TIP781: My Portfolio & Current Market Conditions w/ Clay Finck & Stig Brodersen

26:05Stig Brodersen:And I don't think we need to speculate that AI is going to continue to improve their algorithms, leading to more engagement, better results for advertisers. And they're still in the very early innings of monetizing WhatsApp, which has over 3 billion monthly active users. So yeah, we'll see how these play out. But yeah, those are some picks that I'm pretty excited about. Let's take a quick break and hear from today's sponsors. All right, I want you guys to imagine spending three days in Oslo at the height of the summer. You got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future.

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30:11Stig Brodersen:Let's see your competitors do that. I use this and you should too. If your revenues are at least in the seven figures, get the free business guide, Demystifying AI at netsuite.com slash TIP. The guide is free to you at netsuite.com slash TIP. All right, back to the show. Exciting stuff. Clay, I like that you doubled down on quality. With money coming in every month, how do you think about sizing in your portfolio, adding, building new positions? And also, do you stay fully invested? And if not, how do you think about cash management and opportunity cost, especially in today's market? Yeah. Portfolio management is probably one of the more difficult parts to me.

31:00Stig Brodersen:I can't say I have it nailed down perfectly. But I always keep in mind to make your winners count, you need to bet big for them to actually make a difference. But if you bet big and you're wrong, you don't want to have it to potentially destroy you. So for my stock portfolio, a full position tends to be around 10%. But building up to that 10 % position can be a bit tricky since I rarely hold a very large cash position. I've started to get to the point where You know, it's just hard to build a sizable position without selling something that's in the portfolio, which sometimes is the last thing I want to do.

31:37Stig Brodersen:And every year or two, we see these big dislocations in the market. You know, tariff tantrum was rather quick. March 2020 was also rather quick. And, you know, you see essentially the whole market fall at the same time. So when that's happening, you find the biggest bargains, but also So your other stocks are down. So you're not so keen to sell one stock that's down to fund another stock that's down. So occasionally when I have a new position that I want to add, I may sell or trim one of my positions that is around fair value to add to a new position. But it's just important to keep in mind that it's just so easy to fall in love with the next shiny object.

32:18Stig Brodersen:So So that is something I also keep top of mind as well. So if I own a stock that's less than a full 10 % position, it's either because I just don't have as much conviction in the name, the price isn't extremely attractive, or I'm just not able to get the capital to fund that position. So Interactive Brokers is a good example. I like the setup, but the valuation just is not a screaming buy. And a handful of my holdings are already at a full position. And for the most part, I intend to just set it and forget it. I think Topicus and Lumine are good examples of this. I built up full positions at prices I thought were fair.

32:55Stig Brodersen:And when you don't get too caught up in the share price fluctuations, these businesses are just pretty easy to hold. For Topicus, for example, they continue to publish just consistent, strong 20 % growth quarter after quarter. But when the results are just so good and consistent, it's a fairly easy stock to hold. And this frees me up to focus on other things, whether it be TIP or some of the other holdings. And unfortunately, businesses like this are quite rare and hard to come by. You know, Clay, one of the things that I found to be quite helpful as much as I displayed my ignorance about interactive brokers just before, but one of the things I find to be quite helpful is to think about that the market tends to overestimate the impact of technology.

33:44short term, but then also underestimated long term. And thinking about that in terms of making my investments. One stock that we talked about here the other day, that would be something like Uber. And of course, there's no doubt that mobility and delivery will eventually be disrupted by AVs. But I would also make the argument that it's not really looking like it's going to happen anytime soon. And if you, for example, look at a company like Waymo, and you see it looks like a hogistic growth of what they're doing with trips, we're still talking less than 1 % of what Uber is doing right now. And so you just have to like, and again, I'm not trying to make this episode about, it seems like all episodes about Uber these days, but my point is like, yes, something is coming, and it's really, really small.

34:32And sometimes whenever something really, really small grows fast, it's still really, really small. And so anyways, my point of saying all of this is that, going back to your point before, there is a market sentiment, and that market sentiment can change, and that moves the share price whenever that happens, as much as fundamentals may or may not have changed at all. Yeah.

