The "4 'C's" of AI-Resilient Stock Market Investing | No Limit With Krzysztof and Luke Ep. 15 - 7investing 7investing
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The “4 ‘C’s” of AI-Resilient Stock Market Investing | No Limit With Krzysztof and Luke Ep. 15

AI is disrupting everything around us, right? Not so fast, say Krzysztof and Luke. Our 7investing lead advisors go through four major areas of society where they feel AI will be least likely to completely render obsolete or eliminate human involvement: the "Four 'C's of AI-Resilient Stock Market Investing."

April 18, 2023 – By JT Street


AI is disrupting everything around us, right? Not so fast, say Krzysztof and Luke. Our 7investing lead advisors go through four major areas of society where they feel AI will be least likely to completely render obsolete or eliminate human involvement: the “Four ‘C’s of AI-Resilient Stock Market Investing.”

Along the way, the pair also discuss Krzysztof’s latest book recommendation, how Luke’s mom is Krzysztof’s biggest fan, and how to get banned from playing poker in an entire country.

To join Krzysztof, Luke, and thousands of other investors in the 7investing Premium community, click here.


Luke: Hello and welcome to the latest episode of No Limits with Krzysztof and Luke, episode 15. Today is the 10th of uh, April. 10th of April, and we are just wrapping up the Easter weekend. You know, it’s a bank holiday here in the uk. We get a four day weekend,

but you fellas are hard at work, I guess. Looks like stock market’s open.

[00:00:18] Krzysztof: Uh, yes, sir. We, we, Americans, uh, don’t have, extra days off. We work. We, that’s how we get things done. No time for crumpets and tea on this side of the, uh, Atlantic Luke.

[00:00:31] Luke: Very good. I’ve been a busy boy here. I’ve been studying my portfolio and I, uh, a particular stock you recommended that seems to have skyrocketed this morning. So well done,

Christoph. Thank you. You’re, you’re paying for my beers this week For sure.

[00:00:45] Krzysztof: You got it buddy. That’s what I’m here to, that’s what I was born to do. We’re gonna talk a little bit more about that, when the time’s right? Today.

[00:00:53] Luke: Okay, look forward to it. Good. 

[00:00:55] Krzysztof: So you are back, uh, you are

back across the pond, right? No longer skiing. What’s your next a. 

Because the, the, my, the assumption being you ha you, you, as, as the real World James Bond have, uh, other missions already lining up. What’s it gonna be?

[00:01:13] Luke: well, sorry. I have spent an hour this morning planning the 2024 ski season, but, uh, the most imminent trip we’re, I mean, out to Dublin in Ireland, uh, week after next with a couple of buddies. And we’re doing a sort of three day poker tour. Poker visit. So, um, so that’ll be fun. And then it’s the Croatia trip

after that on the.

[00:01:32] Krzysztof: Oh my God, I love both of those. So poker specifically in Dublin because there’s a there, or because you are just renting. Yeah. Right.

[00:01:43] Luke: Because, uh, uh, probably gone, he, he, I don’t think he listens to the podcast. So one of my very close friends, uh, is banned from playing poker anywhere in the United Kingdom. So we, so we have to go overseas to play. So we’re off to, uh, we’re off

to Dublin. We often go to Spain to play, but we’re going to Dublin to take each other’s money this 


[00:02:05] Krzysztof: how does one get banned from, 

[00:02:09] Luke: yeah. Uh, well, so, uh, well, let’s say he, uh, yeah, during a moment of clarity about a decade ago, he’s self banned. So, uh, so that’s how one gets banned.

One nominates themselves,

[00:02:22] Krzysztof: Okay. So off to Dublin. Dublin, right? Dublin you 

[00:02:27] Luke: Dublin. Yes. Yeah. And I get to exercise my Irish passport. I managed to secure Irish, or basically European citizenship middle of last year to undo the damage that Brexit has done to me personally. So, uh, so that’s nice.

[00:02:42] Krzysztof: How’d you manage that? 

[00:02:45] Luke: Uh, my grandmother on my father’s side was born in Northern Ireland. I didn’t realize that was good enough, but a Hong Kong buddy who did the same thing told me that it’s the island of island.

So, uh, so good enough. And, uh, thank you Nanny Ruby. I have my

Irish passport very handy.

[00:03:02] Krzysztof: fantastic. I really ought to renew my polish one then. 

[00:03:06] Luke: Who knows where the world will lead you in decades.

[00:03:09] Krzysztof: And then Croatia, right?

[00:03:11] Luke: Yeah. Croatia, Serbia. Bosnia, Montenegro.


[00:03:15] Krzysztof: I lo I absolutely love Dubrovnik when I was there, uh, as a young whipper snapper before graduate school. So many memories. Mm, what the city.

[00:03:25] Luke: I’ll be taking my, uh, some of my podcasting gear. I think we’re recording at least one episode, but I’m on the road, so, uh, I’ll

try and get You some nice scenic countryside for that day.

