We Study Billionaires - The Investor’s Podcast Network - TIP 067 : Liar's Poker by Michael Lewis (Business Podcast)

Starting point is 00:00:00 We study billionaires, and this is episode 67 of The Investors Podcast. Broadcasting from Bel Air, Maryland. This is the Investors Podcast. They'll read the books and summarize the lessons. They'll test the waters and tell you when it's cold. They'll give you actionable investing strategies. Your host, Preston Pish, and Stig Broderson. All right, how's everybody doing out there?

Starting point is 00:00:31 This is Preston Pish, and I'm your host. for The Investors Podcast, and as usual, I'm accompanied by my co-host, Stig Broderson, out in Denmark. Today, we've got another book for you, and the name of the book this week is Liars Poker by Michael Lewis. A couple episodes back, we read the book Buffett, The Making of an American Capitalist, and in that book there was a lot of description and a lot of talk about his time dealing with Solomon Brothers and the collapse that was almost going to occur until he stepped in and became the CEO. So this book, Liar's Poker, is all about Solomon Brothers and how that culture that Buffett was dealing with during that time was really cultivated and grown because this book occurred. I don't know how many years before Buffett was playing around in Solomon Brothers, but it was slightly before.

Starting point is 00:01:21 I want to say within five years before Buffett had to swoop in and basically save this company. This book, Liars Poker, was written about the culture and basically growing up. in Solomon Brothers. This was written by Michael Lewis, who, you know, is just one of the best financial writers out there. So Michael Lewis started off working at Solomon Brothers, and this book basically outlines his entire experience of working there. I want to say he was there for maybe five years. Is that right, Stig? Yeah, something like that. Yeah, I think the book was from 89, so he was really describing all the crazy things that were happening on Wall Street in the 80s. And one thing that comes to mind would be something like Wolf of Wall Street or something like that.

Starting point is 00:02:03 That's at least what I pitch here whenever I read this stuff. Yeah, and his description of this stuff is just crazy. So before we get to the book, and we start talking about that a little bit more, I want to throw something out there to our audience that Stig and I are very excited about. So if you've seen on our forum, the warren Buffettforum.com, you might have seen us talking about the new Berkshire shareholders meeting that's coming up at the very end of April 2016. We're getting very close to this because this is being recorded in December, just so everyone knows, it's December 10th while we're recording this. And we want to inform our audience early enough that if you

Starting point is 00:02:42 want to go to the Berkshire shareholders meeting and attend it with us, we would love for you to join us while we're out there. We will put out more information on our forum. Also send something out on our email list at the bottom. When we send out the show notes or whatever, you guys will get the information if you guys are signed up on any of our list. But if you want to go to the Berkshire shareholder meeting and you want to go meet Stig and I, we'll be out there. And so we'll, a bunch of the members of our audience, and so will a lot of the guests that have been on the show. And last time we did this, we did this two years ago. It was just a blast to just interact with some of the people that were part of the Buffett's Books community. And man, we really developed

Starting point is 00:03:23 some just great relationships with some folks. And it was just so much fun. We just had to a blast. And what's great is you get to go into this auditorium. You get to listen to Warren Buffett basically talk about the current market conditions for how long's he do it? It's like an all-day affair. Oh, yeah. And him and childmonger, they can just go on and on and on. That's amazing. No, for us, we absolutely love this stuff. Some other people might be like, if my wife had to go and sit in the room, she'd be like, what are these guys talking about and why is this taking so long? but it is an awesome event. They answer question after question,

Starting point is 00:03:59 and it's just really neat to see their thought process at that level. So if this sounds like something you want to go to, we're going to start building out pages on our site. We're going to start having things available for everyone out there to show you how you can go to this, because it's actually a whole lot easier than you might think as far as getting the credentials for the meeting, and we'll help you through that process

Starting point is 00:04:20 if it's something you really want to go to. Now, here's what I'll tell you. You have to start making this, decision right about now because the tickets to get out to Omaha for that day, they get a little bit crazy. So you want to get that sooner rather than later. You're also going to want to book your hotel a little sooner than later. So if this is something you want to do, you're probably going to have to make the decision pretty soon. But we would love to have you there. We would love to spend time with you and meet you and whatnot. So if it's something you want to do,

Starting point is 00:04:49 we'll be putting out all the information for that very shortly. So let's go ahead and talk about this book. So Michael Lewis, this guy, he's written Liars Poker, the one that we're going to be discussing, was really his first book that put him on the map. And this was a New York Times bestseller. It went wild. It was a very popular book, and it gave him his start. Then he wrote the book, Moneyball, which has been turned into a movie. Then he's written a couple others that were huge. The big short, I just saw literally on TV about a week ago that that book is being turned into a movie. That one was about the 2008 crash, and I highly, highly recommend that book. It was very good.

