Bank Raises, Conglomerates, and LivePerson’s CEO Drops By

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In the latest installment of our Between Two Fools interview series, Industry Focus: Financials host Jason Moser sits down with LivePerson (NASDAQ: LPSN) CEO Rob LoCascio.

Plus, Wells Fargo (NYSE: WFC) CEO Tim Sloan just got a $1 million raise -- did he deserve it? And why does conglomeration seem to work so well for companies like Berkshire Hathaway and Markel, but not for General Electric? All this and more on this week's episode.

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A full transcript follows the video.

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This video was recorded on March 18, 2019.

Jason Moser: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market each day. It's Monday, March 18, and that means we're talking Financials. I'm your host, Jason Moser. On today's show, we're going to talk about Wells Fargo. Did their CEO really deserve a raise? Well, we're going to kick that idea around. We've got a good listener tweet to discuss. As always, Matt and I will have one to watch for you.

But we begin today with a new installment of Between Two Fools. Rob LoCascio is the founder and CEO of LivePerson. As the leader and intelligent engagement solutions, LivePerson currently serves over 18,000 clients with 1,200 employees and offices across the globe. Recently I had the good fortune to speak with Rob. We talked about everything from the intended and the unintended effects technology is having on the world to life as a CEO of a publicly traded company and why he's excited about what the future holds for LivePerson.

Okay, Rob. Customer service is hard. You founded this business, LivePerson, on that very concept back in 1995. What I'd like to know is, first of all, tell me how I, the consumer, might interact with LivePerson on any given day.

Robert LoCascio: If you're a customer of, say, T-Mobile, you can now, through iMessage, right on your mobile device, you'll see T-Mobile there and you can message them like you were messaging your friends and family. When you go to their website on your mobile device, on your iPhone, you'll see a little "Message Us." If you click on it, it also opens that on iMessage. You no longer have to make a phone call or even find a chat -- although I invented chat back in 1997 -- you don't have to find the chat button on the website. Right from your mobile device, you can message a brand, and you can do it on your own time. Maybe you're in the meeting, they get back to you. It really puts the control of customer care in the hands of the consumer, which I think we've all been waiting for, versus being put on hold.

Moser: What was the idea there? How did you start this? What was the idea that really got this thing going?

LoCascio: Like every entrepreneur, there's an event that happened, and you thought, "Why can't I change that?" It happened that I was shopping on the website at Dell computer. I was looking for a computer. I configured it online. And then I needed to basically ask a question. I picked up the phone because they didn't have anything online. I had to actually hang up my connection to the website. And then the person on the phone made me do everything over again that I just spent an hour doing on the website. I thought, "That's weird. If I'm living in the digital world, I'm doing commerce in a digital world, why can't I converse in that digital world?" That made me invent the technology of web chat at the time, and I basically built the company around it from that point forward.

Moser: I was checking out your investor relations site. I've been checking that out periodically here since we've been covering the company. Right there on the bottom right of the screen is that little chat bot, that box that says, "Hey, how can we help you?" That's essentially what you guys are doing, right?

LoCascio: Yeah. Like I said, I came to the conclusion about five years ago that web chat was not going to do it. Even with our largest customers, about 5% to 10% of the volume would go through there, and still 90% of the time, 95% of the time, the consumers had to go and make a phone call. When I saw five years ago, also, I was messaging my friends and family from Facebook Messenger, SMS, WhatsApp, and all that, I thought, "Man, consumer behavior has changed. We don't talk to people anymore. Why can't I do that with a brand?" And that led me to this next innovation. I often think I'm blessed that I was able to create this thing called web chat. It did a lot of good in the world, I think. But I have a second time around of developing and pioneering something that I think is going to have a greater impact on the world of customer care. Definitely in customer care, but a broader impact on what we call conversational commerce, the ability to have a conversation with the machine and get something done with a brand through a machine or with a machine. That's the stuff we're going after. It's really big stuff.

Moser: I love that idea. You're giving brands an opportunity to really take their customer service to the next level. You're right, it's totally changed from when we were growing up. I would much rather interact via chat on my own time as opposed to having to sit there on hold.

Now, when we talk about brands, our show on Industry Focus here, we like to focus a lot on the financials industry, talking about banking and payments and insurance companies in particular. For us, when we look at how technology is changing that space, and it's changing the space in all sorts of different ways, but I think that your technology is certainly helping them up their customer service game. Can you talk about any of the things going on in the financials space in particular that have you excited about the future?

