We Study Billionaires - The Investor’s Podcast Network - TIP459: The Equation for a Meaningful Life w/ Vitaliy Katsenelson

Episode Date: June 24, 2022

IN THIS EPISODE, YOU'LL LEARN: 02:03 - How Vitaliy is thinking through today’s market. 21:06 - When active value investing is too active. 31:50 - How to develop better habits. 40:24 - What Vitaliy has learned from Stoicism. 55:59 - How honing your art and craft is essential for investing and other areas of life. 59:48 - What we can learn from classical composers as well as painters such as Van Gogh. 01:08:34 - The equation for a meaningful life. And a whole lot more! *Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Soul in the Game Book. Vitaliy Katsenelson Twitter. Contrarian Edge Website. IMA's Website. Between Races Poem.  Trey Lockerbie Twitter. Related Episode: Value Investing And Market Cycles w/ Vitaliy Katsenelson. Related Episode: Discovering Value Investments w/ Vitaliy Katsenelson. Check out our favorite Apps and Services. New to the show? Check out our We Study Billionaires Starter Packs. Our tool for picking stock winners and managing our portfolios: TIP Finance Tool. SPONSORS Support our free podcast by supporting our sponsors: Hardblock AnchorWatch Cape Intuit Shopify Vanta reMarkable Abundant Mines HELP US OUT! Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. My guest today is Vitaly Katzenelson. Vitaly holds a CFA and is the CEO of individual portfolio management, better known as IMA. Vitaly is also an author of a popular series of newsletters as well as multiple books, including his newest release, Soul in the Game. It's a beautiful book that goes beyond the learnings from investing and dives deeper into how to make a meaningful life, what I think all of us are really here for. In this episode, you will learn how Vitaly is thinking through today's market,

When active value investing is too active, how to develop better habits, what Vitale has learned from stoicism, how honing your art and craft is essential for investing in other areas of life, what we can learn from classical composers as well as painters such as Van Gogh, the equation for a meaningful life and a whole lot more. Stoicism is a passion of mine and it was a lot of fun to explore it in this format. I also love finding threads between art and other creative outlets to investing, which is often overlooked as a craft. I hope you enjoy it as much as I did, so without further ado, here's my conversation with Vitaly Katzenelson.

You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to the Investors podcast. I'm your host, Trey Lockerbie, and today we have Vitaly Katzen Nelson on the show. Welcome to the show. Joe. Trey, thank you very much. It's a pleasure. I'm a huge fan of the podcast and you guys do a phenomenal job, really. Well, I'm honored because I think you just told me this is sort of the first interview kicking off your new book launch. And we're going to talk a lot about that new book. I'm really impressed with the topics covered in it and it's refreshing and it speaks a lot to me and my background.

And we're just going to have a lot to cover today. I'm really excited about it. This is great. Looking forward to it. Okay, so before we really dig into the book, you've had quite a long career in investing. And I wanted to kind of talk about the market today and get your take on it. So in your career, you've seen a couple of these bare markets. You saw the dot-com crash. You saw the GFC where the market kind of grinded 50% lower. In both instances, it kind of grinded about 50% lower roughly.

So let's just take 2009 and thinking about where the market was around $1,500 a share for the S&P 500 at that time. Thinking about it being at five or near 5,000, like 10 years later, probably just felt inconceivable. And so right now we're seeing the S&P down about 14% from its high. That's the actual historical average for a correction. So I'm kind of curious how you're feeling about today's markets. Is there some number in the future that we can't even conceive of at right now? Are you finding that there should be more pain ahead? So when I look at this market, the market that looks very similar to is a kind of 1999 to Southern to Southern 1 correction.

And if you think about what happened in 99, you basically had already kind of like the technology stocks and dot-com stocks were already going up for many, many years, maybe three or four years. So the market was already expensive. On top of that, you had this wide case care where everybody was concerned that if you take mainframes, the old mainframes, once the clock switches from 1900 to 2000s, they're going to go back to 1900. So there was a huge investment in basically technology.

But the problem is that the investment did not just apply to mainframes, it also applied to old technology. So Dell's and Cisco's and Microsoft's, the demand for their products was just off the chart. But then 2000 came and kind of the world kept going. And this company has discovered, like I'm talking about right now, Cisco, Dell, Microsoft, those are very good solid companies. They discovered that the previous year or two, the sales they made pulled future sales forward.

Cisco sales declined. Dell sales stagnated. Microsoft sales actually went out, but this is very important. But if you look at what happened to the stock prices, Cisco today is still below to Southern High. It took Microsoft like 13 or 14 years to get back to Southern high level. They'll actually, I'm not sure because it went private, But I think it went private at the price that was far below the kind of 2000 high.

So this is point number one. So there was a lot of sales that get pulled forward during the pandemic for a lot of high-quality digital companies. You know, I like talking about from Google to many other companies. But what's also important to understand is that when you look again at the 2000 era, those companies found that when you're growing at a very fast rate for a long period of time, you basically make an assumption that you continue to grow revenue at very fast pace. The reason it's important because you start hiring people as if you're going to do this and you have

assets base as if you're going to do this. When growth slows down, you discover that you have too many people and you have too much assets and therefore what's going to happen, you have layoffs. And this is important because I think what happened during pandemic, it was kind of our Y2K moment for a lot of digital companies. You know, because during the pandemic, we didn't really know how the future is going to look like post-COVID, right? And a lot of these companies were basically assuming that we are kind of in the new normal, digital normal. And today, you know, they're waking up to the fact that I think they pulled a lot of growth from the future.

If you look at Zoom, it's basically went from a child to maturity in two years, right? And now it's a mature company and the earnings are rerading. Its cost structure probably going to have to rewrite and a lot of other things. So the reason it's important is that because what I learn about the market, things go from one extreme to another. And the reason is important because when valuation gets very, very high and people get overly excited as sales growth slows down and as earnings collapse because as revenues decline, the cost is still high and companies now taking charge is lane of people. What's probably going to

happen is that, and this is what happened in 2001, 2007-2, the companies went from being loved to being hated and completely abandoned. And you could have picked up Amazon and some other high-quality companies for 90% cheaper than they were at the top. And so when I look at the market today and I look at the darlings of yesterday, you know, that were too expensive for value investors like me, I think we'll get to the point where they will become cheap enough. We're not there yet. And so I'm kind of looking through Kathy Woods' arc and kind of taking mental notes of companies that like to own that are good businesses and trying to figure out how much you want to pay for

them. So this is only kind of on the dot-com 2.0 bubble. The other things going on in the economy today is obviously we have this significant inflation and we already had inflation before the war in Ukraine. And I think the war in Ukraine basically just added a lot more oil to the fire. And I think we're going to have a, basically, in fact, that additional fuel coming from several sources, number one, Russia and Belarus, so Belarus are the second and third largest exporters of fertilizer, of potash.

And also, so the fertilizer prices are up significantly. And potash prices are up significantly. Also, a diphthergent fertilizer is basically derived from natural gas. and that you guess price is up again because of the war. And so what's going to happen over the next couple of years, or next year at least, we're going to see most likely the cost of food will go up tremendously. Just because fertilizer is the kind of the lowest layer, it's the most important input into food prices. And so you're going to have lower yields because farmers will be more stingy with fertilizers.

