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...
Episode 7 of No Limit has that festive holiday cheer you know you need right now!
December 27, 2022 – By Samantha Bailey
Episode 7 of No Limit has that festive holiday cheer you know you
want need right now! Delight in learning that Luke’s experiment with cold showers and cold therapy took an unpleasant turn, but there’s a clear and important lesson to glean from his whelps of pain.
Thawing off, we discuss whether politics and business are like oil and water, or whether there’s sometimes some necessary overlap, while thinking of the obvious case of Elon, Tesla and the ongoing twitter saga. We also cogitate whether Tesla will be like Chipotle: much higher after all the doom and gloom passes with time and a focus on fundamental performance.
And if you haven’t yet heard about our newest AI toy riffusion.com and its magical bubblegum Euro dance tunes, you’re in the right spot. Will chatGPT replace Google? Was crypto just a huge Ponzi scheme? What’s the best book that Luke has never read? (Get ready for tales of swashbuckling adventure, listeners!) All this and so much more on this holiday edition of No Limit!
[00:00:00] Luke: Hi, and welcome to another episode of No Limit with Krzysztof and Luke. Today is Monday the 19th of December. I think this is our seventh episode. Krzysztof, how are you doing? Good, buddy.
[00:00:10] Krzysztof: Uh, I’m doing well, Luke. It’s cold and rainy and drizzly on the outside here in Austin, Texas. But on the inside I’m feeling, uh, warm and festive and on a Meta level. I I wanted to tell our listeners that you and I did not have much of a pre-planning chat about today’s episode. We basically are pressing the record button, so there’s all this stuff I wanted to talk to you about
which is, I think it’s how it’s supposed to work,
We, we don’t script things,
[00:00:41] Luke: Oh yeah. We definitely don’t script it. Whether, whether that leads to like a, a cogent discussion that has a conclusion or it’s just like a mess of like loose ends, God knows. But we are using quite a cool tool monday.com to at least have a vague idea about what we’re uh, chatting about.
So hopefully Monday keeps us in some kind of path.
[00:00:59] Krzysztof: That’s right. And the first item on the agenda is your update on cold showers. And for the, for the, for the, for the record, you and I are predominantly getting to know each other on a deeper level via these conversations. Right. I mean, I only joined the seven investing team in, uh, what was it, July. And, you know, our, our internal Slack conversations are mostly investing related and analysis and stuff.
But this one-on-one level is, is just developing. And I, I could not tell ahead of time whether you would actually go through the cold shower experiment. Now that said, based on what you told me you’ve done this stuff before right?
And you ride motorbikes.
[00:01:46] Luke: Yeah, self experimentation.
[00:01:47] Krzysztof: that’s right. That’s right. So there was an element of faith I, I had that you, you might actually go through with this. What’s the ver what, what’s the word?
[00:01:56] Luke: Uh, yeah, like among the worst experiences of my life. if you’re
[00:02:04] Krzysztof: You’re welcome.
[00:02:05] Luke: Yeah.
[00:02:05] Krzysztof: Merry Christmas
[00:02:07] Luke: So I’m, uh, if you’re not on video, I’m wearing a Christmas hat, right? So it’s festive, but it’s also to try and help my brain like defrost the most. So I did, I, I think I fulfilled the challenge. Maybe I didn’t. I’m not sure. So since we last spoke, I’ve taken five non-consecutive, sorry, cold showers of like 30 seconds of ice and then like crank it up to hot and then have my shower.
Did that, does that broadly fulfill the expectation?
[00:02:33] Krzysztof: Uh, no, it, it, it failed
[00:02:35] Luke: And I didn’t do it because that’s what I did.
[00:02:39] Krzysztof: Yeah. No, we have to, we have to go back to the drawing board. Back to day one.
[00:02:44] Luke: Well, let me tell you my experience of doing that and then you can tell me what I was supposed to do and maybe, maybe what I was supposed to do is better, but I sense it was probably worse. Maybe I’ve got the water down experience. Yeah. So I did that. So, uh, and I took my fifth cold shower like an hour before the podcast and I’ve, uh, not for public broadcast, I’m sure, but I sent you an audio recording on Slack of the shower and me cursing you mid showerer I did double check. There’s no video on that cuz the camera was pointing at me. Uh, so, okay, so having done five of these things, like the only time I can stomach it barely is after like, some hardcore exercise. So like, I went out for a run at lunch. And, uh, you know, tried to get the body temperature up and then was straight in the shower within like a minute of getting in the door.
And then it’s just about bearable for the 30 seconds. But I did try one morning and I don’t count that I quit. It was, uh, it was too hardcore. Is this supposed to make my life better in some way?
[00:03:47] Krzysztof: No, no. I just thought it’d be a fun experiment. Merry Christmas. Uh, Uh, the theory is that yes, it vastly improves people’s lives and health. Now that’s the theory. And I could actually speak a little bit to my own practice, which is, I think I’m on, I’m approximately like 45 days.
[00:04:12] Luke: Nice. Yeah.
[00:04:13] Krzysztof: And as with most things, it’s kind of stunning that at this point, that shock, that pure dread and shock have worn, have worn off.
So I, I remember starting this and actually even in some portions kind of half midway through the 45 days, it was the psychological dread. That was the hardest part. I was like, oh, I get to, you know, wake up. I get to have a nice warm cup of coffee I get to, and then the thought would, oh, you know, like, oh, , wait, do we cuss on here?
Can we cuss? Or are we
[00:04:47] Luke: didn’t get away with like at least one FBO per episode. I think you can have it. You
[00:04:51] Krzysztof: Okay, well, uh, you know, that thought like, oh fuck, I still have that to look, look forward to. And I’m really happy to report that even though it’s not something I, I look forward to in that, in that pure way. . I’m no longer afraid of it. So that’s one piece. And the, there’s a, the physiological piece is that according to, Vim Hoff,
your cardiovascular system gets a hell of a workout from that switch. And your cardiovascular system is connected to your stress levels. And so that once you adapt to this, the rest of your day, not only do you get this endorphin rush, which I hope you’ve, you kind of feel at least when you get out, you feel tingly and it kind of lasts your
[00:05:40] Luke: And my brain’s still like kind of cold right now. , I’ll take the Santa hat off once I warm up.
