“Tell me where I’m going to die, so I don’t go there”. July 10, 2026

24:12up. I guess it's more of a one being a consequence of another where it's sort of like, I don't have a firm view on exactly how the share price is going to change in the near term. I've got a view in the long term, but that's only on the observation that over long periods of time, share prices tend to track the fundamental performance of the business. So I'm kind of indirectly forecasting a price rise, but I'm really trying to forecast a business that is improving in its quality, and its earnings power. Because I'm pretty confident that if I get that right, then the other will follow. It's almost, you know, you look after the pennies, the pounds look after themselves.

24:51Not quite that, but, you know, that kind of thing. One is sort of consequential of the other. And it's very hard to do because you'll find that a lot of people sort of stay with that and then start with that and then you slip into it. There's little gateway drugs that, like, lure you into it. So for example, the classic one I always see all the time is I really like Woolies at whatever,$25. I think that's pretty good. And you look at the share market, it's like, oh, it's$25.20. I'm going to put a limit order in at$24.90. And it's like, it's sort of like it feels clever. And to me, it's just like, well, A, it's overt price speculation.

25:31You're anticipating the price will go down there. If actually you seem to be inadvertently saying that it's going to drop, fill your order and then rise, right? That's right. Yes, exactly. Where I always think, now there's two possible broad futures. Three, I suppose, go sideways. But broadly, it's going to go well, it's not going to go well. If in 10 years' time Woolies is at$40, you bought it at$25.20 or$23.90 or$26.80, what's the difference? Well, actually, it does make sense. I know it does. Technically, it does. But no difference that's going to matter or you're going to care about, right?

26:06You and me are both having a discussion about how you bought Pro Medicus, you know, 10 years ago at 80 cents and I bought it at$1.50. It's like, well, you've done much better than me, but I've done really well. I'm not losing any sleep over it. And the difference would have been not buying at$1.50 because it had gone up from 80 cents. You were waiting for it to go back to$1. Exactly. Exactly. No, thank you. I'm so glad you said that. And the opposite is true as well. It's like it turns out that Woolies has gone bankrupt in 10 years. It's like, well, I only paid$24 for it. You paid$28 for it. You made a big a lot.

26:38No, we did. We both lost 100%. Like it's nonsense. So there's silly kind of inadvertent speculations that you catch yourself doing. I'm not saying there's no reason to do limit orders, by the way. Sometimes liquidity issues and whatnot are important. And sometimes it's just a matter of I'm just not that much of a rush and I'll buy it around this price. And you've got to draw the line in the sand somewhere. So I'm not trying to be too pedantic or too cute with this observation. I'm just sort of saying, just don't worry about that stuff. And I always make the point, it sounds like a humble brag.

27:09I'm really just trying to illustrate the point. It's a weird brag if it was anyway, because without exception, I've said it for a while and then I actually checked it out not long ago. Without exception, if I was to look at the top five investments I've made, like the ones that really move the needle, frankly, it's kind of like you take them away and it's not a pretty big shot, right? Which is also So another lesson to have. But on all of them, they all dropped after I bought them and stayed down for a while and the loss was pretty brutal, you know. You buy something, it drops 30%, it sits there for two years.

27:50Now in 10 years' time you look back and you're like, who cares? It was sort of brilliant. But again, like I just didn't need to worry about all the silly price speculation. So I've flogged that horse to death. For me, it's something to avoid. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

28:15I'm going to go back to behavioural stuff, mate, and just say ego in general, which kind of captures everything we've said and everything we probably will say in large part. Because there's kind of two ways, more than two ways to get investing wrong, right? But the first part you kind of get wrong or can get wrong is just the structure, the process of investing, right? And you talk about some of the debt stuff you talked about before. And if you simply get the analysis wrong, you're wrong. So you can be wrong in terms of the work you do and how you make that thesis, right? So you can be just dead wrong about the thesis or dead wrong about your analysis or whatever or make some bad choices.

28:51So that's kind of factually wrong, if you like, or just getting the process wrong. The other one, though, is getting in your own way, tripping over your own feet. And that almost always comes from ego. And whether that is you think you know more than you do or you think you can be smarter than you are or you think you can do something, you said, well, I'm not saying that I couldn't do it. Most people can't do it. Most people can do it, probably can't do it very often. You're being very kind to anyone listening who's saying, I do that. Now, you're right. Technically, it's possible some of those things are doable.

29:21The ego that says, so I'm going to be the one who can do it, That self-deception is just legion. It is – and it happens right across the board. You know? Yeah, okay, you might not – you might not be able to speculate on prices, but I can. You might not be able to day trade, but I'll be able to. That ego – and it's what brokers prey on all the time. You know, I don't remember which broker it was, so I'm not bagging them. You know, it was take a position is kind of the idea, right? It's like, well, I don't know. And the I don't know thing is really – that's kind of what I'm talking about, right, is the – and you mentioned that before in terms of circle of competence.

29:53But all the things that you don't know, you don't have to do these things to invest well. If investing was a game of you better master day trading or you can't make any money investing, it's like, well, okay, I guess if that's the only game in town, that's how it's played, I guess I have to play it that way. But you go, well, actually, I could do it without doing that. Okay, so why would I do that? Well, because I can make a lot of money. You can. What are the odds of that? Now, if you're honest with yourself, the answer is really, really, really bloody unlikely. And yet, how many people do it?

30:21Yeah. And they're not – it's not that – maybe they've done it. The ego that says I can do this thing even though other people can't, that's what's going to get you in trouble every time. And it really is. And everything we've just talked about, all those things, it's all of that stuff all wrapped together. I think I can speculate. I think I can use margin. I think I can do that. And, again, some people can. And the real risk here, it's the hackneyed 90 % of us think we're above average drivers thing. You know, because everyone listening here, some people are saying, oh, yeah, you're right, Scott, I couldn't do that.

30:54A few of you, I'm not naming names because I don't know your names and that's good too. I go like, I hear what you're saying, but I'll be right, I can do it. Well, there will also be people who say, I actually have been doing it. Yeah, sure. I have been doing it. But, again, I'm not trying to like throw cold water all over you, those people, but it's like, you know, every night someone walks out of the casino having won money And it's that short-term social, well, not social proof, but it's that sort of experiential proof, quote, unquote, that did it. Yeah, it's like, you know, well done, well done to you, but come back in 10 years.

