Cliff Sosin
speaker
323 appearances
1 recordings
1 series
first heard Apr 2025
last heard Apr 2025
Cliff Sosin’s voice in public audio — every appearance, attributed to the second.
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Appearances
Obviously, water, other than if you think about brands that are more status-oriented, focused. But like if you think about just sort of like a bottle of water, I don't think in the end anyone's that picky.
You know, I think the, you know, the example I gave, like, I don't think it's a mystery to most people that, like, Coca-Cola is a good business, right? I'm not totally convinced that, like, what I just laid out is, like, going to make you a lot of money in the public markets anymore because I think it's priced in. I'm not totally convinced that the people who own these things understand it.
They just have observed that, in practice, these are very brand-new businesses. However, sometimes things come up. I was involved in a nicotine vaping company, which was reasonably successful and ultimately acquired by a large tobacco company. In the early days, you didn't have necessarily all this evidence that these were gonna be really great businesses.
But the theoretical construct that I just laid out to you was an important sort of guiding factor in giving me confidence that this was a business. There's a lot of other factors, but this is a business that, you know, would ultimately be successful. Or, you know, I have friends who I didn't do it because I thought they were right, but I thought I had other things that were better.
And there's opportunity cost to consider. But I have friends who were successful investors in Philip Morris International. They were observing Zin. And, you know, a lot of this... like intellectual construct, gave them a sense that like, that Zin was going to have a lot of brand loyalty, you know, where at that time, you know, it was sort of unproven. And Zin, of course, is... Quite a big one.
Has been proliferated and there's a lot of brand loyalty. But that wasn't obvious, you know, at least it wasn't in the historical data until, you know, so these were, you know, All of these tricks, they're not useful until they are, I guess would be kind of the way to think about it.
I think that if you manage money for other people, you're deeply arrogant if you are going to apply your ethical framework onto the way that you invest. Society in aggregate comes to a collective view of what's allowed and what's not allowed. And we call that the law. And if a business is violating the law, you know, that's often a bad investment because, you know, obvious.
If society is evolving and the law is likely to change, that is a risk that one needs to factor into an investment. And you'd be sort of silly not to think about that.
But if something is just disliked by a group of people, but they haven't built up the critical mass necessary to change the law in this country, and you don't think the risk of that happening is particularly high, but you decide that you're going to apply some moral framework and not make them money to do it, not make money for your partners to do it.
That's a really fraught thing because like what – sort of what gives you this deep wisdom about what's right and what's wrong that is better than like the collective will and judgment of society? And by the way, maybe you'd say, OK, fine. I'm not going to use my judgment. I'm going to use my investor's judgment. But – Then the question becomes, OK, well, but which investor?
And how do you weight them? Like, equally? Is it by AUM? What if it's an institution? Do you poll the underlying people at the institution? Like, this is a wild thing. I think a much better approach is to just say that the goal is to maximize And obviously, in doing that, companies have to comply by the law. You have to comply by the law. And you have to take the change in norms into account.
But laying any sort of further ethics onto that. And then, of course, if you maximize returns, people can, of course, take that money and give it to whatever charity they feel that they want to. And I think that that's sort of the only solution. It's like the only solution that I think kind of resolves this problem that isn't fraught
I've noticed in my career that people in investing circles, they talk a lot about panics, this idea that you want to buy when things are bad. I have noticed that there are certainly economic panics that have happened in my career. I've also noticed there's sort of moral panics that have happened.
you know, you can buy into moral panics much the way you can buy into economic panics and you can do well. Now, economic panics bring with them the risk that things could get worse and the business might not survive the challenges that lay ahead. Moral panics bring with them the risk that You could bring about legislative or regulatory rulemaking change that can hurt the company.
And so you need to take these things into account. But I think that it's reasonable as an investor to look to areas that are viewed as sort of bad but are not illegal. Right. And for what it's worth, when I've dug into most things like this, I've always discovered that these things are far more complicated than the sort of naive, you know, coal is bad. Okay, well, sure.
But, you know, electricity is pretty good. Yeah. You know, so it's complicated. I'll add one other thing, which is this idea that I think you mentioned, which is funds that can't invest or whatever. You know, there's an implicit point that you're sort of saying, which is an elasticity of price concept.
And I'm not that... I think the literature on this kind of agrees with me, but I don't think that groups of investors deciding to forego certain asset classes like oil companies necessarily cause them to be super cheap. I do think that there can be sort of more broad based things where people kind of don't want to own something for some reason.
And that can, you know, and if it's really broad, it can have some effect. But I think mostly what happens is people just kind of get scared. It's more of a panic. People get scared, like, oh, no, you know, this company is going to get shut down because, you know, this group of people view it as terrible and they're going to try to kill it.
Sure, and part of the reason, actually almost all the reason, I said yes, more than all the reason, I said yes to coming on. is that it has been such a wild episode in business history. And I sort of worried that if I didn't try to memorialize it to some extent, that it would get forgotten. And it is such an interesting story. I think it deserves to be memorialized.
I also think it's sort of wildly misunderstood in terms of what happened to Carvana in 2022 and And 23 and beyond. So, yeah, I guess maybe a place to start just to level set for people who don't know it so well. Carvana is an online retailer of used cars. It was founded in 2013 by Ernie Garcia, who you've had on.
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