The truth about investing - Patrick Boyle

25:51So people kind of incorporate these new technologies to try and look modern and ahead of the curve. Yeah, and I think it's funny because actually the other day I was listening to the Odd Lots podcast and they had a woman on who was, it was all about how a Zempick would affect food companies, you know, because if people are no longer - Eating. Well, or sort of binge eating on, you know, Fritos or whatever. I saw 5 % of like fast food company profits are at risk or something. Yeah, well, that was kind of what they were talking about. But they had this woman on and she was very interesting in many ways, But the company she worked for, I think, had some sort of AI thing for working out like new flavor ideas.

26:39And she said, well, you know, it's interesting because many of the flavor combinations that work well in AI didn't really work in real life. And she said, I think people just like the more traditional pairings. And it's like, it might be that people like traditional pairings or it might be that we've had thousands of years to sort of taste whether milk goes well with coconut. You know what I mean? We've mixed everything together. Tuna and watermelon isn't going to float. And no matter what the AI says. It's funny because I do think there are problems that might require an awful lot of iteration.

27:18And therefore, a machine will do that faster than a person will. But there are certain flavors. I don't know. I mean, I'm sure they have some science that I know nothing about and I'd be an idiot. at being negative about it. But it only surprises me so much to hear that an AI bot isn't as good as someone who eats at saying what tastes good. Yeah. They've got no ability to taste the thing that they're recommending. So AI is one. I think there's a quote, isn't there, that we underestimate what tech can do in a year, or overestimate what it can do in a year, underestimate what it can do intend. Yeah, yeah.

27:56Well, that's an interesting thing. It's funny, I was listening to Hidden Forces, another podcast, on the way here, and the guy, Dimitri, was talking about how the world had changed from the 1990s. And it was interesting because his idea was maybe more that the way people behave and the vibe has sort of changed. But in terms of overall technology, I look at, if you get in a car from 1995 or a car from today, like, you know, the big difference is that the new one has sort of a computer screen in it while the old one had analog readouts. But you wouldn't be awfully confused and there's not sort of massive improvements.

28:40I think the biggest is go to a gig and see what the crowd looks like and everyone's holding up a phone. And I think that speaks to the biggest change we've seen in our lifetimes. Yeah, well, just that we have these everything machines, you know, and it is amazing. And yeah, I think, but it's interesting in terms of like, yeah, the mobile phone is definitely a huge change over the last 20, 25 years. But beyond that, you know, there's sort of, there's often this idea that we'll have a Jetsons-like feature. And then it's sort of the same as it was. But instead of a camera, we have a phone. Instead of a book, we have a phone.

29:15Instead of, you know. Yeah, and everything machine is perfect. Dictifor and all these, you needed 50 devices. Compass. And now it's all, yeah, compass. For every time you need to know where North is. It's like everything's all in the phone. Yeah. Yeah. What about crypto then? What about her? Well, how much have you got? That'll be a big zero. No, I find it very interesting because what's interesting about crypto is there's a bunch of people trying to sort of reimagine the financial system to say, if it hadn't been built the way it has been built, you know, which is often off of a history of, you know, paper certificates and things like that.

29:54Could we build it better? And I think that's really interesting. And just in terms of how money is moved, how it's settled, all that sort of thing is interesting. But in terms of like, would I put my savings into it? No. I think it's not really of any interest to me on that front. Do you think there's something then that retail investors, normal people that are listening to this could learn from your quantitative or quant research? Is there anything that they could apply? Not necessarily, because a lot of my stuff is just about predicting short-term moves in markets. And in truth, with that kind of research, you don't necessarily need to believe or care that much about the...

30:39Actually, there's a very good book I read about a year ago about Jim Simons. I forget what it's called. I made a video about it, actually. Great book, but one of the very funny examples was of an investor who came into Renaissance Technologies and they were asked for an explanation. One of the traders, I think it was Mercer, came out and said, well, let's say if Chrysler stock was doing this, that, and the other, and he kind of made this big example around Chrysler, a stock that hadn't existed in like five years. And it sort of shows that a quant investor isn't really that interested in the name of the company or what it does.

31:23It's more interested in sort of its statistical properties. And are you doing this analysis on individual companies or are you talking about home markets? For me, different people do it differently. I was very index-based. I care a lot about liquidity. So basically the thing that makes, and I care about taxes. So futures are kind of a good product for short-term trading, just for US tax reasons, and also just for liquidity. It's very, you know, the size I've traded, it's very hard to move the futures market. And is a lot of it behavioral then? So usually the way it will work, you know, there's a mix where I've sort of tried just to throw a computer at the market and see what it pulls out.

32:13And then I've originally, I tried to just think about what people would do and whether, you know, basically a behavioral idea and see if it works in markets. I found the former idea to be a little bit better. You know, essentially, if you look for market moves that might cause people to make mistakes, there might be an opportunity in there for you. Because I think most of the time, investors in markets are very rational. And once in a while, something really strange happens. And that's when they sort of fall back on instinct. And often in that instinct period, sort of herd behavior occurs. And if you're looking to find repeatable trading ideas in market, you're basically looking for herd behavior.

