Finding Value in Numbers

0:00I'm Marganty for See If A Bookshelf. Is it possible to find value in a company through numbers, through math, through computations? I'm not going to say the definitive answer is yes, but we can gain a few insights through a handful of calculations taught by my next guest is signed as Saudi and his book Finding Value in numbers. The subtitle is the essential investing toolkit to win on Wall Street. Now, I'm going to add my subtitle. It's learned a few key concepts as you build value in your small and growing business. So yes, this book, especially the first nine chapters, it is for CEOs, finance directors, operating managers and board directors. So it's readable, very practical and actionable. We will hit ROIC and go beyond what other textbook writers will teach on ROIC. We're going to bust some sacred cows. One of my favorite things to do, such as discounted

1:06cash flow, terminal values, and big portfolios. Isan Isani, the value of numbers. That's coming up next on See If A Bookshelf. I'm Marganty. I'm not Missouri great, but I do think I'm Columbia good. My topic is the book Finding Value in numbers. Our guest is the very generous and very kind. Isan Isani put yourself in my shoes. How do we do an audio only show on numbers without losing anyone? So what I'm doing in this conversation is to hit a few of the critical concepts hard from this book without getting into math. And I think mission accomplished. I guess you're the one who has to decide that. So let's roll tape with a new friend Isan Isani.

2:07My favorite book on finance without any math is The Wisdom of Finance. Now let's talk about the best finance book with math. I now have a new book that is my favorite on finance with math. Are you going to believe me if I say it's now your book? You're very kind by saying so. I hope your opinion is shared by many others who have seen and read the book. But I personally think that there are many other great books out there that tackle the quantitative aspects of fundamentally investing or value investing in particular. Here's where I get to push back just a little bit. A lot of finance books. They're just they're

3:11regurgitating what I learned back in school. It's just recycled material. But now I get to your book and it's like I'm of course when I say turning the pages I'm hitting the next button on my Kindle and I'm finding this is very very good material. So you got me wanting to hit the next page and again this material has not been written. There may be parts. Yes. But that's where I'm coming from. There's a lot of fresh material for the person who's read a lot of different finance books. Is that a fair is it okay for me to say that? Yes. Because at the end of the day when you write a book you write it for a segment of the audience that you think the book would be very useful to. But internally you also write in the book for yourself. And if you want to

4:18repeat what has been written before by many many scholars or people active in the field it's not going to be intellectually stimulating for you. So that was certainly one motivation for me to focus on new material and new concepts or new angles of approaching things. Another one was because of the gap or struggles. I was seeing many of my students or investors in the early career phase of their work they're facing and I wanted to address that as well and that required to not necessarily reheat some of the widely circulated materials in the past but coming up with new topics. I want to give a suggestion for value investors. There may be students who are

5:19required to read this book and hopefully this will be a book that they will read later. Here's my very strong opinion. Number one, read it once. Now I read a lot of nonfiction. Usually when I read nonfiction I start at the very back. I'll read the acknowledgments and I'll start at the last chapter. I did that with two of your chapters and I thought I can't do that with this book. You can read the last two chapters on their own but I thought this isn't working so then I went back to the front. Start reading then finished it. My advice is once you read it through it's okay to set it down, pick it back up and go through it again because I guarantee you're we're going to hit some of the topics. There are going to be some areas where you want some muscle memory on some of these concepts because you brought some ideas to the table I had never

6:19thought of. I'm a value investor too. I'm also a private equity investor and you brought some things to the table. I've not heard before so my advice is you read this book once. You've got to read it again. Now I just take notes but go through it again. No, I think that's good advice. Something that you can apply to many nonfiction books or finance books, the quality ones at least that your mindset is like a muscle. You need to give me the workout if you want to get this triangle in that department and one of the ways you can do that is when you pick up a book that you think is and knows worthy of focusing on, give your mind the workout by reading it the number of times instead of only once because that helps you

7:19over time to make some of the discussed concepts second nature. This would also be very good book club and material. I'm also thinking the young the young MBA or the young finance professional. It'd be a perfect book to just go through a chapter. I would say at least a couple of chapters I do want to make one last comment before we jump into some of the topics. My customer base are humble and hungry, chief executive officers who are growing fast and they don't have a seat belt. I tend to be that stabilizer that seat belt effect. Obviously we can't slow down but we're bringing some systematic structure to the fast growing organization. I just want to add that this book is not just for value investors because as I was thinking about your book, use the word

