We Study Billionaires - The Investor’s Podcast Network - TIP668: What I learned About Investing w/ Stig Brodersen

Starting point is 00:00:00 You're listening to TIP. I met my co-founder Preston Pish on an online forum back in 2013, where we discussed accounting on what we can learn about investing from Warren Buffett in Charlie Munger. Now, at the time, I had just started investing in my own portfolio and mistakenly thought I could be the next Warren Buffett. And at the time, I do have to say, it seemed like almost everything I touched in the stock market just went up and to the right. And of course, little did I know that everyone looks like genius in a bull.

Starting point is 00:00:30 market because this was a time where I had not yet been humbled by the stock market. And I had an ego your borderline my own nemesis here. So I typed up this Excel spreadsheet and how much I could compound my meager savings if I could sustain its record like Buffett himself. And yes, I am aware of how ridiculous it sounds, but there was nonetheless how I approached things back in the day. So if we fast forward to 2014, this was the time whenever I saw that. started BMS's podcast together with Preston. And again, it sounds ridiculous, but at the time, I had more excited about creating a podcast in my second language. And then all the technical difficulties of handling a microphone, they had a mixer, we had something, a big machine called

Starting point is 00:01:18 a gate limiter, and there was just an endless number of wires and quartz that that was really what occupied my mind much more than how I would perform in the stock market. Well, I had a lot to learn. And today, more than 10 years after we started TIP, I wanted to summarize and outline 10 things I learned about investing. Here we go. Celebrating 10 years and more than 150 million downloads. You are listening to the Investors Podcast Network. Since 2014, we studied the financial markets and read the books that influence self-made billionaires the most.

Starting point is 00:01:57 We keep you informed and prepared for the unexpected. Now for your host, Stig Broderson. You're listening to The Investors podcast, and I'm your host, Stig Broderson. Today I'm going to do a solo episode where I'm going to talk about 10 things I learned about investing after more than 10 years with TIP. Let's just dive right into it. Point number one, be careful who you'll listen to. So I think we're all prone to comparing ourselves with others, even if we know that we should

Starting point is 00:02:37 not. And so if you're running a marathon, it's probably like to say that you don't run against others, but you run against yourself. But at the same time, whenever you do that, people still ask about your time and they're not shy about telling you if they do it faster than you. And it's sort of like the same thing in investing. You know, people want to talk about their portfolios. They want to talk about the track records. And definitely, they want to talk about if they have made good stock picks in the past. And it's easiest set than done. But one thing I learned is really to focus on your own goal. What is it that you want to achieve in investing? And for most people, it's either financial appendants, certain track record, or perhaps it's both. But then you should

Starting point is 00:03:19 start looking for friends on the path, not only with the same goal, but more importantly, those following a similar investing strategy as you. So for example, I tend to hold a small concentrated portfolio with high inactivity. So I currently only hold five stocks in my portfolio, and I really only have a mean for allocation to three stocks. So I look for people who would put at least 5%, preferably more of their portfolio in a specific stock and that also don't want to move around in their portfolio too often. As you might already have noticed, the more specific you can be about your investor strategy, the better.

Starting point is 00:03:55 So I, for example, just mentioned that I'm inactive in my portfolio. But all value investors you speak to, they all say that they're inactive. And so for some people, it means trading out of 20 stocks in a portfolio with 40 stocks annually. For me, inactivity means that I could easily go a year without adding or disposing of any stocks. And so you want to know where the other person is coming from whenever you're speaking with other investors. Not only whenever it comes to how many positions they have, but also how they define long-term investing. For example, on the investing side, Data Roma, it's always interesting to see what Guy Speer does because he moves so rarely. And you could include Novel Liu and Li Lu in the same equation.

Starting point is 00:04:37 And I should say that that Roma is only for you as positions, but I'm sure you're seeing where I'm going with this. And so if you would go to a website like that, I should say it's completely free and it's there for everyone to check out. You know, one investor who became very successful from the movie Big Short, that's Michael Burry. Now, he's really an investor who swings for the fences. And he easily puts 5, 10% in one position.

Starting point is 00:04:59 But his turnover in his portfolio is also very high. and it's not aligned with my strategy. Sometimes I still check out his portfolio because I'm curious, but I don't really pay attention to what someone like Mike Bore is doing. Another thing I look for is the track record of the person I speak to. The better track record they have, the more I pay attention to what they're saying. Now, this doesn't mean that, say, a 10% Kager, and whenever I say Kager, it's compound annual growth rate. So it doesn't mean that a 10% Kega investor can't be better than a 15% investor. It might simply mean that he's unlucky, but you have to go over the odds and have an idea of how they achieved that track record. So was it from a massive leverage

Starting point is 00:05:38 investment in Nvidia, where all his other stocks went bust? Or is this a strategy that only works in the bull market? And is the track record only achieved in bull market, for example? So there are a lot of different factors, not just the keager you have to pay attention to. Another thing is that I pay more attention to public and audited track records, which by definition, few have. And I have no reason to believe that anyone is lying about the track record. That's not by point at all. But I prefer to have a third party to validate it.

Starting point is 00:06:09 And also for me to engage with that investor and know how that's being achieved. And one thing is just that people define track record differently. To me, a track record includes markets that everyone has access to, for example, stocks. and bonds, but it includes private equity and hedge funds because that's not something everyone has access to. So everyone defines that differently. Some investors might include real estate and other investments where they put in sweat equity. Somebody disclosed a track record that's dollar-weighted, others at track record that's not. And I'm not saying that anything is right or wrong. It's just really important to know where the other person is coming from whenever they speak about their

Starting point is 00:06:49 track record. And I should then also say that the focus on track record should not be confused with the scuttlebotten method. You know, if you have the opportunity to speak with anyone, let's say that you're looking at a stock here, if you have an opportunity to speak with anyone who's working for that company, you can get a lot of valuable information. And just because they don't own any shares in their flaws company, doesn't mean that what they say isn't useful. For example, I spoke with someone from Bettson the other day. This is a company I'm invested in, and he didn't have any shares in the company. And so this gentleman, he couldn't give me any insights into the public filings.

Starting point is 00:07:23 But again, that was not the premise. And just like the best leaders, often those who do not want it, because they don't have the ambition for power, sometimes you also get the best feedback from non-investors. But when you do speak with fellow investors to learn what they invest in, it's very helpful to ask about the track records and investing process. And then you have the kicker here. Always make sure to remember that even investors with a great track record

Starting point is 00:07:44 and solid investing process. they can still very often be wrong. All right, let's go to the second thing I learned about investing over the past decade here. Point number two, don't screen for stocks. I mistakenly started my career in stock investing thinking that this was really just a numbers game. And the better a person were at math, the more you would win. And this was obviously the wrong approach. But the approach also implied that I should be using a stock screener.

Starting point is 00:08:13 So, for example, I would be looking at a screen and then, a certain PE ratio, a certain debt to equity ratio, price of free cash flow, etc. Now, screeners can be a good place to start, but what I found was that screen for stocks forced the action too much. And I found myself in low quality businesses that was really outside of my circle of competence. What I do now is rather to look at other investors. And again, I would be looking at investors with a solid investment process and good track records. and then using their portfolio as a filter, and it really helps if you also know what the average price is for a position.