They're going to have to raise prices for corn for anything. And so you're going to have food inflation. Now, you also have a, you know, we're going to have oil prices higher, and that your gas prices higher. Also, as interest rates go up, and this point is very important, as the housing prices went up tremendously. And as interest rates go up, their impact on housing is going to be significant. Let me give an example.

The median house in the United States cost about $450,000. As a 30-year mortgage goes from 2.8% to 5.2, the difference is about $7,000 more year of interest payments. That is basically if a median income in the United States, household income is about $65,000, that's more than 10% of median income is going to be consumed by basically, in other words, think about this. The house you were going to buy hasn't changed. You just have to pay for that $7,000 more in interest payments.

So that's another source of inflation. And on top of everything else, if you were going to buy a car, that car now is going to and you're going to finance it. That car now became more expensive. So what we're looking at is consumer has a limited budget and consumer has been attacked from different directions. Now spending more money on food, on gasoline, on heating, on basically cost of finance now is higher. So when we look at the economy today, I think there's a very good chance that what's happening may basically, it's very stackflationary. This inflation, you know, to a stackflationary, I don't know if it's going to send us into a recession or maybe we're already in a recession, but I know this is not good for the economy.

So as a stock picker, what my company does, we build a portfolio of individual stocks. We have basically shifted portfolio from discretionary spending. So we have very little exposure to stocks that rely on the discretionary spending from consumers because I think that's going to be the area that will be attacked the most. It's certainly interesting times that we're living in. I mean, you brought up Kathy Wood. She's now selling Tesla buying General Motors. I mean, we're shifting into a new era.

To your point, those tech stocks are hopefully going to get cheap enough where folks like us can actually come in and do a Bill Miller strategy where he bought up Amazon, you know, right at the trough of 2009, so to speak. But just to add sort of like a contrarian or devil's advocate take to what you just said, especially around housing, because my concern with housing is that there's just still a lot of liquidity out there. Institutions now entering the market buying up some hard assets in some, you know, regions, major metropolitan areas, for example, that could continue to drive. this thing higher and higher higher. I'm seeing it in Los Angeles, so I'm speaking from my relative experience here, but I'm just kind of concerned. Even though interest rates are going up for the consumer, it seems like these institutions are finding ways to enter this asset class to continue to drive things up because it's simply

a hard asset and they're just trying to protect against inflation that way. I think that is actually a very, very good point. So what I described is, you're right, is basically kind of direct impact on the consumer, right? But think about Blackstone buying these houses, right? and they rented them out. When they rent them out, those rents would be higher as well. And also Blackstone, like the kind of institutional buyers, they are still a small part of the

market, not the whole market. And if the market, if the housing prices start decline, which, by the way, those things do happen, then their interest in buying houses may actually decline as well, right? But anyway, you look at it, if they buy houses and then the rent amount, then they'll be raised in rents, right? So if you're a consumer who now renting, that still impacts your budget. tried because you just tried in a lot of shock the black stone. But that's a very good point.

You mentioned Microsoft struggling for about 13, 14 years. There was sort of this lost decade, if you will, around the late 90s to the 2008 timeframe where the market just simply recovered to where it was. And I'm kind of curious, given that you wrote this book, this little book, about sideways markets, do you see any prospect of that kind of what we're entering into where it's just going to be a decade or sort of a lost decade period where we won't recover? to where we just were only a few months ago for a significant period of time? No, I think actually, if I had an interest in this,

I would probably be re-release in my book again, The Little Book of Sideways Markets, because we are primed for this environment. Microsoft is a good example. Let's examine why the stock hasn't gone anywhere. Okay. I forget the numbers now, but Microsoft valuation was trading 65 or 75 times earnings.

After that, Microsoft, and I'm right now doing from memory, but probably grew earnings and revenues maybe 15% in a year. And it just took 12, 13, 14 years for Microsoft to grow into its valuation of 2000. So it's price earnings when, I don't know, from 65 times earnings to 12, even though while its earnings are growing. And this is why the same, the price you pay actually matters is so important because it does. Let me give you even better example. There is this company who basically is the most important company in the wireless space, Qualcomm. Imagine you are in 1999. The Qualcomm basically has a tax on every cell phone sold globally, because it basically has a patterns for 3G, 4G and 5G.

So every time you buy a phone, about 3% of the price of the phone goes to Qualcomm. Just imagine how beautiful their business is. If you bought Qualcomm in 1999, I think the stock was so expensive that I think it took you like 15, 18 years to get your money back. Again, if you only look at the stock price, you would have seen this. Stock declined first and then basically just did nothing for 15 years. While it was happening, its earnings and revenues were growing very steadily, very, very fast. It just was too expensive.

So if you look at the market today overall, the market last year was very, very expensive. It were pockets of the market were insanely expensive. If you basically look at Kathy Wood's portfolio, that was the insane part of the market. And now what's tricky about this, I don't know what the economy is going to do for the next 10 years or 15 years. Because today, if you think about where we are today, the government debt is incredibly high. And our spending is not declining. So most likely we're going to have higher interest rates going forward. And that's going to be kind of the staple of this economy.

What's important to understand, we haven't really seen high interest rates since 1980s. Since 1980s, interest rates decline. And we haven't seen much inflation either. So as interest trades go up, it's a headwind for the economy. And it's a headwind for the economy. they got accustomed to very low interest rates. So as they go up, they basically slow down a growth. So now you take this, you have high valuations,

and actually instead of being normal growth, having no normal growth, the growth going forward is probably going to be slower. So therefore, that's a recipe for very unpleasant markets. So this is why today as an investor having significantly margin of safety, you know, buying companies who can still maintain the earnings power and grow in an inflationary environment and who's basically whose earnings are not really or revenues are not tied to the health of, you know, consumer's health, that's how you survive in this environment. And I think this is probably the right and the most important time to increase your margin of

safety. So if in the past you're looking to buy stocks as, you know, a dollar for 60 cents, maybe now you want to try to buy it for 40 cents. So that's basically how I look at the market today. Given that you focus so much on stocks, I'm curious because there's an adage that The stock market is where you should go during times of inflation. This is kind of you're both sides of this argument, but essentially the theory is that these companies can raise prices, which then increases earnings and it kind of washes out through inflation. Is that your kind of approach to maintaining with stocks?

Are you operating with that philosophy? Meaning if we're entering the secular timeframe where interest rates will just continue to go up for the foreseeable future, is stocks even better, even though the economy might be suffering are stocks, generally the asset class you want to focus on? So think about stock price. Ignore dividends for a second, okay? Stock price goes up or down and a loan term for two reasons, and combination of these two reasons.

Earnings growth, earnings growth, and change in price to earnings. Okay. So even if number of widgets we produce stays the same and we have inflation, the GDP will grow in the nominal terms, right? So therefore, some companies will be able to grow earnings better than others during the inflation environment, right? But in general, earnings will grow with inflation. So that's a good news.

The bad news is that the price to earnings, which is still very high, will contract because when your interest rates are low, you're discounting the future at low interest rates. When you have high inflation and high interest rates, the future is a lot less exciting. You know, there's high interest rates. So it's a combination of two things. So the inflation is good for nominal. So stocks will benefit because in general companies will be able to raise prices and it's going to show up in the nominal earnings.