LoCascio: We have some of the biggest banks in the world, insurance companies. We have Citibank and HSBC and American Express and companies like that. I have a really good story of -- there's a bank called Buddybank, which is a division of UniCredit. UniCredit is one of the top 10 or 20 banks in the world. It's definitely a Fortune 500. Basically, they decided to launch a bank that was all about the connection with the consumer and this idea of a concierge service. Buddybank is basically like your buddy, and your buddy helps you book reservations to hotels and restaurants, get you tickets, do things, and you also can bank. What they really figured out was that, "Okay, we do credit cards, we're doing loans, we're doing everything, we're a bank. But people are buying things, buying cars. Why don't we try to help them buy a car? And then we're going to get the transaction of the loan to a car. Why don't we help them find a restaurant because they use our credit card?" They've proved out that conversational banking is really what I think is the real future. That's about personalizing the experience with the consumer. It changes the game. Now, banks are more or less places to do transactions. Okay, you have a low interest rate? I'll get my mortgage there. I'll get my credit card here because you're giving me some points. It's a commodity. And what banks are looking for is an ongoing relationship where every day, you're going to want to do something with me. I have your student loans for your kids, I'll give you a car loan. Don't go any other place.

Today it's very loose. We as consumers think, who cares about a bank? I'll go wherever the interest rate is, or the points are. The CEO over there, Angelo D'Alessandro, he proved that this can be different. A bank could be radically different than what we think a bank is.

Moser: I think you said the key word there in personalized. That really takes me to my next question. We live in this day and age where data is everywhere. You said it yourself, your data is your moat. Obviously, today, privacy means something completely different than what we knew growing up. Privacy has been a very hot-button issue these days. To be clear, not only do you have these big customers, you just listed off a few major ones in American Express and Citibank, but you're also partnering up with a lot of big players in the tech space, like Facebook, Google, Apple. We've seen how this privacy conversation has taken place with all of these names. Given that your data is your moat, and you're working with these companies, in the age we're living in now with privacy being such a hot-button issue, what are some of the challenges and the opportunities in making sure that that data stays protected, not only for the consumer, but for you as well?

LoCascio: The thing that I think makes us very different than most technology companies in the world is, we really are representing the brands. The brands are our customers. We're B2B2C. The brands are on our platform, and their consumers come through our platform to reach them. We always have to adhere to what the highest level of security and personal data is and managing all that from the brand's perspective. Believe it or not, the brands have a very high bar. If I'm a bank, I'm working at some of the highest levels when it comes to privacy, when it comes to security, because I know if that gets broken, you as a consumer may leave me.

We always take it from their perspective. We actually run our own clouds. We run six clouds around the world. We can't be on Amazon Web Services because they're not even secure enough for the conversation of data we have.

Moser: Oh, no kidding?

LoCascio: Yeah. So, since the beginning, we've always run our own cloud, because banks won't bank with us, they won't be on our platform otherwise. These are things that we look at. Once again, the consumer is someone who's coming in and have a conversation, and we have to secure that. If a consumer puts in some personal information into the messenger, what we do is we mask it, and then we encrypt it and then we transfer it. We've done that from the beginning. We have a very, very high bar because the consumers are not products to us. To Facebook and stuff, the consumer is a product. To us they're not products, they're part of generating the conversation. We have to protect them and that conversation.

Moser: Yeah, I'm sure that puts the consumer at ease there, knowing that. I didn't realize you guys were in your own cloud infrastructure. That's interesting.

LoCascio: Yeah, we've done that since beginning.

Moser: Man, I didn't realize that. You talk about your data being your moat, and that really is the ultimate way to protect your moat. Even if you have to pay a little bit more for that, it really gives that added sense of security, doesn't it?

LoCascio: Yeah. We're a premium platform, so we get a lot of money to work with our customers, and we provide a lot of value. That value and that value chain comes from everywhere, from the network operations all the way up to, we're always innovating. We're the first to do things in the world. I don't copy other people and try to make things cheaper, faster. I've always run a company where we're inventing new things, working with the customers.

