Beeneet Kothari is the Managing Partner and Principal Portfolio Manager of Tekne Capital Manager, a global fund manager he founded in 2012. Beeneet is part of this year’s Sohn Hearts & Minds Investment Leaders Conference, which is now in its 6th year. If you haven’t heard of Sohn Hearts and Minds before, the conference is one EM’s favourite events in the investing calendar, where 12 local and international fund managers pitch their highest conviction stocks. This year, the conference moves online, and the headliner is Charlie Munger, from Berkshire Hathaway. As Bryce says, ‘you can’t really get much bigger than that’.
The associated listed investment company, Hearts & Minds Investments Limited (ASX: HM1), invests in a portfolio of high conviction stocks including those pitched at the conference. In lieu of management fees, HM1 donates 1.5% of its NTA to Australian medical research each year. All conference proceeds are donated to Australian medical research. Tickets are $500 but we’re lucky enough to offer 50 tickets to our Equity Mates community at 20% off – so only $400. Click here, and use the code: equitymates.
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Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. My name is Bryce, and as always, I'm joined by my equity buddy Ren. How are you going?
Alec: [00:00:30] I'm very good. Bryce. I'm very excited for this episode and for this time of the year because one of our favourite events in the investing calendar here in Australia is the Sohn Hearts and Minds Conference. We get to hear from some of the best investors in Australia and around the world, and there's nothing the Equity Mates community loves more than a stock pitch. Absolutely. And we get 12 of them in one day. And what more can you ask?
Bryce: [00:00:54] Nothing, nothing more to ask for and leading up to the Sohn hearts and minds investment leaders conference, We're lucky to have some of the experts joining us here on Equity Mates, and we kick off today by introducing and welcoming to Equity Mates Beeneet Kothari. Beeneet, how are you going?
Beeneet Kothari: [00:01:11] Good. Thanks for having me.
Bryce: [00:01:12] We're very excited for this one. Beeneet Is coming all the way from the United States, and he is the managing partner and principal portfolio manager of Tekne Capital manager, global fund manager that he founded in 2012. And the need is part of this year's Sohn Hearts and Minds Investment Ladies Conference, which is now in its sixth year. So before we get into today's interview with Beeneet, just a reminder that this is an amazing conference. As Ren said this 12 local and international fund managers pitching their highest conviction stocks. The headline Ren is that one of the one of the I guess presenters on the day is going to be Charlie Munger from Berkshire Hathaway. It can't really get much bigger than that. And we're they're also lucky enough to have MIT Institute Professor Robert Langer, who is the co-founder of Madinah. So an amazing line-up of experts. The good news is that tickets are $500. It's an online on demand event, but Equity Mates are receiving a 20 percent discount for the first 50 tickets sold. So head to the Sohn Hearts and Minds Conference website. We'll put a link in the show notes and enter the code EquityMates one word for 20 percent off. It's going to be amazing.
Alec: [00:02:26] It is. It is amazing. Getting to hear Charlie Munger speak will be pretty epic. Unfortunately, he won't be delivering a stock pitch, but I imagine it would be Berkshire Hathaway if he was going to pitch a stock. But yeah, look, we're very excited. Head over to the website and to give you a taste of what we can expect on the day. We've got Beeneet here with us today. He won't be sharing his stock pick. He's going to be keeping that one secret. He has actually pitched a stock in the last three years. They've were respectively, up 72 percent, 69 percent and 112 percent. you've got he got a bit of form there. Are you a bit nervous to try and match your previous three stock picks?
Beeneet Kothari: [00:03:06] Yeah, I mean, I was thinking about skipping it this year because of exactly what you said here. You're trying your luck. Maybe, maybe pitching, you know, a fourth stock after three good ones, as a reminder to everyone that sometimes stocks do blow up.
Alec: [00:03:22] Well, we're excited to hear what you pitch on the day, but in this interview, we want to cover a little bit about yourself and then two topics which are very hot in the Equity Mates community and we've seen you've been sharing some commentary on China and investing in China and in the crypto space. We love to start these conversations by hearing about people's first investments. We generally find there's a good lesson or a good story that comes out of it. So to kick us off today, can you tell us the story of your first investment?