31:35That's right. And I'm not saying you can't, but it's just different. We run paper portfolios on Strawman. I'm not trying to mention Strawman for the sake of it, but it's just like the person at the top of the three-month leaderboard is often just, well, put it this way, whoever's there now will not be there, is often not at the top of any other longer-term leaderboards and they certainly won't remain at the top of that short-term leaderboard. I'm not trying to, again, be mean or anything. It's just like when you have a lot of people doing a very, operating in a very volatile and speculative arena, it's just like it's the infinite monkey sort of hypothesis.

32:13There's enough people sort of throwing darts at the Fin Review. Some of them are going to land on the best stock in the world. So I just – sorry to interrupt, but it was just like – I just want to make the point. Even if you have been doing it successfully for a while, I would pat yourself on the back, but don't – it's that pride before four moment, and I've seen it before where it's sort of like, I hear what you're saying. Yep, thanks, guys. That's good advice. Well, I'm curious. I'm going to give it a little go because I want to. It's like, fair enough. And then you do it for a bit. It's like, oh, it's successful.

32:42Well, you know what? I got these great short-term returns with just a few grand. Why don't I do it with all of my portfolio? Because look how good I've gone. And it's that, ooh, just, you know, again, maybe you've been doing it pretty consistently for a long time and you've got that confidence where you can really ramp it up. But the last thing you want to do is after a shortish purple patch, even if that purple patch is one or two years, you know, and then you say, well, I'm aping all into this. I've found the goose that laid the gold. You know what I'm saying. You're right. You're right. Thank you.

33:19Anyway, back to you. No, on that, I just, we mentioned before, for a month or two, I did some numbers back in, I think it was probably April maybe, on the sectors that went well in the market. And I mentioned oil and tech. And those sectors have been up and down and one's been up, the other one's been down, and sometimes a couple of years in one direction, then a year in the other direction, and they're really big swings. The tech investor who invested, I think it was 2022, I think, bought all these tech companies and went to the moon. It was like, oh, my God, I'm so good at this. This is amazing.

33:49I'm going to do more of this. Next year, they're down. They're down massively. And this year, the 12 months when I overrated the data, I think it was mid-April-ish, tech and healthcare were both down more than 30%. I think it was more than 40%. I'm pretty sure it was. And resources are more than 40%. Now, it's really, really, really tough. I mentioned ego. It's so tempting to go, how clever am I? I've got a whole lot of oil companies. I've done really, really well. Now, two things can happen. You can have thought, I'm going to speculate on them. I think they'll do well this year. And you're right.

34:17It's like, see, I told you they'd do well this year. Of course they were going to because of X, Y, Z. Now, again, maybe you're right. Maybe you're even right for the right reasons. But are you going to be right next time? If you are, are you going to be right the time after? You mentioned the casino option, mate. It's always a good one because anything times zero is still zero. You can double and double and double and double. And eventually, when you roll up the wrong color or your spin is zero, you lose everything. And so it's that idea, and you made the point of doing a little bit and trying to do it with a lot, is you only have to – you need to manage your portfolio in such a way that when you're wrong, you don't get killed.

34:49The other thing quickly, and I'll throw it back to you, mate, is the difference between day trading and investing. Investing has a positive, what we call expected value, expected outcome. Why? Because company profits tend to grow over time. Now, I can't promise it's going to be the case, but statistically, company profits grow over time. The market goes up over time. If you just say invest in the market, you are likely, very, very likely, certainly it's always been the case in the past, and I suspect very, very likely for the future, it's going to go up. So it's got a positive expected outcome.

35:16Now, if you're gambling, frankly, if you're gambling at a casino or on the tab, it's a negative expected outcome because the bookies keep some of the money. So as a group, you get poorer every time you gamble. Okay, so that's not great. And then if you're day trading on the market, if you're betting on up or down, you bet up, he bets down, one of you wins, one of you loses. It's a zero expected outcome. Now, you might win, he might lose, or he might win, you might lose. I'm not saying you can't make money. What I'm saying as a group, you're splitting a zero-sum spoil compared to investing over the long term, which actually gives you that longer positive expected outcome.

35:51So not only is it hard to day trade, you are actually playing a lower probability game in the first place and then trying to win at that one. If you're a bad investor, I mean, capital I investor, if you're a bad long-term investor, you might get 3%, 4%, 5%, 6 % on average. I mean, if you're terrible, you can buy one company and not be diversified and lose it all. But, you know, I'm putting investor in quotes, right? If you're doing the basic things properly and you're bad at it, you pick the wrong companies. I mean, someone's going to lose everything and everything. 15 companies are all going to go to zero, right?

36:20Because that's a statistically someone's going to do it. But, you know, if you're properly diversified, right? It'd be hard to do it. It would. Well, can I just do Charlie's thing in vert, right? Imagine if there was a stock picking contest and the winner was the person who lost the most money. I bet that a whole bunch of people would fail and it's like I just keep making money. It's a bit like Brewster's Millions or that kind of idea. It would actually be just as hard as winning the regular one. Correct. Well, even harder because the market goes up over time. But yes, you're absolutely right.

36:54Yes. So that's the point is if you're really bad, the average investor who's the bottom quartile investor is probably going to get, I haven't got the numbers, I'm going to make this up, 5.5 % a year, do you reckon, mate? I don't know. I mean, if you're paying a lot of fees, I mean, it's possible to lose money, right? But if you're invested in the average, if you're an average investor, well-diversified, adding regular, all the normal things, you just happen to be a bad stock picker, you're probably going to get four or five something, right? So you're still going to make money in all probability.

37:25Now, no guarantees, et cetera, et cetera. My point is just that at least it's a positive expected outcome come over time, playing any other game, the speculation game, is zero sum. So you're playing a bad game to start with and it's a game that's stupidly hard to win. Choose your game is kind of, I guess, the key message here. But back to my original point that I'll throw to you, whenever you're tempted to think they can't do it but I can or I'm going to be better than them because you have to. If you're playing a game against somebody else and you want to win that game, you have to be luckier and good luck predicting that or better.

