Mailbag, incl: How do I respond to the AI threat with ETFs? February 22, 2026

14:34David Gardner:Well, you can't because you're the easiest person to fall, right? I forget which investor said that, but it's true. We will convince ourselves of anything to preserve our ego. So you can't ever be 100 % sure. I mean, I think the only sensible way I've ever been able to answer that question for myself is to do a valuation, which always puts people off because it sounds hard and it is hard and it's tricky. But it's like, I think we just talked about it with Atlassian. I mean, the share price is not, as Milan has rightly said, is not going to be useful to you at all. So it's like the only thing I need to know, I mean, it's simple but not easy.

15:14David Gardner:The only thing I need to know is how much is the company, quote unquote, really worth? And is the market giving me an opportunity to buy it for less than what it's really worth? And if it is, I should buy it. Right? Like that's pretty much it. Maybe there's some considerations around weighting and that kind of thing. But other than that, it's as simple as that. So as I've said before, I mean, you might have bought it at twice the current price or at one-tenth the current price. It doesn't matter. It's at the current price. Should you hold? Well, if you've done a valuation and you think shares are cheap based on some conservative, reasonable assumptions, then you should hold.

15:53David Gardner:In fact, maybe you should buy some more. If it's fallen in half and you do that same analysis and you go, gosh, it's actually not that cheap, well, then you should sell. that's it i mean i say it as if it is easy conceptually it's super easy i mean that's

16:06Jason Moser:how do you how do you know but but but as i've always said it's you'll never know but going through the process and trying to know will get you a lot closer it's better than just going on vibes right or share price momentum but you know it's it's just pluck some numbers out of the air right as a starting point just to get a feel for it i don't know they're making a dollar per share in earnings? I don't know. 10 % a year, that's what they seem to have done. Management's talking and going, I reckon they can grow 10 % more. I'm like, great, do that for five years. What's the earnings per share then?

16:40Jason Moser:Brilliant. What kind of multiple do you think the market will give it? I don't know, just give it a nine. 16 is a start. It tends to be the long-term market. What does that give you? Is the share price up or down? Account for the time value. You can discount it back to today's price, but that's it, really. And of course, you'll be going, I can make that number anything I want by just choosing the right two variables. Yes, you can. Yes, you can. That's not the point. The point is, is that, you know, the fact is that equation there, you know, if that is what the market is trading at multiple wise, if that's what the earnings per share is, that is exactly what the share price is.

17:14Jason Moser:It's a circular logic. It's implicit in the very calculation that you're making. But at least I now know what needs to happen. It's not just I think the share price will go up. I think a combination of earnings and multiple growth will give me a price that's around that. That's what you're doing. And so, yes, you're still making a guess. You're still having to rely on the assumptions of the future. But it's not just in terms of what Mr. Market's going to do. It's just purely on how much you think it can grow. I've often found it more as a reason not to do something. It's like where you look at a particular business and you go, all right, I'm just going to take management at their word.

17:55Jason Moser:They reckon they can do that. Let's see they do that. And I'm going to assume the market's in a really great mood. And it's trading at a very elevated PE. And you go through the exercise and go, wow, I do that. And I grow earnings per share at 50 % per year for 10 years. And then I give it double the market multiple. And it's still below the current share price. Now, those forecasts might be incredibly wrong, but now I know what needs to happen. And it says to me, if you're buying shares today and expecting a good return, you must expect some combination of higher than 50 % compound earnings growth or higher than double market multiple.

18:32Jason Moser:One of the two or a combination of the two. And then the question is much easier. Do you think that is likely? Not do you think it's possible? Anything's possible. There's all kinds of nonsense, irrational things out there.

18:44Chris Hill:But is it likely? And from Friday's conversation, is it likely based on some reasonable interpretation of the facts, not just because you think it is? So it's kind of some groundedness of what would have to happen for that to be possible and go a couple of levels deep. Is it possible sales grow 20 %? Well, it's possible. Is it likely? Okay, yes. Okay, why is it likely? What are they going to have to do? Is it a price increase? Is it a new market? Is it new products? Is it new customers? Is it market growth? Have a view on those things to get to the point of judging the likelihood with some degree of rational, not evidence, because there's no evidence for the future, but how will they get there?

19:20Chris Hill:What will they have to do, and how will you know if they're doing it?

19:23David Gardner:And I want a really low bar to hang over. I don't want to mention the stock because it's too illiquid, but I was mentioning a stock to you off air before we hit record. They've released results, so I'm really happy. It's done really well, right? But part of it, it's not an exciting business.

19:34Jason Moser:It's really not an exciting business at all. But when I was doing the analysis, it's kind of like, well, hang on. the PE at the time was eight or something insanely low and it's like even if they only grow at

19:48Emily Flippen:you know GDP type levels of growth even if margins don't move even if like it's just sort of like

19:55Jason Moser:it was really easy to get a good return it doesn't mean it was guaranteed but in terms of the future potential outcomes of all the 200 different scenarios you could have done 90 of them gave you a great return. And 10 % of them didn't. So it's sort of like, there's that asymmetry again. I don't know the future, but it's like, not a lot has to go right

20:17Emily Flippen:for me to make money on this. As opposed to, everything has to go right for this other business and then some, and then I might get a market average return. Like, you know?

20:28Chris Hill:I think it's right. Milan, all I can add to that from Ram's perspective is, the question you've got to ask yourself, the price is higher, that's a good thing. Most prices do go higher on quality businesses. Pick any great company of today and look at the share price 20 years ago and ask yourself which one you wouldn't have bought at that price because that would have been up on the price five years earlier. More likely than not, right? Not the actual years, but work with you as a broad idea. So, you know, CSL went from$200 to$300. At what point between those two numbers would you have not bought?

20:55Chris Hill:Now, it's fallen since, so maybe there is a point. But$200,$500,$10,$20,$40,$100, all those prices below the current share price. So don't be frightened of prices increasing. you're right to be concerned about confirmation bias particularly when it's ego stroking confirmation bias look i'm a genius i was right this company is really great because the share price up things going well now you've said you won't be infected by that and you're right but you're also mindful saying maybe it's ego so how do i make sure that i don't fall into the trap and that's exactly the right question ram's point is the right one um look at the earnings power of the business don't look at the share price if the share price got up because the pe's expanded that's probably not a great sign unless the future is genuinely brighter.

21:36Chris Hill:If it's gone up because earnings are working and the PE stayed the same and the share price up because earnings are up, that's great. I mean, again, as long as they have future growth ahead of them, because that's the other thing, if they've got to maturity all of a sudden, banks are a great example. Woolies is a better example, actually, because banks are controversial. I worked for Woolies in the 80s and 90s. Yeah, come on. You're not that old.

21:58Emily Flippen:Yeah.

21:58Chris Hill:You've got your shelves. The 90s and 2000s was like, no. 90s, 90s, 90s, you're right, thank you. 80s, 80s.

22:03Emily Flippen:Well, maybe the child labor laws were a bit different back then. I mean, I know we're old, bro, but that's... We're the same age and just with my own sanity, I cannot believe that you're in the workforce proper in the 1980s. 14 years and nine months.

22:16Chris Hill:No, actually, so Woolies was my first part-time job, so it wasn't, it was the early 90s, you're right, but it was very early 90s. You're more productive than me. I was playing Super Mario Brothers. I had to put fuel in the car. So, yeah. So, my point was, they went almost broke. I think they might have even been in the administration. They were certainly bought out by a private equity model at one point. They were released on the stock market. And they spent the best part of 40 years consolidating the grocery industry. Those guys and Coles. We kind of think of Woolies and Coles as being this massive behemoth today, and they are.

22:47Chris Hill:They weren't back then. I think they started with like 20 % market share each, which is massive in the global context. But in Australia, that's just not even trying. And so, you know, Woolies bought Safeway. Coles bought Bylo. Remember Bylo? Woolies bought Flemings. So, you know, my point is there was a growth phase and a maturation or maturity phase. And you can expect stronger growth when a business is maturing, when it is growing to its future size. And thereafter, you should expect lower growth. That's perfectly great. It's fantastic. If you get to maturity, you're doing really well because you've dominated your industry, right?

23:16Chris Hill:That's great. You've grown, you've achieved something, and you've got to a stasis level. So the question for you, Milan, is where does the company go from here? And does, as Ram said, that price you're paying justify that? Don't worry about the past price. As Ram said, it could have doubled or could have fallen by 90%. Who cares? The only question is, if you pick this business up today and say, right, the price is this, that implies based on – and Ram said just in valuation work. The other thing you can do is the old reverse DCF, which we've talked about, which is just how much growth does it have to achieve to justify today's price?

23:45Chris Hill:And then you can't do better than that. So whichever way you do it, that's exactly the way to do it. So don't worry about where you've been. Don't worry about – and by the way, you don't want to average up. You're hesitant to increase your average purchase price. I would love to increase my average purchase price. My average purchase price has increased dramatically on Berkshire Hathaway and Amazon is two examples in the US. That's a humble brag. Why? Because they just keep getting better, so I keep buying shares. If it's going to go higher, buy higher. Average up, of course you would. If it's going to go from 100 to 1 ,000 and you bought your first shares at 100 and now it's 150, yes, average for God's sake, average up.

24:16Chris Hill:Please average up. I don't know about this company, mate. You haven't mentioned the name, so that's good, so we don't have to talk about it specifically. But yeah, it's all about the future. Is the business growth intact? Are the results coming through? Is the price still attractive relative to those future results? If the answer is yes, yeah, buy shares. If not, maybe you should look at selling the shares. Don't look at the past price performance as anything other than an interesting curiosity. It is not indicative. It is not a guarantee. It's not a driver. In the short or medium term, these things can happen because sentiment in the market changes rarely.

24:45Chris Hill:But when it does, by the way, it can change dramatically. Yeah, so just be thoughtful.