More importantly, and I've seen this especially in the last two years since we launched the messaging platform, I'm so proud that our customers are what I call first. They're all very proud to be first at doing something. T-Mobile was the first brand in the world to go scale with messaging. Citibank was the first bank to do messaging through Google and what they call RCS on Android devices. Vodafone Germany was the first company to go scale at WhatsApp through the contact center from voice calls to WhatsApp. There's so many firsts. We have a guy out there who works for Aramark, and we're doing the first in-stadium ordering of food and beverages from your seat with messaging. In order to do first, we always have to be running at such a level of expertise and quality, because we're trying to get people to do things in their own organizations that are going to put them on the line. They're innovators, and we can't fail them.

Moser: I was thinking about that, given the nature of your business, essentially, the nature of your business is understanding customer service, being able to put that customer first. You understand how hard it is, you understand how to do it well, and when you do it well, the customers that you're bringing in, they recognize that and they want to stay with you. I would think that creates this virtuous cycle that just continues to grow. You established that moat over time to where not only your data is your moat, but really, the service that you're providing your customers is, too.

LoCascio: Yeah, and that's why, once again, I think we take an extra-special view of the consumers, our customers, their data, the quality of our service. Cutting edge, every time we're out there making something new, I often say, you can get pretty beat up because you're putting out new technology, but even if we're doing cutting-edge stuff, new stuff that's never been done before, we have to keep improving it every day. We work very hard at that. That's why we have the biggest brands in the world. That's why they trust us to provide a customer, consumer experience. We're enabling their consumers to connect with them. In some cases now we have 30% to 40% of their consumer interactions going through our platform over voice. That's a lot. And they're like, "You cannot fail. You have to be able to provide a high-quality service in this world that you guys have created."

Moser: As a CEO, as a leader of this company, how do you combat that short-termism on a quarterly basis? You have to get out there, release those earnings, then you have to go do the call. I've read the earnings. I've listened to the calls. You do, you're able to paint that picture of a longer-term road to success. What are some of the things you do to combat that short-termism?

LoCascio: As the CEO of a company -- as you know, we're the best-performing company because it starts with, I'm still the largest shareholder in this company. And that's been that way since I founded it. I have a lot to gain and a lot to lose. I'm aligned with our shareholders.

Now, the difference is that I can't go in and out of my stock every week. You know what I'm saying? I don't trade my stock like that. If you're a fund manager, you can trade in and out of stock, and you have the right to do that. That's a different business model. So I think, by nature, I'm always thinking about, What can I do to maximize the value of that? Sometimes it is by the quarter. I will live by the quarter. Right now, we're living by quarters because we are in pure execution mode. I'm not living by it because I'm trying to live by, like you're talking about, the quarterly thing. I think we need to deliver them very quick results now, because that'll make us win the game.

Now, if you dial back five years ago, you'll see I cut earnings in half. We went through a very painful public experience of people not believing us, analyst stuff, shareholders come in. But I found, I just was straightforward. "Here's the vision. This is what we're going to try to do." Sometimes I could not paint the vision because, for competitive reasons, I don't want to give out everything five years ago. I think you go through this concept of, at the end -- and that's how I always think about it -- at the end, whatever that end is, I believe this company will be worth billions and billions of value to the shareholders, including myself. I think this company could be one of the biggest companies in the world. That's how I've always tried to run.

Now, we're not right now. I get it. But if you work with that viewpoint, you're constantly trying to change, improve yourself, improve the company, and work toward that longer thing. Today we look great. We're at an all-time high. I know that. I know that could be very short-lived. But our vision is not short-lived. We've always been committed to it, as a company, for right or wrong or short-term or long-term. We've been committed to a vision that we will digitize communication between brands and consumers. We will make that easier. We will give consumers their time back. And we're going to change the way in which that experience happens. We're going to be the leader in that. That just hasn't changed. We're committed to that. As long as I'm here, we're committed to that vision.

Moser: That's a really good point. We always love to see founders with skin in the game. Just like you said, you're aligned with shareholders because you essentially are the same as them. You can't get in there and trade in and out of that stock on a quarterly basis, so you have to take that long-term view. And that's good, because clearly, you go back five years, yeah, you guys were in a little bit of a bind there. But if you look over the course of that five years, you know what? You're outperforming the market, and it looks like things are only getting better. You're doing something right.

LoCascio: I'd like to think we all have purposes in life. And, look, we're very much living in a world of short-termism. Everything looks like, in five years, you're a billionaire. Everything's about billionaires and tech billionaires, and five years, you're going to be the next Facebook. Why aren't you the next Facebook? Trust me, even for myself, I've heard a lot of that over the years. Why has it taken you 20 years to do this? Why aren't you bigger? Why isn't this company the size of Salesforce? In my world, it's always Salesforce. And I'm like, I'm not Salesforce and I don't want to be Salesforce. I admire Marc, he's done a great job with Salesforce, but that's not our destiny.

