Kevin Landis on Technology Investments (Podcast)

publicly traded. Kevin not only survived the dot com implosion but thrived. The funds have put up really outstanding numbers over the past fill in the blank, five, ten, fifteen years. Uh. He really is super knowledgeable about startups and technology companies, both both new and old. And one of the things that makes them so interesting is they're located right out

there in the heart of Silicon Valley. It's it's hard to imagine that before first Hand Funds opened up in ninety four, there were no mutual funds located right there in the midst of tech Land. Really quite interesting. He grew up out there, he went to Berkeley, that's his backyard. Really a fascinating guy in a fascinating conversation about all things technology related. I think you'll find this to be

an interesting conversation. I really enjoyed it. So with no further ado, my interview of first Hand Funds Kevin Landis vias is Masters in Business with Barry Ridholtz on Boomberg Radio. My special guest this week is Kevin Landis. He is the c i O of first Hand Capital Management and president and chairman of first Hand Funds. Founded in four with five hundred million dollars in assets under management, Kevin

has specialized in technology. The first Hand Technology Opportunities Funds has been up a hundred and two percent over the past twelve months. Kevin Landis, Welcome to Bloomberg. Thank you very much for having me. So you spent your life in Silicon Valley and are known as one of the longest tenured technology investors. How did you find your way

into tech investing? Well, there's a there's a long, boring story of how I, you know, touched every stone along the path, or there's more of the moment in time terable answer, And I'll give you the moment in time answer, and that is when I was in the fifth grade, I told my parents that I wanted to be a

historian when I grew up. Now, my parents were both children of the Great Suppression, and so they were immediately horrified that I was um unwittingly, I was pointing to a profession that wouldn't make me very financially successful or secure. And they really tried hard to talk me out of it, and finally one of them said, you know, Kevin, if you can figure out the history that hasn't happened yet, then you're gonna be all right son, and the other

quickly agreed. And I thought about that on and off ever since, that if you configure out the history that hasn't happened, that's a really good thing. And I think that's that's a pretty good encapsulation of what I do. That's the definition of investing history that has yet to happen. So I'm kind of intrigued by your background. You have

a BS degree. It looks like this is a double degree in electrical engineering and computer science from UC Berkeley before you got your m b A. The first question is why not go directly to a tech startup? Was there any ever any lure to that? There was, and I considered that, but this was one of those moments where fate sort of intervened. And my dad's business was as a manufacturer's rep in Silicon Valley, meaning he was

the customer facing office. He and his partner with the customer facing office for tech companies based outside of Silicon Valley dealing with Silicon Valley customers. And his partner had a heart attack and had to go in for cornery bypass surgery during my senior year in college, and my dad needed needed me to come and join the business because he would have looked like a one man band otherwise.

So I spent the first four years of my professional career, instead of learning more things about engineering, learning a lot about business and human nature and how to deal with people. So, Kevin, your first experience in the field was not anything that encouraged you to want to become a an insider at

some tech startup. Well, that's right, but it I mean it taught me a great deal about human nature and about business and business strategy, and like you know that, it led to the second job that I got out after business school as an analyst at a high technology market research firm which also began teaching me a lot of the things that that I had thought that I had learned in school that actually weren't true. Give us an example of things you learned in school that turned

out to be not true. Well. One of the one of the explanations for um efficient markets is that there's a lot of just incredibly brilliant, gifted people doing perfect research, and that everything that can be known about a company

is already in the stock price. But when you're an analyst at again, at a high tech market research firm, and somebody from a big name financial firm calls and starts asking you a bunch of very naive questions, it doesn't take you long to realize that the emperor has no clothes, and that maybe you need to modify your thought to realize that the world is not this perfectly ordered place where everything's all worked out. There's actually a lot of confusion out there, uh, and that information is

not really evenly distributed. And all of the forces that finance professors will teach you about why markets tend towards efficiency, they're all valid arguments, but things are usually changing fast enough and people are imperfect enough that markets don't really always have it, have it just right. I couldn't agree with you more. I find markets are kind of sort of eventually efficient, but that's the still leaves a lot of riddle room and and hence the opportunity for some

investors to outperform right. Right, So you're an analyst for a number of years. What else did you do before

launching firsthand funds? In so after being you know, starting out as an applications engineer customer facing with my dad's firm, and then being a junior analyst in a market research firm, then I spent a couple of years as a product manager at a little chip company in Silicon Valley, And again it was it was a great just an example for myself, uh, to realize some of the nitty gritty stuff that I thought I understood as an analyst, but even though I was close to the industry, it wasn't

in the industry. And that again, I just kept learning more stuff that I thought I knew that I hadn't known, and uh and that was where uh frankly though, I I kind of realized one day that I was making more money trading stocks than I was on my day job. And maybe that was the wrong day job to have h Maybe my crew calling was just to be a detect investor. So you launched first Hand Funds in ninety four.

What was the process like of getting that off the ground. Well, that was really daunting because you know a lot of times when your pick, when you're you're young, starting out, you have this feeling like you know the existing businesses, there's some sort of a club and you need to get an invite uh to get in, or somebody needs to give you a chance, and you have to make that leap that says you kind of have to make your own looks and no one's going to hand it

to you. And so my partner and I UH basically figured out how to form a mutual funds. At that time, I couldn't believe there was no high tech neutral fund based in Silicon Valley, and I couldn't believe that that I couldn't find any examples of tech funds that were run by engineers, and it seemed like, oh my gosh, this is If I don't do this, I'm going to

regret it for a really long time. So we need to figure out how to do this, and then we basically just if we pulled a couple of million dollars out of our address books, UH and and got in touch with people that we had gotten to know who believed in us, and said, here's this vehicle we're investing in, and let's let's see if we can make you some money. And that was That was basically our little startup states there.