24:50David Gardner:Can't really hammer that point home because you mentioned CSL in that. So the start of 2020 was$310 a share. And I remember distinctly everyone going, yes, but it's great. It's a great company. Yeah, it is. I mean, I actually would easily put it in the top 10 of all businesses in Australia on the ASX. It's an incredible success story. Actually, back in 2020, so they were earning about$6.72 per share. Last full financial year, they earned$9.33. So they actually grew their earnings over that period 40%. So why is the shares$150? Why is it because they're halved? They're more than halved. It's like, yeah, because they were trading at a PE of 40.

25:34David Gardner:If you compound that growth, it's less than 7%. An incredibly strong, ginormous, defensive, lovely, lovely, lovely, shower praise upon it. They grew their earnings at 7 % per year, and you were paying 40 times earnings for that. What were you thinking? And I thought you in particular, like the biggest and best gigabrain financial experts in the world were always rationalizing how this was. And it's like, look, I know multiples can do kinds of crazy things. And maybe someone who was a megaball might have said, well, I actually did think that they could grow at 10 or 12 percent. No one was saying they're going to grow at 20 percent nonstop over a half decade period.

26:12David Gardner:But that's kind of, if you're trading at those multiples, this isn't like a little bit greater than average growth. You need really strong growth, really sustained growth. It's like, I'm just making myself feel better because I didn't buy anything for the longest time. I love it, but it's expensive. You know, the other flip side that I always think of too is afterpay. People just, God, do you remember the hype

26:39Jason Moser:around all of that thing? The other day I was like, yeah, I mean, just, just, okay. Let's run some numbers on this. Doesn't make any sense. Right. Oh gosh. What's, what's the other one too? Oh, I've gone blank.

26:53David Gardner:Oh, brain chip, brain chip, which I mentioned before,

26:56Emily Flippen:which is such a meme stock and an interesting enough business, but it just went to the moon.

27:02Jason Moser:And it was just like, it made,

27:04David Gardner:you had to assume that this tiny Aussie company was going to basically steal a significant part of the global chip fabrication, the chip design market, you're competing against the Koreans.

27:18Jason Moser:There's no way that that was going to happen in any kind of short timeframe unless it was really, unless you were banking on an absolute paradigm shift once in a species kind of event. And it was just like, I mean, the thing is you're making

27:34David Gardner:this argument well before it got to the top. And it's very frustrating when you go, that doesn't make any sense. I'm super smart and level-headed. I'm doing all the things Andrew and Scott say, so I'm not going to do it. The reality is you do that and then you watch it go up another 10 % and then another 10 % and then another 10%. You know, and it is pain. This is why Isaac Newton, you know, one of the greatest brains of our time, sold his shares in the South Sea Company when it got a little bit heated and then it just kept on going up and he capitulated because all his mates were getting rich.

28:02Emily Flippen:So he bought back in right at the top and then sold right at the bottom. Like it just – so you've got to be really comfortable

28:11David Gardner:with forming a probability-based expectation and then sticking to your guns and the market is going to test you. I said to you off air, it's like it is a machine. Only the market can give you 100 bagger and make it the most painful experience in the world.

28:25Emily Flippen:Exactly. Nothing can multiply your wealth by 100 and you feel yuck at the end of it. But that, or at least the destination, I suppose, once you're there is different. But the journey is anything but, right?

28:39Chris Hill:Correct, correct. It's a funny old pursuit, isn't it? It finally is. Yeah. By the way, brain chip, I looked up the numbers. These shares topped out at$1.76 in January 2022. Four years later? It's 90 % down. 14 cents. More. That's at least more than 90%. Just a crazy story.

28:59David Gardner:No, they might still crack it, right?

29:00Jason Moser:I mean, I would actually, we spoke to the CEO a couple of times. I haven't looked at it for forever, but they've probably made some progress. I mean, you know, they actually had some interesting tech. It's easy in hindsight to go, maybe it doesn't work. I'm completely out of touch with it. But it's not, it wasn't as though every good market narrative, even when it's full of hot air, there's a kernel of truth to it, right? Yes. You can't fake it that much, right? You have to have at least there's that moonshot potential that it could do that. But it's just coming back to the question with Milan and the insurer.

29:37Jason Moser:What do you reckon? Play around with some numbers. And if the hurdle is too high or just too line ball, that tells you exactly what to do. Yeah.

29:47Emily Flippen:Even though you know you sell and it's going to double the next day.

29:49Jason Moser:Yeah.

29:50Emily Flippen:Or you won't sell and it'll halve the next day. I mean, it's going to do that to you.

29:57Chris Hill:I won't but I got a lot of grief on Twitter about brain chip when I was on AusBus I was on Sky News back then I said it's a bit like a luxury ticket and I will say again that's exactly what it is and always was which I mean it couldn't pay off but you point out Moonshots is exactly that right of course these companies are trying to create the next big thing because that's worth doing and people want to do it and it's worth the challenge and hassle but I don't get there because that's just not the way this works That's why we love entrepreneurs and why we love people who are trying to create brand new solutions to new and existing problems.

30:30Chris Hill:Brilliant. That's how the world progresses. So more power to them. It doesn't mean you have to invest in them and the results haven't been flashed.

30:36Emily Flippen:You think the brain chip crew were rough. The afterpay crew. Oh, yeah. You couldn't say anything without just basically, I mean, you've got to hire security whenever you go. And it's like, you said something that was slightly less bullish than I thought.

30:52Chris Hill:That's right. Yeah, what do you mean these people aren't gods? Let's go to a question from Chris, mate. First of all, says Chris, can I say, long may the rant reign. I know I'm absolutely here for the mission of Ram shouting at the clouds and shaking his fists. Captive in my tractor cabin, it is so nice to hear two people speak so passionately about both good and bad ideas, and best of all, fire off a few shots at those in power. We've moderated that a little bit. It's what we do. It's what we do. Now, after the obligatory bent knee kissing of the ring, a question. We have seen gold and silver prices go into lift-off, presumably as a store of value, in times where Air Force One looks more like Con Air.

31:34Chris Hill:I like that. I haven't used that one before. That's great. I'm just Trump fans, but it's kind of pretty good. Why, then, has the Bitcoin price been declining? I always thought it seemed to climb in uncertain times. What is this basic farmer missing from the picture? regards and keep the metaphorical gold coming or I might say the metaphorical Bitcoin Chris we won't do too much on Bitcoin mate but do we talk on air or off air that begs the question doesn't it

31:59Emily Flippen:this morning we talked about it off air when we finished the other part

32:03Chris Hill:so that's kind of the you can have the thesis right I mean the gold buyers and the Bitcoin buyers effectively have the same broad idea there's differences around the edges and I don't want to assault any gold bugs or Bitcoin bugs knock yourselves out carefully I know right but broadly hey if money gets debased if inflation takes off you want something hard the store of value you're not printing it gold and bitcoin it's the same root cause for most people i would suggest some are there for the speculation some are there for the jewelry whatever whatever broadly speaking you're saying i want a scarce unprintable asset in in times of meaningful inflation i think that's not i'm not particularly a controversial thing to say and so you get the diagnosis right or at least doesn't you have maybe i'm not right you have the same diagnosis and you go for the same kind of thing.

32:51Chris Hill:And yet the prices, I mean, talk about bifurcation, right? I mean, you've got one skewing off to the left, one skewing off to the right. We're in theory the same rationale. So it does beg the question, and we won't get into Bitcoin too deeply, mate, because we've done plenty of it, but what's your best guess as to why we're seeing the same thesis broadly end up in two very, very different outcomes?

33:10David Gardner:Yeah. Well, I can only guess because I don't know, right? No one really does, although there's a lot

33:14Emily Flippen:lot of confident opinions that are out there. But it does, I mean, there's been so many, I mean, the best part of it has been all the memes that come out. It's like, you know, when your macro thesis plays out perfectly, but you back the wrong horse, it's like, are you kidding me?

33:30David Gardner:I think the error is in what you kind of said offhand there, is just for most people, this is the thesis. Well, it's like a lot of things, right? There are some people who buy CSL because they're a believer in their long-term earnings capacity. There's others who are rotating into healthcare because their broker thought it was a good idea given the upcoming presidential election or blah, blah, blah, blah, blah.

33:50Chris Hill:The share price over 300 a day moving average Bollinger bands and candles all over the joint. Yeah, yeah.

33:55David Gardner:Same asset, different people, different interpretations, different narratives. The reality is as much to the chagrin of me and other sound money enthusiasts. I think the reality is much of Wall Street in particular and a very large speculative cohort of people just see it as a tech stock.

34:13Emily Flippen:Now, I mean, I'm not going to bore

34:16David Gardner:everyone with why that is a really bad take.

34:18Emily Flippen:It's the risk trade, right?

34:19David Gardner:It's just...

34:19Jason Moser:Yeah, risk on. And so people, I mean, a lot of the tech stocks, a lot of the risk on trades have come off. I would be actually quietly laying eggs if it was sort of like that was down and absolutely everything was up. It's like, why, what is it? This doesn't make any sense, but it is very, to my mind at least, it seems pretty clear that it's part of a broader risk-off narrative. Bitcoin always does. I say Bitcoin, but it's true of all assets, but particularly Bitcoin, you know, it's sort of, it attracts the hot money when it's pumping. Everyone piles into it for all of the wrong they're not there for the mission you know they're there they're there to get rich quick they don't get rich quick it's all a scam they dump out you know um so it's happened a million times before and it'll have i said what i said to you off air is like i'll be whinging to you in five years time how it's crashed to five hundred thousand dollars right you know and it's just like oh it was a million and now it's fine it's just always the way um so i i i would i would answer this question in the same way I would answer if it was a stock.

35:27Jason Moser:In fact, exactly how we answered it with IAG, not IAG, the insurance company. You know, what's changed? What's changed with the thesis?

