Long-Term Investing Ideas in a Volatile Market
Simon recently spoke with a $35 billion global asset manager about how they're navigating the market volatility. The key takeaways are to think long term, tune out the noise...
On episode 5 of No Limit, Krzysztof won’t let politics stand in the way of a good discussion - among many other topics!
November 29, 2022 – By Samantha Bailey
On episode 5 of No Limit, Krzysztof won’t let politics stand in the way of a good discussion about twitter’s glorious, bot-less future and what it means for the tech industry while Luke finds a way to make “super-followers” really work in your favor. We get an update on Luke’s “worry” stocks and how it feels to sell at a big loss without looking back in anger. Krzysztof and Luke also come incendiary blows about whether a license and exam should be required to trade stocks. Plus: not your keys, not your crypto, but what if there’s a burglar hiding in the bushes ready to steal your keys? And then there was that one time Luke laid down a pair of Kings…
[00:00:00] Luke: Hi, and welcome to another episode of No Limit Krzysztof and Luke, A 7investing production. Today is Monday, the 21st of November, and as I’m delighted to be joined by my 7investing lead advisor and good buddy Krzysztof Piekarski, how you doing?
[00:00:14] Krzysztof: Yeah. Hey, happy Monday. Tea Luke. You guys still have a, a Prime Minister?
[00:00:21] |Luke: We do, it’s a political stability here. Everything is fantastic. Although actually there’s some instability in my little home office recording studio. I can see the walls peeling away as I speak. I noticed a recent podcast I recorded with uh, Simon and Anirban. I was super echoy. So you know what I’ve done is I’ve bought by Cheaped out.
I bought from Amazon these cheap, like funky pouring off the wall cause it’s literally falling off. Hang on. I bought a ton of these
[00:00:48] Krzysztof: Oh, wow. That’s serious. Uh,
[00:00:50] |Luke: I’ve lined my wall with these and I came into the office this morning and like half of them are on the floor for anyone who’s only on the audio, they’re like these funky triangular kind of foam acoustic panels, but I shouldn’t have gone so cheap,
[00:01:05] Krzysztof: And that’s how you know we’re serious.
[00:01:08] |Luke: Hopefully I’m not echoing now anyway,
[00:01:11] Krzysztof: Yeah, man. So, uh, since we last talked, the, those of us in the US have had an election and it turned out quite differently than, than predicted. So that’s always a fascinating thing and, uh, rumor has it, a majority of that is because, uh, people were distancing themselves from Trump while just the other day Twitter welcomed him back.
[00:01:39] |Luke: And new horses reentered the race. What’s your, I know we’re gonna talk about Twitter a lot on today’s episode, but what’s your view on Trump reentering the political arena in the States?
[00:01:48] Krzysztof: I think he’s, uh, problematic to say the least. I,
[00:01:55] |Luke: Probably for the Republicans more so than the Democrats, right. He’s,
[00:01:58] Krzysztof: right?
[00:01:59] |Luke: completely split their vote. Yeah.
[00:02:01] Krzysztof: Yeah. The elections told us that people no longer want that level of narcissism. and so his candidates, the ones he backed, were rejected.
So it seems like we have some semblance of, of, uh, I don’t wanna overstate the case, but stability, uh, and Trump clearly represents, Uh, move back toward chaos and, and we seem to be done with that.
So if the Republican party chooses him, like you said, it’s probably gonna be chaos for them and pretty much ensure, uh, more democratic candidates. Interestingly too, this morning I read, the former attorney general bar, outwardly, uh, condemned Trump essentially as, as, uh, highly problematic and not good for the country
[00:02:52] |Luke: Are they still pursuing some sort of conviction against him?
[00:02:55] Krzysztof: Oh yeah. He has all kinds of cases in court and I mean, but I imagine that’s gonna be years or months and years before that plays out, but it’s, it’s interesting he still has a base. But the people who now see their political fortunes in danger are clearly distancing themselves from him.
[00:03:15] |Luke: Yeah. Well, I kind of see this as a bit of a victory for common sense in terms of how the, maybe the voters have reacted to him kind of coming back into the free. So probably it’s positive for the future, but the Democrats have gotta field a better candidate than Biden come 2024.
[00:03:33] Krzysztof: Yeah, yeah. You know, I mean, uh, in full disclosure, I, I, I really detest him as a, as a, as a person, as a character, say, uh, but, you know, I try to, I try to see things from all the sides, and the people in his corner, you know, said he was the kind of force that that questions everything, including all of the raw and including all of the assumptions that needed to be questioned.
So from that angle, he served. I think a really important role, but at some point, from my perspective, again, you have to draw a line. And when your own government, when you’re inciting riots that lead to death with no accountability. I mean, it’s, you know, an agent of chaos that is so virulent is not, I mean, it’s just not how, how civilization works anymore.
[00:04:30] |Luke: Well, it’s that civilization. Let’s turn to, uh, the social media side of things. How’s that functioning? So Trump’s back on Twitter, I saw bit of a disingenuous poll by Elon Musker to say, oh, you know, should we bring Trump back? I saw someone who described some kind of crazy rationale to that, that like, you know, more maybe retrofitted Elong four dimensional chess, that that Twitter poll was maybe a bot trap to try to identify all of the fake accounts,
[00:04:56] Krzysztof: You know, that’s interesting. I actually took that to, to be the higher truth.
[00:05:02] |Luke: maybe.
[00:05:03] Krzysztof: My assumption was that he knew he was bringing back Trump
[00:05:07] |Luke: Yeah, yeah, absolutely.
[00:05:08] Krzysztof: and that that was, I mean, how many, it was, how many millions of votes did that get? Uh, or views? I think 14 something million votes. Right. But hundred something million views.
[00:05:20] |Luke: Right.
[00:05:20] Krzysztof: And I’m guessing the engineers must have caught massive amount of bots. So I believed him.
[00:05:26] |Luke: I, I don’t, I’m not, I’m not sure. I, I’m not sure. I believe that’s why they did it. But perhaps subsequently they’ve realized there might be some interesting insights there. I mean, I think a bit like kind of a lot of his actions, he’s kind of justifying the thing he knows he’s gonna do anyway, uh, with, you know, ascribing it to the, you know, kind of the will of the people.
