Good Investing Talks - Jake Taylor, how does Journalytic help investors?

Episode Date: January 11, 2023

Jake Taylor of Farnam Street Investments has spent a lot of time building Journalytic (https://journalytic.com/). Journalytic is a journaling tool for investors. In this podcast, we discussed Jake's background and what he has built with Journalytic.

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And now without further ado, enjoy our video. The audience of Good Investing Talks, it's great to have you back. Today, I'm having Jake Taylor on. You know him from some other podcasts. We will go into later. But today, it's mostly, we want to discuss two things. One is his new baby, journalytic. We also do a walkthrough for this.

So if you just want to see Generalytic jump to the timestamp, where we start with the walkthrough. But first of all, I want to use the chance to get a bit more knowledge about Jake and how he thinks and what also influences his production of journalytic and his investing style. So let us start with this. Jake, it's the morning, California. Thanks for having me on. Yeah, a little bit early, but that's okay. I appreciate having me on, Toman.

I was trying to remember back when I first heard about you and your show, and I think it was probably the Dennis Hong interviewed, a couple of them that you did, and I was really impressed with it. And so this is a real treat. Thank you. Thank you for the nice words. And I hope we will also do a good interview. I hope with you as a guest, it just flows.

You have, like, when I looked into what is public on you, I think I got the feeling that you have a kind of influence. entrepreneurial spirit, but you started your career in totally the different setup. You were, let me get it right, power systems operator. You're working at a power systems operator running for the grid of California. So this is, I have friends also doing work for Wattenfell, which is a German power operator. It sounds like this is the perfect bureaucracy. So why and when did you decide to quit this for a more entrepreneurial endeavor?

Yeah, I did start my career off in the energy industry. And it was a fantastic place to work. I mean, I loved all the people. It was an awesome career. But it wasn't really my calling. And I didn't realize that until a chance, accidental lunch with Warren Buffett. And the backstory of that is that while I was working at the power place, I went to go get my MBA working on or doing the schooling on nights and weekends. So it was like a working professional. program. And my first year in that program, they happened to win. I won a lottery to go back to Omaha and have that Buffett student experience that he's done with a lot of schools over the years. And so that was a huge nudge for me in, you know, changing my career path because I realized I was so impressed with Buffett. And when I got to learn more about him, I saw that, oh my gosh, like this style of investing, like he just wants to get a good deal on something. That's all that that actually is what's happening. And I had always had that same mentality in, you know, never wanting to go pay retail for something, always like buying secondhand on eBay or in the

United States, we have Craigslist. And so it made perfect sense to me that buying partial ownership of businesses using that same mentality just happened to go under this name called value investing. I just didn't know there was a name for it until I had met Buffett. And so it took me a number of years to transition from one career, which was running the power grid, into professionally managing money but eventually i made the leap and uh haven't looked back since i think there's already a bit of content out there and i just want to focus on the bit of underfollow topic in this episodes and add to this stories about you out there um sure one thing that i would perceive as a bit underfollowed is your are your private podcast you're part of value after hours a great

format that gets a lot of you um with good reasons and you have done to two kind of private podcast, I would call them. It's five GQ, five good questions, and the highcast. What kind of podcasts are they? Well, so to back the story up on that one, so it was probably, it was 2013 time frame, and I had this idea for a podcast where I wanted to interview authors about their books.

And it stemmed from watching, you know, an author would go on CNBC or, you know, one of these kind of talking heads shows. And they would just get talked over just when they were about to explain the interesting part. They'd cut to commercial. It would drive me crazy. I was like, we just shut up and let the person talk. Like, they're about to say something really interesting. And so I thought, well, rather than just complain about it, like, why don't I give them a format for that?

And so, but at the time, I thought, oh, my God, I'm so late to this podcasting thing already. Like, everybody's, there's already every podcast topic that could have been imagined. And this was, you know, 2013. So I decided, well, what the heck? I'll do a couple episodes and see if anybody likes it. And so I started interviewing some authors and publishing them. And it was just really fun to do. It was great to talk to the authors.

It forced me to read books that I maybe wouldn't have read otherwise. And to get a chance to then ask them a couple follow-up questions about their book was like a really interesting intellectual exercise. I read with a much greater urgency of trying to understand because I knew I was going to have to ask some good questions. Whereas it turned what was a very passive thing of reading a book into a more active endeavor, which is, okay, you're going to have some homework at the end of this. You better come up with some good questions.

So that forcing function is kind of a common theme throughout all of my projects is how can I use a forcing function to make myself improve on a particular topic? This is five good questions you're describing right now. And the hike cast, what kind of format was this or is this? So the hike cast was another little side project spinoff of five good questions where I noticed that when I'd go on a hike with a friend, I felt like we would get into these deeper topics faster. It would be very interesting conversations.

And I thought, God, this is the real stuff. This is what people would want to hear. And I don't know if like the vulnerability comes out because maybe you're in nature or you're, I think part of it actually is that you're standing next to each other and not facing each other. And that's like facing each other is kind of a confrontational just like layout. Whereas if we're walking next to each other, you have like a common goal. There's like this bonding experience. And so I felt the depth of the conversations could go in places where it might not otherwise. And it proved true. And if they weren't such a pain in the

ass to edit and create, I would, I'd probably do a lot more of them. But I've just been busy with other projects. And so it's been a little bit on the back burner for a while. you did the editing yourself i did yeah okay it's a pain which was probably a mistake i should introduce it to my editor maybe it helps you yeah i mean they were very much labors of love too i mean i wasn't making any money i didn't sell any ads even it was just purely like something i did for fun to to meet and talk with people so with five good questions you're focused on books so what kind of role do books play for you as an investor in the new investing process I mean, books are, I think, are still a very underrated mechanism, technology for transmitting information.