8:21investible. I always like to ask the question is your business inviable and now I got into the word is your business one that's investible even if it's a private company. I know I know intention to bring it on investors. I would say the first nine chapters all the way through owner earnings. A CEO is going to get through this and not get bogged down. Even when you start hitting formulas, you do a great job at you can skip through the spreadsheets because you do a great job of explaining concepts. I just want to say if you're a manager CEO, this book is very readable, especially through the first nine chapters. Had you thought of that executive reading this book? Yes. I got similar feedback from some of the other colleagues and friends who have read the book. They mentioned that it's relatively easy to read. I was pleased to hear that.

9:23Good. When I was writing the book, the process of summing up with the style, this style of writing was intentional. I didn't want to find the value numbers to be one of these books that discussed important topics but nobody finishes reading them or I can't get past chapter two or chapter three. I wanted to be readable, people to relate to the underlying concept and that was one of the reasons. I wrote it in such a way that you don't necessarily have to go through the exercise or examples that I provide in a numerical way. You can just ask the concepts and move on. I want to go ahead and jump into one of the most important concepts. Now, even though you and I were talking before we hit record, I guess we should state one of the reasons you wrote this book,

10:27talked to me about framework. Tell me about your framework before you wrote this book and now tell me about your framework now that you have this book. As you mentioned, and this is something that I displace in the beginning of the book, I say one of the things that makes great investors is that throughout the professional investing journey, they've developed a structure framework. By using the word framework, I mean, a structured approach to look at investment opportunities and this structure that approach has two components. One is mindset and another is process. Mindset is the way we look at the world. The way we identify patterns qualitatively are

11:30investing philosophy or psyche, so to speak, which is extremely important. We need to be in the right frame of mind. We should have fallen to behavioral traps. All that is the mindset. But the second component is the process and that's what are we going to do in order to come up with the interesting investment ideas? How do we go through different steps to evaluate them? Then eventually make a decision on whether to pull the three gear or not. The book tries to convince readers that in order to be successful investors, they need to have one. And that the framework needs to be theirs. I shouldn't and won't tell them in the book that this is the framework you should have, they need to come up with their own.

12:31When the market situation gets tough, where the environment is ambiguous, if the framework is not theirs, they're not invested in it. They're not believing it's main components, so therefore they're not going to use it. But if it's theirs, if the people have come up with different bits and pieces of it themselves, it's now more second nature. If something doesn't work, they know where to go to fix that the next time. So that's the first thing I'm trying to convince readers to get that they need to have a framework and they need to develop it themselves. Having said that, a bulk of the content in the book tries to get them started somehow by telling them about the components that an effective framework can have. And that's essentially what drives the structure of the book.

13:36One of the tools or components that you bring up early within this framework is return on invested capital. It's a very, very critical concept. And my, again, we're getting into Mark's opinion. I'm not an academic. I am a Missouri Hick. I wear that label very, very proudly. But I would say ROIC, maybe the most complete, comprehensive tool, or formula, whatever you want to call it, to help ascertain the health where the company is. Now, you do state you may need to look at a couple of other numbers. But ROIC is a very complete number. Write wrong or in between. I agree with you. Many in the value investing community or fundamental investing circles.

14:41Are in the quest to find a good business. And the underlying hypothesis is that once you identify a good business, which is not an easy thing to do, if you buy such a business or if you buy shares of such a business at the relative you have to try to price and hold on to it, then you will be achieving satisfactory return over time, certainly over a long term. Now, the question that comes to mind is that what constitutes a good business? Well, there are various ways you can think about what constitutes a good business qualitatively and quantitatively. On the second part, I certainly agree with you that the ROIC is a good measure quantitatively to pick

15:42what constitutes a good business. If you go to investipedia, you're going to get maybe a little bity 300 word blurb on ROIC. I'm holding a book in my, I'm touching a book which will not share the title because we've had this author on before. Their discussion or ROIC is very important, but doesn't get to your level of detail. Now, let's not scare off the reader. You did not approach this. I think a high school student who at least has a little bit of a business aptitude, they could understand this. Here's where I also want to give you a high five. I had never heard anyone bring up the concept of excess cash in the context of ROIC. I'd never heard that before. Maybe my Missouri Hickness is coming through. Maybe it's like, Mark, that's an