Starting point is 00:05:26 And then obviously we did Flash Boys already. We already talked about that one about the high frequency stuff. That was probably about a year ago. So he's written just a ton of stuff, really great authors, but we'll jump into the book here. So Liar's Poker, it's all about his time at Solomon Brothers. So he starts off the book with the story of two of the board of directors playing this game of Liar's Poker. and just so people kind of understand the game. So what these traders would do, and that's what he was, he was a trader for Solomon Brothers,

Starting point is 00:05:58 but what they would do in their meantime, whenever they're just playing around, you might have a guy that goes up to a group of four other traders, and he might pull a $10 bill out of his pocket or a $50 or whatever it might be, and he would say there's four sixes. And so what they would do is they would bet on the odds that as each person pulls a $10 bill out of their pocket, They would look at the serial number, and if there was six sixes on the bills, and when you added it up, then that person would collect the money from the other people. If there was less than that or the number was off, then the rules would play out.

Starting point is 00:06:34 I've never played this, so I'm probably describing it wrong. But what they were really doing, the essence of it is they were trying to figure out the probabilities and they were betting on it. That's what they were doing. So the book starts off with this story with is actually the chairman of their board, John Gutfriend. he was walking down the aisle and he came across one of the other bond traders in, John Meriwether, and comes up to Meriwether, and he says $1 million liars poker. And so the gentleman replied back, he said, well, if we're going to play this, it's a no tears allowed and just telling him that he's going to bet a million dollars on this silly game. And so John Gutfriend replied back.

Starting point is 00:07:18 He said, well, he says, I'm not doing it for one million. Let's just make it 10 million and let's do this. Let's do this right. And the other guy says, you're absolutely crazy. It just walks away. So the whole point of that story up front in the book is just to show, are you lying? Are you just putting on a front? Are you a poser?

Starting point is 00:07:38 Because that's really, the whole culture here is just like, are you bluffing? When you're a traitor, are you bluffing? Are you just trying to trick me? Are you actually being serious? Are you truly that crazy? And so it's just kind of a unique story. And I'll tell you, it really grabs your attention as you start to read the book. And the rest of the book is just as, I don't know, exciting or interesting, I guess.

Starting point is 00:08:01 I mean, for me, whenever I hear this stuff, I just think, that's just stupid. You know, that's just absolutely stupid. That's my personal opinion. I don't live in a culture like that. I can promise you that. Well, that's not value investing, Preston, for sure. It's amazing to hear some of these stories, and I think some of it will just blow people's mind. And I'll tell you this, this is the one thing I want people to take away from this book.

Starting point is 00:08:24 If you want to go work on Wall Street and you really want to dive into finance and become a trader, I would say this is a mandatory read for people. Absolutely mandatory read. You have to read this before you would dive into that culture. Because for me, if I read this as a college student or whatever, there is no way. In a million years, I would inject myself into that kind of culture. There's just no way. I have this firm opinion that when you put yourself in a certain culture,

Starting point is 00:08:54 regardless of how moral or how strong you are as an individual, the longer you stay in that culture, you will become that culture. So I would use that as a word of caution for anything that you're doing, not necessarily going to Wall Street. And I'm not saying everything on Wall Street's bad. I'm just saying that in this particular example of this book, It's really a word of caution to be very mindful of what culture you decide to interject yourself into. Okay, so with that said, we're going to go ahead and kick this over to Stig, and he's going to talk about how Solomon Brothers made money during this time.