[00:05:46] Krzysztof: Uh, but you actually get into a, a long-term, you get a long-term health benefit. , then there’s the, that capacity to really use your mind, to control your body. And I did actually notice that I think I’m getting less wooy about being cold just in regular temperatures. Like once that, you know, a cold wind comes down and typically there’s the like, oh, I’m so cold.
I’m so, this is terrible. Now I’m feeling like, oh, like, okay, cold wind. You know, like there’s that, there’s that mental gain piece of it, which I could feel,
[00:06:23] Luke: is this something you’re gonna continue forever? Well, big, big, big question, but for like, you know, for the foreseeable, for the next 45 showers, let’s say.
[00:06:29] Krzysztof: I’ll, I’ll answer it this way.
There was a day when I had every reason in the world to skip it. Because I went on a cold run. My hands were frozen. I was already, I was like, the excuse in the book was, I already did it.
And I, and then I thought about, is this a legitimate thing or do I wanna continue on this path? And I chose to continue on the path, and I was really, really grateful that I did One quick potential correction is that, I don’t know if maybe I, I misspoke the directions, but What you should do is you should turn the water on hot first.
So whether you’ve exercised or not, you start hot
[00:07:11] Luke: Ah, okay.
[00:07:12] Krzysztof: and then you go cold.
[00:07:14] Luke: and you, you have thin the entire cold shower cold. It’s not just 30 seconds of pain and then back up.
[00:07:19] Krzysztof: Uh, no, you end, you end your complete shower with the cold. And so you start with, 15 seconds, then 30 seconds, then up to about two minutes.
[00:07:30] Luke: Uh, okay. Alright. All right. Let me give that a go. That’s different to what I’ve been doing. That’s the inverse of it. I’ll give it a crack, but not as a challenge. I’ll just out of interest to see if it is any less
[00:07:40] Krzysztof: Yeah, that’s right. And I could see why that would make a big difference, because if the first thing you’re doing is entering that cold shower Yeah. That’s not, yeah. Right, right, right, right. No, no, no. Okay, so maybe you did this. The, although, I mean, the shock is greater, right. Going from really warm to, to cold, but then that’s, that’s a pure like
[00:07:59] Luke: Yeah,
[00:07:59] Krzysztof: mental thing.
[00:08:00] Luke: uh, uh, so one thing I have learned is I’ve got like a bunch of bathrooms in the house, like the en suite. My, the one I normally use in our bedroom. I didn’t realize, like I’ve had it on like, nice, warm, toasty for like, I dunno, five or six years. It’s never got turned down below certain temperature.
The first time I tried to take a cold shower, I tried to turn it down and like all this dust and like shit came outta the bottom and say, I’m like, fuck, I don’t wanna turn this down any further. This thing comes off in my hand. I’ve got a major plumbing incident. So I’ve been using like, the main bathroom for my cold showers.
But that’s how, uh, that’s how little I, uh, I experienced the cold.
[00:08:32] Krzysztof: Well, hey, congratulations. Uh, uh, I mean, I, and I mean that, I don’t wanna maybe overstate this, but to, to, to really experiment in this way, that’s a brave thing to do.
[00:08:43] Luke: Thank you for pushing me into a dimension I hadn’t experienced so far.
[00:08:49] Krzysztof: ho, ho
[00:08:49] Luke: Oh, oh indeed. Yeah.
[00:08:51] Krzysztof: of giving
[00:08:53] Luke: Very good. Alright, should we let Monday take us to our, uh, our first big topic of the day today?
[00:08:59] Krzysztof: Yeah. So maybe, let me, let me see if I could frame, frame this for us. On the one hand, it seems appropriate and wise in most instances to leave politics and political discussions. Out of investing. I’ve seen that rule applied holistically successfully in many different venues. Why? Because people, instead of say, looking at the data right, and the numbers and analyzing the numbers, you get sucked into your worldview and you then start, uh, thinking from, let’s say a position of bias.
What I think is fascinating is that the other side, I guess, would argue that everything is political. There’s no such thing as there being an apolitical stance. That itself would be a political stance, . And so I don’t know for our listeners who’s on Twitter and who’s been keeping up with the latest drama, but as someone who, who has been following it pretty, pretty closely, , I’m left with this genuine question.
is Elon Musk’s swerve into the political,
in an obvious political arena because the topic is about political biases. Is this swerve ill-advised, ruin this for Tesla or divisive for the country, or the highest good or whatever.
Where do you, what, what have you observed?
[00:10:25] Luke: I’m gonna lean on one of your words there, uh, ill advised. And if you haven’t been following the news cycle in the last couple of months, what we’re talking about here is, uh, Elon making an offer to buy Twitter, being forced to go through with the purchase and seemingly having bitten off more than you can chew.
Um, and their policies being like flipped almost weekly. Uh, you know, one foot in, one foot out with Twitter, blue, some, some kind of world stuff that makes it fairly clear in the last couple of days that, um, his version of. Unmoderated chat maybe isn’t the same definition as the dictionary definition of unmoderated.
Um, so yeah, ill advised like I don’t think the guy took any advice on this. He seems to do stuff on a whim and I used to be quite a fan actually, of Elon. Um, but I’ve kind of gone off him actually quite a lot as a result of some of these shenanigans. He’s always been a big voice on Twitter, but suddenly now kind of owning the moderation policy.
Like I think the All In guys said it pretty well that, uh, it’s not an engineering challenge. We said the same thing two weeks ago. Like Twitter isn’t an engineering problem, it’s a kind of social. Political , problem. And there’s no black and white answer. There’s no , objectively true truth, right?
There’s just opinion. You know, if you wanna launch a rocket into space, right, uh, you have to bend the laws of physics, but, uh, you know, you operate within that framework and you either succeed or you fail. If you are trying to, uh, manage a social network, , you’re gonna piss off like half the people half the time, and there’s kind of no getting around that.
