Improving Your Decision-Making Process with Krzysztof Piekarski | 7investing
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Improving Your Decision-Making Process with Krzysztof Piekarski

February 9, 2021 – By Simon Erickson

It’s certainly been an interesting month for the stock market!

The trading world has set its obsessive eyes upon GameStop, with headlines frantically reporting the stock’s every move and social media becoming chock-full of posts boasting about weekly gains. There’s an uncomfortable amount of chatter taking place right now about how “easy” it is to be an investor.

But investing shouldn’t be thought of as buying short-term lottery tickets. Instead, it takes a great deal of thorough and analytical research.

And it also demands a finely-tuned decision-making process. It’s not enough to just do the analytical legwork to find great stocks. We also must have enough conviction in ourselves, to buy or sell exactly when the opportunity presents itself.

In this behavioral economics realm, we recently sought the advice of an expert. Krzysztof Piekarski is a Professor of Rhetoric at the University of Texas at Austin. He’s been an investor for more than twenty years, and he’s extremely in-tune with how human beings make decisions (and even wrote a PhD dissertation on the topic).

Krzysztof also has the distinction of being the only guest writer we’ve ever featured on 7investing. He has written two incredible articles for our site during the past year: Why ‘Don’t Panic’ is Not Good Advice and The Importance of Patience.

In this exclusive interview, Krzysztof offers a framework for investors to dig deeper into their internal decision-making process. He describes how external influences can flip on our behavioral biases, but that by looking inward we can avoid dangerous traps such as hubris or FOMO. A focus on humility and patience can lead investors to much better long-term returns.

Krzysztof explores the topics of “integrity” and “character” in investing, and reveals his own personal approach to buying stocks. Simon and Krzys compare investing with Texas Hold ‘Em poker, and describe how probabilities and incomplete information are things that people must become comfortable with. Krzystof also shares his thoughts about the current market environment, explains how Apple and Tesla became two of his most successful investments, and offers some important words of advice for newer investors.

Publicly-traded companies mentioned in this interview include Apple, GameStop, and Tesla. 7investing’s advisors or its guests may have positions in the companies mentioned.

Timestamps

01:25 – How Krzysztof Views Himself as an Investor

06:47 – Krzysztof’s Current Perspective on the Market

13:42 – Why Don’t Panic is not Necessarily Great Advice

21:18 – The Role of Patience in Investing

26:13 – The Type of Companies that Krzysztof Invests in

32:26 – What Apple and Tesla have in Common

37:51 – Does Krzysztof have a Concentrated Portfolio?

44:44 – A Piece of Advice for a Brand New Investor

 

Complete Transcript

Simon Erickson  

Hello everyone and welcome to our 7investing podcast I’m 7investing founder and CEO Simon Erickson. GameStop has gone from a company that no one was talking about to one that everyone is talking about. But is buying this stock truly the best way to compound wealth in the stock market? And on top of that, are there decision making tools that we can use to be better investors? We will answer these questions. I’m very excited to be joined by Krzysztof Piekarski. He is a director and Professor of Rhetoric at the University of Texas, and joining me this morning from Austin, Texas. Krzysztof, thanks for joining the 7investing podcast.

Krzysztof Piekarski  

So great to be here with you, Simon. I really enjoy what you guys are doing, so I’m really, really looking forward to it.

Simon Erickson  

Krzysztof, I’ve been a fan of yours for years as wel., I know that you’ve been an investor for more than 20 years. And we’re going to be talking not only about GameStop, but also kind of these decision making tools that can improve us that as investors. I’m expecting this to be a higher level, really deeper conversation. And so first of all, I’ve changed from drinking coffee, which is typical for me, to drinking hot tea. And Krzysztof, I know you’ll appreciate this. I put it in my University of Texas mug for you here this morning as well.

Krzysztof Piekarski  

Right on. Good man, Simon.

Simon Erickson  

Can you first tell me kind of your perspective on how you think of yourself as an investor? How do you self describe as an investor and think about the stock market?

