TIP796: Die with Zero & Linde Stock Analysis w/ Clay Finck

You're listening to TI-P. Today's episode will be broken up into two segments. During the first segment, I'll be discussing the book "DiWizero" by Bill Perkins. It's a book that challenges some of the core assumptions that we have related to money and living a good life. As investors, we spend a lot of time thinking about compounding the late gratification in long-term wealth creation. But Perkins flips the script and asks a different question. What's the point of accumulating wealth if you don't use it to create meaningful experiences along the way? Perkins' core idea is simple. Money should be a tool for maximizing life experiences. Not a scorecard you optimize until the very end. He encourages readers to think carefully about the timing of our spending and the reality that our ability to enjoy experiences declines as we age. During the second segment, we'll shift gears to talk about a boring but stable compounder in the stock market, Lindi PLC. From 1993 to year-end, 2024, Lindi stock has compounded at 12% per annum, versus the S&P 500 returning 8% over that same time period. Lindi is the world's largest industrial gas company, supplying essential products like oxygen, nitrogen, and hydrogen, and it touches so many parts of our modern day economy. We'll explore its business model, competitive advantages, capital allocation, and what sort of returns, shareholders can expect from here going forward. So with that, I hope you enjoy today's episode. [MUSIC PLAYING] Since 2014 and through more than 190 million downloads, we break down the principles of value investing and sit down with some of the world's best asset managers. We uncover potential opportunities in the market and explore the intersection between money, happiness, and the art of living a good life. And this show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own. And they may have investments in the securities discussed. Now for your host, Clay Fink. [MUSIC PLAYING] Hey, everybody. Welcome back to the Investors Podcast. I'm your host, Clay Fink. And during this first segment, I'll be sharing what I learned from reading the book, "Dye With Zero" by Bill Perkins. I initially came across this book after my best friend told me that it was a must-read. I thought this would be an interesting book to cover on the show because I found that many value investors think about more than just wealth accumulation. Living a good life is also about how we choose to spend our time, who we choose to spend our time with, and how we spend our money. Many people who enjoy accumulating wealth use money as their scorecard for success. In the main takeaway that Perkins wanted readers to walk away with was to realize that money should be used as a tool for creating memorable experiences, not just a scorecard to maximize and tell death. Perhaps controversially, he encourages readers to spend and give money during years when they're able to actually enjoy it instead of dying with a substantial amount of unused wealth. My friend, David Fagan, from our mastermind community, he recently shared this idea on a call he hosted with the group where he essentially said that much of life is a paradox. On the one hand, we're told to push our limits, be the best that we can be, and let nothing stop us from achieving success. But on the other hand, we're also told to slow down, take it easy, and not take life so seriously. Much of life is about finding the right balance, and I feel that this book can help balance our perspective, especially for those of you who have been quite successful professionally, and potentially need to rethink the other aspects of your life. So Perkins' book is for those who really want to live life to the fullest. Perkins opens up the book with a story about a young couple in their 30s named Aaron and John. They were both successful lawyers and had three young children together. They received the devastating news that John had been diagnosed with the rare and rapidly growing cancer, which was unheard of for a healthy 35-year-old. With John now very sick, the burden of taking care of the family physically and financially fell on Aaron. Perkins then told Aaron that she should stop work and spend as much time with the family as she can, in that he would help her financially if they needed it. In between cancer treatments, the couple enjoyed each other's company. They'd go to the park together, watch movies, and pick up their kids from school together. John ended up passing away in January of 2009, just three months after his diagnosis. Looking back at that period, Aaron recalls trauma and devastation, but she's glad she quit her job to be at home with John. Most people would have done the same thing that Aaron did in these circumstances. Death, you know, it tends to wake people up and the closer it gets, the more awake and aware we become of it. When the end is near, we suddenly start thinking, "What am I doing? Why did I wait this long?" But until then, most of us go through life as if we had all the time in the world. As I mentioned earlier, this is a balanced strike. Many people in our audience likely have no issues with mapping out their five-year or 10-year plan and enjoy delaying gratification. But Perkins argues that far too many delay gratification far too long or even delay it indefinitely. They put off what they want to do until it's too late, saving money for experiences that they'll never enjoy, and living life as if it were infinite. Although the case with Aaron and John is an extreme example, we all face the challenge that everyone's health generally declines with time. And sooner or later, we all die. So the question we all must answer is, how to make the most of our finite time on Earth. Perkins is a big advocate for living life to the fullest by maximizing your positive life experiences. Enjoyable experiences will vary from person to person. Some people are active and adventurous, while others prefer to stay close to home. Some get great satisfaction from splurging on themselves in their families and their friends, while others prefer to spend their time in money on those less fortunate than themselves. He's not one to tell others how they should live their lives, but instead encourages us to choose our life experiences deliberately and purposefully rather than living life on autopilot as many people do. But when it comes to experiences, timing also matters. There is not much value of going on a cruise for a newborn