[00:03:33] Krzysztof: Perfect. You wanna talk about investing things?

[00:03:37] Luke: Yeah, let’s do that. Let’s do that. That’s why we’re here. Uh, you are up first.

You’re gonna tell us something interesting about this chat. 

[00:03:44] Krzysztof: Yeah, so I think

last week’s episode I mentioned that he’s this polymath that has, uh, technical chops, a PhD in engineering, and also looks at geopolitical and historical currents from a very high level, and that when you listen to him talk, it’s. It’s like drinking from a fire hose kind of thing of information coming at you.

And he has this meme we’re talking about, JI Robinson. He has a meme on the internet that says JI was right. And so, uh, and it’s not always a good thing. So he recently made a bed about bitcoin. Going up to a million dollars because the banking system is systemically corrupt. And he was urging people to take seriously the alternatives we have.

And I think, uh, whether he’s right or wrong spec, I mean the be was insane and outlandish. So everyone in the sense knew in quotes that he was gonna be wrong or, or will be wrong. But I think his point is, is. Ought to be taken seriously. and that’s the, that’s the merit I think of his philosophy and his insights.

So recently on Twitter, he said something else that I, that caught my eye and I thought we could, , banter about. He wrote, after AI has eaten everything, digital, I think there are only three things left that are scarce, community, cryptography, and c. And then he elaborated community AI can’t create physical people cryptography.

AI can’t fake digital signatures in commodity AI can’t make oil and natural resources. So I thought it’d be, uh, good to maybe riff on this a little bit It seemed to have provoked me a little bit into thinking. A little bit of, , big picture background for me is that, I, I personally, truly feel that , these are one of the most interesting times to be alive ever because of the absolutely out of this world, increase in rate of transformation and energy.

Well, maybe it’s just the, the highest, quickest rate of change that we’ve ever seen. And so what? 20 years or 30 years before, might only take six months today, and it’s only going to increase. That’s the stunning thing. So I’m thinking about AI quite a lot and I’m trying to consider, I guess, what Bolaji was considering, what can’t AI touch?

And the first thing that I personally came up with is the first item on his list. AI can’t create physical people community. And I think to me what that means is if I’m now trying to study something or try to still put in deliberate work time or effort into, I don’t think it’s a bad idea to continue to invest in people.

In other words, understanding people and understanding squishy things like emotions. And, and I guess you could, you could vouch for this, the business world, you know, runs on deals and it runs on personalities, right? To some extent, to a large extent. You meet people, you go on golf trips, there’s something that the numbers can’t capture.

And I think in the world where coding becomes obsolete because the machines will. Until we have general level intelligence, it seems to me worth continuing to invest in community and in people and in relationships and in that, that those things that can’t be quantified about humans while we’re still on top.

How does that lane for you.

[00:07:52] Luke: Yeah, I, I agree. And, um, you know, it’s gonna make all of our worlds nicer if we think about that, you know, even, um, you know, introducing education to. Uh, the developing nations and trying to create, sustainable sources of energy and food, all the things that can make our lives just easier and better.

Improving human lifespans, you know, longer, healthier lives. I think AI can help us to all those things. And if you tie into the community bits specifically, you know how we interoperate and chat. Like, maybe AI can create efficiencies around that. Like the internet certainly helped us create these communities globally based on interests as opposed to, um, you know, geography, knowing the people in your local village, um, or your town or city. 

[00:08:42] Krzysztof: maybe I’m being old-fashioned here, but, uh, currently the state of the world as I experience it as an individual, embodied being, feels extremely fragmented. You know, that feeling of. Uh, watching the same show as everybody else, and then waiting to talk about it the next day.

That kind of sense of like togetherness. More and more, I think as the years have gone by with social media and how social media affected how people interact with each other. And we all know about bad behavior. It’s something about these platforms make everyone anonymous or disembodied. So you get to be your absolute worst self.

And then that kind of creates more and more division and tension and then it’s real and serious with legitimate repercussions. It’s not like we humans have figured out a way to be, uh, to have a clean split. Oh, when I’m this way online, I’m gonna be this way.

But then in real life, I’m gonna be this way. No, these things bleed into one another. the more time you spend practicing being critical and divisive. You know, playing with misinformation and all that stuff, the more you’re gonna be likely to do that in real life. So I think this community piece feels especially important to me now, you know, what’s the one thing I want to cultivate?

What’s the one thing I really want to put work into? And that, that to me is tending my own small Guardant. What groups of people can I impact on a, in, in a real way. And so I think in, in this sense, you know, community like 7investing, that’s kind of, I think where the strength lies. I’ve gone on about this before, but over time, you know, the same people show up.

You begin to trust them. You begin to learn from them. They end up trusting you. And no matter what the AI robots say or don’t say, there’s a, there’s a palpable value to that deepening of community, so that’s 0.1.