Krzysztof Piekarski  

I think of myself as a humble investor, because well, let me let me give you a backstory. For whatever reason, call it genetic, I was never tempted by a kind of investing that is lottery based. Meaning promises of the wildest riches beyond your imagination. So I never was fooled into buying lottery tickets, or penny stocks or any of that hype. I don’t know why I’m just resistant to those kinds of exuberant, fake claims. Maybe because I’m Professor of Rhetoric, I could see through this sort of false advertising front. So I never got into that. But for a long time, I thought the opposite of that would be doing a whole bunch of analysis, and really getting good at numbers, crunching the facts and getting things exactly right. I think for maybe the first, oh, it was a long time, maybe not the first few years, but in the middle of my investing journey, that strategy of – I would call it mirror analysis – proved more costly to me than anything I’ve done before. Which is counterintuitive to some extent. I think the reason was because I felt sometimes that I was so right about an investment. Because the numbers added up. Because the product was the best. Because other ways are our capacity to be righteous, right? I was really taken by like, no, obviously, I’m right about this, everything – the numbers add up. And then when the stock market decides, you know, it goes the other way. But what seemed to me like diabolical reasons that were, you know, chalk it up to insanity or weird, whatever, it became maddening. And some of my greatest losses were the ones about which I was, in the sense right about in theory. And so that taught me, I think, from then on to try to have some kind of what I call, I mean, this is cliched, but balanced approach. Where obviously the analytical work has to be there., but if that’s not enough, then what is this other thing that’s needed. And that’s when I drifted heavily into the behavioral side of things, the psychological side, the human side, the storytelling side, to counterbalance the analytical, and out of that, I think comes with I would call that sense of humility. That I invest with humility, meaning, I may be right, I may not be right. If I’m right, great. If I’m not, I’m going to admit it very quickly with no sense of shame, or no loss, no damage to my identity. Which then allows me to course correct and keep following the good stories, the ones that are working. So I abandon that sense of needing to be right, and I think, you know, I know it might sound fun. Here’s the thing, I think it if I hear myself saying that it might sound fluffy to any investors getting in the game. “Oh, here’s a guy that just goes by some loosely defined code of humility.” And yet, I’m pretty sure this way of looking at investing has created higher returns for me than any other framework that I could think of.

Simon Erickson  

So let’s get deeper into that, then, because I know that Krzysztof, you kind of started a lot of your investing in kind of the mid to late 90s. You saw, obviously, the.com crash in the early 2000s. That changed a lot of people’s conviction in the stock market. But it kind of feels like there’s some echoes of that today, right? When people are trying to jump in and out of stocks so quickly. I’ve been seeing a lot of messages that people are just saying that investing is easy right now. It’s almost frustrating for long term investors to hear things like that, because it seems to suggest that you could just get in and out of stocks and make a lot of money without really considering those risks. You have mentioned that you really believe in character of investing. And you mentioned things like humility and patience. What do you think about what’s going on in the market right now? And what could possibly we do as investors as a whole that might correct some of this behavior?

Krzysztof Piekarski  

You know, Simon, I think this is actually normal human behavior in the sense that humans in general historically go through phases and cycles. I think the internet makes it easier for us to see more clearly what cycle we’re in. Just because it’s, you know, we all now have these tools that allows (us) to magnify behavior on Twitter and Social Media. But go back to any historical civilization. There’s booms and busts, and human beings are wired. Pretty much the same today as we were wired in ancient Rome. So when things are going well, we get big heads. When things start going poorly, we get overly pessimistic and downtrodden. I don’t think that’s ever going to change. In general what can change, I think what we can tend to in the moment is identifying explicitly for ourselves. Oh, this is a phase that we as humans collectively are in that seems to be getting overly exuberant, overly enthusiastic. overly dare I say greedy and being aware of that. That’s the phase we’re in now and then saying, “hmm, okay, well, that’s an important piece of data, isn’t it?” That is the service, I think 7investing can provide for a lot of people. Not to shame the people who are in are being kind of taken over by this mindset. Because it is normal, but to bring a kind of awareness to them as these kinds of things you’re making claims about on Twitter, about the ease of investing and posting your gains in a month. That that is pointing you toward a greed mindset. And then you have to realize that historically, that always ends badly.

Simon Erickson  

Yeah, and the long term I mean, if done right, we do want to empower investors. We think that the stock market is something that people should actively be involved in. But perhaps YOLO, look how much money I made in the last 20 minutes, and let’s brag about it to everyone who will look at my brokerage, isn’t the most constructive behavior.

Krzysztof Piekarski  

No, I mean, read any Shakespearean play. Read any ancient Greek? Yeah, the story always ends at the same. Always. I like thinking of investing sort of as a two part thing. It’s like, you got to do the initial investing part, analytical part well enough to get yourself gains. And then you got to do the behavioral stuff to keep them.