33:11Okay. Okay. It's interesting because you say that the market's rational, but you watch a YouTube channel and it often focuses on the irrational aspects of the human condition, doesn't it? Yeah, well, that's sort of what's interesting, isn't it? Like, I think what I often look for and what I'm drawn to both in terms of just like what draws my attention is unusual things that maybe need a little bit of explanation. Like one of the videos that kind of the first big video I had on my channel, it felt big at the time, I think it got 20 ,000 views, was when oil prices went negative. And people say, well, what's going on?

33:46And I say, oh, I can explain that, you know. And so, yeah, I guess I'm drawn to sort of unusual examples or odd things that happen and sort of how they fit within finance theories. I worked for a property company before I was, like a few jobs ago before this. And we had a series of clients that were traders and they worked in oil futures. And they were the guys that made 700 million in 10 minutes. And then they've all disappeared. Because the Americans, I think, said that they wanted to do them for, I don't know, they bet that the oil prices would go negative and they made a lot of money in a day.

34:21It's an interesting thing because, you know, what really just happened was that, you know, the way futures work is oil has to be delivered for West Texas Intermediate has to be delivered to a facility in Cushing, Oklahoma. And an awful lot of oil had to be delivered in a couple of days time. And they realized that there was no room for it. You know, the tanks were all full because COVID had happened and planes weren't flying, cars weren't being driven. And so there was really, the oil, of course, is intrinsically valuable, but the cost of storing it was greater than its value. And that's why the price went negative.

35:01So it's a storage problem, not an oil problem. It was a storage problem, yeah. And even just the idea of pipelining it to somewhere else, you know, these pipelines get, well, and they get booked, you know, months and years in advance. So you can't quickly come up with, you know, if you're receiving a couple of super tankers of oil, you can't quickly, you know, find a place to put it. So you mentioned a second ago the ex-hedge fund or you did have a hedge fund. Yeah. Would you describe your hedge fund as successful? Yeah, yeah. I mean, you know, we were in business. When did we launch? Around 2012.

35:36And I sold the business in, I think, around 2018. and then I kind of stayed on as a director a little bit longer. Did you enjoy it? Were you happy when you sold it or did you miss it, like staying as a director? It was a very funny feeling. Initially, my plan was actually just to relaunch it. You know, it was part of moving from, I lived in the UK and was moving to the US and I thought, you know, you can't manage a UK fund from the US. So the plan was to sort of relaunch in the United States. And then, you know, there's sort of non-competes and things like that. And basically when it came time to relaunch, I didn't really want to anymore.

36:23Well, no, it was even just, you know, small children, you know, you're going to get on the road, you're going to pitch to investors. You're going to... And running a hedge fund is quite different to being a trader. and I really like research. I really like trading. When you're running a hedge fund, you're kind of managing people. You're meeting with investors. You're doing almost everything but the thing that you are most interested in. He said you've got like 200 people that have funded it. Each one wants one day of your time of year and they've all given you 200 million quid. So you've got to give them that day.

36:57So that means I just spend the whole year flying to meetings and I don't ever actually do the... No, because you hire a marketing person, but no one wants to speak to the marketing person, right? So the marketing guy just sets up meetings for you. And yeah, I don't know. It was an amazing experience and it was really intense. Like we worked so hard, but then when you take a year off, I almost wonder if this would apply to many people that if you take a year off, you kind of look around and say, what do I want to do? And it might be something different than what you're doing. COVID did that, right?

37:35Yeah, I think so, yeah. That made most people stop. And then loads of people were like - Yeah, and even consider where they wanted to live and all sorts of things. I don't want to do this anymore. How you want to live, where you want to live, what you want to do for a job. Yeah, yeah. You just kind of had this room to breathe. You get off the treadmill for a second and you think, oh, why the fuck am I running on that thing? Yeah, because often there really is just that, you know, inertia in life, you know, where, yeah, it's, you know, it's probably worthwhile every once in a while to pause and ask yourself, you know, is this, because actually if you had asked me in like mid 2018 or 2017, I would have told you I'll do this till the day I die.

38:11You know, I really, like I loved trading. I loved research. I still love all of that stuff, but I didn't necessarily find I was doing it. And in many ways, you know, building a business is very exciting and it's a different thing, but in a way you're kind of building, building with this idea that you'll get back to the thing you used to do. You never got back to it. You never do, yeah. Do you take this approach throughout your whole life, like research, everything you do, or is it just financial? I don't know. So if you're picking schools or, you know. It's funny. I think I'm an analytical person, you know.

38:46Like I think, you know, most of us sort of are the way we are. And I think if you can line up a type of work that works well with your nature, you'll probably do well at it. Last time we recorded, Tamein, you were having some real dramas with your accountant. So how's that been going, mate? They're sacked. So drama sorted. They're a big corporate firm. They didn't really reply to my emails very quickly, like took a week or two at times. And they charged me way too much. I mean, I've got pretty simple taxes and yeah, they were charging me thousands. They saved me some money, but yeah, I had to move on.