[00:05:45] Krzysztof: Yeah, so Luke, tell me right now, it seems like my, well, my twi, my own Twitter feed seems highly polarized. You’ve got the Elon is a nut job and the other side, this is what excellence in execution looks like. What’s your take?
[00:06:03] |Luke: Uh, I, I guess I’m seeing the same sort of stuff. I’m, uh, like, I’m almost to the point where I wanna kind of mute Elon or anything referencing Elon, cause it’s getting a bit, I’d like to just think about some other stuff, but maybe an interesting angle on that question is like how he’s managed the company Twitter since taking it over.
And there’s definitely like two polar sides to kind of how that’s playing out. You know, one, one aspect is, he’s taken an ax to the, the organization in a very smart way and he’s gonna, you know, keep the people he needs to, run a tighter ship and much more operationally effective.
The other side is he’s just will free ignorant of employment laws perhaps outside of the us and he’s fired all of the teams that keep the company operating. Did you see a hilarious tweet today actually about some guy say a Twitter has something called being super followed. Did you see this one?
[00:06:57] Krzysztof: Mm-hmm.
[00:06:58] |Luke: It’s ridiculous. So I believe it some guy. So apparently you can, I’ve never seen this. Apparently you can super follow someone, which means you kind of pay to be a follower and you, you know, you subscribe. I dunno how it works. But I guess the, the, the main account sets like a, a price and then to be a super follower, you know, I might pay like two bucks a month to be a @7FlyingPlatypus, which is you Krzysztof A seven flying patas follower.
Um, so, uh, so this guy tweeted, Hey Twitter, the company seems to be a super follower of mine and I think they’ve probably fired all of the people who look after, like invoicing on account management. So he jacked his own super follow rate up to $10,000 and apparently he got paid
[00:07:41] Krzysztof: Wow. Oh, that’s fascinating. Right? That’s a good business model.
[00:07:47] |Luke: Yeah.
[00:07:48] Krzysztof: in that? Like what’s the stock ticket for that? Luke? Where’s that? Where’s the ipo? Yeah. You know, Anirban, uh, one of our co-lead advisors. Is quite bullish on Tesla as, as am I. And I think in our own conversations, I, uh, he said something that I really agreed with,
Forget the, call it character eccentricities. This is a man who is running a, a rocket ship company that is perhaps exceeding the capacities of nasa, or at least like they’re on a peer, peer to peer level, right? So actual rocket science.
And he completely revolutionized the automotive industry. One of the hardest things to do, possibly, I mean, right? Any industry with operational margins that are truly out of this world. So the thought that this guy. Can’t handle a, a website platform while also, you know, he himself having coding experience and coding, understanding .
And at his disposal, some of the world’s best engineers, this kind of like, my take of my take was that the overreaction to how bad he’s doing and that it’s all gonna crumble, felt to me like yelling, fire in the theater. And, and I was incredibly bullish after that. Like in the sense of like, wow, Twitter’s gonna be, be like, I don’t know if it’s my own Elon Kool-Aid, or, I mean the, just the pieces don’t, the, the pieces do not add up for him.
[00:09:23] |Luke: okay. I, I kind of agree longer term, but he’s gonna do, as he’s self-admitted, he’s gonna do a bunch of dumb stuff a along the journey, cuz he’s just gonna try stuff and what doesn’t stick. They’re gonna abandon, but they’ve like, they’ve clearly mismanaged some key elements of this, like the rollout of Twitter blue, which was the kind.
You know, pay $8 to get a subscription tick. They rolled it out on iPhone and then they had to pull it like a week later when, various big advertisers were being impersonated to the detriment of the advertiser’s brand. Like who knows what goes on inside the mind of his man, I wouldn’t even pretend to understand or guess, but, um, if, I think if he approaches this as a pure technology or business problem, there’s like, there’s another whole angle around who, where they get their revenue today, which is, you know, 90% of their revenue I think comes from advertisers.
Um, and Elon recognizes they have to break that dependence. But if he totally disenfranchises the advertisers on the journey of getting to the point that they have like sustainable subscription revenue, well it’s gonna cost him a lot of money. What am I right to say? The burn rate is like a billion dollars a year.
[00:10:33] Krzysztof: Mm-hmm.
[00:10:34] |Luke: Yeah, he’s got the pocket so you know, he can afford it. He could turn it into something really interesting, but he could also break it along the way perhaps. And that doesn’t mean breaking the technology. Uh, but he could just break the community. Like people would just leave because it becomes like an unholy place to hang out.
[00:10:48] Krzysztof: Do we know how many people are on Twitter?
[00:10:51] |Luke: I can’t, I seem to remember a monthly active user number, which is in like the, a couple of hundred million, but that’s like way lower than Facebook’s and some of the other networks.
[00:11:00] Krzysztof: Right. I was, I was assuming it was like something like 500 million people.
And you’re kind of iterating and he’s trying to iterate in public, which break things, fix them quickly. Break them quickly, fix them quickly. It just seems like given that there is, well, I guess massive, it’s all relative, but, but when you have a massive number of people, not the whole world, but still a huge number of people, and all of a sudden you, you lose what, 7,500 employees?
Right. Was that the, was that the number? Right?
[00:11:33] |Luke: That sounds right. Yep.
[00:11:34] Krzysztof: And it turns out you only need 50 or a hundred of them. So that bloat, right? And this is, I think, right, the main point here. What, I mean, I, it’s a genuine question for me. What were those 7,400 people doing on a daily basis? I mean, that’s the, that’s the knock, right?
Like I, I know lots of things need to get done, but to go from 7,400 to, it’s still being functional enough, functional, functional enough at 100, that’s a massive, massive difference.
[00:12:08] |Luke: Pro, there’s an assumption there that it remains functional, right? So you wouldn’t feel the impact of losing, I dunno, the guys who pay do the payroll over half your finance department, right? There’s some core operational roles and nothing to do with Twitter. The technology I dunno the extent to which he’s kind of cued folk in those departments, but you wouldn’t feel the impact of that until you had to do your next kind of quarterly report or, you know, you had to actually make payroll or something.
Um, so yeah, I’d, I think he’s gonna suffer some issues in the short to medium term, but I don’t doubt the guy’s ability to hold the thing together until they sort it.