37:57And if you think you're going to be better at it, just step back a little bit and go, what makes me think I'm the guy, I'm the girl who can do that better than the person? I don't know who the other person is, by the way, so maybe they've got a supercomputer. Maybe they have 85 years of experience. Maybe they've got insider knowledge. Why are you going to be better than them? And if you know the answer and you can quantify that answer and you can incredibly explain that with evidence, then go for it. If you're like, actually, just because I think, you made the point, just because I think. It's like, no, no, no.

38:22At that point, you're playing their game and you're going to get backside handed to you. It's so hard, isn't it? Because, I mean, if you push that thinking too far, that's bad too because you're going to be crushed by just self-defeat. Like you just, I can't do it. What do I know? You know, we've often spoke of this really weird dichotomy with investor psychology where it's like you, on one hand, you need to have a certain arrogance to think the market is wrong and that there is something available at a cheap price and that you and maybe a few other people have spotted it, but by definition most haven't.

39:03That's why the price is low. But on the other hand, still be humble enough to recognise that you don't know anything. That's it, right. That's exactly it. And it's like if you go too far at either end of that spectrum, it is a recipe for disaster. And so we're sort of saying, well, don't be too cocky. Be a little bit cocky. Be humble, but don't be too humble. That's right, exactly. Like, guys, help me out. So I'm very overtly aware of what – I mean, it's the right thing to say. I mean, this is why it's – partly why it's such a fascinating space because it kind of exists, you know, in this sort of – but it's foots in each – in multiple camps with all of this kind of stuff.

39:43And it's just – it's tricky. Okay, so the one I was going to go with next was the watering of the weeds and the cutting of the flowers kind of mistake, which is a very common one as well, which is I buy a stock, it goes down. Oh, that sucks. I don't like losing money, but it's not a loss until I sell it or maybe I'll buy some more. Because if I buy some more, I'll lower my average purchase price and the loss won't be as bad. I started at$10, put$1 ,000 in, went to$5 ,000, I put another$1 ,000 in. Well, my average cost base is now$750. That's all I lost. Yeah. Now, all of a sudden, I've taken a 50 % loss and turned it into a 25 % loss.

40:24I mean, it's true. It's true. It's exactly true. That's exactly what your loss is. And we do it all the time. And it's, you know, and the other one is, oh, I bought this stock. Isn't it great? It goes up 20 % in like six months or so. Just like an incredible return, right? I'm locking it in. And it's not that you shouldn't lock in profits or that you shouldn't take losses. My point is that you don't do it purely on the basis of the gain or the loss itself. Sometimes, oftentimes, things fall for very good reasons and they'll continue to fall. Sometimes they fall for really dumb reasons and they will recover.

41:02So what do you do? Well, it depends on which bucket you're talking about here because it's very, very different. So I'm not saying – I've said it before, I've learned from experience that it's easy to misinterpret the message here because people say, well, you should take a loss if it's, you know, if the thesis is broken and rah, rah, rah, it's like, you know, or sorry, I should average down. And it's like, yes, yes, maybe you should, but only if nothing really has materially changed and there's still a good risk reward proposition. If the story has changed, the thesis is broken, then that's a completely wrong thing to do.

41:36And I, again, I speak with great experience on this and these are always, always talk about my biggest regrets in investing and they're not the stocks that did terribly. I mean, I'm not fond of that as experiences, but I don't lose any sleep. I lose sleep on the time I kept on averaging down on the way to zero. I lose sleep on the time I made 30 % in six months because I was the world's best stock trader. And then I look back on it now and it literally 100x, you know, like what? That would have changed the entire trajectory of my life had I not been too, quote unquote, clever and reweighted my portfolio.

42:14and, you know, at a point hindsight's always 20-20 and you can send yourself mad. So you've got to be a little bit forgiving, but they are the ones. They are the ones that do it. So I just think don't ever get into this. You mentioned spreadsheets before as well where, you know, you know who you are. You know if I'm talking about you, whereas like you've got your spreadsheet. That's right. Well, my target allocation is 7.4 % and now I'm at 7.7 % so I need to trim and I need to do this. And, again, there's actually a very sensible reason to do a lot of that stuff, but you can be way, way, way too clever, quote, unquote, with all of that.

42:54So it's just for me, any buy or sell decision cannot be framed entirely by what the share price has done. I mean, the share price has to be a consideration, obviously, but it needs to be in the context of what you think the real or intrinsic or true or actual value, whatever phrase you want to use is. Then it makes a hell of a lot of sense. You've got to obviously consider the share price, but just the share price did this, so I'm doing that. And that's where it begins and ends is just don't go there because you will die. If you go there, It's like even if you don't completely blow yourself up, you will guarantee yourself mediocrity and a mediocrity that's like south of the average, which is actually, as we've long said, the average on the market is anything but mediocre.

43:48I love that point, mate. This is not actually going to happen. I don't even suggest people should do this, but in a perfect world, you invest with any knowledge of the share price and the trades will be placed automatically. Yeah. Which is not to say you have a trading system at all, right? So please don't misunderstand me. In a perfect world, I would have on a piece of paper my rough guess, because that's all it can ever be, on what Woolies is actually worth. And then I would apply to that a rough margin of safety. So I'd say, well, I think Woolies is worth$25, and I'd like to buy shares if it fell below$23.

44:23So I'm picking numbers. Don't at me about any of the detail. And please don't take any details. I'm making numbers up. And that would just sit there. In the background, you tell the computer that's what it's worth. And you wouldn't know whether Woolies was at 35 or 20. You would just say, hey, computer, by the way, this place, some will do it at some point. Hey, computer, buy shares of Woolies if they fall below 23 bucks and don't, but only until it's no more than 5 % of my portfolio or whatever you do. Now, again, you made the point about 7.4 and 7.7%. I'm not saying do this either. I'm just saying conceptually, if you think this through, I'm just adding the concentration part because otherwise, you'd have 100 % of Woolies because it was under 20 bucks and whatever.

44:58and every company in the ASX in a perfect world you'd have a decent guess and you've got to be half good at the guesses otherwise the whole thing is a waste of time you should buy an ETF so let's just throw that out there as well but grab and you know what and then you say to the computer right here's my money money's going in every month when the money arrives buy the things that are the greatest discounted intrinsic value and don't tell me the share price don't tell me what I'm buying don't tell me whether it's up or down that's the other thing you made mention of averaging down it's really really really important this is anchoring 101 right it's exactly what you're talking about Don't anchor to either the price you paid or where the price used to be, all right?