Starting point is 00:08:50 And then I'll see if I can reverse engineer what they're doing. And of course, also it has to be within my circle competences. And that really takes me to the third point I learned. Number three, I realized that my circle competence is just shrinking. And I thought I was very smart going into investing. And as a result, I was suddenly prone to over. confidence. And perhaps like others listening to this podcast, I had a bit of success before I was going into investing. And I thought I could figure something out as long as I wanted to learn something

Starting point is 00:09:24 new. And so in other words, I would be thinking if I really wanted to understand the all industry, it was just a question of reading up in the all industry. And if I wanted to be good at investing in retail, I would just read up on retail. And so the irony is that with every past, passing, yeah, I kind of feel like my server competence is getting smaller, and I thought it was the other way around. Let me just give you a quick example of this. I spoke with a member of our TAPE mastermind community the other day. This is a community for listeners of TAP, and we just had a casual conversation about this idea I had about starting a solar choir. And then he asked me the obvious question, so what is your mode? And I had to admit that I'd likely only had one competitive

Starting point is 00:10:13 advantage, you know, for something like a seal will acquire if you were to start that up. And that would probably be in podcasting. And you do not find a lot of listed companies in podcasting. You know, getting a competitive advantage in investing is hard. And it just requires a lot more work than I originally thought. I'm a slow learner and I also realize that it's not enough just to read the public violence. And I should also say, many don't read the public filings in the first place. You really have to go over and beyond to widen your circle competence. So I think I just realized that I'm wired in a certain way. And there are so many fields in business that I just don't understand. And it doesn't really matter how hard to work. I just still don't understand it.

Starting point is 00:10:57 So if you look at my portfolio, I have five equity positions, and they're basically dividing into three buckets, capital location, advertising slash media, and then gambling. And I've spent thousands of hours in various capacities in each of those three groups. And I come to realize that my track record has shown that unless I spend, I'm really sorry to say, thousands of hours in a specific industry, I've typically just not been very successful. And it's a sad reality, and I hope I can find a way to cut corners in the future, but so far it seems like only half work pays off. In other words, I don't think my social competence has been shrinking. I think it's been just very narrow from the very start.

Starting point is 00:11:39 And I should also say here before I would go to the fourth point that I don't think you need to spend thousands of hours widening your show competence. I really think I'm just a slow learner. Going to point four here, read investing books, but still. study real businesses. So I remember going into TIP being really fascinated by everything that Warren Buffett was doing. And I had the idea at the time that other than my flawed idea that you should just be really good at math, I thought that you should read as many investing books as you could. And as much as I still read investing books today, because I can't help myself, after some time,

Starting point is 00:12:17 I start to find a diminishing return to scale. And you also find a lot of conflicting information. Reds really goes to the other part I had at the top of the show about understanding where the other person is coming from whenever they're providing advice. But even if people come from the same place, they can say different things and you can easily get confused. And then I learned that it wasn't all investing books that Buffett read. He started his real businesses.

Starting point is 00:12:42 And I learned that I feel too late. And I sometimes wonder if I read two many investing books. It's one of those things where you can read about. about how it is to be married and have kids, but it's really hard to know before you do it. And some of the best reading is to start a 10Ks from a company that you find fascinating. And I think another thing that I've learned is that you should read the 10Ks, not because you want to invest in the company, just because you want to learn about the business. And then perhaps sometimes you find it to be attractive to invest in.

Starting point is 00:13:13 Reading business books about real businesses is really something I find useful, if not at least today more useful than investing books. Now, I tend to gamify everything in life. And I'm sure many listeners to the podcast feel the same way. Some might already be financially dependent, and they just continue to accumulate capital because it's the new scoreboard. And then they would have people telling them that it's absolutely ridiculous because they can't take any money with them when they leave, you know, as in when they die, and because money is meant to be spent. But I think I think it's for the same reason that probably a lot of people listening to this podcast also have competed in sports for no other reason than they love to play the game and even more

Starting point is 00:13:58 to win. In a similar vein, I thought that I won the more investing books I read. And so if you read just an hour to a day, you can easily read one book per week. If you do it for a decade, you'll make it to 500 books. And I realized that I could probably have been without a few hundred books and be just fine. I still enjoy reading. It's not because I have any regrets of that, but I do think I have been inefficient in my reading. And at least from an investing perspective, I would probably have benefited more if I spent that starting real businesses instead. Now, figuring out who to learn from is easier said than done. Multiple people have said to me over the years, especially at times when I had too much confidence in my own skill set in investing, that I could learn from everyone.

Starting point is 00:14:45 And I do think that is a very nice and inclusive way of looking at the world, but I'll also be the first to say that your time and my time and likely better spend learning from Buffett about investing than John Doe that you meet on the street. That being said, life is not a symbol as just learning from the people with the best skill set. Maggiot might be the best basketball player in history, but that does make him the best coach. And if you allow me to go out on the tangent here, I often debate this with the host here on our network. We want to interview investors who have been beating the S&P 500 for longest and with the biggest margin. We really want we studied billionaires to be the home of where the best investors are. And then at the same time, the investors

Starting point is 00:15:29 with the best track records don't always make for the best episodes and they don't always empower the listeners the most. And I'd like to compare this to the time in my youth where I put myself through college playing poker and I didn't learn most from the best poker players. I learned from the best poker writers who eloquently outlined the game. But ironically, they didn't win or play the biggest games. And perhaps that was because the best players were busy winning or simply because the best players are not always the best coaches, which is basically the example I had before there about Michael Jordan. Anyways, let me rope myself in and go back to talking about what I learned about investing.

Starting point is 00:16:11 And it takes me to the next point. It is point five, set up guardrails for yourself. Richard Feynman, the American theoretical physicist and Nobel Prize winner, he famously said, the first principle is that you must not fool yourself and you are the easiest person to fool, end quote. I do what I say and I say what I do. And it's a wonderful and simple way to live your life. And it's a good way to invest.

Starting point is 00:16:38 But it's also a terrible way to invest. So let me give you a somewhat silly example from real life first. So earlier this year, I was hosting in London for a mastermind community. And I was planning the community lunch. And I had twice communicated to the members where I wanted to host that. and I had hoped that the hotel had a private dining room and I had some changes I wanted to make to the menu that they wouldn't accept. And so that's just the backdrop to that story.

Starting point is 00:17:07 But I was teaming up with a close friend of mine who helped me plan the lunch and I voiced my concern about that. And my friend is very opposite me. He doesn't do what he says and he doesn't say what he does. And he's a very free-spirited person, doesn't plan for the future, does a wonderful job of living in the moment. And when he heard about my concerns, he kept suggesting other places. And he repeatedly, completely ignored my point about, hey, I already communicated to the

Starting point is 00:17:40 community, this is where we're going to meet. He was perfectly happy doing everything at the last minute and changing his opinion. And so my point of this story is not to tell you that I'm terrible at planning lunch or events in general, which I am. But my point of telling this story is that I've realized all the years that I'm wired in a certain way. My point is not saying that one approach is better than the other, even though I should say that being as rich as I am is probably not a good thing. My point is really that you should be aware of how you're wired and whether that works for you or against you. So back to investing.