34:53Stig Brodersen:So I see, as of the time of recording, Uber stock's been dropping with Waymo's release of their monthly numbers. But Uber's such an interesting one because I feel like in 10 years, people are either going to be like, of course, Uber wasn't going to get disrupted. Of course, it was going to be a huge winner. Or it's the opposite where, of course, it was going to get disrupted. So I already see the hindsight bias in play for one like this. But today, I personally just have no idea how this is going to end up shaking out. But I think you mentioned a good framework that people tend to overestimate the impact of technologies in the short run, but underestimate them in the long run.

35:33Stig Brodersen:I just put together an episode on the dot-com bubble, and it certainly appeared to be a good case study of just that. The market priced in that Amazon was going to disrupt Barnes & Noble overnight, which of course wasn't true. But Barnes & Noble's managers laughed at the idea of Amazon even being a competitor because they believed that no one would ever buy books online. So I'd like to keep this framework in mind when thinking about a company like Constellation Software, for example, and their two spinoffs as that's a really core holding of mine and ones that are definitely top of mind for me.

36:07Stig Brodersen:And recently, the market sold off the shares of these due to concerns around AI. And I believe these are largely overblown until there's evidence that proves that otherwise. And I'm certainly open to the possibility of vertical market software being disrupted by AI. Several high-profile constellation shareholders believe that the possibility of disruption in the short to medium term is quite low. And I think it's just near impossible to predict how things will shake out over the long run. So even AI experts and industry insiders won't be able to predict what the future has in store with regards to AI.

36:48Stig Brodersen:So it reminds me of Mark Leonard. He once described vertical market software as the distillation of a conversation between a software vendor and a customer that has gone on often for a couple of decades. So given the close and long-held relationships that they have with their customers, I would expect them to be a beneficiary of AI, but I can't fool myself into thinking that I can predict when this business will be disrupted. But if there's evidence that suggests that it just isn't as sticky of a solution as I thought, then I would need to seriously consider moving on. I think this framework could really apply to any business, any business that could face disruption.

37:36Stig Brodersen:You enter the position with a thesis. And if there's evidence that that thesis isn't playing out or it isn't playing out how you anticipated, then you need to be open to changing your mind. So one thing I would also like to add is how we as humans, we have this natural tendency to want to cling to a story. So when something happens in the market, we want to know the story behind why that happened. So with the case of Constellation, investor, the stock sells off. So investors create a story around the sell-off. It's due to AI fears. It's due to Lennar's resignation. Perhaps that's true, or perhaps there's just one or two institutions who had a major position.

38:18Stig Brodersen:They decided to liquidate for an unrelated reason. So I guess one other thing to keep in mind is that although people will always have a narrative to go with the share price movement, it doesn't necessarily mean that there's validity to that narrative. So that's something I also think about is how stocks move day to day and we create these stories around it, but the market does what it does and it doesn't necessarily have to align with the prevailing narratives. I sometimes wish for the good old days to come back. And what do I mean about that? Well, I remember when I was starting out and I read about the PE ratio, it's just like, oh, is investing that simple?

39:02You just buy low PE stocks, then that's it. I know this probably comes across as the most ignorant investor in the entire world, but that was sort of like, it felt like a revelation the first time I read it until you're like, ah, there's probably a bit more to the game of investing than that. But I had this crazy idea that low PE stocks, that are the quote unquote good stocks. And then you have the high PE stocks that were the bad stocks. And of course, as an investor, you'll learn how to adjust earnings, but you also learn that it can't be an excuse for doing silly stuff, even though sometimes you torture your XLT to do just that.

39:38And then you also, you might buy a high PE stock and get around to it. And then you realized, well, it's price for perfection. So if something goes wrong, it just sells off and you just get crossed. And it's just, it's just a fascinating game. It's a difficult game to play. But I want to ask you a question, Clay, and I don't know if it's going to come across like a trick question, but here we go nonetheless. If you had to choose between a 3 % shareholder yield and 12 % growth, or a 12 % shareholder yield and 3 % growth, and growth here in the fundamentals, pick which one, but what would you choose and why?