[00:10:40] Luke: Yeah, I, I buy that. Yeah. And you know, what’s that? number one deathbed wish for Most folk when asked if they’re in a sort of hospice environment and it’s not, you know, I wish I spent more time in front of spreadsheets and in like chatting to eyes. It’s, um, I wish I spent more time with friends, with family.

Uh, it’s all about kind of people of inter relat.

[00:11:02] Krzysztof: Yeah. Right. And so to kind of flex this back onto investing, if you are listening to this per chance as a. Solitary lone wolf investor, I urge you to take seriously, uh, join in the community of, in other investors because it is so immensely important. Even in the offhand chance that you don’t, in the sense learn anything valuable about any one stock per se. The communal feature of feeling like you’re all in this same boat together, and the com camaraderie and all the ways you get to check your thesis. I mean, it’s invaluable and you could only get that I think via community. So it’s not a small thing. The second piece is cryptography. AI can’t fake digital signatures, and I think this is my bet on why, interestingly enough, I’m very, very bearish against a platform like Coinbase at the moment, I see a lot of corruption. I see crypto as an industry suffering and about to collapse on itself because the systemic corruption was wide enough, deep enough that in the end, what we’re seeing come out is every last one of these platforms has, has had some serious malfeasants behind it.

In a sense, a platform like Coinbase can’t survive the liquidity crunch that’s gonna come its way if when Binance, the last kind of big player collapses. So, I hate to say it, but it doesn’t look good for something like Coinbase. However, I also think there’s immense value, uh, in what JI’S saying that AI can’t fake digital signatures, which means that in an age where.

Trust and proof of ownership gets muddier and muddier. Uh, the cryptographic blockchain technology does in fact solve this problem, so, If you said you bought this thing on a blockchain, you did buy this thing, and you, and from there, the smart contracts can be built and I, my bet is that in the next 10 years, the world’s financial system will in fact transition to doing everything on blockchain.

[00:13:22] Luke: Right. And I suppose that links it to the third point, right? Because in that sense, cryptography makes an, you know, an individual Bitcoin, for example, equivalent to a commodity. You can’t duplicate it, it’s a physical thing, or it’s a, you know, it’s a digital thing, but it’s a unique thing, um,

which is, which has a finite supply.

[00:13:42] Krzysztof: Yeah, right. This thing about, uh, I guess to me, Luke, it’s so interesting this world we’re living in now where I guess for the last decade and change more than that, you know, everything became digitized. Digitized, and than the SaaS model was born. Right? And then software was eating the world. And now, of course, if you invested in those kinds of companies, Starting in, in, I guess the last three years, you’re seeing nothing but red and paint on your, , scorecard.

I don’t think that’s going away. I don’t think digital is going away. I don’t think the cloud is going away. I don’t think data is going away, however,

And this is, I guess, uh, a little bit of a segue into the other thing I want to talk to, talk about, I am reorienting my own, uh, corner of the market where I’m looking at more and more into, I guess the physical manufacturing of things,

[00:14:35] Luke: before we go there, though, just, um, just a sort of big picture thought on this biji. So I guess the bigger thing he’s saying is like, AI is gonna touch everything. Here’s some examples of, of things that can’t. I mean, AI is still gonna allow us to say, make use of commodities more efficiently to maybe create communities in a different way.

I, I tried to think of a fourth thing though, and, uh, the way I turned it into a C is a bit hokey, but if I think about my own, the resource I value the most, that AI nor anything else can make more of, and it’s time if I make it into a c chronology. Um, so, uh, AI ain’t making me any extra time, but, uh, but neither is anybody else.

So, you know, use every day Valu. 

[00:15:24] Krzysztof: Yes, you’ll, I’ll be dead soon. So 

[00:15:26] Luke: Yeah. 

[00:15:28] Krzysztof: ti ti time’s a tick and then that’s not a joke. , time swiftly passes by, you know, this is our only chance. So, you know, what are you waiting for? So, yeah, uh, I’ve turned my direction, investing resources and energy into learning about the battery world. And the reason I I’m doing that now is because the pieces all add up.

Climate changing. We need renewable energy. The renewable energy has got to be stored somehow, uh, and . Without batteries. A lot of the, a lot of this can’t happen. And that’s not even to talk about electric vehicles and wearables and, you know, I mean, the world runs on energy, electricity, and after reading the, the grid, I saw just how urgent this problem is.

It’s also a matter of national security and so forth. When the US government for one, is subsidizing a lot of these investments by close to 50% in tax credits, in cash for the foreseeable, I don’t know, decade. How could I not get interested in this? And my first pick for in the sector was the, my April pick.

A tiny. Little battery company that is, um, under the radar, uh, because it had bankruptcy issues, but it, with the help of the Department of Energy, it would not only survive, but it would, my thesis says thrive. So I’m starting to look into batteries and, you know, the way I do things, I, I really need to start at the bottom and then build my knowledge base up and.