I think the joke was that um our management see was enough that uh we could each buy a sandwich each day, and that was it. So what are the advantages of running a tech mutual funds from right in the heart of Silicon Valley? You know, you can't bump into people and chit chat without picking up UH industry scuttle butt. I mean, I did the best. I had an example just the other day. We my wife and I were working with this uh a dog rescue organization, and and we took a rescue dog for a weekend

while the fosters were out of town. And you know, the guy came back to pick up the dog and we were chit chatting, and all of a sudden, before you know, we're talking about what's going on at vm ware and what's the matter with this company? In that company? Where do you think about the CEO leaving there to go to Intel, and all of a sudden, I'm in the middle of a research meeting and I'm just handed. This guy is dog so uh and you know the same thing, you bump into somebody you know they haven't

seen in a few months at the grocery store. You you're always swimming in it, and uh so people aspect what's your you know, what's your process for going out and and uh, you know, getting ideas and getting skulled button. That's like saying, what's your process for getting wet when it's raining? Just go out sitting and shopping, right, yeah, right, that's pretty funny. You're also the CEO of the first

Hand Technology Value Funds, which is really interesting. It's a publicly traded venture capital funds, obviously focusing on emerging technologies. You were pre i p O investors in Facebook, Twitter, Solar City, Yelp, Roku, leading to the obvious question, why a publicly traded venture capital firm? Well, that's so that was a great That was a great moment in uh

in time here. I mean, you're probably well acquainted with how easy it was for companies to go public in the late ninety nineties, and then the and then the just the dramatic backlash against that. The pendulum swung really hard the other direction. And it wasn't just people being skeptical of of startups uh and and of IPOs, but it was also Starbanes Oxley and a bunch of other really draconian regulations that just made it really, really difficult.

That the I p O went from being uh, sort of this rite of passage that people were striving for to being just awful ordeal that people were avoiding at all costs. And that's we just realized as we got into you know, uh, you know, oh seven oh eight or nine, that companies, by the time they went public, uh, they were so well known and so expensive that a lot of those early returns had already been and you

just couldn't get them in the public market. So, you know, I had by this time already made a career out of mocking and ridiculing companies that failed to adapt um. And you know, when we started out in the nineties, I made fun of Deck in data general, you know, and then uh, you know, by two thousands ten, we were all making fun of Yahoo and UH and and

plenty of others believe me. Uh. And I kind of looked at that, and I said, well, I'm running a what's a mutual fund, but in the industry is referred to as a forty Act fund because that's the the Investment Company Act of nineteen forty. And so one day I just sort of looked in the mirrors, said, right, I'm here in Silicon Valley making fun of people who failed to revolve, and I'm running a nineteen forty Acts fund. Uh And and I thought about that a little bit, said,

you know, I think we need to adapt. So um, we realized that there was an obscure branch of the forty Act that talked about business development companies b dcs, and that had kind of evolved into this odd kind of a credit granting model. But we went back to the original version of that, which is, no always a business development company. We can make this adventure capital portfolio. And that was right around the time that companies like SHA's Posts and Second Market, We're making it easier to

get shares in startup companies. So that was, uh, that just sort of fell into place, and and we looked around and said, Okay, we're just gonna buy Uh, we're gonna look at We're not changing how we look at companies. We're still looking for the same things right place, right time markets that we like, this looks like the winner. And uh, that allowed us to really kind of go back to doing what we've always done. I always pull people. You know, you don't need to pay me to go

buy Microsoft for you. You know you kind of already discovered that one. Uh just today, you know, nobody needs to pay me to go buy Apple. Uh, you can buy it on your own. So but what you're looking for those companies you haven't heard of yet. And so that's why we made that shift. So why do that in a vehicle that's publicly traded instead of just setting up a separate venture capital fund that doesn't have to

go through all of the usual public listening things. Well, I think that we've always had a bit of a egalitarian dance here where it should be available for everybody, and it shouldn't just see this, uh you know kind of I don't want to say elitist, but you shouldn't just be an investment vehicle that's only available for the few. Should be available for everybody. And so I like the idea of publicly listed vehicles. I mean, that's kind of the reason that we didn't start out with a hedge

fund to begin with. We wanted the doors open to everybody. And of course, you know, we're unconventional enough that, um, I don't think we do very well on the on the standard public road show that you'd have to go through to do institution fundraising, So we're not really adapted

at at that game. So last question on the public private issue, what do you think of the line being blurred between these pre public companies and publicly traded companies and all of the SPACs that have come out as a sort of back doorway two I p O companies that don't go through that road show you were describing. Yeah, I think it's first of all, I think it's a good thing that people get in the habit of looking

at companies through the same lens. You know, a late stage public company, you ought to look at it the same way you look at a public company. Uh. And and I think that would uh that that level of scrutiny. That's a good thing. But I'm also I'm a really

big fan of competition. I think it really brings out the best in US, so I view direct listings and fact as basic the other ideas coming in uh and competing with the UH sort of this historical model of I pos the standard S one and you know, I would I don't know if I would say the the old style S one process is broken, but it's certainly bend out of shape and and doesn't work that well because it is it is just it is really onerous, uh,

and it is really tough on the company. Uh. So you really need to be um big with a lot of resources before you do it. And um, that's unfair to a lot of people. Uh. You should be able to go public a little bit earlier, a little bit sooner, and frankly, you know today there's that spack process allows you to talk a lot more about where you're going instead of just being uh restricted and only being able to stay where you've been and where you're going is