and playing golf probably isn't too much fun when you're 90 years old. This idea was clear to Perkins after he had a life-changing conversation with his boss on Wall Street. Perkins went to college at the University of Iowa majoring in electrical engineering. He figured out that there was no way he would pursue the typical career path working for a company like IBM. And he smelled opportunity on Wall Street. So he took a job on the floor of the New York mercantile exchange making just $18,000 a year in the early 1990s. Living in New York, he had very little disposable income. And he started driving his boss's limo at night to earn extra cash. Perkins was proud of his thriftiness and he managed to save $1,000 on such a small income. He was so proud that he even told his boss thinking that he would also be proud. He ended up receiving the opposite response from what he expected. His boss essentially called him an idiot for saving that $1,000, considering that he would be earning a substantial income on Wall Street down the road if he stayed on the path that he was on. He was on his way to making millions on Wall Street. So why worry about saving such a small amount early on in his career? This interaction helped Perkins reshape his thoughts around how to balance your earnings with your spending. And finance, this idea can be referred to as consumption smoothing. Our incomes might vary from one month or one year to another, but that doesn't mean our spending should reflect these variations. We might be better off if we evened out these variations. And to do that, this means transferring money from the years of abundance into the leaner years. Perkins didn't know for certain that he would make it big on Wall Street like he did, but he was fairly certain that in a few years, he would be making much more than he was when he was just starting out. He couldn't predict the magnitude of it, but he was right to be confident in the direction of his earnings over time. Perkins thinking was also impacted by the book Your Money or Your Life, which talks about the intersection between how he spends our lives and our money. And it aims to help people live their lives more intentionally. The authors urge us not to sacrifice our lives just for the sake of money. Instead, Perkins is a big believer in the value of experiences. Experiences don't have to cost us a lot of money and they can even be free, but worthwhile experiences do usually come at some sort of cost. The unforgettable trip, the concert tickets, the pursuit of an entrepreneurial dream or a new hobby, all of these cost money. To Perkins, this money is well worth spending. Many psychological studies have shown that spending money on experiences makes us happier than spending money on things. Unlike material possessions, which seem exciting at the beginning, but then often depreciate quickly while experiences actually gain value over time. They pay what he calls a memory dividend. Carson from the movie Downtown Abbey stated, the business of life is the acquisition of memories. In the end, that's all there is. Towards the end of Perkins, Perkins's father's life, he was at the point where his physical ability had to diminish, and he wasn't able to travel. So instead Perkins gifted him a shamelessly sentimental gift, an iPad full of memories. As a college student, he had played football for several seasons at the University of Iowa, so Perkins took a highlight reel from that glorious season, had it digitized, and he put it on the iPad. We're always reliving our life through memories, and putting them in this format would make them more vivid and easier to relive. As his father was too old to acquire significant new experiences, he could still derive great enjoyment from the highlight video. He thought that it was the best gift he had ever received. When one is too frail to do much of anything else, you can still look back on your life that you've lived and experience immense pride, joy, in the bittersweet feeling of nostalgia. When it comes to spending money, many people who put a lot of emphasis on saving and little emphasis on actually enjoying the money, they probably think a lot about return on their investment. Stocks often pay a dividend and appreciate over time, and real estate generates rental income. Experiences can also be seen as investments, which would probably shock some, but to pay off from an investment, it doesn't have to be financial. When you spend time or spend money on experiences, they are not only enjoyable in the moment, they also pay in ongoing dividend. Perkins then gets into why he believes one should die with zero dollars in their bank account. In the book, he talks a lot about how people live on autopilot. They go to the same job, have the same routines, automatically save and invest, and possibly aren't living life as deliberately as they should. Perkins had a young friend named John Arnold, who would eventually become a billionaire. Arnold started a successful hedge fund called Centurus. On one difficult day, he turned to Perkins and told him, "Once I make $15 million, if I'm still trading, punch me in the face." Arnold was a brilliant trader, and he would definitely surpass the $15 million mark. The goalpost then moved to $25 million, then moved to $100 million. When you're on a winning streak, that big, it's hard to stop. Even when your rational mind tells you that you should, he understood perfectly well that, at a certain point, it makes a lot more sense to spend money doing the things you love instead of simply earning more money. But his new miracle target continued to shift, and as his wealth grew, his leisure time continued to diminish. Arnold ended up running Centurus until 2012 when he was 38 years old, and he built a personal fortune of $4 billion. Now, the vast majority of people can only dream of retiring at 38, but Perkins argues that he retired too late for two reasons. First, he'll never get back those years that he spent just focusing on making money. He'll never be 30 again, and his children will never be babies again. Second, he made so much money that he faces the issue of likely never being able to spend it all. Arnold didn't particularly enjoy running his company, so part of the reason why he continued to do so was just simply out of habit, and that habit can be difficult to break. Earning money is society's way of recognizing a job well done. And once you're in the habit of working for money to live, the thrill of making money exceeds the thrill of