Uh, to do that. I’m kind of trying to refresh my chemistry, uh, uh, and, you know, what are batteries, how do they work? That kind of stuff. So I came across this book, which I have not yet read, but you, you’ll be hearing more about it from me soon. It’s called Stuff That Matters, exploring the Marvelous Materials that shape our Manmade World by. Monik, professor of Materials and Society at Universal College London. Hey, maybe we could have him on the pod. He, uh, he had to follow a books, uh, liquid stuff. I think all about the liquids that, that into our world. So I kind of wanna get my hands dirty, you know, like back into the, the realm of the material.

And a second book that I did start in, um, Well, on my way is called charged a history of batteries and lessons for a clean energy future. And this talks about the more complex relationship between, uh, Renewables. It turns out Luke, whether you know, know this or not. It’s not just like fossil fuels and carbon emitting materials are bad and you could easily switch to another thing.

No, batteries require Earth, earth materials, right? Well, these earth materials. Uh, live in only certain places in the world, and lo and behold, not everyone has equal rights and there’s abuses in labor and all kinds of things. So it’s not a, you know, it’s not an easy problem, , to solve. But trying to understand, I guess, how, you know, the chemistry of this stuff, the shift that’s required gives me more confidence as an investor to then when I open up the investor.

Right, and I see the materials being used and the battery technology that’s being talked about. Okay. I have a platform from which to then kind of begin sussing out the legitimate opportunities from the fanciful stories. So that’s what I’m doing 


[00:19:14] Luke: Yeah, it’s, it’s a good shout. And I think that’s, uh, like my buddy Albert and I always used to refer to Megatrends and certainly energy is a massive megatrend for like, well it has been for a long time, but especially so as we transition more into renewable energy, like now it’s objectively cheaper to generate power.

Through solar than it is through fossil fuels. That transition happened a couple of years ago cuz of the cost efficiencies in making solar panels. So, as you say, like storage is, goes hand in hand with, with renewables because the nature of pretty much all renewable sources as they’re not guaranteed always on.

So you wanna be able to save that energy somewhere so you can pump it out when the sun ain’t shining, when the wind ain’t blowing. Um, so that makes total sense. Uh, glad you’re doing your, your deep dives

And your, uh, building your foundation and knowledge for those recommendations.

[00:20:07] Krzysztof: Yeah. And uh, one other thing to mention, Luke, it, it’s, uh, I also have a feeling that because things go in cycles, that the stocks that are linked to software, As a service. They’re the in turn, going to be forgotten and kind of dumped on. And when the macro economy shifts and businesses start getting better deals for their capital, those stocks will come back.

So it’s not that I, I’m abandoning in the sense it’s not that the thesis was wrong, I hate sounding like a broken record, but I think this is, the more I think about it for myself, the hardest thing to do in investing. Look in places that almost seem contrarian and.

Unpopular in where you’re gonna get a lot of blow back and you know, you’re wrong for this and this reason. And sometimes that’s a megatrend, sometimes it’s a timing issue. Sometimes it’s a particular company. Uh, but when people massively have negative things to say or you know, are listing bearish, uh, reason.

I want my energy and focus there. And sometimes if the bearish reasons are in fact credible and right, then I wouldn’t touch it, you know, with a, with a 10 foot pole. But, but where there’s contrary this, there is massive opportunity. I’ll put it, I’ll put it to you like that. So it’s not like energy and batteries are under the radar, but I think some companies are being unreasonably punished and likewise SaaS stocks. I kind of, I’m sensing that they’re gonna become undervalued in short time, 

[00:21:52] Luke: yeah, I, I buy that. I think your, you’re wise and your right to say, uh, your comment from a couple of podcasts ago, you know, you have to be right and you have to be contrarian. Um, you don’t have to be contrarian, but certainly there’s an advantage there because the market is fundamentally undervaluing, whatever that thing is.

Um, I listened to one of our colleagues podcasts just the other day, uh, while I was in the car. I think Matt interviewed a guy called, um, Tobias Carlisle. Dunno if you caught that one. Well worth the lesson actually. Um, and Tobias was chatting about among other things, Like investing in like companies and industries that are kind of scorned by the wider market.

But if something, if something is like a bit of a shit co. It could still be an incredible investment if it’s massively undervalued, like it might be in a terrible woeful state. But if sentiment is so hard against that company or the industry it operates in, it could deliver like really poor results and still have a massive optic because everyone’s expecting like even worse, it’s kind. Price for absolute doom. So I suppose there’s no one right way to be a successful investor. There’s lots of ways of approaching it.

[00:23:07] Krzysztof: Yeah, and I’ll add to that, uh, uh, another really important mantra is that I’ve learned maybe the hard way too many times. Is, there’s a big difference between loving the company and the stock. And that might be, you know, I mean that gets into the complexity so fast, so quickly. But as you know, for example, I recently sold my Nvidia shares I absolutely love Nvidia, but I sold all, uh, all but one of my shares.

and then, uh, you know, we were having a little bit of a banter. What did I do with the money? I, I put all the money from this beloved company of mine into this little Podunk battery. That’s new company that’s nearly bankrupt for which, by the way, dear listeners, I got rewarded with a clown face, a clown face from.