Starting point is 00:18:21 One set of Godrails I have is that I'm investing in a fund that can not. only be redeemed once a year in a brief window. I think many investors wouldn't like that idea. They'd like to have access to the capital all times. But for me, it's great because it forces me to be inactive. Another set of guidelines I have is not to put more than 10% of my portfolio at cost into a single position. Now, as I mentioned before, I used to make a living playing no-limit poker. And in comparison, the stock market comes with very low volatility. And so, whenever the S&P 500 dropped 12% in a single day. I know it sounds silly, but it's really mundane in comparison to the old days at the poker tables. Now, as I've grown older, I also learned that poker principles are

Starting point is 00:19:06 not a good way to run family wealth. I also know now that I have a tendency to tolerate volatility well, and I probably have a tendency to tolerate it too well. So by having myself at 10% at cost of a single position and then let my winners run, I allow myself to diversify more than maybe natural to me. Again, my point is I want to set up guardrails to protect myself from myself. And we all unique creatures, and I can't tell you how you should set up guardrails.

Starting point is 00:19:36 But I do know it's very hard to change the way you are wired. So if you can set up rules for yourself, that allows you to have your biases work for you instead of against you, that would be preferred. And that sort of takes me to the next point. Point number six of what I learned is do not look at your track record too often. I know that this is going to sound ridiculous, but it took me 10 years to look at my track record. I certainly don't recommend that you only look at your track record once a decade,

Starting point is 00:20:05 and I think I've taken it too far, but I want to tell you why. When I started studying Warren Buffett, it became very clear to me that I needed to think very long term. And looking at my results, every quarter would work against me. Unfortunately, my broker doesn't allow me to compare my returns on all of my equity portfolios. And for tax reasons, they're in separate accounts. So even if I want to invest in the same securities across my accounts, I would get different results simply due to investing timing. And so that would imply that I couldn't tell the track record of all my public equities. Now, there are services that could include not just my public equities, but also all my other assets.

Starting point is 00:20:45 And this is just a quick side story. My broker worked closely with the Danish authorities where I'm taxable and they do it for free. So changing to a US broker, which arguably would be a lot better, like more features, lower commissions or whatnot, it sort of would have been a good decision. And I could see my track record way sooner, but then, you know, I would have to pay for someone else to do my taxes, yada, yada, yada. So I had to weigh saving on costs versus knowing my track record detail.

Starting point is 00:21:10 and I could still obviously make a somewhat rough estimate of how well I was doing in a stock market. That being sad, it started to become increasingly embarrassing whenever I got asked about my track record and I really couldn't provide a good answer. And whenever a friend of mine for the mastermind community then recommend a share site, I didn't have a good excuse not to import my portfolio. 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 00:25:42 Back to the show. I did an episode earlier this year with Clay about my track record that I would link to here in the show notes. It showed a 21.4% Kager since January 1st, 2014. And that is against a 13%-ish kegir for the S&P 500. And I've chosen 2014 because that was the year I started TIP, together with Preston, and then I probably started talking about my positions here on We Study Billioness. A few notes to my track record.

Starting point is 00:26:08 It's dollar-weighted across any of my assets of trade on the public exchange. And since it's dollar-weighted, it's a more conservative measure. And also, I should say for transparency reasons, that I made my first investment in the stock market back in 2012. Now, 2012 and 2013 were just crazy bull-y-ass. And the S&P 500 end up by nearly 30% in 2013 alone. I haven't included the years in my track record because I don't have access to the broker I used back then, even though it would likely be good for my track record if I did.

Starting point is 00:26:38 And as mentioned at the show's top, you know, everyone is a genius in the bull market. I'm certainly no genius. And one thing that I'm thinking about for my own track record is, how would I have done during the great financial crisis? The only bare market I've really experienced was during COVID, but there was such a short period at a time. Like, how well would I have hold my own during the great financial crisis? financial crisis back in 2008, where I wasn't invested. Who knows? And so it is one of the things

Starting point is 00:27:05 I think about these days whenever you hear about all of these wonderful track records. When do the start? Do they start in 2009 whenever the market was trading at very low multiple? Or whether riding a bull market, which you can definitely say that I was too? Or does it stretch back for decades across multiple recessions? I haven't looked at my track records since I did the episode with Clay earlier this year. I simply think it would be counterproductive and I would be tempted to do irrational things regardless of whether or not I would do better in 2024 than my average so far. And so for that reason, I aim to only look at my track record once a year, if not even less frequent.

Starting point is 00:27:44 But at the same time, you need to find a balance between wanting to know how well you do. For example, if you're an active investor and you're consistently out-undercforming the market, you might consider various passive alternatives. and you likely don't want to wait 30 years to realize that you should have done so long ago. But at the same time, you also don't want to make yourself susceptible to doing stupid things by looking too much of your track record and moving around in your portfolio too often because you want the next quarter to be better. That takes me to point seven.

Starting point is 00:28:16 Do not only have public equities in your portfolio. Knowing that stocks are real businesses, I thought whenever I started TIP that I would only hold stocks in a portfolio, and I thought diversification was only a question of holding enough stocks. This was before I studied financial history and learned that seven out of the ten biggest economists in 1900 had their stock market completely wiped out during the 20th century. I also learned how countries behaved in times of crisis in that the stock market could close for a prolonged period of time, which ironically are the times that you need money the most. I consider and consider the U.S. to be my home market and mainly look at U.S. data.

Starting point is 00:28:57 It also means that I'm susceptible to survivorship bias because it implies that you can easily reach the conclusion that if you invest in the U.S., you can never lose money in the stock market as long as you're a long-term investor. Yet, I'm sure if you're a Russian or if you're German investor, you would have made the same claim about your country on the brink of the year 1900, only to see the entire wealth wiped out in the stock market. Today, roughly 60% of my liquid assets are in public equities. I find public equities to be a terrific asset class that I plan to always have exposure to, but history has taught me not to be 100% in stocks, and certainly not all in the same country. That takes

Starting point is 00:29:40 me to 0.8 of what I learned about investing, and that is run your track record 1,000 times. Whenever I look at my portfolio today, I ask myself, what if I ran in a thousand times? How would I do? Most of us are probably inclined to what literature would call resulting. Resulting is when you judge the decision based on the result. For example, you might consider an investor with a 20% return over a decade better than someone who makes 15%. What might be true, it doesn't mean that you know how much risk the former investor took to

Starting point is 00:30:15 achieve his return. And many investors, including myself, have made good money investing in the US. You wouldn't expect anything less from investing in the greatest economy the world has ever seen. But then at the same time, I also have to ask myself, would the US be the best stock market to be invested in in 1,000 out of 1,000 times? Capitalism and history are brutal, and they would probably suggest otherwise. And it's for the same reason that I invested a minority of my money with an asset manager buying public equities. Now, as it happens, and this is my humble brag, my returns have been significantly better than his over the past decade. But I do think if I ran his portfolio against mine in a thousand lifetimes, he would probably come out as the winner

Starting point is 00:30:58 more often than me. And even if he did not, which is impossible to know, I'd like to hedge myself against my own biases and vanity. And there's this paradox here where you have to believe that you are better than average to be an active investor, but then at the same time, you also know that only half can be better than the average investor. But if you don't believe it and have conviction in your decision, this stock market would just never allow you to beat it. As I turned 40 earlier this year, I also increasingly faced my own mortality. I had to assume that if I ran my life and my portfolio a thousand times, at least few of those times, I would die prematurely. So I want to make sure that even if I don't wake up tomorrow, my family would be

Starting point is 00:31:39 okay financially. And whenever you think about running your portfolio 1,000 times, you start to respect the process more than the results you have or have not achieved. For example, I used to think that hot money was a terrible investment, and perhaps it is. But I also grew up in Denmark thinking I would never have a war on my continent. And here we are with a war a thousand kilometers away. I own hot money and include the return to my track record, not because I'm 100% certain that it would improve my track record. If anything, history has shown that hot money is not a good investment, but hard money has proven more resilient in times and conflict that equities in many countries. And I want to be in a situation, like I mentioned before, that if there was a war

Starting point is 00:32:21 and I didn't have access to my equities, and even if I died, my family would still be okay financially. It's a total order. And as a result, you should be a result, you just make different decisions. So when you look at your portfolio, you have to identify what you're optimizing for. Do you optimize for the highest possible return? And are you willing to go broke in some of those 1,000 times? No problem. It's your portfolio and it's your decision. I have hard money, private equity, other asset classes than public equities in my portfolio because I approach investing with the idea of having to run the portfolio 1,000 times and be able to care for loved ones as many, if not all of those thousand times.