actually living. The example of John Arnold is again an extreme example, but it highlights the same psychological forces that play for many people. Many people feel like they can never get enough, and as their net worth grows, their goal posts just continue to shift. Perkins then explains that if you spend your life earning money and then die without spending all that money, then you've needlessly wasted too many precious hours of your life. Now, I feel like this point goes a little bit too far for me, but I definitely do resonate with it to some extent. I do think it's right for us to pass things down to charitable organizations and down to our family when we eventually pass away, and it's nearly impossible to actually die with zero because none of us know when our last day on earth will be. But I think the key takeaway for me is that for those of us who are those natural savers, it can be very easy for us to save far too much, working far too long, and not enjoying our money nearly as much as we probably should. Perkins looked at how much US households saved over time, so the median net worth for the US household between the ages of 45 and 54 is $124,000. So half of households have more than that saved and half have less. What's more interesting though is how the amount saved, how that trends over time. We see a clear pattern that the median households net worth only increases over time. This is a result of people's incomes rising with age and continuing to save what they don't spend. This leads Perkins to the conclusion that most people save well past the point that is optimal, similar to the example outlined earlier with John Arnold. Perkins then looked at the spending habits of retirees once they were finished working. After looking at the data, he came to the following conclusions. As a whole, people are very slow to spend down their assets in retirement. Across ages from 160 to their 90s, the ratio of households spending to household income hovers around 1 to 1. This means that retirees tend to spend whatever it is that they earn, so retirees generally are not drawing on the capital that they've accumulated over their life. Meeting retirees who had $500,000 or more right before retirement had spent down just 12% of that money 20 years later, or by the time that they died. So if someone retired with $500,000, they would have had $440,000 by the age of 85. One-third of all retirees actually increased their assets after retirement. Now Perkins doesn't talk about inflation here as that's of course an important consideration when thinking about things like health care costs. My first job at a school was in the world of health insurance, and it was a pretty common practice to assume that medical costs would increase by anywhere from 5 to 8% per year. For illustration purposes, if someone had $500,000 at the age of 65 when they retired, by the time that person was 85, 500,000 would be essentially worth the equivalent of 305,000 after adjusting for inflation, assuming a 2.5% inflation rate. The good news though is that retirees tend to have much of their assets invested in stocks and bonds, which helps mitigate the impact of inflation over time. Let's take a quick break and hear from today's sponsors. All right, I want you guys to imagine spending three days in Oslo at the height of the summer. You got long days of daylight, incredible food, floating saunas on the Oslo fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. 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For example, no matter how much money you have, if you don't have the drive and the energy to travel in your 70s or it becomes a major headache to travel, you know, you're just not going to enjoy that money like you would have earlier in your life. Perkins saw this in his grandmother who was in her late 70s when he was in his late 20s on the up and up in Wall Street. He wanted to share the wealthy had with those closest to him. So he gave his grandmother a $10,000 check, which he now realizes was actually a big mistake. Because she wasn't really spending any of the money that she had. It's not that she was poor or that she needed the cash to pay bills. It's just that her go-go years were largely over. There's another story from the book about his grandmother that illustrates how some people can indefinitely delay gratification, you know, largely for no reason. She would keep her couch, love sea and easy chair covered in plastic to protect it from general wear and tear. But this plastic also made the furniture uncomfortable to sit on and unattractive. For one special occasion, she had taken the plastic off in Perkins, you know, he loved the furniture. But other than that, that plastic would always be on the furniture and it would stay on for the rest of her life. I think the takeaway from this is why have a nice couch and a nice love sea if you're not going to actually enjoy it. There are certainly times in your life to be thrifty and delay gratification and there are times in your life to actually spend your money and enjoy the fruit of your labor. Some people get stuck in either one mode or the other for much of their life and have trouble flipping that switch when it makes a lot of sense to do so. The other reason that people have a hard time spending their money in their older years is to be prepared for unforeseen expenses in their older ages, especially medical expenses. Medical expenses are of course difficult to predict but that's exactly what health insurance is for. It helps protect against large unforeseen medical expenses, however insurers are not always going to fit the bill if for some reason they decide to deny coverage. So given the uncertainty of their spending needs in the future, many retirees still play it on the very safe side. Given that Perkins mantra outlined in the book is to maximize the amount of enjoyment that we get out of life, then saving all of this money to never get to enjoy it, you know, just doesn't seem ideal. So the question then becomes how do we go about spending our money? Perkins recognizes that with declining health, it will naturally lead to diminishing interest in things that you could theoretically spend your money on. So he's in the camp that you should expect to spend much less in your 80s than you would in your 50s. One of my favorite chapters from the book is chapter 5 titled What About the Kids. Every time Perkins talks about dying with zero, he typically will get some version of the question "What about the kids?" Meaning