A Conversation with Tobias Carlisle of the Acquirers Multiple

Weekly Issue

Tobias Carlyle is one of my favorite people on the planet. Tobias is the author of several books on investing that are absolute must-owns, including Quantitative Value that he did with Wes Gray, Deep Value, The Acquirer’s Multiple, and Concentrated Investing. I have interviewed and talked with Toby many times over the years. He has a new book, Soldier of Fortune, because I dabble in philosophy and historical readings. I love this one because he combined Warren Buffett and Charlie Munger’s writings over the years with Sun Tzu and came up with 13 principles that are outstanding.

This is a great read and you come away with a better sense of what it takes not just to survive but to thrive in markets. Toby, thank you for being with us today.

Tobias Carlisle: Thanks for the very kind introduction. It is good to see you again. It has been a little while.

Tim Melvin: Lots changed. We have moved up to North Carolina, and we are actually feeling the fall and the winter for the first time. My wife loves it. The dogs and I are on the fence. Where did you get the idea for this book? I have never seen it done before.

Tobias Carlisle: I read Sun Tzu when I was in high school because it was one of those books everybody says is a classic. It has been around for 2,500 years. I could not see the attraction, honestly, in high school. I probably had another go at it about every 5 years after high school and just could not ever get into it. Then during the pandemic, I was reading it again. As I was reading it, I thought there is this deep kind of strategy in here. There is a surface way of reading the book, which is that it is about Bronze Age warfare. You would think, what has that got to do with anything? Then I realized Sun Tzu is dealing with a really difficult problem during the Warring States era in ancient China. There was this old empire that fell and there were 300 years of warfare before there was a new emperor crowned. At the very beginning of that period, there were hundreds of these little walled city states that narrowed down to 7 superstates at war with each other. They were in this uneasy stalemate. None of them could win because any time they went to attack another one, it left their borders open for attack by a third.

Sun Tzu wrote this book where he says this is a game with a risk of ruin. You have to make these choices. Are you going to take the path towards safety or are you going to take the path towards ruin? Then he spends the entire book describing how you stay on this path towards safety. He says you have to defend first. You have to make sure that you are safe, that you are going to survive. Then you have to find these opportunities where the risks are well and truly compensated for by the reward. You have this excess of reward. Then he gives you the way of doing that. He has this method. He says you go out and you do this analysis. You look at the situation. You look beneath the surface. You build up your understanding of what is happening. Then you figure out what you are going to do. You are looking for these opportunities where you have this overwhelming advantage. Then you win with this overwhelming advantage. I thought that is exactly what Warren Buffett has been saying.

I read Buffett when I was in university in undergrad, and it appealed to me. It was just a logical kind of way of approaching the markets. What appealed to me most was just that idea that you can figure out a valuation for something based on what you expected to earn into the future based on what it owns. Provided that the downside is safe and the upside is sufficiently large, then you can put a position on. If you do that enough times, then they are not all going to work out. But on balance, they are going to work out.

Some of the softer stuff that Buffett has talked about is the importance of temperament, and Benjamin Graham did too. Benjamin Graham really divided his works into 2. There is Security Analysis, which is all of the analysis. Then there is The Intelligent Investor, which is all of the psychological aspects of it, the temperament. That is arguably the more important part. The security analysis part feels like when you first read it, it is quite complex and it takes a little while to get in. But after a while, it becomes a little bit intuitive. Once you get a feel for what you are looking for, that is actually not the hard part. The hard part is the psychological part. You go through periods like now where the market is racing ahead, but it is a very small number of companies that are racing ahead. Their valuations are looking a little bit stretched to me. On the other hand, you have all these companies that have been left for dead, that have done nothing, that have gone down for years. They do not look appealing at a surface level. But if you look underneath the hood and you look at the fundamentals, they are very, very cheap.

Those 2 philosophies, that there is this analysis you can bring to bear and you can figure out what is happening if you look beneath the surface, and then if you can control your emotions and understand the psychology of the markets and have good temperament, then you can do really well in the market. I just thought those 2 philosophies are so similar. Someone should write it out and describe why.