Starting point is 00:09:28 Yeah, so basically, I would say there are three different ways that you can make money. It's very generic. So the first one is by being purely a broker. So you're probably familiar with that whenever you are trading on an online platform or using your bank. banks platform that you might be paying. I think it's the cheapest out there is probably around five or six dollars or something that per trade. So the broker will collect that money for doing the trade for you. But obviously that was not what Solomon Brothers did. They were in bonds and they were talking about a lot more money than just like 10 shares of Coca-Cola or whatnot.

Starting point is 00:10:04 So what they were doing was they were bundling like huge amount of bonds and they would typically take something like one eighth of a percent of the total sum, they would take that as a fee. So that was the first one. The other way that they made money was that they would be broker with two known parties. And that is something that happens off-screen. So the first one is something that you see on the screen. And when I say on the screen is something you can see on the exchange. But they were also brokering off the screen. So the way this would work was that they would have a client, it might be me. And I would have, say, $1 million worth of IBM bonds. Now, I would need to say, them. So I would call up Solomon Brothers and that would say, okay, I know someone called Preston.

Starting point is 00:10:44 They might not even tell me his name. They probably wouldn't. And then they will take a small cut from that and thereby handling the deal. Basically, as a broker does, getting their commission from facilitating the meeting between the buyer and seller. What they also did, and that was probably the more interesting part was their trading division. So whenever you're trading, you're either doing that for your own account or you're doing it for a client. And so, Solomon Brothers did both things. So what you're doing is that you're basically bending on whether or not the price will go up and down. And since they were in bonds, and as you might know by following the courses and by following

Starting point is 00:11:20 the podcast that we had, if you see an increase in the interest rate, you will see a drop in the price of bonds. So they would be bending on the direction of the interest rate and thereby also the bond prices. And by doing so, they were either making money or losing money for their client. Basically, this is also the very core of trading. I promised or I threatened Preston with a few antidotes from my own trading career. And for instance, what we did because I was in power trading, is that we would be betting on the price of electricity.

Starting point is 00:11:54 So the mechanism is very, very similar whether or not it's stocks or bonds or coffee or even something like electricity. So we would be looking at the weather forecast. And if we saw a lot of wind coming in, we knew that there would be. be a higher supply out there which will drive down the price. And this was actually the same way that Solomon Brothers and everyone out there is trading. They're saying, can we predict what will happen in the future and then start taking bets based on that. So basically, if I could just sum up two different ways of making money. One is the broker part where they're facilitating

Starting point is 00:12:28 buyer and the seller. And then the other one is that they're taking position in the market, either for themselves or for the client and betting on the prices, whatever the asset might be. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is.

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Starting point is 00:16:48 So when we talk about what happened in the book, So it goes through the time Lewis was really kind of getting through this introductory course that Solomon Brothers offers. He went through that and he's talking about how they brought down these big wig executives to talk to the class. The book is full of explicit. So if you're not, if you're riding in your car with your kids, you're probably not going to want to listen to this book through audibles. But yeah, it's very, I don't know, graphic, I guess, if you want to describe it that way. So that's just an FYI. But it's talking about these executives that are coming down and,

Starting point is 00:17:21 talking to his class and using explicitives in, you know, three explicitives in a short sentence. And it's just kind of interesting to see that. And I'm glad that he did do it that way because I think it represents the culture very well and it's very representative of what the experience would be like to go through this. So after his course finished up, his introductory course, all the guys there are fit for the culture based on the way that he was describing his fellow classmates that were stepping into Solomon Brothers. They get into the trading floor and then basically the games begin. All the senior guys that are there just basically using these guys as they're setting up new accounts and getting new customers and some senior level guy walks by senior level trader and just

Starting point is 00:18:02 totally dupes one of them into basically taking on some of their securities and some of their accounts and they immediately just start getting screwed is what happens. And so they're all just fending for themselves. And he said the attrition rate, I can't remember what it was, but I think after a year later, it was something like half of the initial guys. or one third of the initial guys that started out were still there. So the attrition rate was very high for these guys starting out in the firm. Now, it talks about Michael Lewis and how he basically developed this relationship with one of the more senior guys that he could actually trust.