Beeneet Kothari: [00:03:54] Gosh. So, you know, just by way of background, I don't come from an investing family. I was born and raised in India. I never owned a stock in my life. My parents didn't own stocks, graduated college with debt. And my first job in the investment world was working for a legendary investor named Stan Druckenmiller at Duquesne. And I still remember to this day that my first interview with him. You know, I had no idea who he was. And as embarrassing as that is, it was incredibly intimidating. Once you figured out who he was and you had the investing background that I did or the lack thereof. And every day, you sort of, I think, had that feeling that we've all experienced of, you know, imposter syndrome. We kind of felt somewhere between lucky and you felt like you didn't really deserve the job, but the guy I worked for. So this is the year, 2005, 2006. You know, a year out of college, the guy I worked for sent me off to a investment conference annually. A big gaming conference called E3, used to be held in L.A. probably still is. And he sent me off there to figure out between Sony and Microsoft. Who was going to win this round? The console upgrade cycles in the gaming industry occurs every five or 10 years, and we were approaching the next big one. And it's exactly the kind of thing you send your most junior analysts off to do, because rarely can you just show up at a conference and figure out the answer. And, you know, he didn't want to go. Understandably, he sent me off to it. And he had a very clear mission and very clear direction, he said. It's going to be either Sony or Microsoft. Those are the two big dogs. Just go figure out which of those two looks like it's got a higher chance of success. The instructions couldn't have been clearer. I was maybe six months on the job. I show up there. I tried out for Sony Systems that Tiger tried out the Microsoft systems. You know, if you played PlayStation, then Xbox. It's kind of more of the same. And on my way home on that first day of the conference or way back to the hotel, I ran into the guys over at Nintendo. And the line at the Nintendo station started off small in the morning, and by the end of the day, it was wrapping around the block. You know, I'm the kind of person when I see a really long line at a restaurant, I want to get on that line, right? I'm never the kind of person who wants to go to the restaurant where you can get get your sandwich really quickly, because that makes me sceptical. And so I got on that line, and back then this was so early that their console system hadn't even been called the way yet. It was called Nintendo Revolution, and it was truly a revolution. It was something completely different, and I tried it out and I thought it was the most amazing thing I'd ever played. And I grew up as a PlayStation kid. You know, I grew up in college, staying up late, playing Halo on a friend's Xbox as I had a PS3, you know, playing every countless hours of GTA. And so I was a hardcore gamer, PC gamer, all of it. And the Nintendo System was anything but. But I remember just thinking this had the potential to beat out Sony and Microsoft, which at the time was such a heretical thought that the next day my boss called me and he said, Well, which is it Sony or Microsoft? I couldn't muster up the energy to tell him I thought it was 10. Do I did my work that day? On what is the story behind Nintendo? And I had concluded by the end of this trip that it was not Sony or Microsoft that I thought it was worth putting all of our chips on Nintendo. I got back and it's hard to describe the feelings. But you know, not only did you have to have the courage of making a big stock pitch when you were already kind of insecure, not having the kind of background people around you that you were now also pitching a stock that was neither of the two that your boss distinctly told you to go out and research and describing it was also a little bit counterintuitive because it was, you know, you hold the controller and you whack things around and it's a it was nothing like what we'd been used to. The stock at the time was about 14000 yen and we bought about $100 million worth of over the next year and a half, Nintendo went to 70000 yen. It was a five fold return. And you know, I'll take some credit for getting us in the stock. I'll take zero credit for getting us out. That was that was the genius of of the people that I worked for. And so more or less we bought the stock. Nintendo added slow when no one expected these guys to do anything because for 20 years, they had always been kind of a third tier, not even the second tier or third tier behind Sony and Microsoft to a five fold return. I'll never forget the whole experience because it's a reminder of of how important luck is. But, you know, it's like that old story where you got to sort of be there. A lot of other people, you know, probably didn't go to the conference. I think if you had just been to the conference, you would have seen the product. But it also was a reminder that no matter how young or inexperienced you are, you know you shouldn't sell yourself short. I think it would have been too tempting, and I run into this temptation many, many years thereafter, which is, you know, you often when you've got doubts in your head, you will cede to the person in the room with experience. There's nothing that pains more as an investor to have not followed your instinct. And so that was a, you know, kind of a funny story, but a rare one where someone with as little experience as me shouldn't have been following their own instinct. But I did. And you know, it was an amazing trade
Bryce: [00:09:46] and they backed you into the tune of 100
Alec: [00:09:48] 200 million.
Beeneet Kothari: [00:09:50] But you know, that took some, some convincing and back and forth. But yeah, I again, the credit goes to the people with, you know, the decision making powers at the time that they that they felt like they should have trusted me.
Bryce: [00:10:04] So Beeneet, from from that moment to now, you've since gone and launched your own own fund. So have you developed an investment philosophy on your website? You mentioned a repeatable, scalable investment process. So are you able to elaborate on this?