Simon Erickson

Right.

Krzysztof Piekarski  

Right? I mean it’s no good to have at one point had $1 million in digital gains to wake up three days later to all of that to have disappeared because you didn’t consider carefully enough the source of gains. How did those gains happen? Was it right? Something a little more legitimate?  I don’t know the (inaudible) and seems like a good word. Right? Like often, not always, hard work and patience and these character things, we appreciate them because they are more grounded. There’s a little more reality under them, like making real things with your hands. Is that how you made your games? Or did you make them because there’s some wild craze, some wild mania that you happen to luckily step into at the right moment? Is that as legitimate? Probably not. Therefore, more care needs to be taken.

Simon Erickson  

I’m glad you framed it that way, of the analytical piece of this, and then the behavioral piece of that, because we are definitely aligned in wanting to help people invest better. Kristoff, I should mention that since 7investing launched last March, we have only had one guest writer appear on our site. That writer is you, who has written two articles now that we’ve featured directly on 7investing, because I think it’s so important to take that next step and figure out what do I do? You know, how should I pull the trigger on this? I’ve got kind of these emotions about this. How do I control all this so that I’m making good long term decisions? And so the two articles that you’ve written for the site, one was called “Why Don’t Panic is not Necessarily Great Advice” which is very interesting. And then the other is about the importance of patience. And without oversimplifying these Christoph, because I’d encourage everybody to read through each of those articles, which we’ll post to this podcast the links for them. But there’s kind of some consistent themes that you have. One is that I think that a lot of people are trying to oversimplify these managers in our minds that are either telling us you’ve got to buy this stock, get in right now, or you’re going to miss this opportunity, or the complete opposite of just completely stay calm. Don’t do anything. Just let it ride. But in reality, perhaps there’s some kind of middle ground between the two of those that you should be listening to both sides of the spectrum. Can you can you explain a little bit more about your first article and what that means, Krzysztof?

Krzysztof Piekarski  

Sure. Yeah. I think my response, many of my responses are born from my experience as a Zen practitioner, which has sort of been the guiding framework for me for, I want to say 12 years. And that’s what I wrote my dissertation about. So a lot of these ideas stemmed from that particular curious source in the Zen framework, it and I also teach a class at UT called the Non Argumentative Rhetoric of Zen.

Simon Erickson  

I’ll be there, I’m gonna audit that one next time.

Krzysztof Piekarski  

You’re in. It’s actually it’s a life changing course for many students that take it. Because there’s a pop culture view, I think of Zen that basically makes people think it’s about chilling out, relaxing, right? Not being swept up by some emotion. In one way, it’s not wrong. It’s just so overly reductive, that it is kind of wrong. Because what you end up seeing is if you ever encounter a legit Zen master, and there’s not that many of them roaming the earth so good luck trying to find one, but if you do, you’ll notice that they tend to exude this remarkable sense of ease and calm. But what makes them legit and genuine is that that sense of ease and calm is not fake. And it’s not because they are dismissing or keeping things out of view. In theory, if your house is on fire, and you step outside, and you just look the other way, in theory, you could stay calm, right? You could pretend that your house is not on fire. Right. And that’s kind of what most people think Zen is about. A certain kind of pretending that things aren’t as bad as they are, or the house is on fire, when it is what Zen principles ask us to do instead is to actually notice  inside your mind. Inside your mind body complex. All the things that are arising in that and then investing sense that includes like, the part of you that say greedy, and wants more, and is winning. Right? What does that feel like? And then you also have probably another part inside of you that’s really scared. That’s like, “oh my god, we’ve made so much money, we should sell immediately because it’s already up 30%.” Right, we’d be foolish not to – this is what I wrote about in that first article was to not fall into the trap of preferring or arbitrarily choosing one or the other part of you and acting from one or the other. Instead, it’s that middle ground, more middle ground awareness piece where you recognize you have both of them. And you want to learn about what both wants. You want to kind of connect with the greedy one. And you want to understand why is it want you to buy more and more and more, right? What is it seeking for you, right? And it’s a legit, it’s not like a woo imaginary thing. Ask anyone. They will tell you they hear like voices in their heads, right? There’s like, and I’m not talking about like, schizophrenic like medically, like as a diagnosis of by chemical imbalance. I’m talking about most normal people have different feelings, voices, right? So what happens when you turn towards the greedy one, and figure out what it wants for you then get that data and then equally have the capacity to turn toward the one that wants to panic? Why is it panicking? What’s it trying to do for you? And you then, just by doing that, you realize that both of these parts are genuinely interested in your well being. They want to help you. It’s just what’s odd is that their strategies are exactly opposed to one another. So typically, that means that these parts get into conflict with each other because this one wants more, this one wants less. When you think about it that way, that’s where that larger sense of anxiety comes up. That anxiety is the direct result of having two separate strategies fighting it out in your head. So, to land the plane here, what I’m kind of writing about in advocating is a simple capacity to begin to notice. Just notice that this is kind of what’s playing out inside of all of us. That step of just noticing is already like leagues ahead of what most people can do. And it turns out by merely noticing, you gain this extra sense of control, like capacity to actually not act impulsively, based out of whichever one of these two has your attention. And like any good psych study shows us – right – people who don’t act impulsively tend to get more marshmallows (laughs)