35:36Chris Hill:Just for clarity, you mentioned IAG. I didn't know what the company was. I wasn't ignoring the company's name, nor did Ram know what the company was. Why don't we comment on that company at all?

35:44Emily Flippen:I was trying to guess, so I put it on my screen.

35:47Chris Hill:I just wanted to say, because it may sound like I didn't use the name, but you know the name or something else. Just so people know we don't know which company it was. Yeah, it could have been QBE.

35:56Jason Moser:Who knows?

35:57Emily Flippen:It doesn't matter. It doesn't matter.

35:59Jason Moser:The point is, whether it's Apple stock, whether it's BHP, whether it's CSL, whether it's your investment property in Adelaide, whether it's a lump of gold or whether it's even magic internet beans, you've always got to ask yourself that these prices get traded on largely free markets. They're determined by the mood and sentiment of a lot of irrational, emotional human beings. And it just fluctuates, always has, always will. I mean, to think that you're going to buy into some kind of, you know, big multi-decade long paradigm shift and think it's just a steadily 10 % climb each year is just the height of insanity, right?

36:37Jason Moser:It's absolutely not going to happen. So I would argue that the risk reward proposition is about as good as it's ever been. I'll give you some stats on this. Not to people use these stats as in an argument as to why it's going to pump for me. I'm not saying that. But I'll give you one stat that I came across recently, which just urges you to take a more sanguine sort of look at all of this. But obviously, Bitcoin's dropped to 50%, 70%, 80 % many times in its life. But if you had bought every 50 % drop, a year later, 90 % of the time, you're up an average of 125%. Now, people here think, oh, that means I should buy.

37:17Jason Moser:No, no, no, no, no, no. The market is going to psych you out. History rhymes. It never repeats. I'm definitely not saying that. But, I mean, I can pull the same stat out with Apple shares. I can pull, you know, anything you like. So, it's just what's changed. I've said many, many times. Again, I'm trying to make it more broader than this particular asset. But you are going to find that the best opportunities are when the market fundamentally misunderstands what it's got. You've got a lot of crypto bro, idiot momentum traders out there that thought that they would get rich. They didn't. They're on to the next shiny thing.

37:54Jason Moser:Gold's pumping instead. I'm piling into that. Commodities are pumping instead. I'm going to pile into that. And I sit back and go, well, hang on. It's the exact same thing. Underneath the hood, everything is strengthened in terms of the thesis. And it's half price. It's two for one deal. I'm not worried. And if you want to make outsized returns, get used to it because this is going to happen again and again. How's that for a bit of cope, mate? Was that all right for cope? That's pretty good. As the kids like to say.

38:24Chris Hill:That's all they say, a bit of cope.

38:25Jason Moser:As I said, it's not my first priority. I've lost count of the number of times my net wealth has dropped 50%. And the only frustration at this point, I should clarify that because it makes it sound like I'm completely aloof and don't care. It's really annoying.

38:40Emily Flippen:Don't get me wrong. It sucks. I don't like it. But I know earlier in my career when it happened,

38:46Jason Moser:the emotion that you feel was terror. I was going to say fear. Fear is not strong enough. Absolute gut-wrenching terror. You question your thesis.

38:56Chris Hill:Right. It's all like maybe the market's right.

38:57Jason Moser:I question my very sanity and ability to reason in the world.

39:01Chris Hill:Like, how could I get it so wrong?

39:05Jason Moser:Whereas this time, whether it's this thing or it's other things that I've owned. You know, Catapult's another great example. Man, I ate that for years. I just had my face rubbed in that kind of stuff. And it's just like the thesis didn't change. Stay with it, right? Easy to say, hard to do. I keep focusing on the tractor there, my friend.

39:24Emily Flippen:and one day your only regret will be why didn't I get more when I had the chance? Can't give advice, not advice. Disclaimer, disclaimer, disclaimer.

39:33Chris Hill:You asked why it's declining and I thought we'd avoid a Bitcoin prompt, but there you go. Always pumping the coin. So, yeah, Chris, look, I largely agree with Ram. Bitcoin has, I've not done the analysis. I actually asked Chatsy if you'd graph it for me and couldn't do it. We need some more data from me, so I can't do it. It seems to me that Bitcoin's, as an interested observer for a long time, and now I own a very small amount of it, half what I used to own, thanks, Ryan.

39:57Emily Flippen:Not as much as you used to. You were the, I think we said at the time when you announced it on the pod, I said, that's it, that's the top.

40:04Chris Hill:That was the top. It wasn't quite, it had already fallen a little bit. So I didn't buy the absolute top, but suffice to say, the price hasn't been back to what I paid since. So, you know, take your own views from that. Not yet, yeah. So, look, I think - By the way, if you don't think not yet, you should sell. just to underline the point right yeah yeah um man it's the price um the so chris um my experience from the outside on this you gotta be careful with um what you think you know because sometimes you only notice the stuff that confirms to your view where you see a few things and assume that's a pattern and so i haven't done the number i haven't done the graph side by side ram's what about being like tech stock i think is true in most senses um but it does i mean risk going to risk off as a stupid set of cliches and phrases and jargon.

40:54Chris Hill:But effectively, people are feeling bullish and excited and want to make a lot of money and feel like everything's going to go up and they want to be part of the party. They jump into the stuff that they think is going to go up and do well. And so you see a lot of money rush into the hot stock. Story stocks do exactly the same thing. Praneship, anybody? So that story is really common. And it strikes me that the people buying and selling Bitcoin in large numbers on the edges of the trades, because remember, if you don't buy or sell, you're not adding to buying or selling pressure. If 99.9 % of people don't touch their Bitcoin, but the 0.1 % that sell want to sell for half the current price, the price will fall in half.

41:30Chris Hill:Similarly, by the way, the same will also happen in reverse. And like every asset, maybe Bitcoin was never worth$125 ,000. It was just there was a lot of buying pressure. So we shouldn't assume that it was right then and wrong now or wrong then and right now or anywhere in between. You're just seeing the market do its thing. The number of people that want to buy and sell are at different points of time and different prices. When you do see with all sorts of hot stocks, and again, look at I have to pay, look at BrainChip, plenty of others besides I can't think of off the top of my head. You see exactly that story of everyone wants to buy, everyone wants to sell.

42:02Chris Hill:And when the buyers overwhelm the sellers, the price goes up. When the sellers overwhelm the buyers, the price goes down. And why is it operating differently? Ram, you told me off air, I don't think I'm giving anything away here, some charts you'd say who owns what. The reality is most of the gold is owned by institutional holders. Now, if you think about the dynamic there, if the institutional holders already own it, they probably own it for reasons that aren't related to the current very specific circumstance we find ourselves in. Some are buying some for those reasons, but the amount they're buying versus what they already hold is probably pretty small.

42:35Chris Hill:So what's the available supply of gold? Who's selling it? Who's buying it? The institutions are about managed funds, but largely governments and sovereign stuff, frankly. On the flip side, you mentioned to me off air, mate, that 65 odd percent, two thirds of Bitcoin is owned by individuals. Now, think about the dynamics there of how - I guess to play out a little bit more.

42:54David Gardner:So you add up all governments, and there's a bunch of governments that own it, add up all corporations, add up all of the ETFs, add up all of institutional holdings, 15 % of the available float. Like, it's tiny. It's the inverse of gold because it's such a relatively new thing. So - Right. Sorry. Sorry. You go ahead. I'm going to go off on another angle.

43:17Chris Hill:Okay. Well, hold that thought. So if that's the case, think about why they own, what they own it for, whether they're more likely to trade than gold owners are likely to trade. Think about who the marginal buyer is likely to be and what the marginal is likely to do. That kind of stuff is exactly what I suspect is making it operate like a tech store. You know, the big mature businesses that institutions own, And GE doesn't get whipsawed around because no one cares about general luxury, right? CSL, as much as the price has fallen, it's not particularly volatile normally. Now, people have changed their minds on it, so maybe it is a bad example to choose.

43:53Chris Hill:Telstra's probably a better one, actually. You don't get messy volatility because it's a known business. No one's buying or selling to get rich or to avoid losing money. They're there for different reasons. So gold, most of the owners are there because they just want a long-term stable asset to hedge or diversify or whatever. Some of you buyers are buying for different reasons. But again, who are they buying from? A limited number of sellers because the investors aren't selling. So who are you buying from? All the demand is coming on very few who want to sell. Price goes up. Bitcoin, I don't know what the average Bitcoin owner is doing, but there's a tricolabore retail ownership out there that's probably not held for the same sorts of reasons.

44:26Chris Hill:So that's probably, in my view, what's happening. Again, Ram, you started by saying we don't know, and that's a million percent true, right? We all speculate and guess. It's a speculation no more valid or less valid than anybody else's. I suspect if you look at it, that's probably what's happening. if and when people get excited about tech stocks again, I suspect everyone's in there, oh, that's all makes some money. A pile of everything, including Bitcoin, because they kind of feel like it's one of those, it's a tech product in most people's minds. It's not a currency or a store of value. It's a cool tech toy that goes up.

44:56Chris Hill:So I suspect that will happen as well. But as a reminder, and kind of this is the key point, even if your thesis was correct and you bought gold or you bought Bitcoin, you had very, very, very different outcomes. And it's a reminder not to play the geopolitics in the macroeconomics too much. Because, again, you had the same thesis, maybe you did, and you said, oh, this is happening, I'm going to buy Bitcoin. Oh, this is happening, I'm going to buy gold. One did really, really well, one did really, really badly, at least up to now. Even though the theory...

45:22Emily Flippen:Up to now is the key point, though, right? Even though the theory is the same. Like, it's sort of like, zoom out. Yeah. Totally. Over any... Yeah. Gone. Yeah, yeah.