40:14Stig Brodersen:Clayton Higley Yeah, I almost feel like this is a trick question. of course, doesn't mention valuation. But given the companies I've already mentioned here, I think it should be no surprise that I would certainly choose the 12 % growth company over the company with lower growth and a higher shareholder yield. And I think probably the main reason for that is simply just due to my age and my investment runway. So if I were retired and valued preservation of my capital much more than capital growth, then I could definitely see leaning the opposite direction. So Buffett wisely said that it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

40:54Stig Brodersen:And I've interviewed just several great investors who have beaten the market over long periods of time, and almost always they own companies that are in that camp. So I think Franchois Rochon is probably one of the best examples. Since 1993, he's compounded at over 15 % a year, which is certainly no easy task. But his approach centers around that very concept of buying and holding great companies for the long run. Now, part of that might be due to the environment we've lived in the past 10 to 15 years. So perhaps I'm totally biased and I'm not fishing in the right ponds at the moment. But I think this strategy overall will stand the test of time.

41:36Stig Brodersen:There's sort of been this divide in the value investing community of buying deep value or the low PE stocks or buying growth at a reasonable price. And I think both can fall under the value investing camp and everyone should pick the style that best suits them. A couple more points on why I would prefer growth at a reasonable price. I think first is that it can decrease the number of buy and sell decisions that you need to make. So if you enter a great company and it continues to execute over time, you don't necessarily need to make a sell decision for several years as long as they continue to compound earnings and continue to grow.

42:18Stig Brodersen:So in the case of a deep value play, if the stock appreciates by 50 % and approaches fair value, you may decide to sell the stock, pay capital gains tax, and need to find a new opportunity to invest that capital. Whereas in the company that's growing, capital gains can continue to be deferred year after year, and you don't have to hope that you can come across a new opportunity to invest that's in your circle of competence. And the second point I would make is just the inherent asymmetry that the stock market offers. So let's say that an investor chooses to meaningfully invest in what they deem to be 10 great companies and plan to hold those businesses for a long period of time.

43:00Stig Brodersen:And let's say that just one of those companies really surprises you. Instead of growing at, say, the 12 % rate you expected, it grows at double that rate. So 24 % over 10 years. That would equate to an 8x increase in the stock price. So perhaps I'm just not smart enough to venture into deep value territory to find these types of asymmetries that can, say double within six months or a year. And I just personally don't see a lot of investors being successful with that type of strategy, or perhaps I'm just not smart enough. I don't know. I should also mention that most of the money that Buffett made came from these big decisions that delivered the long-term asymmetric upside, whether it was Seize Candy, Apple, Geico, etc.

43:46Trey Lockerbie, Ph.D.: Yeah, it's one of those things where whenever you read about it and you see these case studies about this is what happened to the stock price, you're like, oh, okay, that makes sense. I'll make sure to remember that. But actually doing it, or again, it might just be me who's not smart enough, that is just incredible, incredible difficult. And so I think the method that both of us want to use is more just to let time work for us, find really high quality businesses and weight, which I should also say for the record can be challenging enough. But I'm really curious to hear on that note, Clay, how do you think about the role of what I will just go ahead and call happiness and optimizing for happiness, and then also how that coincides with your portfolio?

44:35And I know it may come across as an odd question, because again, I don't know if you or anyone listening to this or I was thinking along those lines, but if you allow me to be a bit self-serving here, whenever I think about my own portfolio, thinking about, okay, it has to be anti-fragile. I want to be able to support multiple families. And you could say you could do that if you live within your means, and then you would buy the S &P 500 and then hold it for decades. Sure. Yes. I can see why that would work. But on the other hand, it's just so much fun to pick stocks. I know it probably comes across as irresponsible whenever I say that, but I know to a lot of people investing is sort of like this boring thing.

45:22And yes, we want to save up for retirement, but that's just not for them. I love reading 10Ks and 10Qs in my life. I would feel like my life would be missing an important ingredient of happiness if it didn't pick individual stocks. So even if you did show to me, Clay, that I could not beat the market, I wonder if I would still want to try just because it's so much fun. And so how do you think about that for your own portfolio that you want to be responsible, you want to, you have financial goals, you also want to have fun. And I don't know how that works for you and how you define it.