why would you want to pass away without having anything left to give your children, which logically makes sense to ask? It feels a bit selfish if one makes all this money throughout their life, only to pass away and leave their kids without any sort of gift or inheritance. Perkins who has two children himself, he recommends giving to your children earlier in life rather than just when you pass away. Federal reserve data shows that the typical inheritance is passed down to children around the age of 60. That's a natural result, as the most common lifespan is 80 and the most common age gap between parents and children is around 20 years. In most of the money that children end up receiving from their parents ends up being through an inheritance instead of their gift earlier in their life. The utility and value of money changes as we age in accumulate wealth. So a monetary gift at the age of 30 is actually much more meaningful than at age 60 because when we're younger, you're at the stage of your life where you're getting your footing, you're buying a house and ensuring that you live in a good neighborhood, starting a family. Likewise when you're 60, your kids have moved out, you may have paid off your house by then, your retirement assets have potentially grown to a level where you're very comfortable, and getting an extra gift from your parents might make little to no difference in your life. Through this lens, one could argue that a $25,000 gift at age 30 is more valuable or makes more of an impact than a $250,000 gift at age 60. Furthermore, a 30-year-old can also arguably enjoy the money more than a 60-year-old can. As one ages, the utility of money declines considerably. Either you would get a lot less enjoyment out of that same dollar or you would need more money to obtain the same amount of enjoyment as you would when you're younger. As a result, Perkins reasons that as your adult children age, every dollar you give them goes less far over time, and at some point that money might become almost useless to them. To use an extreme example to help illustrate the value of passing down wealth earlier, which do you think appreciates the gift more? A 21-year-old that has zero dollars to his name and receives $10,000 or a 61-year-old that has $5,000,000 to his name and receives $100,000. I think the clear answer is the former. If you're trying to maximize the impact of the money you give, instead of just the total dollar amount, then it's important to also recognize that timing matters. Of course, this does not apply to everybody, but I think you follow the point he's making here. The other issue with passing down wealth when you die is that you're probably assuming that all of your children will outlive you, which oftentimes is not the case. Around 17% of Americans pass away prior to age 60, and around 30% of Americans pass away prior to age 70. I've been fortunate that both my grandmother's are around at 90 years old, and they've both seen one of their children, unfortunately, pass away prior to themselves. Being born and raised here in Nebraska, one of the things that I appreciate about the culture here is how family oriented it is. When I read about Perkins' lens of maximizing your life experiences and closely considering the timing of life experiences, I think one of the things that a lot of people around me get right is taking their families on vacations. Growing up, I would go boating at the Lake Ubiowsarx each summer, and we still have that tradition to this day. Isn't the cheapest trip? Absolutely not, but it's also about having those experiences together as a family, because one day, mom and dad will not have the energy to drive to the lake, and those memories will carry with their children and their grandchildren for a lifetime. Now today, my parents are in their 60s, so now they get to share those experiences with their grandchildren, which are my three nephews. These types of investments pay dividends that may not be as obvious on the surface. Researchers have found that young adults who as young children received more affection from their parents come to enjoy better personal relationships, experience better health outcomes, and also have lower rates of substance abuse and depression. Perkins overall thinking on spending money is sort of goes against what I feel myself and probably how many people in our audience feel. We're often told to start saving money early in life to take full advantage of the benefits of compounding. And they're not fall prey to the hedonic treadmill, which explains for as one incomes rise, their spending tends to rise and tandem. Well, this is exactly what Perkins believes is the right thing to do. But I think we generally all still do spending money in a similar light. We need to strike that balance between spending on the present on things you value and saving intelligently for the future. If we think of making the most of life as simply maximizing our life experiences, then traveling is one thing that many people would like to take advantage of. But traveling has its difficulties as it requires time, money, and health. When you're old, your health is in decline. And when you're young, you might not have the time and/or the money. This is why Perkins encourages readers to travel as soon as they can, preferably in their early 20s. Even if you don't have a lot of money, you should travel because it's the one time in your life where you have the time and the health. By the time you're in your 30s, you might have kids, then you likely want to have the opportunities to travel abroad for an extended period of time. A similar line of thinking can be applied to sports. If you enjoy playing sports, you should do so when you're young because the older you get, more. difficult it is to play sports and the harder it is to enjoy. In my spare time, I enjoy lifting weights, playing basketball, playing pickleball, all of which are activities I thoroughly enjoy and they help keep me in shape. I also play golf from time to time, but it depends on the day whether I truly enjoy it or not. Furthermore, the rate at which you decline physically is partially up to you. The better you maintain your health, the less steep your decline is expected to be. Living has a greater effect on your ability to enjoy experiences at any age than your health. I think some people are fed the narrative of looking forward to retirement because of all the free time you're going to have. You know, you're going to be able to enjoy the money, you've