45:32If price goes from 10 to 11, is it more expensive? Yes, by definition. If it goes from 10 to 9, is it cheaper? Yes, by definition. Is it better value or worse value? That depends on what the business has been doing. And if you're wrong in the first place, it's actually worth 15 or it's worth five, it's irrelevant. So you've got to be roughly right about your guesses, and really rough, but broadly and often. And again, in a perfect world, if you're going to design a system, not a trading system, but an investing system, you wouldn't look at the price. I don't know what the price of all is, I just know I think it's worth$23.

46:02And when it releases the next earnings announcement or a great, you know, it's going to go into the Bitcoin business, just a prick Ramsey's ears up, or it's closing half its stores, or it's just been sued for a billion dollars in court, you go, okay, I'm going to change my value. I think it's now worth$21. Now, and it's trading at$24, the system would automatically sell those shares if they're more than a certain amount above your valuation because they're no longer attractive value. And that's, I say system, I don't for a second think anyone should do this automatically with a computer. But if you can conceptualize that, to your point, Ram, that's where you start to make those decisions.

46:35Because Woolies comes out, so I thought it was worth$25, I was going to buy$23. Great results came out. Turns out this business is growing like Topsy. I think it's$26 and I'll buy it$23.50. Okay, good. And on it goes. And so to your point, as the price goes down, you don't buy more to average down. You don't buy more because the price is down. You buy only if and when it's at a discount to your intrinsic value, your fair value, or the price you think it's worth. Let's not use too much jargon. Less a bit of a discount to allow for the fact you could be wrong. That's just how you do it, right? And so it's obvious and it's clear, and I'm probably flogging a dead horse at this point because I've probably overdone it, but you've really got to think about that.

47:14Like, what is it worth? What do you think it's worth, roughly? You'll be wrong. X, okay. I'll buy when it's a bit less than that, and I'll sell when, to my mind, I try and allow lots of valuation upside when I own a company if I believe the value of the business because, to your point, I don't want to sell out of something too quickly. Oh, haha, wasn't I smart? I'm going to give it a bit of rope generally depending on what the business is. But, yeah, and that's what you do. I don't care where the price goes. No, I say I don't care. We're human. We have to care. We just do. You can't put your biology away.

47:39But the more you can be that person who says, I think it's worth this roughly and I'll buy when it's less than that or someone's more than that to whatever degree you think is reasonable for you, that's the job. It doesn't matter if it's rising or falling. That's it. That's the job. In a nutshell. Yeah. Yeah, yeah, yeah. I'll get to a more company-specific sort of things where I like to not go. But, again, this is a bit more cautious because this is just me. What I've found is good for me and there will be a lot of exceptions here. And this isn't like, well, some people, you know, one in a million can actually short-term speculators.

48:14I'm sure the odds are much better if it's aligned with what works for you. But for me, one of the rules is I, well, look, every rule is meant to be broken, right? So there are, before I say this, I'm sure there are moments where I have made exception. But as a general rule, I'm anti pre-revenue. When I say I'm anti, it's just for me. I tend to not want to buy shares in a company that doesn't have any revenue. I'll happily buy shares. In fact, most of the stuff I own doesn't own, doesn't make any profit. There's one thing I own that will never make any profit or cash flows, right? So it's sort of, it's, but for me, revenue says outside of the share market, there are customers that want and value the product or service this company makes.

49:06Like you've got something that you can sell. Right, right, right. You've got something that can generate revenue. It feels like a silly point to make. It's like, what are you talking about, Andrew? is like, well, I would say not just some companies on the market, I would say a majority of the 2 ,000 companies on the market are pre-revenue. And it's not a grift, it's not a scam, although in some cases it is. It's really just a consequence of we hope that we strike oil or gold or that novel compound that might have some anti-cancer properties is going to pass FDA clearance and these kinds of things.

49:45And by the way, if that happens, you're off to the moon. It's brilliant. But for me, I just can't handicap things, particularly if it's a good or a service that's just outside of my normal world. I am not as a consumer in the market for molecules that have a impact for anti-carcinogen type properties. I just, I don't know. Is it good? I don't know. We've got a device that helps people, helps oil rigs lay underground cables. Like, well, it's hard for me to know if that is a thing and how much of a thing and how good of a kind of a thing is it. If you're really into those kinds, whatever the area is, you can probably make a more informed decision on a pre-revenue company.

50:34Revenue, though, and more importantly for me, it's like we've got a product or service in the market. We're selling it, and each year or quarter or whatever period is that goes by, we're selling more and more of it. When there is strong sales momentum, very happy with that, right? It's not be all and end all, far from it, but it's a nice starting point because they're doing something right. It's got nothing to do with the share market. It's got everything to do with the problem that you're solving for customers. And clearly you are attracting more people or you've got the same amount of people and they're spending more and more and more.

51:04And that is a wonderful sign. Part of that too, just kind of touched on it before, another rule for me is avoid binary outcomes. I like a company where it's like there's a range of outcomes that I can sort of reasonably handicap. I don't know how I handicap whether your approval from the FDA is going to come through or not. And you don't know either. It's not like there's someone out there who knows. Generally speaking, it's sort of like we'll do the test and we'll see. We'll put it in some test tubes or some rats. We'll do something and then we'll know. That's what we're doing here. And it's just like I, for me, that's a don't go there because you will die.

51:45because statistically you probably will. And I just try to avoid things where it's kind of like I've got very little chance of being able to divine the future, to look into the crystal ball. That's always true. I mean, bringing the future is always hard, but at least it's like it's not a Herculean forecast to go, I think all these will be around in 10 years' time and I don't know, they'll probably be selling more than what they're selling today. That's a, that is that guaranteed? No. You know, uh, is it guaranteed the sun will come up to my world? Not really. I mean, it's an asteroid could come and spin it, hit us and knock us off access or anything, you know, things could happen, but that's, I'm not betting against those kinds of, uh, I'm not, I'm not waiting on those kinds of things to happen when, when it, when it comes to, when it comes to something that is just, gosh, maybe it'll happen.

