No Limit with Krzysztof and Luke – Episode 12 - 7investing 7investing
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No Limit with Krzysztof and Luke – Episode 12

March 9, 2023 – By Simon Erickson

Our “No limit” podcast features 7investing advisors Luke Hallard and Krzysztof Piekarski breaking down investing-related topics.

In Episode 12, Luke explains his investing framework with Nvidia as a test case that will save you hundreds of future headaches.

We go back to the poker table to poke and prod at the meaning of “priced to perfection” and what to do when one of your stocks is feeling frothy — do you keep betting or do you fold the hand? Krzysztof meanwhile goes to some other kind of casino on the edge of town, where there are no high rollers but only old grizzled hucksters — can there be investing profit made on the fringes? Yes, if you can find reliable sources for who’s who at the table!

Luke turns on the boosters and expounds on Orbital Aerospace as a big idea for future investing opportunities: reusable rocketry and low earth orbit is getting sophisticated and essential to the telecommunication industry. Meanwhile back on Earth, Krzysztof talks about his latest read, An Immense World, and the ways we can expand our senses both as human animals and as investors.

It’s another razzle-dazzle kind of show so step right up and push your chips into the pile! Everyone’s a winner at the No Limit 7investing podcast!


Luke: Hello and welcome to another episode of No Limit with Krzysztof and Luke. Today is, I think it’s episode 12. It’s recording on the 27th of February, and uh, I’m still here in Blizzard conditions in Lake Tahoe. How are you Krzysztof?

Krzysztof: Um, well, Luke, it seems like you’re in some ethereal divine space.

Luke: It’s, it


Krzysztof: did some slacker, uh, uh, let you in through the pearly gates by accident

Luke: St. Peter. They’ve, they’ve lowered their standards, and I used to ski past them.

Krzysztof: your, yeah, how’s your skiing going? How’s all, how’s, uh, the life of, of living on the mountaintop?

Luke: I haven’t skied at about a week actually. So I, um, I batted myself pretty hard in the terrain park about, uh, last Sunday, and, um, I thought it’d take a few


Krzysztof: does that.

Luke: I, I just a bit of an idea. I was, I was following a buddy through the park, um, at a place called North Star and they’ve got, there’s sort of lots of rails, which are kind of what you’d expect, right?

Like unforgiving pieces of metal that you kind of ski or snowboarded off and then do things. And, uh, we’ve been laying out, this one particular rail just looked particularly ugly and it had kind of big, sort of upward bend at the end. And the idea is if you’re like a superhero, you go off and do a back flip or something, we won’t do anything like that.

But, uh, just trying to ride off the damn thing without killing ourselves. And anyway, I failed, I nearly murdered myself on the rail, so, uh, yeah, could, could have been a collar breaking injury. And the end of my season I got away with it. Just a, a bad bruise. But anyway, so if my mom’s listening, cuz she told me off on Facebook the other day for, um, posting something desperately dangerous.

So, uh, I’m absolutely fine, . Um, so I had a few days off and then I’ve had a failure as well. I was about to go, I went to San Francisco, I tried to go to San Francisco. Uh, four days ago and I was gonna have a, a weekend out with some friends and then rent a Tesla and drive back to the mountains and then actually experience proper full self-driving.

Cuz I’ve got FSD in the UK and it’s basically a gimmick, does nothing. Um, and I got, got some reno. I spent the night there and went, played poker in a poker room and then my flight got canceled and then it got canceled again. So I, I gave up and I’ve come back to Tahoe, but basically we are in, I’ve sat this way round and apologies if I kind of white out and you can’t see much.

Like it’s supposed to be this beautiful view behind the build, behind the buildings. There’s a lake, there’s a lake, there’s some mountains. It’s insane. But actually a blizzard came in, uh, last night and it’s here for three days. So, so risk of death if you go outside the front door apparently. So, uh, I’ll be staying in the casino for the next two days, living on Starbucks and um, yeah, and I’m waiting for the conditions to pass.

We did get 18 inches of new snow just last night and there’s another four feet coming. In the next two days. So it’s gonna be incredible conditions when we get back on the

Krzysztof: Oh wow. Wow. So you poor thing have to spend all your time in a casino taking people’s money.

Luke: Yeah. They go,

Krzysztof: What a sad existence You live

Luke: How’s you? How no blizzards, no blizzards in Texas, I assume.

Krzysztof: No, uh, I sur you know, we survived the week of being without power. Now it’s pretty much spring time. Today might be one of the more gorgeous days we’ve had. It’s, it’s kind of amazing. Spring has been fast forwarded by about two weeks due to climate things. And so the blooms are coming out and, you know, the pollen is in the air and it’s, yeah, it’s pretty much spring today, so Lovely.

Luke: mating season in the Kakowski household.

Krzysztof: It’s always mating season in the Piekarski household. Luke, I know what my jeans tell me. I’m a good, I’m a good order order follower. So shall we talk about investing 

Luke: Let’s do that. That’s why we’re here. Where’d you wanna start?

Krzysztof: I think your conversation and thought process about Nvidia is worth hearing

Luke: Yeah, let’s do that. And um, and there’s a link to poker as well, so I thought it was a good one to chat about on the podcast and get your views too. So, uh, I’ve been pretty public about my own thesis around Nvidia, the, um, graphics card company that are really kind of the future of ai. Um, and the stock has been on a tear in the last couple of weeks.

Really, it’s, it is up significantly. And so we were having a discussion with a couple of members, Heisenberg and Gman on our Discord seven investing community. And the question really was like the company delivered pretty mere results last week, a few days ago, and the stock was up on the back of kind of lame results.