And, you know, like we have podcasts now. We have Twitter. We have blog posts. And a lot of times those feel ephemeral. Like, they're short term in nature. They're a bit of a sugar high often. And I feel like books are still represent this kind of meat and potatoes and vegetables. and part of it is that I think actually

with a book you consume the information on your own pacing like you're reading like you stop to pause you contemplate a little bit before moving to the next section it's an active experience whereas podcasts can be there's like a little bit of friction to pause a podcast and then go write a note and so maybe you're like leave that marginal interesting thing out of your notes and off the table and maybe that like extra thought that you would have

put in, you sort of skip over because the next piece of content is coming in. It's like on this treadmill. And so I think it's still very underrated to use books. And like for me personally, I use books to solve whatever problem it is that I'm tackling at that moment. Even for instance, like I, when I was writing a book, I was having a hard time telling a story around that book. And I realized, well, who tells good stories? And I thought, well, Hollywood does. So I went and read a couple books about screenplay writing and that helped me to like craft a story that was hopefully better than what I could have come up with on my own. I almost view books as like this, these things that I load into my RAM of my brain to then like go do the computational, you know,

tackle whatever it is that I'm trying to figure out. Have you built a certain design for you or environment to read books in a good way because I know it's like the everyday life it's hard to keep this kind of patience and also also the opportunity to write things down in a good way. Yeah. I'm very much a physical book reader still, even though like environmentally, I hate it. It's suboptimal in a ton of ways, but I still like to actually write in the margin of a book when I'm taking notes. And like that marginalia is very important to me. And then I will then go back through the book after I read it and then get my notes out of it. So there's kind, it's like, it's much more laborious process than, you know, if you have a Kendall and you like clip something and then send it to a, you know, a note taking app. That's cool. I think it's great. Like, but I, my, my personal processing of that information is not as in depth as when I do it on a piece of like actual the physical book. And I think the medium sometimes influences how seriously you take the message. So, you know, when I look at it like if I'm reading it on my computer, for instance, it doesn't feel like it. It doesn't feel like it. carries the same weight as when it's in the actual physical book.

And I think I weight it differently just because the sensory experience is different. Have you ever thought of writing a book yourself then? I did write a book. Published it in... Bad preparation from my side. That's okay. Yeah, 2019, I published a book that was a fictional story that explained capitalization. to like a younger investor, basically.

And it's not a world bestseller? Well, I mean, to get on the long tail of world bestsellers, you know, it's incredibly difficult. But it did better than I ever would have imagined. And I received so many nice notes from people who I really admire, investors who I respected and admired, that somehow the book ended up on their desk and they read it and sent me something nice. nice so all in all it was it was three years of torture to write the book but it was uh since then it's been it's been really pleasantly received and and the feedback that i've gotten has been majority of it's been really nice so it in the end it was on net a win but it was definitely

a very arduous experience to to write a book if there is still a chance to buy it we will put a link in the show notes for people who are interested in getting the book yeah it's on it's on Amazon in print digital and audio book but recently you decided with journalytic to some kind of like go more in the note-taking shovel delivery business so to say and maybe we can start also with screen sharing at in a few minutes but maybe you can help me understand what is the the kind of problem you're solving with journalytic yeah it was exactly that it was it was trying to scratch my own itch of being a professional investor and feeling like there wasn't a tool out there that

was doing the things that I really wanted to do. And the original idea of this, like, I actually just wanted to build it for my own internal use, like at my firm. And after going through it so much and really thinking through it, I started to realize, well, shoot, if I'm having these problems, chances are there might be some other people who are as well. And maybe there's even a commercial product here that could help at scale and be really useful for people. So I mean, we should probably preface the whole explanation of journalytic with a couple of things, because I don't think it's for everybody. Like, there's some things that you have to say yes to for you to want to use the product and get usage out of it. And the first thing is that I believe that it requires a growth mindset.

If you have more of a fixed mindset where you don't think that you can improve at something, where you don't think that if you put in effort, you can get better, then this product is kind of a waste of time for you. But if you do believe that you can get better and you want to get better, I think that there are things built into the structure of this that will help you improve in a much faster way. The other thing I would say is that it requires some self-honesty. So you have to be willing to hold the mirror up and be willing to recognize when you make mistakes and accept them and figure out how to fix them. if you just want to assume that everything is all good and that, you know, it's not your fault or, you know, your decisions are, it's, you know, not, your choices are, you know, influenced by the outside and it's not your fault, then I would say that like this, this may tell you things that you don't want to hear. And so unless you are open to that kind of self-criticality, I think it's probably lost on you and it's not going to be a good fit. So, but if you are self-interested or you are interested in learning about yourself and you are interested in getting better than I think what we've built is, I think it really works. And I could say that after using it like a rudimentary version of this now for more than 18 months. And I think it's really, really helping my own investment game and the process and the speed at which I'm getting

better at it. What kind of pain points that you experienced with other solutions on the market that finally led you to decide, oh, I want to build something on my own? Yeah, I mean, you had some great note-taking apps. I mean, I used all of them at different points, trying them out. But what I always felt like was like, this is all general purpose software. And it doesn't know that I'm working on investments specifically. And so if they were to design something with investments in mind, what would it look like? And that was where we started building from, is how do we take an investor's mindset and the goals that they're trying to accomplish and start from that at the very beginning and build from there, as opposed to what we all do now is take a

general purpose software like a notion or a Rome or, you know, OneNote. There's a bunch of them. And then how do I like shoehorn my process into that so that hopefully it gives me what I want? So the other thing I was trying to, so like number one was just like getting more organized. Like get everything into one place. I was writing like I'd have yellow note pads. Some would be at the office. some would be at home. My notes are scattered all over the place. I couldn't search very well through them. Normal note-taking apps solve a lot of that.