But price earnings will decline, which will wash away. some of the gains you get from earnings growth. So this is why it's kind of a tricky environment. And then you want to own companies that have price and power. As an example, if you are a retailer that has exposed to a lot of discretionary spending, you will be the casualty of inflation, because consumers will have less money to spend at your stores. If you're a grocery retailer, you're probably going to be a key. As an example, like Warren Buffett, when somebody asked them, what are the best taxed to own during the inflation environment, he said, you want to own a claim on somebody else's revenues.

Just think about this. I'll give you a couple examples. And I'm not saying those are good stocks. I'm just giving examples of businesses. They think of McDonald's. They collect franchise fees from their franchisees. As franchisees, revenues go up, McDonald's cost don't change as much,

but whatever, five or seven percent they charge, that nominal number goes up. Another one would be, let's say, a master card or visa. Again, it's a claim. They collect 50 base points of 1% of every transaction, right? as the dollar volume goes up just because of inflation, even if we don't produce more widgets, their revenue goes up, even though the costs don't go up as much. Let me give a couple examples of companies V-O. So we own pipelines. Think about a pipeline. You basically have

fixed assets that have almost an infinite life. If you just maintain your pipeline, those assets have almost infinite life. And when the pipeline build those assets, that's in the yesterday's costs. Now, they are able to raise prices with inflation. A lot of the contracts allow them. to raise prices with CPR or PPI. So their revenues go up where the costs are mostly fixed and don't change. What's also important to understand, maintenance capital expenditures for pipelines are very, very small. Like when you look at the business, you want to look how much maintenance capital expenditures

they have in relation to their assets. In case of pipelines, those maintenance capital expenditures, I'll give an example, beyond enterprise products, which has about $8 billion operating cash flows. They are maintenance capital expenditures, about $500 million. dollars and I'm being conservative. So if that maintenance capital expenditures goes up 30%, the revenue, you know, like let's say we have this runaway inflation, the revenue going up by 10% that contributes 800 million dollars. Eight hundred million dollars. If the costs go up by 30%, that now, you know, their margins too can be much, much healthier. Anyway, as an example. So

that's how we basically position portfolio, like one stack at a time. Given that you've seen a couple of these big correction periods, are there any tips or tricks you've picked up because obviously as things get cheaper, it's exciting, but there's always that fear of catching a falling knife, for example. So are there any indicators that let you know, okay, we're nearing the bottom, we're getting there. A lot of times, you know, X amount of companies hitting their 52 week low or whatever it might be, just general indicators that you are watching closely right now. You usually look for something else. You look for when the technology stocks declined today and there's still interest in buying them, that usually tells me that's too soon.

It's when people start treating them as a radioactive waste. I remember like in 99.com, companies would rename their name to dot com and the stack would go up 30% just on changing its name. And then to 1,0002, dot com companies would scrape over the name, that come from the name because it became radioactive. So at some point, we're going to have this, you know, the tech stacks. They are still darlings. At some point, they will become kind of radioactive and nobody wants to write about them.

Nobody wants to talk about them. Nobody wants to show them in their portfolio. This is when you want to buy them. That's number one. Number two, what I learned is that we go over, and I already mentioned it, we go from one extreme to another. We go from love to hate. And so you're probably going to be able to buy these companies.

In this environment, it's very dangerous to look what valuations wore over the previous five or ten years. This point, actually, this is probably the most important point I can make about this. In this environment, when we analyze companies, we focus on absolute valuations. In other words, what is this company worth just based on its cash flows? It's very dangerous today. You look at a company that says it's declined 50% and you say it's only trading at 15 times revenues. And now it's cheap because it used to trade at, I don't know, at 40 times revenues.

Well, the problem is that 40 number, that was wrong. And so it could be that 15 times revenue number as well. So you really should look at the best job you can figure out what the earnings power of this company is or it's going to be. and value those cash flows. And that's how you arrive to the price. What do you think it's worth? And then you want to still take a haircut and say, I want a margin of safety if the future is not as bright as I think it may not be.

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value investors are saying and you kind of take it as gospel. You've written a book about active value investing. So I'm kind of curious over the next 10 years, how active is too active and how active is too little active. You know, if we want to see these environments shifting as quickly as they have been, you know, when should we just buy and turn the screens off and wait 10 years versus, you know, maybe managing actively? I'll give you a couple answers. Number one, like the kind of this continuous boom markets train you to buy and hold, right? Because every single time you sold it in the past, price earnings got higher and higher, right?

A lot of times not because the earnings grew, it's just investors were willing to pay more and more, okay? If we are entering into sideways markets, the opposite happens. the price to earnings keeps declining, right? And actually, they teach you at the end. You want to be buying and selling all the time. The truth is somewhere in the middle. So if you want a company that is like your next Apple,

and when I say next Apple, meaning company can compound earnings at 20% a year for next 20 years, now this earnings growth will overcome almost any P.E. compression that the market will throw at it. So in that case, you want to be kind of continue to be buy and hold investor. It's just because if the company has a very high return capital and has a huge growth runway ahead of it, you know, has a moat, then be buying whole investor business stock. That's those exceptions, though, right?

So during the sideways markets, you want to buy companies when they're undervalued. When they get to fairly valued level, you want to sell them. And it's not trading. It's a basically just your realization that extra bonus that you used to receive from price churning is going from below average to average to much budget average is kind of That's kind of the staple of the bull markets, not the sideways markets. Thank you for that. So now I want to kind of transition a little bit into your book because it is a topic that we actually strive to cover on this show.

While we love the tactical investing things, I think we're all here to learn more about the philosophies to just live a more meaningful life. Because I think there's a lot of synergies between investing and living a meaningful life that you explore in this new book. And something I actually learned from the book that I didn't know is that the actual ancient Greek translation of philosophy is, is quote unquote love of wisdom. And when you study successful people enough, you often find this common denominator that they're just these voracious learners. And you, like me, I think we're not a great student earlier in life. And so I'm kind of wondering where things kicked into high gear for you when you found your quote unquote love of wisdom enough to where you decided to spend your life studying it. Okay. So let's talk about writing first, because I think that's part of the

answer. So I started writing in 2007 four. Okay. At that point, one, I had a child. I had my son, John, I was three or four years old. I completed my graduate degree in finance. And I was teaching actually investment class at City, Denver. And street.com was looking for writers. And they were not paying anything, which was great because by not paying me anything, they were paying.

So I started writing for the street.com. And I realized I really liked writing. And I got to admit, like, I hope they don't have an archive in my articles because you read my early articles, they were incredibly boring. Because I had a very little self-conference. and I wanted to make sure that all my numbers were right to the decimal, and it were very proper and very boring. And then one day, I wrote about, this is maybe 2005.

My son is four years old. And at the time, I had this TiVo device that would sit on top of your cable box. And I had issues with the box, and I called TiVo. And remember, this is 2004-S7005, and the voice, you know, so they had a voice recognition software that asked you a question and you have to answer it. And as you can tell, I have an accent. And so I would speak to the recording, and it would like, to the phone, it would not understand me. And then my four or five-year-old son here is playing.

And what I had to do, I gave him the phone, and I basically would tell him what to say into the phone. And Jonah spoke with this perfect Disney accent. And this is how I could communicate with Steve a customer support. Why it's important. What I just told you, I wrote a small article about this, 500 words. And on this response to this article was so great. Okay. I got more emails and feedback than anything else I've written before.