52:39If it happens, it'll be great. That's just not for me. I, so I'm going to, I agree with you entirely. and it's how I invest too. But just for the sake of the fun of it, I think there's always two ways to think about investing. I think it's really useful to do both, and that is at a company level and a portfolio level. You know, I've kind of talked before about, you know, should a company diversify or is that the job of the investor? You know, the mining company with 15 different commodities, the mining company with one commodity. At a company level, it's riskier if it's not diversified. But if I'm buying a group of companies, do I want the company to do the diversification or do I do it for myself?

53:13And you don't get to tell Fortescue or South32 whether they have a lot or not much in terms of, you know, resource or which resource they should or shouldn't have. And you can as a shareholder, but they're not going to listen to you. But it's kind of an interesting idea. And I think I raise that because I agree with you, but I also know other investors. David Gardner is a great example. I've mentioned him a dozen times recently, actually, not deliberately, just because it had come up. He's a, quote, growth investor, end quote. And I've said before, he's at more losses than most. His strike rate is well below half.

53:41And he's been the most successful investor at the Motley Fool by miles, not because everyone else sucks, because he's just really, really good. And so for him, it's not exactly a binary outcome, to your point. I don't think he's ever wanted to think pre-revenue. He may have. But it's more just that point about a portfolio level. It's okay, right? So if, what's okay? You have to be good at any of these things. But if you can reasonably get one out of 10, but that one out of 10 goes 100 bag when you do that, and you can do that reliably, not you think, back to our point about ego before, but you can, it's perfectly fine for Dave going to lose money or not make money or lose to the market on seven out of 10 companies because that's what he's trying to do.

54:13It's not at portfolio level. It's fine. Individually, you go, three out of 10, that's a stupid result. Who would do that? It's like, well, the person who made a lot more on the three, they lost on the seven. That's the answer, right? So I don't do that either. And I'm not saying you're wrong at all. I agree with 100%. I'm just making the point. All these big winners, they were all post-revenue though, weren't they? Amazon and Netflix and all of those. I just mean more. And I'm not, yeah. I think buying a range of pre-revenue companies are silly, frankly. But I'm just making the point that you can do it.

54:39You have to be consistent internally. buying one of them is not going to, in any of these cases, you can be as wrong about Woolies as well, maybe as wrong because you won't lose everything. But you can be wrong about Woolies, you can be wrong about the pre-revenue company, you can be right about either. And we keep, I hope our listeners are kind of getting the, this is all one kind of broad area, right? Because as I'm talking, I'm tipping on EGAR and I'm talking back about, you know, portfolio, I'm talking about the stuff you've already mentioned about circle of competence. It's all that, it's all that.

55:03And this is kind of one of those ways of saying, when you buy stuff, be careful. From a company perspective, mate, So things I have changed, I'm talking about changing before. I used to be really allergic to debt at a company level, and I'm not anymore. Not that I love it. I'm really careful about it, but I'm less anti it than I used to be at an absolute level. So I think there's - Less binary. Maybe the other thing, for everything you've just said, and you made the point about there's always exceptions, maybe the Charlie Munger is no absolutes. And that actually might be a useful heuristic across the board.

55:37Let's go in another direction. I'm going to change and come back here. But I think the idea of being absolute about anything is a real mistake. I only do this. I always do that. That can only be right. That can always be wrong. I think that's really dangerous because it allows you a level of confidence in your decision-making that just doesn't exist. The phrase we haven't used for a while is Strong Opinions Weekly Held. And it's a beautiful phrase. It's a have a view, absolutely. But nothing is absolute. Nothing is definite. Nothing is certain. It's a phrase that's a very Buddhist, doesn't it?

56:10But that idea of just, you know, is debt useful sometimes? Yes. Is it destructive other times? Absolutely. Okay. And to your point, you made it at the very beginning. Debt is, you know, we'll send you a break if it goes badly in a way that other things, other attributes don't. So, yes, it's riskier at an absolute level, i.e. it's a higher level risk than no debt. But it also can be a really useful way to create returns, to maximize returns on equity, maximize shareholder returns, if you can use reasonable amounts of low-cost debt. as a company, and we've talked a lot about marginal now and talk about the company stuff you mentioned before.

56:42That's one thing I've kind of gone a bit softer on. I don't do pre-revenue either, just to that point. Just to be really clear about that one, not a thing I do. I tend to... So one thing... You talk about inverting, right? I'm going to kind of take that to a bigger level, which is I'm not a contrarian by nature, but I am allergic to both absolutism, but also to... Groupthink is probably too cute a phrase, but when everyone's thinking something, it's like, you know, when everyone's thinking the same thing, no one's thinking. It's kind of the old line. And I just think there's a lot to that. It doesn't mean that big companies can't be bigger and great.

57:23You know, everyone loved Amazon for years and it's gone really well. I'm not saying you have to be, you know, negative on everything, people are positive on it or vice versa. Being contrarian by definition is as stupid as being absolute because it just makes no sense. But when... Everyone else thinks the world is round, so I think it's flat. Exactly. Or some things are right. The consensus is usually right. Yes, exactly, exactly. But it's also just have a think about when you get those extreme examples. And kind of one thing to learn is, and it's really hard to do, particularly early on because no one likes to be the odd man out.

57:59Well, a few people do, not many, right? Most people like to be popular, like to find comfort in the social proof you mentioned earlier, Ram. That stuff is really, really comfortable, right? And so it's tempting. By the way, it's also with the price going up. Everyone loves this company. Enron, great example, right? Everyone's buying it. Everyone's making money. Everyone's saying energy trading is the next big thing. Everyone's saying these guys are geniuses. Everyone's saying, so you've got the price going up. Everyone's on board. No one's, you know. And then a kind of story you like made is the emperor with no clothes, right?

58:29Emperor's new clothes, yeah. Right, Richard Kast, thank you. That kind of story of someone says, this kind of feels a bit weird and dodgy and, you know. Now, people have been shorting stuff for years for no reason or for reasons that weren't justified. People have been betting on things that haven't worked out for reasons that haven't been justified. Just be really careful about going with the crowd. So I think, you know, back to Munger, the positive way that we're talking things you shouldn't do, but thinking independently is the answer. Going along with the crowd because the crowd's going, particularly when the crowd seems not right.