 The AI bandwagon, the force is strong with this thesis right now. Anything that has AI in the title, is, getting kind of pumped to the moon as the Redditors might say. And so in video have benefited from that. So the question, the legitimate question on the discord was like, this is, this is probably price for perfection.

Now, is this a good opportunity to trim or perhaps sell some of the stock, wait for the stock price to come back to Earth and then buy back in? And so, I can’t ever give personalized investment advice. Every investor has to do, I think, what makes them most comfortable. But maybe just to share what makes me most comfortable, and it’s this concept I’m gonna say, of optimizing for the simplicity of future decision making. So let me break that down a bit and give a poker analogy maybe to start with. So when you’re playing poker, Like the, the winner. Ultimately the winner is the person who makes the least mistakes. So one way to improve as a poker player is to try and take decisions that make your future decisions easier.

So I’ll give you an example, actually hand a real handouts in, a few days ago in Reno. I’m on the river, so it’s kind of the end of the hand. We know all the cards and I’m playing against quite a tricky opponent. And I’ve seen him make kind of bold moves, uh, several times, over the last hour or two.

And I’ve got a pretty strong hand, but it certainly doesn’t rate to be the best hand. Like I’m, in my mind, I’m kind of 50 50 whether I’m ahead of him or 

Krzysztof: you have?

Luke: I think I might have had. Second pair of top kicker on a fairly all over the place board.

I was, but I was fairly confident I was ahead, so like there against a more passive opponent, I would definitely go for a value bet on the end, like try and put in maybe a third of the pot and hope that my opponent calls behind and I get a, a little extra money. But against this particular opponent, I know in his arsenal he’s got a bunch of check raises with worse hands, ie.

Like, he’s allowed me to bear. I bet. And then he, he puts a very significant bet in, and we both got quite deep stacks at this point in the hand. Um, so if I go for my value bet against this particular opponent, he might check, raise me, and I’m gonna have a really tough decision because he could have nothing, uh, or he could have a, a significantly better hand.

And so I kind of took the, you could say like the chicken’s way out by just checking behind. And I was ahead, you know, I won the hand. Um, but I took a decision that made my next decision where basically mitigated the need for that next decision because I could have made a big mistake on that next decision.

And that’s, that’s, you know, one way of reducing your variance in poker a little bit. Reducing your potential to make errors. Um, I ideally sort of improving your results, so bringing this idea back to Nvidia, um, and the suggestion from some of our Discord members, maybe you should sell a bit and then buy back in later.

Well, for me, if I’m doing that, I’m kind of setting myself up to have to make a difficult decision in the future, which I might screw up if I sell half or all of my Nvidia stock and I’m waiting for the stock price to go down. Well, you know, maybe it does, maybe it doesn’t. Um, but I’m, I’m gonna have to keep asking myself that question almost every day.

Like, is it time to buy back in? Is it time to buy back in? . So I’ve got this thing, you know, consuming cognitive bandwidth. And then what if I missed the bottom? I have no ability to time stocks, time the market, and if the stock cut’s going back up, you know, worst case here, maybe I miss buying back in ever.

And so I kind of find myself not owning Nvidia when it goes on. What I believe believe honestly is gonna be, you know, a significant market beating potential over the long term. So even though it’s probably likely the company is gonna take a bit of evaluation haircut over the next few months, maybe the next few years.

The long term I don’t think is impacted. If anything, I would say most recent results from the company tell us the long term is stronger than. Given the partnerships, it’s forging with the hyperscalers and companies like Microsoft and Oracle. I would just prefer to keep it simple, not sweat what’s gonna happen in the short term, focus on the reason why I own this company and they just continue to hold it through thick and thin.

If the thesis really breaks, that’s when I’ll reevaluate it. But just because it’s expensive, uh, on a evaluation basis, that’s not thesis breaking for me right now.

Krzysztof: Man, that’s a lot. There’s a lot in there. I think I try to follow your same framework. My name for. Is know the game you’re playing. Correct me if I’m wrong, but sort of a, a analogous to what you were talking about, right? That there’s money to be made in, let’s say moving in and out of stocks based on all kinds of factors, but let technical and momentum and short term thesis changes and all that, and then there’s a way to make money in the very, very long term, right by hold and the massive winners will take care of everything.

Luke: Yep.

Krzysztof: But it does come down to the error. Correct me if I’m wrong, Luke, is that if you find yourself in the gray area and you somehow forget or, or drift from your core base approach that you. You call yourself, let’s say a long term investor, but all of a sudden you start selling and buying based on things like valuation that you’re drifting from your, your, your core sensibilities to this gray area, and that’s where you’re gonna get hosed, is that kind of what you’re saying?

Luke: uh, potentially. And that, that’s definitely another important factor. As you say, you know, play the game that you are strongest at.

Krzysztof: So Right. Maybe to, to be more clear, if you’ve decided that your long-term shareholder of Nvidia in this case, then regardless of what the bumps that happen in the matter of months or years, you’re keeping simple the decision to not even worry about selling out unless a catastrophic thing comes along.

Luke: Yeah, and let’s actually think about just the maths of it perhaps. I dunno if I can do this on the fly, but if we, you know, let’s say we own a thousand dollars worth of Nvidia today, and if we genuinely believe that’s gonna be worth $5,000 in 20 years time, right? I’m just making these numbers up.

Um, so if we just sit and hold, sit firm, we’re gonna make 4,000 bucks over the long term. Like if the thesis stands up, you know, clearly anything could happen. But if we go around trimming and trying to buy back in, let’s say we sell the whole thing and then, we wait for the stock to go down, I dunno, 25%.

And let’s say we succeed in doing that and we manage to buy back in for say, $750. Well, when the stop gets back up I guess if we proportionally bought say amount, maybe we’ve made like an extra thousand dollars over that period, but what if we failed to buy back in? Right. So we, okay, we saved ourself the $250 haircut in the short term, but we just, we never bought back in cuz we, we made a mistake.