Starting point is 00:18:37 And this gentleman really kind of helped him out. And he just started making these trades and started doing really well for himself and with some of the clients. And so within a, I would say, two years, three years, Michael Lewis built up to the point where he was basically making $10 million for the company. Based on the time that he had been at the company, he was only able to make, I'd say, 80 to like $150,000. And back then, that's, I mean, you're talking about a lot of money.

Starting point is 00:19:02 That's a lot of money today. But he was making that back in the 80s. As a young kid, he was, what, 24, 25 years old at this point, Stig. He was pretty young. Yeah, he was very, he was just first out of college, as far as I remember. Yeah. So, I mean, he was making a ton of money. But he was also making a ton of money for the firm.

Starting point is 00:19:18 He's making $10 million a year for the firm. as that number grew, so he started even making more money for the firm. I think he was around 27, 28 years old when he was describing his time where he was pretty much becoming a middle level to a higher level executive within the company. He was shooting into the stratosphere in a quick way within the company. And I think he said his salary was 400,000, 500,000 or something like that. He was doing quite well. It was as high as his band could be for where he was, his duration in the company. And he got to the point where he just hook a step back and he says, what value am I adding? Like, what is it that I'm doing?

Starting point is 00:19:57 How am I actually creating value for society? And I think that that was his main reason for getting out and just saying, I'm doing something different. So very interesting stories. That's the thing that I really want people to take away is this book will definitely keep you entertained. It was one of those books that when I'm driving in my car and I'm listening to this, I get to where I'm going. and then I continue to sit in the car to listen to the rest of the chapter or I just get drawn in totally. Not all the books we read are like that. Some of them I can't wait to turn it off and get out of the car. But for the most part, I really like almost all the books we read. But this was a pretty interesting one.

Starting point is 00:20:34 I think you'll enjoy it. What other stories you got stick that you wanted to throw out? I know you have quite a few talking points. Yeah, I think that the whole interview process was extremely interesting. So if anyone would doubt this, would say that trading is really tough business and especially the interview is actually dreaded by a lot of people. And what Michael Lewis does is that he talks about what is called the stress interview. And apparently that's something that's used on Wall Street and I've never heard about it before. The candidate, he was asked to open a window at the beginning at the interview. And obviously, this is a window that is sealed shut so he can't open it. And then the people just see how that candidate reacts under pressure. That's the only,

Starting point is 00:21:17 intention of that. Or another thing that they did was that they wouldn't invite someone in. They wouldn't just give him a silent treatment. They won't speak to him at all and completely ignore him and then see what he did. And I'm like, but why you might be asking. But again, that's part of the culture. And again, to test you, how do you react under pressure? And I think that was, I like that. So I think it's a horrible story, but I think it was a really fun story too. I kind of liked that part of the book. I thought that that was hilarious. So the best part I thought of the first story there where they said that they gave them the task of the guy comes in, he's sitting there, the interviewee

Starting point is 00:21:49 and the interviewer sitting there and the interviewer says, open that window over there. And it talks about the different, how some guys go over and they try to open it and they're just like, well, it's locked and they come back and sit down. Other guys continue to struggle and just try to muscle it open

Starting point is 00:22:05 and they're there forever and they're not going to sit down until they actually are able to open the window. And it said that there was one gentleman that got a chair and tried to break open the window with the chair. And it's just, I found the story hilarious and I think it was kind of neat to see how they were trying to test their personality to see what their endurance and just personality was.

Starting point is 00:22:27 This book really put a smile on me because they were talking about the interview and how he was prepping for the interview. And what he was saying was that, you know, you always get that question, why do you want to be a traitor or whatever kind of job you might be applying for? You always ask, why do you want to do this? And he said that the one thing you can never say is that you're doing it because of the money. So I just remembered, like, what I thought whenever I was prepping my first job interview in the trader world. And I remember speaking to my wife about this, and I was telling him, well, so Sophie, should I be saying that it's because of the money? Because trust me, guys, the money is really good whenever you're a trader, as President also

Starting point is 00:23:05 mentioned. And we'll go more into the conversation, how that works. But that was the big reason, actually, to do this for me. But again, it just felt wrong for me to say, wow, I want to be trade in your company and that's because I can make a lot of money. I actually don't care about the rest. That would be the most horrible answer you can give. And the answer I came up with was the true, but only partial true. It's because of the thrill of making a trade is so awesome that I can't help doing it, something like that. And that is what I said. And I actually eventually got the job. But the reason why it sounded so much fun whenever I read the book or whenever I heard the book was that Michael Lewis said, apparently that is the golden answer you can provide