But that was like step one was like, okay, you have to get digital with this if you want to have good search capabilities and tagging, backlinking, like, between entries. The other aha that we had was that using a journaling interface as the way to get your notes in, take journaling to the next level about your own investments and your process is the interface with the brain is what we're going for like how do we get your thoughts into here so that we can

then help you to recognize where your where your shortcomings are and how you might be able to fix them you already named them a bit but maybe let's call them out a bit the goals that are embedded in the software so what are the goals that are embedded in journalitic yeah the goals are record in high fidelity what you were thinking in the moment so that you can go back later and see what was your thesis what were you thinking what did you get wrong and it's so wickedly difficult to just try to keep it all in your head like your brain the way our memories work is we will rewrite history to protect our egos in a way in how we remember what we thought we knew at particular times. So to move that out of your brain and into somewhere where you can go back

and read it later is such an advantage in getting better and understanding the mistakes that you're making. So that's number one. It's just like, let's get a high fidelity record of what you were thinking. Now, number two, at the end of the day, what we're trying to do is make better decisions. And much of the software is just about recording your decisions and then getting feedback on those decisions. And so we've built where you can input a reason. And so we've built where you can input a reason code for any decision that you're making, whether it's you're buying, you're selling, you're passing, or you're holding. And you could even include your own, like, custom decision types, but those four are the sort of the main categories. But putting in a reason code at the

time that you make the decision will allow you to go back and look at that class of decisions as an entire bundle of decisions. And how did that go on to perform? And now we can start to see, oh, every time that I said I bought for this particular reason, it ended up not working out very well. And so there's something wrong in the logic that I'm using some mismatch between my mental model of the world and what ends up happening. My predictions are wrong here. But I don't know that unless I actually capture the data.

So at the end of the day, a lot of this is about capturing unique data about your investment process that currently is just going unrecorded. Maybe now it's time to jump into the software. So feel free to share your screen and show us a bit like what expect us. Your journal is already quite filled, which is quite good. So this is a demo journal. My personal journal is private, but that's okay. There's still plenty of stuff in here that we can talk through to show like what's happening.

So the first thing is that it uses like kind of the Twitter convention of like a cash. tag. So whatever company it is that you're looking for, you can basically tie your ideas together using the cash tag. And so let's say that you're researching the 10Q and you come across something, you take a bunch of notes about it, you hit post, and it'll just create a new journal entry for that. And you can see all these different journal entries that we've created. You could shrink it down into just showing you the headers so that you can kind of look back and see what you were working on. And this is sort of just basic note-taking stuff. Now, any of these names, you can click on it, and it will take you to an idea page for that.

And here's where it starts to get kind of interesting, is you can start to see recorded journal entries overlaid on the price chart. So here's all the different Amazon entries that we've done in this particular little account. And you can also go through and look at all of your different journal entries that you've made for Amazon. And we can even go a little bit deeper into our process here, and we can look and see, like, when was the last time we wrote about this, when did we create this first entry, what's the price done since we started looking at it? Where is it in our process? How many journal entries have we done on this? Record our decisions on, like, different decisions that we've made.

This one, we haven't actually made any tags yet, but you could see, like, what tags have you used with this name a lot? So maybe, like, you could see here, if you're using red flag or green flag, like, you'd see, oh, maybe. man, there's been a bunch of red flags accumulating here. I should probably take a look at this again. Or other names that you've used in association with that. So this is like the first pass of looking at all of your different ideas that you're keeping track of. Over here in the sidebar, you can look at your different tags that you want. It's sort of like a shortcut menu, different names.

You can save individual journal entries. So where it starts to get more interesting, and here's where we go from just a simple note-taking app, into like, okay, this was built for investors, is we can look at, we have the special actions here. And these are all investment specific things. So recording a decision is the number one thing that people are doing right now in the app. And, you know, let's say we're recording a buy decision on today's date for Amazon. And, you know, we can put in a reason code and we decide, you know, we like a lot of downside protection on this, you know, throw in the price and the number of shares that we're buying. And then put in a little bit of extra.

reasoning that's kind of like clues for yourself to go back and look and read about it later. And let's just say, like, love Bezos here, right, even though he's not running it. And then we'll post it. And now we can go and see on our Amazon price chart. And we can even filter here by decisions. And we could see we've made two decisions here. We made one back here when we passed on it. And we made another one here where we decided to buy it. So you can start to see your whole life of ownership of a business. And then on this Ideas tab, you can go through and see all the different ideas that you have and organize them by where they are in your process, where they come from.

So that's another interesting thing, is looking at where is the source of all your investment ideas coming from? Who is the friend that's giving you the good investments and who's giving you all the duds? It would be kind of interesting to know that, right? I'm the one with the bad ideas. I think we're all guilty of it at different points of time. And then we can look at all of our decisions here. This actions tab is sort of like review of all of your data that's been structured. And so we can see like, hey, we passed on Carvana in January of this year.

And it turned out like maybe that was a pretty good idea. Yeah. So some of the other things that we included in here for investors specifically, you know, running a checklist is an important thing. So we actually have built in 45 different categories of checklist in our library, and there's more than 300 different questions. And they range from different behavioral biases that you might be running into, to accounting red flags, to different asset classes, actually, or even just more general, like, run of the mill, like, okay, I'm listening to a conference call. Here are the things I need to pay attention to. And of course, you can build your own as well and create your own custom checklists, use our items in with your own and blend them.