kind of what matters for stuff. Huh. That's interesting. I know quite a few other people out in your part of the woods. Venture capitalists like Bill Gurley have been big champions of the direct listening exactly because the I P O process has become increasingly difficult over the past I don't know twenty thirty years is that is most of this a post dot com implosion effect. Was it easier in the nineties, Yes, absolutely absolutely going public Going

public in two thousand's was still really really easy. But you know, if you look at the scandals, if you look at all all of the busted I pos, the whole pet dot com generation. Uh, and then you combine that with some of the corporate scandals i e. World Calm, Tycho, and Ron, those are kind of my big three. Um, you could say frauds. We're not afraid of the word fraud here, right, those the reaction to those kind of got conslated. Uh So corporate fraud and busted I. He

has kind of got conflated. And and everyone said, despite the fact that those management teams thought went to jail under existing law, uh and Justice Serve people still said there ought to be a law, and so they made Sarbanes Oxley. Um. And I think that's the equivalent of you know, going home and kicking the dog because you're because your boss is mean to you. Um. So the dog they kicked there was you know, the next twenty

years of tech companies wanted to go public. Um. But The other thing I'll say there is that you know, the direct listing and and the Spack merger are actually kind of converging on a on a similar UH path. Today. UH there's usually a big pipe of public investment and a private or private investment in public equity, and that pipe investment UH is highly supportive as back transactions, and it's almost becoming a standard part of it, like a

required part of it. That's kind of like building your book on the I P O figuring out who is going to own that stock afterwards. And it has a lot of the lower costs associated with a direct listing. So people are talking about the blended cost with your pipe plus back transaction. So the market is trying to find the right the right mix of that makes a lot of sense in tech stocks. Right through the nineties

really a unique period in history. I always kind of chuckle when I see some of the young guns compare the current market to the era or the dot com implosion, although I'm chuckling a little less these days than I was a year or two ago. What's your taken on this comparison? How did the twenties match up against the late nineties. Well, first, let's talk about how they're the same.

You know. I think the feeling that one gets here uh is we're reminded that a little optimism is a great thing u uh and and too much optimism can you can drive right off the road, and that can be a really bad thing. So uh, it's good to have people looking for looking towards the future, looking to see, well, what could we do? What could this company do? Um? What how do we change things for the better? Uh?

And it should be about that. I think somewhere along the line, though, there's a segment that simply is saying, uh, how do we just get rich? And uh? There's nothing wrong with the profit motives. It's great, I'm a capitalist, but um, you know it should be what how are you? How are you making the world better? And what are you? What are you really uh driving towards I'm actually kind of encouraged that a lot of the sort of the the striving and and the looking forward what can we do?

Has to do with solving really big problems. How do we go to space again? How do we? Uh? You know Elon Musk wants to go to Mars. That's good for him, you know, how do we send lots of other people there, how do we bring people back and uh, and how do we sell climate change? There's there's some really big things there were there's are no quote a few years ago somebody said we were promised flying cars

and instead we got a hundred and forty characters. Uh. To me, that was that was that was this great encapsulation again of just how you can kind of get off track if you're when you've got a bunch of smart people working on something. You know. Uh, it's sort of if you're working on on making crops grow on some stupid online game, Uh, that has limited value. On the other hand, if you're actually working on making crops grow,

maybe that's better. So I like that, uh. And I like that people are are looking at companies and not saying, well, what did you do over the last five years, but what are you gonna do in the next five years. That's the right way to look at It's the better way to look at it. Um. I just I guess I would cautume folks. A lot of these companies aren't gonna make it. A lot of these companies are gonna

fall short their lofty goals. That's probably okay. I mean, it's it's okay that pets dot Com blew up because now you've got Amazon. So for better or for worse, you've got Amazon. Somebody made it. Somebody made it work. Uh, and somebody was actually right in all all the hype that they were generating. And I think it'll be this way again. Uh. And in the meantime, markets will do their damned this to give us lots of opportunities to

hurt ourselves financially. So two thoughts about that. One is pets dot Com might have been a disaster, but today we have Chewy, which is doing really well. I'm intrigued by the concept of genomic agriculture as the better bet than Farmville. Discuss some of the things you see that are really more along the flying cars progression than the hundred forty character progression right right, In other words, the sort of the John F. Kennedy called action momentum. It's

focused on duty instead of call of duty. So yeah, I guess, uh, you know, UM, electrification of transport is a big deal. Yes, you're still using power, but I think that the part that UM people are kind of learning from direct experience on their on their personal vehicles is that the great thing about having an electric drive train is that you can harvest all the energy uh

that's built up in your vehicle speed. And I always you know, tell people, go stand out in front of your house on trash day and watch this big heavy truck going from zero to ten miles and back down to zero, all the way up and down your block,

and think about all that wasted energy. And if if that truck had an electric drive train, uh they wouldn't have to hit the brakes, they they just ease off the accelerator pedal and you would regenerate and store all that energy each time they they come to a stop. Uh So, in other words, one of the biggest untapped sources of energy out there is the momentum uh in these vehicles. And uh so, the mania you electrify you you start to harvest that. Basic ideas like that are

really a big thing. And um so, I think, yes, taking a lot of the waste out of the system and a lot of the wasted energy that's going to get us a long ways towards climate change. And there are gonna be a lot of other great examples. I think we go we go to space again, We're gonna find better ways, uh and better materials for insulation. You know, heat shields are serious business in uh in space, and you know, I think ten years from now we'll have

much better insulators. That means we're going to be much more energy efficient and again that's going to help with with global warming. So there there's a lot that we can do. We have really, really some daunting challenges, but

we think it to work on them. Let me jump in here and ask you this question because I started out trying to do a twenty twenties comparisons in the nine nineties, and what I'm reading between the lines is the technology that you're looking at today seems to be much bigger, broader impact, more significant both politically, socially and economically than some of the let's call them more frivolous dot com technologies that were Investor Darling's in the nineties.