Simon Erickson

It makes sense, Krzysztof, the long term reward for being patient and listening to the inner voices and what they’re telling you to do or not do. I can see how that would make you so much more self aware. The other article you wrote was the importance of patience, which you were calling forbearance. Your article that you wrote, and I thought it was very interesting, one of the things that you had mentioned in that article was that patience is not passive. You know, being patient is not just the same as tuning out or pretending not to notice what’s going on. Can you tell us a little bit more about how you think that applies to the market? I mean, obviously, we’re seeing a lot of herd mentality. We’re seeing a lot of retail investors buying GameStop just because other retail investors are doing so without any kind of analysis whatsoever. I mean, we preach long term things like watch lists, and being ready, and doing the analytical political analysis. But then you’ve also got to know as an investor, when do you act on something that you’ve done your homework for? So what’s the role of patience in investing? And then also, what’s the role of taking action when the time is right?

Krzysztof Piekarski  

One of the most interesting things I learned in my studies of this to a Westerner like myself, (is) this Eastern world of Zen, and Chan is that the character, you know, how their languages pictographic? I guess that’s the correct way, right? The symbol for patience is a technically it’s translated as a heart that has a sword hanging right above it. And I actually find find that very moving and it kind of lanes, like it really helps me understand what this quality is pointing us to. In other words, what does it mean to have a heart that’s open with the sword? Meaning, you know, a symbol of danger, hovering above it, like what do you have to do to keep that heart open? This concept of forbearance to me points directly to me needing as an investor set of principles. That to be successful with this game, you have to kind of have a game plan right ahead of time. A set of I’m not sure if it’s a code exactly, but some sort of system that you’ve thought about, you learned about, you kind of forged in the fire over the years, right? As you gain the experience, and you come up with these principles that you believe work. You may be you may or may not be right about them, right. But that’s with experience and kind of being able to change over time helps you do you can always adjust, right, but you start out with some set of principles. This concept of forbearance, therefore points you to the notion that principles are all fine and good when things are easy. But when things get hard, is the first thing you do is toss your principles out the window? If you do, they’re not really your guiding principles, are they? They’re a theory, you know, they’re kind of like theoretical things. That would be nice, if only you could, but then you realize, “oh, I’m not really living from them.” Forbearance, I think, is that capacity that you can cultivate over time to live from your principles. And when things get challenging and weird, like in the current GameStop saga, that’s a perfect example of a ready made situation that gets to test you, and gets to try your principles. And when the GameStop saga started unfolding, did you get suckered into the the buying frenzy? Did you panic and like, what is it that happened? Or were you content sort of staying on the sidelines and saying to yourself, well, that’s a kind of weird investing thing I haven’t seen before. And there’s nothing, I’m going to be interested in it, I’m going to observe what’s happening, but there’s nothing that I but by entering that world, I’d be violating principles three through seven. So I’m going to have enough forbearance to stay out of it and just observe. Last is an investor without principles.