16:45every textbook. I had not seen that. By the way, thank you for the 1% rule. You can just find it if you want to in a bit. I'm not done yet, sir. Be careful with the financial approach. So we have the operational approach, the financial, I had not heard that before. Then the whole concept of adjustments. This is all new to me, but yet you're leading the reader very gently. I'm just saying this is not just, here it is, guys. Now, let's move on. Again, you did a great job explaining ROIC. The problem is that if you go to a lot of financial platforms, whether the new generation ones, which you can stop ascribed to the internet or the more legacy ones, like Loombergs of the world, they do provide ROIC for public companies. Certainly makes life very easy when you're dealing

17:46with the stable companies that have been around for a long time. There is no special angle involved with the company. The challenge is once you get into new economy businesses or business is going through certain type of transition. Those numbers are not accurate. That was one challenge, which I wanted to address by introducing the concept at this most simplest form. Then what the reader through, what are the things that they need to do to adjust this number when they face certain special scenarios? The second thing I wanted to mention was the distinction you made about operational view of return and financial. If you look at financial platforms and certainly many companies on Wall Street, they generally calculate return with capital at the very high level

18:53using the financial aspect, which considers debt and equity to come up with the notion of investor capital. The reason they do that is because it's much easier to calculate and these figures are available in a standard way for many public companies. But financial view of return with capital also is very easy to mess up. That happens as an example in what you mentioned earlier, when people forget to account for excess cash or if they only consider commissioners for the company when they look at the equity and not necessarily pre-furchers and think of that nature. I wanted to educate the readers on some of these nuances

19:58and that eventually became a number of chapters close to 70 pages on ROIC. Is that just men, economic value added and related measures? I would say the last 15 years, any time I approached the concept of, and again, this is for non-investors, this is for CEOs, business managers, any time I talk about the cost of capital, I mean, it's like deer in the headlights, like what? I love what you do in the book. You just make it really simple and I don't want to steal your thunder. What percentage can we typically use? When it comes to cost of capital and ROIC, as a rule of thumb, I generally use 10%. Thank you. And I'm doing that for now on. It makes life easier and I have a dedicated chapter on cost of capital and also discussed the topic in ROIC chapters as well. Once you run different scenarios,

21:05you realize although there is some variability involved from one case to another, you see some differences. The difference in the outcome is not significant and it just makes sense to put the energy on the levers or the calculations which really move the needle and that's one of the reasons I generally in my own analysis stick to such a lot. I work, I really like the Tim staffing industry, don't ask me why, it's just a very fascinating industry, but it's all, it's you talk about zero fixed assets. And by the way, we don't even have a lot of intellectual capital. Now we know, we know how to find temps, get them, hopefully keep them. We're really good at finding paying customers who write us checks or I should say who hits send on ACH every

22:11week when we build them, but we don't have a lot of IP on the balance sheet. And I also work in healthcare. I really like the physical therapy space, especially in the US. Same thing, we don't have hardly any fixed assets. ROIC is kind of not really relatable for that. What's your suggestion? Which by the way, you do bring this up in a round about way, it's SaaS-based businesses. What's your advice for us who work in service-based businesses? Yeah, so one of the portions of the work is dedicated to the value of intangibles and how they impact the way they analyze the companies. So for example, I use a table in one of the chapters which shows what were the top 10 companies in the US on S&P 500 in the 1980s, 1990, 2000, 2000,

23:20and 2020. We'll see that as the time passed is by, we get less and less likes of some mobile in the top 10, and more Microsoft, Amazon, Google, and companies alike, in which intangibles play a very, very important role. They're generally asset-like. And if you use cookie cutter formulas for ROIC, we don't really get insightful numbers. Because they have very little physical assets, generally speaking, ROIC will be in the hundreds of percent, which intuitively, and then when we zoom in, realistically, doesn't make sense. So we need to make adjustments. And I tackled this area in the book in at least a couple of ways. One of them is I introduce a series of intangible

24:23related adjustments. How do we quantify value of employees, customers, or R&D assets, and how we adjust ROIC with adjusted figures for these three categories? So that's one way I address the SaaS and asset-like company issues. Another way I discuss that is through discussion of topics such as unit economics or things of that nature, which is very, very common mind investors who operate in this space, and provide really valuable lands of looking at how these companies generate value. With these service-based businesses, I'll do one in two things. I'll do some modified version of EVA. And the other thing I might do is if this is a business that has NOI of about a million dollars, usually the owner between salary and equity distributions