Is that a fair compare and contrast. I think so. You know, UM, if you look back at the one of my favorite examples is uh, you know, sort of creative destruction, was we disintermediated travel agents. If there were a lot of people who worked in the as travel agents. There are still a few, but they're really kind of high end concierge folks. Everybody can go online and book

their own travel right. Uh. And in fact, you know, when I fly on Southwest Airlines, I just intermediate Travelocity and just go straight to state to the southwest side. So um, that's a great efficiency. But yeah, and it's not just the late ninety nineties with everyone wanted a website, having a website for certain things, that was really really good. But even since then, you know, look at what the

tech industry did with transportation. The right hailing services lift in uber Um fix a really really daunting problem, which was that there's nothing wrong with the cab. It's just that it's not here. Uh, that the cab dispatch function just never never evolved to wear it all to be. So now that we have GPS in our phones, we can we can we can hail a cab no matter

where we are. That's great, it solved some problems. But you know, I I think a lot of us are just uncomfortable with the idea that a lot of this amazing technology is really useful in keeping current on our Instagrams and posting selfies all over the place. That's not a good look. I mean, even if you look good on your Instagram, that's not a good look. Just being all about that makes a lot of sense. So let me finished by circling back. Do you think the current

environment is a late nineties bubble like market? And if not, do you see pockets of bubbles in any areas in particular? You know, somebody asked me the other day about do you see bubbles? And I, I well said, of course I do, And I realized, Uh, there's there's the Haley Joe Osman character in the movie The sixth Ens where

he finally contesses to uh. He says, I see dead people, right, and he's he's very scared as he says that I kind of feel like I see bubbles everywhere I look, and that that's what I'm realizing is that's just the normal natural part of the environment. There are bubbles all the time everywhere, and um, you're just uh, you're you're not noticing them because when they pop there, each one isn't necessarily big enough to take down the whole system. Um,

but you know, most companies fail, Most companies don't get there. Uh, the actual survival rate is a lot lower, uh than then you think it is when you do the real accounting of it, and working with startups teaches you that pretty quickly. That's okay. Lots of stocks are overpriced, That's okay, because the benefit to getting a few companies to be really successful in solving it, getting it right. Um, those benefits are worth it. Quite fascinating. So let's talk a

little bit about We'll start with the technology funds. Doubling your benchmark is quite an achievement. But what I'm more fascinated by is you're up that much without owning Amazon, Alphabet, Apple or Facebook. How did you? How do you accomplish that? I thought you had to be in the giant big

cap tech stocks to put up triple digit returns like that. Well, you know, it turns out that a twenty billion dollar market cap you can go to forty billion just as easily as a one trillion market caps can go to two trillions. Uh, and in fact, in some cases even

a little bit easier. Um. You know, it is true that there are moments, and you know, we saw these again, you know, in the nineties and at other times when people just want to pile into tech and they pile into the names that they already know, and because they get comfort in those names, they feel like they understand them because they're familiar with them. Um, turns up, those aren't actually the same thing. But okay, fine, there are

moments when when when people do that. But taking a longer view, uh, there is a better moment when people are craving growth and they're seeing that to go get a company that has a robust growth for years to come. Um, you can't take the people who are already worth a trillion dollars or more and populate your portfolio just with those names. Um, you need to find companies that you know. Maybe they're maybe they're only only twenty billion in market cap,

but they're on their way to a hundred billion. That's a better way to return. But you've got to be comfortable that you've done your homework and it's not a household name. And people might look at your funny if you tell them that you own this crazy stock named cheg or roku h. And that's okay. What about Tesla? I know you owned it briefly, but it really was never a significant part of this portfolio. Why not own a Tesla? Is it you mentioned earlier? Hey, you don't

need me to tell you to go buy Microsoft. Is Tesla in the in category? You know, test was a great example of when you're right, even if you forget why you're right. If if the stock is working, um, maybe the best thing for you to do is just turn off your computer and go to the beach uh

and let it be working for you. Uh. And and so you know, shame on me for thinking that I was, you know, overly clever when the market the market was really really frothy, and so I thought I'd get cute and on a really really down day, I would uh buy some beaten up Tesla shares and then write some covered calls against it. And the worst I could do is, you know, makes x percent. And and of course then it rallied right past that, and I got taken out

of the stuck. Um. And that was just me trying to prove to myself once again that I'm not a very good trader. Uh. And I should stick with investing. Um. You know, when you see a company like this that becomes just absolutely unsupportable on the valuation side, that the numbers just don't seem to work. Um, you can you know, you can pull your hair out. Uh. You can shake your head, or you can just say, all right, well,

that's the power of optimists. That's the power of when people really believe in something, they will really support the hell out of it. And UM, find other examples of that, uh that you could put in your portfolio that haven't been discovered yet and that haven't gotten all of that psychology behind them just yet. Huh. I love this quote of yours quote. I like to remind people that the time to invest in Netflix was when you never heard

of Netflix. Explain the thinking behind that. Well, you know, the the argument is that pick any great um investment in technology, and what you're going to see is that those stocks performed best when people were just figuring it out and adding it to their portfolio. There's a there was a moment where somebody would stay in a ABC corporation, never heard of him, and then I think I figured them out. Oh yeah, I'm I'm in on that idea.