59:01Well, here's the thing. We talk about short-term stuff, right? Just because something happens in the short term doesn't make it right in any long-term sense. And so everyone says buy Enron. The Enron price goes up. Everyone says buy Enron. The price goes up again. Everyone says buy Enron price goes up again. You're like, I'm sitting on the sidelines here and everyone else is getting rich. And this is the worst thing ever. And I can't stand this. I just have to do whatever. And conversely, when a share price is down on a great company, now Woolies, we've talked a lot about post-masters, right? The masters now went to hardware, lost money.

59:28The margins fell. It fell to$20 at one point, something like that. No one's buying Woolies. Everyone says Woolies sucks. That idea when everyone's thinking the same thing. Buffett said, another drink, you pay a high price in the stock market for a cheery consensus. You also pay a really high price for a miserable consensus, i.e. you miss out on a lot if you let the crowd tell you, everyone knows that Woolies is a terrible business now. I don't think so. So there's just that. I think just being – so don't follow the crowd. Don't get caught up in the momentum of share prices or opinion or whatever.

1:00:02Again, you mentioned RAM. The card's often right. Trends are often right. But separating out the trend from the fad, that's probably the key. Yep. Yeah, you generally want, I mean, it's just always good to think independently. Yeah. Not for the sake of it. We all know investors who are just contrarians, just, oh, everyone thinks that, so I must, you know? Like it's not, but you want to be able to form your own views and articulate it. And if ever you had to have it go head to head with a debate or someone who felt the opposite, you feel as though you could at least mount a reasonable argument, you know.

1:00:40I think that's actually a really good thing to do actually just as a general rule is to, you know, to avoid the echo chamber, the confirmation bias, find someone. Here's back to Munger, right? Like you should be able to articulate the bear case better than the bears if you like a stock, right? If you can't, what the hell are you doing? That's not to say that you must embrace it, but you must understand it and you must be able to reject it, you know, or at least have reasonable grounds on which to doubt it because otherwise what are you doing, right? Like it's just to go, I don't. In fact, that's probably the best version for me to go to.

1:01:21So if I, for the next example, if I can't mount a credible argument that speaks against my position or my intended position, you know, I want to buy a company. And I was like, well, why wouldn't I want to? Back to inversion again. Why wouldn't I want to buy this company? Yeah. You know, well, it's a really great exercise too. So this is – it sounds like a shill as well, but I think this is why it's good with straw man to sort of put your views out there amongst your peers. I agree. Because you just – you pause a little bit longer. It's just you. It's all right. Yeah. I don't have to justify. I just think I'm doing it.

1:02:02It's like, no, write out something that a lot of other smart investors are going to read. Yep. And like, whoa, you know, if that makes you nervous, That's probably telling you something. Not that you should have this, back to our earlier point, that you should have this blind faith in your ability and be super uber confident in everything you do. But, you know, there is a signal there. It's just sort of like, well, your subconscious is screaming, actually, I don't, I can't do that. And if I can't do that, then I probably am not looking at the full picture here and I certainly can't. Because it's easy to have conviction when the share price is going up.

1:02:42Everyone's got conviction when the share price is going up. You know, it's only when it's like it crashes 50 % you sort of see who's, you know, all that talk about diamond hands, bro, where did that go? You know, it's like we've all got diamond hands on the way up. So, yeah, that's another place I try not to go and try not to avoid is anywhere where I can't argue the opposite of my view. I'm going to take your diamond hands, mate, and probably we'll bring this to an end at some point soon, but I will, not that you're wrong about that, but I think something you should never do is refuse to change your mind.

1:03:19Oh, my gosh. So, again, strong opinions, weekly held, right? You need to have an opinion. If you're going to put money on the line, we treat investing, some people treat investing like gambling but with like extra zeros, which I just, like Invincible is okay, right? It's like red or black. I'm not going to gamble on more than$100 a casino. What do you think, I'm mad? But I'm going to spend$1 ,000 on that specky miner. It's like, would you buy 1 ,000 a lot? Would you put 1 ,000 a lot? I mean, if you would, fine. So we convince ourselves that somehow it's better or more noble. We talked before about, you know, it's sophisticated.

1:03:50I'm investing. I'm not gambling. We use it both ways. Even those who say they're investing who are effectively just gambling with shares, right? Same thing. But the idea of kind of you want to have those strong opinions. You want to say, I've done the work. I've made the effort. I think this company is worth my investing dollars. Now, at the expense of spending it, at the expense of investing in something else, it's a high bar, right? Like if we're going to put$1 ,000 down somewhere, it's going to be on the thing I think has better than average chance of giving you a better than average return.

1:04:17Otherwise, why am I doing it? And there's plenty of other options I could choose instead, including an ETF, as I've already said. So that's your starting point. But then don't be so – what you had your thesis, and you mentioned, you know, explain it to someone else and all that kind of stuff, but just be ready to change your mind. The old, you know, is it Keynes? When the facts change, I change my mind. What do you do? It's like that's what you should do. Again, back to where you go a little bit, right? It's like have an opinion but be ready to change it as soon as it is necessary. And that's hard.

1:04:46And that's just not on the share price alone just to reflect on a point. It's not on the share price at all. Because, again, back to my pretend system. If I think it's worth$20 and the share price is$14 or$25, it's still worth$20. That's what I said it was worth. Yeah, so the share price is irrelevant. It doesn't mean if you think it's 20 and it's 14 and it drops to 10 that you were wrong. Exactly. You might be wrong. Yes. In and of itself, that doesn't signal that you were wrong. You go from 20 to 30, you can still be wrong because the market was wronger than you are for a while. Yes, 100%. How many times have AMP jumped up and then fallen back again?

1:05:21That's a point. But be ready to change your mind based on – and thank you for bringing that up – based on changes of the investment thesis itself. In other words, look at the company and say, is it the company I thought it was? Is it doing the things I thought it would do? Is the competition, is the market, is the economy, is the whatever things are relevant to your thesis, are they playing it as you expected? And when you go, actually, that thing's changed. Okay, cool. So what does that mean for the future? Well, okay, growth's going to be much less than I thought. Cool. So then what's it worth?