25:32is going to be about a quarter of a million dollars a year. We'll look at his or her economic profit versus accounting profit. It's not the one way to measure. I mean, are we in the right business? Now for them, it's like there's no other choice. Either sell out and go work for a big organization or their PTs or dentists for the rest of their lives. But I will do a modified version of EVA sometimes if ROIC just does not make sense. Am I off track or am I crazy? No. That's also another way you can look at these businesses. In respect to the example that you just shared, one measure that they really like that combines economic value added EVA with some of these important elements that we like for asset light and SaaS businesses is

26:37EVA divided by sales. So you can think of EVA divided by sales as an economic operating profit margin. Right. And because sales can never be negative or very, very small compared to profit margin, we don't face the challenges of dealing with ROIC for asset light businesses. We don't deal necessarily with very large numbers because invested capital is low. Another benefit of using EVA divided by sales as a modified operating profit margin is the fact that now you can compare industries across, you can compare companies across industries, you can compare SaaS companies with maybe utility ones and so on and so forth. And evaluate your portfolio in a broader sense and

27:42in more homogeneous way. Most of the businesses I work with we do have small marketing teams anywhere from 5 to 9 or 10 people. We don't delegate them as such but some of them are working on what I call direct revenue building activities. I mean, they're involved in rain making activities and that's about as operational as you can get. But then you've got those who are working on brand building, which is going to have an impact really for years to come. And at the remind owners, you don't know what the return is going to be until years out. And you bring this topic up and you also make a suggestion on modifying the denominator. So your numerator may be

28:44today's numbers but you may want to take that denominator and go back a few years because what you're investing today may not impact today's numbers until going forward. So I've kind of teed it up for you. Do you want to take it from there or what I'm describing? Sure, I think you brought a very important aspect of this to the conversation. I don't know why but something that just came to my mind was scenarios in which boards or CEOs set some agenda or metrics as a key KPIs to follow or for the executive team. And if that one of those measures is a simple version of ROIC, it pushes the organization to focus on short-term measures. Exactly. If they, on the other hand, in many cases, focus on longer-term capability buildings,

29:50example of which is developing a new strong brand, they might be penalized. And executive teams are generally very smart and they don't want to be penalized. So the net effect of such as measure would be focusing on short-termism. But on the other hand, if we try to somehow incorporate intangibles in our word view and the behavior-run organization, import capacity in CFO or COC, we make sure that the balance short-term is then with what makes the organization more sustainable in terms of its performance in the long-term. You show us marginal ROIC. And I'm thinking, who's ever taught this before? Where have I

30:51never read this before? Marginal ROIC. Now, if you remember the book, if you remember the book, Managing for Results by Drucker. Now, he's not talking about ROIC, but he does talk about marginal improvement. And it's like, how come I don't ever read this in more modern books? And then I get to your book. And I just, again, I just want to give you a high five of addressing mentioning the thought process, leading us to readers through this, and it's like, this makes a lot of sense. Where did you come up with the idea, or are you going to say, Mark, I learned this in college, or Mark, this is self-evident? I've not seen this before. Stay with us. We'll be right back. If you're a pet owner who wants real talk on training, behavior, and everyday life with animals,

31:53check out the Fresh Patch Podcast hosted by Drew and Gabe. We cover the wins, the challenges, and everything in between. So wherever you listen, search the Fresh Patch Podcast. We're good pets, get it. Yeah, two things in response to this. One is, and this may not be directly related to our discussion of the book, but it's something that I think is important and is worth mentioning. I was educated in the 90s, and one of the things I've noticed is that, at least in my view, the concepts and the components which are necessary for organizations to succeed, for investors, to take their performance to the next level are generally not the new things. A lot of them

33:00are the old things that we forgot, as we're dealing with AI, with the stream of information, coming to us from 10 different directions, and so on. If you revisit some of the wisdom that was shared with the world by some of these thinkers like Peter Drucker, Deming and so on, the 70s, 80s and 90s, we find a lot of useful gems in them. So that's, I think, a certainly influenced my thinking. But the second reason I included Marginal RSC in the book was because, as fundamental investors, a lot of time, we're dealing with future and the perception of the future by the market participants. And if we take a look at general ROIC and EVIRD measures, they're generally backward looking.

