Whitney Tilson recently spoke @Google, as we reported earlier today. Tilson discusses the talk, 3G, Hertz and more in an email sent to investors. Tilson discusses his recent channel checks at Hertz, which we first reported, but Tilson ignores the VW piece and discusses the Buzzfeed story (which we must say is another great piece by Mariah Summers) in his email.
Whitney Tilson in his own words below.
1) My co-author of The Art of Value Investing: How the World’s Best Investors Beat the Market, John Heins, and I spoke at Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) on Nov. 21st as part of the company’s visiting author series. Here’s a link to the video of our presentation. Mine is entitled “A Google Skeptic Eats Crow” because, in perhaps my worst public call ever, I heaped scorn on Google’s stock just before its IPO a decade ago (it’s up ~11x since then – oooops! At least I have never been dumb enough to short it!).
Whitney Tilson: Mark Zuckerberg’s crusade
2) Speaking of incredible tech companies, I enjoyed this cover story in the latest issue of Time about “Mark Zuckerberg’s crusade to put every single human being online” (only ~40% of the world’s population currently is, despite 85% living within range of a cell phone tower). Here are the last four paragraphs:
People sometimes ask me if I think that Zuckerberg is a little bit “on the spectrum,” as the saying goes. My answer is no. In fact, I sometimes wonder if he might be one of the most mentally healthy people I’ve ever met. He’s extremely smart, but he doesn’t have any of the neurotic self-consciousness or self-doubt that often accompany high intelligence. His psyche, like his boyish face, is unlined. His drives are unconfused: when he wants something, he sics his hugely powerful and rapacious intellect on it, and usually it comes trotting back with the prey held gently in its jaws, even if the prey gets a little bruised along the way. He’s concerned with nuance and subtle shades of meaning only to the extent that they’re of practical use to him, which means not at all. His faith in himself and what he’s doing is total. He may be wrong, but he’s not cynical; he’s wholly ingenuous.
One might argue that somebody who shapes the social lives of a billion people and counting ought to have a more finely wrought sense of human nature, a deeper appreciation for what is lost when a new technology becomes part of our lives as well as what is gained. That would certainly be nice, but like the nervous and insecure, people with finely wrought sensibilities rarely build companies like Facebook. And maybe it doesn’t matter. Over the past decade, humanity hasn’t just adopted Facebook; we’ve fallen on it like starving people who have been waiting for it our entire lives, as if it were the last missing piece of our social infrastructure as a species. Pundits are free to wring their hands and mumble their nuances on Ello. Judging by their behavior, most people don’t care.
Universal Internet access has, like Facebook, some of the feel of manifest destiny. The tipping point is already past, digital threads are woven too deeply into human life. We can’t go back, only forward. And if someone’s going to make it happen, it might as well be Zuckerberg. Talking to him, you have an eerie sense that as crude as his methods sometimes are, he is among those who will win the future—he is among the technologists who have replaced poets as, in Shelley’s phrase, the unacknowledged legislators of the world. “We feel like this is just an important thing for the world,” Zuckerberg says, “and there are no steps that are clear steps to make this an awesome business or to have it fully rolled out across the world, but I’m pretty confident we can do it. I’m pretty confident it’s going to be a good thing.”
The real difference between Facebook’s first decade and its second may be that when Zuckerberg started out, he genuinely seems not to have realized how big Facebook was going to get, and how much power he had. “If you asked me in the beginning what would happen in our first decade,” he says, “I would have been pretty off.” He under-estimated himself. It was a rare mistake. He’s unlikely to make it again.
Whitney Tilson: The best operating managers in the world
3) I’ve said many times that the Brazilians who own/run Anheuser Busch Inbev SA (ADR) (NYSE:BUD), Burger King Worldwide Inc (NYSE:BKW) and now H.J. Heinz Company (NYSE:HNZ) are the best operating managers in the world – and further evidence for this are the numbers Heinz reported in its 10Q for Q3 ’14: on a 2% decline in sales, cost of products sold fell 15.5%, resulting in gross profit increasing 39%. SG&A fell 11.4% as well, so operating income (excluding “Merger related costs”), rose 363%. Simply phenomenal – especially since this wasn’t a badly run company – noted activist Nelson Peltz of Trian had been on the board since 2006.
If you want to learn more about them and how they do it, I recommend three books:
- DREAM BIG: How the Brazilian Trio behind 3G Capital – Jorge Paulo Lemann, Marcel Telles and Beto Sicupira – acquired Anheuser-Busch, Burger King and Heinz (available only on Kindle)
- Double Your Profits: In Six Months or Less
- Dethroning the King: The Hostile Takeover of Anheuser-Busch, an American Icon
There’s another book about them, The 3G Way: An introduction to the management style of the trio who’s taken over some of the most important icons of American capitalism, but I haven’t read it yet.
Whitney Tilson: Jeff Smith’s campaign to take control of Darden Restaurants
4) A very insightful, in-depth article in Fortune about Starboard Value’s Jeff Smith and his successful campaign to take control of Darden Restaurants, Inc. (NYSE:DRI).
The most feared man in corporate America these days is not named Icahn, Ackman, Loeb, or Einhorn, but rather Smith, as in Jeff Smith, the boyish-looking 42-year-old co-founder and CEO of a previously obscure $3 billion activist hedge fund called Starboard Value. In October, Smith accomplished something that even his more flamboyant, better-known activist peers can’t boast about: He took effective control of a Fortune 500 company—Darden Restaurants, the owner of Olive Garden and Longhorn Steakhouse, which ranked No. 319, with some $8.5 billion in sales last year—while owning less than 10% of the company. Thanks to his success in running a highly contested proxy contest, Smith replaced the entire 12-member board of directors and assumed the role of chairman. Along with his handpicked board, he will soon choose a new CEO to run Darden. Welcome to the new world of corporate takeovers.
Smith is well aware that his stunning victory represents a landmark moment in a long-running debate: What is the correct balance of control over publicly traded companies between management and shareholders? After a brilliantly executed campaign that included both withering public criticism of Darden’s DRI 0.79% leadership and careful