Beeneet Kothari: [00:10:21] Yeah. Tekne is a technology fund with a global focus. I'm based in New York. We've got teams all around the world. We have a team in Brazil, India, China, Korea and now Southeast Asia, in Jakarta, Indonesia. And you know, I've come to believe a few things about investing. Number one, it's the portfolio that matters more so than any individual stock pick. As much as I love coming down to hearts and minds, and I think one of the most frustrating questions I get asked is What's your favourite stock pick? Because I don't think about it like that. I think about us owning a portfolio and a portfolio has some things that are good and some things that are bad. You just never know ahead of time. And in fact, I think a good portfolio has things that are working and things that are. But over the long run. All you should do well. So we have an enormous focus on our investment process on the portfolio. So what is a portfolio to us? Number one, it's concentrated. You know, if there's one lesson I've learnt from from the mongers and the buckets of the world is that you can't you just cannot outperform with a diversified portfolio. So concentration is a single digit number of stocks to us. I think once you get into 20, 30, 40 stocks, you know, at some point you might as well own an index. The second thing is, if you're going to be that concentrated, you better buy a specific type of stock. So we only buy businesses that are growing. We only buy businesses that are profitable and businesses that are on levered. I think if you own a portfolio of companies that grow, make money and can do so without the use of debt and the, let's say, 10 companies that you own are uncorrelated to each other. So your fund isn't a China fund, it's not a crypto fund. It's got one of everything in it. The odds that you take a permanent capital loss on that portfolio over, let's say, a three or four year period. You know, I don't want to say zero, but it's very low. And that's what we're trying to solve for, which is a portfolio that's concentrated that can win. The individual businesses can grow, make money, can do so without the use of debt. And then there's not a lot of correlation within that portfolio.
Alec: [00:12:29] Mm-Hmm. I love that and I love the investment. Philosophy is very focussed on the the portfolio construction rather than the philosophy for finding each individual stock. I think it's a lesson that bears repeating and reminding ourselves. But beneath you, you mentioned that it's not a China fund and it's not a crypto fund. It's an uncorrelated fund. But we are going to turn to China and crypto because we were looking at your Twitter in preparation for this interview, and we saw you trade in an AFR article on yourself and you said it's very early days in both China and crypto, and that caught our eye because, you know, they're the two hottest hot topics in the Equity Mates community at the moment. Let's start with China. I guess a lot of people would be somewhat surprised to hear you say it's early days in China because it has been an absolute economic miracle for the past few decades. I think the number is like 600 million people have been taken out of poverty, and we've seen some of the massive companies that have emerged as a result. Why do you think it's still early in the China story?
Beeneet Kothari: [00:13:36] So let's take a step back and zoom out a level. China will be with 98 percent probability the world's largest economy within the next five or 10 years. And when that happens, GDP per capita will be about one third of the US's GDP per capita. In other words, there's another several decades thereafter of growth 10 or 15 years ago when I made our first Chinese investments. China was one seventh the size of the US economy, and since then it's compounded at a much higher rate of return for a longer period than the U.S. has. So it's now already three quarters the size of the U.S. economy. Very, very fundamentally. It's the second largest country in the world with over a billion people, and they've got a very clear goal starting at the very top, which is of growing the size of the pie. The second advantage that I think they've got is they think about the way that they're going to get there in terms of leadership position through the use of technology. So what that has created and you know, we as a fund are extremely bullish technology outside of the US. The way we look at it is really simple. If you look at the global stock market of technology company, about seventy five percent of the market cap is in the US, but the US is four percent of the world's population and 16 percent of global GDP said differently. 96 percent of the world's population, 84 percent of the world's GDP, has practically no representation in the stock market, and that's not sustainable. Now, it's tempting to say, Gosh, who's really going to compete with Microsoft globally, you know, won't you just have one operating system, et cetera? I would question that, but I would at least grant that. All right, there might be some sectors where you'll have a winner. That's an American company globally, but it's not going to happen across the board. So, you know, I think China has shown an ability to develop a local ecosystem. It's shown an ability to play catch up. It's showing an ability to perform. I think the odds that they give up now, when they're when they're at this close to winning the race. And again, the day they win the race, they still got a long way to go. The way they calculate which is getting GDP per capita to be at the same level as the United States is. So it's extremely, extremely unlikely. But I think the single greatest economic story of the last hundred years, which is about a billion people have been pulled out of poverty, right? I think what's still mesmerises me is that the Western media and I would include, maybe I should say, English media generally rarely mentions what China has achieved from from a humanitarian perspective, which is an economic engine that was almost necessary to pull something like a billion people out of really complete poverty. And people always ask me, what's the next China? And my answer is it's China, because there's 600 million people on the east coast of China that are now living a comfortable life relative to 25 years ago. But there are 600 million people in rural China who want to get out of rural China, move over to the eastern seaboard and the government wants as the country wants this. And that's a huge economic engine. That population is twice the size of the US, twice the size of Europe. You know, I just don't think you want to get in the way of this freight train.