Um, we didn’t catch the bottom and uh, and suddenly maybe the stock price was above the thousand dollars we owned before. And so, um, so we’re like, oh, we’ll just wait for it to get down again and maybe it never comes down again. You know, for me that’s the doomsday scenario where in trying to save a couple of hundred bucks I end up missing out on a couple of thousand dollars, which is what the long term thesis is gonna deliver me.

Krzysztof: And on top of that, let’s not forget taxes. That’s a huge consideration, which may be beginning. Investors totally forget that the moment you sell, you’re now you’re getting a bill on the assumption that there was gain. So that’s one. But also maybe from from me, there’s an even more. , uh, unquantifiable bit to this, which most people ignore, but it’s maybe the most meaningful, which is time.

I mean, I know this sounds the, I mean, it, it’s metaphysical and it’s not to trade in and out like this costs you time, your actual life. And because you have to be paying attention, you’re going in and out. In theory, if you extrapolate this to the extremes by once, check back 20 years later, has saved you a whole lot of 

Luke: Sure. Yep. And, uh, emotional turmoil along the journey. If you just, if you’re able to literally coffee, can that stock and forget about it for two decades.

Krzysztof: Can I, engender a little more conversation on this topic with you, Luke, specific to Nvidia.

I think it’s fascinating that there’s now this broad thing called ai and if it has ai, you know, people are buying up this thing, right? But that, that’s a very, I think, unsophisticated way of thinking about it, right? Because it’s just a marketing scheme at this point. You want to, as an investor, ask yourself, is this maybe core AI that can’t easily be marketed?

And I would argue, that something that NVIDIA does is representative of core AI capacity. That there are few companies in the world that could do exactly what NVIDIA’s doing. and ai, the whole infrastructure of AI basically runs on its capacities. Therefore, it’s not one of these, oh, and by the way, we have AI plug-ins and I’ve been guilty of that too a little bit.

You know, cuz in trying to find AI companies, I’m like, oh, does it have an AI element? But Moton now, most of the time it will. But how deep is it right?

Luke: Yeah. Yeah. Like, um, like some companies will literally just be bolting AI onto their, what their actual core is, and then, you know, getting some sort of AI uplift, but a company like Nvidia really are fundamental to the whole thesis. Like a AI can’t happen without companies like Taiwan semi ASML, Nvidia, AMD, and arguably the hyperscalers who are building their own hardware, right? That stuff all needs to be in place. It’s the building blocks for everything else, and I think that’s what makes this, in my mind, actually the strongest investing thesis I currently hold for the 10 year period.

Krzysztof: Oh, that’s interesting. Right? Cause I was thinking Tesla. And the reason for that in part is my definition of core AI being is the data set proprietary. And when I think of say, full self-driving over, over however many millions of miles, , I could see that no other company has access to that data. That’s what makes it a unique case versus, you know, the commodified, uh, data’s everywhere.

Now. You’re getting the replicants and the the, yeah, the water down version of search say.

Luke: a, that’s a really interesting rabbit hole. Um, because like AI as a capability is suddenly allowing companies to extract much more utility from the mountains of data that they have. So, I dunno, let’s take my ex-employer, HSSBC, right? We had literally decades and decades of payment transactions and data that could be mined for kind of marketing insights to our customers. And the company just does nothing with it cause it has no idea how to use that data effectively. Well, suddenly you could point the right kind of AI tools at this, the monstrous quantities of data, and suddenly start using that information in really interesting proprietary ways to really make your business model much more robust.

So companies that do have these mountains of data, if they’re not scurrying around and trying to figure out how different AI techniques can help them, well they, they really should start doing that immediately.

Krzysztof: mm-hmm. . Yeah. Agreed. The second thing I wanted to, to get your take on Luke is you mentioned this concept of price to perfection, and I think that’s a, that’s a tricky concept because,

Luke: should have thrown like air quotes around that because I don’t really believe that at all. But, um, but

Krzysztof: Yeah, but you know, it’s, it’s one of, I think it’s one of these things that is true and not true at the same time, because on the, on the one hand, uh, I could, based on everything we’ve said so far, I could easily understand that to mean even though Nvidia is still expensive or expensive at this moment, given where it’s gonna be 20 years from now, the expensiveness or high valuation is still way less than what it will be, right?

In other words, that the high price, however high it might feel comparatively is not going to be that high, versus something like a bubble, which we just lived through, where the expectations were beyond perfection. And the real question then ends up being, Can we tell the difference

Luke: Like really anything could happen. The thesis could break, you know, the company could have some significant failing in the next this week and, uh, you know, that could significantly impact its prospects.

But, um, the balance of probabilities, having analyzed the thesis in some depth multiple times, leads me to believe that the chances of making a multibagger return from here outweigh the chances of the stock crumbling into dust over the long term. But that none of that tells us anything about what the stock price is gonna do this week, next month, next year.

Krzysztof: Yeah. This is that gray area in investing again, where you need to have begin developing, I think, some intuition and discernment between expensive versus unrealistic.

Luke: Yep.

Krzysztof: There is no correct formula for that. Everything depends on the specifics of the company you’re looking at.

But in this case, in this particular case that we’re talking about, Nvidia as. Being in quotes, price to perfection. It does not feel to me like Bubble Terry. It just means you need to wait, like you were saying, a long time for the thesis to really play out.

Luke: Yeah, agreed. Again, this is all a long-term view and I almost expect the stock to take valuation haircut over the next few months. But I’m not gonna trade just to end in anticipation of that.

Krzysztof: Yeah. And in fact, the way you could frame it to, to yourself is if it does drop, you just get to say, oh good. If I have extra capital, I could add even more.