Starting point is 00:33:05 It's surely a different way to think about portfolio. And that takes me to the next point. Point number nine, precision sizing. This is one of the things I've changed my mind on the most over my investing career. And I don't expect to have it completely nailed down today. That being said, after trying and failing, I don't know how many times, even. after catching a break here and there more due to luck than skill, I want to present what I'll learn about precision sizing.

Starting point is 00:33:33 So I generally have three options whenever it comes to positions for my listed securities. The first option is 1%, the second one is 1 to 10%, and the third option is 10% plus. So let's break each of them down. A 1% precision for me means that I've done proper research and have a general idea of what the valuation of the asset is. For example, if it's a stock, I would have read the most recent 10K, their previous earnings call, and have a pretty good idea of the competitive landscape. I might have at this time put in between 20 and 40 hours at this point, sometimes a little less,

Starting point is 00:34:08 the other times significantly more. But what I've learned is that I don't really understand any of my investments before I owned it for some time. I simply process the information differently whenever I'm invested, and I pay more attention, but I'm also more susceptible to confirmation bias. When I started investing, I would put a large part of my portfolio into a single stock. And if bad news came out, I would be quick to dismiss it as being short-term and not fundamental to the business thesis. But I also come to realize that the more I invested in a single position,

Starting point is 00:34:39 the more biased I also became that this bad news was indeed short-term. Knowing my own bias is better today, I forced myself only to take a 1% startup position. Enough for me to pay attention, but not enough for me to give me too much confirmation bias whenever I processed information about a stock. But like I mentioned, once I own a stock, I typically also get a much better understanding of what the value is of the stock, and oftentimes it's quite different

Starting point is 00:35:07 than what I originally thought going into it. That allows me to exit it or simply hold onto it and add once the stock reaches an attractive valuation. And you would think that it would be possible to do that without allocating 1%, and it likely is for some. But for me, owning and learning more about a stock, if only 1%, it just gives me the conviction to scale up to a full position of 10%.

Starting point is 00:35:28 Now, the second option is whenever I have a position size between 1 and 10%, these are stocks that I have conviction in and that are trading at an attractive valuation whenever I add. I will get closer to 10, the higher the conviction and the lower the opportunity costs. The opportunity costs here would be what other investments I have available. I also know that I'm often wrong and I can be sitting in an echo chamber with others who are bullish on the same stock as me, so I kept myself at 10%. If the position takes off, I simply let my winners run. And if a position becomes larger than, say, 10%, it typically means that I'm right in my thesis. And the way the math works in investing is that you want to ensure that you're not cutting your flowers and watering the weeds.

Starting point is 00:36:12 However, the other side of the coin is that you should not lose money. And so making sure that you don't add to a position that you already have 10% or more in is a way to guard yourself against that. Now, I should say that 10% works for me. Perhaps it's 5% for you, perhaps it's 20% for you. It all depends on your risk tolerance and your financial goals. And just to paint a bit more color around that, if 10% sounds high, there's also a natural hats for me.

Starting point is 00:36:40 So I spend less than half of what I make. Currently, it's around 30%. So I would have cash inflow that I could put into the best investment opportunity in one of those positions that makes up less than 10% of my portfolio. So my biggest position above 10% automatically becomes smaller, everything else equal, and then I can funnel my cash into the best deemed risk versus reward opportunity. Like I mentioned before, this framework might be the best framework for me, but it doesn't mean it's the right thing for you.

Starting point is 00:37:12 You might spend less, some more of your disposable income that I do, or you want to be more concentrated or more diversified than me. All that is good. And that takes me to the 10th and final point. Point number 10. What are the implicit assumptions of the advice you get? I interviewed Guy Speer earlier this year, and it was from him that I learned the framework of running a portfolio 1,000 times.

Starting point is 00:37:35 In the interview, we discussed that premise, and I told him I only had five individual stocks. Now, I think Guy has 20 stocks in his portfolio. And I'm really going to paraphrase here, but he was basically saying that if you have 20 positions that are equally weighted, time will make sure that you eventually get concentrated in some of your positions and you would have a different risk profile if you started with 20 positions. As always, Guy is absolutely right.

Starting point is 00:38:03 It also shows the importance of understanding implicit assumptions when someone is giving giving you well-meaning advice. It's very hard not to look at the world from where you're standing. Guy has more his wealth as a proportion of net worth in his equity portfolio than me, and he also has more his family money in the fund. Also, he has investors who have the vast majority of their wealth with him. Add to that that he's a different a team and had different life experiences that have shaped him. So my point is that my circumstances are different, not only from Guy, but from you and everyone else listen to this podcast. I have a bigger part of my net worth in private equity than most. And I see the world through a different lens,

Starting point is 00:38:40 not a better lens, but a different lens because I had different life experiences and I'm just wired differently. And we're all unique that way and actually into it the best possible way for ourselves. While some people might not be able to sleep if they don't hold at least 50 stocks, I don't think I could sleep if I did. I want to read the filings of the companies I invest in, knowing what is happening with our competitors and everything else in between. I have other companies on my watch list that I want to invest in at the right time and the right price. And if you own 50 stocks and you want to be dealing about all the filings, the competitive landscape, you have your own watch list, you could easily have to read a thousand reports

Starting point is 00:39:20 and filings annually. And if you just spend one hour on each, it's 20 hours per week. It's certainly doable if that is your full-time job, but I can't and won't carve out 20 hours every single week to look at my equity portfolio. Now, please don't get me wrong. some investors would happily own 50 stocks, never read a single filing and sleep well at night. That is just not how I'm wired. I need to be on top of my positions and there is only so much time more to spend on it.

Starting point is 00:39:47 So ironically, owning five stocks give me less stress than owning 50 stocks. Now, again, my point is not about how many stocks you should own, but rather when you hear advice, make sure you understand where the advice is coming from and in turn if it applies to you. more often than not, it's simply just not relevant. All right, so that was 10 of the most important things I learned after investing for more than a decade with TIP. When I started, I thought there was a right way and a wrong way to invest. Humbled by the stock market and life, I later learned how we all approach investing differently

Starting point is 00:40:27 because of our circumstances. A good friend of mine recently turned 50, and he just sold his company. and hadn't invested much in the stock market. He then asked me how to do long-term investing. He wanted specifically to make 10-X his money in a decade with very low risk, and then he would start spending the money that he made. So many of you might be listening to this thinking, that is an outrageous expectation.