I like that, and I just if I look back over the years, some of our best years performance wise were when other people were following in love with this, falling in love with the stocks that we already owned. But we made those investments in years where we didn't necessarily perform that well. So you know, you you you make your best investments, you know, a year in year two and maybe you get all the return out of it in year four when people catch up to your

way of thinking and start to agree with you. Quite interesting. You know, you launched the tech funds some sometime late in that cycle, and the returns despite that timing, they've been top decile for over ten years two percent a year or for fifteen years a year And I'm looking at your five year return is a year. What are you doing that is garnering these sorts of returns? Is it simply finding these currently unloved but future loved tech companies?

Is that the secret? Sauce? The shortest answer that I can give you to that question is what are we doing being right? Um? And that's going to happen a fair amount of time, a fair amount of the time anyhow. Um. You know, I go back to my early days as an analyst at a market research firm, and um, when when people said, well, how big is this market going to be? And how do you just determine how big

this market is going to be? Nobody knows? Nobody really knows how big upside is and the markets that you can understand really really well are already establishment. Do you want to know how big is the market for automobile tires, There's somebody who's got all that data. You want to know how big is the market for dental floss and toothpaste. Somebody's got all that data. And you know what, that's

not where you want to invest. It's really boring. Uh. If you want to know the market for a new generation of small satellite, nobody really knows, uh, And that's what makes it so interesting. And so having worked on the job many many years ago as a young kid and realizing that I was supposed to come up with a number, I kind of understand now that, Uh, it's

it's not all about buttoning up your spreadsheets. Sometimes it's about leaning back in your chair and staring up the ceiling and asking yourself, just how big could this market become? How big is this opportunity? And um, that's that's the key thing there. Where when you see a company that's in the right place at the right time, they're on the right track, then the question is just how much bigger could this market become? How much? How high is up.

And Um, if you've got a good feel for answering that question, Um, then you're gonna be in some really promising stocks and a few of them are gonna work well for you. And that's that's what's gonna make that difference. So so last of these questions. You're a board member at several Silicon Valley startups. I have to think that helps you keep a close eye on trends that are

developing in the private sector. Does this translate directly to ownership in the public sector, Yes, absolutely, because in the commercial world, Uh, it's not that you know, public companies only transact with public companies and private companies only transact

with private companies. Right, it's all mixed together. And one of the things, of course that being on a on a startup board teaches you is that, well, it gives you sort of a peek behind the curtain and you see how much chaos is actually president most companies, and how you know, there how many fires they have to put out every week while still focusing on the big pictures. Um. And so you'll you'll you know, you'll learn a few a few things that are really important. Uh and uh,

and then along the way. Yes, you will get valuable scuttle buds. Um. You know, one of my one of my favorite is, um, my favorite observations is you ask people their opinions on things, You'll get much more valuable information than if you're just ask them for a data point. You know, everyone thinks that insider inside is all about who's going to make their quarter, who's gonna miss their quarters?

I really couldn't care less. Uh, that's that's that's the wrong game to play, and get in trouble for playing that game. Anyway. What you really should be doing when you're talking to somebody is to ask yourself, this person is an expert, is something they know a lot of things that I don't know? Um, what can I learned from this person? And usually it's not about them divolving some facts and figures, it's about them sincerely, honestly sharing

their opinions. Those guys over there are a bunch of bosos. These guys over here are the right guys. By the way, the real talent is leaving company X and going to company Y. That's the kind of stuff I like to get. And so yes, working close superstartup companies gets you that quite fascinating. Let's talk specifics about some of your favorite investments today. What sectors and types of businesses have you

most excited. Well, you know, there's always a collection of revolutions that are sort of underway within tech, and you know, you hear about what's getting disrupted today and what's in mid disruption and what's in early disruption. Um So, despite the fact that Netflix has been at it now for many, many years, um we're still kind of in maybe the middle innings of streaming. And the fact that cable companies are still in business and still pushing the old business

model is evidence that there's more to come. You know, the the old thing is history doesn't repeat. But Ryan, what I would say is that today Roku rhymes with Netflix. Roku was that company that when I talked about it three or four years ago, I got a blank stare. And today more and more people recognize the name and kind of understand what they do, and they fit that pattern of the company that fights with no one and wants to be everybody's partner. Uh And it gets themselves

in the middle of that trend. It kind of find there their niche within that ecosystem. And uh So I'm excited about the move too, sort of the on demand streaming, and I'm excited about Roku's position on what's still a really really big wave. So that's one example. Another great example, I think is when we look at e v S electric vehicles. One of the things that you have to dig a little bit to get this appreciation is the voltage.

