen to Tom and get on his Twitter stream. It’s a fun one. He’s not afraid to share his opinions. What’s your take on the crypto world? Are you still involved?

Tom: I got a great call. And we were involved in crypto until today. And the reason we’re not in it today is…which I’m not allowed to say, but my numbers are pretty good this year. And I just looked at and I go…I’ve got Ziopharm, I got PLXP, I got these other things are going to work. I don’t even need to think about this right now. But I got the call months ago that Goldman Sachs, JP Morgan, Druckenmiller, Paul Tudor Jones, were talking to one particular individual trying to understand why he had put so much money in Bitcoin. And that person is a friend of ours, no need to give his name. He’s been out on Bitcoin a lot, talking about it. He’s a personal friend, and an investor in some of these other businesses that I’ve mentioned today. So you could, with your PI skills, you could figure out who it is. He said, “You got to own Bitcoin because all these guys are now starting to move into it.” And going once, you know, the clients want it. Druck was interested because Druck is…you know, I used to manage money for Soros when Druck was there. Druck’s smarter than smart when it comes to this kind of thing. He was showing some interest in it and alike, and they just said, “All these guys are going to have to buy it.”

So we took a pretty big position when it was really…well, it was in the lowest teens. I think we started around $12,000. Okay. But it only took off because this guy’s story came to fruition, right? I mean, all these guys started to buy it. Now, at $50,000, I mean, I think there’s a really good chance it does go to $400,000 or $500,000. It makes sense to me. And the part that I find really interesting is how people would say it’s an absolutely worthless asset. Well, that’s the same guy who paid $130 million for a Monet or Picasso, he paid $130 million. It’s sitting on his wall. I don’t know if you can see this little thing over here on my wall over here. This was $129. I got it from the…I love it. Okay. I put it together. I love it. For $129. I have some nice pieces of art, but nothing like the kind of numbers we’re talking about. He’s putting $130 million in it. Well, he’s not putting it in because you get $130 million dollars worth of … out of it. Yeah, he gets to show his buddies that we all know, that’s about it, right. But you know, the bottom line, he thinks it’s a great place to store value.

If this thing becomes accepted as a great place to store value, and it is easy to use, and somehow the U.S. government and the rest don’t figure out how to ban this thing, why isn’t it going to have a value that’s going to represent the supply and demand issue if this many people want to own? It makes total sense to me. On the flip side, it makes no sense to me. And it could absolutely collapse and go to zero. And quite frankly, I’m glad to own the U.S. dollar. But if you live in some of these other countries that have crappy currencies, it ain’t so fun. I have some friends from South Africa, they’re getting slaughtered. They have gotten just slaughtered down there, they would’ve been a lot better in Bitcoin, right. So some people are kind of forced to do it. And other people want to do it because this is a great store of value. And there’s a uniqueness to it. But I think it’s got more on the outside than it does on the downside. This is my guess.

But you asked me today and we don’t own it as of today. So that may be a good trade and a bad trade. Because so far, it’s been a great trade for the year, right. But if I don’t have an advantage on Bitcoin, why the hell am I owning Bitcoin? Some small amount for fun, but we did not have a small amount for fun. We had a more material amount based upon the information that these guys… And so we were able to kind of buy it before a lot of this noise started surfacing in the market. It’s really interesting. And I know we’ve gone way over. So you’re going to ultimately cut a lot of this crap, which is totally fine. But I heard Munger the other day. Thank God that a guy who is 97 can still be an investor because that means I got another 30 years that I can go, right.

Meb: That’s the big compounding stat is if you look at Buffett’s wealth, the vast majority of it just because of the way compounding works, come in the last decade or two, right?

Tom: It was made for my age going forward, right? It wouldn’t make my age going back. You know, people say, “When are you going to retire?” I go, “When I can’t do math in my head.” They go, “We already can’t do math in our head.”

Meb: I have a lot of young friends that get frustrated about their progress. And I’d love to show the examples. I mean, I think Robertson at Tiger, I don’t think he got started at a fund until he was like 57. So there’s so many examples of people late in life. I’m going to show you, by the way, here’s my favorite piece of art. I’m going to change my backgrounds for you guys on YouTube. Have you ever seen this picture? This is a Western artists Bev Doolittle. And she’s a little kitschy, but she does paintings where like things are a little bit hidden. And I just loved these as a kid. So there’s a little bit of romance. But if you can see this, it’s a bunch of bear. It’s called “Doubled Back.” I had this hanging in my office. And this is kind of a little bit of a play on the stock market bear. But there’s a bear paws going up and then hidden in the bush is a giant grizzly bear.

Tom: Didn’t see it until you told me,

Meb: Perfect. Yeah. Ready to chomp you. So…

Tom: Now it’s a great piece.

Meb: But I’m the same way. I got to print and it’s only about I think 500 bucks maybe.

Tom: There’s a lot better than the Mona Lisa. But I wish I owned the Mona Lisa, I’ll say that. I just mentioned, you know, Charlie Munger, and he was talking about, you know, he’s 97, he was talking about how this isn’t long, this is an investing and stuff like that. Well, I got a question. Even if those people did a single best in the world, whoever did it. The question is, if Bill Gates is your best friend for 35 or 40 years, let’s say 35 years, he’s your best friend. How did you never own any tech?

Meb: Just for the regret minimization alone. It’d be like, “He’s one of the most brilliant people I met, put a little bet on this jockey.”