And this is when I realized that being myself is very important. And I think that article was probably instrumental to shaping me as a writer. So point number one, in life we have this little moments. And that was a little moment. I call it TiVo moment. But we need to pay attention to that. Okay. And luckily I did.

And that changed the way I write. But I still continue to write about investing. And I would write me about investing in my articles we published in Financial Times, you know, institutional investor. And I would send it to my friends. And when I was sending to my friends, I would also write something about my personal life. And then as my email scruberers grew, it wasn't just my friends who were receiving my articles and my personal notes.

And people started to tell me that they came to me for the articles, for the investment articles, but they stayed for the personal stories. And what changed with me is this. Writing basically forces you to think a lot more. Because it's almost like it's a focused thinking. Think about it. I wake up every day at 5 o'clock for 35 o'clock and I write for two hours. That is a two hours of concentrated thinking.

And most of us don't, like a lot of people don't have that luxury. And therefore, they just don't get to spend much time thinking about things. So that basically turned me into a thinker. And over time, I started to write about, you know, and I also love classical music. and you and I share interesting music. And what I learn is this. If I write about this, this gives me an opportunity to learn more. And also, and this is nothing to understand.

When you write daily, you become a writer. So I always, can if somebody says, what do for a living? If I don't want to talk about stock market, I tell them I'm a writer. But my daily job is not a writer. I'm an investor. However, since I write daily, part of me is a writer. And why it's important, because as a writer, you always look for stories. As a writer, you look at life differently.

So my father paints, and you can see the paintings behind me. Those are my father's paintings. And whenever we would travel on vacation, my father would always kind of put his hands like this and always look for something to paint. This is what painters do. They look for what they want to paint. As a writer, you always look for stories. So I wrote about, you know, first about investing, that about life, then about classical music. And when I started to write more about classical music, they changed what I read. Now I start to read more about classical music. I think writing basically turned me into what I am today. Let me ask you a tactical question about that. So you mentioned you write for two hours a day. Is there a hard stop at that two hours? Meaning if you're on a roll and you're like really crank and you have this idea, you want to get out, are you disciplined enough to say, oh, two hours are up? Go to save some more for tomorrow. All right.

Let's get into Inside Baseball a little bit. Okay. So there are two type of writers. Okay. There are two philosophers when it comes to write. And there are professional writers who basically says, I'm going to write 1500 words a day. Those are people who Michael Crichton, John Grishman, and other. who basically would write a novel or two a year, right?

I look at writing a little bit different. Basically, I create a space two hours, and from five to seven, I write. And that's a space that basically where I show up, and I have no idea if the muse or my subconscious will show up as well and what I'll produce. And so a lot of times I would show up and I would sit in a steroid computer and produce nothing or produce complete junk. In the beginning, I would get upset that I, my wife would say, how much did you write today? And I would say, a paragraph.

She said, so you spent two hours in the basement or that's what you did. And at first, I was kind of upset at myself or how ineffective I was. But then I realized that actually when I leave my chair, like, you know, I wrote for two hours, even though I have nothing to show for this, I implanted seeds in my subconscious. And then while I'm taking a shower, going for a walk, this is where ideas will come. And next morning when I show up, I'm going to have something to say. So most of the time I'm constrained by 7 o'clock because I have to drive my kids to school.

In the summertime, when I don't have to drive my kids to school, if the sense is just flowing, I may stay later. But a lot of times, it just kind of life comes in. By the way, I have three kids. And my youngest one is 8 years old, and my oldest one is 21. And I still remember the days when I was driving my 10-year-old, who is now 21 to school. And now he doesn't need me to drive him to school. school anymore, right? And so therefore, when I drive my eight-year-old to school, I realize that I only have another nine years or eight or nine years. So when I drive her to school, I try to be present

and I look at it as such a huge privilege that I get to drive my daughter's school. And so this is why, so I don't look at seven o'clock as, oh, I have to drive my daughter to school and therefore I can't try it. Actually, look at it as a good thing. I look at it as I get to spend the 20 minutes in a car with my age-old. Reframing. Well, we're going to talk about that as well. So the reason I asked about the two hours was, I remember I heard Seinfeld talking about his process and he had a hard stop. And he said it because what you highlighted earlier, that it's hard work. Like he kind of compared it to going to see a trainer and saying, you know, how long is the session and the trainer being like, it's undefined, you know? He's like, no, he's like, no, you have to have a 30 minute time limit on it to get through it. You almost have this like positive thing to look forward to at the end of it, which is interesting. It is. And it's also, writing is not always fun. It's a lot of times it's true. ratios. I think Jerry is absolutely right. Having a defined two hours is very important because I know it's a commitment. And Seinfeld has another trick where he tries to not to break his trick. So he shows up,

he wants to write a joke every day. So I write, you know, these few exceptions every single day. Like when I go on vacation and I travel, things get complicated. But when I'm in Denver, I write every single day without exception, even on Saturday and Sunday. Yeah, I think Seinfeld like X's out calendar squares on his wall. So he actually visually sees the brakes in his system. It was just so interesting. And this applies to so many things. We're going to talk a little bit about having a process and systematizing things for investing.

And it's funny to see the synergies across multiple interests. So that's a good habit to develop. And I want to talk about good and bad habits. So if anyone is familiar with coding, you understand that an algorithm, for example, is just essentially if this then. And we can use this framework for developing good and bad habits. So I'm kind of curious for you. What are some examples where you've used?

if this, then to either enforce a good habit or even, you know, replace a bad habit. I give you two for the price of one. So this is a, it's not in the book, so this is going to be interesting. So I found that I drink a lot of coffee. And I like coffee. I just, as silly as it sounds, I like the taste. So at some point, I found that I drink literally, you know, maybe six, seven cups a day, which is too much. So I created this if, this, then, habit. So for every cup of coffee, I do 30 pushups. So literally, so if I'm at the office, or at home, before I can have a sip of coffee for every cup, I do 30 pushups. So the number of cups declined to two or three, and I do now 60 to 90 pushups a day.

So think about this, the bad habit declined, and I'm also doing extra exercises. So James Clearer wrote this phenomenal book, Atomic Habits. And he basically says, when you're trying to create a habit, the whole idea is that you want to make it as easy as possible to create this habit. So if you want to run in the morning, put your running shoes so it's easy to see them and prepare your running clothes. So it's easy to see them. Like for us, the issue was like, I live in Denver. So we go skiing in the wintertime.

And the issue with skiing is actually we have to recreate a habit every single year because we don't ski. We only ski for four months a year, right? So for eight months, I don't ski so that habit gets interrupted. So what we did with kids, we actually have ski bags that are packed the night before. And all the boots are there and our ski clothes are prepared. So when we wake up in the morning, we don't have to put a lot of effort to go skiing because we still have to drive for two hours to go skiing. And then the first day of the season is the most difficult one.

The third one is much easier. So when you try to create a habit, let's come back to your writing. Okay. Don't focus on how well you're right. Don't even focus on how long you're right. Focus on showing up and start with five minutes. And for five minutes, all you do is right. Okay. And do this for 20 days and then raise it up to 20 minutes. And just, you know, the whole idea of creating habits is just persistency.