Simon Erickson  

We have seven of them, Krzysztof, which we should post this as well. Thank you for the spot up on them. There was one of the things in this article that really caught my attention that I thought was quite insightful. And that is you were pointing out that we never have complete information as investors. And I think that this is kind of another one of those emotional anchors. So if we say all I’m really interested in this company, maybe I’ll buy it, but there’s something that just kind of holds us back from, from taking from actually hitting the buy button from actually taking a position. Maybe it’s ah, maybe I just haven’t done enough research. Or maybe it’s too expensive of a value, whatever it is, we never get complete information as investors. We can’t know everything. What types of companies do you invest in? And what generally prompts the moment of action for you to purchase a new investment?

Krzysztof Piekarski  

Mm hmm. Great question.

Simon Erickson  

I got plenty of hot tea, if you need to take a minute.

Krzysztof Piekarski

Well, I’ll confess to you that I also, since a fairly young age, I was hit pretty hard by the poker bug. I’ve always been fascinated with human behavior and how people tell stories to one another. And poker is this game that, Texas Hold’em especiall,y that relies on it, you know, its structure is incomplete information. And then on the highest levels, you’re not playing, you’re not really playing the cards, you’re playing the other people. And so I’ve more than more than dabbled in this world. And, you know, you learn, for example, that sometimes .06% of the time, you might look down at your hand and see aces. Well, aces are funny thing, because aces are the best hand that you could be dealt. So you’re on about approximately 82% favorite to win. And 82% is pretty high percentage, right? So many people then get all excited about their aces, and most of the time they do well. But you then also have to realize that 18% of the time, they’re not going to win, even though there’s nothing better. Statistically 18% is still pretty high. Right? Right? I mean, if one of five times you cross the street, you’re gonna get run over, you’re gonna write your – is it’s it’s not as simple as it seems. Right? So given this framework that even in the best of times, there’s no such thing as a sure thing when we’re dealing with incomplete information. I think over time I’ve let go of needing to be right. Or, you know, I got rid of that perfectionist part of me, too. I got him to relax. You know, I have these conversations in this parts way, saying I know you want the best for us and I know you want 100% accuracy, and I know why you would want that because it’s safer. Because of course, we want to invest in things that are 100% given. And that’s actually not how the world works. So thank you for sharing with me your concern about the need for accuracy. But in this case, we don’t have it. So we’re gonna have to proceed anyway. And so once I kind of negotiate in me the reality of the world. I tend to lead with companies that – this sounds cliched and hokey, but it’s true. Feel good to me. And so that’s kind of a two part thing itself. When I say feel good to me, one, on an almost literal level, because I’m deeply concerned about ethics and morality and the impact that my actions have on others, and that some company’s actions have on others. I simply won’t invest in the company. I don’t care how good their numbers are, if I think they are doing explicit harm, like knowingly. So I just don’t touch any of that, like the world is complex enough, or troubled enough, I don’t need to participate in any way, in that kind of thing. So therefore, if there’s a company that I actually believe in the mission, where I actually think they’re helping, you know, solve an important human problem, I get excited. That’s what I mean by feel good in one way. But the other way is, like, by feel good, I then do the analytical piece of it. And you know, like, increasing revenue growth, or accelerating revenue growth, in the huge open market feels good. Right? So I examine the business model, right, the business model and the numbers. So that I make sure I’m not telling myself a story that’s not backed up by evidence. And that to me feels good when I could sleep well at night, right? When the balance sheet lines up. When I combine those, and there’s a company that I feel good about, regarding its mission, I feel good about the business model and the numbers. Unlike I then talked to my you know, that inner perfectionist and I say, well, we might get this wrong. But the principles tell me it’s worth enough consideration to try out. And usually when I invest, I take a initial small nibble position, listen to a few conference calls, and then get to know the people. As my confidence increases, then I start building out that position.

Simon Erickson

And you’ve got to give me a concrete example. Krzysztof, I mean, 20 year investor, what’s a couple of companies that have lined up with your to feel good process. You feel good about their principles that they have, and then also the numbers really seem to suggest it’s a good investment too. Any companies you’ve been proud of over two decades in the stock marketaaaa/

Krzysztof Piekarski  

Two decades. Yeah. The sad thing is that all in all these cases, I sold too early.

Simon Erickson  

Sure.  We all do that.