And should he, as the CEO of a number of companies that are changing the world, get involved in this absolute mess? I don’t think so. I don’t really like what’s happened. Um, and I think he’s probably realized he’s done that in the last 24 hours because he put a poll out last night, um, saying, I will abide by the, the results of this poll, yes or no, should I remain as the c e o of Twitter or words to that effect.
And last time I looked a few hours ago and I contributed to the, uh, yes, you should quit, like hand over the reins side of the pole. , cuz I want him to get back to focusing on stuff that actually, well, not that Twitter’s not important, but stuff that he can apply his prodigious talent to in kind of solving hard physics questions and engineering questions.
I think running Twitter is really a different kind of problem that he’s not suited for.
[00:12:59] Krzysztof: I voted the same way, Luke, same exact way, and I had maybe the same experience as you. I followed Musk, I as a human, and as an engineering inventor. Now for a long time I read that biography, I followed a bunch of deep dives on him. Really admired many of his talents and trying to keep my own political views out of it as much as I can.
Although in full disclosure, I’ll try to take it case by case and make my assessments about policies, not from a pre-established view, but tell me what the facts are and let me not involve my biases. That’s what I try to do, right? And I have the really uncomfortable view for the first time ever, which really surprised me actually, that because I drive a Tesla, I might now my car, the car that I love and gives me so much joy, might actually be as I’m just driving around.
interpreted as some sort of political statement, some sort of like, maybe even a political statement that potentially I really, really don’t align myself with.
[00:14:10] Luke: I, I feel the same way. I’m, I’m less proud of being in a Tesla .
[00:14:13] Krzysztof: Yeah, because that was the era of clean energy, right? And this is saving the world. Right. But now if you forget, yeah. Right. It’s not about any one particular policy. But if it’s so happens that I disagree with a policy, and now the spokesperson of the company is, uh, let’s say an unapologetic advocate for that policy in a, in the most public of ways.
not behind closed doors, not measured, not like a thoughtful article written in some academic journal, but like publicly screaming it from the rooftop. I couldn’t believe that. Wow, do I have even a little bit of doubt by driving my own car and it was so uncomfortable.
[00:14:54] Luke: Like, it’s not the role of corporations to take these kind of extreme views and, when Musk gets involved in a company, his voice becomes the voice of that company because he’s such an influential public figure. Working for HSBC in the past, right?
An in an incredibly complex situation caught between like multiple geopolitical powers, uh, as an international bank, which is kind of headquartered in London, but makes most of its money in Asia, particularly in Hong Kong, a very complex place for the bank to be. And leadership would correctly kind of go out of their way to try to avoid getting kind of mired in the obvious politics, um, of their situation.
It’s not like it’s quite a difficult place to run any organization, let alone a financial services organization. Um, but you know, Musk seems to rebel in it. I I don’t think it is right for, , corporate leaders and corporations to get involved in politics in that way.
[00:15:50] Krzysztof: Yeah, I, I agree. I thought of an analogous insight that potentially might be useful for investors. I was. Pretty, , involved in Western Chipotle, Chipotle, Mexican Grill. CMG is the stock ticker. I thought it was a really innovative company. Great business model. Would eat there all the time, yada yada.
Then there was the burrito scandal, right? Where do, do, do you know what I’m talking about? Are you
[00:16:17] Luke: I’m, I’m, familiar with the e coli scandal. Is that,
[00:16:20] Krzysztof: Yeah. Yeah. I mean, there was food poisoning that was widespread and many people got ill from eating it, Chipotle, and of course the stock crashed. Of course. I mean, , your, you know, all of a sudden your main product is poisoning people and, and not in a very pleasant way. In the short term
it was, it was. not far-fetched to sell your shares because the brand was going through a very tough time. But look at the chart now. In other words, all time highs. And I think one thing to consider or at least think through in this situation with Elon, and I think this was what Anban was talking about on his feed for seven investing maybe in our own internal conversations is, is often, maybe not always, but often the wise course for an investor is to take the long view, remind oneself of the long view, and no matter how bad it seems in the moment, and it’s not even that it’s gonna be a day or a week, it could be several months, but if the company is sound foundationally.
Then these kinds of storms end up being tremendous opportunities.
[00:17:32] Luke: and you’re talking here, I suppose about specifically about Tesla’s share price, which some market commentators are. Kind of conjecture is, it’s a consequence of him being focused on Twitter and all the noise over there. But I think Anna Band’s view, which is probably closer to the truth, is, you know, it’s, it’s probably driven by multiple factors, like what’s happening with interest rates and inflation and Tesla’s own, you know, order backlog and uh, you know, real business metrics to do as a company.
But you can’t help but kind of stick these two things together and say, oh, maybe it’s because Elon’s being a like an ass over here that Tesla Stockright is suffering.
[00:18:08] Krzysztof: Yeah. So, right. So the question, the I I would say the open question remains as an investor, is this a Chipotle moment for Tesla and is the brand damaged beyond repair? If it’s not, this could be a tremendous opportunity.
[00:18:26] Luke: I buy that. I buy that. I’ve, uh, for transparency, I had a new model three performance coming, and I bumped it by a quarter for kind of personal reasons to do is my own personal cash flow. Frankly, uh, I’m glad I did now because they’ve just announced the model of refresh. I may as well wait for that till next year.
And I like the flexibility of the order process. I can just kind of kick it out by a couple of quarters without kind of jeopardizing anything. But I am, you know, I’m, I do feel kind of slightly relieved emotionally that I’m not giving money to Tesla right now. Um, and there are be, there are other options now.
Like I’m an investor in BYD Chinese electric vehicle manufacturer, I think they’re about to start shipping vehicles into like Western Europe, um, and into the us. Um, there are a bunch of other quite compelling options from some of the other manufacturers. But then, you know, at the same time, Tesla have got all these other arms , the one that’s probably nearest to, hitting the production line, I suppose is the semi, you know, I’ve seen quite a dramatic, uh, successful test of that on a 500 kilometer journey recently.
I’m sticking with my Tesla stock, but when it starts to consume too much of my emotional bandwidth, then uh, I’m happy that I’ve actually only got, I think, a two and a half percent allocation in my portfolio. It used to be like a 10% allocation a long time ago.