Tim Melvin: You did such a phenomenal job. There are lots of quotes and references. You start off with the 1st law of the 13 laws: the ideal strategy succeeds without conflict. That is a whole book right there. When you find an investment where you just look at it and say, I have to own that because I cannot really see how I can lose, but if I am even vaguely right, it is going to make me a ton of money, that kind of describes value investing in 1 short, tight sentence.

Tobias Carlisle: I am glad you picked up on that. Really, the challenge with writing this book was every single time I pulled up one of the things that Sun Tzu says, I was like, that is the most important part of the book. I wrote the introduction like 7 times because I would write the introduction and then I would write the next chapter and I said, no, this is more important. This part has got to go first. It took me a really long time to filter down. I do think that is really the key to it. If you pay attention to it for long enough, and he talks about it being a matter of experience and having a good method, which sounds exactly like Graham, you cannot get the experience without doing lots and lots of reps. Over the course of a business cycle, you can see how cheap things can get. You can see how expensive things can get. You can know roughly where you are in the cycle. That was the one thing. Sometimes you do get these things that you just look at them and you just know that thing is going to work out.

Tim Melvin: I am on chapter two here and this is a quote that I had totally forgotten: you can ensure the safety of your defense if you only hold positions that cannot be attacked. That describes my bank stock portfolio. I hear all the time why do you own this little bank? They have all this excess capital. They are not doing anything fun with it. Look at this bank over here doing all this cool high-tech lending. Why do you not own this one? If it all goes boom, this bank is going to have a problem. This bank over here is not going to have a problem. At some point someday somebody is going to look at that cheap valuation in all that capital and say, I could use that. They are going to buy it. They are going to pay me a lot more than I paid for it. But I cannot be attacked in the interim.

Tobias Carlisle: I could not agree more. I really think that is the key. Listening to Buffett and hearing it reinforced by Sun Tzu really made that point clear to me too, that provided that you take care of the downside first. In many instances, you are just waiting. You do not know when the upside event will occur. You are hoping that it will occur. But provided that all of your positions are not going to blow up and go to 0 or worse, take down the entire portfolio, if you have something, leave it.

There are lots of ways you can blow up an entire portfolio. I know a couple of them. I have learned those. I have managed to avoid most of them, but early on it might have been a little bit more luck than anything else. But I just like that idea. If you do your analysis on that basis, just buy the stuff that is not going to blow up. Spend your time in there. Then out of the ones that are not going to blow up, clearly there are some that have a little bit more upside optionality and ways to win.

That is what you want, multiple ways to win, multiple upside optionality. All you have to do then is wait and you have time on your side. Better if you are a little bit positively carried. Better if management is buying back stock. There are lots of little things you can do to get more advantage on your side.

Tim Melvin: Munger once said, and I identify much more with Charlie Munger than I ever did Warren. I am a grouchy old man that reads a lot and just wants the kids to stay off his lawn. That is my spirit animal. He once said we did not make anywhere near as much money by being the smartest people in the room as we did by avoiding stupidity.

I always bring it back to banking a lot, but there has never been a banking crisis that was not created because some banker somewhere did something stupid and the stupidity became contagious.

Tobias Carlisle: I could not agree more. I cannot believe the way that you have done this by wrapping these ideas together. It is so obvious when you read it, you think, why was this not done a million times by now? They fit so perfectly.

Tim Melvin: I am glad you enjoyed it because I felt like I did not know how many people this would appeal to. But I just had this compulsion to write it because I felt like the strategies were so similar. You even get into Ted Williams in here, which is one of my favorite stories and it is the most Buffett-esque analogy that is the most applicable to markets.

Tobias Carlisle: It is amazing reading. I had never read that book before. I have seen Buffett quote it, but I read it and there were 50 quotes that I could have taken out of it. I have a greater appreciation for Ted Williams having read that book because he really did it. He is the Sun Tzu of baseball.