Now, at the end of this whole thing, if we get to where I think we get, I think everyone will be very happy, and I think everyone will be very proud. I'll be able to show the world that if you put in the time and you're committed and you're persevering, ultimately, you will reach your goal. And financial rewards just follow always. Market caps follow. If we do good for our customers, our market cap will follow. That's my thing. We're just on a different journey. Our journey was never about five years. If you looked at us from the beginning -- you guys have been following us actually from the beginning-beginning, when we went public, after we had to restructure the company's during the dot-com downturn, all of that. We've been through a lot to get here. But that makes us prepared for the big things. And we're here today, I think, looking at the big thing. We're staring at the big thing, and that's conversational commerce.

Moser: That's great perspective there. Now, let's pivot a little bit. I want to talk about something I know you're really proud of, and I can understand why. Our listeners, I know, will love to hear about this. You're involved with an initiative called the Equal AI initiative. Is that right?

LoCascio: Yeah.

Moser: Tell us a little bit about that.

LoCascio: Equal AI is, obviously, we're using a lot of AI technologies. Actually, I think we've done a really good job at getting people in organizations who normally wouldn't be exposed to this. In our case, we work with contact center reps. They're the ones creating bots, they're the ones using AI, which is really unique. You would think only data scientists and engineers can use AI, but we built our technology so that the people in the contact centers can use this technology to better their work.

I started to see that there's a lot of challenges with AI in the world. It's in many different places, everything from Amazon Alexa, we talk about gender. It's a woman. It's a woman's voice. Why was that created? Now, we know there's problems with children watching their parents give commands to this woman in a machine. We know the bias with data sets. There's all this bias with data sets, and we're reading about this every day. Well, I was like, instead of just watching this from the sidelines, I said, "Let's create an organization. Let's bring people together." We've got Jimmy Wales, Wikipedia, and Arianna Huffington. And then I brought on Miriam Vogel, who's worked for President Obama, and she ran the bias training programs for the federal law enforcement groups, the DEA, FBI, she created all the curriculum for that. I said, "Let's get ahead of this. Let's start to create some frameworks and let's invite people in, let's invite companies in, let's invite other leaders in, let's invite a diverse group of people to help shape how this could be." It gets a little tiring hearing Elon Musk talk about how AI is the basically the existential threat to humanity. Like, I get it, but there's also a lot of things that could happen as long as we're more transparent about it and we don't leave it in the hands of just technologies behind the technology door. That's our goal with Equal AI.

Moser: That's great stuff. Listen, I want to be respectful of your time here. I know you're a busy guy. I'm going to wrap this up. The way we like to wrap up our interviews is, we're big readers, we love to read, our listeners love to read. We're always looking for a good book to read. I'm going to ask you, Rob, do you have anything good you've read lately? A book recommendation that we might want to go pick up?

LoCascio: I'm reading a couple right now. I'm reading the book Zucked, the Roger McNamee book you probably know about. Zucked: Waking Up to the Facebook Catastrophe. I think it's important, especially being a technology leader, to read a book like this. I fundamentally believe, like he does -- I don't want to make a comment on Facebook or Zuckerberg. I don't know Mark Zuckerberg on that level. I think he's built an amazing company. But there's something fundamentally wrong with the technology leadership today, that leadership, the Googles and the Facebooks and Amazons and even Apple in certain ways. I'm 50, and I grew up in an era of Bill Gates and Larry Ellison and Steve Jobs and Scott McNealy and Andy Grove. These guys were my heroes. They were ruthless competitors, but they were always working toward building these great companies, but it wasn't at the expense of society in many ways. They competed with each other, they were ruthless in many ways. Obviously, Microsoft, in some ways, the government stepped in on them. But you always felt they were trying to give the world things that would make our lives better. I don't feel like they ever looked at consumers or the general population as products that should be managed like products and marketed like products.

I don't know how we got here, but it's become a place where there needs to be a new voice. We cannot keep going with the winner-take-all mentality. And I get it. That's capitalism. I'm a capitalist. And I'm a competitor, trust me. But I do not believe the current frameworks are going to work.