[00:19:44] Krzysztof: Mm-hmm. . Yeah. It’s just maybe to in, in this particular topic, it just can’t be a good thing. , if you are putting your investors into an emotional blender.
[00:19:56] Luke: Right.
[00:19:57] Krzysztof: right. . That just can’t, can’t be good.
[00:20:01] Luke: Cool. Okay. We, we agree on that at least. Uh, investing, we should be where we should strive to keep a clear head and make unemotional decisions. So ideally you want like a nice, boring business that’s just in a compound over decades rather than one where you’re seeing it in headlines every day.
[00:20:16] Krzysztof: Yeah. And maybe I’ll just, just, I’ll add one more thing to counteract that, that maybe negative spin. It still also remains true that the Tesla as a materialistic object is still the one thing I own that continues to give me joy every time I use it. The joy of not just the safety and and the performance stuff, but to make a product that is, that I think.
Uh, happiness, the happiness quotient say is, is also important to keep in mind. So it’s such a, it’s such an ambivalent s space we’re in with regard to that one leader and that one product. And
man, man, I guess I have so much more to say, but I don’t wanna drill on this Luke last question about this. Is there a number two at Tesla? Like who, if somebody were to say, Elon, we have to have a conversation, is that person or do we know who that might even be?
[00:21:14] Luke: There was some confusion in the headlines about Fortnite ago where I think the head of Tesla, China, or somewhere in Asia, head of Tesla, Asia, was rumored to be taking over the, the global company. And I think that was a miscommunication in like the, you know, the chicha on the, on the press. But, uh, and maybe that guy was sort of taking a step up in his own region.
Um, I don’t recall the name. Um, I’ve not seen any other news in relation to it. I haven’t heard any other names. Uh, I dunno who his COO is.
[00:21:42] Krzysztof: Yeah. That’s another reason to be somewhat concerned. If you have a figure that is that powerful and has that much control for, for him to have the capacity structurally to go rogue
[00:21:55] Luke: Right.
[00:21:56] Krzysztof: without any, any call, it checks and balances. Whether I, I mean, I’m, I’m saying that from a place of open inquiry, if that is the case where there really are no checks and balances and no number two or number three in.
That is structurally problematic, it seems like.
[00:22:14] Luke: The other lens I would apply to any company is if you have that kind of key man risk they could go under the proverbial bus, as we say in the uk. And, uh, if you haven’t got a succession plan in place, that could be potentially an existential risk to the company.
If that is the case in Tesla, um, then, you know, it’s something shareholders need to be aware of.
[00:22:33] Krzysztof: Mm-hmm. , agreed. Shall we talk about, uh, chatGPT
[00:22:37] Luke: Yeah, let’s do that actually. What do we lead in with, uh, with that AI toy you were playing with?
[00:22:41] Krzysztof: Yeah. I’ve surrendered from talking about AI as that thing which will be in the future to now it’s like, what are, what’s the new thing? What’s the new revolution? What’s the new mind blowing thing? And I just came across this, it’s called uh, riffusion.com, you open it on your web browser and you type in some combination of sounds that you’d like to hear, or tones or music styles. And then it actually comes up with it’s AI version of that particular song.
And they’re all, I don’t know how, how to describe it. They’re. If nothing else, amusing, and passable and delightful and weird and like . I’m like, oh my God. Luke, what’s your experience with
[00:23:32] Luke: I, I know to play with it for like an hour before the podcast, cuz you, you threw a link on Monday. It’s pretty cool. I like the idea of like an AI composer, but, uh, it’s kind of rough around the edges. I don’t know what kind of prompts you gave it. I think I asked for, uh, like something, something to do with classical piano and something to do with rap.
Like anything that seems to have, like words like rap. You’ve got this re weird synthesized noise that sounds like it should be a human, but it’s, it’s meaningless kind of gibberish of which you’d expect. You know, it’s being generated by this kind of large language model essentially. Um,
[00:24:09] Krzysztof: Shall we give our, our viewers a, a sample?
[00:24:13] Luke: go for it. . You wanna try
[00:24:14] Krzysztof: Here’s what, here’s what. Yeah, the, here’s what came up. I, I have not heard this by the way yet, but we have a suggestion called bubble gum, Euro dance
[00:24:27] Luke: Doesn’t
[00:24:28] Krzysztof: we go. ,
[00:24:34] Krzysztof: It’s just like, it feels like internet 1.0 where, you know, it’s like this, this, wow. Oh my God. But the, everything looks so crude and my spacey and, you know, uh, flashing neon things at you. It’s exactly what I need on this dri on this drizzly cold winter morning
[00:24:54] Luke: like Everything sounds quite say me to me, I’m not quite getting it, but I think the idea is brilliant. I love it.
[00:25:00] Krzysztof: Yeah. Let the AI robot know , like, where’s your creativity, man? Where’s your humanity?
[00:25:09] Luke: So creativity and, uh, creativity and ai. So we were gonna chat about, go, go a bit deeper. We were gonna chat about G P T and the question as to whether it poses a threat to Google.
What do you reckon?
[00:25:21] Krzysztof: I am not an expert on this. I have done a minimal amount of research. I was surprised to consider the possibility that Google might be in the crosshairs of future ai. And they gave me pause and I thought, okay, well how could that be? I think the theory is that something like chat G P T will become commoditized over time, but that’s not the hard part.
Well, at some point it won’t be the hard part. Just like internet websites, were not hard over time. What will differentiate the products is the quality of the data set on which it’s based. Right. And so if you have access to some particular silo of data and that’s what you build your robot on, and that will be proprietary and be able to do magical things and nobody else can.
Right. But then I, that got me to thinking in the sense that what is Google? Google is a kind of. Information aggregate it takes a pool of info, ranks it according to some algorithms, and then sells advertising based on the ranking. Right?
[00:26:31] Luke: Make them make the world searchable. I think that might be part of their mission.
[00:26:35] Krzysztof: That’s the base. I mean, that’s the maybe very base layer of, of this company. So if, if data becomes available to all these other kinds of machines, call it, or, or I, I don’t even know how to address it. I guess. Ai, algorithmic machine learning conglomerate. And that these models are now trained in the way that is more sophisticated than say, goo, what Google is doing.