45:29David Gardner:Well, I mean, this is the curse of our industry, is that you can make any point you want by just being selective in your data points. And I was just about to do it. us but we'll go back two three four you like any other period and it's just there's no competition and people go yeah but you're cherry picking it's like well but some of the bears though if you're just going to take the most recent high and then make so by that argument csl is a is a meme stock right you know that's right by that atlassian atlassian is just like an absolute joke and there's nothing there it's like well that's not exactly true is it so there's there's nuance to all of this.

46:03David Gardner:And then I think the other thing I mentioned to you as well is that, I think I mentioned this previously, is that you've got to understand that for the longest time, where it was even more than two thirds of all the available stock owned by individuals, there's a lot of people out there. It's hard to imagine going back to the year 2011 and you've just got your laptop at home mining Bitcoin. And every block that you secure, you're getting, what was it at that point? 50 Bitcoin. 50, right? And that's when, we don't have to guess. We can look at wallet addresses and chain data and the rest. And there's, you know, relative to the global population, a tiny number, but like, you know, thousands and thousands and thousands of very, very lucky, farsighted people that just have thousands of coins.

46:53David Gardner:And they have now, for the first time ever, got the regulatory clarity, which is important, so you can actually sell it without the FBI knocking on your door. You've also got the depth and the liquidity of Wall Street providing that bid. If you tried to dump 1 ,000 Bitcoin a few years back, you would crater the price 90%. There just wasn't enough buy demand to do it. This is what I think everyone's missing. Everyone's looking at the selling, not realising that every trade is one seller and one buyer.

47:23Emily Flippen:The more important question is, how is it that a trillion dollars of this asset has been dumped and we're only down 50 percent? Someone is accumulating on the other side of that. It's not retail. Look at Google Trends.

47:40David Gardner:Crazy Uncle Ted's not ringing you up saying, how do I get this stuff? It's just completely not in the news cycle. And even if it was, I mean, do the average mom and dad punter have a few hundred million dollars to it? Like, someone's bought. You know, that's a deductive, logical sort of statement. And does it mean that these OGs have, like, lost cause in the mission? Dude, if I had 1 ,000 coins and I've been holding them for 15 years and I'm now a billionaire, I'm going to sell some. And I could probably only sell 30 % of them and still have a stack the size of Christmas but also get to reap the benefits of, you know, the investment that I made.

48:20David Gardner:So it's sort of like this is inevitable and unavoidable going forward. Anyone who's in this, in fact, let's just broaden it out. Anyone who's in the share market, again, I just, I can't, I think you need to almost be a bit Charlie Munger, super derisive and critical and sharp and slap people around the head with this. If you think you're getting into any of these games and it's just going to be an easy ride to Valhalla, you just, we'd all be Warren Buffett if it was that easy, right? You know? Now, that's not to say that there are other people out there, and let's be balanced on this. I think this is a nonsense.

48:57David Gardner:It's going to zero. And if that's your view, well, then it's still expensive. And you drop another 80%, 99 % from here and still be too expensive. So it comes back to the insurance stock question at the beginning. What do you think is a reasonable way to value this and what do you think it's worth? And if it's above that, then you should definitely not buy.

49:15Emily Flippen:Or vice versa. Makes sense. Yeah, totally right.

49:19Chris Hill:Yeah, so Chris, the answer is because not everyone's buying and selling for the same reason. There are different groups of people who are doing the buying and selling those two different asset classes. And even if you get the thesis right, if that is your thesis, it doesn't mean the market has to follow with those assets, whatever they happen to be. Choose healthcare. There will be more healthcare. Okay, well, Healthscope went broke. So the theme and the trend.

49:42David Gardner:The nursing homes was the great one and funeral homes. Remember that? Oh, the ageing demographics. Everyone's dying. Yeah, and like, terrible investments for other reasons, but a reasonable sounding narrative, an absolutely god-awful investment.

49:56Chris Hill:I understand. You remember when Buffett bought Apple, right?

49:59David Gardner:He bought it in 2012. Right. You know, it went from$23 to$12 in that year.

50:05Emily Flippen:There you go.

50:06David Gardner:That's$264 right now. I mean, I don't know what else to sort of say.

50:11Emily Flippen:Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

50:21Chris Hill:Jeff says, G'day, gents. Long-time listener, first-time questioner. Welcome, Jeff. Thank you for asking your question. Thanks for the great educational information over the years, he says, that has helped you to retire six months ago at the age of 60. In brackets, Yes, Scott, there is no reason to hate me. I don't hate you because you're young, Jeff. I may hate you because you're retired. I hate other reasons. I can find a reason, Jeff. I can find a reason. I'm not a hater, generally speaking, but you know if you if you challenge me i'll find one if you're younger than me or retired i don't like it just just just quietly matter as we get older there's not many people who aren't in either of those brackets you're either younger than we all retire that cohort of the worst time to be alive yeah right right it's getting narrow as i have been transitioning to retirement says jeff i've been gradually removing individual stocks and moving to etfs to concentrate on having fun fair enough more of a barefoot sit and forget style most of my money outside of super has gone into NASDAQ, AUSTEC and ASX ETFs.

51:18Chris Hill:On a recent podcast, you discussed what you might avoid due to the AI revolution. But how do you avoid it if you're largely invested in broad-based index-following ETFs? Would you consider thematic ETFs, i.e. industrials, resources, AI and robotics, etc.? I know you're not usually a fan of thematic ETFs, Scott. Yes, you're right. But does this looming disruption change your mind in any way? Now, Jeff goes, I actually found out the same question Chris asked about the Bitcoin and Goldie moving in different directions. But all good. Cheers, Jeff. Jeff, I hope we've done justice to your second question with Chris's answer to Chris's question.

51:55Chris Hill:Let's stick with the first one, mate. If you're an ETF investor, what, if anything, do you do in response to the risks, the threats, the opportunities of AI?

52:05David Gardner:Nothing. It's kind of the point of being, buying a broad-based ETF is saying, I don't actually know what's going to happen on a stock-specific or sector-specific basis. I just know that on average, equity markets will track the bigger, best-performing companies, whatever they're in, and I'll get exposure to it. I'm very deliberately targeting mediocrity in a good way. Because the mediocre return, as far as the market is concerned, is a great return. I'm not gonna triple my money in a year but I'm probably not gonna like lose my shirt either so straight and narrow right down the middle that's exactly what is and it's a very sensible thing to do particularly in this case too

52:51Jason Moser:if you want to focus on other things so as soon as you depart from that which is fine I depart from it but you know you can't have your cake and eat it too right you've either got to be passive and just let the market do its thing and know that you know whatever there might be a future in the next 10 years that a new technology yet to be

53:14David Gardner:discovered comes out next year and it is the dominant market sector in 10 years time and

53:17Jason Moser:that's what it is yeah now if you've got an etf you've got it right well done anyway yeah yeah so so so go with that i i i would otherwise if you got it if there's nothing wrong with sort of playing a theme, but I'll let you answer that part of it. I just think usually, particularly the really big megatrends, we used that word the other day, it's just sort of like they can be true or overall, but even leave you with a pretty ordinary average.

53:50David Gardner:So, I mean, if you bought a hundred bucks of every single mining company on the ASX, you have not done well, even though commodity prices have gone well.

53:58Jason Moser:So don't broaden yourself out too much. People forget this about diversification. It's a wonderful thing, but you can absolutely be over diversified, right? So don't do that. And then it's like, well, so now you're saying I need to actually start picking some stocks. I'm like, yeah, that's what I'm saying, you know, but I don't want to do that. Yeah, that's totally cool too, but buy an ETF, right? By broad-based index tracking ETF. like I'm trying to think of um I'm trying to think of some trends that largely played out but where the ETFs that tracked them didn't do that well and there's actually loads of examples so I can't believe I'm drawing a blank on this but and the reason is is because like particularly in tech the the economics and the mechanics of it tend to be that these are very they're global markets that tend to be winner take most which dominated by a really small handful of players We're never going to live in a world where there's 400 ride-sharing apps because you just lose the critical mass dynamics and the network effects.

54:59Jason Moser:There's no world that can sustain that many different operations and we're all going to be running that many sort of different apps. So, you know, if there's only going to be a handful of winners and at this stage there's 100 contenders and the other 97 are going to go to zero, you know. Now, I've often talked about that approach of taking a bit of risk and expecting 5 out of 10 or 6 out of 10 to only work and the rest not to. The math still works on that because you get a big enough gain somewhere else, it makes up for the losses. But when you've got 100 stocks or 200 stocks, it's like, well, the math still works.

55:37Jason Moser:It's just that the few that do win have to really win and really win rather immediately. So rather than – if I was going to try and walk a middle path here, I would put 90 % or make up a number, a majority of my money in the ETF, and I'd have a little play money portfolio where I can sort of scratch that itch with what – of prosecuting my thesis on where the world is going. That way, if I'm right, I get a bit of a sweetener, and if I'm wrong, I'm still left standing.

56:06Chris Hill:Yeah. I think now it up front, mate. Nothing is the answer. because if you're passively investing in ETFs, that's what you're trying to do. And by the way, unless AI destroys market value overall, those who use AI that are publicly listed will benefit from whatever. The beauty of the ETF is you own them all. So as Walmart suffered, Amazon grew. As the newspapers, Fairfax and News Corp fell, Seek and Car Sales and REA rose. And so that's the point of the passive ETF, right? Whatever changes happen now, if it goes to private companies, that's a different thing, of course. But Google's got Gemini.

56:54Chris Hill:I own shares in Alphabet that owns Google. Microsoft's got a stake in OpenAI. I don't know where and to whom the value will accrue. And I don't even know that we'll necessarily accrue to a public company at all. It may not. Frankly, my working hypothesis is most value from AI accrues to the consumer, not to a provider. but for all of that, you will get the benefit of AI through the market, and you'll probably lose some value from some companies in the market. But overall, as long as the listed share markets remain, we mentioned on Friday, the kind of idea that as much as there's a lot of dross on the public markets, it still remains the single best subset we can get access to of value creation from capitalism in the world.