And then when you tackle an idea, let's say, I can insert a checklist really easily. And let's say I want to look at, I'm going to run Warren Buffett's checklist on this. Okay, here's all the stuff that Warren Buffett would ask himself about an investment. And you can fill in whatever these answers and say, like within my circle of competence. And then we'll just hit post real quick. And obviously we're not going to have all of these different questions. But we can then have a record when we go back and look at this that shows,

oh, okay, I answered this particular question and here's what it showed. And you could actually sort of keep track over time if you run the same checklist on the same companies to see how your thoughts are evolving over time, which is actually a pretty interesting intellectual exercise. There's some other more advanced features in here, like creating a self-contract. So this is inspired by Andy Duke's work where any time you make a decision, whether it's a buy or a sell or whatever or a pass, you should be thinking about what would have to happen in the world for me to change my mind about this. So let's say that I bought something and I decided, oh boy, like if this, you know, if management does one more bad acquisition, I will decide to sell my shares. So you would be able to structure it in a contract here for yourself where you put in the, let's say, as a kill criteria for management, bad acquisition here, and then the detail would be like, I will sell my shares.

And so what you're doing is trying to give yourself, while you're thinking sober, before you're in the middle of that bad thing happening and it's really hard to think, you're setting up the criteria, you're giving yourself a plan for if these things happen, here's the action I'm going to take. and then you'd be able to go and look and see here are all my self-contracts that I have going right now and, you know, if I can execute on them. Some of it might be a valuation. Like, you know, if Berkshire gets to this certain level, I'm going to be a willing buyer because I know Buffett's doing buybacks at that share price. And then making probabilistic predictions. So this comes from Phil Tetlock's work on super forecasters, which is a fantastic book. So you can make a probability prediction on, let's say, I think there's a 75% chance that Amazon's revenue will grow by 10% per year. Okay. And then I could just hit post. And now I can go back and I can keep track

of my different predictions. And what's really powerful about this is that when you, as opposed to right now, to figure out if you have luck versus skill in the investment game, you have to almost be doing it for more than a decade to see, like, okay, I've taken enough decisions, and now the price is telling me whether I was right or wrong about that. That's like a long, long time to figure out luck versus skill. But if I instead start recording things about the business fundamentals and what I think they're going to be and assigning probabilities to that, I can start to much more quickly accumulate a data set that will tell me, am I demonstrating luck or am I demonstrating skill here? And, you know, if it turns out that all of my predictions are terrible, I'm way off, I'm overconfident, and yet the price is going up, that is telling me that, like, I've just been getting really lucky and actually, like, I'm probably about to get clobbered. And that's really good thing to know about yourself, right? And then the last thing, which I think is really probably going to be the most power of thing, is actually capturing a feeling. So you can do a feeling of whatever you want. Like, it could be about a particular idea. It could be about the economy. It could be a,

about mental or physical. I actually think there's a ton of space to be figured out in this physical. And one of the things that we're building towards is including biometric data from your Apple Watch or your O-Ring or your Fitbit, and having that pulled in here to get your physical, like how is your biometrics indicating

that you are in your decision-making headspace? And having that included to show like, oh man, I got a terrible night's sleep last night. I had an argument with my wife. My heart rate variability is in the 10. Hank, indicating that I am not ready to be making any big, high-consequence decisions. And I should probably take today off and maybe come back tomorrow, and maybe I'm in a better headspace.

And we see that, you know, all the psychological research points to how you can go wrong in your decision-making, whether you're hungry or you're tired or you're stressed out. All of those things are hugely impacting your decision-making. And then when we start getting into the metadata of what were your journal entries that you've been doing? like how much work have you been putting in? So in this dummy account, you know, there's not as much work. But if you look at my personal one, like this entire thing is dark green because I'm,

this journalik lives on my second monitor all day long and I'm always inputting stuff in there. But what we're giving here is a bunch of data points on, you know, how much work have you been doing? Like, have you been recording your feelings? Have you been, how much time, like, you can look and see like, what did I work on last week? Like, what's, what's I, where is my work product? Like, how much time have I been spending in this? It doesn't look very impressive on this one because it's a dummy account. But mine, you know, those green bars are really high.

You know, they're in the 30 hour a week range. Like, what ideas have I been working on? And does this match up with my portfolio? So, you know, I've been journaling a tongue about all these different companies, but are those even the companies that I own? And am I potentially taking my eye off the ball of where my money's invested? It's good to know these things about where you're putting work in. And then eventually, when you have enough data built up to look at your different reasons that you've made investments, this is what I was talking about, analyzing your reason codes to see what is coming out of that.

So, you know, for this, let's say, like, we're looking at the buy and reversion to the mean is my thesis for this, for one particular reason code. Okay, well, I bought Exxon back in 2020 because I thought it was going to revert to the mean. And that worked out really well. So let's say that passing on something and, okay, management red flag, that was a reason to pass. Let's see, like, what was the name that actually led to that? Let me throw on the cell here. Oh, pass, I mean, sorry. Okay, we see, like, oh, we passed on Tesla, and we could actually go to that particular decision and see, like, what were the notes that we took to ourselves?

I was like, what did we say here? Oh, okay, I didn't understand the business, and there were a few red flags around management. Like, I have high fidelity input into what I was thinking at that time now because I recorded it. And then just some other basic stuff about, like, how much time have you been working, different decisions, like sort of like hit rates and how well have you been doing?