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41:26That's vanta.com forward slash making money. There's a link in the description though, so you can just click that. So, you know, you obviously do a lot of research on your channel now as well. So it's kind of similar. And you said to Richard Coffin at Playing Bagel that 90 % of what you did when you were in the quant side was research. Yeah. Yeah. This thing about doing something that you're good at, I would say that maybe one of my talents is I'm a good communicator. I'm good at people will say, oh, I'm relatable. And in the finance world, we struggle with that. But then the research side is something that I've kind of had to push myself into, if that makes sense, to make the content good.

42:04Because I have a desire for it to be good. It's not something that's naturally come to me. Yeah, yeah. But even still, I guess, if you are researching it, Because sometimes I'll start work on a video and I'll be, you know, digging into it, not just this is boring, you know. And if I don't find it, it might be an amazing topic, but if I don't find it interesting, I'm not going to communicate any enthusiasm for, you know, because sometimes you just sort of feel like, gosh, you know, I do a video a week. It's time to work on a video. But, you know, there are times when there's nothing that really grabs your attention, you know.

42:42And that's going to be hard, you know, but luckily there's so much happening in the world. So what do you do in times like that? Do you just not make the video look for something else? Well, it's interesting. Well, I have, I keep a list in my phone of like often I'll just be out and about and I think, oh, that's a bit interesting. And I'll just put a note down. And so if I don't have, you know, if there's nothing like really gripping in the news or whatever, I'll dig through. And often I look through that list and it's ghastly. You know, you think it's a great idea. at the time and you're like, I think I know why I didn't make that video.

43:16But other times you, because often what I look for is not so much just to tell people the news because they often know the news. I think it's to say, here's the thing that's happening, which is timely this week, but more interesting, here's like an idea from finance that if you know this, this can sit in the back of your head and it'll be useful to you for years to come. So sort of, I guess, a meal for a lifetime tied in a meal for a day. I think as well what you do well is, if I use an example of, say, Silicon Valley Bank and the collapse there, there's a lot of hot takes and people saying this happens.

43:57And then you go, no, actually, this is what's happening. This is how it could affect the system. This is why it's important or why it's not important. You know, So you have that finance view on it that many creators will just rush to repeat the headlines. And you can tell they've just skimmed the FT and are spitting out what they've read there. It's funny, though, because there are some creators, like I'll sort of expect them to have... The funny thing with YouTube is that you're slightly incentivized to put up fairly clickbaity thumbnails. And there's some people and I'll see their thumbnail and I'll be like, oh, what an idiot.

44:31But then if you click on the video, you're like, I actually did a pretty good job at that. I think you also, though, you create the audience long term. So for you, I think, you know, you could probably put out anything and you're going to get a couple hundred thousand views because people trust you, your research, your style. I'm the same. I can, instead of going like, why the S &P 500 is going to crash, I could say, should you buy a global index or the S &P 500? And that video will get a load of views because people, the audience know, they trust. I think people who rely on clickbait go down a path that they can never get out of.

45:05Yeah. Well, and often the problem with relying on clickbait is that often the thing that will sort of drive people's emotions the most is very negative. You know, so it's sort of, yeah, like you say, I mean, if you look at some of the big finance YouTubers, like a lot of their thumbnails are sort of the world is ending. But every day for the last, you know, 10 years they've been saying that. And, you know, I think it does work in that people sort of see the flames in the thumbnail and they kind of go, oh, I need to know this. But after a while, like if you've watched a few of those videos, maybe you lose interest in sort of the same thing over and over.

45:44You get desensitized. You're like, okay, like the last four videos you said at the end of the world and the world's still going and now you're making a new video. I also think the long-term finance audience wants to learn. They don't want to see the world burn. You might get like the passive viewer who goes, well, yeah, clicks on that. But what you want, like you said, maybe off camera because T was too busy messing about, is you want an intelligent audience that wants an intelligent conversation and they're going to show up every week for years, right? Yeah. Well, actually, sometimes like, you know, I'll run into someone, you know, an awfully smart person that I have a huge amount of respect for.

46:18And they'll say, oh, I love watching your videos. And I'm like, gosh, you know, because I don't, you know what it's like. Like you put out these videos and a number, you see a number of views, but you don't really know who these people are or kind of what it means. How do you feel about the success of your channel? It's funny because I, as I was saying to you earlier, I'm often surprised like when someone will say to me like, oh, you have a big channel. And I guess I know a few people who have bigger channels than me. And so I still think of myself as kind of a small YouTuber. There's always a big amount to.

46:50Yeah. And so, you know, I have friends like, you know, Coffezilla, who is, you know, he puts out a video, it gets 3 million views, you know, the biggest video I've ever had. In fact, actually, an interview that I did with Coffezilla a few years ago probably got more views than almost any video on my channel, you know what I mean? So when someone says to me, oh, you have a big channel, I'm like, well, have you seen this one? That's one of our guests, Tim Armou, said that. He said that you always, whenever you're in a new room, you're like, oh, I'm a millionaire, but he's got 10 million. And then the guy with 10 million is like, oh, he's got a billion.