Starting point is 00:40:52 You might be thinking that 10 years isn't long-term investing in the first place, and waiting until you turned 50 years old cripples the element of compounding. Perhaps you were more stuck on the 10-X in 10 years. as being naive, it's something that is possible but with low risk. Ah, that seems tough. Now, I can't fault you if you think any of this. It's easy to point fingers at others and say the way that you invest is the right way. I certainly thought that often.

Starting point is 00:41:21 But whenever I get the chance to really get to know the other person and where they're coming from with their portfolio, it's rare that it doesn't make sense what they want to do. My friend has been used to working very hard in his business, and like all entrepreneurs, he has learned that you need to act to create results. That is the way to get a positive feedback loop and then to pivot. 10 years is forever when you run your own business. And to buy stocks in the market and then sit on your hands, isn't how most business owners are wired?

Starting point is 00:41:55 Main entrepreneurs would tell you that being an entrepreneur in the first place comes with the lowest risk compared to being an employee because if they do so, they would have to rely on the kindness as strangers. Whereas if they're business owners, they're in control. And then you would have many workers who collect the salary, they feel the very opposite and would never take the assumed risk of starting their own business. They would feel like investing in the stock market is like entering casino. But here's the thing. No one is crazy and we all shape our experiences and our own mental models of the world. My parents experienced the crazy high inflation in the 1970s and got burned in the stock market. And when you experienced that,

Starting point is 00:42:33 it's no wonder why they decided to tie up their wealth in real estate. Ever since I started investing in the stock market, it has gone up and to the right. I was still a student during the great financial crisis, and I hadn't invested a single dollar. As you also heard me talking about in this episode, I come from a background where playing no limit poker paid the bills. So it's likely why I wouldn't mind putting 10% of my portfolio in a single position. I'm certainly wired to swing for the fences to my own detriment, and I have to guard myself against, well, my own biases. And we're just all complex creatures and full of paradoxes.

Starting point is 00:43:11 I remember telling my mother when I was eight or perhaps nine years old, and I collected pennies that I wanted to use them to save up for retirement. And the thought of spending more than 50% of my income today makes me nervous, roughly spending, call it third percent of my income, feels safe to me. You know, my wife recently talked about the idea of buying a car. We never owned one, and the thought of incurring fixed costs just, it doesn't feel good to me. And it sounds like I'm a pin and pincer, right? And I don't know if I am, but I also know I'm the same person that was looking at the S&P 500, dropping 12% in a single day during COVID, and really hoping that the action would start soon. And most people would consider

Starting point is 00:43:50 the behavior of the latter to be a other gambler, but wouldn't be able to square that circle with living well within their means. So let me just hit my point home that no one is crazy. What other do makes perfectly sense to them and what you do makes perfectly sense to you. And for that reason, I also want to stress that this episode is what I learned about investing. It's not what you or anyone else has learned. And it also makes it so much harder to conclude what I know for sure. I strongly believe that for investors, having 15 orange correlated assets is a great North star for approaching most financial goals and a wonderful way to protect yourself against

Starting point is 00:44:30 your own biases. And I truly believe that you should apply the mental model of running your portfolio 1000 times. But focusing on the process and not the result is much easier set than done. When I started TIP, I was a teacher at the local college. And back then, I knew as many teachers who thought they were below average at their craft, as I today know investors to think they have a below average investment process. I've learned to approach investing similar to Buffett's metaphor about the ovarian lottery.

Starting point is 00:45:01 So this is a concept proposed by Buffett to describe the randomness of birth. You know, according to his concept, individuals do not have control over the circumstances that are born into such as family wealth, country of birth, and their abilities. and there are so many other things that are determined by randomness. This is how I'm looking at investing as well, and why I keep coming back to this idea of running a portfolio 1,000 times. You are bound to have 10 backers if you invest long enough. And some of the times you will have 100 baggers,

Starting point is 00:45:32 meaning stocks that will make your money back 100 times. Is it then skilled to find 100 baggers? I would say that it is. Is it luck? Well, perhaps luck is on the spectrum. Yes, you can see. certainly make yourself available to luck the more rocks you turn over, but you also need to have the luck to be able to access a broker's account in the first place. Billions of people

Starting point is 00:45:53 on this planet just can't. And yet, as imperfect as the sciences between luck and skill, and as much as we all think that our investment process is above average, it still comes down to just that. What I learned about investing is that it helps to read, read hundreds of books, read hundreds of findings for public companies and continue to compound your knowledge and in turn your wealth, but only if you enjoy the process. And whenever you do, you will start to do pattern recognition. You'll see that everything that has happened in the financial markets has happened before. You will see that 10 years or even a lifetime isn't long in the grand scheme of things,

Starting point is 00:46:32 and that we could all be fooled by randomness. You'll find that you can and should learn from other people's mistakes, but also that some things have to be learned by making the mistake yourself. You will find that money can't buy your happiness, but it certainly can be a good start to taking out many of the things that makes you unhappy. Perhaps what investing in life will teach you is that it's not about the destination. The journey is the best part. Let's take a quick break and hear from today's sponsors.

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Starting point is 00:50:09 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. So let's transition into the next segment. And for that segment, I invited my co-host, Clay Fink, to join me.

Starting point is 00:50:29 Clay, I just listed the top 10 things. I'll learn from investing. I won't ask you to name another 10, but I'm curious to hear, with your time in the market, could you list perhaps the top three things that you feel are for you have been evergreen and that you learned? Of course. Well, that was a great episode, by the way. I thoroughly enjoyed it. And what a tough question. So, you know, I kind of pause of, you know, what does this question really mean? So I kind of treated it as lessons I would tell my younger self starting out. So this is really just lessons or things I would tell the younger version of me that knew nothing about investing going in. So when I joined TIP, I really, I'm not sure

Starting point is 00:51:13 I could have told you that I had an investment approach that I had settled on at that point in time. And that was until I had interviewed Chris Mayer on We Study Billionaires. That was episode 543. And Chris really helped drive home the point to me of buying and holding, you know, these great, high-quality, big winners in the stock market. But then it's also coupled with his approach of minimizing the potential downside by focusing on companies with owner-operators and strong balance sheets. So his approach really deeply resonated with me of, you know, putting a high focus on business quality.

Starting point is 00:51:53 And then I started discussing it on the show and bringing it. on similar types of guests, and I found that it really resonated with a lot of the listeners as well. So my number one lesson here is to really not be afraid of doing something like index fund investing or something that tends to be more safe and tends to be a comfortable approach for a lot of people. And doing that before you find an approach of individual stock investing that really suits your style and your temperament. So that way you're always participating in the market, but you may still be more interested in learning more about something like individual stocks. So I think the best approach is really the approach that you're likely to stick with for the

Starting point is 00:52:36 long run. I think some people can fall for the trap of constantly changing their style. And then I believe that really just hampers their returns and their chances of doing well. So the second lesson I have here is tied to patience. And there are many aspects to this. So when you zoom way out, investing is a really long journey. I just recently turned 30, so I hope to be an investor for another 50 years. And whether you find a high quality business this month, six months from now or 12 months from now, over the grand scheme of things, it really doesn't matter all that much. But in the moment, it feels like it matters a lot.