Luke: Exactly. Right. And I’m, I’m still building my Envidia position. I, we had this discussion on the Discord. Exactly. I’ve, I’ve purchased it twice my own portfolio and I’d love to increase my exposure to it. So Yeah. Actually quite right. I’m looking forward to a bit of a drop so I can buy another piece.

Krzysztof: Yeah, me too.

Luke: Should we, uh, should we talk about lottery tickets and invest.

Krzysztof: Yeah, anyone following my own recommendation so far for seven investing might really see a platypus investing style, because I don’t have, one industry or one category that I look for. It really is sort of all over the place, like a, like a mismatched animal with, with, with all kinds of, uh, parts and hinges.

Which by the way, uh, oh my God, the book I’m reading, uh, my book of the week is just mind blowing and it includes discussion of pla platypuses. So more on that, uh, legum in this episode, but I found myself spending the last two weeks or so going down a rabbit hole. in a direction, investing direction, I would kind of call the fringes.

And now I know Luke’s one of your recent investing recommendations from a couple months back. You know, I think you started the presentation with warning and like, you know, this is right, and, and, uh, I mean there, I’m, I’m not sure you could call that fringes. That that could be maybe just like a, a, a bet on innovation that’s a way off from becoming viable.

I’m actually talking about situations that are fringed like because, uh, you have the, the components of the situation are very specific and, um, there’s a problem. Usually there’s something kind of think turnarounds and. Bad financial situations and or some special catalyst that maybe only a few insiders know about.

Otherwise, the company is really kind of unseen and the catalyst may or may not show up. And so you’re sort of, these are the things I kind of think about as trying to read t leaves and I label them lottery tickets very deliberately because as I do my research and let’s say that and, and look for evidence, and let’s say in a good case scenario that evidence continues to mount, that the, that the thesis is tenable.

That we’re, uh, in terms of probability that the, in poker terms, I guess the, your hand is transforming from say, uh, you know, eight 10 of clubs to, uh, King queen to maybe, you know, uh, a pair of sevens or, you know, maybe jacks so that the before the flop, the probability of you winning the hand is steadily increasing as the evidence mounts.

Right? So we know, you’re never gonna beat the house in, in gambling. And so when you sit down at the roulette, you may or may not win, but the odds are against you. In the cases I’m talking about, I’m only interested if I really think the probabilities are in my favor.

So of course, that’s way different from a lottery where the odds of you winning are pretty much zero. Nonetheless, I still think of it as a lottery ticket in investment category because it’s not based on what I would say a long term foundational belief in the company’s.

uh, durability. I’m specifically looking at the situation as a kind of one time will all the evidence amount to a big pop kind of thing. And if I’m right, then I win the lottery, right? And I have only so much time to place my bets because there’s a catalyst in the wings and so forth. And the reason I’m mentioning this today is because on my radars once such company that I discovered, and it might become my April recommendation for seven investing.

But the strange situation is that the catalyst might very much show up at the end of February or sometime in mid, mid-March, or sometime in, maybe even by the end of March, in which case the big pop would come before the recommendation comes out. So it’s hard to, you know, um, who knows, who knows what will happen.

But the real incentive for me even doing this work is because sometimes when the market is so wonky and the strongest companies are having a hard time and growth is slowing, and you’re like, where do I look? Where do I look? I think there’s always opportunities to make money in the market if you do in fact know where to start sniffing.

And my own answer to that is something I talked about, I think early on in our podcast, Luke, that what I found throughout my investing career over the 25 years plus is, I think something you might have learned or maybe you excel at, you know, in the, in the world of actual business, is that what tends to matter most is the quality of the people that you surround yourself with.

And over time knowing. What network, like relationships you can build and depend upon in a bidirectional way so that you’re not alone, kind of, you know, being a Sherlock Holmes figure, but instead you are, you can be pretty confident though, of course, never exactly a hundred percent confident that the information you’re getting is authentic.

That this isn’t some kind of scam artist or gamesmanship or kind of in it for yourself. Uh, weird situation. And that piece in my history as an investor has helped me more, pretty much than anything else. And it seems fluffy, maybe, I don’t know fluffy is the the right word, but if you’re in with the wrong set of investors, you’re gonna be hosed. If you’re in with the right set of investors, you’re gonna do well because of the checks and balances.

And I guess that’s pretty much to land this spiel as another one of these, I guess, uh, implicit advertisements for seven investing. I would argue that the seven of us are trustworthy characters. And so if there’s a piece of information that comes out that is problematic or, or enthusiastic, at the very least, you ought to know if you’re on our side, if you believe in our trustworthiness, that it’s worth investigating further.

Luke: and I, I agree. But I would say as well, the service isn’t about, Hey, trust us, we’re the experts. It’s about like, we are the experts. We’ve done a bunch of research. Here is the rationale. Now make your own decision. But we’re trying to give you all of the building blocks and, you know, expedite your own research process and coming, coming back to your, sort of surround yourself with smart people.

Comment like the power of being a team of seven advisors with actually, you know, fairly diverse range of opinions and approaches to investing. At least really quite valuable. I’ve, I’m shocked actually. Like I found myself quite aligned. To our colleague Matt Cochrane’s investing approach. Over the last year or so, even though I came to seven investing thinking I was this kind of crazy wild growth investor, a number of the picks I’ve made are actually from, uh, Matt’s own personal portfolio and the companies that he’s quite close to, um, which has surprised me.

It’s interesting to have that range of approaches and then, you know, pick and choose from them. Take, take the elements of different people’s, uh, strongest characteristics and try and make them your own.