From a team member who shall remain nameless. But, but I save the receipt and we shall see. We shall see how that turns out. But I think the bigger investment investment here is it’s, I, I’m arguing it’s hard to do, right? It’s hard to sell a great company to buy a shitty company in. Well, shitty. I mean, it’s, it’ll, you know, it’s all relative.

Um, but. I think the, I made that decision because I was able to, given what I know, discern the potential of the stock over in the sense, you know, the potential of the company, if that makes sense.

[00:24:47] Luke: So clearly I gave you the clown face. I’m half in Jess and I was howling quietly, like sniggering to myself as I posted it. But, um, uh, you know, I have stock in both of these companies in Nvi. And in your little battery tech co. Well, at least I’ve got call options on it. Um, I want them both to succeed.

You’re absolutely right. I suppose I, I’ve taken, I think now the decision. Not to sell my Nvidia stock just to where whatever downturn is coming, cuz bottom it like it’s so ridiculously overvalued at 177 times free cash flow. The company has never been this expensive, quite frankly. Um, so it’s priced for beyond perfection.

I’m expecting my stock holding to get cut in half. Who knows? And if it does actually calls for celebration. Cause I’m gonna add to it. I just, I’m really aversed at trying to time the market. So I’m different investing styles. I’m unhappy to wear a downturn cause I can add to my position cause I’m still growing it and that’s yard, that’d be a good thing I think.

Um, but I, I wouldn’t argue with any investor who decided. Reduce their position I

about setting out completely, but reduce it makes a lot of sense. 

[00:26:01] Krzysztof: And I would encourage all our subscribers listening to this to not think in binaries either, because you know, this is a binary, the way we’re talking about it, almost like selling Vivian by a nearly bankrupt company or not? No, it’s more like, Um, somewhere in the middle, you know, there’s gray area and you could do it in terms of different percentages or you could actually, uh, uh, you could assess this problem in more ways than.

Uh, I am now. I used to be a long term investor when I never sell, and now I’m gonna be a momentum trader, you know, looking in the Dungy corners of the market. I think of myself as, you know, like a platypus. Uh, I try to really, uh, From the bottom up, from the fundamentals up. Looking to, to satisfy both those, both those, um, be right and be contrarian.

And sometimes when the, when the potential is so much greater over here. I’m not going to stay committed to a label or philosophy just because that’s how I invest in quotes, which 


[00:27:13] Luke: good. And I’m like, I’m fingers crossing you. It’s platypus as opposed to clownfish. Let’s hope it plays out that way. 

[00:27:22] Krzysztof: I really hope I don’t end up a clownfish.

[00:27:26] Luke: And you know, the only reason, the only reason I say that is, I think you’ve massively overallocated to this niche idea. You said you were something like 20, 30% invested in this one company. Like for me, that’s my style. That’s clownish behavior. Even if you’re in like a Google or an Amazon or something super robust, that’s just way too much allocation to do it into some crazy ass company. Well, you know, in my, in my world, that’s gambling. 

[00:27:58] Krzysztof: Yeah, that’s interesting. We’re talking, this is two poker players, uh, sitting at the table, you know, and the analogy I gave, uh, uh, in my report was that to me, this feels like holding ACEs, which pre flop is what? 80% ACEs, right? 

[00:28:13] Luke: sure. 


[00:28:14] Krzysztof: Or 82, whatever the nu Yeah. Whatever the number is, which means you know you’re gonna lose 20% of the time.

As I did more research and, uh, digging into this, I, I kind of bumped up the probability up to 90%, which still means I’m gonna lose 10% of the time. Um, my own, you know, assessment, why did I make it my number one position? Uh, and at approximately 25%. Is because I still think in my phase of life with income coming in, uh, and a 90 something greater probability, as far as I could tell, I’m willing to take the swing.

If I lose, it’s gonna be extraordinarily unpleasant for my portfolio, but I will survive and I will fight another day. You know, if you’re, if you’re in a different phase of life approaching retirement, you just don’t do this. So it’s risk management stuff. And you have to know, that’s the other thing you have to know, I had to admit to myself by working backwards, yes, if I’m wrong, can I be wrong? Yes, I could be wrong. If I’m wrong, I’m gonna lose this much amount of money. Will that devastate me? And then, you know, work from there. 

[00:29:29] Luke: Yeah, very wise, and this is exactly why, like, you know, it’s. Not risky. It’s like, it’s, it’s highly legislated against in terms of giving personalized investment advice. You have to go through a ton of training and in the end, the training tells you you can’t actually say anything useful to that person anyway.

It’s completely pointless. Um, you gotta figure this out, stuff out for yourself. Do your own due diligence. Don’t trust others. And it’s highly personal as you say, you know, your stage in. How much, how much of your net wealth is tied up in the stock market?