Then what will prevent however many years down the road, a brand new company setting up shop saying We’re a company that uses AI search and all these ways, plus we’re doing something that Google can’t and advertise with us. I mean, that’s
[00:27:23] Luke: There’s a, like that Google can’t, let me jump in there with a bit of rebuttal. Um, so Google certainly can, right? They own, there’s two things happening in Google. I think there’s probably hundreds of things, but two that are notable, like they own Deep Mind, which is kind of unarguably the world’s greatest collection of.
AI experts developing some incredible applications. Um, but they also have Google Lambda, which is a large language model that you might have seen in the news a few months ago, maybe six months ago. It made headlines because, their model, which is not publicly released yet for good reasons, um, convinced one of their own AI researchers.
It was actually conscious, this guy, Blake Malloy, lemoyne. Um, and I think Blake was kind of exited for being a bit naive around the thing he was in, he was interfacing with. But that kind of got the question that got the conversation started on, the seemingly powerful capabilities of these tools.
And now they’re in public hands with things like chat, G P T. Sundar pii, Google’s uh, c o um, came out recently, just last few days and said like, we haven’t released Lambda to the public. Because these things aren’t giving reliable information. Right. And you know, if you use Chap g p t, it’s all prefaced.
When you go in there with, it’s, it’s kind of making this stuff up. It’s trying to give you a cogent response that fills human. It may not, you know, don’t act on this information. It may or may not be accurate. Google has made a name for themselves, I think, by trying to provide accurate information. They clearly have this capability.
They’ve chosen not to make it public facing yet, because it might detract from the Google brand. Like even if we think about, um, uh, forget the name of it, but didn’t Microsoft try to launch a chatbot a couple of years ago? They put it live and it became like a flaming racist within like two days because it had been trained.
Like some data set that was just kind of out there from 4chan or something. Um, so they’re trying to be responsible about it. So I, I do think they’ve got the capability and I think when they finally integrate it into like the Google interface, you know, we go to the search page now, uh, they’ll do that in a fairly thoughtful way.
That’ll add a lot of values. Um, so I don’t think they’re gonna get displaced by this, but I think we certainly will see that kind of natural language. You know, maybe you ask today, you know, you go to Google with a task, right? You know, tell me about X, whatever that thing might be, and it’ll find you the top results.
You know, maybe the step beyond that is then you could actually have a dialogue with the Google search engine about those things and maybe have a conversation rather than just kind of going straight to the source or something. Something perhaps unimaginable. I do like this direction of travel. I do think these large language models have a lot of power and they’re just gonna get more value from human time and make seemingly all roles now, whether they’re engineering or artistic, uh, more effective because they’ll kind of accelerate what we can do because they brought the interface up to like a more human level.
[00:30:29] Krzysztof: this is on maybe the, the very broad, in a broad strokes way, Luke, I, I wonder about the innovator’s dilemma and things like this. And in hindsight, everything is obvious, right? But when we think about large, huge companies, which we thought there’s no way they could be disrupted. I mean, even, even like leading companies that have bleeding edge engineers and thinkers, like Intel comes to mind as one recent example that’s kind of trying to fight back.
But you know, they were at the edge and all of a sudden they make one choice. In this case it was not entering the mobile Apple contract and that basically dooms them to mediocrity or worse, or potential bank bankruptcy. Right. I wonder to what extent, 10 years from now, 15 years from now, or maybe even sooner, we might be talking about Google in the same way despite, you know, your case is, I think, a strong one that Google is actually, uh, on the edge and forefront of ai.
So hopefully they won’t have a blind spot around it, but that anything is possible.
[00:31:37] Luke: good point. I agree. Certainly there’s no, um, absolutes in anything of my worldview. And, you know, I consider Google to be one of the core components of my own portfolio. It’s one of my six core stocks, but, uh, it’s still an allocation that’s not gonna wipe me out if, uh, if it turns out they have doomed themselves to mediocrity in the future.
[00:31:58] Krzysztof: Yeah. And it’s just, uh, it’s just a thought that I think all skilled investors need to become comfortable with, that even the company that you allocate in your own mind as the safest of the safe and anchor and pillar, they too could seemingly out of nowhere become disrupted, and you just never know, and you need to keep that in mind.
[00:32:20] Luke: totally agree. The power of, uh, diversification, important part of the investing framework.
[00:32:25] Krzysztof: Mm-hmm. . Yeah. So, n are we, we feel satisfied with that.
[00:32:30] Luke: I think so. I think so. We’re welcome questions. If you wanna fire a, a query over on Twitter or uh, find us on the 7investing discord. If you wanna challenge either of our views, we put forward there. If you do a quick, uh, quick mini seven investing advert, cause it’s got something quite exciting happening today, I think.
And then we’ll, uh, we’ll get into our conversation about blockchain. Um,
[00:32:48] Krzysztof: Yeah, let’s do
[00:32:49] Luke: so, uh, you and I and our five colleagues have been beavering away over the last couple of weeks and we’re putting out our year in review today, I think, uh, due to go live afternoon, isn’t it? And this is a kind of look back at all. How many, how many active recommendations have we got now?
Nearly 150 made more than 150 stocks on the scorecard.
[00:33:10] Krzysztof: 190, I think.
[00:33:12] Luke: We’ve, we’ve refreshed our due diligence and we’ve put together an almighty update for our subscribers and our members, uh, which gives a up-to-date view on how we feel about each of those companies.
So hopefully this is gonna be a really valuable artifact for everyone who’s signed up today. And if you’re not signed up, probably means there’s no better time, and I think we’re still running our $1 for one week deal.
If you wanna dip a toe in the water, pay a dollar, go check out at 7investing.com/subscribe and go check out our year. Get our expert lead advisor team view on those 190 different companies, and if you don’t see at least one or two in there that they interest you and you wanna hang around for, well, I’ll be shocked if you don’t find one, but if you don’t, then expire your membership and you’re, you’re a dollar short and hopefully at more than a dollar wiser.
[00:34:03] Krzysztof: Yeah. And I’ll add that a strength of seven investing is the breadth of research. And it’s, it’s painful to know that out of these companies that we’ve researched, we know there are multi, multi baggers in there. Like there’s no doubt especially from these price levels. And so the trick of course, is figuring out exactly which of which of them they are.