Bryce: [00:17:05] There's been a lot of concern recently about the increased regulatory action that's happening in China. We've seen what's happening in the tech space, the for profit education gaming, as well as the economic instability. You know, we've seen what's just happened with every grant. So how do you think about these risks? You know, over the next few decades?
Beeneet Kothari: [00:17:24] Oh, I think over the next few decades, it'll be a blip. Here's how I think about it. I think every five years, as we all know, China goes through an election. It's not really an election cycle. The way let's say America has it with every four years. It's more of a confirmation process, with a few folks setting out an agenda for the next five years, the next five years. And what they tend to do prior to that 12 to 18 month period approaching the election, which in this year will be in October of 2022, is there's a lot of, you know, they pick up the sabre and wave it at areas they'd like to improve their society. If they're parts of it that they don't like, they fix it and take action. What you have to remember is the following Xi Jinping is a de facto nominee to lead the country again. I think that much is well reported. It's not well reported as about 100 people beneath him who are fighting or sort of angling for their political power. And in China, if you don't get that, that's all there was. And your political career might come to an end. And so you've got a number of deputies, hundreds of them throughout China, who've got jurisdiction over some tiny little province, some tiny little sector of the economy, some something that they've got an opportunity to show the people at the top that they can enact some change and this is their opportunity to do so. So I think there's a lot of posturing that's going on. I think it all comes to an end in about 11 months. Number two, I think there's almost nothing that's happened in China that is negative for the economy over the long run. You know, so let's talk about the education shutdown that occurred for the for-profit industry in 2018, 2019 2020. China registered a population decline for three years in a row. It's never happened before, so you now got the largest country in the world that's focussed on growing now registering a population decline. And when they researched it, one of the things they discovered is while it's quite expensive to have multiple kids because it turns out that there's a for-profit education sector in China that's $400 billion annually. And parents don't want to spend that much money, so they shut that down. It wasn't about the education industry. You know, they shut down several other things in the economy that made it difficult for parents to have multiple kids. They've got a three child policy. And the average family has something like one and a half kids. Right. I think to sort of stay flat, you need to have 2.2 kids per family. They're targeting three and they're tracking it half of that. So they've got much bigger ambitions, much bigger goals. You know, one of the other announcements they had was if you go to a factory in the United States or Europe, what you would find her are, you know, employees with with wage protections. You know, all these sort of requirements around wearing a hard hat and OSHA safety goggles. No one thinks anything of that in China. These things don't exist. They make them a rule. And people start screaming, Oh my goodness, they're so. So what people have lost context of is that they're coming from a different place, right? They're solving much different problems. So just like, you know, America didn't crumble when we enabled or enforced minimum wage requirements or all sorts of other factory safety standards. The same also is unlikely to happen in China. So it's hard for me to be bothered by them instituting a number of, you know, economic policies that I think are medium term to long term, quite positive.
Alec: [00:20:54] I appreciate the level headedness of your analysis, Bernie, and you're right that if you you used purely consists of, I guess, a western day to day media, you might have a very different take. So let's get us feel headed. Take on. What's perhaps the most consuming China issue at the moment, which is the US-China, I guess, great power rivalry and especially what we're hearing and seeing around Taiwan at the moment. What's your take on that, I guess from a geopolitical perspective, but probably more important for this conversation as an investor who's looking at opportunities in China?
Beeneet Kothari: [00:21:34] I don't make very much of it. I think one has to remember that the vast, vast majority of wars that have been fought over the last hundred years have had the United States, as you know, to varying degrees, as an aggressor. And as far as I can remember, China was was hardly involved in any of them. I think the odds that China starts something that looks anything like a war are quite remote and they've been very clear and they've been very consistent about that. You know, in the modern world, it doesn't behove anyone when you've got nuclear powers all around the world for anyone to be talking in such aggressive terms. I think as far as as an investor goes, you know, the hot asset in Taiwan that everyone talks about is TSMC. TSMC is probably the single most critical company in the global supply chain infrastructure, and this was true. By the way, pre-COVID, as most people probably know, Taiwan Semiconductor produces something like 60 percent of the global high end semiconductors that go into almost anything that that you touch these days, including automobiles and many sensitive parts of the economy. Well, I think there's an assumption by a certain group of people out there that, you know, China would therefore want to take over Taiwan as a backdoor into taking control of Taiwan Semiconductor. China, famously over the last 20 years, has poured billions of dollars into a home grown. So Mainland China domestic semiconductor industry, which has had so far almost no success in producing semiconductors, that non-Chinese companies would want to use. Well, the problem I've got with this idea that they would then therefore go after Taiwan Semiconductor is Taiwan Semiconductor isn't an island. Taiwan may be an island, but a semiconductor company these days produces all of its chips by buying equipment that's sold by American companies and sold by companies like Achmat, by land sold by a Dutch very important company called ASML. These companies in that scenario would be completely shut out of providing sensitive equipment to China. And so you would be buying some. It would be a pyrrhic victory. And so I think it's one of those arguments that's easy to jump to conclusion about something nefarious happening. It just doesn't stand up to logic. I think what's much more likely over any reasonable time horizon is that the current state of affairs continues without, you know, without a clear resolution, and there are tons and tons of examples of that geopolitically over time.