1:05:53Well, I thought it was worth 20. Now I think it's actually worth 17. The price is 18. And you made the point of averaging down before, mate, and watering your weeds and pulling your flowers. That idea of, okay, well, I've changed my mind. It's worthless than I thought. I have to sell. I have to. I should sell because it's the right thing to do because I'm moving on. The endowment effect is really, really strong. Great bit of research about coffee mugs. Remember the story of the coffee mugs? Yep. Researchers gave half the people in the group a coffee mug and the other half money and they switched it around.

1:06:27and in very, very large degree, the mug was always worth more when they owned it than what they would pay for it to buy it themselves, which is madness, right? If a mug's worth$5, you'll sell it for$5, you'll buy it for$5, but they wouldn't sell it. Have you ever met anyone who's tried to sell a house? Right. That's exactly what it is. Or a car. Yep. It's like, it's worth more than that. And it's like, well, I mean, I'm a chef, frankly. You know, it's like we all do it. It's just, well, it's my house and it is obviously worth more than what people are bidding for it. It's just the endowment effect.

1:06:56It's a thing. So that's really important. Be very careful of that. When the facts change, you've got to change your mind. And you're going to have to work on it. By the way, all the things we're saying today, these are not just do it tomorrow morning. You know, oh, thank God you told me, guys, I'm going to be an investor come Monday morning. I mean, hopefully it'll help you a little bit, but hopefully over time it helps you a lot because if you can work on that sort of stuff, really ask yourself, and I've said it a million times before, imagine your whole portfolio was sold, well, this is Friday afternoon, so imagine it was sold earlier today, and then Monday morning you've got less cash in your account.

1:07:23What are you going to buy? Are you buying back those shares? Are you buying back that many of those shares? Or are you buying something else? Or are you not sure? That's a really, really helpful, you know, talking about a lot of capital gains tax the last couple of months. But, you know, if there's no CGT, no trading costs, it'd be great to look right. If you had to literally every morning or once a week, once a month, whatever it was, okay, new rule from the ASX, every share gets sold at the end of the month and you have to place your new trades on the first of the following month. just the mental process of, huh, am I really going to – I mean, I do think I was overvalued and want to sell it, but it's been sold for me.

1:07:56Now I'm not going to buy it at that price. That tells you exactly – if you wouldn't buy them, you should be selling it, right? And if you wouldn't sell them, don't buy it. It's just all – It's amazing how often I come across someone who go, oh, you know, a stock will be brought up and go, oh, I've got shares. And then you go, really? Oh, gosh, because I – oh, yeah, it's totally overvalued. But I bought it at this. That's right. I'm like, what? I don't get that. That doesn't make any sense. Now, yes, if there is tax consideration, that is a factor. But to say on one hand I own this and a lot of it and I also wouldn't touch it, I wouldn't buy it anymore because it's way too expensive is just sort of like what are you?

1:08:35You're playing a game of chicken there that just like against your own rational reason and thinking. I don't know. It doesn't make any sense. No, it doesn't. So, yeah, I just think stronger thinking is so don't be absolute. don't get too caught up with what you own. Don't think it's worth more just because you own it. And like we always say, if you can work at that, if you don't rely on me, tell me how to do it because I don't know either. But directionally, that's the direction you're going to head in. Well, I don't know if I have too many more. So just, I don't know. Do you have any more? Because I'll tie a knot in the thinking or try a bow on.

1:09:14The only thing I wanted to just really, we've talked about it a little bit before, But to kind of finish off, I think I'm going to go with don't forget to learn from your mistakes. Oh, that's a good one. And just because we're wrapping up and I'll let you wrap up. It's a teachable moment, as they like to say. Well, it's kind of – and learn from your success as well. But I think, you know, if you don't learn from your mistakes, you're going to repeat them. And I think there's a difference between – well, there is a difference between making a mistake and castigating yourself for it and making a mistake and learning for it.

1:09:45It's the old thing of an old sports coach who says, I don't mind you making a mistake. Just don't make the same mistake twice. And that's kind of the – That's where I'll kick myself. Right, exactly. You know, I don't care. I've done a bunch of dumb things. Oh, you know, now I know. But when I make the same mistake multiple, like, Andrew, how many times do you need this lesson? I'm going to throw one more very quickly because that's one that you know I love, is don't learn the wrong lessons. Right, yes. Which I always said before. But that one is just – and they sit together and it's opposites to each other, those two last statements, right?

1:10:16So learn from your mistakes, absolutely, but don't learn the wrong lessons from your mistakes. In other words, the thing that went wrong may not have been a mistake. The thing that went wrong might have just been circumstance. And, in fact, if that thing plays out another 10 times, you're going to be right out of those 10 times. That's not a mistake. That's just circumstance going against you. I took a bet on a loaded coin that 90 % of the time lands heads. I bet heads. It came up tails. I'm an idiot. I did the wrong thing. No, you did the exact right. Right? That's the mind blow with investing is that you can do the right thing and get bad outcomes and you can do the wrong thing and win.

1:10:50Like it's just, it messes with your head and it's like you're doing the absolute, the opposite of what you should do and you're winning and, you know. There's been plenty of companies where the share price has gone up and then crated and people have bought it for the wrong reasons or never the wrong reasons. They were wrong about the analysis. Oh, this is going to be a great long-term success story. They buy it on one, it goes to five, they sell it at five, it goes to zero. So, honestly, and this is, by the way, speaking of ego, this is hard, right? You have to admit to yourself, I made a five-bagger and I was wrong.

1:11:19Oh, yeah. Because you can't. Well, most people can't. They will not accept it. No, no, no, because I knew it was going to happen after five. Then it went badly. And maybe it did. But just bear in mind, as you say, you can be right for the wrong reasons and wrong for the right ones. You finish up, mate. My classic one there was Pointera, which hasn't gone wrong lately. But I did insanely well out of it. I think, well, my point is it was like nothing to do. I just, you buy enough shares over the years, everyone's going to have this experience. Like it went from 4 cents to 90 cents. Like it had no business at 90 cents.

1:11:55Like it really didn't. And I'd be lying if I said I top ticked it. Like I didn't, you know. But I made a lot of money out of it and it was all dumb luck. It was all dumb luck. I mean, I remember at the time when I first bought it, I thought it might be worth around 10 cents. I thought it was undervalued. Like I felt as I was doing the right thing. But come on, it was never part of the thesis that that was going to come up 20-fold in the space of a year. Like that was, you know? So, yeah, you really, I love that one, Learn the Right Lesson, because those experiences embolden you and it's like, you know, you can get away with it once, maybe twice, But it's like you keep playing against the odds and it will, you know, reality will assert itself.