saved up all those years, but the real golden years of enjoying the fruits of your labor come before the traditional retirement age of 65. So it's all about finding the right balance between time, money, and your health. At different points in your life, each of those is going to look different. When one is middle age, say in their 40s, stealing good health and is in a great financial position, the biggest constraint is likely having time. So this is a period of your life where it can make sense to exchange your money for more time when that allows. That might mean hiring out tasks that take up your free time like house cleaning, yard work, home maintenance, and repairs, or even cooking or grocery shopping. Sometimes it's easy for me personally to outsource some of these things, but there's still those tasks that are just difficult to outsource to somebody else. Something like house cleaning is something I just don't really hesitate to outsource as that time can either be used to earn more money or just do something that I enjoy. In chapter 7, Perkins discusses time-bucketing your life. When Perkins' daughters were little, he would often watch kids movies with them, but then one day his younger daughter was 10 and she just wasn't as interested in watching movies anymore. All of a sudden she was too old for it. If someone had told him that at this specific date, at this specific time, his kid would stop wanting to do this activity with him, then he would probably have done it more and made the most fit. But unfortunately in real life, we do not receive this luxury. We sort of assume that some things will last forever, but of course they don't. But recognizing that they don't last forever, that everything fades and dies, can make you appreciate everything more in the here and now. Die with zero is predicated on the hard, cold truth that we all die and as we age, our health will gradually decline. But there's another less obvious truth about dying that has important implications for how you should live your life. We all die a multitude of deaths throughout our lives. There will also be a last time that Perkins goes waverunning, a last time playing in a poker tournament, and a last time to board a plane to fly somewhere exotic. It's kind of sad to think that eventually the teenager in you dies, the college student in you dies, the parent of young children in you dies, etc. Once each of these many deaths occur, there's no going back. Maybe quote dies is a bit harsh in this context, but you get the idea. They'll keep progressing from one stage of life to the next. The die with zero philosophy recognizes this fact and seeks to make the most of each window of opportunity before it closes forever. Perkins discusses the work of Bronny Ware, who had conversations with patients on their deathbed about the lives they had lived in the regrets they had. There were five common regrets they shared on bug them. The first was wishing they'd had the courage to live a life true to themselves as opposed to the life others expected of them. It's a regret about not pursuing your dreams and therefore having those dreams unfaithful. If you ignore what you truly value in life and instead pursue a path that society pushes on you, you risk having real regret at the end of your life. In our American culture, society can push values such as hard work and earning more money and deemphasize things like leisure, adventure, and quality relationships. The second regret, which was actually the top regret for male patients, was this. I wish I hadn't worked so hard. Now, that's not to say that you should immediately start working less, but instead recognize that our time here is limited, we should try to make the most of what we're given. To help do this, Perkins introduces the concept of time buckets. Time buckets are a simple tool for discovering what you want your life to look like in broad strokes. You simply map out the rest of your life in five to ten year increments for each bucket, and then consider the key experiences, activities, or events that you definitely want to happen during that period of your life. If experiences are some of the best parts of your life, then it's probably good to actually write down some of those experiences that we'd like to have in our lifetime. Some examples can include having a child, running a marathon, hiking the Himalayas, building a house, starting a business, go skiing a certain number of times, and so on. This can help us actually consider some of the really important things that we want to do in our lives. For example, I'd like to spend a couple of weeks in Europe, but I haven't been able to find the time to actually do it. It's easy to live our lives as if we'll be able to make time later, but then life only gets busier, and it becomes even more difficult to make that trip. Mapping out your life in some fashion can help us be more intentional with the things we would like to do throughout the different stages of our lives. In the book, Perkins gave readers an impossible task to die with zero. But the real aim was to ensure that we'd live a life intentionally instead of on autopilot, and maximize the use of our wealth to live our best lives possible. That's why dying was zero, at least to Perkins is a worthy goal. As someone who's a natural saver, and often times enjoys delaying gratification, this book really got me thinking a bit differently about how to approach saving and spending my money in living out my life. So during my last episode, which was published a couple of weeks ago, I discussed the drawdown in constellation software, which primarily occurred due to AI fears. This made me consider what type of company might have near zero risk from AI specifically. Software companies are going to be some of the first targets for disruption, but what companies have practically no chance of being disrupted by new technologies like AI. One of the first companies that came to mind for me was a company that a member of our master my community pitched to the group. That company is Lindy PLC. So I'd like to give our listeners a bit of an overview of the company and some of the things that I learned from that presentation. Our member who's an equity analyst at a multi-billion dollar wealth management firm, he posed the question to the group, "If you had to invest all of your net worth in one company over the next 10 years, and you cannot sell it, what would you own?" For him, the clear answer was Lindy PLC. Before getting to Lindy specifically, when we think about what type of company we would want to put our entire net worth in for 10 years, the company probably needs a few characteristics at least in my mind. So the first would be, I would need to be highly certain of the future state of that business. Second, I would need to be highly certain that the future state of that business will be positive. So it would need to be able to grow earnings at an adequate rate in essentially any market environment. And finally third, the company needs to be trading at a reasonable starting valuation. So let's see exactly how Lindy may or may not fit into that framework. 