Starting point is 00:23:46 on Wall Street. You can never, ever say you're doing the job because of money. You have to say that you're doing it because you just love making good trades, even though everyone knows that it's just a lie. It's a lie just like liar's poker. Now, that's an interesting point. I think that's a good highlight as well, Stig. What else? Did you have any other ones, Stig? Yeah, well, I think I want to talk about the conversation as well. And first of all, I actually like to ask you a question, Preston, because one dilemma that he raised is that Sullivan brothers actually lost a lot of talent because they weren't willing to compensate the employees compared to other Wall Street companies. So he was talking about the best trader they had. He was making like $20 million plus,

Starting point is 00:24:29 like both years he were there. And like his cut of that was, I think it was something like 90,000 the first year, which was like salary cap and then $175,000 the second year. And And McLeod was raising the question, so how much is he really worth? Obviously, it's not worth 20 million, but how much is he worth because it's the company's the risk, it's the company's money? So I think I'll ask you, Preston. How much is someone worth if he can make, say, $20 million for his company's money? So I would think that it would be a function of how hard would it be to replace that person? So if I can go off the street and take a trained monkey to basically come up with $20 million just because he's sitting on something that has an enormous flow of cash flowing through the pipes that you can basically suck some of that off of.

Starting point is 00:25:18 I would think that I'd pay them not nearly as much as what some others would think that you would pay. And it would be down where his salary was because there's no competitive advantage for that skill set. I think that's really the discussion here is what's the competitive advantage for that skill set that can sit in that seat and do that job? Do you really need to have an MBA from a warden or from Harvard in order to sit in that seat and conduct those trades? Or do you just need to be a good bluffer and a good person who has good interpersonal skills in order to develop the relationships and sell one thing here and buy it over here and just know the delta between the buy and the sell price?

Starting point is 00:25:54 So I think you need to have a basic introductory course, but I don't think that that's something that you need to even go to a four-year college for necessarily. I think that you could teach somebody that in a year and then move out. So I guess that's where I would look at it first is the skill set and how qualified it is. I mean, this isn't brain surgery here. You know what I mean? It's just not. It's not something you needed to go to school for for 10 years to do effectively.

Starting point is 00:26:18 So that's why I would say, because I think a lot of people immediately hear this guy made $20 million. So if you pay him a million dollars, that's only 5%. It'd be like a 5% royalty on everything he brings home. I don't see it that way at all. I see it as how hard would it be for me to replace this guy and pay somebody else to do exactly what he just did. And so I think that that number is much lower than a million dollars. I say, you know, a half a million dollars would probably even be a little high.

Starting point is 00:26:48 Now, the issue that you run into is, let's say that you own that company or that big bank, and that's your policies to keep the prices down at that level, and you're going to have the flight of talent, if you will, within the community. So within your business. So then you got to ask yourself, say I make that decision and I push the price down and I hold to my guns and say, you know what, these people are replaceable and I can find this talent reemerge somewhere else. The thing that you have to ask yourself then is how do you basically retain this talent up front? This would be the model that I would go to if I was one of the CEOs in this industry. I would say, I'm going to do the hard work up front. I'm going to send these people off to Harvard for free. I'm going to send these people to wherever. I'm going to pay for it. Okay, up front. But what I'm going to get in return is a contract that goes out to five, 10 years where they have to stay within the business with an automatic price model set. Now, where you're assuming a lot of risk as the CEO and the owner of the business is you might

Starting point is 00:27:45 get a total turd that you're paying for to try to retain and you don't know that model yet. So that's where these guys really have a tricky is I'm thinking through the thought process that stick through me on the hot seat there to figure this out. that's my thought process as I'm going through this because it wasn't something that we had prepared or I knew that he's going to ask me that. So that's my thought process as I'm thinking through this. And it's a very hard thing because let's say you don't want to do that model right off, right out of the get code because you don't know the personality person. And you bring this guy in for the first year and he's already performing and making you $10 million in the first year. Now you've got a problem because he's not going to want to stick around for 10 years making $200K. He's going to run somewhere else. So I think that's the hard thing is just the competitive nature. business, how many seats are they open in Wall Street, but I definitely don't think some of these people deserve to be making, you know, a million dollars a year because they bring in 20 million. I just, I do not think that at all. Yeah, I completely agree to you. And I think it's a tricky discussion because I think when you reach that level, like, you literally wouldn't be