[00:12:44] Krzysztof: So it remains to be seen. Right. But the message, the clear message here that’s worth thinking about is if he’s successful,
[00:12:51] |Luke: Yeah.
[00:12:52] Krzysztof: then to go from 7,500 to say a hundred tells the rest of the big tech world, including all the stock based compensation stuff, like, this was a joke to some extent.
What we were doing before was a joke. Shareholders were being mass sacrificed at the altar and for what? For no good reason. So it seems seismic, right? It seems like this is a kind of seismic moment in both in where we are with macro, where we are with growth rates and the what Elon is trying to pull off.
Like it would be a revolutionary kind of shift, right?
[00:13:31] |Luke: I, I agree. Maybe bringing it back to that comment I just made about all these kind of operational teams. Like I saw a Twitter thread, um, maybe a week ago that talked about a potential implosion in SaaS. You know, maybe the SaaS bubble popping, because these companies are on such a high burn rate.
They have so many different services. They’re paying tens of thousand dollars a month for subscribing to, to kind of run bits of their organization. Well, actually though, if they can take the Twitter lesson, if they can like slash and burn their permanent workforce, get their costs way, way down, that’s fantastic for shareholders.
It’s fantastic for stock based comp, and you can still buy in a lot of these operational capabilities so, you know, maybe it’s things like this that, uh, you know, continue the SaaS kind of business model for the next decade.
[00:14:19] Krzysztof: Mm-hmm. , man, what, what a time to be alive. Do you have a more like a personal, emotional human, stake here? Or is it pure business, business analysis kind of thinking?
[00:14:34] |Luke: On, on Twitter specifically. Uh, yeah. I, I, I am rooting for the platform to succeed and must succeed and for him to turn it into like a stronger, better platform with less bots and crap. Cuz it’s the, it’s the only social network I take seriously. Like proper quality conversation happens there. I, I think I said to you the other week, I installed TikTok, so, you know, I’ve still been swiping on TikTok, right?
Remain some downtime here and there. Every, every other advert on TikTok right now is a crypto scam. I’ve dug into it, but they’re trying to say, oh, you know, you can arbitrage your Bitcoin by buying it here and selling it.
[00:15:11] Krzysztof: Mm-hmm.
[00:15:12] |Luke: Bullshit guys. Um, you know, there’s a lot of, hang on, my cat’s going crazy how?
Say hello Sui.
[00:15:18] Krzysztof: Yeah.
[00:15:19] |Luke: him before the podcast. I fed him before the podcast and he still wants more get outta here. Um,
[00:15:26] Krzysztof: man. With a, with a.
[00:15:29] |Luke: if you hear him squeaking, he’s like shouting at me down there, um, uh, coming back to Twitter, right? So it, like that stuff happens on Twitter as well. Um, if Elon can fix that, it’s gonna be a better network.
Um, and I get a lot of personal utility out of my use of Twitter. It’s like the only place I go to get used pretty much
[00:15:48] Krzysztof: yeah, I was wondering about that. You know, the education, the amount that I’ve learned via that platform, it seems to me it’s the only place you have legitimately serious people offering legitimately legitimate value to others.
[00:16:01] |Luke: right.
[00:16:01] Krzysztof: Uh, I have a deep bias against Meta for all kinds of reasons, not worth talking about right now.
So I completely left that place. Uh, Instagram, I basically took Cal Newport’s, you know, warnings about social, the harms of social media seriously. And so I got off of basically all social media and then education is via Twitter. Take that away. And I think it would feel like a big gap. A big gap in my resources. So I really hope he succeeds.
[00:16:34] |Luke: Did you, uh, out of interest, did you check out Mastodon, which is being touted as a potential Twitter replacement?
[00:16:41] Krzysztof: No, I have not.
[00:16:42] |Luke: I did. It’s kind, it’s clunky, it’s slow, it’s clunky. It took me too long to sign up. I kind of gave up in the end, but, uh, . Yeah. I dunno, I dunno where people go. I see a bunch of, uh, influencers.
I respect moving to Instagram. If Instagram can be turned into like a place where more serious discussion happens, that’s great, I suppose. But yeah, I’m still hoping Twitter is the, uh, the place to hang the town square.
[00:17:07] Krzysztof: I wanna over exaggerate a point because maybe it’ll provide, some folks listen to this, some context. I really, as someone who is fascinated by the likes of Leonardo DaVinci and someone like Einstein, I think it’s extraordinarily rare when you have a clear.
um, genius is an overused term, but someone operating on using metrics in a way of thinking that is so far above and not above, that’s also hierarchical, but so other than where most people operate, and for him to have all the resources that he needs and to be willing to do everything in public and the kind of like, um, prankster tab boot makes, makes the whole show.
One of the, I mean, it’s like the most entertaining thing I could, like, there’s no, there’s no television series I’d rather watch than how this is unfolding live in, you know, in real time, like on your computer screen. It’s so fascinating.
[00:18:06] |Luke: If, uh, If, you’re not, if you’re not on Twitter and you’re kind of worrying, wondering what all the drums about, like go check it out. And why you there? Maybe go follow Krzysztof and myself.
[00:18:14] Krzysztof: That’s right. That’s the first step. God, we’re two old fuddy duddies compared to all, all of the things that, anyway, so, uh, Luke you were, you had a, you had a mission. You, you’re on a mission. You took, you took my, my, uh, what’s the polite way to phrase this, My encouraging words to, to have a look at a portfolio category labeled as Worry Stocks,
[00:18:45] |Luke: Yeah, I did. I’ve done pretty well actually. Hopefully you’ll be pleased with my, uh, my progress. So when we last met, uh, you told me off quite correctly for having this fairly chunky worry stock category in my own personal investment portfolio. I haven’t got the numbers at hand. I think it was, I had something like 10 stocks categorized as worries and it was like 5.1% of the portfolio.
So I’ve been through like maybe half of those. So I think I’m now down to six worry stocks, uh, which represent two and a bit, two and a half percent of the portfolio. So that’s pretty good. I’ve kind of, kind of halved the challenge and I did that by. basically selling three things that I’ve kind of given up the ghost on.
So I sold five the, uh, two sided marketplace. I sold a little company called Curiosity Stream and uh, and I sold Asis bio and I sold that last one just cuz damn like I have, I can’t even remember what these guys do now. I’m so not close to the business model if I don’t understand it.