Krzysztof Piekarski

Right? You know, that feeling. But the big ones, historically, I remember, was Apple. I used Apple from the time I was in eighth grade. So before Apple had the big combustion of like becoming a dying company and Steve Jobs getting kicked out of the board, I always loved the product. And I kind of got to a sort of snobbery against -pardon all you Android people or you UPC people out there – but like I just felt like I remember in the I guess mid, this must have been like the mid 90s late 90s, I remember loving the product, loving the mouse, loving the the color, the apple, like everything about it felt better than what I saw my PC people have to go through with the DOS weird, like carrots and weird hieroglyphics on the screen. And then I would walk into a computer store, right? And there would be the 98% of it was PC stuff and then in some hidden corner was the Mac section. And I was like, why is this like the thing that’s better? And like good and friendly is like a pariah. Anyway, I loved the idea that the the friendlier, more human computer would be the better product. And so I invested in Apple kind of way, way back. And then the iPod came along that you know, and then it kind of reinvigorated itself. So I held on to Apple ffor that sort of Jobs in vision of making computing more human through, I think, through the mid iPhone stage, so it’s pretty long time. So that’s an example of like, believing in the company and riding it for for a while. A more modern example would be Tesla. It’s actually come to think of it the two are related, When Steve Jobs died, I generally felt like a missed something important to me, as a human, was gone. Like I actually cared about Apple as a company, as a kind of ethos. And so when that went away, for a little while, there was a gap of like, I don’t know, if you if you’re a weenie investor, who sort of, you know, you know, what it’s like, sometimes to look forward to earnings calls. You know, people are at different levels with investing, but it’s possible I’m here to tell you to get excited about

Simon Erickson  

Those are exciting Friday nights for us here, Krista. We are always going to the earnings calls.

Krzysztof Piekarski  

Yeah. So, you know, when I realized I’m no longer looking forward to Apple’s earnings calls, I began kind of scouting for the kind of replacement. And that’s when I discovered Tesla quite early. Because I truly believed in the climate change issues that they need to be solved. I thought Elon Musk had the same kind of brashness, or kind of creative genius that Steve Jobs did. And so I hitched my wagon to that story very early on. So that was a successful investment for me for quite a while. And then I sold too early, when there was all the market manipulation and bankrupt, you know, near and bankrupt. Like, there’s a lot of uncertainty that my own threshold was not willing to hold through. But that’s kind of separate.

Simon Erickson  

So one other topic I wanted to chat about. And I think there’s some investing takeaway on this, but I want to extend your Texas Hold’em analysis of the poker playing to to investing and talk about the the incomplete information, but then also adding to positions over time. As you know, as a poker player, you don’t have to go all in before you see the flop. You get more cards that you get to see over time. And just like in investing, you don’t have to put a full position or put everything in right up front for a company. You can add to it over time. I think one of the games we also play with ourselves as investors is valuation. We say a company is just too expensive, or I just don’t know, it seems like it’s too expensive for me to get into. But the stock market, of course, is always forward looking. It doesn’t matter what the past history of the price of the company you’re buying into is, do you add to positions over time? And do those tend to be – do you have a more concentrated portfolio? Or do you tend to spread bets over a bunch of different companies that you think share the principles that you’re interested in? And then kind of let the winners rise to the top?

Krzysztof Piekarski  

Great question. My portfolio is is a kind of a mirror. It has a very different front from a very different back. Most of my allocation is in a few companies. I think the actual numbers, like 85% of all my assets / wealth is in I think 12. Like very concentrated. And then there’s this long tail that has like 80 companies that are tiny, tiny positions. And so the technical answer is like I have something like 100 whatever companies and yet, it’s only really 12, that 12 to 15 that will make any significant difference at the moment. And so what I tend to do, and this actually goes back to that character piece – I’ve learned I think over time that one of the most important things for me is believing in the company. Like genuinely believing, like caring, almost. I don’t know if that’s too strong a word, maybe not caring about the company. And when I asked myself, “what is a company,” I realize a company is a group of humans, like I forced myself to dig through that that kind of abstract thinking of a company is just a ticker or a price or even the business. And I think of it as a group of people, and therefore, after I make an investment, I’ve already done the work in terms of the numbers and the numbers seem to be going well, right. That’s what the service 7investing provides, among other things, but right, but that’s a key component. Once that’s sort of doing its thing, I keep adding, I keep listening to the earnings calls, right? I keep getting to know the leaders of the company. I keep getting to know what happens when a tough period rolls around. Are they honest? Or do they dissemble and try to avoid the real issue. As long as the people running the company continue to impress me in terms of integrity, in terms of creativity, in terms of truth telling, and all these character things? I typically tend to add, because the story was there, the numbers are there, the people are there. And so for me, the other companies, I would say in my top 12 are now longer term positions. Because they’ve gained my trust, put it that way. It’s not always that simple, right? It’s not always that simple. Sometimes there’s a hot comment that arrives on the scene. Right? And it’s like, okay, I don’t like the IPO landscape and all of that. But even then, if I take a sizable position at the start, it’s not going to be more than you know, like 4%. And then I become very careful to make sure I follow the people. Quickly, I make it a priority to learn about the company’s character. So yes, I add over time. And I’m pretty quick to cut a company as soon as anything is untoward. So it’s a kind of paradoxical – yeah, it’s a paradox, paradoxical answer I’m giving. It’s like, in theory, I want to develop a long term relationship., and as long as my partner and investing in this case the company shows up with full integrity, I continue adding. The moment there’s something weird or off or the story becomes pure story, I’m out. You date the stocks. You don’t marry them. But I’d like dating for a long time.