Starting point is 00:53:16 So I can imagine many investors in Apple in 2005, they feel like they missed out when Apple went from $1 a share to $2 a share split adjusted. Today, Apple's over $200 a share. So I would say, tell my younger self not to rush into your investments and don't rush to find your style. And once you find a stock you like, have the patience to get in it over time and just let it compound. And, you know, some stocks that I've bought over the years, some have grown significantly

Starting point is 00:53:46 faster than I expected and some have either gone nowhere or gone down. And from the outset, I really couldn't, you know, foresee which was going to be which. And I've kept the patience of holding on to a lot of these companies and just seeing how they pan out over the next few years and continue to reevaluate and be patient and holding them. And then the last point on patience is to sort of reiterate this point of to be patient and building your position. So through my job here at TIP, I get paid every month and I have cash coming in to deploy. and I typically don't hold cash other than for personal reasons. So, for example, I'm going to be doing some traveling and going to Austin,

Starting point is 00:54:27 and I just wanted to have some extra cash for personal reasons, because you never know what life will throw at you sometimes. And by the way, if any listeners are in the Austin area, I'd love to connect. So feel free to reach out if you'll be around this winter. But in terms of investing, I'd just like to keep a low cash position when just looking at my portfolio. and given that I want to own these high-quality businesses, I value time in the market over timing the market.

Starting point is 00:54:53 And I'm also no valuation expert, and timing the dips of some of these names isn't a game I always want to play. And the irony with high-quality investing is that some of my most expensive-looking stocks also tend to be my best performers, and we'll see if it continues to be that way in years to come. And I'm reminded of a Charlie Munger quote that whoever says, said that getting rich was going to be easy. And my third lesson here is to be humble. The world is likely a lot more uncertain than we believe it to be. And thanks can change rather quickly. So the

Starting point is 00:55:29 market has a way of really humbling me personally whenever I get really confident in my positions. And I remember when I first started getting into this game of investing and starting to learn more in around 2016, 2017. And many people around that time, I recall, said that the market was overvalued. And it was time to maybe have more cash or sit in cash. And since the start of 2017, with the benefit of hindsight, we can see that the S&P 500 is up over 50% since then. So remaining humble can really help you keep an open mind, taking new ideas, and be willing to admit when you're wrong. And if you aren't willing to consider these new ideas, then you won't evolve as an investor. And I really believe that value investors are going to need to continue to evolve because the

Starting point is 00:56:15 world is just changing faster than it ever has. Instead, one thing you've told me that's really stuck with me is that you kind of joked that you've been operating TIP for the past 10 years. And each year, more and more people seem to say that we're in a highly uncertain environment. And it really makes sense initially. And that's not to say that they're wrong. But once you hear it enough times, you start to think that uncertainty is just a key part of the game.

Starting point is 00:56:43 And for me, the lesson is that uncertainty can present a lot of opportunity. I guess another reason to be humble is that as someone who picks stocks, I need to understand that the odds are likely stacked against me in terms of doing better than something like the index. And if I do beat the market over, say, the next 10 years, a large part of it may be just simply due to luck. And a Hendrick Bessonbinder shared with me in a recent interview that just 4% of stocks since 1926 accounted for.

Starting point is 00:57:13 for all of the net wealth creation in the United States. So if you don't hold the stocks in that elite category, then earning high returns may prove to be pretty difficult. Yeah, and that's so well said, Clay, if I can just go back to what you said there about uncertainty, I remember whenever I started investing. And so I think I made my first investment in what, 2012-ish or so in the stock market. And I put in most of our money as I remember it,

Starting point is 00:57:42 But I do remember whenever we then started TIP and I learned more about Buffett. And I saw, oh, okay, Buffett has whatever kind of percent in cash. I should probably also be in cash. Obviously, I had no idea why he was having so much cash and there were a good reason for it and the way it was with insurance and having that buffer and just managing him, you know, billions of dollars. And I was like, it looks uncertain. I should have cash so I can buy the dip.

Starting point is 00:58:05 And then you sit there for some time and you're like, and I'm probably colored by, you know, 2013, 14, like all of those years being bull market. But I just remember at least for some time thinking, and that's why I need cash. And now I'm just thinking, to your point, buy high quality businesses and stay in. And it's just like the future is just always uncertain. And hindsight's always 2020. You know, that's just the way it is. And I certainly remember going to COVID and thinking, I have no idea what's going to happen.

Starting point is 00:58:34 And it's sort of like easy here in 2024, looking back and like, oh, of course you should have bought, you know, in March or 2020 whenever it was. It was so clear that then we blow over and then, you know, the Fed would print a lot of money and things would go to the moon. I was like, I don't remember the period as I have a hundred percent conviction in that happening and zero percent that it's not going to get worse. That's just not the way it goes. So, anyways, yes, the future is always uncertain. So thank you for bringing that up.

Starting point is 00:59:04 And also, like hindsight 2020, like we talked about so many times here on the show. And I should probably say on that note, I can't believe we didn't set up the mastermind community before. I don't have a good reason for it. I remember whenever we talked about it last year before Omaha, and I had this crazy idea that, oh, we should do a stock investing course because that's exactly what the world needs, just yet another stock investing course. And you were like, you were sort of like nice about it, but you're like, no.

Starting point is 00:59:35 You're like, let's not do that. Then you came up with the idea of the online community, and then we could meet up in Omaha. and all the good stuff. And I think I've been surprised to learn how much I benefited from being a member. Obviously, I'm super, super biased as I'm saying this. But I thought originally that it would really be about stock investing. And I have learned about stock investing. So please don't get me wrong.

Starting point is 00:59:56 But I think what I enjoy more is that I met so many people in the community with shared interest, she had values. And I don't think that it's a surprise that some of them just become your friends. Because, you know, let me just give you one example. You know, you. So you vet all the applicants. that's coming in, Clay. And one of the questions you ask are, like, what's your favorite books? And I don't want to give your list of sort of like a TTC. That's not the intention. But, you know,

Starting point is 01:00:20 many of the listers should be like, Paul Childus Alman, I reached a happier. You just sort of like know that you might have found a kindred spirit whenever they say, like, those are their favorite books. And, you know, they probably don't know too many people living in the next block. Yeah, they might say they're into investing. But like, if you love those books, you're into a very specific form of investment, done a very specific way. And so I don't know. if this is the best way of putting it. But I visited London not too long ago and I met up with the mastermind community there in person. And it was, my metaphor is sort of like, if this was a date, it's not, I should say, we're just meeting up with fellow investors. But if this was a date,

Starting point is 01:00:56 you're not starting from scratch. It's almost like you're starting from the fifth date because you already have all of those other shared values in place. Yeah, that's a really great point, Stig, and like you, I just really continue to be impressed by the members who are interested in joining over time. I mean, some are former CEOs of a global family business, some manage a family office or manage a fun full-time. And I also really like having new members join who are interested in sharing with the community and also just interested in connecting and networking with others in the group. And admittedly, many of these members are certainly much smarter than me when it comes to stock investing. So selfishly, I just see it as a win-win for everybody. And some members are also

Starting point is 01:01:41 open to doing things like sharing their portfolios on a call or just joining for like a member spotlight, different things that we do with the group. And there's certainly plenty to nerd out on. And you know when you're connecting with others in the community or getting on circle, you aren't going to be wasting your time because each member has been vetted. Yeah. And I should probably, with all my biases then say that I so much appreciate the high caliber here of the community members. And of course, we're all busy and that's just the way it is. But, you know, one of the things I found to be quite interesting is that there's so many in our community who are financially in a place where they don't need to work. But then at the same time, even if you don't need to work, most people want to work

Starting point is 01:02:22 and they love working, they love sending new goals. And so I think it creates this wonderful environment where everyone is respectful of each other's time. And then at the same time, what I've certainly benefited from is that many of the members have full control over their own schedule. So we can still do things from 9 to 5, which has been absolutely wonderful. And we also cover a lot of different times zones. So 95 is obviously different. And another thing is just like with the flexibility that our members have, they just live very interesting lives because they have very different opportunities presented for them. So, you know, I want to, I want to sort of like tell an old story. And I should say this is a metaphor, hopefully for a community.