57:36Chris Hill:So I am... We discussed what to do to avoid the AI revolution, but that's if you're picking stocks. If you're getting everything, I wouldn't want to... Let me put it in the positive. I would bet a reasonably large amount of money, quite literally, because I own the NASDAQ ETF and a Vanguard total market ETF in the US. I'm betting a reasonable amount of money and I would bet even more money. that the share market is higher 10 years in 10 years time than it is today. Now, it could crash the day before, but, you know, they work with me hypothetically here. Despite and or because of the growth of AI.

58:14Chris Hill:Same as the internet, right? The internet was going to disrupt a whole lot. So we could have had this question, Jeff. And by the way, it's a great question, mate. I'm not a criticism at all. If you asked this question in 1999 and said, how can I avoid, you know, how do I avoid the disruption caused? No, 95. How do I avoid the disruption of the internet? I don't know what I would have said, but I hope I would have said, I don't know, keep your ETF because the market will be higher in 25 years time than it is today. And that would have been 100 % right. Now, I'm not a genius. I'm no forecaster, but until and unless publicly this company stopped creating value, there's a very good chance it goes up.

58:45Chris Hill:So man, I would sleep very well with your ETFs. If you want to pick stocks, pick stocks. That's what Ram and I do as a day job. But if you're happy with ETFs, I think sometimes the worst thing to do with ETFs is try to be actively passive. That is, I'm going to ETFs and choose passive ones, but I'm going to choose which ones of those I get. It's like, well, what you've done is you've picked stocks and just convinced yourself it's an ETF. Now, yes, you've avoided picking the individual stock but as I've said a million times, if you pick a, you mentioned AI ETF, Jeff, so I'll use that one. I picked the AI ETF because of the theme, right?

59:14Chris Hill:That's fine. And you know what I'm going to say because you know I'm critical of thematic ETFs. If you bought an AI ETF, the question to me would be, how's it made up? Is it made up just of pure play AI companies or is it every company that has some sort of AI going on in their business? You see a lot of, what was the big thing? Trying to think back in the day. There was an ETF, you remind me, Ramit. I don't think it was Bitcoin, but it was something. Anyway, and like Visa and Moscow went in there because they used the payment rails or something. It was a really, really - It was a crypto ETF. It was a crypto ETF.

59:46Chris Hill:Thank you. That's exactly what it was. And it's kind of like, okay, well, and again, by the way, Visa and Moscow probably did better than most of the cryptos.

59:51Emily Flippen:Blockchain ETFs, which is even more hilarious.

59:53Chris Hill:And so you kind of, in that context, That wasn't a setup, by the way. I literally couldn't remember why they were in the ETF. But the point of that is that Visa and Visa are probably better than most of the crypto coins, frankly, for reasons that Ram will happily rant about for ages later. Oh, yeah. But the idea was you said, well, I don't know which crypto is going to win. I'll buy crypto. I said, well, all of them were crap and diversifying didn't help you. And so to that…

1:00:16David Gardner:Because it was a category era, but anyway. Right.

1:00:17Chris Hill:And that was kind of my point. So think about the AI. What's actually in the AI ETF or even industrial's ETF? What's excluded? um so i yeah long answer jeff i would just buy the etf and enjoy you said you want to do it to um cost around having fun i can't tell you what you should do jeff but if i was if i own if i had only etfs or i was moving to etfs i wouldn't lose a wink of sleep about the coming ai impact on my on my etfs not because i know it won't happen just because i don't know that it won't and i can't make any objective decisions otherwise and so i would stick with the strategy i already have which i was very comfortable with.

1:00:51David Gardner:I found a good example. There's a Betashare's Global Robotics and Artificial Intelligence ETF. And what has happened on that front? Oh my God, everything's happening on that front. That is the place to be. And so I haven't picked something that everyone thought was going to be good and then wasn't. I picked something that everyone thought was going to be good and was, but the ETF is still trading below the high that it reached in 2021. So could you imagine that like this four years ago five years ago my gosh this is this is not like a short-term thing i think imagine the person you're having having lunch with a friend he goes i really think this ai thing is going to take off and ruby's just like the future man and he's like yeah they're absolutely right like and you've not made any money like that's exactly right i'm cherry picking the dates i know but but it's just sort of like that's the point unless you actively choose

1:01:43Chris Hill:the company and the price and buy only when you get that price on that date. You're just picking a date. If I just invested then based on a theme, I wasn't doing the value thing. I wasn't doing the company selection thing. I was just doing the blind purchase of a theme idea.

1:01:57David Gardner:I mean, yeah. I mean, again, you can always mix it up if you want. I just wouldn't tinker with the core. Tinker at the edges. I mean, you want it life, Jeff. You're 60 and you're retired.

1:02:14Emily Flippen:Do your thing.

1:02:15David Gardner:Do your thing, man. Like, this is it. Like, you know. I mean, what's the best case scenario here? Maybe 3%, 4 % extra compound annual over the remainder of your life? It's not. I mean, I'm the first to admit that those things add up over a long period of time.

1:02:31Chris Hill:But in terms of, I'm not saying you shouldn't buy green bananas anymore. I'm not that far off that mark myself.

1:02:37David Gardner:But it's just like, I just don't. I think what matters, only you know what matters to you. but I'm going to assume what matters to you is that you can maximize your healthy lifespan and, you know, experience life to the full now that you're not working for the man, right? Like, I'm not going to, I don't know. Maybe you love it, which is a different story. But if you don't, and you're doing all that extra work and taking that risk for what might end up being a slight outperformance, it's just, I don't know. For me, I'd rather go sailing, go fishing, play golf, whatever it is that floats your boat.

1:03:10Chris Hill:And frankly, for the average investor who doesn't know which way AI is going to go and wants to be least exposed, the ETF is still probably the best option anyway. You're not as exposed if it goes well, but I don't know what's going to happen to me either. So be exposed to an entire index. It's almost literally the perfect scenario. Unless you want to make a bet and say, I will bet on AI or against AI as a concept, even then. It's stupidly hard to try and do it at scale anyway. But you're saying AI is going to be a big thing. Is it going to add value or detract value? I don't know. Is it going to add value to individual companies or to a whole sector or to nobody or consumers?

1:03:41Chris Hill:I don't know. So then you're back to, I just invest faster.

1:03:44David Gardner:Very much might be the consumer that the value accrues to, right? Like that's the other thing.

1:03:48Chris Hill:I mean, we talk about the internet companies like Google and say how big they are. It's like, well, look at all the money they've made from the internet. It's absolutely true. Google doesn't exist without the internet. No one's using a Google version of Yellow Pages, right? It just doesn't exist. So there are companies that have absolutely made massive amounts of money and value for as native internet only businesses. I'm an Amazon shareholder. Amazon doesn't exist without the internet, but retail doesn't go anywhere. I mean, it's just, you know, like, so where'd the value go? Well, the value went to Walmart lost value.

1:04:14Chris Hill:Amazon gained it. And the consumer did a whole lot better because now I can jump online or my Woolies order will be here in an hour's time. I mean, that's the consumer value of the internet. And I'm convinced it is orders and orders of magnitude greater than the value. But in monetary and non-monetary shows, by the way, than the value that is accrued to individual companies that happen to be internet specialists. I suspect the same is true of AI. You've used it for what you've used it for, for work, mate. I've used it for work. I use it for home all the time. I'm looking at a new camper trailer to replace what we've got now and I have just absolutely flogged the hell out of it to compare right now.

1:04:47Chris Hill:And it's just a really simple example, right? You don't go back, do you?

1:04:50David Gardner:It's a one-way door. It's like the internet. You don't use the internet and go, actually, Yellow Pages was better. I'll go back to the phone. Yeah, exactly. Yeah, you know, oh, this car thing looks all right, but I'm going to stick with horses, thanks. Like, it just doesn't happen, right?

1:05:01Chris Hill:And the consumer value is where it's going to, yeah. Can I make one little point there you said

1:05:08David Gardner:For people who don't know where AI is going. I would actually include the experts in that too. Not because they're idiots, but because you find this with a lot of cutting-edge technologies, they're very hard to forecast. You could look at the great – quantum is a great example. They're like, you know, in fact, studies have shown that people closest to it are most likely to overestimate its success because you kind of see the potential. You know what I mean? And it's like, oh, it's going to happen next. It's just there, yeah.

1:05:37Chris Hill:Yeah.

1:05:37David Gardner:I mean, there's Sam Altman doing the, you know, because he's trying to raise money, so he's going to talk a good game. But, you know, it's like, oh, AGI next year. And it's like, what? Now, how many people on the planet know more about AI than Sam Altman? Not many. Of the 8 billion people on the planet, I'm sure there's, you know, several thousand people, but all these engineers and the PhD gigabrains, but not many. And yet, and I always come back to that. It's stuck and burnt into my mind that Bill Gates interview with David Letterman from the 80s. 90s, sorry. I do love it because it tells that story.

1:06:10David Gardner:And here is the guy, the guy at the forefront. He's riding the wave of this new innovation, this massive disruption, this massive paradigm shift. And he could not imagine anything beyond a chat room and listening to a ball game like it was the radio. That was his vision of the internet. Is he an idiot? No, he's a very intelligent man, right? And he was the expert and he called it wrong. And so these things are just dire, especially in the early phases when it's sort of like you can, I mean, I can remember because I was there. You were too. I mean, the internet was a thing. I was convinced the internet was a thing, right?

1:06:51David Gardner:Four marks, Andrew, you picked it.

1:06:54Emily Flippen:But I didn't foresee how it was going to be a thing, you know? Yeah. And most people didn't.

1:07:00David Gardner:And I even love to throw Charlie Munger under the bus here too. is probably I can't think of someone I respect more as an investor, right? He's like, you know, he just completely threw shade at the internet for forever. And just like he was wrong on it.