Starting point is 00:28:50 any happier if you made already, say, $175,000 a year. Like, it wouldn't matter if you got a million instead. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. Vanta automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a stock two or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy frameworks. Companies like Ramp

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Starting point is 00:32:09 and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. So this is where I get a little frustrated. And I really apologize. If there's people that are in this industry and they're listening to this conversation, I apologize if you're offended by what I'm about to say. But the thing that I really go back to is what's the value that's being created.

Starting point is 00:32:34 If I make $20 million for the firm and it's all transactional costs, it's arbitrage. So these guys are arbitraging the deal from one asset, same asset going from one hand to the other hand. What value am I really creating by transferring that from. one person, let's call it person Y to person X, what value did I just actually create? I wouldn't say really all that much. I just helped, you know, broker the deal is all I did. So is that worth, you know, hundreds of thousands of dollars to broker that deal? That's kind of crazy if you really think about it. Because it's not like you're going and helping them analyze the security, the valuation. You're not going out looking at property and saying this is safe. No, you're just basically changing a couple

Starting point is 00:33:20 keystrokes on the account. So whenever I look at that value, it is so lopsided and not really creating, if anything, it's creating drag for society. It's creating drag and there's efficiencies there that need to be gained from a society standpoint in order to make this more effective. So whenever I look at the value that's being created, it really makes my eyebrow kind of go up like, what in the world are we doing? And that's where I've really got some major issues as well. And I think that, you know what, I'm of the opinion that the universe will always work things out and it will always find efficiencies. And that's going to be a pretty dramatic thing for some folks. And I think that maybe it might be a good thing. But I'm curious to hear if Stig agrees or you see it differently. The thing is really tricky discussion because when you are living in this world called Wall Street or trading, whatever, you just get other values. And it's like things just change because you are really, really in the bubble. And it's,

Starting point is 00:34:19 At this point of time, and I think Mark Lewis also addresses that it's not about how much money you're making for the sake of money. It's more a way of keeping score and how you feel you're being treated than that you really need the money because you can still pay your rent and put food on the table for a family. But I just want to tell you a brief story about something I experienced myself. And I might look at myself today and think that I'm a very calm person and I wouldn't fall for all of this. And I also watched Wall Street back then. thought, hey, I could never be consumed by this industry, but I actually did. So whenever I started, and this was just upon graduation, I was offered a position as a trainee, and I made something like,

Starting point is 00:35:01 I think they offered me something like $60,000 in like a base salary. And obviously, that's a lot of money, but not as much money as you might expect in trading. And this is actually a fairly common. So whenever you start out, I think Mike Lewis, he said that he made something like $42,000. Now, admitted, this is also like two decades ago or 25 years ago. But like your base salary in the very beginning is really not that high. And it's definitely not high compared to like the pressure that you're under working as a trader. But what's happening is that they will test you in the beginning. They will test you and see how you handle the pressure, like the games, all that's going to happen.

Starting point is 00:35:38 And then they will work out your compensation based on how you perform. And so for us, there was something like six months after. that would call you in, and then you will negotiate your bonus structure. So you would basically still have a somewhat low base salary, but you will get a lot of bonus and company bonus and all of that. And I was offered something like 100K more. So I was, again, right out of college, I was making something like $160,000 a year. It might be slightly less year. Now with the dollar so strong, but my head is spinning right now because I'm converting anything from Danish Kroner into dollars. And he's even accounting for the currency devaluation.

Starting point is 00:36:15 even. Yeah. Oh, geez. Oh, such a geek. Yeah, it's a turtle geeks. Okay, so I was making, say, 160,000 here. And I vividly remember I went up to my boss just a month after that saying, I want more. I'm not satisfied with 160,000. And again, why wouldn't I be?