And the current requirements for electric vehicles are different, and that requires UH different different materials technology, and so a lot of the more efficient UH electronics they're not built

on silicon, but they're built on silicon carbides. And it just happens that there's this company that's been struggling since I kid you not the late nine It's called Cree and based in North Carolina, and they have been struggling their way down this really difficult learning curve of how do you work with this exotic material, and they have finally found themselves in the exact right place at the exact right time. Because power electronics made with silicon carbides

perform much better and give you better electric vehicles. So you don't need to decide if you want to buy Tesla or you want to buy Lucid Motors, where you want to buy Neo, you want to get exposure to this trend, uh, you can buy Cree and we have, and that's one of those stocks has performed really well but still has a fairly modest market cap and still has plenty of headroom. And we're really excited about that. I recall Cree is one of the big innovators in

LED lights. I don't know twenty years ago, is this the same company came up with the chip or or something like that. Absolutely right, So this falls into the category of a solution in search of a problem. What Cree developed was the ability to work with silicon carbides, and they struggled for years to try to figure out what's the end market. We're silicon carbide really really taste, and they thought it was l e eds for a while. But then what they found was that you didn't have

to make the perfect LED using silicon carbides. UH, you could make a cheaper LED using other technologies and other materials, and you could do it in China and so never mind all that. And that was a really daunting challenge for them to get through that, but they did quite interesting. So are all these changes that are coming slow iterative changes or are some of these more revolutionary than evolution. I think that it's somebody once called a successful startup company,

an overnight success, ten years in the making. Uh, this, this, this often. And if you think about how long we had cell phones before one day you look around and noticed that everybody had a cell phone. Um, you know, for me, that was uh gosh. You know, in the early nineteen eighties when I was a college student, nobody had a cell phone. By the end of the eighties, anybody in sales had a cell phone, but that was

about it. Um. And by the end of the nineties, it seemed like everybody had a cell phone, but all they were doing on their cell phones was talking. So you can see that the big, big, important changes they take years to unfold, but when you look back at it or you can't believe just just different things were, you know, from one decade to the next. So obviously evs are a longstanding trend that has nothing to do

with the pandemic. But you've mentioned some things that seem to be a little pandemic related, obviously streaming being one of them. What about things like distance learning and remote work? Are these pandemic trends or do they have legs? Are they going to continue once things start getting back to normal. I think those those examples are both trends that were

happening already, UM, but the pandemic accelerated them. One of the things that's happened here is that our daily lives have been so disrupted that almost anything is on the table. We're willing to rethink things, and we're willing to go try new things. And so that's UM. Overcoming the inertia. I mean, inertia is really that's really tough. You've got

something that's not broke, Why fix it? Uh? And and uh, you know that's why you pay your cable bill every month and figure the next month, I'll work the other thing out. Um. And you know that's really true with education. UM. Unfortunately, the state of education, it's such that you've got people who have, through no faults of their own, are our great advocates of supporting education and find themselves being defenders

of the status quo. And so I guess one of the one great commentary I heard about a company one time, as they said, the guy said, this was a great company, they just forgot to evolve. UM. I would look at our educational system and say they kind of look like they forgot to evolve, and this pandemic now is maybe maybe going to give them the necessary kick in the pants to hurry up and evolve and and figure out

how to make it better. I mean, my old alma mater, UC Berkeley, they've got students living on campus or living off campus close by, but doing distance learning from their apartment, um, rather than moving back to their parents house. But that's a little odd. It's clearly a workaround, uh, And I think that's causing a lot of people to ask some very good questions and figure out what's the better way to do this and how are we are we just getting stuck in our old ways of doing things or

or not. I think with college there's the whole social, physical interaction aspect of it that gets a little lost, um with distance learning. But they're obviously room for both, right, They're not mutually exclusive. Oh, absolutely right. You could argue that the university experience a lot of it is about learning in the classroom, but a lot of it is about getting on with life and you know, leaving the nest.

You can also argue that for elementary school, a lot of it is about learning, but a lot of it is simply daycare so parents can go to work. Um, you could argue that in a lot of zip codes that it's actually about making sure kids are not food insecure and and it's actually a great way to make sure that you're you're investing in more ways than one

in the next generation. So one of the things that's happening is is people are stepping back and looking at as the educational system and saying, well, there's more than one function going on here. Which of these functions can be done better and differently? And are these naturally bundled together? Is a right to bundle daycare and food with learning?

Your ABC probably seems to work. Uh. Is it natural to bundle together learning differential equations and organic chemistry with learning how to go out and do your own laundry and shop for your own groceries? Maybe? But you know just which part of this picture needs to be disrupted and rethought and which part of this picture is working just fine and ought to be preserved. That's a great exercise for all of us to go through. So let's

stay with that idea around remote work. Obviously they're slack and zoom and all the other technologies. The enterprise companies like Google and Microsoft and even Apple for that matter, have been big winners in this space. But I personally find the groundhog day effect of seeming every day is the same. You're not what you describe as the person who you're dog sitting for or going to the supermarket. You very much miss that. And I think it's as true for work as it is for school or your

local community. What do you think stays from the work from home phenomena once we get past the pandemic? What changes are taking place and and how will the world look after things get back to quote unquote normal if if we ever do, we're certainly not going to return to pre pandemic world. But what does normal look like

in the future. Well, one thing that I think changes that the you know I look for I'm looking for silver linings, right, So one thing that I think the changes, it's a really good thing, is that people are focused a lot more now on deliverable. So when we're just going to have a zoom meeting and we're going to talk about X, Y and Z, we're gonna get to the end of that zoom meeting and we're just gonna say, all right, well, we're gonna come back around, you know,

in three days and meet again. And this is exactly what people need to have achieved or brought back to the table here. So I guess the the co worker who just sort of hangs around and ship chats with everybody and tries to look busy and tries to be in meetings and all that doesn't actually contribute that much. But it's just trying to make sure he gets his job.