I just do not have the bandwidths to get back into it. And then I had a fairly chunky one block, you know, was known as Square that was on my worry list. I’ve kind of upgraded that back to my growth list. I think I’ve kind of reinstalled my, uh, my belief in their model.
[00:20:02] Krzysztof: So one thing that maybe some investors who might be in the beginning stages or even in the middle stages, or nevermind maybe for everyone, what was the feeling you had after you sold them? Like once the sell, once you pushed the button and then they were out of your portfolio? What, what did you experience?
[00:20:21] |Luke: uh, yeah. Okay. I suppose a bit of relief that, uh, like I’ve got a better handle on what I own for one. It’s been on my to-do list for some time, like, go understand these companies and fix them. So I, you know, that little, uh, jot of, uh, what’s it, serotonin, whatever the, the, uh, the brain hormone is that when you’ve done something that, uh, that rewards you, like, I’ve now got something off my to-do list.
And I like, I’m a guy who lives his life by list,
[00:20:48] Krzysztof: Yeah. I find it’s, uh, it’s, that kind of task is maybe one of the most difficult things to do, to execute, but when executed, it’s that one decision that takes care of a hundred more, and somehow I feel more clean. Anytime I, I complete the process, one, identify something that concerns me to take a deliberate stance toward, okay, I’m gonna figure this out.
I’m going, I’m keeping this, or I’m going, I want to, actually, it’s more about why, going back to why do I have this company? Checking out the biases, all the anchoring, fallacies, all of this stuff, right? And then making a decision, okay, I’m no longer either, I’m no longer worried about it because of this and this reason.
I understand the thesis and I’m going, it’s, it’s clear or it’s out. And that feeling of relief, it’s maybe one of the, it feels well earned in these situations.
[00:21:49] |Luke: Yeah. I, I know you’ve, uh, you’ve, you’ve had a significant removal from your own portfolio lately, so I guess you are speaking from the heart there a little bit.
[00:21:57] Krzysztof: Yeah. Yeah. And it’s so hard. It’s so just, just not to sugar coat, coat this, especially when you’re looking at heavy losses
[00:22:06] |Luke: Mm-hmm.
[00:22:07] Krzysztof: and often with these c. . It’s like, it’s not like all the potential is all of a sudden out the window, like the, for, for most of them, the potential is still great and now you’re thinking to yourself and it’s 80% cheaper.
So to, to make that executive call is incredibly hard and I think maybe a saving grace for me. Maybe the thing I overlook most of the time is the thought I could always buy it back once it merits inclusion in my portfolio,
[00:22:38] |Luke: I get that. I’ve come a slightly different way cuz I’m, I’ve, there’s a term I kind of picked up being a change guy in a bank for a long time and sometimes like you don’t have enough information to make a decision, but you have to make a decision and you have to kind of move forwards.
So the term I would use when I’m running like a steering committee or something and trying to get a decision was like, we’re gonna take this as a no regrets decision. We understand the fact that we don’t have all of, we have imperfect information, we just make the best decision we can today. And we’re not gonna regret that, you know, no matter what, cause we took, we took the best decision we could take.
So I’ve kind of applying that framework. To those smaller decisions around my own portfolio. Like I’m a bit very unlike yourself. Like I haven’t held onto like one share. I’m probably, you know, I’ve exited these companies, I’m not gonna follow them anymore. I’ve got, you know, better, bigger fish to fry. Um, and if they go on to be a hundred baggers from here, well, you know, great for the team and the founders.
I kind of took my no regrets decision, so I guess I’m gonna have to try and not regret that.
[00:23:33] Krzysztof: Oh, that’s a great counterpoint. I think to what I was saying, yeah. Often I’ll leave the one share just to keep it, uh, because there’s a difference for me when the stock is on the watch list versus it’s still literally my portfolio, even though I don’t count the one Share holdings as holdings. I don’t know if that’s like a slide of hand kind of thing, but it helps me.
You know, either see, just, it keeps me bec I think usually it’s because I understand those companies well. They stay more visible to me when I have them one share. And it’s maybe not so much about regret, even though that framework you, you talk about is really strong. But it maybe makes it easier for me to follow the story and then go back in if the evidence warrants it,
[00:24:19] |Luke: Yeah. Yeah, I see that. And it’s the way your approach is powerful, but the downside is like, it’s always just consuming a little bit of your emotional bandwidth. And if you do see, you know, I missed out on this huge gain, right? That’s very clear in your mind, like it’s there on your scorecard.
[00:24:36] Krzysztof: Yeah. Yeah. Good point. Luke, uh, hopefully, yeah. For, for people listening to this, this would be an interesting place for anyone to offer some commentary. Should you be, I guess, watching this on. Because it, it feels to me like we’re offering two useful strategies that are different from one another. And maybe it’s the case there, like, uh, one of those know yourself kind of things.
Where Right, where for Luke, the no regret strategy just makes the bandaid ripping, ripping it off that much more leaves him at ease. And, and for me it kind of, there’s a strategic element that I, I play with,
[00:25:14] |Luke: That’s the hardest thing about managing a portfolio, right? It’s actually not managing the portfolio. It’s managing yourself. And I think your comment there, you know, know thyself as the, uh, as the oracle said to Neo, right? That’s, that’s the most important thing. If you can manage your portfolio in a way that plays to the things that either you’re strung out or you’re comfortable with, you have a much more higher chance of success.
[00:25:35] Krzysztof: right. And then sticking to that strategy, especially when things get.
That kind of thing is what experience gives you over the years. And it’s always humbling when you realize so many years in, right? And I’ve made this fairly rookie mistake again,
[00:25:53] |Luke: Yeah,
[00:25:53] Krzysztof: right? But then acknowledge it and, and make the needed move and onwards, right?
[00:26:00] |Luke: You know, that’s, that’s an interesting segue to another conversation I know we wanted to have today. Um, uh, and it was about a comment you picked up on a recent episode of the All In Podcast. Do you wanna, do you wanna pick us up on.
[00:26:11] Krzysztof: Yeah. Uh, forgive me if I don’t re remember who said it exactly. And the, the, the full context. But I thought I heard one of the gents over there say, there needs to be a test. In order to participate in the markets. And I think they were specifically talking about crypto, uh, in the context of crypto, right?