All of these things are very individual and very critical to those decisions. 

[00:30:04] Krzysztof: So, you know, I, I want to just twist this just a little bit just to kind of see, I’m curious how you’ll answer this Luke. This, maybe I should save this for, oh man, this could be, no, that’s what I’m gonna do. I’m gonna save this for one of the questions at the end of our conversation. 

[00:30:21] Luke: Okay. 

[00:30:21] Krzysztof: cuz it’s too good a question.

[00:30:24] Luke: Okay. 

[00:30:27] Krzysztof: Okay.

You have, uh, things to tell us about, uh, robotics.

[00:30:32] Luke: Uh, I do, yeah. Okay. Yeah, let’s do that. Um, we were digging through the Arc big ideas 2023 deck like a few episodes ago and picking up random topics. I dunno if we’ve got bored of this now, but I’ll do one more and then we can decide if we wanna carry on with it. Um, I picked out robotics, um, and I’ve got a bit of a vested interest cuz I think.

Kind of own a robotics company in my portfolio. So we’ll chew the fat over that in a sec. But a couple of factoids from ARC that I think are, uh, quite fun and interesting, and it all ties into the rapidly increasing efficiency of robots in different forms. Um, and how that, you know, how they’re becoming dominant in. Uh, manufacturing as well as a bunch of other sectors. So, uh, ARC tell us that Rob robot performance has increased 33 times in the last seven years. Um, so if we now compare, say at the end of 2022 A, this is like an Amazon warehouse type environment, so, you know, highly production line type of work.

So humans. Pick and place about 400 items per hour. Robots used to underperform that in 2019, uh, as of 2022, robots can pick and place a thousand items per hour. So now far in excess of the efficiency. Of a human. And I guess as a consequence of that, Amazon in particular, but a bunch of other companies as well are ramping up their deployment of robots.

So, uh, the Amazon have something like 1.6 million human employees worldwide. At the end of last year, uh, they now have half a million robots deployed, and that’s up from 350. Thousand, uh, a year prior, so, you know, accelerating rapidly. Um, and this is all really because of. Advances in machine learning, uh, computer vision, all these kind of AI type things that are just enabling robots to do much more, much faster.

And I gather Amazon are now producing over a thousand robots a day. So, uh, in the next couple years, certainly the number of robots they have in their warehouses and in their logistics chain is gonna exceed that 1.6 million. Humans. That’s quite interesting, I think. So when we say robots or we talked about manufacturing there, but actually robots are being used in lots of different sectors. So in healthcare, um, just a, just a sidebar a little bit into a company. I’ve owned the very first growth company I ever bought actually, and I’ve, I’ve already shared this on Twitter, so it’s certainly not private information.

Um, I bought a company called Intuitive Surgical who are. Surgical robots. Now, they’re not really robots today. They’re actually more like extensions of a human surgeon. And the, the surgeon has, uh, kind of a 3D augmented reality type view, and they have their own, their own hands are driving. Tiny, tiny manipulators on the end of like little robot arms inside the patient.

So they’re able to do, you know, micro precise surgery. But the company’s interesting cuz it’s kind of transitioning, I think, potentially into being a sort of truly autonomous surgeon at the point where, They, they’ll get FDA approval for this because already now, if you’re a surgeon doing some sort of, uh, well understood surgery that the robots have been used thousands and thousands of times for before.

If the surgeon tries to do something that’s a little bit unusual, you know, maybe they make an incision that’s perhaps not in the standard place for a particular type of operation. The intuitive surgical robot will give them a heads up and a warning won’t stop doing it, but it’ll give ’em a warning. By the way, you might be doing something, uh, unusual here so they can kind of check, check what they’re up to.

And so if we’re at the stage with intuitive surgical where the robots are kind of monitoring and prompting, we’re probably not that far away from the stage where. Subject to approvals, the robot’s actually doing the surgery, maybe overseen by a human surgeon, and then suddenly gonna democratize healthcare, make these complex, expensive operations perhaps much, much cheaper.

And. Kind of roll them out to the whole world. Cause you wouldn’t need to be a surgeon in the same geographical location to be able to oversee like a hundred robots doing these, uh, prostatectomies perhaps all over the world. Um, at much lower cost. So robots in healthcare, I think very exciting. Um, robots in agriculture and food product.

Uh, you know, farmers are far more efficient these days, and like one human can, , manage a far higher output on their farm, um, with robotic assistance, um, robots in exploration and research, you know, in space or in hazardous environments. Um, I think really interesting, really interesting sort of conversions of robots and ai and we’re gonna start to see this stuff, um, far more.

And even our friends over at Open ai, they’ve very recently invested 23 million, not a lot of money, but bodies shows the direction of travel of their own thinking. They’ve invested 23 million. Into the robotics company, one X Tech. So this perhaps hints at some ideas they’ve got about bringing, you know, chatGPT or their other technology into the physical world.