47:23And then the guy with a billion is like, well, he's got 20 billion. So you're always looking at the next stage up. But do you ever do quantitative analysis on your channel? Not really. Like for yourself? Yeah, it's very funny because I never know. Every video I make, I'm an optimist and I always think it'll do really well. And then there's some that do awfully well. You're the opposite to me. I guess I'm enthusiastic. You know, when you hit the upload button, you're like, well, you know, I think that's decent. And then, but I know. That's terrifying for me, that process. He hits the upload button and turns off all the lights and puts a blanket on his hand.

48:01He's just like, everyone hates me. The world hates me. Yeah, hide behind the pillow for a little bit. And then I come out and everyone's like, oh, I'm like, oh, it's okay. But the thing is, I can never gauge, like when a video does awfully well, I'm like, I really don't know how. And there's some of the videos I put up that I really like that didn't get many views at all. And I can never under, you know, I have no instinct for what people will want to see. So I just put up what I find interesting. I think you have to separate yourself from views being the measure of success because they're not.

48:30It can be so random. Yeah. Timing as well. You know, how do you know that you might release a video and then that hits the news somewhere else? And I think most YouTubers, once they get past a certain point, realize that views are a bad metric of success in a way. Yeah, yeah, yeah. I mean, you always want, you know, you don't really, you wouldn't go to the effort of making a video if you thought that no one would watch it, you know, that would be insane. But... You did that at the start though, right? Kind of actually. It is true, yeah. Well, early on, a lot of my videos were sort of to help out my students because, you know, I teach at two universities here.

49:11And often as exam time approaches, you know, I'll get these emails and they'll say, you know, can you explain implied volatility to me again? And I start typing, you know, and then you start sort of, you know, if you get three of those, you copy and paste and send the same text to three different people. But I thought, well, gosh, you know, I could just explain it once quickly and here's a link and that would work better. And so actually amusingly, when I got to the end of, you know, probably my first year or so of, and it took me about a year and a half, maybe two years to even get a thousand subscribers on YouTube.

49:48And at that point, I thought, well, I've done what I came here for. You know, I've got the links I can give to the students. I'm done, you know. What do your students think of, I mean, it must be quite odd for them, right? You know, I don't think, amusingly, I would bet that most of them haven't really heard of the YouTube channel because a lot of an awful lot of international students, you know, so they, you know, they're from China, they're from India, like the Chinese students, they don't have YouTube. actually a funny thing though is about a year ago one of my students told me that there's whatever the chinese version of youtube someone has like overdubbed all of my videos and uploaded them there so that's kind of funny you're just all over wechat or something like this yeah yeah i mean it it seems it seems mad to me that they they wouldn't know do you what do you think of the space as a whole before you answer that question i i remember when you came into when you started to blow up And it felt a bit like the chatter in the personal finance community was almost like when the ETF for Bitcoin came out.

50:49It was like, here's an example of mainstream adoption of what we do. You know, in the sense of you're from a traditional finance space, you ran a hedge fund, and then you started a YouTube channel. It felt like the traditional finance world was taking us that space seriously. Well, it's interesting as well, because I guess there are, you know, like Ray Dalio has a YouTube channel, but it's kind of, it's very produced. Highly stylized. Yeah, and it's kind of, it's more like TV and just, it's sort of like corporate. While I think the thing that people like about YouTube is that there's a real person there talking to them.

51:25And, you know, I think, yeah, there are, of course, like, you know, really big kind of important people on YouTube. But often, I think it's almost a mistake sometimes if you make it too much like television, because television is designed to be sort of watched and it's about separation in a way. It's sort of there's on the stage and off the stage, while YouTube always feels more like a friend telling you things. Or even, you know, listening into this conversation, like I imagine people at home, they're listening and it's almost like they're kind of down at the pub with friends talking about something and they don't get to talk very much.

52:05but um you know there's there's a much more natural feeling to this than than we'll say a traditional television we get traditional people in here from traditional media and they come in and go oh it's an actual house and i'm like well of course it is to me it's like why wouldn't it be but they think maybe it's a set that's made to look like a house or something like this but yeah it seems obvious to me to be low budget almost because i'm a consumer of youtube yeah the best thing i like when i see a creator is going back to their old videos and seeing that journey. Yeah, yeah. Well, it's so interesting how, it's funny though, because there's a few things that possibly make you good at YouTube that a lot of people can't pull together because you might be really good at telling a story, but not good at, you know, working a camera or working the microphones, doing all of this stuff.

52:55And I think it's hard, like I just happened to like be a bit of a hobbyist photographer and had a decent camera around the house when I got going and things like that. But even, you know, the microphone, like in the early days, my sound would be awful, either way too quiet or loud and clipping and all sorts of problems. And the thing that used to make me laugh is that people would say like, get yourself a decent microphone. It's like, I've got 12 decent microphones. I just don't know how to use them. Yeah. What do your peers think from traditional finance about what you do now? Do you speak to any of them?

53:30It's funny because I think most of my friends wouldn't even really know that the channel exists because I don't really think about it or sort of talk about it that much. Because, you know, my main focus, I teach at the university. I do even like a lot of online classes for the university. So I'll actually, that's what's quite cool is I've got like a good sort of streaming setup, you know, because of my YouTube studio to do teaching. But most of my friends, I bet most of my friends don't even know that I do this. But the channel's a big thing, right? You say your focus is the university thing, but the channel is a big business.