Tom: Finally, he bought some Apple. And you know, they made a fortune on Apple, but they started with a fortune. If you’re so great at everything, why didn’t you own all this technology? And why the hell you own Coca Cola that’s been $40 forever? I don’t care what dividend pays, because all Coca Cola does is make people fat and give them heart attacks. But I just think it’s interesting that he’s got a really strong opinion on Bitcoin and a really strong opinion on these Reddit investors. Because a lot of money’s made, it’s not long-term investing. It’s fine unless you’re those guys. Those guys are long-term investors. It’s very successful. It’s like I said, it’s stupid to shoot at guys that you will never be as successful as they are, but I’m not shooting them. But it is really interesting that he shot at these younger people that are investing in this way. But for gosh’s sakes, he used to send a letter, it took six days to get there, if it ever got there.

And so, you know, the world is changing. And I think any form of investing, where a guy’s willing to commit his capital and learn and experience. I got a young daughter who’s really, really smart. And she’s got a great nose for stuff. So she’ll buy Lululemon just because she sees the logo when it’s like 30 bucks, right? She’s really, really smart on that. She works with us. But she also…we get to trade our own accounts, as long as they report to me. Okay. So she’s been trading, we’re on account a little bit. And you would not believe how easy investing is. You buy something and you sell it at a higher price. Until a few days ago when it wasn’t so damn easy, right? And so these kids should be allowed to learn, they should be able to buy this stuff and hold it and get slaughtered, or what’s wrong with the guy who put $15,000 in Bitcoin and is worth $5 million. Congratulations, great trade. There’s nothing wrong with that. Right?

But you know, they’re trying to vilify it, and you know, Munger’s all over it, Buffett’s all over it. I just think, you know, value investing… You know, what Bill Miller said about value investing? I heard a podcast he did, which is so superior to the one that I’m doing, unfortunately, but he’s smarter. Someone said, “What’s the biggest mistake you ever made in your life?” Bill goes, “Becoming a value investor. I missed so much opportunity being a value investor.” And they said, “Why did that happen?” He said, “My parents dropped me on my head when I was four.” Because value investing sits too damn long. No one has as much time anymore. Saying that going back to Ziopharm. I first bought it in 2011.

Meb: You’re on the journey, man. You’re in it. That’s a decade.

Tom: It’s a decade, and is when I was talking to the CFO, absolutely ripping him, who is an accomplished guy. I mean, if you caught cancer, you’re a pediatric and you got cancer, you would want to go see him. He is very accomplished that way, just not a CEO at all. And I was talking to him about how long it’s taking, he’s been there since 2015. He goes, “Well, you know, these things take a lot of time.” I said, “Are you serious? My daughter in law went through college, med school, now has a plastic surgery thing. She got out of med school. She’s a plastic surgeon in the amount of time when you don’t even have anything in the clinic yet.” Oh, my gosh, it’s been so long on that thing. But I will say it’s offset by the fact that we bought KLSS at 11 and sold it at 41. Let’s see, that was 30 minutes, I think. And we bought AMC at four after the close. The market close. I’ve made five trades in my life after the close. After the close, AMC is $4.85 and I go, “Crap, I got to own this thing, this thing is going to go up.” So I call one of my trader, I go, “Can I buy stuff after the close?” And he says, “Barton, how long you’ve been in the business? Of course, you can buy stuff after the close.” Bought one. But we didn’t buy a huge amount, maybe 400,000 shares, something like that. And literally on the open, I think I sold at 21. So it’s okay, when you own things for seconds, and when you own things for a decade, when you average it out, it’s not really a decade, it’s only really about 9.9 years.

Meb: I was laughing as you’re talking about it, because we wrote a long letter about this. It’s hard for us as public investors, public fund managers, because we got to be careful on what we talk about. But we always err on the side of transparency, and of course, being honest. But that was the joke with us with GameStop. As I said, you know, “You guys talk about diamond hands and holding this. I’m a quant, we’ve owned that since 2013.” I was like, “We bought it at 30. Watch it go to 50. Lost 95%.” And then, of course, I don’t even know if the IRR was even that great. But we owned it through that whole slog. We’re the opposite side of that 10 year hold on that.

My goodness, Tom, this has been a blast. I’m glad we all survived San Francisco and the pandemic. We’re not going to wait two years to do this again. That’s for sure. Looking forward to hanging out in person. Can people follow anything you’re talking about? Where’s the best place, is it Twitter?

Tom: The only place to follow me is Twitter. I don’t go on Facebook or anything like that. I keep being told every other day, “You shouldn’t be on Twitter, it can only cause you problems.” And I go, “Well let me tell you what’s happened to me on Twitter so far. I’ve got about 30 new ideas, because people direct message me because I don’t block people, and they go, ‘Bart, you should look at so and so.’ What do you know about that?” I found that very effective. And if I was running for president of the United States, I think I would not be on Twitter.

Meb: As long as you have a thick enough skin, I mean, every day goes by, the trolls are out there. If you can have a good sense of humor, thick enough skin, it’s 100 or 1000:1 benefit on meeting. Ninety-nine percent of people are wonderful, decent, loving. That other 1% is probably just having a bad hair day. That’s the way I think about it and have a little humor. We’ll put show note links, Twitter handle @ThomasUBarton1.

Tom: That’s it. And guess what? I tweet under my full real name because I don’t believe in tweeting under like some pseudonym.

Meb: Good. Well, it’s a fun Twitter account as well. Tom, thanks so much for joining us today.

Tom: Thank you, Meb.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at the mebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.