I'll tell you a couple examples. We have customers who will never be on Amazon Alexa. They'll never, ever be on there, some of our brands, because they will not give their business and the insight to Jeff Bezos. That's going to prevent them from being in homes, potentially. There are people who won't advertise on Facebook because they know their data is going to be viewed. There are things going on that just aren't good for our overall business. My greatest concern is that the tech CEOs -- and I'm one of these -- we're going to start being looked at in a very negative way. That's not what we're all about. It's not what I'm about.

It's a good book to look at, How did this happen? How did this happen? How did Facebook get there? I just wish that the leadership would just kind of mea culpa and be like, "Look, it's time for change," versus everybody stopping and hoping it'll go away, or hiring people to lobby in Washington to make it go away. Ultimately, as a citizen, I feel like there's something fundamentally wrong with these businesses. It has to stop. So that's the book I'm reading now.

Moser: I think a lot of people would agree with that.

LoCascio: He does a great job. He has good insight about the stuff.

Moser: Yeah, I think a lot of people would agree with the sentiments that you just laid out for us there. Listen, Rob, this has been a real pleasure. I appreciate you taking the time out of your day to speak with us. I know you you're a busy man. What you've done with LivePerson to date is just phenomenal. I can tell from talking with you, the passion that you have for this business. Thanks so much for taking the time, Rob! I hope to talk to you again soon.

LoCascio: Thank you. Have a good one. Thanks, Jason!

Moser: Joining me in the studio via Skype now, as always, is certified financial planner Mr. Matt Frankel. Matt, how's everything going?

Matt Frankel: Just great. It's a beautiful day down here. It hasn't rained in four days, which I think is the longest stretch we've had all winter. It's a good time in South Carolina.

Moser: [laughs] Man, I tell you, we've got some overcast weather up here, but it seems like spring is just around the corner. Maybe just a few more days of this winter stuff to deal with. I tell you, I was watching the players on a golf championship. It got me thinking about Augusta. Already thinking about Augusta, Georgia, the Masters. Just a lovely time of year, not too far away.

Let's steer away from golf here for a minute and talk about banks because this is Industry Focus: Financials. Matt, I set this up in the beginning of the show here. We were reading through an article last week about Wells Fargo's CEO, Tim Sloan. It looks like Mr. Sloan got a little bit of a raise for 2018. I guess the question that's on everybody's mind right now is, Did he really deserve it?

Frankel: I'm going to argue for and against this. Before I start getting hateful tweets, just bear with me for a second.

First of all, just to put everything in context, his total compensation went up to $18.4 million, which is a million more than last year. Whether you think $18.4 million is too much for any one person to be making, that's another issue. But the raise is the issue. His base compensation really didn't go up. His base salary of $2.4 million is the same as it was last year. His stock-based compensation actually went down, which makes sense, because Wells Fargo's stock has done so terribly. Where he got more money was, the board decided to give him a $2 million bonus, which he didn't get at all last year. That's the issue here.

Now, first, I'll argue for it. To put it in context, Sloan is still actually one of the lower-paid bank CEOs, even with this raise. Jamie Dimon made $31 million dollars last year. Brian Moynihan made $27 million last year. But, to be fair with those guys, they weren't running banks that had 10 different scandals and all kinds of stuff like that going on.

We don't know what the bonus itself was actually for. This is the argument where I want to know a little bit more before I rush to judgment. If, let's say, when he took the job as CEO, he agreed to a certain amount of travel days, a certain amount of times testifying in front of Congress, things like that, and he wound up having to do more, maybe the board decided to compensate him for that extra work. I know at The Motley Fool, sometimes I get assigned a project that turns out taking twice as long as my boss intended it to, and they wind up giving me a little bonus for it. So maybe it was something like that.

Moser: Sure, a little overtime. Makes sense.

Frankel: It's really tough to make the case that Sloan has not put fixing the problems at Wells Fargo as his No. 1 priority. If you read either of the last two annual reports, they issued a separate report earlier this year about all the ways they've changed the culture, some internal changes they've made. So, those are the arguments for why he might deserve a bonus.

Now, having said that -- again, don't get on your Twitter just yet -- the arguments again against it are, one, the bank still hasn't made enough improvements to satisfy the Federal Reserve, whatever the Fed's looking for. Remember, there's that big penalty that's still in place. Wells Fargo is not allowed to grow. So this guy's running a bank that isn't growing.

Moser: Good point.