Tim Melvin: For those readers and viewers who are not familiar, Ted Williams in his book The Science of Hitting said that he identified the few areas in his swing plane of all possible swing planes, part of where it was on the plate, height, all of that. In one little segment, that is where he could get hits. In one specific segment, that is where he could drive the ball. The only times he swung was in his hit zone. He ignored everything else. He became the greatest hitter of all time. Maybe Ty Cobb was better but Ty thankfully never wrote a book. If more investors did that, identified this is my sweet spot, that is where I should swing, I think most people would make more money.

Tobias Carlisle: It was a funny experience reading because even calling it The Science of Hitting is reminiscent of The Art of War. As I was reading through, I thought, has he read The Art of War? It is an amazing book, but I love the fact that Buffett used it as the analogy for his investment style, which is just wait for the things that you know are going to work. Wait for the things that you understand. Wait for the things inside your circle of competence.

Sun Tzu says something similar. I got this from Charlie Munger. Charlie Munger calls it via negativa or via negativa. I am not entirely sure how you pronounce it. But the idea is that you do not succeed by doing brilliant things. You succeed by not doing the dumb stuff, not doing the stuff that is going to blow you up, not doing the ruinous stuff. I think that is hard to appreciate when you are starting out as an investor, but as you see more and more people blow up along the line, you realize that success in this game is survival more than it is anything else.

Tim Melvin: You just see so many people who do what is popular, even though they do not understand it. They have no idea, but they are going to day trade tech stocks. They know nothing about trading or tech stocks, but there they are swinging away every morning. But they are in an industrial business where they know every in and out, absolutely everything about it. They own no shares in any of the companies. That has never made much sense to me at all.

Another one here, so many of these deal with avoiding risk to profit. It reminds me that Andrew Lo, the professor at MIT finance and economics. If you have ever read Andrew’s books, I mean, they are dense. It is like reading Ulysses. It is not going to come easy. But he said one sentence that is probably 1 of the more important sentences ever: the key to success as a long-term investor is to survive as a long-term investor.

If you can just let reasonable levels of intelligence and common sense dominate your thinking and avoid the absolute blowups, you can achieve a fairly decent amount of success. If, like Munger and Buffett, you are really good at avoiding stupidity, then you are going to do real well.

You also talked about a lot of the principles here because Buffett obviously attacks when the time is right, but only when the time is right. If you have ever read all of the shareholder letters, and I know you have, as I have, most people have not. A lot of people own a copy that have never opened them. It is free online. He knows exactly when to put the money to work.

If you look and there is an important market bottom, there is Warren smiling, leaving the brokerage office because he is done buying. Cover that ground a little bit of how to know exactly when to attack and how Sun Tzu and Warren set that up.

Tobias Carlisle: One of the really great lines in there is that Sun Tzu says if you know how to win before you fight, then you can control the forces of victory. But if you begin to fight and then figure out how you are going to win, you have already lost because somebody else, possibly your opponent, the market, whatever. That is a good thing for investors to think about. When you are buying something, you should know how that situation, how you expect that situation to work out or how you know it is going to work out. You do this enough times, some positions work out and some positions do not. It is good to understand what is happening in the position.

That is often the tension. You get something that looks optically cheap or it is cheap according to your principles, but you always have to acknowledge that the market is out there and the market has a different point of view, which is why the price is where it is. One of you is right and one of you is wrong.

If the market is right, then you want to be able to figure that out pretty quickly and move on. If you are right, even if the market goes against you, if the underlying fundamentals are going in the direction that you like or it is doing the thing that you want, you know how you are going to win.

You can stay in that position even if the price is going against you. The price becomes largely irrelevant at that point because your business, every quarterly report comes in, you are happy with that progress. They are buying back stock. They are generating lots of free cash flow. They are doing all the things that you want them to do. You know how to win. I think that is really important.

Buffett is immune to what happens in the stock market. He does not care about the prices. What he is thinking about is the underlying business. That takes away all of that tension about what the price is doing. You do not have to worry about that anymore. You do not have to worry about what the market does because you are focused on the fundamentals.