Starting point is 01:03:04 But so this expert were asked to come and fix this plan. And he looked at the plan for 10 minutes, all the machinery there. And he put an X on one of the machines. And that X basically said, this is the part of the machine. You need to get replaced. And then the plan would stop working again. And so whenever he was discussing the prices for our services with the plant owner, the plan Render said that he would only pay him for 10 minutes of work. And then the expert said, you're not paying me for the 10 minutes of work. You're paying me for the 10 years. It took me to tell you just in 10 minutes, this is the part of the machine you need to have replaced. And so, you know, what I love about the community is that there's so many experts in their

Starting point is 01:03:47 respective fields and you get so much bang for your buck per minute that you put in. And I don't think, I should also say, Clay, I don't think you give yourself enough credit whenever you say that there are a lot of people who are smarter about stock investing than you. I don't, I don't think that's the case. I think, for example, one of the presentations we just had was the one about Renauducinelli and Lance and Edwin from a community to make that presentation. And then they're the experts in that. And yes, they're much smarter we are about that specific stock. But that's sort of like what I love about, you know, the community. Like we have a lot of different experts in stock investing, but also in other field. So it's more like in this setting,

Starting point is 01:04:22 you're the novice and then the other setting you're the expert. And it always changes. And another thing I really like about the mastermind community. Yeah, they say that you're the average of the five people you spend the most time with. And the community is certainly a great opportunity to surround yourself with people who are the experts and feels that you aren't an expert in. And it really means a lot to hear you say that. And you make a good point that we do try and be mindful of people's time. And I think it's the same thing here on the podcast. When a guest starts rambling, you and I aren't afraid to.

Starting point is 01:04:56 just remove it from the audio to respect the listeners' time. And, you know, we try our best to ask the most thoughtful questions we can to make the episode as valuable as possible. So every week in the vetting process, I'm hopping on calls all the time with prospective members of the community to, you know, share more so they can learn more about it and see if it's the right fit for them. And it's not uncommon for some people to hesitate to join because of the price. And I really don't blame them because when you think about it, we're really appealing to value investors who always want to ensure they're getting a good margin of safety and that the value is greater than the price, whether they're at the grocery store or sifting through a watch list of stocks.

Starting point is 01:05:38 And recently one prospective member asked me if he could speak with another member that actually ended up living in his local area. And to the best of my knowledge, he spoke very highly of the community. But I've also been in this role long enough to realize that many people tend to tell you exactly what you want to hear. So I would also say that some members have even found it so valuable that they've switched to from monthly to annual billing. And that's because they really want to be in it for the long term. So I would also say that the community, like with a lot of things, it's really not for everyone, which is a good thing. And one of the things that you told me when we launched was that if you become the community for everyone, then eventually you'll become a community for no one.

Starting point is 01:06:24 And since you mentioned members highly valuing their time, I oftentimes feel bad about asking some members to present, but I really only do it around once a year. So while one person might be doing all this prep work for presentations and like that Brunello call, you see that our members put a lot of prep work into sharing around these topics. But they also get the benefit of tuning into 20 plus other presentations throughout the year. So again, I really see it as a win-win for everyone. So some of my favorites from this year, Wyatt, who's an equity analyst, he did an excellent stock presentation on MasterCard. And then Joe, he previously worked at Microsoft for 25 years. And he's done a portfolio overview and just opened up. He's totally open books, shared his

Starting point is 01:07:09 portfolio, and shared his thesis around many of the names he owns. So it really creates this positive feedback loop where everyone really cares about that quality. is really mindful of others' time as well, as you pointed out. Yeah, and another thing, Clay, is that I realized how many of our members who come from a background, typically as, or I don't know if it's usually typically, but I've noticed that there are quite a few who have a background where they run a successful business on their own, and now, you know, they accumulated some wealth and they want to, you know, invest in stocks. And I kind of like to find it to be quite interesting because I came from the world of stock

Starting point is 01:07:45 investing and I'm sort of like looking into perhaps buying private businesses. And I don't know if the case is that the grass is just always greener on the other side. You know, there was one community member who posted something where as a reply to me where he said that he'd gone through a number of transactions, some of them closed, some of them didn't, and he was just so happy looking at the public markets that run by some of the best managers in the world that was just trading at 15, 20 times. and it was just so nice because it was so passive. And I was like, wait, wait, wait, that's all wrong. Like you come from this world where, you know, small businesses trade for like three times earnings, five times earnings.

Starting point is 01:08:26 And he was like, yes, but no. Whenever you start to normalize the earnings and put in the swag equity and it doesn't really trade that three times earnings, I kind of like feel that it was interesting. And again, like the grass might always be green on the other side. I don't know. One thing I recently had been looking into, like I mentioned, as being potentially acquiring private businesses. And so far, it's just been an absolute wonderful experience because I remember whenever I started studying stock investing in death and reading book after book and new things

Starting point is 01:08:56 open up every time and you were speaking with other investors and you were just on such a steep learning curve. And I don't want this to come across as I can't learn new things about stock investing. I certainly can. But interesting about looking into private businesses is that there are so many in our mastermind community who are successful business owners. And I would actually say quite a few of them are like, who you don't know what you're getting into here, Stig. But anyways, it's just been so interesting to have a chance to hang out with them online, even a few of them in person and just learn from them.

Starting point is 01:09:25 It's almost like I'm rediscovering stock investing for the first time, and I learned so much every time I started the field. So I guess this is also my way of saying that from the size of group, you are, and I think we are like 115-ish, You know, if you're interested in serial acquires or mining rights or nanocaps or, in my case, private businesses, like, it really doesn't matter which kind of niche you're looking into. You'll find a one, two, perhaps a handful of experts who just love to work with you on that and discuss with you. And I think that's the ethos of our community really wanting to pay forward.

Starting point is 01:10:00 Yeah, I mean, I can certainly see why public markets are just so attractive. is someone like with a private equity experience. It reminds me of Monash. He grew up and his father was an entrepreneur. And then he went off and got a safe, secure job. And then his dad's like, okay, it's time to go and start your own business. And Monish said, don't you remember all the pain we went through? It's like Stig, don't you see how difficult this is going to be? So I'm actually really curious. When it comes to private equity, you've been looking into getting more involved in this space yourself. So what's that experience been like for you? and where are you at in the process?