Frankel: [laughs] Right. No. 2, it's not like Tim Sloan was brought in from the outside to fix the problems. He was already there. Tim Sloan was the president and COO of Wells Fargo while all these scandals were going on. In a way, it's like he's cleaning up his own mess. This is why politicians like Elizabeth Warren think he should be fired.

Moser: I think you make a good point there. I was going to maybe cut him a little slack, saying, "Maybe he's coming in and helping clean up a culture that obviously was out of whack." But the fact remains, you're right, he wasn't hired from the outside. This is really partly a mess of his own making, whether he was a CEO or CFO or COO, it doesn't matter. When you're in that executive suite, perception is everything. There's no question that he had a part to play in what really broke this bank to begin with.

Frankel: Right. That's why Elizabeth Warren and a lot of other politicians think he should be fired, not getting raises. It's his mess! In a lot of people's minds, he should be lucky to have a job at all after all the thousands of consumers who were taken advantage of, admittedly, by the bank.

There's some gray area here. Like I said, he's still on the low end of the pay scale for bank CEOs. He has done a good job, in my mind, of trying to rehabilitate the bank's image, making some cultural changes and things like that. But on the other hand, has it been enough? Maybe not. And it's his mess to begin with. So, like I said, I'm torn.

Moser: Yeah. It's always worth mentioning, it's not like you just turn this ship around overnight. That's a big company. Clearly there were several points of failure. To clean that mess up, it's going to take a while. I feel like they probably would have been better served to bring in someone from the outside. I think that's an easier message to communicate. But they chose to go another way with it. Fine, whatever. When you do that, you have to recognize, this is going to be a problem that you're going to deal with. Again, perception oftentimes is reality. When you have that headline saying that the CEO of this bank has just been screwing everybody left and right, and just got a raise, people are going to be mad. I get it.

So, yeah, make sure to tweet @TMFMathGuy for all of your controversial -- [laughs] Just kidding! Don't give Matt a hard time! I think you played that one very well, Matt. A fair look at both sides of the coin there.

Let's jump in Twitter here really quick. We got a good question over on the Industry Focus Twitter feed yesterday, or maybe the day before. It was from Jerry @GSLOShake. Jerry asks, "Can you explain why conglomeration is viewed as a positive for companies like Berkshire Hathaway, Markel, and Boston Omaha but not General Electric? Is it all about the insurance angle? Or is it more about a track record of smart acquisitions? Thanks for the great podcast."

Jerry, thank you for the kind words. Thank you for listening. And thank you for the question. Matt and I agreed this was one we wanted to get on the show here today. It's a fun one to sit here and talk about a little bit. Matt, what's your first take here?

Frankel: There's actually a couple of different questions contained in that tweet. Let me tackle them one at a time.

First of all, it's not that conglomeration is a bad thing in GE's case specifically, or because it's a noninsurance company. The problem with GE is leverage. As of the last quarter, about 75% of GE's capital structure is debt. That's not sustainable. It's how they conglomerated. In the early 2000s, GE Capital, the finance arm, started to get a little bigger, and then started to take on products that it was never really intended to do. It was really just meant to supplement GE's other businesses, providing financing for things they already make. But they got into subprime mortgages and things like that. Any company that got into subprime mortgages in the 2000s was not doing well. It's not that they didn't work. I would point to a company like 3M as an example of a noninsurance conglomerate that really works. 3M has healthcare operations, chemicals, consumer goods, you name it. It's a question of leverage. That's point No. 1.

Point No. 2 is, the insurance angle, it's not necessary, but it definitely helps in terms of the leverage financing angle. Insurance companies are a provider of very low-cost or no-cost, actually, capital. Warren Buffett mentions the float from time to time, meaning that all the money that is brought in from his insurance businesses before it's paid out, in the meantime, can be invested for the company's benefit. They don't have to pay interest on this money or anything. Imagine if someone gave you $100 billion that wasn't yours, but you got to keep every cent that was made by investing that money. That's a lot of capital that's essentially free. That's why the insurance business is really the fuel that helps some of these conglomerates that you mentioned.

Moser: One point also to remember with insurance companies is, because they are beholden to certain guidelines, rules, and regulations in regard to how some of that money is invested, some of that money has to be placed in low- or virtually no-risk bonds or other fixed-income instruments. Now, not all of it. I'm not saying all of it. But they do have to mind that. There is a little bit of a risk tolerance there, you could say. You know that they're not going to completely go off the deep end and just make all of these bad investments with all of that float. There's some protection there, wouldn't you say?