34:07We look at the historical financial data of the companies, and then we try to gauge whether what we see is an indication of a business being in good financial health. As investor, though, that's only a part of the equation. We're not getting compensated for analyzing historical data. So now the question is, how do we get at least some indication of what's coming in the future? Marginal RSC is an effort to at least partially answer the question because the difference it has with the regular RSC is it shows how the business is evolving over time, which for the most part will continue in the future as well.

35:13So that was another reason I included the discussion of Marginal RSC in the book. You mentioned this a few minutes ago, and I want to mention it to unit economics. Again, I'm going back to all the different finance books I've read, unit economics does not typically come up. In blog posts, yes, ad nauseam, especially SaaS, Centric, and businesses. I have a nitpick on public company reporting. Is it related to unit economics? I'm really mad. I'll use RadioShack as an example. It's my poster boy for why we need more unit economics if an answer reporting. Think about the five years before RadioShack is about to blow up. What did it have been nice to know by cohort, little store, medium store, big store?

36:20Number of transactions per store per year, average transaction size. If we just had that the last five years, you can look at the financials and see what's going on, but if I just have those unit economics, what are they doing? It's like, oh my gosh, people aren't coming to the stores anymore. We got a problem. So I do appreciate you for bringing up unit economics, but I'm also mad because you have to dig for them. I mean, you have to dig for them and find other secondary sources. So it's a little bit of a store spot, but and you bring some of this stuff up, but it's still a great section in the book on economics. So I again, thumbs up. I agree. I think if you look at the way many small cat investors, including a design of algebra, why talk about in the book, if you look at the way they approach analysis of the companies,

37:27measures like unit economics, this type of analysis, especially makes us for those businesses, because you want to understand if this small company, which seems to be good, can become an exceptional large company or not, or if it's a established company that you're dealing with, is performance deteriorating at the most fundamental level. And unit economic helps you with that. Unfortunately, I think one of the reasons we don't get to see this type of analysis in the public filings at least, is because companies in different sectors interpret this area differently, and it's very hard to standardize them. But certainly if fast p in the future can come up with a way to provide guidance for companies

38:34to report such measures, if it be a game changer. So I'm holding a book in my hand, knocking on it. And like every finance student, we learn discounted cash flow analysis. Well, it wasn't until I read the Warren Buffett way by Hagstrom that I think I maybe saw one of the greatest examples of discounted cash flow analysis. And so, as I'm reading your book, I pulled it out, and I'm just thinking, see, this is where I could say this is my show, so I get to say what I want to say. You're saying, say it, mark, say it. This is BS. Because like I'm like, I can get the giant company growth rate, 15%, 15%, 15% for the next 10 years. Terminal value, there's no way.

39:34So you don't throw DCF into the bus. You walk us through each bullet point on DCF and say, this is a problem. You don't know this. You don't know this. So my big aha was, Mark, you better be careful next time you use that discounted cash flow analysis. Did I steal your thunder? Oh, I think the original credit for this view of DCF analysis goes to Bruce Greenville, the emeritus professor, the legendary professor of finance, that Columbia Business School, who thought many successful investors over the 90s, 2000 and 2010s. And I certainly subscribe to his view of DCF analysis as well.

40:39What his view is and what I also talk about in the book is the fact that DCF is a very, very important tool in fundamental investor toolkit. But it has its own place and shouldn't necessarily be used as the main technique for coming up with evaluation of the company. And one of the reason it shouldn't be used as a main tool for coming up with value business is because most of it is based on making assumptions about a stream of cash flows in the outer years. And those assumptions are generally very, very speculative. In oftentimes 70 to 80 percent of the figure that we come up with is driven by those terminal

41:42value assumptions. So what Bruce is saying, has been saying for decades now is that, okay, why don't we, in a state, adopt a different perspective when we want to value a business, instead of looking at income statement, which when it comes to projection is very speculative. Why don't we start from balance sheet, which is much more tangible. We actually have the accurate numbers and break down the value of a company into smaller components. For some parts, let's use balance sheet and for the other parts when the numbers are more speculative, we make that appropriate assumption. The net effect is that if we contrast this approach with using DCF right off the bat, the degree of errors that we make in coming up with a figure for value, a range of figures for value is relatively less. And that's what I