Touching on that consistency or persistency of showing up to write every day. It reminds me of actually one of my favorite poems of all time. It's by Charles Bukowski. It's called Between Races. And the poem basically goes through this where he's at the horse races where he's every day, basically. And a guy comes up and wants to interview him. And he just says, no, no, no, I don't do interviews. I don't want to do anything. And then the guy finally breaks down. He says, look, it's not really an interview with. I just want to know what it takes to write. He says, basically, talking to the young man made me feel bad. They thought that writing had something to do with the politics of the thing. They were simply not crazy enough in the head to sit down to a typer and let the words bang out. They didn't want to write. They wanted to succeed at writing. So when you talk about the persistency of being a writer, is that something that can be learned?

Meaning like, it just takes showing up every day and doing it and eventually you become a good writer. Or do you have to have something in you that's crazy enough to sit down? the type every day and get better at it. Number one, the Epictetus has this saying, if you want to be a writer, write. So showing up is very, very important. A lot of times we think that, like waiting for the muse, okay? In other words, when the muse comes to me, when inspiration comes, then I'll write. Well, that's not how it works.

You show up and then you try to write and then inspiration comes. The act of showing up is that that's what's great inspiration. I really love writing. I don't love it every day. And some days I love it more than others. But I'm willing to suffer for writing. I love music and I would like to play piano, for instance, but I'm not willing. And actually, I tried it and I failed miserably.

More importantly, I was not willing to suffer, you know, to play piano. So this is very interesting. After the book came out, I wrote four new chapters that were not in the book. And by the way, this is, and you can get the, your listeners and viewers can actually get the chapters. If they order the book and they send in, you know, from Solenigim.com, and send a receipt that they bought the book, they'll get those chapters. In this chapter, I talk about a conversation I had as a friend who basically say, Vitali, I would like to write. And, you know, I went through every, you know, through my routine of writing.

And then he said, you know what? Maybe I should hire a writer to write for me. And after a very long conversation, I realized he doesn't want to write. He'd like to have written. That's different. And so he was not willing to suffer for writing. And therefore, that was not a good problem for him. Okay, it's a problem, but it was not a good problem for him.

So, and again, happiness in life comes from having good problems. So you really have to be passionate about something. Then it's going to become a good problem. Talking about suffering a little bit, that might be a good segue to lead into stoicism, in a sense, because that is sort of the idea of reframing suffering to a degree. I actually had this idea reading your book. I was thinking, stoicism is kind of like downside protection if you compare to investing. You're kind of just trying to eliminate the downside protection.

So there's an entire section in the book dedicated to Stoicism. So walk us through your discovery of Stoicism and why you're so drawn to the philosophy. You know, I've been stumbling on a lot of quotes by Epictetus or Marcus Aurelius or Seneca, and they always sounded very, very smart. And then I read this book called The Art of Good Life by William Irvin. And by the way, it's a phenomenal book. And if you pick up this book and you're new to Stoicism, skip the first three chapters, because it's about history and different philosophies.

And go to chapter four, I think. This is where he starts talking about Stoic philosophy. You can come back to the first three chapters later. But I think if you start with chapter four, I think it's going to make sure that you're going to complete the book. But what really got me into Stoicism is one quote by Epictetus, and which sounds so banal and so plain, but it was an aha moment for me.

And the quote is very simple. Some things are up to us. They're internal. Some things are not up to us. They're external. And that is such a simple quote. And I'm shrinking the quote a little bit. But if you look at your life and realize that you have so little control what's internal to you,

basically you have control about what you think and how you look at the situation. And you have very little control about anything else. You go into the airport to rent a car and the car is not available. That's external. That's not up to you. You're taking a test. The only thing you have control over is how much how you prepare. for the test. You had to control how you showed up every day and studied for this test. But even when

you're taking the test, there's so many random factors. When I visualized the test, I think about my CFA exam, where I brought two calculators to the exam, because what if the battery died and won? So, but while I was taking a test, there were so many things that I could not control. If the AC was working, if how well I slept last night, all the different things. So that was external to me. When somebody is rude to me, it's external to me. Now, this is very important. Even what I just said, somebody is rude to me, that's my interpretation. This is another part of Stoic philosophy. I can look at what they said and I can perceive it as rude and therefore it's going to impact

me. Or I can basically look at what they said and not phrase it as rude, but basically say just being different to what they said. And therefore, as you kind of mentioned, Stoic philosophy allows you to kind of reduce the downside volatility. So I reframe what the person said as basically kind of been neutral and not taking it personally. Whoever is rude to you, whatever, but if having a bad day or whatever, you don't know what's happening in the person's life.

Therefore, if you take it as rude and that upsets you, you allowed yourself to be upset. That's internal. Again, see, what they do is external. How you perceive it is internal to you. This is where you talk about reframing. That's what reframing comes in, right? You basically look what happens to you and then you reframe it in a way that it doesn't hurt you. Yeah, there's this quote actually by Mike Tyson.

I came across once where he basically said, I once used to get mad at people until I figured out that if I get mad at them, then they own me. And I just thought that was like so encompassing of this philosophy in particular. Yeah, I think the, I forget one of the, either ascetic what Victor said or something along the lines that you would not allow a person to come to a house and trash it. But by reacting what the person says, you basically allow them to get into your mind and do whatever they want in your mind. So that's the same concept, yes. You kind of mentioned this idea of with externals or in internals. You referenced the Buffett quote about a scorecard. I think a lot of our listeners will be familiar with that. But I also came across

this quote recently. I just overheard someone say it. They're like, you have to control the controllables. And I just thought that was like almost bumper sticker ask, you know, but simple enough for me to remember it. And I thought that was really cool. You know, you do touch on Seneca. And I came across Seneca really in my early 20s. I think during my like search for enlightenment that I think a lot of young guys have that certain experience in your early 20s. And I've kind of come to think that the word enlightenment can be defined by this idea, which is essentially you can't believe everything you think. So you almost have to get this out of body, look at yourself and your thoughts and analyze them

objectively. And everyone experiences imposter syndrome, for example, and maybe artists more than others. How does learning about an artist's life, as you've dissected multiple artists in the book, how does it help you manage your own imposter syndrome and not believe everything you think? Oh my God. There are so many ways I can answer this question. I think one of the most important things I did is I meditate. I have on and off moments, but I mostly meditate.

So I should say, it's not I meditate, I mostly meditate. And meditation, people usually misunderstand what it does. You know, meditation they think it's a kind of, it calms you down, so it never does that. But there's one, this very important benefit of meditation, it allows you to look at yourself as an out, like, at your thoughts as an outside observer. So in other words, when a thought comes to you, you actually be able to kind of look outside this thought and observe that you have this thought. There isn't it's important because that gives you self-awareness and mindfulness.

Because a lot of times we go through life kind of mindless. We have this conversation in the head all the time. And we're not even aware of this because it's been there all alive, right? But once you start noticing this conversation, first of all, it allows you to be a treat of negative emotions because a lot of the conversation is negative. By observing that you have a negative thought, it's actually neutralizes that. So that's answered a part of the question. But let's talk about what we can learn from other creators. Well, number one, you know, I write about Chekhovsky, for instance, right? We listen to Chekowski's music today,

and we hear this absolutely unbelievable music. And we don't think about how much struggle and effort. Chikovsky went to write this music. And every creative person struggles to become good or to create something that's worth listening to, worth looking at. And in the beginning, they were not good. And they kept doing it and kept failing and getting better and better. You mentioned the imposter syndrome.