Krzysztof: right? Yeah. And, and maybe to, um, to flesh this out a little bit more, I’m really talking about there being a huge difference when you’re trying to look in corners where not everyone is looking, because that is that contrarian piece I was talking about last week. It’s not just about finding the best businesses.

You have to find the best businesses that everybody else, for one reason or another is undervaluing, discounting, not looking at, forgot about on and on. But when you’re looking in these lottery ticket like corners, , you’re gonna see cobwebs and you’re gonna see spiders and you’re gonna see some nasty stuff in there because no one else is looking right?

It’s like that dusty attic. So how then can you kind of make sense of the creepy crawlies? Uh, and in those kinds of corners, you get scam artists and you get the pump and dumpers and you get those sort of all kinds of machinations that on the surface might appear legitimate, but, but the moment you look at the kind of character that is recommending you this evidence or sharing this evidence with you, and if they’re sha shady or sketchy, run, you know, run fast because odds are it’s not gonna end well.

But if in fact, you know, you have a sense of quality and character, despite it being in the creepy crawly attic. , there’s further reason for you now to continue your due diligence. Look with your own eyes, knowing that you’re now in, in this together with some egos, ego like eyes, right?

And that kind of makes a big difference.

Luke: Yeah. So, cutting to the punch. So it sounds like you’ve got one of these lottery tickets, you’ve done some research, you’ve kind of weeded through the cobwebs and the spiders, and you think there might be some gold hidden under that web. Um, and, but I, I guess you’re not gonna tell us what the stock is though, right?

We have to, we have to join up and then be a member on the 1st of April, and hopefully the lottery hasn’t paid out before.

Krzysztof: That’s right. I guess that, that you, that value sense. Yeah. That’s the whole reason to join our, our community is to get this information that’s exclusive. But on the other hand, I don’t know yet whether I will make this recommendation or not.

I have actually taken the position in it myself, uh, but whether I will have that position by April or not, or is, is unknown. So stay tuned.

Luke: Look forward to seeing what’s to come.

Krzysztof: All right, Luke, do you wanna, do we wanna switch gears? 

Luke: So we said last week we were gonna take a troll through Ark Invest’s big Ideas 2023, and I think they had 14 different investing fees and they tried to set out quite a nice deck.

It’s worth well worth a read. It’s, uh, a free read if you go to check out their website. Um, and we said we’d dive into one of the topics each week. So this week I thought I would take a look at a bit of a wild one at the end of their deck. Orbital Aerospace. You wanna hear a little bit about this

Krzysztof: I know nothing.

Luke: I know something. Uh, I am a Rocket Lab shareholder, personally. Uh, I think they’re a really interesting company and I would love to be a SpaceX shareholder, but, uh, but that’s not, not permitted right now. They’re still a private company. But let’s talk about arc invest thesis around this topic. So all this little aerospace basically, , like putting infrastructure, putting stuff into orbit.

So first of all, why do ARC think this is a megatrend and a, an interesting investment theme? So the main thing is around the cost of putting mass into orbit. So, up until like the two thousands, it used to cost upwards of $18,000 to put one kilogram into orbit.

So like, I dunno, I weigh 65 odd kilos. Um, , I couldn’t tell you what, what 65 times 18 is, but it’s a lot of money. I couldn’t afford to put myself into audit right now. Um, but uh, but that price has come down significantly. So today, and we’ll talk about why today that cost is down to about $2,000 per kilogram.

So I could kind of, I could orbit myself for just over a hundred thousand dollars and that price is expected to come down perhaps as low as $130 per kilo, perhaps even lower than that. So why is that cost coming down significantly? And what does it mean? Well, the reason why is really SpaceX pioneering reusable rockets.

So instead of like throwing stuff into space and then everything falls into the ocean and then just sort of sinks to the bottom and clutters up like the fishy homeland, uh, we’re now able to recover. Rockets little company called Rocket Lava. Doing that by literally like catching stuff with helicopters as it as it parachutes to earth.

SpaceX are doing it in a super sci-fi way by literally like landing the boosters and then reusing them. And in fact, SpaceX Falcon nine now has a booster that’s flown 14 times. That’s pretty impressive. Um,

Krzysztof: Mm-hmm.

Luke: now, uh, let’s distinguish, uh, what we mean by putting stuff into orbit.

So actually the kind of interesting place right now is l e o low Earth orbit, which is about 300 miles up. So this is an interesting place to be putting stuff right now because what SpaceX are doing is they’re, they’re deploying starlink.

So they recently had their 200th, um, Falcon nine launch, uh, just a few weeks ago, I think. And as part of that launch, they deployed another 53 starlink satellites. It’s actually incredible watching the deployment of the stuff looks like something outta James Bond, like the, the deployment mechanism opens up this huge array of satellites come out, and then they kind of all unfold and then they start to, you know, drift into their, uh, deployed.

Position as they start to orbit the earth. So like SpaceX are putting up like 50 at a time. Satellites they’ve got, there are something like 3,500 starlink satellites up there right now, which is more than half of all the stuff we’ve got in orbit. So just over 5,000 active satellites up there today. Um, and it’s expected by the end of this decade could have almost 60,000 satellites in orbit.

So, um, you know, what are the starlink satellites doing? Why are they up there? , they’re creating this, planet wide internet. Basically. So if you’ve got a starlink antenna, which is like a little base station, looks like an old style kind of satellite dish, if you’ve got one of those in your back Guardant or in your roof, you can now connect to the starlink network and you can get pretty impressive, um, connection to the internet, uh, from anywhere on the planet.

So it’s quite interesting. Um, and because these are low Earth orbit only 300 miles up, you get what’s known as low latency. So, uh, latency is basically how long it takes to get a reply back from the satellite. So low latency is important if we’re having, say, a live video conversation.