Starting point is 00:36:35 But it was kind of like, I had the feeling that someone got more. I felt like I was making all these millions and millions. Again, as Preston said, you kind of do, but it's for someone else. as money and you can probably hire someone else to do it just as good as you. But I was kind of feeling since I'm making so much money, I should also have more money. And so I think I said something like, I know it's only been a few months, but I would need at least $40,000 more. And obviously, that was declined because they would not negotiate new conversation packages like every two, three, six months or whatever. And now than the thing about it, it really doesn't make any sense why I would

Starting point is 00:37:10 do that because my wife, she also working as a trader back then, we're living in a, a a small 600 square foot apartment, no kids. So with two trader salaries, you might think, hey, they got everything they need. But I was so unhappy for so long because it didn't get more because it wasn't about money. It was about keeping scores. So whenever I read these stories, and I'm thinking, oh, that, you know, how can he say I need more? And why is the money so important? And he should just be satisfied with what he has. I mean, it happened to me. And I think, just as Preston mentioned, whenever you are part of a culture that is so strong and you spend so much time there, it's just so hard not to be called in the middle of it.

Starting point is 00:37:52 And the thing that I got from the story stick, and you watch Wolf of Wall Street, I haven't seen the movie, but I've heard different parts of it. But the thing that I take away is that it's a breeding ground for ego. It just seems like the ego and these cultures are just crazy. And when you're exposed to that, either you develop an ego to combat. the other egos or you just get eaten alive. Now the question I really got for you is who was a better trader, you or Sophie? That was definitely me. No.

Starting point is 00:38:22 She was probably a better trader than me, to be quite honest. Just so everyone knows, Stig's wife has a doctorate in economics. So she's nobody's dummy when it comes to this stuff. She could probably do a lot better job at the podcast than the two of us combined. All right. Well, that's all I have for the book. I don't know if you have anything else you wanted to highlight Stig. No, I think we pretty much got everything covered.

Starting point is 00:38:44 I would highly recommend. I think you might have you said this, Preston, but I would highly recommend to all our listeners out there if they're considered a career on Wall Street to pick up this book. Even though it's old, I think the whole thing about culture on Wall Street is something that you should be aware of before you start there. And then, just remember, I would never, ever point fingers

Starting point is 00:39:06 because I read all the books and watched all the movies and I still did all the same stupid things as all the other traders. So it might not be helpful, but I definitely think you should read this book. All right, guys. So this is the point in the show where we're going to take a question from a member of our audience. And this question comes from Julian. Hello, Preston and Stink. This is Julian from Bucharest, Romania.

Starting point is 00:39:26 My question is about us investors who are located in smaller developing countries with emerging markets. I wanted to know, while learning the lessons, would you recommend to study and invest in the local markets only, or should you consider bigger international markets like USA or UK, with the risk of not understanding the whole context and culture of these foreign markets. Thank you, guys. Yeah, so I think it's a good question because, like Juliana, I live in a small country, and I'm actually not that much invested in Denmark, and there are a few reasons for that.

Starting point is 00:39:58 The one is that say that I want to invest in an index, now biotech is like huge in Denmark, and because we don't have that many companies, you're really not that diversified if you like most people start to invest in indexes. And I think that's something I don't know the Romanian stock market admittedly,

Starting point is 00:40:16 but I think it might be something you should also be looking at if you're comparing to S&P 500 in America and thinking, well, I'm probably diversified if I buy the national index. Another thing is that the selection of stocks is typically not that tempting for you if you live in a small country, say,

Starting point is 00:40:34 Romania or something when there's not like But it's not a big country. It's just like if you want to invest in, say, all companies, there might just be two, three, four companies, and it might be really, real hard for you to compare with competitors. So one thing is that you might have information that it's accessible for you specifically, but it's really hard and it's really not that useful if you can compare that to an industry. And that's why I also typically favor American stocks

Starting point is 00:41:01 because the information out there is just so much better. Now, there are a few problems about investing. in foreign markets like the U.S. if you live in Europe. For one thing, it's typically more expensive. So I would usually pay a fee there is, I think, three to four times as high whenever I'm buying American stocks. I could imagine it would be something similar for you, Julian. And another thing is that if you invest in another country, you might also be exposed to currency risk. So, Julian, the way I'm going to answer this is really kind of to point you towards a book. So there's this book called Global Value, and this is by MEPFAS.