Bryce: [00:24:10] Now, before we move on to discussing all things crypto, I want to close out this part of the conversation by asking you what are some of the most exciting sectors or companies that you're seeing in China at the moment?
Beeneet Kothari: [00:24:22] Great question. You know, I would say it's a very long list, maybe, too. Let's go to the first one is we should take very seriously China's commitment to reducing their carbon emissions and decarbonisation of that entire economy over the next 50 years. I think we should take most countries quite seriously at those proclamations, but China in particular. And therefore, I think the electric vehicle industry in China, which is the largest automobile market in the world and growing, is probably one of the biggest and and hottest sectors over the next five to 10 years. You know, to me, there is no question about it that electric vehicle penetration, which is hovering at about one percent, is going to go to 100 percent. And I think it's very, very likely that you're at the very steep part of that s curve where you're just about to rocket. Now there are a tons of limitations, you know, you're not selling software, you're selling a physical thing that needs to be made. You got to dig up and find, you know, nickel and cobalt and lithium. But it's going to get done because if a country wants it to get done, it's a group of countries wanted to get done. That's how big things get done. And it seems like it's happening. And China's, I think, you know, ground zero for this. So that's the first sector. The second sector is software. Historically, China has not had a very good software industry. And I think there's a very good reason for that. When you've got an economy that grows 10 percent a year every single year, software is typically invented because you're looking for efficiencies. You know, when you've got an economy like the American economy, which grows, let's say, zero to two percent a year. Software allows a company to grow its profits even if revenues aren't growing while in China. Just for showing up every year, you get 10 percent more revenues, while if that's the case, no one is looking to make things more efficient. Well, now that growth rate is slowing and what you're starting to see is it's enterprise software starting to creep up. One of the things we track because we have several investments in this is the AI sector and you can track patents. China has now issued the most patents globally of any country in the AI sector. Now, it's very easy to get critical about the quality of some of these patents, and I'm open to some of those criticism. But nonetheless, I think the the AI software sector in China and there are going to be some publicly listed companies over the next 12 to 18 months. I think it's going to be an unbelievable sector over the next five to 10 years. So those be my two fascinating sectors.
Alec: [00:26:58] We could do a podcast episode on each of them. But we we've got to move on because we want to get your thoughts on another sort of hot topic, which is crypto. Before we do, we're just going to take a quick break to hear from our sponsors. So, Bennett, before the break, we we spoke about China, we now want to move to another hot topic, which is cryptocurrency. And in that tweet that we spoke about earlier, you said very early days in both China and crypto crypto total market cap, I think, sits at now two point five trillion. So it's it's definitely had a an amazing decade. I guess the question to kick us off, why are we still early in cryptocurrency?
Beeneet Kothari: [00:27:45] I think if you if you open up the Wall Street Journal on any given day, there will be 100 topics in there. And if all you do is read the newspaper for a given day, you won't have a clue on how to contextualise this hundred different stories that all seem really important. But I think if you take a big step back, a very clear, most important story of the last twenty five years, and therefore I think this 100 year period is the internet. And there's no question about that. And I think we're we're just beginning to enter. You've got to remember that just in the last five or 10 years, something like four or five billion people around the World Cup connected to the internet via the smartphone, that's just happened. It just happened in the grand scheme of things. This happened last night. Therefore, I think we're entering the golden era of investing in network effects. To me, cryptocurrencies and any other concept which which includes things like smart contracts or protocols or applications, you know, whether it's NFT or metaverse, any of those things which really utilise four or five, six billion people being connected 24 hours a day to each other. I think that's where you've got to be invested. And today nothing has the global reach. Nothing has the kind of effect and the kind of foundational impact of cryptocurrencies that I can think of.