Where how many ideas are, like, how many ideas have you been looking at versus passing on? All those kinds of this metadata about your investment process that you can know about yourself. So this is why I said at the beginning that you really don't want to tackle this unless you're very serious about wanting to improve because it takes work to record all this stuff.

But hopefully you can see that if you put in that work on the front end, that there's going to be a bunch of goodies on the back end for you in reports and different things that you can then learn about yourself. So that's what I built it for, because I wanted to know all this stuff, basically. So one day your journal will say that you have to go on holidays if you're too stressed

and have to relax. So I will like, if I wake up and I know, like I'll look at my sleep score and I'll see like, oh man, that's not very good. I feel tired this morning. I will then journal like today is a no decision day. Like you can do some research, but maybe even then don't push too hard because you might, you might come to the wrong conclusions. Today's not really a conclusion day. Then there's other days I wake up feeling fantastic. I'm ready to take on the world.

And those, like I'll record that and I'll say like, okay, today could be a day where if you got to something, you're likely maybe more insightful today because you're in a great headspace so um that's i think that kind of stuff is super important and i think it's kind of largely ignored when we talk about investment process you had this showed this action triggers or these actions are there already like if the berkshire falls below 1.3 times book value is there already a alert coming by it by it no i so that's something that we're in the process of building is the actual alert for some of these data, like fundamental data triggers. And in fact, I would love to be able to build it such that an AI could read what you said.

And then if it thinks it sees something comparable to that in the 8K or the 10Q or wherever the data shows up, be able to throw up the alert like, hey, I think that you might have had an alert triggered based on this most recent filing. Maybe you should take a look at this section. I think we could build that eventually. I don't think it's like out of the realm of, you know, it's not fully science fiction. But we just, you know, we're very early in this, so we're still building towards those kinds of things. But hopefully we'll have some of the more basic valuation data, like, you know, price to book on Berkshire being a triggering alert.

But as it is now, you can set alerts based on time. Like if you wanted to have a journal entry resurface, you know, a week from now or a month from now, you can do that. And we also set up inactivity alerts based on from an idea level. So if I haven't journaled about one of my companies and I have an activity alert set, it will tell me like, hey, it's been 30 days since you've journaled about this. Do you want to make a new journal entry or 90 days? Which is kind of nice if you're owning businesses. And a lot of times time can go by and you're like, you know what?

I haven't looked at that in a while. I probably should. Like just depending on my own memory to think like, oh, I probably should. Instead, I set alerts, 90 day alerts at a minimum on all of my ideas so that at least once a quarter, you've got to come back and like just kick the tires a little. little bit, right? How social do you want to make the experience? Does it make sense to allow sharing function of notes? Or is it more like that you want to have your personal diary that's not for everyone? I think the answer is yes to both of those. You want your private journal where you

put your most deep, you know, thoughts in there for later reflection. But I also think that like Turning it into a multi-player game with shared journaling is a huge unlock. And one of the issues that you have as an investor always is getting that outside view. Like, you know, being able to show you something about a particular investment that maybe you're missing, and it is hugely important. And you just wouldn't, you just didn't know about it. Like, how would you even know? You know, we all have these blind spots in various ways. And sometimes the most obvious thing to someone else is missed by us.

And so having someone point that out is hugely valuable. However, it can also go too far and be tip into groupthink, where then everyone is like self-reinforcing, you get escalating commitments to an idea, you get social proof, you get commitment consistency bias. All of these things are serious pitfalls for investors as well. So we have to be very, very thoughtful about how we roll out the shared journal functionality so that we don't end up too far in either direction where you're not getting good outside view, but you're also not getting. subjected to a whole washing over of groupthink that then makes you, that's where you end up with stupid decisions is on both ends of that spectrum. So we're still in the process of doing a lot of interviews of investors to figure out exactly how they want, how they want to work together and how we can keep them in that in-between sweet spot. But it remains to be seen. But we're working

towards it. I think we're going to get it. And I think it's actually going to be, we have some ideas that I think I haven't seen anywhere else that I think are going to be actually really valuable for how people work together with their investments. How do you think about data ownership? Because if you said the AI function, it's quite interesting and can be helpful. But on the other side, it's also my secret source I want to have. And I don't want to be placed by a computer who's reading out my information. Yeah. Well, more importantly, like, how do you make sure that, you know, there aren't humans reading your journal entries and front running you or things like that, right? We've seen that with some of the apps with order flow, where, you know, Robin Hood, for instance.

But so that's hugely important to us. And like one of the primary things that we had to tackle early on was how do we handle data security? And the answer is that we have encryption at your browser that then happens first before it comes to the server. And in the cloud, that our data is encrypted at risk so that it wouldn't, it can't be hacked basically and so it's hugely important like we can't read anything that anyone is writing in their journals that's the that's the short answer of it what is what are the most popular popular functions and where are you surprised that people use it in a different way than you've expected so number one like decision recording is the number one uh number one usage feature

so far uh second to that is the recording the feelings which is good i think that's like important I think there's probably a lot of signal in that feeling, noise, that if you could do a better job of capturing it, that you might be able to tease out, you know, when do you, like, it's quite possible that when you have that pit in your stomach and you feel sick when you're hitting the buy button, it's actually like, that means that no one else would ever be buying because they feel sick, too, and maybe that's the opportunity. We actually don't know the answer to that, and it might be idiosyncratic, but it'd be really interesting to know the answer eventually for everybody. so yeah decision recording and and then feelings and then obviously a lot of like just tagging and note taking more generally that happens in there but um some of the surprising thing is you know there's this idea of like revealed preferences and economics where there's what people say and then there's what they actually do and everyone loves the checklists that we've built they say they love it and they look at it and they're like oh my god this is exactly what i need i need to start doing this. But relatively