1:07:13Jason Moser:And like to think that – Jerry, I'll read the same.

1:07:15David Gardner:Jerry, I get a million examples, right? So what I like – just to make the point, how do you reconcile all of this is that – and again, I mentioned Buffett and Apple in 2012.

1:07:28Jason Moser:well, when there is a genuine paradigm shift and AI is exactly that, you don't have to be in on day one at the ground floor to do well, right? Because if this is what we think it is,

1:07:42David Gardner:this is going to play out over a multi-decade timeframe. It just integrates every single aspect of our life.

1:07:48Jason Moser:But at least if you wait a little bit, yeah, you lose the really big upside, but you're also betting with a much better risk reward proposition. It's been de-risked In 2012, you didn't have to be Nostradamus to know that Apple was going to be a great company, right? I say that. I didn't buy any. But you know what I mean? But the person who bought Apple in 1999 really was going out on a limb. Like you just, it was really hard to see at that point in time. Now, fast forward to 2026. It's Berkshire's biggest equity position. And it's absolutely, I just mentioned the share price before. It shot the lights out.

1:08:25Jason Moser:That's how you invest in new technology for my mind. And it's very, something I'm pretty wedded to as a way of thinking, which is don't go, don't be super early.

1:08:35Emily Flippen:You kind of want that phase of the Gartner hype cycle where you've gone through the peak of inflated expectations and then you, oh, it's called the trough of disillusionment, right? It's sort of like, it's going to change the world. Everything goes to the moon. It's like, oh, wait, I still don't have a robot butler. Boom, it crashes down. And then you have this slope of enlightenment

1:08:53Jason Moser:where the technology matures and people get busy, they roll their things up, they actually build it. And I would even say now, some of the AI tools I'm using in 2026, which is just blow everything away from last year. And it feels, in the moment, it feels glacial, right? But then you step back and you think, gosh. And so anyway, I would be very tempted if that's what's exciting you, and I don't blame you if it is exciting you, to show a little bit of restraint because for me, smarter people will probably have a better handle on it. But for me, I can't handicap the odds of like, is AI going to be a thing?

1:09:32Jason Moser:100%. Who's going to win it? And how are they going to win it? I can't tell yet. In five years time, it turns out that Anthropic has absolutely smashed, as a random example, OpenAI and Gemini and all the other models. And they've just made some breakthrough that's all IP protected. And now it's clawed that's embedded into everything, okay, I'm going to go and drop it.

1:09:54Emily Flippen:And I'll be buying it at five times, 10 times the price that it is now.

1:09:57Jason Moser:But if that is true and there are serious networks and serious sort of what I like to call trapdoor moats, there's big switching costs with that. I'm like, I'm going to keep riding this horse, right? Why would I get out of that?

1:10:13Chris Hill:100%. 100%. Yeah, nothing to do with it. Sorry, mate.

1:10:17Emily Flippen:Flog that one to death. No, it's great.

1:10:19Chris Hill:That's great. It's great. So let's go back to it. I'll finish with a question from Nessie, who ran into us a couple of weeks ago. Hi, Scott and Andrew. Thank you for answering my question about mean reversion. Very informative and balanced. Apologies to Scott. As I said, I loved Andrew more because I was a Strawman Premium member. He says, it's a great service, by the way. Nessie, you're not helping, mate. Scott, to make you feel more loved again...

1:10:41Emily Flippen:I'll send you that case in beer later.

1:10:43Chris Hill:To make you feel more loved again, I would say I was a multiple-service Motley Fool subscriber. He says, was, right? Not is, was. Doesn't make me feel any good, Nessie. And thanks to your US picks in ShareAdvisor, my US portfolio has returned 25.4 % per annum for the last 12 years. Bloody hell. I should say, I'm not going to take total credit for that, Nessie. We get a lot of ideas. We've got all of our ideas coming directly from the US and then we kind of vet and list the ones that we are comfortable to recommend. I was back at uni as a mature student the last two years and just didn't have time for everything.

1:11:14Chris Hill:But I will be back soon. I will hold you to that, Nessie. Write in to us when you do. And then I'll answer your question. No, I'm kidding. Further to the discussion on mean reversion, could you perhaps take us to a working example to show us your thought processes and wisdom? We prefer to keep the curtain closed on that one, Nessie. We might be the emperor's new clothes or the wizard behind the curtain. Maybe Ram's favourite, Prometicus. Is the recent massive drop in price a mean reversion of the PE? Sentiment, lower expectations, or a combination of all three? And how do you decide to weather the PE crush and continue to hold or sell.

1:11:51Chris Hill:I must admit, I often stick my head in the sand and recite, be slow to buy and slower to sell. Plus a little finger crossing and trusting of management. Appreciate your thoughts, Nessie. I'm going to start very quickly around with his last point and I'll throw it to you. Go for it. Because he's a straw man member. He clearly put his chips in your camp, which is fine, Nessie. No, I don't. I'm not even slightly upset about Nessie. I'm fine. I won't even think about it after this podcast. I won't dwell on it. I won't talk about it. I won't complain to my wife later. So the trust to give management thing is only interesting in the context of the business and the investment aren't the same thing.

1:12:26Chris Hill:I mentioned that on Friday. And I know you know that, Nessie, because you're a strongman member, so you're very good at thinking about companies and the art of valuation and other things. But trusting management of the world's most overvalued company is probably still not great. So I know you're not saying that, but if we talk about mean reversion, it's about share price. It's kind of one of those things where, by all means, trust managed to execute. But if we're talking about mean reversion when it comes to pricing, share pricing, which is kind of what you're talking about here, I think you know what's entirely what you're talking about.

1:12:54Chris Hill:I wouldn't trust management. Let's take Sol Pats, right? Let's say Sol Pats goes from$38, which I own shares, roughly is, to$3 ,000 a share tomorrow because people get excited about it. I trust Robert Milner implicitly to do the right thing for shareholders. He's proven over 30-something years he's acting in the interests of shareholders. So I trust him to do that. Do I trust him to justify a$3 ,000 share price? No, I don't. And again, I'm not saying that you're saying that either, mate, but it's important to separate the investment from the business. Put it back together at the end because you've got to work out what the business is before you work out how much to pay for it.

1:13:26Chris Hill:But trusting management or distrusting management won't probably solve your valuation question about mean reversion necessarily. It does if you think about the difference in potential future growth. But again, that's kind of partly separate. All right, mate, over to you then. So, with Leeds ProMedicus or not, choose a different company if you want. Huge drop in price, about two-thirds, give or take. It jumped a little bit, I think, earlier this week, so maybe not down quite so much anymore. Is it a mean reversion of the PE? Is it sentiment? Is it lower expectations of the business, something else or a combination of all of them?

1:13:54David Gardner:Well, you kind of said the same thing three different ways, sentiment, expectations, and PE. I mean, it's kind of all the same thing. That's fair, actually. Yeah, that's a good point. I think that's exactly what's happened. ProMedic has actually dropped their results this week. and let me just very tactfully fumble around as I open it. Last one. It was very, oh, for God's sake. Fluff, fluff, fluff. I can't even find it. It was an excellent result. It was an insanely good result. Like most companies would sell their mother to get the kind of growth that they're getting and yet the share price has done what it has done.

1:14:34David Gardner:And in fact, if you look back at just the per share earnings of this business, I mean, last year it was$1.10, then it was 80 cents, then it was 58, 43. So if you go back just five years, so we'll ignore some of the base effects from working off a very small base here. They've compounded their per share earnings at close enough to 40 % per annum, right? So they deserve a very high multiple. Absolutely, they do.

1:14:59Chris Hill:If they can keep it going.

1:15:01David Gardner:If they can, thank you. If they can keep it going. I know you know that,

1:15:04Chris Hill:but I just want to be very clear here. The past is the past. If it's hit maturity and it's not growing, then it's not worth anything. If growth increases massively, it's worth even more. But if it can keep doing anything like that sort of number, it certainly showed itself to be a quality business growing very, very well.

1:15:17David Gardner:Absolutely right. You're absolutely right. So the PE ratio as I speak today is about 90, I believe, or so. So even though it's done that incredible growth in the earnings, back then the average annual PE ratio was 125 or something.

1:15:37Chris Hill:Yep.

1:15:37David Gardner:So there's a 30 % headwind for you right there, just on that. And so when we talked about mean reversion previously, PE ratios were the great example, right? Because that's just what they do. As we also said, I think they're not anything you can set your watch by in time. But what it means is that when you're buying a stock with a very high PE, you've got to expect that over time, maybe it's gradual, Maybe it's slow and maybe it settles at a higher than average kind of rate. But it's a very spurious or let's just call it bold investment thesis that says the PE will always trade at 200. In fact, it'll go from 200 to 300.

1:16:18David Gardner:Now, great. If that happens, fantastic. But gosh, that's really going against every observable fact we tend to notice in markets when it comes to market multiples. So I think that's exactly what you're seeing. um you know and it's still up there as i said it's still up not like look if they you can again we talked about this at the start of the pod let's go what are they dollar 10 per share in 2025 grow that for 40 for 10 years do that even give it a p of 25 which is like contracts a lot more you're still making money right you're still making money not no not insane amounts of money but that's what you want and that's how i do it with growth companies i just i can't predict predicting a PE is like predicting the market price.

1:17:04David Gardner:I'm literally trying to guess sentiment.

1:17:06Jason Moser:So I don't try and guess it. I just assume that it's going to mean revert.

1:17:11Emily Flippen:Because what I like about that approach is if I'm wrong and it didn't mean revert, it's like, oh, you mean my return is even better than I was expecting? Like this is, thank you. Thank God I was wrong. Like it's okay to be like, I don't mind being wrong when being wrong means I made more money than I expected to make.