1:12:40And yes. Look, so my, I guess my closing thoughts are with all of this kind of stuff is investing is a lifelong journey. It is a field that requires of you to always be learning, always be learning. I don't think you ever get to a point where it's like, I know it all. I figured it all out. But, you know, it's like you can get a lot of the basics under your belt in a reasonably short amount of time. When I say short, I'm not talking weeks or months here. But, you know, over the course of your human life span, you stick at it. You're going to – 10 ,000 hours of anything, you're going to get really, really, really good at it.

1:13:22But you'll never get to the point where it's like, that's it. I've perfected it. There is no further to go. So that's the first point. The other point is, this is another Mungerism. I'm going to get it wrong, but it's just like, you know, no one's so clever to figure out everything for themselves. You know, it's the whole Newton standing on the shoulders of giants kind of thing. It's like all of the great insights and ideas have been had. I don't think I've come across a fresh one ever, really, you know. And it's interesting when you prosecute some of the Buffettisms and some of the quotes, it's just like you realise that actually you, you, not stole it, but you're, you know, this was said before.

1:14:00And then you go, oh, where was that said? But it was like from the Bible or something like Texas 2000. Oh, the Greeks were talking about this, not in this way, but you know, the old saying is there's nothing new under the sun. And I think that's very true when it comes to investing. There are new technologies, there are new sectors, there are new companies, there are new opportunities, there's new financial products, there's new regulations and all that. There's really nothing new. In terms of the big picture stuff. Yeah. Can I just quickly jump in? You said there's nothing new under the sun? You know where that comes from?

1:14:31Is it the Bible? Yeah. Yeah. I thought so. I just mentioned the fact that everything comes from us. I was like, actually, that comes from the Bible too. It was a nice little setup. I'm not a religious person, but there's some – I think all the – great. All the old religious texts, you know, whatever they are, there is a lot of wisdom in them. I mean, I choose not to take them as literally true. in a lot of cases. And there's also some pretty wild stuff in there as well. But there is a lot of wisdom in there. And we have as a species figured out a lot of stuff thousands of years ago, right? And it's just sort of like when someone comes along and goes, ah, this is a genuinely new thing.

1:15:10And, you know, to be fair, they do come across very, very, very occasionally. But it's a good rule of thumb just to always assume that, you know, people have wrestled with these concepts before and it's out there for anyone who wants to sort of like chase it down and learn it. And that's the thing, right? You say something under the sun, literally and metaphorically. What's great about that is exactly what you just said because this is all now accessible because I've got the internet. I mean, it's only like you have an idea. It's like someone would have had this idea before, but it was probably in a different language, in a different book, in a different country, about a different topic, and I could never have come across it.

1:15:44I had to come up with it myself. You have literally. And when was Graham's book published? Was it the 30s or was it late 20s? Either way, we're very close to 100 years, right? We've had 100 plus years of what I would call modern investing theory, not to give it capital M-I-T, just literally in the way we can understand investing now. There's 100 years of it. It's not that much. And by the way, it comes from ASOP, as you said, mate. It all builds on itself anyway. But it's super accessible, right? And so now it can be hard to try and work out which to follow and may require a bit of effort, a bit of work.

1:16:18And that's hopefully what this podcast helps you with a little bit is our thoughts on it. We're not always going to be right and whatever else. But that idea of here is some knowledge you can access online. AI, LLMs, ask it to tell you. Like just talk to me about some of the different investing approaches and how they work and where should I go for more information on that. And again, not taking advice from AI, but learn from those who've come before. We've talked a lot. We haven't done one for a while about our favourite investing books. And if we did, we'd just repeat it because it might have changed.

1:16:46I don't think you also have either, I suspect. But that idea of just – that stuff is out there, right? and grab it and learn from it. So you can start from, you know, life's too short to make your own mistakes. Learn from the mistakes and success of others, and then you can start from there. And it kind of takes us full circle, mate. And Charlie Munger is one of the absolute greats. I've got a book behind me actually called Poor Charlie's Almanac. There's a book recommendation. The Wit and Wisdom of Charles T. Munger is the full title. Just a fantastic reason. You've got to learn about Charlie.

1:17:14If you're inverting or knowing where you're going to die, so you're not going to go there or not doing stupid things, If any of those concepts of – well, we haven't just done mungerisms today, but that was Ram's impetus for the idea. If it works, I'd strongly recommend that book. It's a very, very good one. Lays out a lot of Charlie's thinking really, really nice. I think I've read the book once and listened to the audio book twice and it's still not enough. It's a very, very good resource. I've got to revisit it. Yeah. Do. Do some favour. Do you know his whole invert thing came from – so he was in the army.

1:17:44I think he was in the meteorology area. And part of the thing he was looking at was like what determines if an aircraft returns to base. I bet you a lot of people's brains are pinging right now because you would have seen, it's actually been a bit of a meme there for a while where you see the image of the Spitfire and it's like where all the planes that came back where it was hit. And they said, oh, well, that's the area that we've got to reinforce because that's where they're being shot. And it wasn't Charlie's original insight, but he made the observation himself was that actually these are the last places that we need to reinforce.

1:18:20We need to reinforce where the bullets are because when they get hit there, they don't come back. In fact, these are areas that you can sustain bullet damage and still fly. So why are we, you know, again, invert the problem. And it's such a great way of thinking. It's such a great way of thinking. Maybe that's the best way to end the pod is just to whatever investment idea you have just instant like that last sanity check should be what if the opposite were true you know and just take take that as an idea even if it feels like a wild and silly idea and just run with it and you know maybe maybe it does just peter out and go yeah no the opposite is stupid so so so therefore i've got more now so i've got more conviction in in the original idea or was like well no maybe maybe there is something to be said for that that that counter view you know um So, yeah, hopefully it's helped.

1:19:10There is great wisdom out there for anyone who cares to seek it out and then spend a lifetime trying to refine. Beautifully said. You just suggest we will finish the podcast there. So, Will, thanks for listening. Enjoy the first half of your weekend. We'll talk to you on Sunday morning. Until then, full on. Cheers. 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.

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