Tim Melvin: 1 of the laws that you have in here is prepare for everything that can happen, not just what you think might happen or what you hope might happen, but look at what are all of the possible outcomes on this.

Tobias Carlisle: That is also a Taleb idea that I like. Nassim Taleb has that great idea about thinking. In many situations, there are these probability weighted outcomes. You think it can go up 10 times, it can go down 50 percent, but then there is maybe a 5 percent chance it goes up 10 times, a 10 percent chance it goes down 50 percent. You can do a little calculation, but sometimes you find these situations where there is a non-zero chance, and I do not want to ascribe a number to it, but some non-zero chance where these things are a 0. There are lots of industries like that where the business or lots of business models like that where they do really well through 7 years of the expansion and then year 8 they are Taleb’s turkey and they get taken to the woodshed.

Tim Melvin: This is a great time of the year to tell Taleb’s turkey story. You want to share that one with everybody because I do not think everybody knows it.

Tobias Carlisle: Nassim Taleb has this idea that you cannot judge the success of a turkey’s life based on all of the progress that it makes up to Thanksgiving where it gets its head chopped off. Every day it gets fatter and bigger and you think this thing is doing really well. Then whatever it is, a week or 2 before Thanksgiving, it gets its head taken off and it is 0 and it is dead. It is not a successful turkey.

Tim Melvin: All the turkeys think the farmer is the best person ever in the entire history of the world, which really reminds me of market because you have this flock of people that think this thing is wonderful. Some people call them turkeys. I call them day traders. It is all wonderful until the day it is not. Then it tends to be terminal. The 7th law, again, 1 of the most important ones that seems so common sense and yet it is never written down: seek asymmetric opportunities.

Most people do not think that way. I can remember as a broker, we used to get the research reports in every Monday morning from the research department. This was back in the days of mail. They actually mailed things. I know I am a dinosaur. You would get these and you would look at them and be like, here is this stock and here are all these wonderful things. The current price is 20 and we think it could go up to 24. I would be, why in the hell, why am I excited about this? That is 20 percent. The stuff you sent last week went down an average of 30.

You have to balance this out here because it is hard to make money with 20 percent gains.

Most people are very happy with the 20 percent gain. But in the grand scheme of things, it is probably not going to make you money if you keep harvesting those things. Touch on that one a little bit. How can we seek out the asymmetric opportunities?

Tobias Carlisle: I think about every situation as a question of magnitude and frequency. Magnitude is the size of the gain that you expect and frequency is the probability of getting there. For every situation, for every company, you should do a valuation. What is the worst case scenario here?

What is the bad outcome where the business maybe does not fail, but the business really struggles? Then what is that business worth in a trough?

Some businesses have some value, have some residual value, and that is your downside. Then your likelihood of that downside, you can estimate often because the nature of what you and I are buying is they are closer to the bottom of their business cycle. You have basically all of the bad luck that has sort of drained out of that thing, or it has got all of the bad luck. It is full of bad luck. You are looking at it. Then the upside is the best case scenario. Then you might have a mid-case scenario, what you expect to happen.

You can look at those things. I would not ever actually do this calculation. I would not sit down and write this calculation out. But I would look at each position and I would think, I am looking to avoid 0s.

There are just some business models that they look good, but the other thing that I am trying to avoid is stuff that, there is a lot of businesses out there right now that there are a lot of stocks that really have no business. It is not that they have no profits. They have no revenue.

Tim Melvin: No business, no revenue. They plan to do something. They have already run up to these extraordinary valuations. Nuclear energy, let us name names because I will lead the pack if you want.

Tobias Carlisle: Nuclear energy stocks.

Tim Melvin: Most of them, the small module reactor stocks and the fusion, there are people out there bidding nuclear fusion stocks up to billions of dollars. We are currently capable of generating nuclear fusion that lasts like 1 millionth of a second. The Chinese are a little better. It is not happening anytime soon. You cannot put discounted cash flow on that. I tell people all the time, if you are going to trade that stuff, make sure you are really good, nimble trader. Do not fall in love with it because you are trading garbage. There is an outcome of 0 here.