Simon Erickson  

Let’s stick to the principles and have conviction I think are the takeaways from that one. I have one last question for you.  Krzysztof, a lot of people who might be listening to this podcast might be new to investing, and they are jumping in at a very interesting time right now. It’s been an interesting year for for investors out there. There’s so much good advice from this entire podcast for people to learn from you. But if you were speaking to a brand new investor that’s just now buying their first stock, what would be one piece of advice you’d give to them?

Krzysztof Piekarski

Great question, Simon. I think this tip might take us full circle. My strategy is one of humility. So for you new investors when you’re hearing these hot stock tips, when you’re seeing GameStop soaring. You have the herds downloading Robinhood and all of this, that’s telling you that greed is now operating. Remember, greed does not end well for often. There’s a reason for that. And so, if you can remember to invest with humility and patience – basically these two virtues that we’ve been talking about, then you realize there’s no rush. You don’t have to rush to buy all the things with all of your money. You could test it out, right? Buy a 10th of what you can afford. See how it starts playing out? If it goes bust, you’ll be happy. You only had a 10th. If it does, great, okay, well, if it does really great, then you you also made money, which is the point. So that kind of moderation. But the larger sense of humility to me is like you invest with a self awareness, that one, you’re never going to be right all the time. To buy the game structure, you can’t be right all the time. It’s just impossible. So if you’re not, if it’s not about being right, then it’s about just being careful. It’s about being in control of, you know – in dialogue, I would say with these inner parts of you. So that the greedy one gets to have a say, because you got to step up to the table, right? The greedy one is inviting you into the game good. It’s helping you in that way. The fearful one is telling you to be cautious because it’s dangerous. And it is. So you listen to that one too, and when you get those parts dialoguing with each other, that is what I call integrity, meaning integrated. Your parts are integrated with one another. They’re not in their separate corners. And if you can invest, you know, then you follow the recommendations that 7investing offers, right and you read the analysis, you begin to understand the idea behind this investment. If it makes sense to you, if you enjoy the company, meaning you you like the idea of what it’s doing in the world, then start out with a position that’s reasonable that you could afford to lose in philosophical technicality. Sleep well at night. And then when things unfold add a little more. Patience, right? Not patience, as in like, be an old Chinese Zen master on a mountain, right? But if you invest with integrity out of principles, it feels good. Because you’re not going to be pulled and pushed by these impulsive parts. When it feels good to you, you’re not going to make some of those behavioral mistakes that from my mind the most costly.

Simon Erickson  

I think those are great investing lessons about humility and patience and the integrity of investing again. Krzysztof Piekarski, he’s a professor at the University of Texas. I consider a Zen master of investing. Krzysztof, man, a lot of fun. Thanks for joining me on the 7investing podcast this morning.

Krzysztof Piekarski

Oh, it’s a pleasure speaking with you, Simon. You guys are doing such great work. I love your recommendations. And I love being able to contribute in what small ways I can so really appreciate it.

Simon Erickson

And we’re gonna give even more access to Krzysztof for people that want to get into this topic a little more. You’ve seen several of his articles on our site and now we’re having the podcast with him. We’re going to find ways for our subscribers to interact for those that might be interested in learning more about behavior and that side of investing. So Krzysztof again, thanks for joining 7investing podcast here today and for everyone listening, thank you for tuning in as well. We are here to empower you to invest in your future. We are 7investing.

 

 

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