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So whether you're prepping for a SOC 2 or running an enterprise GRC program, Vanta keeps you secure and keeps your deals moving. And here's a number that really stood out to me. Companies like RAM and Ryder spend 82% less time on audits with Vanta. That's not just faster compliance. It's more time for growth. I love that over 10,000 companies from startups to big enterprises trust Vanta to handle this stuff so they can focus on what actually moves the needle. Get started today at Vanta.com/tip. Lindy is the largest global provider of industrial gases with $34 billion in revenue and $220 billion in market cap. When I say industrial gases, think of things like oxygen, nitrogen, hydrogen, carbon dioxide, etc. The company also designs and builds equipment that produces industrial gases and offers customers a wide range of gas production and processing services. Lindy is a global business as they have around 65% of sales outside of the US. The business was started in 1879, so there's a very long history here and the company merged with PraxAir in 2018, which is an American industrial gases company. Lindy is domiciled in the UK, but with the merger of PraxAir, you can really think of this as an American company since their corporate headquarters is in Connecticut. Over the past few decades, the business has performed very well from a financial standpoint. For the 30 years or so leading up to 2024, sales have compounded at 9% in earnings per share as compounded at 12%. The industrial gas segment has 30% EBIT margins, and overall return on the VISTA capital is over 20% after backing out Goodwill and Intangibles. From 1993 to year in 2024, Lindy's stock has compounded at 12% versus the S&P 500's 8% over that same time period. In their investor presentation, they also showcase how they've compounded sales, earnings per share, operating cash flow, and their dividend at a much faster rate than their competitors. So how does Lindy make money? Lindy supplies the industrial gases, which are these critical resources for various parts of the economy. Industrial gases are essential inputs in most manufacturing processes, but they only make up a low single-digit percentage of most cost structures. So being able to source these resources from a reliable producer is absolutely essential. A few examples might include Coke and Pepsi using carbon dioxide for carbonation, hospitals using oxygen for respiratory therapy, TSMC and Samsung using nitrogen and hydrogen for chipmaking, and steel makers using oxygen and argon for steel processing. The important thing for me, at least, from a business perspective is that these are critical components to a well-functioning economy. Hospitals cannot operate without oxygen, and Coca-Cola needs a partner like Lindy to produce carbonation. Lindy's end-markets are fairly well diversified with some being more cyclical than others. They're more resilient end-markets are healthcare, food and beverage, and electronics, and they're more cyclical end-markets are chemicals and energy, manufacturing, and metals and mining. Lindy distributes his products three different ways. First is on-site. This is their biggest long-term contracts. These customers require the largest volumes of product, which is typically oxygen, nitrogen, or hydrogen, and they have a relatively consistent demand pattern. So Lindy will make these huge capital investments to construct these plants on or adjacent to these customer sites and supply the product directly to customers by pipeline. These contracts tend to range anywhere from 10 to 20 years, and they contain minimum purchase requirements and price escalation provisions. So Lindy ensures that they're going to get their required return since they're putting this huge upfront investment to construct these plants. Today, on-site distribution comprises of around 25% of Lindy's business. The second form of distribution is merchant distribution. These deliveries generally are made from Lindy's plants by tanker trucks to storage containers at their customer sites, which are usually owned and maintained by Lindy in the least to the customer. Merchant distribution tends to be contracts around three to seven years. Through these merchant contracts, Lindy is able to leverage their existing infrastructure to deliver industrial gases to nearby customers. Since these contracts aren't as capital intensive, they're able to target a higher return on invested capital on these contracts. Today, around 1/3 of Lindy's business comes from merchant distribution. The third form of distribution is package gas, which you can think of as smaller volume packages that are supplied in metal containers. Sailors may be delivered to the customer site or picked up by the customer at a packaging facility or retail store. Package gases are generally sold under one to three-year supply contracts and through purchase orders. This segment makes up more than one-third of the overall business. All three of these distribution methods, onsite, merchant, and packaged, they're all sourced from the same air separation unit. The other beautiful part of the onsite contracts that Lindy has in place is that even though these contracts might range from 10 to 20 years, they're almost always renewed. So Lindy is able to take these major contracts that they put in place and then they leverage these contracts to find opportunities to deliver the product to different customers that are in close proximity. This creates an industry where there are several local monopolies because it's un-economic to transport these gases more than 100 miles. You tend to only see one or two of these major industrial gas companies in each region holding that local monopoly or do-oply. So there's several attributes of this that are really attractive from an investor's perspective. So Lindy has all of these