54:06But I think it's a niche thing once again. Like I think, you know, there's people, like I said, there's people who know it and they sort of, if they've watched a lot of the videos, they know it and they think it's great. But if you haven't, you know, it's entirely off the radar. Every video you do fills out 10.02 arenas. So, you know, it's niche, but it's, you know, Drake only filled it three times. So I think it's, the scale is massive, right? And it's international. Well, actually, a funny one was a little while ago, I put up a video that it's the best performing video I've done on the line, you know, the linear city.

54:45in Saudi Arabia. And that really quickly hit like 2 million views or something like that. And that week I went to my guitar lesson and the teacher was like, I saw you. And I was like, what do you mean? And he's like, you have a YouTube channel. So that kind of, I guess, went outside the finance niche into just kind of broader YouTube. Did you ever get scared? How do you mean? I'm not just scared of like the possibilities season of growth and like being in the deep ending like wow now everyone knows who i am and well only now that you're saying it yeah yeah i feel like the bigger youtubers get like the more i didn't sell a hedge fund so i'm still trying to pay the bills maybe perhaps a bit more comfortable so it's a bit more chill actually it's funny because um you know over the weekend i was talking to a guy who has a big podcast and uh it's funny because my wife had been on a plane and she noticed that, you know, you look around on the airplane of what entertainment people have, and a number of people had his podcast on.

55:51And I was like, you know, your podcast is way bigger than I thought it was. And he's like, yeah. Now, while we've got you, what I would like to talk to you about is if we could zoom out a bit, maybe leaning on your research, is a little bit about the UK economy and your views. You say you dip in and out of the UK. Yeah. You made a video where you looked at, I think it was a Goldman Sachs paper, which basically pointed out that the UK, amongst its peers, was doing pretty badly. Yeah. Yeah, there's a number of struggles. It's always complex as to what causes problems. And people, for various reasons, it's very easy to say it's definitely because of Brexit, but it would appear to be something other than that.

56:39There were a number of papers I looked at. One, I'm trying to remember who wrote this one, but British stocks have maybe underperformed. The underperformance began around the time of the Brexit referendum, but it's so uniform. A way of thinking about it is that if Brexit was definitely the issue, there would be some companies that were heavily impacted by Brexit, and they should do horribly. And there's other kind of British companies, but they're so international that they're mostly unaffected and they should do fine. While actually you find that the discount is fairly broad based, like that all of the companies have sort of started trading at a discount about US and European companies for some reason.

57:32And some of it is, you know, there's kind of been maybe a little bit of a productivity deficit in the UK over the last maybe 20 years. And this has been talked about for quite some time. British businesses are not investing as much. Maybe they underperform and maybe the uncertainty associated with Brexit. In fact, that's partially even why I wanted to move from a UK-based fund to US was just that it wasn't very obvious that I'd be able to sell internationally post-Brexit. So you look at these things and you think, well, maybe the reason, although Brexit itself is not necessarily the cause, maybe it sort of put a bit of a scare amongst business people and they backed off on making any big plans and the lack of plans has possibly hindered the UK economy.

58:31But nonetheless, it would still appear that British stocks are trading at a discount to, even when you adjust for sectors and so on to American stocks. You talk about tools. I'm going to point to, I say it all the time, but the internet speeds here. So I've got shockingly bad internet where I live up north. Yeah. Copper wire, it's below what they deem as a minimum requirement in terms of speeds. Do you think lack of investment in infrastructure, that could be the thing? That is exactly the type of thing that will hold people back because productivity is just basically how much work can you get done in a given time.

59:09And, you know, what are the tools? You know, you give a person a computer, they could do more work than they can do without one. And, yeah, I think, you know, that sort of thing, you know, and a whole bunch of little things like that could be what has been holding the UK back a little. I drive to my local Tesco's car park to get the signal to upload videos to the channel. Do you really? Wow. That's how slow it is. Sitting there for an hour with a meal deal. Oh, it's funny because I have quite fast internet. And a while ago, I worked out that when I plugged my, I used to just, you know, wander around the house with a laptop.

59:47And I worked out when I plug it into a router, I get about 10 times the speed that I get on Wi-Fi. And then I realized if you match, if you have all of the correct cables in your house, you get even faster internet. So then rewired every cable in the house. So I bought Starlink, which is Elon, your favorite guy. And what he didn't really mention was the upload speeds are terrible, which is a function of a signal being sent up down from a satellite. I know. Starlink is kind of an interesting thing because it's basically a Wi-Fi router in low Earth orbit, right? And what's interesting about that is that when not many people use it, you'll get decent upload and download speeds.

1:00:34But the more people who sign up, the slower it'll get over time. And even it's a very funny thing because when you think like two thirds of the planet is covered in water, most of the satellites are hovering over areas where they're doing next to nothing. And then even in terms of who can afford to pay for an expensive internet service, it's kind of Western Europe and the United States. So it's a very interesting thing where an awful lot of the satellites are kind of... It would be amazing if you're like a farmer out in the middle of nowhere. And I think at the moment in big cities, you're probably still doing okay with Starlink, but should mass adoption occur, you'll probably see slower speeds.