Um, and I guess we’ve all seen the Boston Dynamics robots kind of leaping and prancing around. I’ve only seen ’em on YouTube, but they certainly seem to be far more agile, uh, and perhaps well terrifying I suppose, over the last year or two. That’s

their capabilities Would you make of all that?

[00:36:32] Krzysztof: , mind blown. I can’t stop thinking about everything you said in terms of the increasing rate of change. So that’s what’s coloring all of that, that you know, it, it’s not even so much that we can make fancy robots. It’s at what rate that. Beyond what we comprehend or expect. Will these robots begin pro proliferating and actually, uh, not taking over in the dystopian sense, but taking over things we once did not think could be taken over.

And then part B for me is how do you model financially something. Robots being made deliberately by a company like Tesla, who we know has the world’s best engineers and essentially unlimited capital pool, and that they’re deliberately working on creating more and more robots. Like where in your spreadsheet do you, how do you, how do you evaluate any of that?

Which is, I think the answer is people don’t, right now, I don’t think there’s any analyst on Wall Street that. Robotics in Tesla’s p and l, and yet it could be like, what? Hundreds of billions. I mean, I don’t know. I 

[00:37:46] Luke: Certainly massive accelerant to their efficiency if they can start to, or it wouldn’t even be about taking humans out of their manufacturing chain. It’ll just be about like 10 Xing their manufacturing capability with the same number of humans. Um, yeah, probably, probably one, uh, wall Street ish firm that have baked their stuff into their model, I guess is Arc Invest.

Right. They’re pretty fanciful with their financial models, and I thought,

[00:38:13] Krzysztof: Right. They’ve just earned on the other side, which is slightly inaccurate. 

[00:38:17] Luke: that’s right. 

[00:38:18] Krzysztof: world, uh, real world, uh, numbers, 

[00:38:22] Luke: It’s something about buying a robot. Right now, I’m, uh, I’m in the market for a robotic lawn. And, uh, spring has sprung so the, the grass is starting to grow again. It’s probably time right now. Dunno if you’ve, uh, had a play or seen any of those in operation recently.

[00:38:35] Krzysztof: Didn’t, didn’t, uh, what’s it called? The Roomba people, didn’t they, weren’t they working on what?

[00:38:42] Luke: I was holding out for one. They had one, but they announced in 2019. And it turns out I just, I literally refreshed my DD on this just an hour ago, cuz I’m looking on Amazon to buy a, a lawnmower. Uh, it looks like they canceled it in 2020 cuz they wanted to focus cuz of covid and, you know, supplies chain challenges.

So they’ve just kind of doubled down. They’ve, they’ve launched a mopping robot for the house so they can need like mop and vacuum, but you can’t cut, cut your grass yet. So it looks like. Bosch and a few other manufacturers are the place to go. 

[00:39:11] Krzysztof: Okay. You know, uh, I mean, maybe you are, you’re a British royalty, whereas us Yanks, we like getting out there. We like rolling up our sleeves. You know, put on the rice hat, you know, uh, and, and put, you push the thing. I don’t even use electricity. I get one of those, one of those manual things, you know, work those traps, work those delts, you know, get out there, break a sweat.

Just a different difference in, in, uh, way, way of, uh, living. Huh?

[00:39:38] Luke: I gotta, I gotta protect the neighbors cuz uh, they usually get an eye of Katrina in a bikini doing mowing the lawn. So, uh, it’s to protect

their eyes. 

[00:39:50] Krzysztof: Luke, are you ready for your three questions 

[00:39:53] Luke: Uh, yeah, I am, let’s do 

[00:39:56] Krzysztof: because Yeah. Uh,

Uh, so wait, I need to, um, I need to cross one of these out.

[00:40:06] Luke: While you’re figuring that out, if you’re just joining us on episode 15, um, Krzysztof is gonna pitch three conversation topics to me. I’m gonna put a line through one, then he’s gonna pick one of the remaining two, and I’m gonna try and give him a minute of wisdom on whatever random fanciable thing he’s come up with. 

[00:40:23] Krzysztof: Okay, here we go. Here are your three, three options if you could. Number one, if you could become. Uh, master or, uh, say PhD in an academic discipline overnight to better your investing chops, what would it be?

Question number two is you are faded to live the rest of your life with either intense boredom or intense anxiety. Which of those two do you, uh, do you pick?

And then the question I really hope you, you, you answer is it’s the beginning of the night and you are told that on your way to the, to play poker in a high stakes, high stakes poker world, you are going to get delta ACEs.

At five times a greater rate than than probability suggests. And so these are big stakes. Big, big table. How much of your, of your wealth do you bring that night to that table?

[00:41:37] Luke: Got it. Okay. Uh, I think I’ve got an answer for all of these, but I’ll like, I guess you wanna talk about the last one. Uh, my answer’s gonna be boring to all of these a little bit. I’m gonna put a line through bored of anxiety cuz that’s just gonna make me depressed answering that question. Yeah. 