But the information is in front of you, right? And so I think it’ll be, A good experience for anyone who had any curiosity about seven investing to at least take a look at this report. And if nothing else, allow it to be a really fascinating, uh, portal into all of the deep, deep dives that lay behind the curtain.
But here’s your overview. Here are the 190 companies that we have done a lot of research about. It’s a wealth of information.
[00:35:01] Luke: And, and each of those companies has a conviction rating. So if you didn’t have the time to read all 190 updates, just go check out the ones that we are rating as a strong buy right now. Like that’s our, the best of the best amongst that scorecard.
And today at least my strong buys are the companies from my side of the scorecard that I really feel have the highest chance of delivering market beating returns over the coming years.
[00:35:24] Krzysztof: Yep. Okay.
[00:35:26] Luke: Alright,
[00:35:27] Krzysztof: Shall we talk about blockchain Luke?
[00:35:29] Luke: Yeah, let’s do that. This one’s been on our list of things to chat about for a little while. We haven’t got round to it, so, uh, I’m interested to hear what you have to say.
[00:35:38] Krzysztof: Let’s see. I, I’d like to just first acknowledge that this current moment in the industry is horrific, but I’m a lake comer. I, I was not around for the, the previous winters, crypto winters as they’re affectionately known. But this one, it just reeks of the worst of humanity that you take a good idea what I think is a good idea, and then you watch how power and greed corrupts it, and then the cost.
of that corruption, massive and systemic. So there’s no doubt, and it’s kind of interesting to read the headlines asking, was it all a Ponzi scheme after all? That’s really, I think the open question, my answer, my own answer to this is, sadly, this is a number out of thin air, but sadly something like, call it 95% of these things probably were Ponzi.
However, all my understanding of the underlying technology, and let’s say in the two main cases, in the case of Bitcoin, I really do buy the financial argument for why this particular technology is in fact the best form of money that humans have created. I actually buy that argument now.
The volatility involved and it’s, and how it will spread. That’s, that’s all other, you know, next layer stuff. But fundamentally, when I’m emperor Luke, I will install Bitcoin as the, the global currency. So just be, be apprised, , because it just works. It works the, the way good money ought to work. In the case of something like Ethereum, which I understand as a kind of software system that runs on blockchain technology
[00:37:26] Luke: As well as being a currency, but yes, it’s both of those
[00:37:29] Krzysztof: as well as having value, right?
Yeah. But it’s predominant use case is to allow programs to run, run on top of it. And the, the most obvious use case is something called the smart contract, which means. in the end that the promise of this technology is that instead of having to trust another entity or another person, another party, you actually know for sure whether the causes and conditions of a certain contract were met and paid out and delivered.
So maybe the ad is you just take the middle man of trust out of it and you leave it to the technology. And I guess my view on that is it remains likewise positive and optimistic that there’s too much good that can be gained across all the industries. If you leave out the shadowy backdoor, and just let it all be in the open. And that takes me full circle. The whole problem, , really ironic, really tragically ironic of this whole circus is that turns out that the people who were corrupted by greed and power were doing things in the shadows, and hence the bankruptcies and the systemic failures.
Had they actually been using the blockchain technology the way it was designed in its intended, then we would have known exactly who has what, how much, and which Waller, blah, blah, blah. And things would run smoothly from there. So in summary, Luke, it feels like a really dark time. that will not destroy this technology because it’s too powerful.
[00:39:17] Luke: Yeah, I, I’m, I’m with you. And so, and I think you and I both own, you know, a small allocation of cryptocurrency and our own portfolios, and I think we’re probably both, uh, instinctively perhaps believers that smart contracts and decentralized currency probably is the future. But I’ve been exploring the Bear case over the last day or two just to, just to really kind of challenge my own worldview on some of this stuff a little bit, because as you say, we’re in like the latest crypto winter.
Like you, I haven’t been around long enough to experience the previous ones. Um, you know, question mark, is this the end of cryptocurrency? So in my bear case research, it seems unarguably there’s value in blockchain technology to support a cryptocurrency like Bitcoin or Ethereum or many other currencies, some of which are legitimate, some of which are perhaps fraudulent. But I, from what I’m reading around the Bear case, all of these other potential applications around smart contracts and I was really excited about some of the ideas. You know, I don’t have to prove I own my Tesla because there’s a licensing authority called the D V L A in the uk and they, they’re the centralized authority.
I can just have, you know, like on the car blockchain, I can say. wallet owns this vehicle. Okay. There’s thousands and thousands of applications like that, that sort of makes sense. But actually from when I’m reading the Bear Case, I’m kind of challenging my view around that because are there really any practical implications of blockchain technology outside of money, but really actually add anything of real value or real utility?
I think I’m, I’m possibly playing devil’s advocate a little bit, having. Sort of explored the bear case a little bit. I’m not sure these views necessarily represent my own view personally, but I’m definitely more on the fence having explored it a little bit today.
Performance, transactions per second on any blockchain is many, many orders of magnitude slower than any other, uh, traditional kind of centralized authority ledger. But that will improve. I get that. I get that that will improve. Um, but the question is like, is this like a solution looking for a problem?
Like if we say, let’s explore the car question, like as a blockchain of vehicles, and I can say, I can prove mathematically I own the one that sat on my driveway right now. Like if, if the dvla, the licensing authority made a mistake and my car ended up registered to somebody else, well, it’s not like I have no recourse.
There’s a central authority I can challenge and there’s like a legal framework and contracts and, as a regulatory authority, there’ll be various oversight bodies. There’s ways I can ensure that the transaction, I believe to be true is kind of upheld. Um, if you put all that stuff on the blockchain, a bit like we saw with NFTs earlier this year, um, it’s complex stuff and maybe it’s a function of the kind of immaturity of the market right now.
But if you, if you are defrauded, if you sign a contract and you execute a contract perhaps without fully understanding what you’re signing, well, you might lose ownership of your NFTs or in the future, your car. And the nature of blockchain is, well, who do you complain to? Nobody, and it’s in theory, it’s an irreversible transaction.
