Top Quotes from E1222 with Acquired.FM’s Ben Gilbert & David Rosenthal "Berkshire vs. Bitcoin & Amazon buys MGM"

Listen to this full episode on Apple Podcasts

Guests:

Ben Gilbert @gilbert

• Co-Host, Acquired.FM
• Co-Founder, Pioneer Square Labs and PSL Ventures (Startup Studio/VC fund in Seattle)

David Rosenthal @djrosent

• Co-Host, Acquired.FM
• Independent Angel Investor / Startup Advisor

Reflecting on Twist E1217 the Taylor Lorenz Interview

"Part of the reason she's so misunderstood or maybe controversial is because people look at her as something more than a culture reporter." - Jason

• David noted: Creators are Taylor's constituency, she was right to point out that she is not the New York Times.
• Ben's take: She's opinionated, she has very interesting content, but she works at a company and isn't the owner of it. It would be weird to go after a specific employee of a tech company you had issues with.

Bitcoin's Price Drop

• "My take is everything that you just said in the intro (teeing up China and climate etc.) is noise... every time that Bitcoin has a run-up, it will always have a crash down. So far, it has been very effective at using that run up to bring more people into the ecosystem." - Ben Gilbert
• "The crypto community whether intentionally or not, is very effective at using hype to increase the surface area of the ecosystem." - Ben Gilbert
• "There's no innovation in Bitcoin. It is what it is, and that's attractive, you know the rules aren't going to change." - David Rosenthal
• "People become more engaged with the better use case." - Jason
• "I will never use margin." - David Rosenthal

Berkshire vs. Bitcoin

• Ben and David both like Bitcoin and crypto as a space, but they also have a great respect for Warren Buffet, forcing them to "hold two opposing ideas in mind at the same time and still retain the ability to function."

"Having Warren Buffett in the back of my head (and of course, Charlie), saying these things have no intrinsic value, what do you mean by the dip? The dip only surely exists relative to some intrinsic value of something... and the only intrinsic value of Bitcoin (but you could argue all cryptocurrencies), is what you believe that other people will believe that it should be in the future, it doesn't have a set of underlying profits, it doesn't have a set of underlying cash flows." - Ben Gilbert

• In 2020 Warren Buffet wrote, “Our unwavering conclusion: Never bet against America.”
• The Rosenthal Doctrine: "Never bet against the internet."

Expected Value

• Expected Value = (Probability something will happen) x (Payoff if that thing happens)
• Berkshire's style of investing aggressively indexes toward certainty. The payoff is muted, but fairly certain many years into the future.
• Tech investing is more middle ground, some predictability it will happen with larger payoffs. Early-stage is more speculative with bigger returns.
• Crypto is on the other side of the spectrum, "The probability of that something happens might be really low, but the payoff will be really, really high."

You can believe in two opposing things at once

• Buffet is the greatest status quo investor (future is mostly going to look like the present), but he doesn't seem to have actually dug in on the details of crypto.
• "I am sympathetic to the argument that you can look at Bitcoin as it could grow to steal Gold's market cap, and that the idea that there's still a 10-15x left in Bitcoin." - Ben Gilbert *not investment advice
• "I think it's so often in investing the right answer is you don't know what the future holds. It's uncertain. So you should do both." - David Rosenthal

Other Crypto Beyond Bitcoin

• Bitcoin is one of the least interesting crypto currencies.
• Ben mentioned Uniswap and Solana as promising use cases.
• Right now it takes a long time to settle the buying & selling of securities and requires a "market maker" to intermediate the trade, taking several days to settle.
• Uniswap is an automated liquidity protocol that does this in a near-instant, decentralized way (more info).

Big Berkshire Takeaways

• Berkshire spent years understanding the sector understanding a business to know what price they would pay for it. When there was an opportunity, they were always there and could make a decision in an hour, because of how prepared they were.
• Warren Buffett, "I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will."
• From Snowball, the book on Berkshire Hathaway: In 1997, Bill Gates joined Warren Buffett and Roberto Goizueta on a panel discussion at Sun Valley that was moderated by Don Keough. “I used to talk to Bill all the time, and I’d always use this expression that a ham sandwich could run Coca-Cola. And Bill wasn’t quite housebroken then. So we were sitting on this panel, up in front of the audience, and Bill said something to the effect that it’s pretty easy to run Coke.” - Warren Buffet

Amazon buys MGM for $8.45 billion (Including James Bond IP)

• Amazon got great deal terms they are notoriously unbelievable negotiators.
• The James Bond movies have grossed over $7B total, Skyfall grossed over $1B in revenue on a budget of $200M.
• Amazon can use its operational excellence to capture easy wins for maximizing the value of MGM IP.
• "The operations of the Bond franchise have been so screwed up, the movies come out so slowly. Amazon's gonna be able to clean that up and pump out a movie every 2-2.5 years" - David Rosenthal
• Jason thinks there is a huge possibility for Amazon to expand the James Bond Universe. "World-building" like Marvel and LOTR.
• Other bond characters can have their own movie.
• There are opportunities for retcon and fan service in between Bond plots.
• Retcon = a piece of new information that imposes a different interpretation on previously described events typically used to facilitate a dramatic plot shift or account for an inconsistency.
• Jason movie recommendation: Dredd.

For context on the MGM opportunity

The Highest-grossing franchises of all-time (via the-numbers.com):

1. Marvel Cinematic Universe - $22.5B (Disney property, acquired for $4.2B in 2009 - Disney is in the black on this deal)
2. Star Wars - $10.3B (Disney property, acquired for $4B in 2012 - Disney is in the black on this deal)
3. Harry Potter - $9.2B (JK Rowling owns character rights, WarnerMedia owns film rights, NBC Universal also involved - messy situation)
4. James Bond - $7.1B (Amazon property)
5. Fast and the Furious - $6.05B (Universal property)
6. Batman - $6.04B (WarnerMedia property)
7. Lord of the Rings - $5.8B (Middle-Earth enterprises property, Amazon bought TV rights for $250M in 2017, put at least $1B into five seasons of TV series)

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