Frankel: Yeah. That's a very important point. You have to be good at running an insurance business for this model to work. Obviously, Warren Buffett and his team are. Markel's another one that's really good at running insurance businesses. Boston Omaha is up and coming, it remains to be seen. I'm hoping that they eventually -- I mean, not just because I'm a shareholder -- I hope that they grow into an insurance operation like Markel or even Berkshire.

You have to be good at running an insurance business first. If you're not running an underwriting profit, all the float in the world isn't really going to help you that much over the long run.

Moser: Yeah, that's a good point. It's worth noting, Boston Omaha and Markel are businesses that, they're running their businesses in that Berkshire mold. They look to Berkshire Hathaway as the North Star. They're thinking, "These guys did something and did it really well. We'd like to do the same thing there." So they're running their businesses with similar philosophies in mind. Certainly Jerry picked out a couple of good examples there in Berkshire, Markel, and Boston Omaha, and looking on the flip side with GE. Clearly GE was mismanaged from a number of perspectives. All great insight, as usual, Matt. Appreciate that. And appreciate the question, Jerry.

All right, it's that time of week. We're going to wrap things up here, Matt, but before we do, we want to give our listeners one to watch. What is your one to watch this week?

Frankel: Fidelity National Information Services, ticker FIS. They just announced they're acquiring Worldpay, which gives them an instant No. 1 market share with payment processing. If you could buy an instant No. 1 market share in the up-and-coming payment-processing business that we're always raving about, that's a pretty good move in my book. If you're not familiar, Worldpay is the No. 1 market share in merchant payments, primarily focused on e-commerce. They process about 40 billion transactions per year -- not dollar amount, 40 billion individual transactions.

This is a big, big merger. They're getting $35 billion for the company. It's a cash-and-stock deal. As would be expected, Fidelity National's stock actually dropped a little bit after the merger announcement. That normally happens. Usually, the acquirer drops a little bit because they're paying a big premium, they're taking on some debt, some uncertainty in execution risk in actually achieving the cost savings that they're claiming. But they already have a big market share in helping banks process credit card transactions, help service auto loans for banks. This also gives them the No. 1 market share in payment processing worldwide, which in my mind is a really nice business combination going into this cashless society over the next decade or two.

Moser: All right. I'm going to go with another company that we cover a lot of here -- a couple of companies, really, that have made a little bit of news here. I called out MercadoLibre a couple of weeks ago. This week, I'm going to go with PayPal (NASDAQ: PYPL). If anybody out there was following the news, they would have seen that MercadoLibre recently raised close to $2 billion in equity offerings here, which on its own is impressive. I think that was a good move. They took advantage of the share price being nice and high at this point in time.

The neat thing was that PayPal invested $750 million in MercadoLibre. That, to me, is telling from a number of angles. First and foremost, we talk about MercadoLibre as more than just an e-commerce company. It is certainly a payments company as well. We saw this most recent quarter, their platform, Mercado Pago, is processing a lot of dollars through that network. Granted, when you compare it to something like PayPal, it's a drop in the bucket. But you have to start somewhere. It's nice to see that PayPal and MercadoLibre are partnering up there. It's always interesting to me to think about how so long ago, there was this connection between MercadoLibre and eBay, and we know that PayPal came from eBay, and now there is no connection between eBay and MercadoLibre, but there's now a connection between PayPal and MercadoLibre.

All to say, you probably want to invest in PayPal and MercadoLibre and just leave eBay alone. Anyway, I think it's just a neat angle there with PayPal. Good to see that they're investing in that global payments network, and good to see MercadoLibre taking advantage of it.

With that, we will call this a show. Matt, as always, I appreciate you taking the time to jump in with us this week.

Frankel: Of course, it's always great to be here.

Moser: All righty. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Today's show is produced by Austin Morgan. For Matt Frankel and Rob LoCascio, I'm Jason Moser. Thanks for listening and we'll see you next week!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jason Moser owns shares of Amazon and Markel. Matthew Frankel, CFP owns shares of Apple and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), Facebook, Markel, MercadoLibre, and PayPal Holdings. The Motley Fool owns shares of General Electric and has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple. The Motley Fool recommends 3M, Boston Omaha, eBay, LivePerson, and T-Mobile US. The Motley Fool has a disclosure policy.