So are we actually just kind of creating a wild west for all markets, um, where you just don’t need to remove the central authority. Actually, the central authority could arguably add some value. Again, I’m, I’m putting this challenge specifically outside of the world of money. I’m just kind of talking about everything else,
[00:42:55] Krzysztof: Wow, we could talk about this forever. I don’t know if this is addressing your, your critique Luke,
so forgive me if I, if I really don’t respond directly to you. It might be implicit, but let me come back with a positive use case that I, where I, I think I see in my mind why it will be useful. Let’s take the music industry, or rather, let’s say any ar artistic industry where, and this is my ma, my main main Prince , was all about this battle that an artist within our current structures, becomes the slave of the corporation to some often derogatory and almost malevolent ways, right? That you can’t even sing your own song kind of stuff, right?
[00:43:42] Luke: A more recent example perhaps for our younger listeners, uh, Taylor Swift.
[00:43:46] Krzysztof: There you go. Thank you Luke . Thanks for that. . So a technology like blockchain on which NFTs are built allows artists to unequivocally and transparently see who exactly is interacting with your work, and then can set up a smart contract that says all royalties or whatever, or divided by percentages like this, the.
Percentage will go to the artist, this percentage will go to my listeners, and there’s not that, that greedy hand, corporate hand coming in kind of taking, taking away by, by fiat, if that makes sense. And so in the world of, of where musicians on Spotify aren’t making it, even if their songs are being played a million times, this seems like a clear solution that is not in search of a problem.
There’s a major problem of, call it equal distribution, that is, that needs fixing and this particular technology does it in the future in, in the.
[00:44:58] Luke: It doesn’t, it doesn’t address all problems though, right? You know, you could, you still have music, piracy and things like that. Blockchain’s not gonna magically make that disappear. But you’re saying, let’s say in the case of Spotify, uh, specifically like small artists getting paid. Like a vanishingly small amount of money when their music is discovered and played, is it really gonna make
[00:45:19] Krzysztof: I think, I think, I think I’m even more optimistic than that. It’s not even just about small, call it small, medium, or large size artist. I’m thinking like in the most generic term, even say an author, any anybody who creates something or writer a musician, a dancer, whatever. Let’s say that they have people in our increasingly call it fragmented world, where you obviously aren’t, your audience is not 8 billion people.
It’s going to be, let’s say the 1000 or 10,000 people who really care and love you, right? In those circumstances, And even if it’s more, it’s still the case that the predominant royalties go to the corporation. What if via this technology, the artists themselves get to control almost all of the, the flow of, I think of money as energy, right?
The flow of monetary, energetic exchange. That anybody who really cares about , what I put out into the world, they will receive from me and they will give back to me via their participation. And that will all be transparent and it won’t suffer manipulation via some outside power structures.
And that in the end, this will create a healthy ecosystem of fan and artists with both profiting.
[00:46:40] Luke: Maybe, but maybe also it could be destructive. Maybe I’m not addressing the kind of the blockchain question here, but um, you know, if you do remove the middle, like this big layer of distributors and publishers, whatever that, that, that layer calls themselves, does that maybe make it impossible for us, like a budding author or artist to get discovered?
Cuz they could never have the marketing budget or the exposure to build an audience outside of, you know, their immediate social circle perhaps.
[00:47:11] Krzysztof: Well, that’s an interesting, test case, but isn’t, isn’t one of the surprises about Amazon, like an unexpected surprise that you could theoretically self-publish and if it’s any good and maybe you catch a few breaks here and there, but it’s not hard to actually get a book into the hands of.
Of strangers without any, uh, assistance from, say big publishing house, and now they could also have its own life.
[00:47:40] Luke: sure. Like I’m a fan of removing the middle man you know, that’s not a blockchain question. So maybe we’ve gone off the point a little bit and we’ve come to a point of convergence. But you know, to me, Any kind of two-sided marketplace like Fiver or Airbnb and, you know, platforms like that, they’re all about removing the middleman.
Like they’ve replaced a middleman with a different kind of middleman, but they’re putting like buyers directly in touch with sellers, making it more efficient and hopefully generating, you know, cost efficiencies for everybody who plays in the market, both the creators and the consumers. So technology is doing the things you are describing in a good way.
Um, does that, do you need blockchain to do that though? Does it add, really add anything other than just an alternative mechanism, for achieving the same thing you could do with a central authority.
[00:48:31] Krzysztof: That’s a nice way maybe for us to close this point. I keep coming back to this idea that trust works. In other words, what you described works most of the time until it doesn’t.
[00:48:44] Luke: right,
[00:48:44] Krzysztof: For those of us who were already investing in 2008, the thought about Lehman Brothers and Bear Stearns, they can’t fail.
They’re too big to fail. , they’ve worked all along, so why would they no longer work? And so if 99% of the time it works, that’s great. But the 1% of the time where Whate was said is different from what was actually happening. When that fails, we know the entire global order was, was wobbling
[00:49:14] Luke: right. And even to link it back to a previous topic we’re talking about today, but on a micro scale, I guess, you know the central authority of Twitter. If you suddenly you find yourself, uh, in opposition to one of their policies that they’re changing almost on a daily basis.
You could find yourself banned with very little of a course, and that’s it. You’ve lost your social media presence. So, yeah, I agree. That’s, uh, that’s an argument perhaps in favor of a more open, decentralized, marketplace.
[00:49:44] Krzysztof: Yeah. Yeah. And uh, to sum up my view of blockchain in general is this maybe optimistic view, that it’s what enables full transparency and then let everything else be built on top of that and all its infinite permutations.
[00:50:00] Luke: I’m, I’m with you. I think, um, I’m optimistic, but it’s a small allocation in my portfolio because, uh, there is a side where this perpetually remains a solution that doesn’t really find a home with an actual business problem. Alright.
[00:50:16] Krzysztof: Luke. I, I see we’re sort of running up against our time boundary, right? So shall we, shall we end with the three questions?
[00:50:26] Luke: if you’re up for playing the three conversations game. Yeah, let’s.
[00:50:29] Krzysztof: Okay. So I’m the one asking you things this week.