speaking, the uptake of checklists has actually been kind of smaller than we would have thought based on what they've said. So the actual revealed preference of the action versus the versus the what they said has been a discrepancy, whereas the decision recording is like happening

all the time. So that was a bit of a surprise. I thought people would be more into running checklist based on what they asked for. How do you decide to make progress? with you as a business builder is it like is it community driven or how do you go about this well we should probably say that the journalick is completely free right now for anyone to use

and we anticipate this particular set of features the tools that built that you've seen just now would remain free forever and we will continue to build on top of those features in a bunch of different ways that hopefully ideally are so cool and so good that you're people would be happy to pay for it, and they would feel like they were ripping me off because they were getting such a good value out of it. And that's well I'll know that we've done well. And I think we'll get there because we're already getting tons of great feedback from our user base, but like we could definitely use more. And, you know, I'm in it every single day working as well. And so I've got really strong feelings about like, what's it not doing for me right now?

Like what part of my investment process sucks that I might be able to get better at? And so we're always working on pushing those boundaries. And, you know, I've already what's baked into this, I've, this is, you know, a decade plus of thinking about the investment process and how to improve it and being pretty diligent about reading the decision making literature and research in psychology and trying to bake some of those things into the structure of it so that you can, so that we can identify the problems and then help you solve them. So I think we're going to get there. But as far as like building a business, you know, it's still very early days and we're still figuring out exactly. Who is that customer who is just like just gets it right away and loves it and wants to do more and wants to give us that great feedback? And when we sort of have a better handle on who is that sort of avatar customer group, we'll know more like what do we need to build for them to get over that bar where they'd be very happy to pay for it. So it kind of remains to be seen about where we end up.

We have we have hypotheses about what that might look like, but you always have to test that against the data of the marketplace of what do people actually want. What kind of bias protection is baked in? Can you give some examples? Sure. I mean, running a checklist is a way to incorporate more system two thinking as opposed to hot gut reaction system one. It slows you down, makes you be more methodical. Having the predictions be probabilistically based

so that you can get a sense of your overconfidence or underconfidence relative to your competence. So the contracts, are a way, self-contracts are a way for you to express your best intentions while you're thinking soberly and then have a plan to follow when the S hits the fan and you want to be able to execute on it and have a clear mind and know what's the procedures I'm going to follow if this is going to happen. And some of that might have actually come from my energy background. The entire energy grid runs with that mentality of procedures of if this happens, we already

know exactly the mitigation steps we're going to take from an engineering basis. If this line goes out of service, here's the 10 steps we're going to take to fix the problem. And the whole thing is built from the ground up with that mentality. And I think the investment process when well executed looks a lot like that as well, where you pre-program, like if this happens, here are the steps we're going to take to fix the problem or to make the right decision in that moment based on what we understand today as opposed to if you wait until you're in the middle of the firefight in the war you know there's just this fog around you i mean anybody if you go back to think through like march of 2020 and you know how how clear was your headspace while like the world was shut down it was

really hard to think clearly at that point so i think uh that's that's another bias that we're trying to to mitigate against how did it change yourself as an investor using General analytic. So, so far, getting all my notes at one place has been a huge unlock for insights. Having the decision reason codes and being able to look at them to see, okay, when I've used this particular reason code, how did that group end up working out? It's still a little bit early for me to say where, like, I don't have a big enough data set quite yet, but I'm getting there.

And I know I will get there eventually where I'm going to have true insights into my process. It's just going to take a little bit more time probably because I'm a low turnover investor, so I don't have a ton of decisions happening all the time. So it takes a little while to accumulate the data set. But it's starting to get there. And one of the interesting insights so far in that has been, some of them have been a little funny in that one of my reason codes that I use is asymmetric outcomes. And so the idea of being like, okay, chances are if I lose, I'm not going to lose very much,

but if I win, I might win big. and that as a category so far has done really poorly. And I wondered to myself, like, did I have the asymmetry backwards? And it was like, if I win, I'm going to win a little. And if I lose, I'll lose a lot. And another reason code that's been kind of interesting to unpack has been increasing certainty. And this one typically would come from if I own something and then I'm following the business. And like there's data that comes out in the 10-Q that makes me feel like I understand better where this company is going.

I have increasing certainty about the business. That one is actually done relatively poorly, surprisingly. And what I think that speaks to a little bit is that it's going to take some more time for some of these, the last three years of kind of insane markets to wash out of some of these decisions. The timing kind of matters a lot for some of these because the tides have been so strong. I mean, 2020, you had a dramatic drop, a huge recovery. 2021 you're into like one of the all-time potentially like bubble eras like I think we're going to look back at 2021 and say yeah that looks like 99 that looks like 2007 that looks like 1987 or you know leading up to 87 that looks like the nifty 50 so and then you know 20 20 22 itself has been

you know everything going in the other direction so there's been large tides with which to evaluate the decisions individually inside of there. So there's a lot of timing luck that's involved in some of this analysis early. But I think with more time, eventually that washes out and you start to get at the actual like luck versus skill element of each decision. It will be interesting to see you looking to the notes in 2042 and see what you've written on in 2022 and how this resonates. I think about like how much money would I pay to look at a a fully filled out journalitic profile of Warren Buffett over the last 50 years.