local monopolies or do-oply's. Their products and services are mission-critical. The products are a low overall percentage of the customers overall spend, think around 1-2% and they have a high cost of failure. This is a formula that leads to a very sticky customer base and strong pricing power. Furthermore, Lindy typically includes cost pass-through in their long-term contracts. So they should be able to pass along inflation in any of their raw inputs onto the customer. Overall, the industrial gases industry has seen consolidation. Over the past 25 years, the market share for the top three players has gone from around 40% to over 60%. And return on capital in the industry has improved as the industry has consolidated. In 2000, the return on capital employed was around 10% for the industry. Today it's around 16%. This consolidation also highlights the network density required to operate profitably, which helps prevent new entrance from entering the space. Network density refers to Lindy's ability to serve many customers within a concentrated geographic footprint, using shared infrastructure like pipelines, production plants, and distribution routes. This density creates a major cost advantage because the more customers Lindy serves in a region, the more efficiently it can spread fixed costs across higher volumes. It also raises the barrier to entry. Since a new entrance would need to build massive capital intensive infrastructure without having enough local demand to operate economically. During this dense network, reinforces Lindy's local monopoly position and makes it extremely difficult for anyone to replicate their scale and reliability. Other aspects of their moat involve trust, reliability, and their engineering expertise. So since they're the standard in the industry and they've built up the scale, there is little incentive for a new entrance to enter because the value proposition cannot be significantly improved upon. So even if someone does invest all of this capital and offers a 10% discount on price, most manufacturers just aren't going to be interested because there's the risk that it doesn't work, and the industrial gases are a low percentage of overall spend anyway. So you might as well go with the proven players. And since gases are so critical to the manufacturing processes that Lindy supports, choosing a reliable supplier is oftentimes a top consideration. Since Lindy has a very dense network, they tend to be one of the most reliable sources. The other two big players in the industry are Erlequid and Air Products. Erlequid is headquartered in France and Air Products is headquartered in Pennsylvania. Lindy has around 1/3 of the market today, and the top three players add up to more than 70% of the overall market. Historically, Lindy has been the more disciplined player of the three. Their laser focused on cost discipline and return on invested capital, and of the three players, Lindy has the best return on capital, and one of the main reasons for that is how they're able to leverage their on-site distribution systems to supply products to these customers. As a result, Lindy has historically generated much better returns for shareholders than their competitors, as earnings for share over the past decade have grown at around 12% per annum. Management takes a balanced approach to capital allocation. Just over 1/3 of cash flow gets deployed into sharey purchases, 1/3 of cash flow goes to the market. to CapEx and the remainder is distributed as a dividend. The management team is incentivized based on organic sales, net income, cash flow, return on capital, relative total sharehold of return, and absolute stock appreciation. There are also thousands of managers on the ground operating these business segments globally that are also incentivized on many of the same metrics. What really stands out from listening to management on earnings calls is just their discipline. They're very clear that they will only pursue projects that meet strict return thresholds and are backed by long-term contracts, even if that means walking away from growth opportunities that don't meet that criteria. They repeatedly emphasize not all growth is good, and their $10 billion project backlog is designed to generate attractive returns and drive high-quality earnings per share growth. Above all, management consistently frames decisions through a long-term lens. Starting on return on capital, durable competitive positioning, and compounding shareholder value over multiple years rather than chasing short-term volume or headline revenue growth. Management has noted that around two-thirds of their backlog supports contracted clean energy projects, which aligns with the global push for decarbonization. Rather than speculating on commodity prices, Linde focuses on building out infrastructure that enables customers to reduce emissions through hydrogen, carbon capture, and other low-carbon solutions. Many of these projects strengthen Linde's existing network density, creating additional opportunities to serve nearby customers and improve returns over time. Importantly, management remains disciplined, only pursuing clean energy investments that meet these strict return thresholds and are supported by high-quality counterparties. In that way, this global energy transition becomes less of a risky bet for Linde in more of a long-term play. At a high level, I think Linde is a business that one should expect to grow alongside the broader growth of the economy, increasing volumes at around 2-4% per year, and part of the magic of this business has been their ability to capture these high-return projects that improve margins and boost earnings for share. This is despite not increasing their volume significantly, so with 2-4% growth in volumes, you also have 2-3% growth in price, so those alone will generate 6-8% in earnings growth. Then they receive an additional boost to 10-12% earnings growth due to cost efficiencies and sharey purchases. But it's also important to keep in mind that Linde has been operating through a somewhat lackluster manufacturing environment ever since 2021. In 2021, volumes grew by 8%, but in the 4 years after that, volume growth over any calendar year has not exceeded 1%. However, management has been pushing prices to try and drive more of that revenue growth. So jumping back to Linde in the Praxair merger, the merger closed in October of 2018. This merger has really worked out well for Linde because the industry benefits from consolidation and