That we have all these scams taking place. And that’s in part because people, to a large extent, do not know what they’re doing on a, on a very basic level. So I think that comment was meant to be provocative, but they were, whoever said it was quite passionate, they’re saying it’s, it’s basically idiotic for us to allow people to engage in complex, risky markets, say without any way of knowing their qualifications to step into this arena.
So just like we have a test for driving, why do we not have a test for market participation? And I thought about that and I, and it kind of just, it resonated so much. to me with Seven Investing’s mission, first of all, like we provide an immense amount of research for you, but the idea in a larger sense is we’re empowering you right, to know what you’re doing.
Right. Which you, you, it’s kind of like a university of sorts. There’s no official test, but is that really a bad idea? Like, would not our culture in general be better served if there was in fact some sort of certificate you needed in order to buy securities?
[00:27:53] |Luke: So I think there’s two aspects to this and I think the conversation the guys had on the all pod was like your point, but there’s an additional point as well. So it was certainly about crypto and the view that, you know, to engage in some of these risky things that we can do today. You should probably have a bit of education enablement and maybe certification to protect you.
But at the same time, I think in the US there are certain, uh, investments that a regular retail investor cannot get access to. Venture capital stakes, crowds, funding, things like that. And at the same time, you know, introducing some education and a test to allow people to do something they can’t do today could also be valuable.
Um, but if we stick with your first point about, should we introduce a qualification to allow you to be an investor? So I think that’s kind of the point you were digging at. So, um, I kind of get it, but at the same time, I’m a bit resistant to that because already not enough people are investors.
And if we, let’s put aside, uh, you know, growth investing and managing an active portfolio, if we just say, you’ve got 10% of your salary going into some sort. Pension, you know, savings account for the future, and it’s investing in, um, like passive index trackers. It’s investing in the S&P or the Foote or whatever it might be.
Should we establish more barriers to that? Like we want everybody to do that. Surely take charge of their, uh, financial future.
[00:29:17] Krzysztof: Yeah, that’s a, that’s a good point. Luke. I, I wonder if the analogy of driving is, is useful. You know, on one hand it allows us immense freedom. We also acknowledge that kills, let’s say, 40,000 people a year, right? So everyone know. That they are inherent dangerous to this thing. And yet we obviously support, or at least in the United States, forgive me for, for being US centric.
But I guess in the, in the modern western world, our driving is kind of a, a, a linchpin to how we do things.
[00:29:48] |Luke: Mm-hmm.
[00:29:49] Krzysztof: Uh, the fact that not it’s so central to people’s lives, but we also need to make sure you, you at least can pretend to drive the car and park it and can read the basic signs. Doesn’t get rid of the dangers, but it does.
what does it too. I mean, is this maybe a, a point in your case? Like
it standardizes what we think everyone knows on a road and it, and I’m assuming some classes actually teach you something worthwhile, so,
Maybe. Maybe in the, yeah, I’m stuck
[00:30:24] |Luke: here’s a, here’s a, here’s a way, here’s a way into it. Cuz I, I think there’s something that all societies should do, which they don’t today, which is like some basic level of it, or investing awareness, understanding compound interest, things like that. But as a, at a. Kind of school level.
I don’t, you know, when you say, well actually from even kind of preschool, you could start to do that with like Legos and building blocks and stuff and bartering. But, uh, you know, right through the curriculum, I think there should be like an applied track to maths, which just talks about personal finance and, you know, the dangers of credit cards and buy now, pay later.
That’s the kind of stuff that’s gonna protect people. Um, at the same time, you know, I think everyone should, you know, learn the basics of first aid. Like there are sort of basic things that don’t take much and that could be incredibly beneficial for the individual and for society. But should you have to get some sort of license to be an investor, like, I think we should be making as easy as possible, not more difficult.
[00:31:21] Krzysztof: Yeah. You know, I agree with you. That’s a, that’s a good point. It’s kind of like we’re trying to do two separate things and, um,
it’s like maybe yeah, like having encouraging people to complete something like maybe in the future, seven investing offers an investing certificate and it’s very obvious that if you take a month of months worth of classes with the seven investing advisors, you’re gonna be leagues ahead of where most people are, and you’re probably gonna save yourself from doing something incredibly stupid.
[00:31:55] |Luke: On a, voluntary basis. Absolutely. Like having wider availability of that sort of stuff. Um, and the stuff we do at seven investing actually is relatively complex. We have sort of tailoring our subscription product to a more sophisticated investor who really wants to manage their own investments.
Um, and even having like the basics. Making that stuff, more widely available. You know, some government funding. So at least, like I, I recently enabled, the ability to trade options in one of my accounts.
I had like a ton of, risk approvals. I had to tick off and eventually even I’m bored of reading like the details and all the terms and conditions. I’m just clicking, like accept, accept, accept. We need something a bit more engaging than that. Um, but yeah, making that stuff more widely available to a regular investor can only be a good thing.
[00:32:44] Krzysztof: Right. And I guess even then, it only goes so far if we wanna talk about the FTX meltdown, right? Talk about insanity, but one of the wildest things from my perspective is how many supposedly professional investing houses did not do what I guess in hindsight looks like, basic diligence.
[00:33:05] |Luke: Yeah.
[00:33:06] Krzysztof: I mean, I really don’t know the details Luke, but, but Chamath actually on the All In podcast, he said it clearly, right? Like he said, we did our research and we need you to follow up with X, Y, and Z. And , the response was, uh, go f yourself.
[00:33:22] |Luke: Probably there’s like a million better informed sources that you and I to get into the details of what went wrong with FTX. But clearly a bunch of folk failed their due diligence, but the people I feel sorry for are mom and pop investors who maybe had their currency, had their cryptocurrency on this centralized exchange, assuming it was safe.
But this is like at the wild west still, right? It’s unregulated. This, there’s no insurance to protect. Um, your funds on those platforms, it’s not segregated money. You’ve got no way of evidencing that. They have the reserves that they say they have so they can pay you out if there’s a kind of run on the bank.
Unfortunately, it ties into that, uh, conversation we were just having about, you know, having a better understanding of what it is you’re doing. If you’re in the world of cryptocurrency, like many of the protections you have compared to your regular bank account, they, they just do not exist.