Bryce: [00:29:06] Pretty intense. Yeah, it's fascinating time with. So we've spoken to, you know, investors who bitcoin maximalists, who are Ethereum only or, you know, open to everything. Seven. Eight, Where do you sit on the scale?
Beeneet Kothari: [00:29:22] Yeah. I'm not going to evade your question. I feels like it, but I'll offer my personal opinion and then I'll tell you our firm view are sort of institutional or house bill, which as you may guess by the answer, the phrasing of that answer are two different things. I'm personally a bitcoin maximalist, just Maxie's, and institutionally, we think that it's really quite early to figure out what the winners are. And a lot of these these tokens and certainly some of the other coins. So the difference between a coin and a token as a coin, as its own blockchain. So think Ethereum, Solana? Whereas a token will use a protocol but often leverage an existing blockchain such as bitcoin and Ethereum. Our institutional or house view is that a lot of these coins and tokens present interesting value, and it's really quite early to bet on them or bet against them. And so institutionally, what we have done is we bet on what we call the picks and shovels of the crypto industry. So, for example, I think we're the only fund in the world that's a shareholder in almost every major exchange in the world. Shareholders in Coinbase Shoulders and Kraken shoulders and Colby Deribit, et cetera, et cetera. And we've really made the bet that you just want to own a slice of it all. Because if this is 1990 for Web 1.0, you don't want to sit here and pick winners. My personal view is the following I'm smart enough to realise that my personal views are often wrong, which is why we've got a firm that has the ability, to some degree to override my personal opinions on things. My personal view is the following a lot of these coins and tokens effectively exist to create value, which then gets transferred in between people in the value being money. And that idea of the money is supposed to create an incentive for people to do the thing that you want them to do, whatever you know, whether it's playing a game or whatever the thing is. Well, why are we creating all these other versions of money? If we've got bitcoin, we've got a one trillion dollar asset with a 13 year investment history. It's got no cooperation, no one behind it. It's unhackable, it's absolutely sturdy and it's robust and it keeps getting better and bigger. It's got institutional support about it. Why aren't we just using that? You know, why are we kind of recreating the wheel? What I think is going to happen over the next five to 10 years is a lot of these protocols are going to start moving over to bitcoin. I do believe that bitcoin can solve most, if not almost all, of the problems that a lot of these other coins and tokens seek to solve today.
Alec: [00:32:05] So be looking at your website. Techni is an investor in a lot of industries that seem to be right on the forefront of disruption from cryptocurrency and blockchain technology. Media payments, telcos, you know, they're they're often the businesses or the sectors spoken about when we talk about the disruption that is coming. What companies or what sectors do you see as the most at risk of disruption from this cryptocurrency wave?
Beeneet Kothari: [00:32:37] Everyone really be nice. You're really the answer is everyone. And to me, this is this is just as big as the internet was. There was no one not at risk of the internet. It was simply a question of did you figure it out in the year 2000, 2010 or 2020? You had no option to not worry about the internet. Did you need to figure it out yesterday or have you got a little bit of time? And I think I think crypto is the same thing. So so the big one is obviously finance. Traditional finance, what what is called track in the industry? You know, to me, it's a really quite sobering statistic that out of the seven or eight billion people in the world, only a fraction of them have really been fully integrated into the banking system in a way that's that's welcoming, inviting and profitable for them, for the individual. And there's no reason why it needs to be that way. To me, it's just remarkable that as the connectivity of the global population has gone through the roof over the last five or 10 years, you know, billions of people have been connected. The financial ecosystem has remained unchanged. The number of bank accounts at JPMorgan has remained unchanged, et cetera. So I think everywhere you look, whether it's access to money, access to savings, access to investing, access to mortgages and lending and borrowing, all of these features and tools that people like you and I are accustomed to, we're used to where we expected because we belong in the financial system. There's billions of people that don't, I think, would never will. And I think the single greatest achievement crypto can have is to create a truly fully inclusive banking ecosystem globally. There's an element of that which is, of course, you know, something like a few billion people. Well, in the world now live in a regime which has double digit inflation, you know, I think there's a real economic salvation that could be offered to those billions of people in the form of bitcoin. And these stories, unfortunately, a dime a dozen and each time you hear a read about them, it's it sort of breaks your heart. So, so finance this one. The second big one is the internet itself, and I'm sure you've read a lot about Web 3.0. And you know, we could do a whole another five hour podcast on that. But here's how I would very simply describe it. Web 1.0. So this is the 90s. This is where I grew up was effectively a bunch of websites that were read only, you know, you'd go on a website, you would read it, and people hadn't realised that websites could be interactive. It didn't just have to be like a newspaper. You know, when people first created the internet, they just replicated the magazine and you remember you would have pages where it would actually flip because that's what they just knew. Well, then you had Web 2.0, where you had things like Facebook and Twitter, which was two way. The problem was it was controlled by corporations. And so all the value you were creating in all the YouTube videos you were uploading to your page or all the tweets you were tweeting out, you weren't getting a dime. It was accreting to to some corporation. Web 3.0 turns that upside down. It effectively takes the read write functionality that we discovered over the last decade that websites aren't static. You can contribute, you can read, edit, but that the value you create should have created a creator in the form of tokens, et cetera. And I think that's going to be a huge breakthrough, which will be attributable directly and fundamentally to crypto because you've got to use that underlying technology and it's going to represent economic liberation that you, I think, haven't seen because think about the trillions of dollars of wealth that have been created by the five companies around the world to now getting distributed to all the people that are actually creating those values.