operating at scale. Air network density leads a lower per unit cost, improved service and stronger pricing power. Just as importantly, the merger brought together Linde's world-class German engineering with Praxair's reputation for operational rigor and cost discipline. After the deal, the combined company's streamlined overhead, optimized plant efficiency, engaged significant procurement and logistics advantages from its larger footprint. Linde's tighter approach to pricing and capital allocation also became more central, helping expand margins and strengthen free cash flow. Altogether, the merger turned Linde into a more efficient shareholder-friendly industrial gas powerhouse, even in a slower volume growth environment. So the question then becomes, how much more can Linde continue to improve margins? Upon the merger with Praxair, Linde started to identify areas where there were opportunities to improve margins. If a plant in Mexico was at 40% margin and another plant in Canada was half of that, management would be on their team to do what they need to do to get them to the margin level they needed to be at. Whether that be hiking the price or adding necessary tools to improve the efficiency. Alongside pricing, Linde's management team consistently frames productivity improvements as one driver of long-term earnings growth. Even in weak demand environments, they emphasize that productivity is how they keep expanding margins. The business operates in a decentralized manner where they constantly have thousands of operational improvement projects happening, and they share these best practices for sites that have margin levels that need improvement. And increasingly, Linde is leaning on technology, digital tools, and even AI to accelerate these productivity gains, helping them optimize pricing, manage costs, and run plants more efficiently. Over time, these innovations give them another lever to keep expanding margins, even when volumes or the broader industrial economy is sluggish. I think it's reasonable to assume that margins will continue to expand over the next five years or so, but probably not at the rate that they've expanded since the merger with Praxair since they've already identified a lot of the lower-hanging fruits. Taking a look at the valuation, Linde trades at a premium to the overall market due to the business's durability and low-terminal value risk. I think it's pretty fair to say that in 30 years, Linde will still be providing industrial gases globally to industries that are a cornerstone of our daily lives, things like healthcare, chips, soft drinks, etc. The Ford PE tends to trade in the mid-20s or a 30% to 40% premium to the S&B 500. The market places a premium on Linde's earnings because of the certainty with which they'll be able to continue to grow going forward. Very much no matter what happens over the next decade, the world is still going to need industrial gases. What I think is also important to consider is that volume growth has been quite modest in recent years with the exception of 2021. If we believed that the economy is cyclical and things eventually pick back up, then we could see a bit of a tailwind from economic growth, whether that be Europe's economy gaining traction or the AI and data centers in the US providing a bit of a tailwind. Another key support for Linde's long-term growth is its $10 billion project backlog. With roughly two-thirds of that tied to contracted clean energy investments, giving the company high visibility into future earnings. So as hydrogen, decarbonization, and advanced electronics infrastructure continue to scale globally, Linde's positioned as an essential supplier to many of these projects. In the company's most recent earnings call, they got it for 6-9% growth in earnings per share in zero percent-based volume growth. Over the long-term, management expects to grow earnings per share in the 10-12% range, which comes from a combination of raising prices, increasing efficiencies, buying back shares, and reinvesting in future growth. Even in a stagnant manufacturing environment, Linde seems pretty well positioned to continue to grow earnings per share at 10% plus, and if the manufacturing environment manages to pick up globally, then we could see Linde benefit due to higher volumes, higher price increases, and increase operating leverage. As people continue to talk about the potential of a recession in the near future, management has even gone as far to say that they've been going through an industrial recession for more than two years. While there's seen massive investments in AI and digital infrastructure, traditional industrial markets like manufacturing, metals, chemicals, and minings, they've been facing continued retrenchment. In Linde's recent performance, showcases their ability to continue to be prepared for the worst, and ready to capitalize on any upside opportunities that exist. So Linde grew earnings per share by 8% in 2024, and 7% in 2025, and that's honestly pretty remarkable given the macro backdrop that they've been facing. So I wouldn't be surprised to see a business like this, to have some upside if the manufacturing base picks back up overall. So to wrap things up and summarize the Linde thesis, Linde operates in an attractive industry with rational players and offers products and services that are mission critical. They have an unrivaled network density, which enables them to offer competitive prices and generate industry leading returns on capital. They're well positioned to continue growing with the global transition to clean energy. They have world-class operators with a business owner mindset. From top to bottom, they prioritize increasing efficiencies in achieving higher margins over time. And lastly, the business features best-in-class financial performance with unwavering capital discipline, which positions them to continue to deliver solid returns for shareholders from here. That wraps up all I have to share on Linde today. I hope you found it useful or interesting in some way. So with that, thanks a lot for tuning in to today's episode. I hope to see you again next time. Thanks for listening to TI-P. Follow We Study Billionaires on your favorite podcast app and visit the InvestorsPodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider objectives, financial situation or needs. Investing involves risk, including possible loss of principle and past performance is not a guarantee of future results. 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