Tim Melvin: Quantum computing is another one. Here is the thing about quantum computing. 1 of those companies is going to win. But it is only going to be one. Do you ever see the movie The Highlander?

There can be only one.

Tobias Carlisle: They are remaking it. Henry Cavill and Russell Crowe.

There is only going to be One. There is a good chance that somewhere along the way, IBM or Microsoft buys them. They are the ones that win. Google is doing it too. The thing about quantum is the technology is so far away.

Tobias Carlisle: There are so many of these businesses out there or so many of these stocks out there at the moment, they are really just science experiments and the science is a long way from turning into a business. It is hard to assess the outcome of those stocks. People see the stock has run up a lot and they think they project that into the future. I think it will keep going up. But the problem is that we do have these periodic little bull markets and bubbles where science experiments do very well and we are in 1 right now. There are a few things that the technology is not there. It is being pulled along a little bit by AI. I think some of the Mag 7 are probably long-term winners, but that does not mean that they cannot trade sideways for 15 years. That is certainly what happened in the late 1990s. It was not so much a dot-com market as it was a large growth market.

There were lots of names that were not dot-coms. Microsoft, maybe you can say that is tech, but then Walmart, certainly not a dot-com at that point. GE. Those companies had these incredible runs through the 1990s and became huge. Then from 2000 to 2015, the stock went nowhere. The SPY went nowhere for 15 years, even though those businesses remained. They still grew like 30 percent a year. They were still phenomenal businesses under the hood. Same thing can happen now. AI is an incredible technology. It does do some extraordinary things. They are putting a lot of money to work.

It is still too expensive and they could easily go sideways for 15 years. You need to be aware of where you are. That is another principle in the book. Do not attack unless you have all the advantages on your side.

Tim Melvin: Microsoft is one of the greatest companies in the history of the world. You have a hard time finding a company consistently better than Microsoft. It is going to be hard, really hard to find that company and that business. When you think about how they have adapted and grown and changed with shifts in the market, it is phenomenal. If you paid the price in 2000, you said Microsoft great company, over time, it is going to grow. It is going to be great. These are brilliant people. The business will be fantastic.

You were right. You were dead on right. In 2017, you broke even.

Cisco. John Chambers built a company that without John Chambers and Cisco, the Internet would have been a lot harder. It still would have happened, but with those routers and switches and the mass production of them and the way they have stayed on top of networking and cybersecurity, they make a lot of everything else that came after possible. That company has grown by this massive factor since 2000. Someday, if you live long enough, you will break even on that stock from the price that you paid in 2000. You had most of the equation right. But you did not have all the advantages on your side.

Tobias Carlisle: That is 1 of the key things, that idea that that is the asymmetry of the bet. You can be right, but you can be right on the business, but wrong on the price that you pay. That is what asymmetry forces you to look at. Am I getting the price right as well? Or is this something where a lot of Mag 7, a lot of these businesses are getting to that point where they are priced to perfection. I do think that they are very good businesses and they are highly likely to be much bigger than they are now in 10 years and 20 years time. But their valuations are so stretched that it might take that 10 years to grow into that valuation. Any little market, the market is a cyclical beast. It runs from these tech kind of cycles and then it goes through financial cycles. We have had a very extended tech cycle that started in the bottom in 2009, certainly in like 2015. It has run for this decade. I have charted this a few times where I just showed the performance of the biggest stocks against the smaller stocks or against the market. There are 100 years of data now going back to 1926. You can look at this very clearly that your advantage for holding small stocks over bigger stocks is about 0.8 percent per year, which is a big compounding over 100 years. But then you have these 6 or 7 periods where you get massive outperformance by the biggest stocks. We are in 1 now that started in 2015. I think folks are used to the biggest stocks being dominant. You think how could it possibly be any other way that these big stocks, they are too big, they are too well financed, they are so smart. Yet we have these many, many examples where they have underperformed the market for a long period of time. The individual investor has this massive advantage in small stocks.