Bryce: [00:36:23] It is fascinating. I love talking about it and you write the note that's probably another five hour episode. Ren and I also have a debate around the value of Facebook and Metaverse, which is probably another five hour conversation. But look, before we get to our final three questions, I just did want to quickly touch on hearts and minds. Investment Ladies Conference You're back this year for your fourth appearance. So why is supporting H.M one important to you?
Beeneet Kothari: [00:36:50] I guess there's two things. One is the mission that they've got the amount of money that they've now raised. I lose track of it. The last I'd read, it was over $25 million. I think the number is probably greater than that. You couldn't spend your time and resources in a better way than supporting medical research to me and to probably many, many people who also participate paramount. The second, which, which is just a personal comment, is the people that I've gotten to know, the organisers, the people I've I've been lucky enough to have had dinners with and who hosted us over the years are just some of the nicest people that I've met. You know, it's an added benefit that they all speak English, which you don't often get when you when you get on a very long flight from New York, but feels a little bit like a home away from home because I've now gone there every single year for several years. We've got several clients down in Australia and it's a nice opportunity to see a bunch of them. So it's just been it's been a wonderful little break, but I kind of get to enjoy each year, you know, right before the holidays kick in.
Bryce: [00:37:58] Nice. And I've got to ask as well, you know, the last three picks, as we said at the top of the show, have delivered seventy two percent, sixty nine per cent and one hundred and twelve percent return in the 12 months since since pitching those stocks. So what's the secret sauce to picking a stock that will have a catalyst for change in a period of 12 months that are going to deliver these sorts of returns?
Beeneet Kothari: [00:38:20] You know, I assure you that those results could have gone could have gone the absolute opposite direction, you know, to me. I think it's it's just over a 12 month period with, you know, let's just admit it is a relatively short time period. The single biggest driver of something that could help you is catching sentiment. You know, sentiment is the kind of thing that, I mean, just think about the last 12 months or the, you know, from what happened to the beginning of last year to the middle of the pandemic towards, you know, maybe six or nine months later, when sentiment shifts, you can make 500 percent, very, very quickly. And so if I had to pick one variable, you would probably want to buy a stock where sentiment is quite negative. And if I think about, you know, we first picked up a Brazilian company where sentiment is quite negative, we then pitched a Chinese company where sentiment was quite negative. We then pitched a payments company where sentiment it was an IPO. Sentiment is quite negative. And so the stock we're working on for this year. Sentiment is quite negative and people are. Buried up on it, you know, it's phenomenal to 20, 30 billion dollar business, it's a large company. Sentiment is negative. And you know, if you get those things right, you can make a lot of money in a short period.
Bryce: [00:39:37] Well, very much looking forward to hearing the stock picture. Remind us of the Equity Mates community that if you want to hear the name pitch and the other amazing expert investors and also Charlie Munger, head to the Southern Hearts and Minds website, we'll put a link in the show notes. And for the first 50 community members who buy a ticket, you'll get 20 percent off. So a fantastic opportunity. Hear some of the best in the business. It's the most amazing stock pitch for that for the next coming 12 months, so very much looking forward to it. It's been an absolute pleasure chatting with you today. We've had a thank you write a great amount of fun and Ren is going to just close out with our final three questions that we always ask all guests who come on.
Alec: [00:40:20] So we like to start by asking, do you have any books that you consider? Must read?
Beeneet Kothari: [00:40:26] I'm a bit of a Peter Thiel fanboy and I think everyone needs to read is, I think, his only book certainly his most famous book called Zero to One. It is just, you know, the guy's a contrarian. He does not know how to think in a straight line. And I think that book is is is one of the most powerful business books that I've ever read in my life.