That guy's in trouble because in the age of zoom meetings and all of this, and and working from a distance, you can't hide the fact that you're not delivering the good um or it's much harder to hide that. So

I like that, you know. I guess this kind came partly from a conversation I had with a woman who was they went from being a consultant to an employee, and she said, you know, actually consultants do really well when they get hired because every time that they have a meeting or a project, they're looking for what's the deliverable at the end that they always come through with something and they forced people to define what it is they need and what it is they want that. That's

not the only thing. Um, there's a lot of other stuff that maybe the softer sides are more creative side. Um, we're just hanging around other people and thinking about things and bouncing ideas off each other. That's really great. UM. I guess that maybe the journalistic equivalent of that is where the where the good story ideas come from. Um they get you know, ideas get tossed around and people

think about things and magic some time somehow happened. But that that takes place in any workspace where um, the people make each other more creative by this sort of relaxed interaction. That's the thing that I think we're going to find has been missing. And all this work at home stuff, so we need to get we need to get the right mix of that. So I think there'll be a lot of offices that'll tell you that you only need to come in a couple of days a week and you can work from home some other days.

Makes a lot of sense. Last pandemic related question, So casinos are closed, sports scambling seems to have all but disappeared, and a lot of people are replacing it with trading. What do you think of the whole robin hood TikTok reddit community actively day trading for lack of a better word, Is this anything significant within the market or is this just a small niche of visible but not especially market moving participants. Well, you know, first, I'll just comment that

as as an active investor. As active investors, we can't complain that the market gets gets it wrong from time to time. I mean, if markets were always right, then we would have to go find a way to make an honest living somehow. Uh So the a's for the you know, the robin hood crowds. I love those guys when they're buying stocks that I already owned. Um and uh but you know, I don't get to have it both ways. Uh. If people get over excited about something, there could be a harm and you know the and

you could or you could pay in all sorts of scenarios. Right, what if you what if the robin hood crowd did your favorite stock right through the steeling up to a point where you just absolutely can't justify it, and so you do the rational thing and sell it, and then it keeps going up, so everyone thinks about like, oh, this is gonna crash, It's gonna be terrible and all that.

I look at this and think how many people got forced out of test Lack because that crowd pushed that stock up so fast, and and they'd have been better off if the stock didn't look so explosive to the upside, and they just made a lot, a lot of money over time. You know. I I think we all look back with certain things with regret. And I mean I look back at Amazon. You know, that's been out of

my portfolio for the last ten years. You know, I would be even even happier today if if if I hadn't let that that stock just run right out up from out of my grasp. Um. So yeah, one one scenario here is that that crowd um takes some of my best stocks out of my hands by making them too expensive. Interesting, let's talk about those downturns and those recessions. You've said those are usually seen as bad times for growth stocks, but they also reveal the best opportunities for

what stocks are doing well and what's just been coasting explained. Well, look, um, somebody said once that um, you know, calling something a commodity that is not a dirty word. You know, certain commodities you know, Uh, there were times when you really wanted to own oil. There were times when you really wanted to own cotton futures. Um. If you think of growth as a commodity, then growth is most valuable. Like any commodity, it's most valuable when it's scarce. Well, in

the midst of a recession, growth is really scarce. And a lot of the mainstream companies, uh that were you know, where a good year was when they grew uh four, and a bad year was when they you know, didn't grow at all. Those face might be shrinking, and a lot of the other companies that you know, uh thought that they could grow ten percent every year are struggling to grow one or two percent um. That's that's when

growth really is the most valuable. And if you can identify growth and see it where other people don't get appreciated, you're going to be making some of the best investments of your career right during those times. And so yeah, you look at O eight No. Nine, that was probably a really good time to get into Netflix, probably a really good time to get into Apple. Yeah, in in boom times, everybody looks like a growth story, and that's that's wrong. And uh yeah, during a bust. It looks

like no one's growing. That's also wrong. Huh. Quite interesting. So I only have you for a finite amount of time. Let me jump to some of my favorite questions that I ask all of my guests. And since we've been talking about Netflix, let's discuss what have you been streaming

these days? Give us your favorite lockdown entertainment? You know, Um, I have to say that, like a lot of people who like complex business and drama and true crime stories, um, that Breaking Bad put us all on a really dark path. And for me, that path went from Breaking Bad to Narcos to Ozark too uh zero zero zero two gomra uh. And so currently I'm screaming Goma, which has got me thinking of that I can almost speak Italians and and

it's just very dark. And so I need to break out of that rent because because you know, um, that's that's that's not a good place to be. So the other great thing that I saw the other day was a biography on Ulysses S. Grant, and it was a wonderful look. When most people look at that periody and you have history, they focus on Lincoln Um. Grant was a wonderful strategist, uh and um. It was a great example two of of an individual who wasn't really a

big success in life until he found his role. And when he found his role, he became a U a big success and that was that was wonderful. Man. I'm a big fan of the Planet Money uh podcast over over on NPR UM. But of course I did listen to Odd Lots the other day on their their story on t SMC and I thought that was well done. And yeah and and I and I love there's one

called Cautionary Tales that talks about disasters and how they happened. Um. And then finally, hardcore history is a kind of a niche uh sort of a military history uh um game, which is it's great too, you know, to to get your strategic gears turning quite interesting. Tell us about your mentors who helped to shape your career. Well, I you know, I didn't. I didn't work at uh you know, at the elbow of Da Vinci or Nicolangelo or anything like that. But I did read a lot um from uh specifically

in investing from Peter Lynch and Warren Buffett. Um. You know Peter Lynch when he wrote one up on Wall Street kind of gave people permission to uh realize that they have an edge. You're an expert at something, you just need to figure out what it is. Uh. And so as an engineer who was looking at tex stocks and wondering about the efficient market hypothesis, that was a great, a great way of a framing things. That was very helpful. And I I just loved the home fund wisdom of Buffett.