Tim Melvin: We do because I personally do all right. I live a nice life. I mean, I have got everything that I want. We have got almost everything my wife wants. We are in good shape. But I do not have to fire off a million shares on the bid of Apple. I do not need to accumulate a billion dollars worth of a position by this week. I have got all these advantages and I can get into these teeny tiny little companies that the big guys cannot. I routinely give it away because I want to trade whatever the guys on TV were talking about. To me that is just a special form of insanity.

Tobias Carlisle: You want to be away from the crowd a little bit. The interesting thing about Microsoft, I am glad you raised that earlier, was that Microsoft was expensive in 2000, but it got cheap. 2010, 2011, they were pitching it at value investing congresses. Whitney Tilson had a pitch out, it is 11 times free cash flow, but it had its first year of revenue going backwards. It had Ballmer as the CEO and there was a handover and people were like, Ballmer is not good enough. There was some real risk in Microsoft. Maybe the next stage is not gonna be a Microsoft type market.

Tim Melvin: You want better than Microsoft. You and I both love EV to EBIT. That is another whole long discussion. But if you ran screens on EV to EBIT and actually wrote about this at the time, and you were looking at the cheapest tech stock with a decent F score, there is this little company on there and they made chips for the gaming market. No kidding. That is literally they were considered a gaming chip company and they were the best, but how big is the gaming market? I mean, even my son, eventually I am like, kids, you have got to get a job. That happens. The market is capped by the need to grow up. But NVIDIA was on that list because it was trading at 8 times trailing enterprise value to earnings before interest and taxes.

If you wait long enough, everything gets cheap enough.

Tobias Carlisle: I am sure that someday we are going to see most of what is in AI. It is going to be available at the kind of price that I want to pay or that Warren would want to pay. It is like Sun Tzu’s enemies have left. He can now attack.

Tim Melvin: That is a great line. I wish Sun Tzu had said it because I would have used it in the book, but it is not a Sun Tzu line. I was always told it was a Sun Tzu line, but the line is if you wait by the banks of the river for long enough, the bodies of your enemies will float by. Whoever said it, it is absolutely a great line. Because I was the 1 that was late to this call, I want to be very respectful of your time. This book, it is not only a fun read, but you are going to stop about 100 times the way I did and say I never thought of it that way, but it makes absolutely perfect sense. It is going to be cemented in your brain. This is extraordinarily well-written. I want to congratulate you on that. I always admire great writing and this is definitely great writing.

Tobias Carlisle: I very much appreciate that because I know you are a great writer too, Tim. Thank you for that.

Tim Melvin: The idea is brilliant. I have read Sun Tzu. I have read Buffett. I never would have thought to put them 2 together. When I am looking at it like this, this is peanut butter and jelly. This stuff belonged together all along. Great job. Buy this book. But we would be remiss, Toby, if we did not talk a little bit about how investors can do some of these things. Be in that fortress position. Attack when the opportunity is best. You talk about this a lot on your website, The Acquirer’s Multiple.

That is also the name of one of his books, in case I forgot that one.

The Acquirer’s Multiple is EV to EBIT for the simple reason that as Toby found out in his research and I found out in mine over the years, that is the multiple that all the PE guys and serial acquirers, they are like, do not tell me about the PE. Tell me how much cash and debt the company has, how much total capital is in this, and how much money are they producing before I pay interest and taxes? Because my accountants can make the interest and taxes be whatever I want it to be. Tell me how much cash is being produced. That is the key multiple. You talk a lot about that. How can investors use that to create the defense and attack when the time is right?