Let me paint this picture to you. I started to write for the street.com in 2004. And I was 31 years old. And a year later, after I've been writing for the street. for a year, I decided I want to write for Financial Times. It's like going from high school baseball to playing for Yankees. And luckily, I had so little self-awareness in the time, because I did not deserve to write for Financial Times. But I behaved this, if I did, and after I read a few articles that gave me confidence to keep doing this. So the imposter

syndrome is basically is the difference from where we are today, where we think we are today. There was a saying, fake it till you make it. And it's not really about, deceiving others. It's about deceiving yourself. It's actually creating self-confidence for yourself to doing what you think you don't deserve to be doing. And think about just to make things even more interesting. I wrote my first book, Active Value investing. I started working in 2005. Again, like maybe three or four months after starting writing for Financial Times. Again, like, I'm looking backwards and I'm so thankful that I was clueless because today, probably most of a a world person of myself, probably would not be able to do this.

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2025. Carefully consider the investment material before investing, including objectives, risks, charges, 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. I want to stick on that topic of deceiving yourself, because when you think about stoicism, And often people just think, oh, these are like emotionless people that, you know, have something, some maybe neurological difference in their brain and they just can't feel emotions. And that's maybe what makes them a great investor, for example, because you have to weather all of these different environments where things might be going against you.

And the way you described in the book is really this beautiful way of reframing it, as we've talked about. So you need a little bit of stoicism to weather these different environments, but you can potentially overdo it. You mentioned the snowball in the book and how he's described. And that, to some degree, feels like stoicism at its absolute maximum or the farthest end of the spectrum. Why would investors, maybe on this topic in particular, not want to be Warren Buffett?

Okay. So two answers. Number one, just because a thought into your mind doesn't mean it's the right thought. Okay. So framing it the right way is extremely important. Here's an example. When the stock price declines 30%, you can frame it differently. You can frame it as, oh, my God, my portfolio over the stock.

stock price declined by 30%, or you can look at it as that at this point in time, the market's opinion on this stock, it's an opinion that took it down 30%. So the question you should really ask yourself, what is the fair value of the company? The stock is down 30%, so what? That's an opinion. That's full change. The question you should really ask, has anything happened to companies' earnings, cash lows, has the value change? So that's point number one. Another thing about Warren Buffett, When I read Snowball, which is a great book about Warren Buffett, I read it when my kids were still very young, and I'm so lucky that I did. Because what I saw there is the Buffett I don't want to become.

Because Warren Buffett basically had such a great dedication to investing that it took over his whole life, his whole personal life. He spent very little times his kids. He neglected his wife. And I'm not judging it. That was the interpretation. That's what I learned from the book. Because nobody's perfect.

Warren Buffett had such a great positive impact on me as a hero. But this part of his life, he was my kind of anti-hero. Okay. And what I realized that I may be able to be more successful than Buffett because I'm going to have a better relationship with my kids. I'm going to spend more time as them. And that book was probably one of the most important books I read at that point in time because I actually realized that time is fleeing. So what happens to investors, not just Buffett to everybody, like investing is almost like a drug. And if you have a passion and you love doing this, like if you don't put kind of guardrails,

I'll be spending 24 hours a day doing invested. And by doing this, I will neglect people I love, my kids, my wife, my relatives. So I always have it on the back of my mind that my kids will not be young forever, that if I don't spend time with them now, when I wake up, they're much older, there'll be different people. And I can't go back when we do it. Because again, my kids, they'll grow up.

And it's kind of interesting, I look at the videos of my daughter, my middle daughter when she was six or eight years old. And part of me vaguely remembers who been that age because they grew up slowly. And then you remember them when they were now, maybe a year ago. But I also have a good feeling that they know that I've spent time as now. And that's very important to me. It's very important for my kids. So I wrote on the subject before the book.

And my son knew about this. And when he was going to college, when he was going to college, he was going to go on a trip to Israel in his gap year. And before he left for Israel, he wanted us to exchange notes. He would write us a note and we would write him a note and you would read it after he gets on a plane. And I remember the note he wrote to me and he said that after I read Buffett's book, I was always concerned that I'm not spending enough time as him. And he said, don't worry, he's been a great father and you always spend enough time as me. never felt neglected by you. Those probably the most important note I've got in my life.

So that's what I learned from Snowball, I guess, yeah. You know, you touched on Buffett and his craft, right? He's sitting at his office, studying, investing, like, focused on his craft. And that is, like, very admirable, to your point. And even though we might be able to overdo it, there's a lot in your book about sort of art meets craft, you know, having soul in the game. All these things kind of calculate to having a meaningful life. You mentioned Yiro from the sushi restaurant in Japan, spending 80 plus years perfecting sushi.

And I've seen the documentary, actually, and there's a part where the understudies have to make rice for like 20 years before he lets them like do anything else. It's that extreme. And I'm kind of curious, while there's a lot of things to admire about someone who is so focused on their craft, those guardrails you mentioned. I'm kind of curious how you go about implementing those so that you know where the boundaries are, where you're focusing enough time here or there. So a couple of things. I drive my kids to school most of the time. Being in the same room with kids doesn't necessarily mean that you are being with your kids. You're just being physically there not mentally.

By focusing and spending time as I'm talking to them, that's what the attention is. You know, and by the way, just the last thing I want to do is to create an image that I'm a perfect parent. I'm not. I'm struggling through parenting life like everybody else. But I am constantly thinking, am I spending enough time as my kids? And when I feel that the work takes over my life and it just kind of pushes out of everything else, I stop. I consciously make a decision to spend time as my kids. And it's just something, it's like a muscle you train.

It's just something that you have to be aware of this because if you're mindless about it, especially, you know, I'm listening to this podcast because, you know, like if you're passionate about investing, it just kind of takes over your life. And so I constantly remind myself that they won't be on forever. That's actually the exact reason I switch careers away from music to be present. I read the same book that has the exact same impact on me actually in the same way. And now I am a father and you're a father and parenting you write a lot about in the book. And I want to go to your father who you seem to have a high regard for.

And he was also a very accomplished painter so much so that you actually feature his work in the book. So I want to know a little bit what you've learned from his craft and his creative process and what you've taken away from seeing him work that you either apply to your investing or to your writing. What I learned from my father is this constant curiosity to learn. It's kind of like there was another title that was competing for the book. You know, it's called Soul in the Game. Originally, I was going to name it student of life. And that's because to me, that is such an important concept.

When you are a student of life, then you are open to learning all the time. I'll give an example. If you play chess and you lose, You can get upset about it or you can reframe it as, again, coming back to reframing, as that part of learning is losing. And so my father, when he was, he painted since he was seven years old and he's incredibly accomplished artist. When he was 60-something years old, he discovered that in Denver there's this very accomplished

terrific artist, his name is Kim English, who did this wonderful pastels. My father, I don't know, maybe 65 years old, this very accomplished artist enrolls in the master class of Kim English to learn about pastels. He had zero ego because he finds joy in learning. If you feel that you finally arrived and you learned and you know everything, you're so dangerous. Because right now you basically, your ego is, you have this God complex and your ego makes you very, very dangerous. That means you're going to lose a lot of mind at some point. If you are a student of life and you're constantly willing to learn and change your mind, because being student of life allows you also to change your mind because you're still learning.