1:01:20It's certainly not cheap either. It was sold as it would be very cheap. It's not. It's£110 a month I pay, I think, for it just to have an okay download speed, which is nowhere near as fast as fiber. And then like you say, the people I know who've got it are like, they've gone traveling in their£100 ,000 van around Europe and they stick one on the roof. They're like rich people. It's not like helping people in Namibia get online. No, no. Well, yeah, that's kind of the problem is that it doesn't, it's, you know, who knows what will happen in the future, but it seems it would struggle to serve a mass audience, I think.

1:01:56So the future point now that you mentioned, what do you think will happen in the future? The next 10 years, like what kind of trends or themes do you think will dominate investing? One thing I think is possibly that we'll see a reversal from growth to value, and that's just based on the fact that in the very long run, both styles of investing seem to perform about the same. You mentioned growth and value investing. What do you mean? What's the difference between the two? Well, it's kind of two historically quite different approaches to investing. Growth investing is finding companies that are really ramping up, like their sales, the size of the business is really growing fast.

1:02:38And people invest in that to sort of own the new thing. You can think of like when computers first came out or like Apple when the iPhone came out, massive, massive growth. And so people jump on growth with the idea that that momentum will continue and maybe that that company might end up owning the whole category, the way a high percentage of phones, we'll say, are still made by Apple today. Value investing is, it doesn't need to be the opposite, but it tends to be, where it's based on the idea that you just look at the expected cash flows from a business. So you're trying to find good value or basically cheap stocks.

1:03:19And so that will involve analyzing the accounts and just saying, well, we've got a whole of stocks here. These ones you get, you know, the next 10 years worth of earnings you get for this price while you're paying a much higher price for earnings of other companies. I'll take the cheap ones. And so that's value versus growth. Awesome. Thanks. Do you prefer either style? Historically, I've been a growth investor. I think that growth has outperformed for so long at this point that it seems unlikely to me that it just kind of can't do it forever. Also, it's worth noting that even when growth does work for a long time, it's often different companies, you know, because companies go through these phases of huge growth and then they become mature companies and you might then be swapping them out for new high growth companies.

1:04:11But I just feel that really over the last kind of 15, 20 years, there's been almost no performance in value investing. And it seems to me that if you're a little bit nervous that markets seem toppy or expensive, rather than going to cash, I'd say maybe take on some of these value stocks that haven't performed. And thus, if a bubble bursts, they shouldn't necessarily burst because they were never inflated to begin with. But really, since the credit crunch, all of the growth has kind of come from what they, now we call the magnificent seven, and it used to be the FAANG stocks. But if you look at European or British stocks, they really haven't done much since the credit crunch.

1:04:56Most American stocks have not done much since the credit crunch. And it's been this sort of handful of tech stocks. And I would think that going forward, it's probably likely that we see a resurgence in maybe some of the overlooked sectors. Do you think rates are a big factor in that? Interest rates as in discount cash flow? Yeah, I mean, it's a huge, Which, because the reason, well, one of the reasons, you know, also these tech firms have, because rates were low, they had a ton of money thrown at them and they were able to do stuff with that. So that's a positive. But then on the other hand, when you have a company where all of its earnings are kind of 10 or 20 years out in the future, when a dollar in 20 years time is worth a dollar today, which is what you get in a zero interest rate environment, well, that's a very valuable company.

1:05:46When you start discounting things at 5%, even right now, there's very much that feeling that people are still saying, when will rates go down to normal? And look at a 100-year chart of interest rates. We're not high at the moment. And so should rates stay higher for longer. You know, a lot of these sort of less, I don't know, there's some of the Silicon Valley companies that like, you know, these Uber, you know, I made a video called Blitzscaling that looks at companies that essentially aim to grow and not really worry about making money. And when you look at that kind of a business, like it's a very unusual environment we've been in when that has sort of been the stuff to invest in over the last 20 years.

1:06:40And it slightly entertains me when, you know, you'll see these sort of Silicon Valley thought leaders and they'll kind of, they'll say, I'll give you business advice as to how to, you know, become very wealthy and blah, blah, blah. And they're advising you to start up a business that requires huge amounts of capital that generates no return on investment. You know what I mean? Like it just, the stock price goes up. But for most people, like if you want to start a business with your own money, you probably want some sort of return. You know, you want it to pay you. Yeah, you want cash flow. You want positive cash flows that you can reinvest and pay yourself with.

1:07:16Or you get the guy from SoftBank to think you're the man. Yeah, well, even, yeah, like WeWork's a great example. But even it's been pointed out, you know, the big story at the moment is whether Tesla shareholders will vote for Elon's pay package or not. But Elon's pay package is more than Tesla has ever made in earnings. I know it relates stock price, not to the earnings, but there's many Silicon Valley businesses like that where in terms of the cash flow they've generated, it's negligible. It's all of the wealth just came from stock price. And that works. Well, it can happen in this sort of zero interest rate or really declining interest rate environment.