He's great at actually being a bit of a disruptive radical and disguising it as being a very conventional kind of homespun of uncular guy. Um. But both of those people gave really well reasoned explanations for why it was that the Emperor has no clothes. And that's that's one of those great lessons in life that they don't tell you when you're a kid growing up, is that the adults are kind of making a lot of this up

as they go. Um. And it's not quite such an orderly place as you're led to belief, to say the very least. Let's talk about everybody's favorite question. Tell us some of your favorite books and what you might be reading right now. A couple of books that are really enjoyed early on had to do with individuals overcoming adversity. So the Count of Monte Cristo and h The Old

Man in the Sea. The Old Man in the Sea is still kind of my favorite, and uh made me enough of a Hemingway fan that I later on I read several of the other books and the one that stuck with me was for Whom the Bell Tolls that in the Spanish Civil War and had a great lesson that there are times when you need to be decisive and you're going to regret doing the thing you know you need to do. I like reading strategy books, so you know, Michael Porter's Competitive Strategy is a classic. You

know it. It provides a great framework for a lot of your competitive thinking. But if you've already read that, I recommend The Art of War, kind of a classic. Um. And on the economic side, I think a great book for me was UH, Free to Choose by Milton Freedman, But I guess close runner up behind that is pre Economics, which is just a wonderful way of of just being being creative and how you frame the question is really

really important and I got a lot out of that. Now, the next book, I have to tell you one of those silver lining from the pandemic was, um, getting in a healthy habit of going for long walks and listening to books on tape. Um. So I've listened to The Great Gas Being Now finally, and UH enjoyed that a lot.

But when I was a senior year in college, I got into an argument with a guy who was a sociology major and and you know, sciences versus humanities, and I made the case that, um, you know, really you couldn't if you're gonna learn the sciences you have to do while you're at university. And I think the way I won the won the argument, at least in my version I won the argument, uh, was that I said, I can always go read Moby Dick. Good luck five

years from now getting your head around quantum physics. Uh. And so you know, I never went back and read Moby Dick. And the next book I'm reading will be a you know, going out for a walk, a long walk for a a podcast, and and Moby Dick is up next. That's interesting, to be fair to the sociologist. I recently took a course on astrophysics online. It's not the same as having those exam coming up each quarter, but you do get broad exposure to an area you

you might be interested in. Not the same as the class, but but certainly uh intriguing. And I had the same experience with that you did with Old Man in the Sea. I started reading it on a on a flight to Florida, and by the time we landed, I was done and it was just an absolutely you know, you're it's one of those books you're sad when it's over and you immediately want to reread. Yeah, yeah, and you really want to meet the great DiMaggio that was that was the great.

But the hero of the story has his own hero and this great DiMaggio that he hears about on radio. What sort of advice would you give to a recent college grad who was interested in a career in either technology or investment management. Well, I think I would give the same basic advice no matter what your career interest is. And that is so much of life, whether it's you know it is, you know your career and your in what business you're going to be in, it's not really

about money. Money is a construct that any economics professor will tell you. It's only there to facilitate ever more complex bartering and you're well, you're always bartering what it is you can do for somebody and what it is they can do for you, and you're making all of these trades. Uh. And so before you start sitting down and figuring out how to barter, you need to understand what it is that you have to offer other people. You need to get to know yourself and figure out

what it is that you can offer others. And if it's not enough, then you need to cultivate that. You need to work on what can you become? Um And once you figured that out, then you can, uh, then you can make your way in life. So I think a lot, a lot more effectively UM and I UM, But it's not about finding a job that you can

get that pays. Well, that's only one component, right. I mean, the perfect job is one where or the perfect career is one where you you enjoy it um and uh So even when it's not paid, you still enjoy going to work, you're good at it, and other people valuate if you can if you can get those three things to line up for you, um, it's going to click. But you can't do that unless you really know yourself.

I think that's pretty good advice, and our final question, what do you know about the world of investing in technology today that you wish you knew twenty five or so years ago when you were first getting started. Uh. I guess what I would say is that the world is a much bigger mess than you realize. Uh. It really is chaos out there, and there's a lot of things that are far from perfect. And that's actually a good thing because it means that you can go out

there and you can find ways to improve it. Uh. And I think that the example that everyone can relate is that um generations of people complained that they couldn't get a cab and then somebody created a right hailing service where you could and got rich doing it. So, yes, it is. It is a big mess out there, and we can't complain about it. Our job is to say to ourselves, with the conventional wisdom is usually wrong about something,

maybe more than one thing. Our job is to figure out what they're prevailing with and is wrong about and then act on that. Quite intriguing Kevin, thank you for being so generous with your time. We have been speaking with Kevin Landis of Firsthand Funds. He is the c I O. Of Firsthand Capital Management and President and chairman of Firsthand Funds. If you enjoyed this conversation, well be sure and check out any of the other four hundred

or so we've done over the past seven almost eight years. God, that's pretty insane. Um. You can find that at iTunes, Spotify, wherever you find your favorite podcasts. We love your comments, feedback in suggestions right to us at m IB podcast at Bloomberg dot net. Be sure and give us a review on Apple iTunes, and you can sign up from my daily reads at Dholts dot com. Check out my weekly column at Bloomberg dot com slash Opinion. Follow me

on Twitter at rid Holts. I would be remiss if I did not thank the crack staff that helps put these conversations together each and every week. Reggie Bazil is my audio engineer. Attica val Bron is our project manager. Michael Boyle is my producer. Michael bat Nick is my head of research. I'm Barry Reholts. You've been listening to Masters in Business on Bloomberg Radio