Starting point is 01:10:37 Yeah, so I should probably preface this by saying, I don't know what I'm doing at all. So that's going to be my starting point. So with that said, I can't say I've overpressed anything. I've been looking to work on a few different projects. And I should probably say that the mastermind community has been very helpful, but in different ways. So one of the projects I've been looking at has been to buy a small Canadian business.

Starting point is 01:10:59 In this case, the reason why I'm doing it like that is I have a potential business partner in Canada who would run the project. And if I even take one step back again, I would say that I generally have the framework that you can only be obsessed with one business at a time. But you need someone who is obsessed in that business. Every business needs someone who's obsessed. And for me, that's TIP. And so whenever I am looking into buy a business in Canada, which probably comes across

Starting point is 01:11:31 is very random. It's because I think I found the right person to team up with, and then I can invest alongside him, but he can be the one who's obsessed, which is sort of like, it's an important detail. I just wanted to mention. And so in this specific case, this was actually a Canadian business that was specializing in taxes. And so someone you might be like, you don't know anything about taxes in Canada, and you're absolutely right. I don't. And so the intention was more to buy a business together with a business partner and then hire someone who had the competence is to do it. Long story is like there were a ton of traffic to this online business five times the size of TAP and it was just under monetized to a lot of extent. So I was speaking

Starting point is 01:12:11 with one of community members who happened to be a tax accountant in Canada, not in the sense of hey, let's do business together and let's have you invest, but it's just more like we're looking at this business opportunity. What are your thoughts? And he was super nice about it, but he was also like, whew, be careful here. You have to consider X, Y, C. And so Whenever we did that, it became pretty clear that this was not something we should do. But I think really where I benefited from that was just to save a bunch of time and just be like, no, that business opportunity, even though we could buy a ton of traffic for very little money, it was just not the right fit for us with the type of structure we have.

Starting point is 01:12:49 Great, let's move on to the next thing. So that's one thing I'm working on. And so another thing I would say is that many people here who listen to this probably heard Buffett talking about. You don't have to swing it at every pitch. And that's sort of like how I feel about opening myself up to potentially acquiring private businesses. I don't know if I'm widening the field that I can sort of like play in by saying it's not just public equities, but also private equity. Or if I'm just venturing aside my survival competence, I think I think time will tell. And I wouldn't be surprised at all, Clay, if we're sitting here in a year having this discussion, I'm like,

Starting point is 01:13:27 I just wasted a year of my life trying to find the right business. just didn't work out. So anyways, I'm working on this project here with a friend and potential business partner in Canada. And I would say that that has been an interesting experience, and it's been an interesting experience in more than one way. Because one of the challenges that I face is, and I think perhaps a lot of the listeners can resonate with that is that they don't feel that they can find the time to run the business, either because they already have a job or because they already run the business. And so it's been kind of like interesting to explore this idea of being a junior partner.

Starting point is 01:14:07 Junior partner in the sense of I don't want to own more than 49% of the equity, but I really want to team up with someone and together control the business. So it's not like we can't, it's not like we necessarily have to replace management, but him and I would need to have control of the business. And we want someone who is obsessed about the business. And it's sort of like, it's interesting this idea of teaming up with someone else. It's just like, you know, I learned a lot from teaming off with Preston, and finding, like, that one-on-person is kind of interesting because I'm sort of like working with two different

Starting point is 01:14:37 models. And speaking with quite a few people about how to set up the right structure, there's something to be said about teaming up with someone who has a proven track record, I don't need the money, which in this case would be the situation with a Canadian business partner. And a part of me is like, it makes me nervous. You know, I understand whenever people need money and how they behave, whenever they're They need money. But a part of me is also like, okay, if you already exited a company, sold it, don't need

Starting point is 01:15:08 to work a day in your life, and you still work all the time, perhaps that's a good sign that you want to team up with this person so he can do it again together with you. And then there's sort of like the other way of looking at it, which is working with someone who might not be in a financial privilege situation, but then really wants to prove himself. and just very, very hungry. And that's sort of like a different type of structure. And I think I've seen both things go right and seen both things go wrong. Like I've really seen those people who have been very, very successful.

Starting point is 01:15:41 And they just can't flip that switch off and quote unquote enjoy life because their version of enjoying life is just going to continue working. And then I've seen people who strive for financial freedom. And then once they achieved it, they're done. Like they're just, they're done. So anyways, and this is a long response, which probably also shows I don't really know exactly what I'm doing, which is how I prefaced my original response. I'm also looking at buying small businesses in Scandinavia or the UK. And I set up a website at vMSPodcast.com slash acquisition. I'll make sure to link to that in the show note. And I would shamelessly like to hear from any of the listeners if they have a company for sale. And on the website, I've set up like different criteria. It's not just like, sent me an email, but, you know, there are some things about return

Starting point is 01:16:33 on investor capital and, you know, net profit margins and how much profit and size of, all of that stuff. You can find all of that on the website. And if I can just tie that back to the mastermind community, I just found it very helpful to speak with the community members about private business because so many people come from the background of running their own private business, either as an executive or or they might have control of it. They might be a family business.

Starting point is 01:16:58 It might be themselves who started originally. And I should also stress that the intention of our community is by no means to raise funds or have anyone solicited their services. That's very much not what it's all about. It's really more to have a group of people where you can support each other and help each other in whatever direction, whatever kind of journey that you're on. And so our members are investors by heart. And I think that type of investing mindset is very helpful.

Starting point is 01:17:28 And so, for example, like I mentioned before, I was speaking with a tax accountant in our mastermind community, who's also an investor. So whenever you discuss, like, oh, so what would it take to run this website with all, like, millions of millions of people visiting? And so he wasn't just looking at it from a, this is what he would do as an accountant. But also, like, as an investor, this is what I would say for you to get X, Y, C, Y, C. see return. And I think just that angle is just extremely helpful whenever you're an investor yourself. You know, some of these people have just seen so much as it relates to private equity, public equities, to business and whatnot. And that all sounds wonderful and very exciting. So I hope it all pans out well for you and you don't see yourself running back super fast to public equity

Starting point is 01:18:15 investing and whatnot. And a lot of what you're saying, I think, refers to just betting on the jockey instead of betting on the horse because it seems that As you look at smaller and smaller companies, the one or two people running that business becomes more and more critical is what I've seen. Well, to give closing thoughts here on the community, if this is something that sounds interesting to you to our listeners today, they're welcome to join our waitlist. That's at theinvestorspodcast.com slash mastermind, and you'll be hearing back from us here soon.

Starting point is 01:18:47 And you can also just reach out to me directly. That's at clay at theinvestorspodcast.com. I'll also mention that we have some fun calls really coming up that I'm definitely looking forward to. So we have a bowl and bear discussion on Tech Neon. So that's actually a holding of mine and a previous holding of Stigs. And then we also have a stock presentation by my co-host, Kyle Greve, on natural resource partners. So definitely always have some really fun calls coming up. We host a number of different social hours.

Starting point is 01:19:14 We bring in special guests and whatnot. But you can learn more about the community at our website. Fantastic. Clay, thank you so much for joining me. for this second segment here of the show. Thank you, Stegg. All right. So with that, I think we're going to end the episode.

Starting point is 01:19:28 Thank you so much for tuning in. And we'll see you back again next week. Thank you for listening to TIP. Make sure to follow We Study Billionaires on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to The Investorspodcast.com. This show is for entertainment purposes only,

Starting point is 01:19:49 before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

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