Cause I don’t want like a two second delay. Otherwise we’d be kind of looking at each other and wouldn’t be a very engaging conversation. If you’re doing, I dunno, something like high frequency trading or something like some application like that. Very important to have very quick response times. You can see what’s happening.

Um, if you’re playing computer games, you want very low latency because, you don’t wanna hit the fire button in your game and then the rocket shoots off, but like a second too late and then you miss your target.

Krzysztof: Is this look a, a, a key ingredient to the future of the Metaverse because of the late latency being a, a prime mandate, you can’t have a Metaverse with, with latency. 

Luke: Yeah, absolutely a hundred percent. Yeah. Like you wouldn’t wanna walk into some sort of VR environment and start chatting to some other avatar and you’ve got this delay and everyone’s kind of jerking around and teleporting around the room when you should be like a nice, smooth, engaging experience. So starlink aren’t there yet?

Uh, they. That they, that they can offer latency of 20 to 40 milliseconds, which is pretty good, almost comparable with like a good broadband connection. Um, I, I did find a gaming magazine who had tested this and they found that that was kind of optimal conditions. And actually it was more like 40 to 50 milliseconds, sometimes a hundred milliseconds, but startling, you’ve only got three and a half thousand satellites up there.

And this stuff is, it’s not like geostationary kind of over constantly overhead. These things are whizzing around the earth. Like every two hours they do an orbit. So the more satellites in space you can imagine they’re like this big network, a constellation. Um, the more there are up there, the more likely is you’ve got one nearby at any time and then just gonna get much more reliable, consistent internet infrastructure.

So this stuff is real important, in terms of, bringing the internet to remote communities. If you are a, a villager somewhere in sub-Saharan Africa and maybe you don’t have access to like a good 4G network or a 3G network, you’re kind of offline, um, there could be some incredible talent, some incredible business opportunities there that are, are going unrealized, because these communities are not fully connected to, you know, this wealth of information that’s, that the rest of the planet are enjoying.

So I think that’s gonna be really fantastic for the world to kind of bring us all online. Um, but also, you know, if my own sort of selfish benefit, if I’m out on an airliner or a cruise ship, suddenly I could have access. You could, you could put a starlink antenna on your recreational vehicle, um, on boats.

So, uh, so suddenly it’s nice to be able to have access from anywhere. I think that’s pretty valuable. And I’m not on T-Mobile, but a deal that T-Mobile inked with SpaceX, uh, back in Q3 last year means that if you’ve got a T-Mobile contract, I’m not sure when, but at some point in the next year or so, suddenly you’ll be able to send and receive text messages from anywhere in the world with your existing phone because that’s powerful enough to, uh, send them, receive like a low, a low bandwidth data connection to the starlink network.

So that’s incredible

Krzysztof: So Luke, can I ask you about the, maybe what feels to me the obvious bear case in terms of the wow factor of the technology or the necessity of the technology? I’m on board, or I’m with you on all of it, but isn’t, what am I missing? When I think, okay, you send a whole bunch of stuff up into space for, let’s say a few years now you’ve set up all the space toys, they’re floating around up there.

They’re doing what they’re supposed to do, but where does future revenue come from? W why keep sending rockets up there when you’ve already done the things?

Luke: Right. Krzysztof, like we’ve, we’ve already invented everything that we could ever invent. Right? , the, uh, like every, I think starlink on their third generation of satellite design. So, you know, they’re gonna keep innovating and keep finding ways to improve the bandwidth. And I dunno about you, like at home, I’ve got maybe.

50 megabit, uh, connection reliably and maybe 10 or 20 megabit upload. But that’s pretty poor compared to most of the developed world. But the UK certainly my road anyway isn’t properly connected. Um, I would love to have gigabit and once I’ve got gigabit, if someone could offer me like 10 gigabit, well hey, I’ll take it.

Right? People are always gonna want more and find ways to use more, and particularly if the Metaverse becomes real, right? That’s gonna be a potentially a huge bandwidth, uh, consumer, um, for, you know, anybody who’s connected. But let, even as park the comm side of things, cuz there’s a bunch of other good reasons why there’s benefits in putting stuff in space.

So you’ve heard of the International Space Station, that’s a collaboration between 15 or 20 countries, including Russia and the us. Um, but the ISS was put up there I think 21 years ago. It’s only expected to have a 15 year lifespan and it’s still flying around orbiting the earth in a low earth orbit actually.

So it’s, it’s that sort of 400 kilometers, 500 kilometers up I think. Um, and it has to get boosted a couple of times a year cuz they have to keep it in orbit. Otherwise it’s just gonna kind of fall into the ocean. Well I think nasa, uh, are planning to deorbit it like it’s nearly had its time now. NASA plan to deorbit it, it around 2030 I think, and then it’s land somewhere safely in the Pacific, hopefully safely in 2031.

Well, we have to replace that with. So now a whole bunch of private companies are planning to build their own private space stations. I know this sounds like sci-fi, but this is real. So companies like Blue Origin, which was, uh, Jeff Bezos’s, new Endeavor, Northrop Grumman, Axio, nano Rack, Ciera Space, these companies are all already working on private space stations.

And you might say, well, why? You know, there’s, uh, there is the obvious sort of scientific benefits and the ability to, um, you know, run experiments and understand the universe a bit better by doing stuff in space. There’s advantages in doing that, but also tourism at some point. If you’ve got private space stations, hey, who wouldn’t want to, uh, go take an orbit around the Earth for like a week’s vacation?

That could be interesting. Um, but as we start building real orbital infrastructure, there’s huge benefits to society as a whole, right? You’ve got literally, Trillions of dollars of value in minerals and things kind of flying through our solar system. Uh, these, you know, heavily mineral rich asteroids, right?