Alec: [00:40:49] Nice one. Yeah, I love it. Second one, forget valuation just purely on fundamentals. What's the best company you've ever come across?
Beeneet Kothari: [00:41:01] Oh. Gosh, look, I think the best companies in almost every instance have the best CEO in place. It's hard to think of anyone right now operating more at the height of their game than probably probably Facebook. So I think that, you know, I think he goes down as as a as a goat, and it's kind of remarkable to see someone at roughly a trillion dollars in market cap effectively make a hard pivot. And by the way, to do it quite publicly? Yeah. And I think the most remarkable thing about what's happening is, you know, what he had built over the last, let's say, 16 years was just an unbelievable brand. What people underestimated was how amazing Facebook has brand had become. And then the brand became tarnished and it had negative value, and he recognised it and got rid of it. So I think whenever you see a CEO effectively make a hard turn publicly, especially when it's difficult or not easy to do. You know, you've got to kind of tip your hat to them and watch them and follow them. So Facebook, it would be my candidate just because of the guy that runs it. Yeah, yeah.
Alec: [00:42:14] Well, now this is normally our final question. We have thrown one extra one in for the H.M one speakers. But if you think back to your younger self, you know, going to that video games conference, what advice would you give your younger self?
Beeneet Kothari: [00:42:30] You know, it would be to spend more alone time. I think when you've got the inexperience that I had in the investing world, I was very tempted to spend time with a lot of other people to build mentors, to learn from others to to go out to dinners all the time, to go out to lunches, to make friends. And I think in doing that, there were times when I lost a lot of myself. And now that I've got six years of experience compared to zero when I started, I find myself wanting to go out to these dinners and conferences less. And I find myself wanting to. I would rather spend four or five hours in a book or four or five hours on the internet, going deep in a topic by myself. And I wish I had done that a lot more. I did that a lot in high school. I did that a lot in college, but I wish in my first five or 10 years professionally, I had allowed myself to be a lot more alone with my own head and my own thoughts, rather than always kind of seek either the comfort or the experience of others.
Alec: [00:43:24] I love that. That's some good advice there. Now, Beeneet, a final question specifically for the HM one speakers because Charlie Munger is the keynote speaker at this year's conference. If you had five minutes with Charlie Munger, what would you ask him?
Beeneet Kothari: [00:43:43] We're separated by something like seventy five years in nature or whatever the maths is. And to anyone who's approaching 100 years, my real question is, you know, from the day Charlie Munger was born to today, there was this unbelievable revolution that happened called the internet. And, you know, for the most part, both Charlie and Buffett missed it. And I think it's quite remarkable that it wasn't for a lack of access, right? These guys literally hung out with Bill Gates on the board. And that's just the one person we know about, right? Let's just assume that they had access to whoever they wanted. I mean, there were there were stories about Larry and Sergei would come out to visit them when they changed the name of Google to to Alphabet, to make it like a holding company, kind of like Berkshire. And for someone who has gone through so many cycles, you know, my one question is when you see something that could, that could be a big deal, what is your process for going through that exercise? And today, I think it would be it would be cryptocurrencies. It might be a giant scam. It might be a huge fraud or a fad, but it might be something giant. You know, you could sort of go on and kind of just keep investing in the Coca-Colas of the world and you would do just fine. But I think it would be a tragedy if you didn't invest some resources in figuring it out. So I'd love to ask, you know, often the best questions you can't really ask if you don't have a personal relationship because the question kind of just gets treated literally. But that would be my question, which is there were have been many five year periods from, let's say, 1990 to today, where you had to ask yourself if this was a big thing or not. And in each instance you decided not to. What was that process?
Bryce: [00:45:27] I would love to hear that answer. Great question. Well Beeneet, that brings us to the end of our conversation today. It's been an absolute pleasure. thank you so much. We've taken so much from this, and I'm sure the Equity Mates community as well will and we're looking forward to seeing your stock pitch. Here's to another year of 100 percent plus growth. So all the best and we will hopefully keep in touch and chat at some point next year.
Beeneet Kothari: [00:45:48] Thank you so much, guys. Thank you, Bryce. Thank you Ren.
Bryce: [00:45:53] Thank you very much. Hey, thanks for listening to this episode of Equity Mates. We love hearing from you, so drop us a line at email@example.com or even better, go to your podcast player and leave a five star review. Also, a reminder that the Equity Mates content train doesn't stop when you've run out of episodes to binge. We've got a brand new website, a Facebook discussion group where on Instagram, YouTube and slowly making our way as an influencer on Tik-tok. That's Ren. So come and say hello and join the community. We'd love to welcome you. Until next time.