And it’ll be a long time before that that market matures to the point that they.
[00:34:17] Krzysztof: Yeah. And in another note of, of, uh, genuine, condolence to anyone that really lost anything really, were the terrible outcome. The only silver lining I could think of is, you know, like a good forest fire. The, the ground becomes more fertile for the authentic players,
We have to go through the scam phase, right? Like, it’s just how, I guess it always works, right? You, you, that’s the only way humans learn to weed out the greed and corruption and drift. And my, my genuine hope and suspicion is that the crypto industry, because the technology is so fundamentally powerful, will become better, stronger, uh, and more, civically minded in the future.
And that’s a good thing. It’s just a great sorrow that came at such a high cost.
[00:35:11] |Luke: We probably haven’t seen the full cost just yet, right? There seems to be a lot. Collateral damage from FTX is meltdown. So we could, well, we’re likely to see a number of other big institutions go down at the same time. You know, really, I, I, I took the view, I’ve got a tiny, better cryptocurrency.
Not, not a huge amount at all, like less than 1% of my portfolio, but I took the view if I’m gonna have, uh, this sort of investment, I don’t wanna put it on a centralized exchange, I’m gonna use self custody. So I’ve got like a hardware wallet and I’ve taken certain, uh, steps to preserve my, passphrase, my key, uh, and I’m confident it’s all secure.
It’s not worth trying to hack me and go after me. There’s not enough there guys. Don’t bother. Um, but I’m pretty confident in my protocols. Um, but it is complex to do that stuff, right. And, you know, if you don’t wanna write down your, uh, passphrase somewhere, you know, some people like have it stamped into a block of a mini and bury it in the Guardant or something.
I haven’t done that. Don’t come and take up my Guardant. Um, Uh, if you, if you haven’t protected your key, then if you lose your key, you’ve lost your coins. So, you know, there are downsides to that as well. You have to trust yourself not to do something stupid as opposed to trusting the exchange not to do something stupid and lose your currency on your behalf.
So, you know, it’s just a difficult place to be a retail investor, I suppose is
[00:36:26] Krzysztof: Yeah, that’s a, you raise a good question. I, you know, when you’re a complete beginner, I would agree with you that maybe it’s a high learning curve. I’ve been trying to figure out this crypto world now for, I’ve had my hands dirty in it for about two very active years, so I’ve went through. Painful phase of nothing quite working and like links leading to dead ends and all that stuff.
But now I maybe hold a little bit of a difference of opinion with regard to, say the difficulty of going into a hard wallet. I, the company, I use the, uh, ledger nano, you know, like they, they, you know, you plug it in and the directions are written in a humane way, easy to understand way. And if you could read what the directions tell you, I thought the process was actually more simple and more accessible.
Certainly way, way more friend user friendly than all the other Wild West crypto stuff. And I’ve now coached a good number of people to do exactly that and no real issues. You just have to be careful, right? Like pay attention, follow the steps.
And yeah, keep your password like in a place that’s safe.
But to me that doesn’t feel that much different than like, you know, where do you store your passport? Whether you, you know, you’re not gonna just, if you could, if you could hold onto your passport right in some drawer or some safe or someplace in your house, you could, jo you, well put in the words you wrote down to protect your crypto and it doesn’t feel that much different.
[00:38:04] |Luke: I mean, this could be fun, but like, here’s, uh, here’s two things to think about then that maybe, I dunno, maybe you’ve addressed this already. So, uh, okay. You’ve got, if you have literally got your 24 word phrase written down somewhere in the house, right. That is a, there’s a risk there and criminals are becoming more sophisticated.
So if they see something that looks like that, even if you’ve tried to encode it in some way, someone might figure out that that’s what it is. And then it’s, it’s very simple. Cost ’em 50 bucks to buy their own ledger. He basically sees your private keys using that passphrase and drain your accounts. If you haven’t written it down and it’s not straightforward, what are you gonna do when you die and how is someone going to inherit that cryptocurrency from you?
[00:38:46] Krzysztof: Wait, I thought you were asking me. I thought I’m the one doing the three questions this week.
[00:38:52] |Luke: I came up with
[00:38:53] Krzysztof: What’s more
[00:38:54] |Luke: this, so I’m not gonna discuss, but I did, I did come up with a way to fix, to solve this problem, which I can’t discuss, but, uh, I’m happy to share with you privately,
[00:39:02] Krzysztof: Alright. Yeah, I thought, yeah. Okay. Right before we give away, uh, too much information to the FTX scammers in our, in our audience.
[00:39:12] |Luke: yeah, yeah.
[00:39:14] Krzysztof: Uh
[00:39:14] |Luke: we come off this topic though, like there is a, I saw a really good article on the street just a few days ago. Um, and, uh, it was a chap just on The Street is, uh, written a piece on the increase in scams as a result of this kind of fdx meltdown. And there’s some, just some, I won’t go into too much detail cause I know we’re running a bit long on this episode, but there’s some, you know, nasty stuff happening.
And I think just as a warning to anyone who’s listening, right, you know, protect your cryptocurrency. If someone calls purporting to be from, Binance or Coin Desk and they say, you know, they’re trying to get you to give a certain information to secure your account, it’s probably a scam, right?
You just need to have your bullshit detector on max, uh, mode right now, in particular all the time. But especially right now cuz crypto scams are going crazy again, probably haven’t got time to do justice to the topic, but there’s some. You know, some really nasty stuff called pig butchering, which is, seems to have sort of taken hold as a, uh, you know, sort of center of this stuff actually in Cambodia where I was quite recently.
But whole teams, incredibly well funded teams of folk, um, who are basically executing, uh, scams on, you know, innocent folk overseas with things like romance scams. And, you know, you would be shocked, I’ve read some case studies, you’d be shocked at the, the amount of time and effort, uh, and resources that go into executing some of these scams.
But when they pull them off, you know, they’re taking people for literally, you know, millions of dollars. One, one poor lady I listened to an interview with, lost $6 million to one of these romance scams, um, and it kind of wiped her out when she was in retirement. It’s really not a pretty picture. There’s actually another level of hell to this whole thing, unfortunately.