1:07:58But there is a point at which, if you owned 100 % of a business, you'd have no interest in the fact that you have to keep putting money in and nothing ever comes out. While if it's publicly listed or if VC investors will keep giving you more money for it and sort of keep marking it up, well then yeah, you're a billionaire and you've got a food delivery app and there's 20 other food delivery apps that are all the same. So where do you see that going? like in the, for example, Tesla, for example, like where would you see? Well, Tesla is a profitable company. And, you know, the thing is the people who buy the cars really like the cars.

1:08:39I don't think it's, you know, I do think it's an expensive stock, but it's not in this group. But there's many of these, it's funny because many of the kind of hot VC stocks at the moment are versions of things that we saw back in the late 90s that kind of, you know,.com bubble and someone said, you know, I can, like there was a great one, what was it called? Cosmo.com. And it was kind of Deliveroo, but in the late 90s. And they would get anything from a store until you could kind of order a CD from them and they'd go to a store, buy a CD, bring it to your house, you know. And obviously that's not a good business to be in.

1:09:22like if you're paid sort of 50 cents and the guy on a bicycle is like going all around. You need slave labor. Yeah. Well, you need people to just keep bidding up the stock and you can pay the guy on a bike with stock rather than with cash because there's no cash coming in. And those things really flared out quickly. Like I think one of the biggest sort of boom and bust stories, there was a British one called Boo.com. And I think they raised like a billion pounds or something like that. And I think they wiped it out in a couple of weeks. Like it's a crazy story. I'd have to look it up, but it was kind of one of the crazier ones.

1:09:59But today, you know, many of these companies are five, six years old and they're still not cashflow positive. And, you know, should they increase prices in order to be cashflow positive, they're competing with someone else who'll keep prices low. So I don't know how that ends. Twitter never made any money, did it? No, it occasionally was profitable, but I think the best year it ever had made about a billion dollars, you know. And so it's not, yeah, I mean, it's a great example of a company that sort of was culturally important, but as a business, you know, if it was wholly owned, you would never want it.

1:10:38Like more money has gone into Twitter than has ever come out in terms of cash flow. But for the VCs, does the model work because they get to dump it on the market? it. It's almost like a great afford area. The funny thing is they used to dump it on the market and they don't really anymore. Like in the late 90s, like during the dot-com bubble, basically two guys and a computer would sort of slap a name on the door and they'd say, we're going to sell dog food on the internet. And there'd be an investment banker knocking on the door and they'd say, shall we go public next week? And it's like, can I get a second computer?

1:11:09And there'd be a huge valuation and then it'd be gone six months later. While now companies are staying private for much longer. And it's sort of interesting because will the VC investors be left holding the bag? Because we'll say if there is, if retail, retail investors do seem to get excited about certain types of stock. In recent years, like some of those space things like Virgin Galactic got people very excited. A lot of the SPAC stuff. Yeah, like kind of stuff that sort of seems futuristic and kind of hypey. But you have to wonder how like sort of the fifth line, you know, food delivery app is going to do or, you know, the version of Uber with a different local.

1:11:56You know what I mean? Like you have to wonder, will, you know, there's sort of this thing where they need to find a bag holder. And the truth is the current environment, like we still do have, you know, we've got sort of Bitcoin at 70 grand. We've got, you know, GameStop pumping last week. I haven't looked at how it's done today. But, you know, retail is still willing to sort of buy stuff that seems exciting to them. But there's many times, it took Google a long time to go public because people have been so burnt by the dot-com stocks that you said, like, it's a search engine. They go, no, no, no.

1:12:39I bought Yahoo, thank you. A-O-L, no thank you. But in the long run, there's no way around it that a business that doesn't make money isn't a very good business. And, you know, maybe some of these things can pivot into something profitable, but not all of them, I don't think. In the reverse, then, if a few businesses drive most of the market returns as outliers, but VC are holding these businesses pre-IPO for longer, does that mean we'll just see less value available for investors like myself, say, who buy indexes? Because by the time the business gets to the index, it's been through its growth stage.

1:13:21So the old idea of an IPO was an IPO was to raise capital, to grow a business. Well, now it's an exit for sort of founders and VCs. So it's quite a different thing. Like it's a later stage firm that there's an argument that it's towards the end of its growth phase. And actually, that's even an interesting thing. this. Aswath Damodaran did a bit a while ago, where he talked about how long companies grow for, and you'll see people building models for many, you know, sort of businesses that are hyped right now, and they'll say, well, you know, it's going to keep growing sales at the same rate over the next 10 years as it did over the last 10 years.

1:14:02And Damodaran points out that it's very unusual for a company to be in like hype or growth for maybe more than five or six years. You know, A company just matures at a certain point. And yeah, I guess if the VCs are wise enough to get out as the growth is starting to dry up, well then, yeah, maybe the retail investor becomes the bag holder. But many of these are still private. It certainly feels like retail are bag holders. IPOs are a disaster whenever I look at them. Yeah, yeah. Well, it's, yeah, I guess it just, it's a very different market to a decade. ago. And so, yeah, it's sort of hard to work out what's going on in terms of, but I still think for an investor, I very much lean towards, when people ask me, what should I do?