That is incredibly important. So anyway, what I learned from my father is kind of being a student of life. So that kind of takes me to the next part of the book, which is around classical composers. So you actually are a big fan of classical music. And I really enjoyed this part of the book, particularly probably for obvious reasons. But I've never been a classical music fan. I mean, I appreciate it. But I wouldn't say it's like what I go to to listen to, mainly because as you put in the book,

it quote unquote takes work, much like writing as we talked about earlier. But what are some of reasons our listeners should invest in learning about classical music and specifically the composers behind the work? Well, I think first of all, they should listen to classical music because so beautiful. I have this website, my favorite classical.com, where I actually share my favorite classical music clips and writings about classical music. And I think there's a, if they source website, I think I created a playlist, called it and Gateway drugged classical music.

So I just, I found the recording, like the pieces that are the most easiest, they require the least amount of work for you to listen to and to fall in love with classical music. But I think the reason you want to read about them, because, like, as I mentioned, Chikovsky, just anything creative comes with its own sense of difficulties. I'll give a couple stories. In, in early 1800s, Beethoven was the biggest composer of the West, like bigger than any other composer. And in fact, when he wrote his ninth symphony, somebody said, this is the day the music

died because you can't write anything better than this. This is the type of music. So, and Beethoven had a very interesting impact on other composers. I would argue that he actually set music back many years because everybody looked at him, there was so many composers in his shadows that a lot of them stop composing. Other ones composed but never published it. Like there was a composer that lived in Vienna, probably not that far away from Beethoven at the time, Franz Schubert. And he wrote 6,000 pieces of music throughout his life. And he died when he was very young, I think in his early 30s. And most of it will never get published because he was in a Beethoven shadow.

Because he was like, how could I possibly publish this when I just heard Beethoven's 7th symphony? And the irony of this, today we listen to Schubert and Beethoven at the same time. And we don't say this one is, you know, Beethoven is better than Schubert. They're both beautiful just differently. Music is a, it's not math. Some people love Beethoven. Personally, I like Schubert's music more than like Beethoven's music. This is me personally.

Let's apply this to investing. Who is the Beethoven of investing? Warren Buffett. I'll give an example. So for a long time, Buffett's, remember Buffett used to say that he doesn't invest in technology stocks because he doesn't understand technology. I remember so many value investors who said, I don't buy technology because I don't understand technology.

Well, the Buffett was at the time was 85 years old and they were 12. 25 years old. Maybe they should understand technology. So what Baffett was saying, technology was, what they should have learned from Buffet is the technology was outside of his circle of competence. That's why he did not invest it. That's the lesson they should have taken out, is that that's Buffett circle of competence. When you're 25 years old, your sort of competence is different. So therefore, maybe you should have invested in technology because it's easier for you to understand it for an 85 year old. Let me give you another example. There was this another composer, Berlioz, who never got classical training as a composer.

He started studying music when he was 12 or 13 years old because he did not know the classical rules of how to compose music. Like Picasso has a saying, you learn the rules so you can break him. Well, he never learned the rules. So when he was breaking him, it was much easier for him. So a lot of times we get exposed to dogma. That actually reduces our creativity. There is some value in arriving to your not.

knowledge through first principles perspective, not adopting somebody else's beliefs. There is a terrific investor in Switzerland, Robert Vinyl. And we had a dinner with him, and I told him, you know, because Rob never got a classical education and value investing. So I told them, you're like parallels. You did not know the rules where you were breaking when you started investing. So another thing you can learn from classical music composers, like, you know, if you're a creative person, is that to create anything worth listening or watching or hearing, to do the

this, you need to go through a certain amount of suffering because creativity, suffering is almost like as a part of anything creative. When you work on a construction site and you are there with a stop sign, you know, when it's stop and go, that there was very little creativity in this, very little suffering. When you write in the book, when you write in an article, when you write music, that process is never linear and never pain free. And all those composers went through their own version of suffering to create this music. You cannot be in a stock market and not expect that you're going to have positive years all the time, that you're going to go through investing without kind of experience any kind of pain. That is a good problem. Like, if you love investing,

that is part of the course. There'll be time when you'll be very upset. By the way, in the chapter, there's a book, there was a chapter called Payne Uproin investing, where I discussed basically very painful period of 2015, you know, as an investor. I wrote this, chapter in 2016, and it was so painful and it was so embarrassing at the time for me that I just wrote it and never published it. And I finally, six, six or seven years later, it was easier for me to publish it in the book. As you and I talk, indeed, like a lot of NASDAQ stocks are down a bunch. And I have a lot of friends who are terrific investors who are struggling right now. And I would really encourage them to read this chapter because, you know, I try to explain

what I went through and how you could apply stoic philosophy to this experience and how, how it could actually reduce your pain. What you just say kind of reminded me of this quote is attributed to William Faulkner a lot. I think it's older actually, but it's this idea of killing your darlings. It's sort of a literary term. And I'm curious to know if you've experienced this as a writer, because what you were saying about Buffett, not understanding technology, well, he then went on to buy Apple. It was like one of the greatest trades of all time.

You know, this is someone killing their darlings, so to speak. So it's something that was, this idea that's precious to them, ultimately breaking that rule. It's kind of aligned with, you know, strong opinions loosely held or something, if you will. Just expanding your learning, things that you hold precious, just understanding when it makes sense to disregard that. And I'm kind of curious that this ties into another point you were making where the best I can describe it is I was at the Van Gogh Museum in Amsterdam once and you see his early works of landscapes.

And they're like some of the most incredible landscape paintings you've ever seen. And they're like kind of by the book in a way. they're very like, I think technique-wise, like, I'm not an artist, so I can't speak like you can't, but they're just unbelievable. And then you go look at his later work and it looks nothing remotely like it. It's sort of like he learned the rules and then decided to break them. He sort of killed his darlings, if you will. Do you feel like this is a theme that can be applied to investing in the same way? Well, first of all, that Van Gogh Museum is my favorite museum in the world. I've been there, I think two or three times that I absolutely love that museum. You see it,

Van Gogh's early paintings, and they're absolutely phenomenal. They're very traditional, but they're phenomenal. Now, if that's all he ever painted, we probably would never know about him, right? Because they're very, very good, but they're very similar to everybody else. And through iteration and discovery, you know, Van Gogh probably discovered his style that's, when you see Van Gogh painting today, you know it's Van Gogh, right? His later paintings. So, like, I think the mistake people make is that when we look, other people, we should learn not what they think, but how they think. See, in the sense, like when you talk about Apple, right, we should learn from Buffett, not that you should not buy

technology, not what he thinks, but how he thinks that I'm not going to buy technology because at this point in time, it's outside of my core competence. But Buffett had, there is this terrific writer, Ben Thompson, who writes statutory. And I read him daily. And what Ben has this unique ability to go back and criticize himself all the time, where he says, I wrote this, I was wrong, here's why. Because that is the only way to learn. Seneca has this quote, which basically sums it up, time discovers truth. You can apply it to anything and you can apply it to investing. Because think about as an investors, we want to discover what the company is worth before time discovers it, right? Therefore, it's not about us trying to reinforce our ego that I'm always right. I'm

always right and I never make just, you know, mistakes. Investing is really kind of a quest for truth. In that quest, you want to, I guess, you know, have strong ideas loosely held. In other words, if you had a belief and it was wrong, well, you done the belief and you have a new one. So that, I guess, sums up sort of my interpretation of this equation you have in the book, which is essentially art plus soul in the game equals meaningful life. So the art piece for me, what I'm taking away is sort of like, you know, discover your own style. And the, you know, use these creative processes to inform different ways to approach both life and investing, plus soul in the game.