[00:50:33] Luke: I got my pen and paper handy. I am a quick explanation if you’ve just jumped in today. So we are currently rounding out every episode with a three conversations game. This week Krzysztof is gonna , give me three random topics of conversation to a pin on. I’m gonna nix one of them and he’s gonna pick one of the remaining two.
And I have to give them a minute of fairly cogent uh, debate on the topic. And I’m gonna remove my sound to hat cause I think my brain is now warmed up and ready.
[00:50:59] Krzysztof: All right, here we go. Luke. Question one. What do you do if you find yourself the owner of a company which no longer aligns with your own political views?
[00:51:10] Luke: Right.
[00:51:11] Krzysztof: So all of us say, seemingly, all of a sudden, the politics change. And, uh, you don’t, you don’t fancy them.
[00:51:19] Luke: Right.
[00:51:19] Krzysztof: Question two is, who should the CEO of Twitter be and why should that person be Luke Hallard?
[00:51:29] Luke: Okay.
[00:51:30] Krzysztof: And what will his new policies be
[00:51:33] Luke: Okay.
[00:51:34] Krzysztof: in question three, since you confessed in the our last episode that you don’t read, what’s the best book? You’ve never read it
[00:51:44] Luke: Oh God. Uh, I’m gonna, I’m gonna, Nick’s question two because the premise is flawed. I’d be among the worst people to run Twitter. Um, so your, your choice. 1 0 2, 1 oh.
[00:51:56] Krzysztof: I’m so curious why you would be one of the worst people to run Twitter.
[00:52:00] Luke: Because I don’t care that much. I find social media
[00:52:03] Krzysztof: Uh
[00:52:04] Luke: but a bit frivolous, maybe
[00:52:06] Krzysztof: Okay. Then, uh, answer the third question.
[00:52:10] Luke: Ah,
[00:52:10] Krzysztof: Since you, since you don’t read
[00:52:13] Luke: I was just making notes for number one,
[00:52:17] Krzysztof: What’s the best book that you’ve never read?
[00:52:19] Luke: uh, uh, okay. Uh, okay. Uh, only because it’s come to mind, uh, recently because I saw it pop up on like my streaming solution of choice. I am actually able to read, obviously. Um, I made a concerted effort to, uh, try and read some classics many years ago, like 10, 20 years ago.
Um, and I was, I was close friends with a friend Rene, who’s, uh, you know, she’s very well read. She actually now runs a bookshop in, um, twizzle in New Zealand. Um, and, uh, and so she said, well, you, you’re struggling with, you know, this Charles Dickens and this other stuff, like, you’re you, they’re impenetrable.
Go read the Count of Monte Christo. So I read that, that is an incredible book. Um, and over thrilled. Like it’s, it’s, it feels so modern for an old book. Um, and the story is, Excellent, outstanding. And so, uh, but there’s no good TV adaptation, so I just watched like two different TV adaptations in the last couple of weeks, which is why this comes to mind.
And I know I need to go back and reread that book. Um, so that’s, that’s quite a, hopefully that’s quite a good high quality answer. Like I have other bad answers. I’ll give you another perhaps bad sort ofs. Cause I do like science fiction. That’s kind of my, uh, um, my sort of guilty pleasure. My wife maybe throw out all of my sci-fi books.
But there’s a really, really good one, which you probably haven’t heard of, but I highly recommend. So. One of my favorite science fiction books, which is quite a short read, and it’s really good fun, is something called, all You Need Is Kill by Hiroshi Something.
Saka Zuko or something. And it was made into a really good Tom Cruise movie called Edge of Tomorrow, which you may have, you may have seen. It’s where he’s like a army kind of nobody grunt. And then, uh, he, uh, he ends up having to like live the same day over and over dying and dying and dying. The movie is actually really good.
Uh, it’s, it’s kind of a vague adaptation of the book. The book is outstanding. So, uh, that’s my kind of sci, my edgy sci-fi recommendation we need is killed. But if you want quality the Counter, Monte Christo
[00:54:27] Krzysztof: Count of Monte Crystal. Wow. I would never have guessed that answer. Wow. Right on. Oh, that’s amazing. I was actually in the bookstore. I’m always in the bookstore. Uh, and, uh, I had the same, I think that I came up with this question cuz I was looking at Don Quixote
[00:54:41] Luke: Ah, yeah.
[00:54:42] Krzysztof: that is considered like, like the best novel of all time by many, I think it’s Moby Dick or with, but like, class talking about classics.
And I, and I picked it up and it’s, it’s a thousand, it’s, you know, it’s so long. It’s so long and it’s kind of weird for, uh, there to be these classics that are like considered the best. And I mean, I’m, I’m a English literature PhD for goodness sakes too, and I never touched the thing, so it’s kind of like, oh, you know, shit.
I, hi. So anyway, Donte would be my own answer to that question. So you, our dear listeners, have Monica Cristo and Donte to choose
[00:55:24] Luke: as a English lit, uh, PhD, you endorse the Counter Monte Cristo as a recommendation.
[00:55:30] Krzysztof: Absolutely. Oh yeah. Nothing like some swashbuckling romance and, yeah, right.
[00:55:37] Luke: Good. Great. I’m glad I found an answer that may your approval
[00:55:40] Krzysztof: right on. All right. I’ll keep you around for a little longer. So Luke, it’s, I think, uh, we’ll have one more, one more episode, right.
[00:55:51] Luke: the new
year. Yeah, this is gonna
[00:55:53] Krzysztof: Until the New Year,
[00:55:54] Luke: think this is going, let’s wish a merry Christmas to our listeners cuz this one’s going out probably around Boxing Day, I think. And then, uh, yeah, then we might, uh, and then it’ll be the new year before we speak to everybody again.
[00:56:05] Krzysztof: That’s right. Merry Christmas. Happy New Year. And hopefully, uh, we could do like a best of episode for next time in whatever ways appropriate. Awesome. Thanks for joining us.
[00:56:18] Luke: for joining us and if you’ve got value out of today’s podcast episode, maybe do us a favor and share it with a friend. That would be a New Year gift to us. have a great fortnight, everybody. We’ll speak to you soon.
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