Tobias Carlisle: I like it as a valuation tool because it is more holistic. It looks at the cash and the debt and minority interests and preferred stock. It really gives you a picture of what you are paying in totality. Whereas PE just looks at market capitalization, any measure that just uses prices, ignoring the debt picture of the business. Then I like operating income on the other side or EBIT. There are any number: EBITDA, EBIT, operating income, operating earnings, free cash flow, cash flow. They are all operating cash. They will give you roughly the same answer. It does not matter too much which 1 you use, but EBIT is the 1 that has tested best historically. That just tells you how much cash is coming in. You can use it to look through the capital structure a little bit, find things that are unexpectedly cheap. It happens all the time. They have just had a sale. They have a big chunk of cash sitting on their balance sheet. They are trading very cheaply relative to the operating income that they are generating. Historically, it has been a very good way of outperforming the market. It is the best simple price ratio. I think you need to do other things. As you point out, like looking at the F score or looking at the, there are other steps that you can take to improve the performance of that very simple measure. But as a standalone, it is pretty good. I do other things too. I look at the quality of the business. There are lots of other things you can do to improve your chances, but that is the way I think about giving ourselves every single advantage we possibly can. I just look for things that have all of these advantages and avoid the ones that have all of the downside blow up risk, put that portfolio together. Then if you survive long enough, it should work out.

Tim Melvin: You touched on something. I touched on it a little bit with the F scores, but people look at value investing and they say it is garbage. If you marry that together with credit, the way Buffett did without ever talking about it, and the way Marty Whitman never stopped talking about, but value investing using low multiples, that is very much a credit and quality story as much as it is just a multiple. Piotroski found out in his original research, you and Wes touched on some of this in Quantitative Value, most stocks that are cheap are cheap for a reason and they are garbage. In fact, it is over half of them when you use price to book or EV to EBIT. They are cheap, they are not great companies, they are not good businesses and they may not survive. But if you can narrow it down and get the credit right, it becomes a lot more powerful.

Tobias Carlisle: I could not agree more. The credit investors, I do not know if they are smarter necessarily. I just think the process is better that they are looking for downside because their upside is capped. All they can really do is manage the downside. I think that that credit analyst mindset is a very powerful 1 when it comes to looking at the equity because the credit tells you whether it is going to survive or not. The price ratio tells you what performance you are going to get if it works, but credit tells you whether it will survive or not.

Tim Melvin: If you can marry those together and get them both right, you dramatically increase not only your odds of success, but as in the book, looking for asymmetric opportunities, the magnitude, I think, of your success. What else can people find on your website that might be useful to them?

Tobias Carlisle: I have 2 ETFs. I have ZIG, which is a mid cap, large cap, deep value ETF, which is DEEP, which is a small and micro ETF. They both trade very differently to the way that the rest of the market trades. If you have a large allocation to tech, it might be not a bad idea to have a look at small cap value ETFs and just see how it has traded relative to tech in the past. That would be my expectation for what it will do in the future.

Tim Melvin: I am going to touch on this because it is 1 of my favorite parts of your website that you left out. They also put together a weekly mailing that comes out and it is just their overview of everything they have read this week. It is throw your newspaper away, turn the TV off and just read this because everything that you want to know about valuation and the way some of the top performers are seeing markets and what is happening in markets in the world comes to you in this little email and you can just click through and see a week’s worth of news all at once.

Tobias Carlisle: That is Johnny Hopkins who puts that together. I read it every week and I absolutely love it. I think he does a great job. It is phenomenal. I send him through interesting articles that I find, but he tracks it all. We get a lot of very positive feedback about that link fest that we put together.

Tim Melvin: Toby, as I said, I want to be really respectful of your time because I wrote the time down wrong. Toby is on the West Coast and I got it all messed up. I was late to the meeting. But Soldier of Fortune, I got mine on Amazon. I am sure it is in all of the bookstores. This is just a great read. It puts together the philosophy of investing in ways that marry Sun Tzu together with Warren Buffett and Charlie Munger in a way that after reading it, none of us thought of it before this because it just makes phenomenal sense. Great book. Thanks so much. I appreciate it. The Acquirer’s Multiple, you have to check out the website. There is literally an MBA worth of value investing information and material on there and of course then you can follow links to the ETFs and all that.

Tobias Carlisle: Thanks so much, Tim. I love talking to you. It is always good to catch up.

Tim Melvin: All right, great. Thanks for being with us. We will see you next week.