I used to kind of bait these folk when they got in my Twitter DNS and, you know, lead them on a little bit just cause I think if I’m wasting their time, they’re not pestering somebody else. And I was kind of thinking, oh, look how clever I am for doing this. Actually the next level of hell I hadn’t appreciated is, unfortunately there are people from all across Southeast Asia being trafficked into Cambodia with the offer of like a job offer.
And then they’re basically in human slavery, uh, and they’re being forced to execute these scams. So unfortunately, you know, the poor person you’re chatting to is probably in a much worse situation than you. But, uh, you know, number one, look after yourself.
[00:41:34] Krzysztof: Wow, that’s terrifying. Yeah. Uh,
[00:41:37] |Luke: Should we, uh, should we give a quick plug to The Street , so we do some work with the street, uh, about 7investing the street is a fantastic, uh, resource for kind of financial news, financial education, but articles like that.
Crypto scam one I just mentioned. We’ve got a fairly close link with the street ourselves, one of our ex lead advisors and still a very good friend of the seven investing family. Dan Klein, he’s their managing editor. Um, Dan’s got a great history with, um, many finance websites, deep, deep knowledge, um, and it’s just, it’s a really good new source.
You know, I said earlier, Twitter’s my number one use source. That’s true. But I go read a lot of stuff on the street too, so I would recommend checking it out at thestreet.com if you’re not familiar.
[00:42:21] Krzysztof: Fantastic. Yeah. And you’ll, you’ll be seeing more content from the seven advisors linked, uh, to the street. So great way to get your finance education up to par.
[00:42:33] |Luke: So what else should we tackle today, buddy? What’s on our list?
[00:42:35] Krzysztof: I, I’ll quickly mention more of my reading journeys. Um, I’m getting close to finishing chip war, which I, I, I still maintain. This is one of the most thrilling, enjoyable reads in recent days, just as a standalone, forget investing. But the things I’ve learned in here are kind of, uh, blowing my mind. Um, and I’m not even at the good parts yet.
I’m not even at the, you know, in the contemporary modern area yet. So highly, highly recommend that. And I just finished a work of fiction called When We Cease to Understand the World. By Benjamín Labatut, I believe is his name, a truly stunning work of art and imagination. It’s quite short and it’s, um, it takes real scientists, including several quantum physicists.
I have a, by the way, I have a, a long standing dalliance with, with physics and quantum physics, and it kind of fictionalize their worlds during peak, their peak, uh, call it, um, imaginative episodes where they were about to figure out some major discovery.
[00:43:49] |Luke: Hmm.
[00:43:50] Krzysztof: I’m not doing it justice because the book at its heart is really about, how impossible it is to know the world.
That’s what physics shows us on the quantum level anyway, and some of the.
dangers of maybe assuming you know too much and you know, like the arrogance of science and that the repercussions of, of discovering say how the world works leads to things like chemical warfare and World War I and nuclear bombs. And so it’s a, it’s quite a mess, but it’s a beautiful, beautiful book. I couldn’t recommend it more highly.
And it kind of fits in into the investing paradigm because quantum physics is about probabilities rather than cause and effect. And you know, as poker players and investors, we know the value of When you see the world probabilistically
[00:44:40] |Luke: For sure.
[00:44:41] Krzysztof: linearly.
[00:44:42] |Luke: I, I definitely feel like I’ve got, uh, shrouding as portfolio at the moment where every time I open the box at like, 9:30 AM US time. Who knows whether it’s gonna be green or red. My portfolio is both alive and dead at the same time.
[00:44:56] Krzysztof: Well, you’re in better shape than Mines pretty much dead every, every time. I don’t, I’m pretty sure it’s, there is nothing alive in there, um, any longer. And by the way, Schroer was one of the main characters there’s a chapter devoted to him.
[00:45:15] |Luke: , I’d love to put it on my reading list, but my reading list is so long and I, I just spend so little time actually reading. I spend all my time like blue. Well, if I’m trying to keep my head out of TikTok, but Blue to actual news sources, um, like the world, there’s so much shit happening in the world right now.
I don’t find the bandwidth to. You know, read for pleasure or, or even for education,
[00:45:36] Krzysztof: Right. You’re one of these millennial whipper snappers. Huh? You have no time for books? No more Luke. Huh?
[00:45:42] |Luke: you got it.
[00:45:43] Krzysztof: your thumbs. How big are your thumbs? Are they, are they gorilla size yet?
[00:45:47] |Luke: Do you wanna hear something extremely dumb? This is about two months ago when I was with my buddy Tom and someone gave me a business card and I was kind of, I’ll admit I was pretty drunk at the time, and I, I was, I was squinting to read the business card and I tried to like pinch to Squi to scroll it home and zoom in.
I was like, what am I doing?
[00:46:03] Krzysztof: Oh my god, that’s such a great, that’s such a great point though. Can you really imagine what it’s like, you know, if you’re, say two or three years old and all your life, you’ve. Your parents gave you the devices. I mean, the way you understand the world. Talk about when we cease to understand the world is so cognitively different from, you know, our generation.
But anyhow, um, seems like you’re lost cause So, uh, you ready for three questions?
[00:46:33] |Luke: Uh, oh, wow. Gosh. Yeah. Three conversations, games, uh, your turn to ask me. Let’s just, uh, quickly remind anyone who hasn’t listened to a prior episode. So, uh, we usually wrap up each episode with three conversations Game this week. Krzysztof is gonna pitch three conversations that I have nothing, no idea about what he’s gonna ask me.
I’m gonna get to, uh, cancel one of them that I really don’t wanna talk about. And then he’s gonna pick one of the remaining two, and I have to give him a minute of well reasoned, uh, discussion on the, the chosen topic.
[00:47:05] Krzysztof: All right, excellent. So, Luke first one is, uh, is kind of a softball question.
[00:47:12] |Luke: I like it.
[00:47:12] Krzysztof: Your life, uh, your life depends on making the correct investment in sort of absolute dollar terms. And we’re talking about, uh, the investment period starts today and it ends five years from today. And you have to bet your life on either Elon and Twitter or Zuckerberg and Facebook.
[00:47:33] |Luke: I Go ahead.
[00:47:34] Krzysztof: Which of those will bring in quantitatively a better return on, in, on capital?
[00:47:42] |Luke: What? Okay.