1:17:27David Gardner:I don't want to be wrong. It was just like, oh, the whole thing rested on this never. ever reverting. But that, and again, that's the numbers that you've kind of got to do. Can they sustain that kind of growth rate? And if you think that they can, then I would argue it's dirt cheap. In fact, plenty of people on straw man are doing that right now. That's the bet.

1:17:46Jason Moser:They might be wrong. It might actually be that they only grow at 15 % compound for the next 10 years and then traded to PE of 16. You're not going to lose your shirt, but it's going to be a really mediocre

1:18:00Chris Hill:investment does that make sense perfect sense um the other thing about growth by the way is don't forget at compounds which everyone knows kind of instinctively but if you've got 40 this year and 40 next year 40 the year after the dollar value of the growth you have to find is enormously larger it's why trees don't grow to the skies why elephants can't dance choose your favorite however used hackneyed metaphor um at some point you just can't add enough dollars now i'm saying this as a case of ProMedic because I'm just making the point that, I'll go back to the numbers, right? The earnings per share went from$0.09 to$0.12 from 2017 and 2018.

1:18:34Chris Hill:That was a 30 % increase, right? So big, but only required$0.03 a share to increase. Now, their current earnings per$1.10 a share, if they grow that at 30%, they're going to find$0.33 worth of growth. In other words, they're going to add three times as many customers as they had in total in 2018. Now, Often they can because you have a bigger sales force, you've got better reputations, you've got use cases, case studies. Let me spit that out. And so I'm not saying it can't be done either at all. I'm just making the case that the incremental increase in percentages hides the sheer number of people.

1:19:12Chris Hill:I'll make it slightly unrelated but also kind of totally related reference here to population growth. People say, oh, population growth, 2%. It's not that every year since 1940. It's nothing new. It's like, yeah, that's absolutely true. except that in 1940 we had x number of people so two percent these days is worth a lot more of those people and by the way we've used up most of the available housing land so trying to house two percent more people when your population is 28 million rather than i mean i don't know what the numbers were two percent more when your population was 12 million not only is it a much lower number but you've got you've got much less space to put them in in in relatively inside sydney or melbourne or i mean you can go to over the mountains and i don't want to i don't want to talk to the analogy too bad hey hey stay away from the mountains it's sacred exactly yeah but Yeah, and the Highlands.

1:19:53Chris Hill:So there's some symmetry about that. If you're on the mountains, I'm on the Highlands. So, yeah, my point is adding that number of people is not the same circumstance as the same number or same percentage when you had a bigger potential. Go West, young man, in the US, right? They went West. There were a whole lot of Native Americans there and horrible stuff there. So, you know, again, it's an uncomfortable analogy, but there's a lot more land they could simply, by force and unreasonably, take, you know, acquire, just occupy. but at some point, look, go to California now. You know, the number of people, the percentage growth, all that kind of stuff is absolutely the same.

1:20:26Chris Hill:So just be careful of that. It's easy to kind of go, oh, 30 % a year lasts X number of years. And you're not saying this around at all. They've been able to do it this far. It's like, yeah, but just understand the size of the problem. You mentioned CSL back in the day, mate. Part of the problem I had with CSL 300 bucks is you kind of go, well, hang on, how much do they have to grow at that rate? Okay, it's this much. But these guys are already an enormously large business. They've got to find billions of dollars worth of revenue somewhere. Where's it going to come from? Now, maybe they find it, but it's like, that's not just, hey, guys, let's go and sell another couple of blood vials to the bloke down the road.

1:20:59Chris Hill:That is, invent an entire new category of treatment and hope you dominate it. And it's just a much, much higher amount in decline. It's why big businesses slow down when they get big. Woolies gets to 45 % market share. It's probably reasonably done market share-wise. Why? Because they've soaked it all up. There's not so much more they can do. um so understand the difference between the early growth stage and the maturity stage we talked about that before um i think it's a really really important part of thinking about it here on on mean reversion specifically i do want to it's a it's a very valid concept generally statistically most of the time so i use generally most of the time deliberately there to to to walk this one back a little bit we you could play mean reversion to pro medicus as pe and say hey the pe has been 100 for the last five years and now it's 50 so if i mean revert it goes back to the average that should mean it goes back up again.

1:21:47Chris Hill:That would be mean reversion. In that very narrow sense, if you said averages tend to, or numbers tend to revert to the mean, you would say, well, Prometheus's PE is lower than it's been in ages, therefore it's going to go back up again. And you would have said the same about Woolworths. And you would have said the same about insert slowing CSL. If everything was mean reverting, you would sell everything that traded above its PE, historical PE, and by everything that's below, it's historical PEs. And you're probably going to lose a fortune trying to do that. So when we talk about mean reversion, just be careful about the data set.

1:22:15Chris Hill:Now, you're not making this mistake necessarily, but given you asked the question, it's a really good opportunity for us to talk to all listeners about exactly that idea. Don't just look at the – be careful what mean you're using, I guess, is what I'm saying. Now, over time, if the market doesn't change dramatically, at a market level, when you've got lots and lots and lots of different diversified companies, the more – what do they call a bloody thing? Observations you have in your sample, then you start getting close to average mean reversions. and when the mean itself tends to be built on mathematical reality, which is a PE is a function of price and earnings and earnings tend to only grow at a reasonable rate over time over the very long term.

1:22:55Chris Hill:And the analysis tells us that if you pay more than about 15, 16 times earnings for an average ASX company, earnings rate is probably not going to pay for that. That's why. So there's a reason that those PEs tend to revert. Don't assume the company's PE has to revert to anything necessarily other than over the very, very long term. And remember that it reverts not because it has to, in this case, in my opinion anyway, but because the maths of valuation mean that by the time it's growing at 4 % a year, it should only be trading in a per year 15, just because that's fair value. So it's not so much it goes to 15 because it has to, because it should, because everything does.

1:23:28Chris Hill:It's more that if you believe in the numbers of discounted cash flow valuations, you can't grow forever. So your growth is probably going to slow. And if your growth slows, the price you can afford to pay is going to slow. And the average company is worth about 16 times earnings because of the rate of its growth. And I hope that doesn't feel too academic or esoteric, but that's kind of why you'd expect it to fall over time towards the market's PE. But Amazon's been above market PE for 25 years. Now, is that overvalued? Maybe, I don't know. But it can stay very high for a very long time if it does above average growth.

1:24:00Chris Hill:So think about the mean reversion. I would argue closer to either the total market at maturity, which is one way to look at it, or effectively a mean reversion of sorts, which kind of talks to a DCF valuation, which is just at a given level of sales, of growth, the price you pay should be about X, and that should kind of get you pretty close. How's that going around? Did I mess that up?

1:24:23Jason Moser:Yeah. No, it's great.

1:24:25David Gardner:I'll try and do it just to stick with ProMedicus to use the example. I brought some numbers up here with the help of my junior analyst.

1:24:37Emily Flippen:What junior analyst? so yes i know i'll be getting the coffees me too um so the core radiology market that they operate

1:24:47Jason Moser:in that's called pax it's for an archival immediately i'll get into what pro medicus does but the market that they caught that they operate in globally is worth five billion dollars

1:24:57David Gardner:the cardiology has a separate field that they think that they can get into i think they can too by the way um that's probably about four billion dollars and then there's the other ologies as well that there's potential for this Visage 7 product to sort of creep into. So you add all of that together and you get a total addressable market of 15 billion US dollars. That's a lot, right? They're not doing that at the moment. I can tell you that much. But if you extrapolate their revenue growth forward for 15 years, their revenue is bigger than the entire addressable market. Now the addressable market itself might grow.

1:25:28David Gardner:They might invent something else entirely that allows them to get into a different field and all of that kind of stuff. But there's a lot of ifs there. It's hard to pull the rabbit out of the hat five times in a row and just do it

1:25:39Jason Moser:perfectly each time. So this is where you've got to, this is where, just to illustrate the point, it's sort of like, well, the person who rests their thesis, and I'm not saying too many people are necessarily doing this, although arguably a year ago, they must have been, because how else did they justify the value? But they're saying, well, it's always grown at 30%. They only own about 10 % of their addressable market just within the PAC sector. I think they can keep growing. It's like, well, okay, let's do some maths on that. Let's take their$200 million in Aussie revenue. Let's grow it by 30 % per annum.

1:26:11Jason Moser:And after a while, because of the nature of compounding, you're just dealing with such vast, vast numbers that you're actually big. Even the most successful company in the world is never going to capture 100 % market share. So we're expecting them to capture 100 % market share, the market itself to continue to grow at an extreme rate. And then at the end point, once they've somehow managed to do that, which would just be the most unheard of thing ever for a company to go to zero to owning 100 % of the market in a short space of time, well, then what? There is no more market. You've got it all.

1:26:48Jason Moser:You can't go beyond 100 % of the market, right? So how are you attracting a 90 PE at that point? Where is the growth possibly going to come from. Now, maybe at that point in time, they've invented some other widget thing and they can do it, but that's what you need to do. So I'm not saying this can't happen before we get a bunch of emails in telling me where I'm wrong and this and that, because people get very annoyed if you talk about a stock that they like. And I love this company. I've said it for the record. I actually personally think it's getting extremely interesting, right? But it's just not the bargain basement price you think it is by virtue of just looking at what has happened so far.

1:27:22Jason Moser:And for even to get to a decent valuation at this point, I still have to factor in some mean reversion with the PE. And on top of that, some very strong, very sustained revenue growth and ongoing margin expansion. It's all possible. And if anyone can do it, they can do it. But none of that isn't, and I would argue for others, shouldn't be predicated on, no, no, no, they're always traded a PE of 50 or something like that. And I can be really confident in that assertion because all I have to do is look, as I like to say, history is a great teacher. Look at any developed market over any length of time.