We could start legitimately thinking about mining those if we’ve got a whole load of stuff in space because it’s expensive currently to get stuff into space. Once it’s there, it’s relatively cheap to maintain it. Um, so we could start, uh, suddenly have access to potentially kind of unlimited mineral reserves.

You know, everyone’s worrying about can we continue to sustain production of batteries and battery tech because we’ve got all these kind of rare earth elements that we need to get access to, to build batteries at scale. Well, there’s literally trillions of tons of this stuff flying around in space that could be, uh, captured and harvested and then, You know, de orbited.

Um, and once we can start build, doing that, you know, we can start building stuff at scale in orbit. Um, we don’t have to, um, lift mass up from the earth, which is hard to do still, um, because it’s all kind of there waiting for us. And maybe, you know, start 3D printing stuff from raw materials in space. You know, this is gonna be a stepping stone, I think orbit, stepping stone to building something on the moon, stepping stone to building something called Mars stepping stone to polluting the rest of the universe with our kind of crazy species.

Krzysztof: Okay, so the industry is much, much greater than I could even envision with my poor earth man’s philosophy. And what I hear you saying is you’re gonna be one of the first humans on Mars. Is that right?

Luke: I don’t

Krzysztof: Is that, is that what I heard? That’s what I think I heard, is that you’re, you’re, you’re leaving snowboarding and skiing behind Boring, uh, motorcycling.

Boring. Luke’s going to Mars, folks. Luke is going to Mars. You heard it here first on the seven investing pod. Our first, uh, Martian

Luke: Well, certainly my investing thesis are going to Mars as, uh, to say that this stuff is like a trillion dollar industry, I think is wildly underestimating how much value, uh, there is to be had once we actually conquer space,

Krzysztof: So fascinating. Yeah. All right. Let’s see how this plays out. But, uh, we have some, uh, orbital aerospace investments in the seven investing ecosystem. So if you want a deep dive. Into some of the stuff that Luke was talking about, you know, where to go.

Luke: and do, go check out that arc invest deck. So I think next time we’re gonna tackle the topic of smart contracts. Is that right?

Krzysztof: Uh, that’s my aspiration, Luke.

Luke: Cool. Look forward to hearing about that one.

Krzysztof: In the meantime, I want to give a quick mention of a book I just finished, uh, for a class I’m teaching, which is called An Immense World, how Animal Senses Reveal the Hidden Realms around Us. And what was this book is, is a narrative of experiment after experiment after experiment into the ways we’re finding out all.

Fascinating senses that animals have that allow them to perceive in ways we can’t even fathom on a literal level. And I’m not gonna bore you to death with, with all of it, but it’s, it’s, I I was truly fascinated by it. But I’ll mention two specific examples I thought were really mind blowing. One of them has to do with the sense of, uh, echolocation and we’re familiar.

The, the best examples of that are bats and dolphins who kind of combine, uh, sound. And in the sense they translate sound coming back as a kind of way of touching things. And the fact that dolphins could discover tiny, tiny nuanced differences from a big distance away is really mind blowing. But, uh, in, in that chapter and.

The only example in the entire book was a human, and this human Luke, I don’t know if you heard of something like this, this, uh, young man was born and then lost his eyesight. I think if memory serves like se, several months into his life and for whatever reason, he developed or started clicking, making audible sounds.

So this is obviously when he stole two years, you know, very, very, very young. And by starting to click and make auditory sounds early on, his mind’s capacity to interpret sound grew kind of like the way we pick up languages really fast early on. And he kept developing this talent so that now as a mature adult, he can, he walks around.

He also uses things like canes cuz he’s blind, but he clicks like a dolphin or a bat does. And he could actually walk around a neighborhood, put him in any, say, neighborhood with streets and he’ll tell you the kind of material the houses are around him, where cars are parked. In other words, he’s seeing like a do to some extent.

He’s actually seeing while blind, to the extent that he’s actually able to ride bikes while being blind without crashing, which I thought was like totally mind blowing, uh, and inspiring, right? That, that are, are, are minds are really capable of miracles really, if we train them properly on a certain mission.

And his mission was to see without light and eyes

Luke: You wouldn’t, you wouldn’t even think we had the physiology in our ears to be able to do that.

Krzysztof: Yeah. Uh uh, um, and now he, he makes his living by coaching blind people, you know, to ways to develop way more profound capacities in, in this way. Which curiously, this is a little bit of a provocative thing. Some people in the blind community think he’s doing a disservice because they kind of think of themselves as having, you know, a certain way of living.

And he’s challenging the notion that blind people can’t see, which is a little bit disruptive. But, you know, that’s a whole nother thing. It’s pretty profound. Uh, the other, the other fascinating example was, was about the sense of magnetic perception, which, uh, revolves around animals like birds and turtles.

Knowing where to migrate thousands and thousands of miles away through, uh, by perceiving the earth’s own magnetic fields. So you could spin them with whichever way you want. You could blindfold them, you could plug up their ears, noses and whatever, and they’ll still find their way back to exactly the same point that they departed, but we still really don’t know fundamentally how this sense works, but one of the main leading thesis I thought was just mind boggling.

And I don’t understand this , so forgive me if I butcher this, but it has something to do with, light coming into that animal’s eyes. and then using the concepts derived from quantum theory and quantum entanglement that the way entangled particles in the field of vision respond to light, tells them something about the magnetic field.

So that this sense literally, uh, is a kind of embodied way of making, of using quantum uncertainty to it’s . Yes. The expression of your, on your face is exactly the right one. In other words. In other words, the way that that living creatures perceive things on this planet is so mind bogglingly more sophisticated and more miraculous and more misunderstood than we have any idea about.