So before we take off, I want to certainly make sure we cover what soul in the game means. How do you define soul in the game and putting those two together to get to a meaningful life? So first of all, what is soul? What is game, right? But game is something that you're truly passionate about, something where it's a good problem for you, something you're willing to suffer for. When I say suffer, it sounds kind of almost like I feel like, you know, Jesus dying on the cross. That's not what I mean.

It's just when you'll be doing this, you know that there'll be times they're going to love it. There'll be times where it's going to be difficult and painful. And you are fine going through this painful times. So that's the point I want to make that. So what is soul? Soul, there's something that is so important and dear to you. And like, it's part of you. Like it's a, so when we talk about Jiro, you know, the guy who makes sushi, making sushi was so important

for him. The movie is called Jero's Dream of Sushi because he thought so much about sushi how to make the best sushi he can possibly make that he even dreamt about. By the way, in the book, I have this concept that I'm very proud of because that's probably the most original thought of the book. This kind of idea, discussion of art and craft. Okay. So the story goes like this. My brother and my son, John, and I were in Venice. And we went to Morano factory. And there was this guy who was making a horse out of glass. You have this kind of bulb of glass, and he takes this triceps and puts them into this bulb, and suddenly, in a matter of 30 seconds, there's a horse out of nothing, out of glass.

We were so shocked by that. And we were walking on the street and discussing, is it art or craft? And then we realized when we look at the stores, they all have this horse. So I would think it was maybe it's a craft, maybe it's not an art. But what I realized, we are looking at that the wrong way. In any creative activity, when you start doing it in the beginning, it's, mostly art for you. Because when you could repeat something for a long period of time, then it turns into craft. So when this guy was creating a horse for us, because he makes probably 50 of those horses a day,

for him it's all craft. There's very little risk in it. He knows exactly how it's going to look when he sits down to make this horse. When he started making it in the beginning, for him, the ratio of art and craft was very different. It was mostly art and a little bit of craft. So in any activity. If we do it long enough, and just we do keep doing the same way. Over time, it starts being an art and becomes more and more craft. So it's up to us to change the activity a little bit. So let's apply to investing. If all you do, just imagine, like this is, I'm going to describe a very pathetic existence. If all you do investing in utility stocks, that's all you do, there's 10, 50, I don't know, 20 companies in the United States, whatever, that's all you do

invest in those companies. And you do it for 20 years, it's going to be all craft, no art. So if you grow your circle of competence over time, then you introduce more and more art to it because there's more uncertainty. There's more things you don't know. And in life, you want to maintain this very nice balance, especially investing between this. You want to have a circle of competence so you know that you won't make mistakes. But if you stay in this circle of competence all the time, if you don't grow it, you're going to be very little art left in your life. So again, keep coming back to Buffett. But Buffett by an apple was him basically expanding his circle of competence.

So coming back to Sol in a Game. So what is Sol in a Game? I got the idea from Nasin Talib. In his book, Skin in the Game, he talked about Skin in the Game and Soul in the Game is next iteration of that. Skin in the game, basically, if I could put it simply, is that when you associate with people, you want to basically deal with people that not only have upside in your relationship with them, but also have a downside.

So in other words, when somebody invests with IMA, if this relationship is limited to the fact that I just charge them fees, I have no skin in the game. The way I get skin in the game is that I own all my liquid net worth is basically invested in the same companies my clients do. So I have skin in the game because if I do research and I buy a company stock A for them and I own the same stock, then I experience the same downside they do. Again, all my liquid net worth is in the same stocks. So that's skin in the game. Soul and Game is kind of next elevation of this, where what you do is so dear to you, where money becomes secondary, where money is just a kind of byproduct. It's a second derivative of what you do. When you have Solony game, you would never do anything to unethical. You would never do anything that would violate your principles. So when you have Solony Game, you're very focused on what you do. You try to be in that positive to society. In other words, think about it. Imagine you're making sushi, but you wouldn't want to eat it because it makes you sick. Or you think, you know, you give it to people and it poisons them. So it's very difficult to maintain soul in the game

if it's not not positive for society. So that is what, and I'm missing a few points, but that's what basically, you know, having soul and again means to me, something that is very dear to your heart, that you do this with passion. And it's meaningful. So to me, investing is meaningful because especially in environment we're in today, you know, I feel like if you pay investors by index funds, then for the next 10, 15 years, they're going to have a very miserable existence. And having creativity in my life, that's what kind of recharges my batteries. It gives you a lot of pleasure and also a lot of pain, I imagine, the struggle, suffering

element is important. And this was such a great refresher for me, in particular, reading this book on, especially the psilicism part, where this idea that you can't avoid pain in your life, in order to live a good life. It actually requires something painful or suffering that these dramatic words we're using, but to your point, it has to be this good problem to solve that you have to want to get up and go do every day. So putting all these pieces together, basically having the creative element, looking for that inspiration, not being dissuaded by people like Buffett and Druck and Miller or whoever who has gone on to be these titans of industry, there's still opportunity to break

some roles and craft your own voice and, you know, create your own style, looking for things that are worthy of your time, worthy of the suffering that might go into it, knowing that that's what it's required to have pleasure. I don't have a meaningful life at the end of the day. Vitale, this was so insightful. I really love this book. I love the way you write. You inject all this humor along the way. I highly recommend people go pick up this book. It's called Soul in the game. Where can people find the book, find you, find your writings, find your fund, any other resources you want to share? Sure. So they can find the book on Amazon or wherever the books are sold. However, if they go to SolingameaGnet and there's instructions there and they send us

receipt of their purchase in the book, they'll send a bonus chapters. So that's a Sol inaginagame.net. They can find my writings on contrarianedge eGGE.com and they can subscribe to my articles. Also, So unlike you guys, we have a poor man's podcast, meaning that it just basically my article's read to you by another fellow. So it's not a true podcast. So investor that FM, then you can subscribe to our podcast. And just again, just my articles read to you by a professional reader. Vitalik, congratulations on the book.

Really, really loved it. Really loved our conversation. And I appreciate it. Let's do it again. That's right. Thank you so much. It's a lot of fun. And you guys, you do a phenomenal job.

All right, everybody. that's all we had for you this week. If you're loving the show, don't forget to follow us on your favorite podcast app. And please leave us a review. If you want to get in touch another way, you can find me on Twitter at Trey Lockerby. And if you really want to up your investing game, I highly recommend you check out the investors podcast.com or simply Google TIP finance. And with that, we'll see you again next time. Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by the Investors Podcast Network and learn how to achieve financial independence. To act, access our show notes, transcripts or courses, go to theinvestorspodcast.com.

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