Like, what has he been thinking about in real time? What is, like, what decisions, what did he pass on and what was the reason? How'd that do? And just be able to see the entire data set of Buffett as a decision maker for 50 years would be so fascinating. Like, I'd pay almost infinite amount of money for that. I think the insights that it would reveal would be just staggering. And so if I want to eventually, I'm never going to be Buffett.

no one will. But if I want to understand myself better and have that long arc of seeing myself as an investor growing, I have to start recording all this stuff now so that when I get out to that future point, like I have the data set to work with. Journalistic also changed you not only as an investor, but it also opened the dimension of the business builder to you. What was the moment when you decided to make this serious? Well, so I've been super, super fortunate that I ended up with some two terrific co-founders in this project. And that, you know, when we were originally talking about all this, it was sort of like, yeah, wouldn't it be cool if XYZ? And when we got serious about it and actually started building, it took it to another level of like, okay, boy, we really have to think about this.

And then, you know, we've hired some employees too since then. And so now it's like, okay, this is a very serious endeavor that we're working on this. So it has forced me to learn so much about software that I didn't know about before, which has been like drinking out of a fire hose in a lot of ways. But it's been terrific to, like one of my co-founders is an incredibly strong technological background. He was one of the early employees at Microsoft and worked at Google and worked at valve the video game company and so he knows how to build pretty much anything and he like he knows how all this stuff works and it's it's almost literally like having a genie for me where i'm like well

could we can make it do this and you know then he'll say well yeah we can of course we can do that but here's you know three different tradeoffs to think about if we go in this direction versus this other direction he's just built so much that he just knows where all the traps are and so to learn from someone with that level of expertise has been it's been so cool uh as as as someone who was coming in very novice. So what were the learnings about software besides these genie moments you just read? One of the big ones was, you know, he said early on at Microsoft, when you look at like any piece of code at that point had a high chance of being very valuable because it was

replacing something that was typically on a pen and a paper at that point. And so the ability to manipulate the data, all the things that we sort of are blind to now and take for granted in a digital world didn't exist in the early 80s, relatively speaking. And so every single piece of code was very, very valuable relative to now there's so many different, it's branched so much. And now there's so many different ways of doing things that it's actually pretty difficult to make something that stands out relative to before, where it was like, you know, it's just like kind of diminishing returns in a way where the bigger the code base gets of

the entire planet, the whole. harder it is to write something that's super unique that can like really move the needle compared to other things. How did you change as a businessman and also as an investor when you had the first employees? What does this give you? I mean, it's definitely a forcing function of like, boy, we better like make sure that we what we're building is heading in the right direction and we're not spending too much time, you know, messing around in the wrong places. It's a forcing function to really focus on that roadmap and also actually prioritize things. You can just wander around by yourself with one developer, let's say, and build a million

things and not actually go out to the marketplace and see, like, well, does anyone actually even want this? Or is no one going to be using that feature? So you have to start getting more feedback incorporated sooner so that you can actually build the things that matter because it's very expensive to build now. Like we have mouths to feed. We have to be going in the right direction with this boat. Otherwise, if we're going in the wrong direction,

it's very expensive to do that. So it really makes you pay a lot more attention than when it was just sort of like taking time. But now that it takes money also to explore, boy, you really want to make sure you're like turning over the right rocks. What kind of business have you understood better when becoming a builder yourself? You know, I have an appreciation for how messy business can be.

And I think, I mean, I kind of knew that all along that, like, boy, it's, at the end of the day, there's a lot of humans involved. And anytime there's humans involved, it's going to be messy. And we don't, as outside in like public equities investors, we only get a certain view of the total picture. And a lot of times it's just this little keyhole that they want us to know about, right? Like that management is not necessarily, you know, being nefarious about it, but they just want to put their best foot forward like anybody. And they want to portray that, like, things are smooth under the, under the surface. And you can't blame them for that, but maybe potentially underneath there's all this calamity that's happening and it's messy and like this person doesn't like this person and all of those types of things, the humanity of it. I have a much better appreciation for the other operators who are trying to build something that it takes way more time than you would ever expect to build something. It's messier than you would ever expect. There's actually a lot more thought that goes into it than probably you give appreciation to as an outside investor. I mean, when you're watching a company and you're like, what the hell's taken so long? Why aren't they turning this

around? Like, what's, you know, get to it. Well, it's harder than that. Like, it's, it's just simply harder than that to actually be the man in the arena who is doing the, the real work. So, I have a little bit more sympathy for management when it comes to how difficult it is to run a business. What do you think about the clock speed and software? It looks like from software you think it's digital, scalable, fast, quick, whatever. And then you build it yourself. I think it's, 10 years you started with like the first seat for what you're building now? Yeah, so I think, I think copying software is like other people's software is not difficult. And but I think actually writing thoughtful good software is incredibly difficult.

And the tradeoffs decisions that are made, the user interface and what's actually not included can actually be as much of a as important as what is included and not cluttering up the ux at the end of the day every single good or service on planet earth is is there to accomplish something for someone and and really making them the hero of the story like all of the users of journalytic to me I think about them is how do I make them the heroes of this story how do I help them on their journey of getting to being the hero and what can we build that would would allow them to do that like what jobs need to be done for them to achieve progress in their lives in what they're hoping to accomplish in the investment world?

So when I strip it back to that level of sort of human wants and needs, you build differently than purely just like, oh, hey, that's a cool feature. Let's throw that in. It really has to be more thoughtful than that and more holistically thought about, like, what are they really trying to accomplish? And I think that that's how you end up with good software. Like, there's an elegance to it that requires pruning of what is good to only leave the grate. And so it's not this, like, when we think about software as, like, well, why don't you just include everything?