1:14:54I kind of think buy an index fund. But I do think there's once in a while, there's a few companies and I won't say which ones, but I look at some of the big stocks within the S &P and you kind of think, well, I'm not sure that I want to own that one. And, you know, and even actually there was kind of the funny thing a couple of years ago when GameStop and what's the other one, AMC really pumped. And I think they got jammed into like sort of a mid-cap index or whatever. And it's kind of like it's a bit unpleasant if you're sort of a mid-cap index investor and you just want sort of, you know, you want sort of reasonable companies.

1:15:34Instead, you've had a bunch of stonks dumped on you. Yeah, meme stocks have just risen in. Even like Michael Saylor's MicroStrategy, because of the Bitcoin holdings, it can just jump up and down on it within the indexes. Yeah, actually that's such a fascinating one because if you look at a long enough chart of that, you get to see kind of how the current, because often people say to me, it's crazier now than it was during the dot-com bubble. and actually a long chart of, what's it called? Micro strategy. Because he's been going for a while. Well, because he was a dot-com bubble stock to start with.

1:16:11And then he became, sort of did nothing for a good, I don't know what, 10 or 15 years and then became basically a Bitcoin ETF. And you could look at that and kind of say, well, yeah, as crazy as Bitcoin is, it's not really as crazy as some of those dot-com stocks were. Yeah. It's not repeating itself. It's just kind of echoing. Yeah, it's interesting as well. I think even the crypto thing was interesting because during the real kind of bubbliness of the COVID market, in a way like a lot of the crypto almost was, because when people would say, you know, traditional investors would say, well, stocks are expensive, but they're not that crazy.

1:16:49And it's like, well, it's because there's this sort of escape valve that's crypto, you know, where the kind of, you know, the most risk seeking money goes to crypto. So in a funny way, if crypto hadn't existed, maybe we would have seen the stock market get much bubblier. But there was sort of this, you know, this pressure valve. Yeah, well, you've got like blue chip Bitcoin, as they call it. And then there's like pancake flip, like, you know, there's like these crazy things that are doing a thousand a day percentage or whatever. And there was some serious amount of risk being taken, wasn't there?

1:17:23Yeah, yeah. How come you never did any quantitative research into Bitcoin? You know, I've made a ton of videos that don't say that they're about Bitcoin, but they sort of are. Because during the kind of really peak Bitcoin thing, if you were negative about it, they'd all sort of pile into the comments and attack you. So you couldn't really say too much. But I made a number of videos just about kind of the history of money. I made a video about John Law, the man who invented paper money, which is a fascinating story. I made the Ponzi video. I made videos about the sort of, what's it called? Essentially in the United States, it's actually perfectly legal to have your own form of money.

1:18:16They call it private money. And so I made a video about that because for quite a while in the United States, I think the smallest banknote that was made was maybe$1 or$5. I forget. But back then, that would have been a couple of weeks worth of income, right? So in fact, the federal dollars were sort of used as savings in banks. But if you wanted to spend money, you need something smaller than that, like to buy a newspaper with, and you just get basically a token from your local bank. And those things, you know, the bank might go bust or whatever else, or if you moved, you know, more than a certain distance from that bank, no one would accept it.

1:18:58But it was a fascinating thing. And so there's money, like both sides kind of have a little bit wrong in that maybe traditional finance people often think that money has always been what it has been forever, which is not at all true. Or they think it was just gold, but that's not really true either. Or then there's the kind of crypto people who think that they're doing something that's never been done before. But throughout human history, we've really worked out ways of sort of exchanging value with each other. Tokenizing value. Seashells and things. Yeah. And that's even an interesting one because I lean on that as a version of the proof of work thing with Bitcoin, because it used to take about a day to polish one of those beads out of a seashell.

1:19:50And therefore, if you were paid with one of those, you were really being paid with something that a lot of work had gone into and it wasn't easily counterfeited. And so there's all sorts of stuff. And even a lot of people often think that historically everything was barter, that you'd sort of go down to the store with a chicken and exchange it for a loaf of bread. But often it was much more favors, like where you'd sort of help your neighbor with something and they'd provide you with some food from their farm or something like that. And yeah, I mean, the world of moving money around has been, it's complex and it's always been complex and it will continue to be.

1:20:35And that's why you can't rule out entirely the idea of a functional version of non-government money, which could be crypto. But equally, there's a very interesting and complex history of that stuff. Yeah. No, I just want to say thank you so much for your time. Thank you for having me. Bye. Yeah, no, no, no. You're welcome anytime. Hey guys, did you know that we summarized all of our episodes in a newsletter? You can find a link in the description. And please remember, this is not financial advice. Like we say a lot on the podcast, investments can fall and rise. In fact, it's pretty much a guarantee.

1:21:13Past performance is no guarantee of future results. So your money is at risk with investing and other fees may apply. As with everything financial, please do your own research. We really encourage that because no one cares more about your money than you. I'm Damo. I'm T. This was an episode of Making Money from Our Company Most. It was filmed and edited by the team at Flowspire, Jack and Ben. It was produced by Ruth Edwards and brought together by Will Stollerman. What about Ruth and Toothless a Dog? Yeah, shout out them too.