42:47subscribe to and presenting the both in the valuation chapters. I'll make two quick points about that. For the eager reader, you said start with the balance sheet first. I just want to say for the eager reader, that's very early in the book. So you don't have to wait for it. I mean, it's like very early and it makes sense and you spell out. I mean, I would just say to the reader, follow the example and do it in a spreadsheet and it makes a lot of sense. And the other thing I do like about this chapter or as you bring this up is you're not being legalistic about it. You're not banging me over the head. I feel like I'm being gently educated. And so I liked the approach. So I felt like why have I been doing this? But again, you're staring me, I think, in a very healthy direction. Real quickly, there is a chapter

43:49on short selling. And of course, my mind is roaming. I'm a big fan of the book, dead companies walking by sky. I think it's Scott Farron. And we've not got around to talking to him. I just have a nosy question. Do you do any short selling? I have occasionally done short selling. But it's not common practice within what I do on the day-to-day basis. I found it though that going short is generally much more intellectualist in relating. And you need to do a lot of work in order to get conviction. Because you need to keep in mind that if you announce your short position in the marketplace, nobody likes it. Certainly,

44:56the management doesn't like it. And you need to always monitor your positions. And that, by itself, is very stressful. But on the positive side, it's intellectually very stimulating and exciting. I do have a funny money, marks funny money. It's not insignificant. But it's my e-trade account. And I'm thinking, I think I have too many stocks. I've 10. And it's usually around five. But it's now 10. And I'm looking at your chapter on portfolios. I actually read it twice. And at the very beginning, you give this breakdown of how many hours. And I'm cracking up 24 hours for one stock, for one quarter, if you're doing it right. And I'm thinking, Mark,

45:56I think you need to pair back. I guess I have too many, don't I? And those numbers which I provide in the portfolio decisions chapter, at least within the professional management business are bearable. So if you really want to have an edge in the market, when it comes to a specific name, you need to spend more time on those. The rationale for me presenting those numbers is that what I want to convey is essentially the fact that size of your portfolio, at least in part, is a function of the resources that you have at your disposal. And resources that you dispose of also include analyst time or portfolio management time. It takes certain number of hours to get an intelligent

46:58perspective or view on a given company. And if you start adding more and more stocks to your portfolio, at some point, you're stretching it. So that should be at least a consideration if you're doing fundamental or value investing when you're constructing your portfolio. Do we have time for a quick lightning round? You have no idea what's in my and the way this works. And by the way, you can guess where I stole this name from. Jim Kramer, James Kramer, and I used to love his radio show about 20 years ago, because I was on my way home and at five o'clock, and I loved the radio version and I loved the lightning round. And so I'm just going to throw out a few terms and we'll go quick just what comes to mind. So we're looking for quick answers. I do have a pretty long list. So we may I may only

47:59get to do five of these. So and I do again, I hope you have a sense of hero because number one, number one is the Hawking index, the Hawking index. Great fun, very to gauge whether people finish a book or not. And by the way, I'm sending you a screenshot because I do have a highlight that's from the very last of the book. So that's why I want to bring it. It's like, when you mention that, I thought, I want him to know that I've been high. I have a lot of highlights in this book. Okay, this is, you're getting into an area. I'm a huge, huge, huge disciple of W Edwards Denning. So this is a concept that I love. First level thinking, second level thinking. Yeah, first level thinking used by many investors, second level thinking or what gives edge to an investor and separates

49:02him or her from the crowd. Reflex, reflexivity. I don't say the word all the time. Reflexivity theory. What explains irrational behavior in the market, including parabolic growth and subsequent decline in the stock prices? Here it is. It is in my lightning round. Diversification is protection against ignorance. I love this statement by Warren Buffett. I need to always remind myself when I want to add new stocks to the portfolio. The rule of 72 or the rule of 72 seconds. Great mental math. If you want to think about growth of a business and relate that to IRR and things of that nature. The reason I wanted to get that in this show is my mother-law who passed away never years ago. She was not a business person. I learned the rule of 72 seconds from Carolyn

50:09Dietiker. That's a tribute to her. Thank you. By the way, I did not know these other rules. I will let the reader figure that out. I learned some other things about this rule. Private market value. Amazing concept. The value of them pioneered by Mario Gabelli. I love it. This is all good. The implied growth rate. The implied growth rate is a very useful measure when you want to identify how much growth is baked into the stock price. Various scholars have talked about it, including Rappaport and Paul Johnson. Now, this one could be almost a fourth of a show. We're not giving it. You could say, Mark, you idiot. How come we didn't talk about this earlier? We came close. No pat, no pat, or net income.