1:28:02Jason Moser:You will never see a company sustain that for the duration. They won't. They can't. The market's not that irrational. You know? And again, that doesn't mean it can't go double from here in terms of it could. It's already shown us that that can happen. But long term, that gravity and that mean reversion is going to drag it down. Sorry.

1:28:21Chris Hill:Yeah, it must. I mean, Buffett's talking about Berkshire. You're saying it can't keep growing at the historical rate forever because eventually it becomes bigger than the US economy, which clearly is not possible, right? So trees don't grow to the sky, as they say, and that's the challenge is at what point does it mature and is there enough room left in your assumptions for that to be the case sooner than you otherwise might hope it will be the case? Because maybe it does and maybe it's brilliant. I've got to say, mate, too, the one thing, I'm no expert on Pro Medicus, but I've said this before on the pod, I know I have, I'm sure I must have.

1:28:50Chris Hill:I used to love high margin businesses. The longer I do this, the more I tend to not shy away from them, but it's the beeswax your margins, my opportunity line. It's like, well, so what you've done is you've proven that you're making a 73 % gross margin, I think the number was, from their announcements. Like that's spectacularly great and take the money and take the money and take the money, right? Except if I can do something almost as good for a third of the price, who do you choose? Does it need to be the very, very best gold plate? Maybe it does because medical devices, I don't have a view.

1:29:20Chris Hill:But there's a lot of room there for someone else to go, do you know what? I could have a shot at that. I think I could do something like that and I could put some money into it. And if I'm half successful, I'm happy to take a 40 % margin or a 70 % margin because money is money. I'll take the money. It's not to say every company successful will necessarily be swamped by competitors. I have the same view of NVIDIA, by the way, the chip maker. It's at the front of its technological story right now. The question really is what enables it to remain at the front? What enables it to retain that competitive advantage, to retain that pricing power?

1:29:57Chris Hill:And I'm not saying ProMegas doesn't have it. I'm just saying you have to believe, to your point, you're talking about margins expanding. I mean, I would start by saying you have to believe no competitor will come and erode those margins in the first place. And I'm not saying it will happen. I'm just saying very rare you get 75 % gross margins on challenge without some sort of really serious network effect, like a classified or a social media business or something else where that network effect just means that customers gravitate to you. And probably because I might have one, again, it's not a criticism.

1:30:26Chris Hill:It's just like, I look at those margin videos and another one. It's like, well, is it the biggest and best right now? Yeah. Could someone do something similar-ish for a cheaper price? I mean, maybe the chips are two thirds as fast but cost half the price. Okay, well, I'll just buy more chips. Yes, I'm going to do it every day of the week. Now, will it happen? I don't know. I'm not shorting it. I'm not saying it's going to fall. I just think if I look at that and go, the higher the margin, the more confident I need to be about the sustainability of the competitive advantage. And if I am, that's great.

1:30:54Chris Hill:If I'm not, it's a long way down. Even if you don't, there's a dollar of sales, but have to cut your margins to compete. That puts a decent-sized hole in the investment case. So, again, not saying it's going to happen. I don't have an informed view. It's too much for me. So my view is currently, I guess, I'm saying away. If I knew it was stupidly overvalued, I'd short it. Not that I short, but if I had that conviction, maybe I would. But, yeah, too hard for me because all the things that have to remain true will be unchallenged or expand to justify the current price. I can't personally get there with enough conviction to buy it.

1:31:25Chris Hill:It doesn't matter I'm right. Yeah.

1:31:28David Gardner:I mean, this is why moats are so important. Yes. I mean, the very nature of capitalism properly framed is that high margins are like a moth to a flame. It's going to attract what? It only costs you that much to make it. I'm going to do it. It's inevitable. Whenever you see a company, this is how I identify moats. Not necessarily what the moat is, but the presence of a moat is almost axiomatically determined by high sustained margins. My favorite go-to example, because I love to bash them, is the ASX. Yes. The actual company that's listed on itself. You know, they've got insane margins. I think it's like 50 % margins.

1:32:08David Gardner:Like the kind of margins that just make no sense and would never happen in any world where competition was allowed to sort of function. or maybe there's just a natural monopoly with what they do. But what is it? Last year they had$5.81 per share in sales and they made$2.59 per share earnings.

1:32:25Emily Flippen:That is amazing, right? And they have managed to do that, even though they've been really badly run and all the rest of it.

1:32:32David Gardner:It's sort of like not many companies enjoy the regulatory protections

1:32:42Emily Flippen:and natural market dynamics that this company does. And so you're right. I'm just trying to illustrate your point. But you can imagine why they're kicking so hard.

1:32:51David Gardner:When any threat that that would open up to other marketplaces or in any serious kind of way, you would be in big trouble. Sales might stay the same because you managed to hold your own in terms of market share, but your profits are going to fall and all of a sudden your PE is going to compress. Yeah. This is, I'll wrap it up. We've got to go. I wrap it all up just by trying to, like, I think everything that we've tried to say during this podcast and also on Thursdays is that the future is entirely unknowable and anyone who thinks otherwise is kidding themselves.

1:33:24Jason Moser:So the best you can do is a bunch of different scenario analysis, what needs to happen, and then try and put some reasonable probabilities around it. It sounds like, oh, my gosh, that sounds like a bit of a crapshoot.

1:33:37Chris Hill:It's like, yeah, kind of. It really is, yeah.

1:33:39Jason Moser:You know, but it's a far more disciplined way to act, right? And at least you're operating in a manner in which I've set the milestones on the road that I need to see to show that I'm going in the right direction. If I don't see these things, I know the thesis is busted. I need to reformulate it or I need to get out or one of the two because the original reason for buying it isn't there. you know, and it doesn't matter how smart your reasoning was and how deep your analysis is. That's just going to happen all of the time. And I think that's what puts a lot of people off. It's that not knowing.

1:34:21Jason Moser:It's that probabilistic nature of it. But that's the way that you've got to think about it. And so the person and the investor, it comes through in a lot of questions, you know, how do I know? How do I know? How do I figure this out? And we give these really wishy-washy, well, actually, you can't figure out. It's impossible to know.

1:34:37Chris Hill:That's right.

1:34:38Jason Moser:What? So how does, so it's pointless. No, it's not pointless at all. You've just got to, you're just going to make a bunch of mistakes, but overall you'll be right. And then you can make mistakes of reasoning and then you can make, you can do absolutely no mistakes in terms of process, but get a bad outcome. This is one of these weird domains where you can do the right thing and be punished and do the wrong thing and get rewarded as I often say. And so it's just the way you've, you've got to come at it and you will always face that uncertainty. But as Munger and Buffett say all the time, just want to, that's just the nature of it.

1:35:08Jason Moser:It's not comfortable, but it's the way it is. But if you can tilt things in your favor, if you can just make sure that the odds are never going to be certain, but they're more biased towards you. You know, someone offers you a game of two up and the coins are loaded and you know which way they're more likely to fall. You'll play that all day long, even if you have a really bad losing streak. In fact, you know, a lot of, you know, you can do this yourself with spreadsheets or just like getting a piece of paper and flipping a coin. We know it's 50-50. Yeah, that's right. It's absolutely, like you do that a thousand times, you're going to find that there's multiple periods where you flipped like 12 tails in a row.

1:35:45Jason Moser:You know, it's going to happen. It's not like one, it's not heads, tails, heads, tails, heads, heads, heads, heads, tails, heads, heads, heads, tails, tails, tails, heads, heads, heads. And it's all over the shop, right? And it's sort of like, again, when you zoom out, the pattern is as clear as crystal. But in the moment when it's your real money

1:36:03Emily Flippen:and these periods are years, not just minutes or days. I'm doing everything right. I'm just losing.

1:36:10Jason Moser:And that is why you have to be a psychopath, masochistic weirdo, I guess, to sort of stick at this for any length of time because that's the arena that you're going into. You can deny it and try and pretend it's not, but it's not going to – reality will assert itself. Or you can embrace it for what it is and play according to the reality of the situation. And if you do it smart, you probably get it right more often than wrong and it's the best you can hope for.

1:36:39Chris Hill:Yep, I think that's about right. No, it's a probability game. It's literally a probability game. That is the bottom line. You will never find perfect accuracy. And the pursuit of perfect accuracy means you won't ever make any effort and we know the result. So it's a case of absolutely making educated assumptions. I'll say educated guesses. Here's the other thing. Let's not pretend that we have some particularly – we need to wrap some. Let's not pretend we have any particularly – investing is not like – investing is not bestowed with some special insight. We call them forecasts rather than guesses, right, because somehow it seems better.

1:37:14Chris Hill:A guess is made by someone who knows nothing. A prediction is made by a weatherman, but a forecast, oh, that's made by an analyst with a spreadsheet, you know. And that's why I bristle people to say, oh, gambling and investing are different. I mean, they are at some level, but only if you imbue them with certain meanings. The rest of the time, we're saying that looks like a decent price based on a range of expected outcomes, which is exactly what you do at the track. Now, you might be good at the track. You might be bad at the track. You might be great at the stock market or terrible at the stock market.

1:37:41Chris Hill:It's the same process you go through. And so when we kind of pretend that somehow – it turns people off for a start, which I hate because it's like, well, I can't do that. I'm not an investor. I just – it's like, well, okay. Everyone should be doing it. Some people shouldn't, and that's completely great. If you're not capable, interested, have the temperament for it, please don't do it. Buy an ETFG fishing, please, for your sake and for mine. The same reason I don't use wingsuits. Right. It's not going to end well. Kind of. Jump off a cliff with one of those things, right? Now I'm thinking about those ski jumpers in Milan, but let's not go there with their suits.

1:38:13Chris Hill:Have you seen the controversy on that one? Oh, yes, I have. It's not late enough yet. Thanks for being with us. We'll finish that one right now. Until next Friday, have a great week. Fool on. Cheers.

1:38:24Emily Flippen:The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.