And I mentioned this in part, you know, I like making connections to investing and it, and. I was like, how am I going to connect us to things we’ve talked about? I kind of think of this notion of expanding your awareness of your own sensibilities to the investing framework. And you could do that by asking yourself, when you invest, what do you primarily rely upon?

Like what, how do you do the thing that you do? And you could be, uh, you could rely on numbers, right? Or you could rely on narratives, or you could rely on sort of people like I was alluding to, or like some animals on this planet, including ourselves. There’s a way something happens when you deliberately focus on the way you do the things you do, that that sense actually grows and becomes more and more accurate.

So, Obviously this book is not a book about investing. It’s a book of science and with some philosophy thrown in. But it’s really affecting me personally, how I perceive the world. And the more open I get, the more I feel like I become better at all the things that I do.

Luke: Yeah. Very good. What are your, undiscovered senses you think in that, in that sense then that you’re gonna try and develop a bit like, you know, the, the, the blind chat teaching people to echolocate how you’re gonna echolocate your next investment

Krzysztof: Um,

it might be, it might be, there’s a chapter just on the individual senses, but in the ways all the senses unite. Like an octopus is the main character in that chapter where you could. , instead of separating these things, you’re really thinking about how all of the senses add up to a greater sum than their parts.

And so that’s, that’s maybe where if you’re weak in one area of investing, I don’t think you have to become a, a master at it. But if you simply become a little more aware of that way of doing things and add it to your repertoire, your whole sensibility grows more than if that’s the only way you do things.

Luke: right.

Krzysztof: So I don’t know if that, I hope that’s useful to some extent.

Luke: Yeah. Very cool. I I’m definitely gonna research this guy. That sounds very interesting.

Krzysztof: Ksh, I think might be his last


Luke: I need, to 

Krzysztof: Shall I ask you, uh, uh, three questions. Reject. You reject one, and, and I determine the, the other.

Luke: Uh, let’s do it. Let’s play the three conversational again.

Krzysztof: So these are because I’m a slacker and did not adequately prepare in time for today’s conversation. These are questions Luke was intending to ask me, which for one reason or another I denied in previous episodes. So right back at you buddy. Thanks for, for for being a good sport. So here are your questions.

Option one, our flat earthers just having a, a laugh at the rest of us, or do they really believe this

Luke: are you, you answered this one. Um, so, uh, yeah, you did. Yeah. Let’s call gone. Yeah. I’ll probably reject him, but you answer, you gave a great answer to this one, which I can’t improve on. Gone.

Krzysztof: Oh, okay. what’s the best meal you could prepare for? A dollar.

Luke: Okay.

Krzysztof: And what will be the biggest impact of AI on society in if I, I’ll make it more specific in 10 years.

Luke: Okay. Uh, well, I’ll, I’ll reject the flat Earthers just because Yeah, we did, you answered that one. I can’t improve on it.

Krzysztof: Okay. So I’m in a futuristic state of mind. 10 years from now. Ai. The biggest thing, the biggest thing that’s gonna be. Like, you know, time traveler 10 years from now, or 10 Yeah. Will be like, holy, holy moly.

Luke: Uh, one immediate answer comes to mind, but it’s not a nice answer, but it’s 10 years. It might be a bit soon, but maybe in 20 years. So, uh, and I’ll, I’ll try and think of a happier answer as well while I’m talking about this. So there is this thing, the singularity, and I’m not remotely religious or, you know, have any kind of beliefs in that way, but, um, Essentially when we reach the singularity, essentially we are creating like our version of a God figure, right?

Some super intelligence that essentially is, uh, omnipotent, and omniscient. So, uh, you know what? So what, I don’t think it’s gonna happen in 10 years. It’s probably 20 years, but the biggest impact on society is probably the end of society as we know it when this thing finally happens. 

Because essentially we created this, intelligence that far exceeds our own ability to kind of outmaneuver it and shut it down. Um, and then we either end up in a scenario where we are the pets of this benevolent, uh, dictatorship, and maybe that’s like a really happy, rosy society that we all are nurtured in, or we are just the irrelevant ants and this thing extinguishes us because we’re, you know, we’re not beneficial to its long-term, uh, mission.

Whatever it decides that might be. So that’s probably the biggest impact on society and that is gonna happen and I think it’s probably gonna happen in the next 30 years. Um, but it could be the next 10 years. Um, I didn’t think of a happy example while I was talking there. 

Krzysztof: Luke Remind? Yeah, remind me. Remind me not to invite you to any parties. who brought this guy He looks chipper and cheerful on the outside, but

Luke: It could be a happy society, right? We’re gonna, we’re probably gonna murder ourselves, um, in the next 20 or 30 years anyway, maybe sooner than that. So, like, I, I, for one, welcome our AI overlords.

Krzysztof: Okay, so death to everything and everyone, and it’s really gonna be

Luke: or it might be very good, but we, we have no way of influencing that. Yeah.

Krzysztof: Yeah. Right, right, right. All right. 

Luke: have asked, should have asked me about the, uh, the $1 meal. I would’ve been happier result.

Krzysztof: yeah, Well, in that case, I was really terrified. You know, you’d answer a can of beans and we’d be no better off

Luke: I’m not bad in the kitchen. It was gnocci. I, I not, I make a pretty good knocky. I could do that for a dollar

Krzysztof: Nice. All right. 

Luke: That brings episode 12 to a close. Like we’ve now got a dozen, uh, unlucky episode 13 in two weeks time. Hopefully we haven’t had singularity by then and been distinguished.

Krzysztof: Luke hallard is @7LukeHallard on the Twitters, and I’m @7FlyingPlatypus. And you could find our deep dive reports. On

Luke: If you enjoyed today’s episode and got some value out of it, do us a favor and please share it with a friend. Until next time,

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