51:18No pat. Because it's not diluted by leverage and other financial engineering and occasionally perhaps to say mumbo jumbo. This is all okay. We are getting through my learn. By the way, sometimes when I do this, I'll get these answers that are three minutes long. You're doing great at this. I think you've done this before. Last one. This goes back to discounted cash flow. I had to get this in. Terminal values. By the way, do you have a such a humor? Terminal values are easy to determine. What comes to mind? Don't hold back. Well, easy to determine if I want to be very cruel, I would say, but they generally garbage. Thank you. You're too. You're very kind. I wanted to hear something almost very smart, Alex,

52:20that you're crazy. That's as false as you can get. That was our lightning round. Again, there was so much to go through this book. I thought, here's a cheat code to get through some of this book is just hitting. There's a lot for the reader to unpack. Again, this is just a great fun book. Like I said, I'm ready to go through it again. We do need to wrap up. I ask every author about some of their favorite books. I've been looking forward to hearing this answer, and you can answer this any way you want. You can tell me your favorite books of all time, what you've been reading lightly, answer this however you want. I generally don't read a lot of investing books. I do occasionally read some maybe two or three a year, but most of the books I read and I enjoy are either history books or biographies. A one book which for many years was on

53:28my bucket list, and I finally read it last year. It took me a couple of months because I like to read this stuff slowly, and was the best book I read last year was PowerWorker by Robert Carroll, which is about the life of Robert Moses. It was unbelievable. What do you think of him? I became a fan. I immediately started checking the internet to see if he is attending any event. Near me, I realized that in New York, New York Historical Society had organized the sit-down conversation with him. Two weeks prior, me finishing the book to celebrate the 50th anniversary of the PowerWorker's publication. Sadly, I missed that. I think that book is a masterpiece. I think

54:32you generate masterpiece like this only when you have what I call selfless exceptionalism. Robert Carroll dedicated his life in selfless exceptionalism mode, writing about people who pursue power, obtain power, and eventually lost it, and the result is the collection of books that have remained with us for decades, and I think we will be part of the literature treasure in this country. PowerWorker is certainly one of those, and collection on the biography of Lyndon Johnson is another. Bully Fulpit is another one about Teddy Roosevelt, William Howard Tath, so I really enjoyed that, and then another

55:37couple of biographies that I've read in the last few years that I enjoyed. One is called Universal Tune, which is by Carlos Santana. Very different. It's not about the politician, but that book was really inspiring, and another book that I really enjoyed, and I finished it recently, was Elon Musk by Walter Isaacson. Isaacson, I, by the way, I liked that book. And tell me if you think I'm wrong, I did not come away from that book, disliking Musk. I mean, I think there's some insights of his personality, but I came away with some things I actually appreciate about the way he thinks and operates. So for me, it was a very enlightening

56:37book on him. I agree. The universal book, yeah. Universal Tune. Yeah, by Carlos Santana. I agree with you, and Elon Musk, Elon Musk perhaps might not be a person who I have coffee with, or might not be my type of person. But if you think about the hypothetical scenario, let's say our planet is a catastrophic situation, and then we need to build spaceships and go to Mars or live on another planet. People like Elon Musk certainly be the best choices to embark on such projects and really save the world. So in that regard, I think, for a grasp of humanity or our modern world, it dependent on having such figures in our society.

57:39This has been good. I hope I have not bored you. I maybe at times talk too much. This is really your show when I do author interviews. It's really the author's show, not mine. So if I talk too much, I apologize. It's only because I'm enthusiastic about this book. So I hope I do not bore you, sir. No, not at all. Thanks for your kind attention. I was delighted to hear that you've enjoyed these topics that I discussed in finding value in numbers. You are listening to CFO Bookshelf, Life Long Learning for Financial Leaders, and now back to our host, Mark Gandy. Again, thank you for making it this far. The book is finding value in numbers. In NBA school, there's a thing called math camp, and you'll find math camp in this book. So take

58:42your time with it, work through the problems, develop mastery, and these key concepts that is on is teaching us. We need to call this a wrap. I'm Mark Gandy for CFO Bookshelf.