[00:41:59] Krzysztof: Okay, then. Then talk to me about the way you would think about this question regarding you getting Dell ACEs. At five x, you know, you’re gonna get ACEs five x the normal rate for one night, and you have access to a high stakes, uh, Texas, no limit game. 

[00:42:21] Luke: Yeah. 

[00:42:22] Krzysztof: How much money are you bringing?

[00:42:23] Luke: So, uh, so there is this thing, the Kelly Criterion, which you may not, may or may not be familiar with. You, you heard of that. 

[00:42:31] Krzysztof: Uh, it doesn’t sound familiar. 

[00:42:33] Luke: Okay. Okay. Well, interesting. So it’s, uh, I’ve, I’ve forgotten the formula. I’ll take a guess at what it was. It’s one of two things. So essentially the Kelly criterion says if you are gambling, uh, and you believe you have the best of it, I think, um, so you, you have an edge then what percentage of your bank role should you wage.

Um, uh, based on your probability of success, and it’s, it’s kind of optimizing your return relative to the risk of those smaller kind of outcomes wiping you out. You’re trying to minimize the risk of ruin. Um, and it’s, it’s, it’s either half or two times your. Edge, something like that. I mean, go Google it.

I’ve forgotten the details. Um, so I’d probably apply something like that, but my, like if I was really in this magical scenario, so I’m playing a pretty big game in about two weeks time in London with some buddies, uh, private game. Hence my buddy who’s band is playing that game.


like I 

[00:43:38] Krzysztof: Why do I so badly want in on that game? It seems.

[00:43:41] Luke: You don’t trust me. You don’t. It’s horrific. It’s all complete loos. Um, so, uh, so I do have a, I have a sort of notional poker bank role. I’ve got something called, uh, some poker Tracker app, and it’s kind of my lifetime, uh, winnings to date since I started tracking such things. Um, and it’s a, it’s a number in the sort of moderate five figures Sterling.

Um, I guess if I knew I was going into that game and I was genuinely gonna get dealt ACEs five times more frequently, and so I’m gonna be a. You know, significant advantage in this game, even though someone will spot eventually that I’m getting a lot of ACEs, um, I guess I would take my whole bank role, um, and I’d just kind of wear it and I’d be happy to get wiped out.

I suppose I’d need to raise that money cuz I don’t have that kind of cash just sort of kicking around at a bank account. But, uh, but yeah, go big. I’ll go


[00:44:37] Krzysztof: See, that’s what I was talking about. Every so often you get, you get dealt an investor’s hand, right? You know, you’re either a poker player or you’re not. And if you are a poker player or investor, and here I’m defining it as both are enterprises that have, uh, that include high levels of skill with, uh, an inevitable.

High, uh, luck factor, but in which the skill outweighs the luck. So if you’re getting the best of the, of the sort of probabilities given to you, it’s kind of, it’s it, it’s almost it. I’m overstating this, but the way I’m thinking about it now is if I didn’t wanna make a high percentage bet on this high probability, Investing outcome, then I should maybe invest in index funds, 

[00:45:31] Luke: Sure. Somewhere in somewhere in between those two things is probably the correct answer. And based on your. 

Age and your ability to recover from a total of wipe out, that’s pretty key. Like, I will, not to break your analogy, but ACEs are only like a 50% favor against two opponents and against the, you know, if you get four or five people calling you, you’re probably gonna lose.

So, um, you know, ACEs can be good in the right situation, but they can be. Deadly as well because you’ll tend to overvalue them and uh, you’re generally gonna play a big pop. So I I, if you gave me a choice of being dealt ACEs or being dealt nine 10 suited, I’ll take nine 10

every time. Cause I kind of know where

I am.

[00:46:12] Krzysztof: Oh, interesting. Okay. All right. Am I ever gonna get an invite to a game with you?

[00:46:19] Luke: We’ll get a game. We did talk about having a game with members of the seven investing Discord, so maybe we should, um, renew that suggestion to Simon. I think it’s a bit, maybe a bit unethical, but we’ll have to play for prizes rather than cash, I think. 

[00:46:35] Krzysztof: And quality time with us? Right? What’s more valuable? 

[00:46:38] Luke: you 

[00:46:39] Krzysztof: Luke. Uh, so good seeing you Cro on the right side of the, the pond.

Good luck in, uh, good luck in Dublin. 

[00:46:46] Luke: Thank you. Yep.

Absolutely. Yep. Good, good spending quality time with you as ever. 

[00:46:51] Krzysztof: and, uh, let’s see, uh, Let’s see what happens in two weeks time.

[00:46:55] Luke: Let’s do it. Hey, by the way, we have to meet at some point. My mom is a big fan of yours. Uh, so, uh, she’s reminded me when I saw her the other day. We need to, uh,

we need to press the flesh at some point soon.

If I make it out to Vegas, I’ll let you know. 

[00:47:10] Krzysztof: That’s the best news I’ve heard in in a long time. All right, Luke, take care.

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