It's like the shelf can be as big as we want, like put all the items in it. That is true. There's not that physical constraint, but there's a mental constraint of how many things we can keep in our heads at one time and still execute a process. And so if you're giving them everything, it can start to. to clutter it up to where then they do a bad job with it and now they're not accomplishing what they want to accomplish and so it's it's there's a much more work that goes into it than than i ever fully appreciated and now uh like when i see good software i'm like oh boy somebody really thought about this a lot yeah it's it's an interesting question i had with with thinking

about software i met two companies recently that tried to get the insurance market in germany one i interviewed and the one has bought 13 software companies is now combining this to build a new like infrastructure and the other one is just like might have not invested that much into software but it's more on the sales side getting customers on getting traction on and stuff like this it's it's quite interesting how this concepts differ and it's quite interesting to see who's in the end winning with a software because i think it's more about like yeah making customers successful than building just the perfect software offer well and what's difficult about it is that so you have these different sort of like ropes that need to be

like braided together you have the user's feedback is sort of like what they tell you that they want they have you have the user's actual feedback of like what are they doing like there's the revealed preferences and that like speaks to our difference between like checklist usage and what they say they want and then you have also like what is the what would the research say in psychology about like what should we be doing to be the best decision makers that we can be and then we have like sort of like my vision like what do I see like that I would want to use and and we have all these different sort of like channels of like information that we need to incorporate together this like deck of cards that has to be shuffled and you know the problem

is is that a lot of times if the customer will say like well I want a faster horse and I will say I'm on the other end I'm like well what if I wanted to build you a car what would you think about that. And so, like, having the different, a vision along with the feedback and blending those all together is actually requires some art to it. And you have to have the data to support it in a scientific way. But there is some art as well of, like, knowing how to weight those different factors as you then move forward and exploring, like, what jobs can be done by the software. especially if it's such a niche product how do you think about the sufficiency of data so if you have just like potentially a few 10,000 users of it may be more but like this

and then you only have a small sample how do you think about like this this this art of weighing data in yeah I mean we've tried to take like a crawl walk run mentality to that so like we were in a closed beta, where it was just invite only for almost a year, while we built out what we thought looked like a minimum viable product. And then that just launched two weeks ago, that minimum viable product. So that was like a whole year's worth of, call it maybe 500-ish users, where we're getting their feedback, we're talking to them, we're interviewing them, we're onboarding them and seeing like how's their process work and how can we like incorporate things and that was what led to this first pass of here's the feature set for a minimum

vial product well now we've we've turned up the user base a bunch and we're turned up the feedback as well and so now we're on the next phase which is let's build for product market fit like we have minimum viable product where I think we've we've demonstrated that like what we've built is useful to people how do we take it to the next level of being useful and how do we identify who is that user that really just absolutely loves this and how do we find more of them. And that was, so that's this next phase that we're working on. So, and then after that, it's, it's about scaling, finding those people and, and then really building from there in a, in a much faster direction. But at all times along that process, you're trying to, like, make

sure you're not moving in the wrong direction ever, right? Like, that's what you're always worried about is, you know, I'm, I'm wandering through this wilderness. No one has a map. And I'm, I want to make sure I'm not, you don't want to be sprinting if you're going in completely the wrong direction. So try to walk first before you realize, okay, like I'm heading north. That's the right direction to be heading. Maybe let's start jogging now that we know that north is the right place. I don't know the exact city that we're heading to north, but I know it's one of them is probably the right place. And once we know that, okay, here's where we're actually going, then we can start to sprint towards it a little bit faster. So we get back again at the high cast.

that's right that was all preparation for for running journalytic yeah i thought this when i designed the questions but not that that cleverly yeah that's a very tie-in um do you have anything to add because we've already talked one hour here it might not be a full hour because we cut some out but do you have anything to add for the end of the interview yeah i mean i would just as a as a call to action for the users, if they feel like they want to get on this investment process improvement journey with us, go to journalytic.com, get an account, it's free, and then go in whatever business that you've been thinking about, the investment, go in and create a feeling entry for that company, and maybe write a couple sentences about it. There has to be some

company that you have a feeling about right now. Record it, and then go into, that dashboard that I showed you where you could see like that entry overlaid on the price chart. And then just imagine if you kept recording for a while, like how would that start to build and what that might tell you about yourself and how your feelings are driving your investment process. And if that feels like a worthy investment of your time, like see if you can kind of keep going. And if you can, eventually it builds up into a habit. And then you actually start to look forward to it every day. Like I can't wait to get in in the morning and start journaling about what I'm thinking and feeling and get my notes going in there and knowing that I am like taking

steps towards becoming a better investor every single day and maybe you know each every day's progress is small maybe immeasurable but I know that eventually they start to compound and add up and at eventually at some point it's going to be I'm going to be a such a better investor because I put in this little bit of extra work every day than if I had wasn't doing something like this that sounds like a good plan so just follow his call to action and thank you very much Jake for coming on and it was a pleasure talking to you and I hope we we can have an update in one or two years to keep my journal up to date with interesting yeah I want to see what what you were thinking in 2022 and you know what decisions you made and what were the impacts

and I think it'd be a really fun conversation to compare notes in a little bit of to see what were we thinking? How bad were we? How dumb were we back then? And hopefully we're smarter in the future. For sure. We hope to be smarter, but sometimes we aren't. Sometimes I'm also not. Maybe it works for you. Thank you. Before I start talking too much, let's end this year. Thank you very much for coming on and thank you for listening to now. Thank you. Thanks, Tom, bye. Bye. As in every video, also here is the disclaimer. You can find a link to the disclaimer below in the show notes the disclaimer says always do your own work what we're doing here is no recommendation and no advice so please always do your own work thank you very much