Starting point is 00:41:36 And Mab is really good at value investing abroad and investing in international markets around the world. So his book, I think it's only $2.99 for his Kindle. So there's a really cheap book that you can get if you have an e-reader, if you want to read it on your computer. That's where I would point you. And what he's doing is he's basically teaching you how to do value investing in any country around the world and basically capitalize on low market values. And also piggybacking on Stig's comment by using. indexes in those countries. So that's where I would point you or anyone else in the audience that's interested in doing that. If you're not familiar with Meb Faber, we've talked about him a couple

Starting point is 00:42:15 times on the show. I know Toby knows them. Mab got this idea where why do I limit myself with value investing principles just in the United States? Why don't I look globally and say, which country is offering me the best valuations? Why am I not funneling some of my capital into those? And that's what his book is all about. The name of the book is Global Value, How to Spot Bubbles, avoid market crashes and earn big returns in the stock markets, the name of it. So we'll have a link to that in the show notes if anyone's interested in looking at that book. Meb has a great talk at Google where he's talking about this approach by implementing value investing techniques internationally. So what we'll do is we'll have that video in our show notes.

Starting point is 00:42:52 So after you're done listening to this, if you want to pull up our website and go to the show notes, we'll have that in there so you can listen to him talk about. I think it's about a 30-minute talk at Google. It's a fantastic presentation. It's completely free if you guys want to listen to that. that and get a glimpse of what he's talking about in this book. All right, Julian, so thank you so much for that question. We're going to send you a free-signed copy of our book, the Warren Buffett Accounting book. And for anybody else out there, if you want to get your question played on the show, go to

Starting point is 00:43:17 Ask the Investors.com, and you can record your question there. And for anybody who gets their question played on our show, you'll get a free sign copy of our book, the Warren Buffett accounting book. We just really want to stress this. If you want to download Liars Poker for free, and listen to this book, go to Audibles. That's where we listen to all of our, are books that we talk about on the show. If you use the link on our website to go to Audibles, you can download the book for free. You don't have to pay anything. Now, this was kind of a cheaper book. Liars Poker wasn't all that expensive because it wasn't too long. I would recommend that you use that free credit on something that's more expensive. Some of the books out there are like

Starting point is 00:43:53 $40. So regardless, if you use the link on our site, you get a free book. It is a total win-win for you if you use that link. So we highly recommend that. Also, if you sign up on our mailing list, you'll get our executive summary of Liar's Poker. It's like it's four or five pages long. So we send those out. We try to send out twice a month, sometimes only once a month. We'll send out our notes from the books that we're reading. We don't send out any spam.

Starting point is 00:44:17 We try to talk about the current market conditions whenever we attach the executive summary. So we highly recommend you guys sign up on our mailing list. And you know what? If you don't like to be on our mailing list, it's too easy to unsubscribe. And we won't hurt our feelings. We're really doing this more for the audience to help them out. If you have any questions at all about this episode, go to hashtag TIP67 on Twitter. And we'll try to answer your questions there.

Starting point is 00:44:42 We're really enjoying the exchange with all the members of our audience on Twitter. But we just can't tell you enough how much we appreciate our audience. You guys are just absolutely amazing. The amount of information that you guys feed us is just unprecedented. It helps us out tremendously to redistribute that information back to the audience. So keep that flowing. We really appreciate it. We might not be the best at responding to everything, but we're trying very hard to try to respond to everybody.

Starting point is 00:45:09 But please realize that what you're sending us, we are seeing it all, and we are able to then distribute that back to the community, either through the forum or on the podcast. So thank you guys so much. That's all we have, and we'll see you guys next week. Thanks for listening to The Investors Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www.com. your questions or request a guest appearance to the investors podcast by going to www.com. If your question is answered during the show, you will receive a free autographed copy of the Warren Buffett Accounting Book. This podcast is for entertainment purposes only.

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We Study Billionaires - The Investor’s Podcast Network - TIP 067 : Liar's Poker by Michael Lewis (Business Podcast)

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