[00:47:43] Krzysztof: Question two, what’s harder? Laying down a great poker hand with a huge pot when you see a nasty river card show up or selling a stock with , tremendous tech potential. , but that’s down like 97% and is in that worry bucket,
[00:48:04] |Luke: Hmm. Okay. Yep.
[00:48:05] Krzysztof: what’s harder? And the third question, who will win the World Cup and why will that team be Poland Okay’s like,
[00:48:17] |Luke: I’ve, okay, I’ve gotta put a, a line through the World Cup just cuz literally I have no idea about football. I’m a fan of Poland, uh, crackow Crackow many times. Uh, and I, I wish you all of, all the luck in the World Cup, but I have no vested interest in, uh, in the outcome, particularly, uh, based on where it’s at, but that I didn’t like previous World Cups either.
[00:48:40] Krzysztof: okay. Wow. That really surprises me if, uh, you know, learn something new every day, but you seem like made for, for, uh, football. Okay. Um,
[00:48:51] |Luke: I was too focused on chatting, chatting up the goals when I was a youth, and I let my, I let my competitors watch the football matches.
[00:48:58] Krzysztof: Okay. Ah, so, okay. I see. That’s a smart playbook. No wonder you’re, you. Okay? I see what you’ve done there. Uh, tell me, yeah. Uh, tell me about what’s harder. Laying down the poker hand or, or selling that investment that just won’t leave you alone.
[00:49:15] |Luke: yeah. Okay. Okay. Um, and I, okay. I think I, when I was at my poker prime, I think one of the strongest parts of my game was the ability to make a big fold, which I guess is what you’re describing there. You know, you huge. Amount of money in the middle. Maybe it’s not, it’s not a huge amount more, but you sense that your opponents stronger and they’re trying to just sort of squeeze that last bit of cash out of you.
It’s kind of folding in those situations. I’ve actually folded King’s preop, uh, correctly once in Las Vegas, uh, to create a claim and, uh, from the crowd wore my buddy I was with just shrub his shoulders and called me an idiot. Even I was correct in that occasion, . Um, so I used to make great faults. I will say I now, my game is terrible now because I play with a bit too much alcohol in me and I’ve lost the ability to make those great faults.
I just wanna see my curiosity gets better at me. Uh, so that’s a, that’s a massive part of my game. I need to tighten up. So that is, but that is hard and I’m finding that very hard now. Um, but I will say selling a beaten down stock is potentially harder. Um, and I’ll reference back to that conversation we had earlier about no regrets.
Like, I know I, I talked a big game there and said, oh, you know, no regrets decision. I’ve just sold five and I’m not gonna look at five. But if five does do a hundred x, like 20 people are gonna come and tell me. Right? So there’s no getting away from that information. . And I am gonna feel like a donkey cuz I , I lost like a ton of cash on, well, a fair bit of cash on five.
Uh, and if I could have ridden that back up to, you know, glory days, then fantastic. And I’ll try and remind myself of my rationale for selling, which was well thought out. , but I think in the long run, if a company I sold succeeds that will prove to be the harder thing to keep in my cool and my calm, uh, when I know I’ve then, even though I’ve made what I thought was the right decision, it’s turned around and bit me.
And I suppose another aspect of all of those two things is like, if you’re making that fold in poker, Like the only thing you can lose is the money on the table. It’s no longer your money anywhere. It’s now the pot’s money. Uh, if you, you’ve artfully chosen those two things, cuz it’s very, very similar, but if you, you know, sell that beaten down stock, um, the amount of money you could lose inverted commerce, it’s theoretically infinite.
If that company does like a thousand x. So, you know, the potential, the potential loss on paper is much greater in the, with the stock than with the poker hand
[00:51:50] Krzysztof: Wow. With an answer, I’ll, I’ll push back just in one way because there’s, there’s the step beyond laying down a great hand, uh, in with a, with a huge pot, and that’s when you lay it down only to see that your opponent was bluff. That because that takes away your dignity. you’re left with nothing. At that point, you’re, you’re left, you have no money.
You ha you, oh my God, the pain. I just, I think I, maybe I’d rather lose 5000% in the stock than, than to have that, that kind of
[00:52:28] |Luke: Well, we, uh, if I, not really an anecdote, but a bit of sort of insider kind of, if you play a lot of poker then, uh, you might introduce something called the Seven Deuce Game. Are you familiar with that? Um, so if you’re playing regular, if you’re playing regular sort of Texas Holden, which is the most popular game, like I play, me and my buddies play all sorts of different games.
But in regular Texas, Holden, like the objectively, the very worst hand you could. Is a seven and a two of different suits. So anyway, we play the seven deuce game, which I know a lot of high stakes folk do as well. We’re not high stakes players, but we do this too. Uh, if you raise with the worst hand, if you raise with Seven Dee and you subsequently win the plot, however you win it by bluffing or just by getting there, you know, flopping Quad Sevens, who knows If you’ve raised Prelock with the worst hand and you win, everybody around the table has to give you some money.
Like we, I think we did it for like five, five bucks or 10 bucks. So because of that, uh, there were one or two characters in our game who were go mental with seven dudes just cuz they wanted the glory of showing the bluff when they won a big pot. They were, that was a fantastic addition to the game for players like myself who probably didn’t quite have the Khans to make the big play with the seven.
We would make significant equity from this crazy plays that would result as a consequence of people going wild with that bad hand.
[00:53:44] Krzysztof: And you see folks, this is why No Limit with Luke and Schoff is now your favorite podcast,
[00:53:51] |Luke: Are you the seven De and this Krzysztof You’re a pair VAs my friend. You’re a pair VAs
[00:53:57] Krzysztof: Uh, all right. I think that, uh, yeah, that, that wraps us up, right?
[00:54:02] |Luke: For another two weeks. Yep. Today was, uh, Monday the 21st of November. I guess this is going out just at the start of December.
[00:54:08] Krzysztof: Okay? Right on Luke. Always a pleasure. Can’t wait to, uh, see you soon for, uh, and hear your next pitch for seven, seven investing.
[00:54:16] |Luke: Fabulous. You too. I, I’m pitching mine in about two hours time and I know you love this company. I’ve got an interesting take on it.
[00:54:22] Krzysztof: Oh, can’t wait.
[00:54:24] |Luke: Thanks everybody. See you in Fortnight.
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