Business Breakdowns
· Freddie Lait
[00:00:00] S1: When we're looking at what gives our businesses a competitive and strategic advantage over their industry and that will endure for the long term, one of the really best ones, and we've only got a handful of these that have this competitive advantage, is this low-cost, high-service model. And service in this case means better access to markets, quicker trading, neater valuations. Not yet someone on the end of the phone, but wait and see on that. But so this low-cost-to-serve, high-quality product, it's brilliant because it's so hard to compete with. This is one of the best examples that we have found and obviously others being things like Ryanair, Costco, and a few other businesses on our lists, and I think it leads to 10, 20, 30 years of potential advantage which will come through in this case through account growth. And so that's been the primary one, and I think when you've dug back as long as you can in the history—and there's quite a bit written about this business over the last 48 years—this obsession with technology, automation, and costs has been there from day one. And so that's a softer point, but it's around the culture of a business. It doesn't have to be founder-led, but it's often founder-led. But it's certainly got to be someone with skin in the game, and it's got to be someone who intrinsically demands that of a business. I don't think it's something that you can come through with an MBA and just say, "Oh, I'm going to go for a low-cost model." I think it's got to be something that's really in you. And I think the final thing that this business helped teach us is just how cheap very high-quality cyclical businesses can become because people misunderstand or fear cyclicality in what is otherwise a very strong growth business. This was trading on 12 or 13 times earnings, delivered earnings only 18 months ago. It's a little more expensive now, but it's still inexpensive the way we look at these things, which is with all cyclicals, you'll always get a good chance. You can find the great cyclical. You might have to wait three or five years, but you'll always get a great chance. And the great ones are worth waiting for.
· Zack Fuss, Freddie Lait
[00:00:00] S0: Well, Freddie, Jacopo, I appreciate you guys coming on so much to discuss IBKR. Around 50 years ago, Thomas Peterffy came here with effectively nothing and has built what is today, I believe, a $75 billion plus business of which he owns the vast majority. It's a really interesting story from both a business history but also business performance perspective. I really appreciate you guys coming on to help tell it. [00:00:00] S1: Great to speak to you.