46:01Stig Brodersen:Yeah, it's a good question. without really thinking about it that way. I've sort of thought about managing my portfolio to optimize for happiness. So in my mid-20s, I was much more interested in scaling up the size of my portfolio as quickly as I could, either through additional contributions or through the returns I was targeting. And now today, I've seen this shift where I'm pretty happy with the foundation I laid in my 20s and just much more interested in, not much more, just a bit more interested in capital preservation, building a portfolio that will still deliver good returns, but also be more anti-fragile, partially inspired by you.

46:43Stig Brodersen:And I do like the approach you've taken, of owning several uncorrelated assets, despite how unpopular some of them might be, whether it's a couple of global ETFs or gold or Bitcoin. I also like that you have Berkshire in your portfolio. So it's quite an eclectic mix. But given Berkshire's size, I'm not sure that it would be the right pick for me. But I think there are several other candidates that can play a similar role where it's just a durable company that might not grow the fastest, but it just serves as an anchor in the portfolio that can help you weather through drawdowns and help you invest counter-cyclically.

47:27Stig Brodersen:And I think that companies like Markel, Fairfax Financial, or even Brookfield Corporation could be other potential candidates that could serve a similar role as Berkshire down the line, but are all just smaller companies that can reinvest to a larger extent. And part of me views the process of stock investing as buying good businesses, but also outsourcing the role of capital deployment to some of the best managers in the world, whether it's buying a serial acquirer that's deploying capital into acquisitions or buying a business that grows organically. Those are capital allocation decisions that hopefully create a lot of shareholder value.

48:17Stig Brodersen:And I think many people overlook that the stock market gives them exposure to invest alongside some of the world's greatest entrepreneurs that create just a tremendous amount of value for society. So some of them even get paid next to nothing for the companies they work for. So to use an extreme example, investing alongside Warren Buffett by owning shares at Berkshire is like investing in the world's greatest hedge fund except you don't get charged 2 and 20 fees. So the world is also just a chaotic and unpredictable place. And by partnering with these great managers, you're betting on just some of the smartest people in the world being able to navigate through such choppy waters.

49:02Stig Brodersen:And as you've said countless times, capitalism is brutal and management must know how to navigate. So I derive some level of happiness of getting to bet on jockeys who have a track record of treating shareholders well and treating shareholders like partners. So like you, I also like businesses that are interesting for me to study. This is a continuous process of finding what's most interesting to me and what I can and cannot wrap my head around. But a business like Constellation Software to me is just really interesting. They're able to buy these durable software companies for five times earnings by these companies all over the world, and they just seem to be able to just keep on doing it effectively.

49:46Stig Brodersen:And to your point, in the last episode we recorded together, they seem to just have an unfair advantage that practically no one else can replicate. And they also just keep pulling new rabbits out of the hat with the announcement of their spinoffs and these larger acquisitions they're implementing. And all along the way, they treat shareholders about as well as anyone. And they aren't perfect with some of the things they do, their recent AI call and perhaps the transition of the new president. But I think things will all shake out just fine for shareholders over time. And then you read up on a company like Interactive Brokers, who was founded by this guy that came from nothing after living in a socialist country and builds this amazing company.

50:29Stig Brodersen:It just gives you a better appreciation for the companies we interact with day to day. These were built by just some of these great entrepreneurs. And I do enjoy just hearing about some of these people's stories and how they built the great companies that we interact with day to day. And there are several other lesser known examples of managers who have built these businesses and have the majority of their wealth invested in these businesses. So I still want to try and implement that anti-fragility that you mentioned as I transitioned to a new stage of life of buying a house, starting a family.

51:12Stig Brodersen:And it reminds me of one of our members of our Mastermind community who mentioned to me that his mindset around investing changed once he started having kids because he just wasn't just investing for him and his wife anymore, but he was investing for the next generation. So in a way, he tries to invest through the eyes of his kids looking back 40 years from now. So that's just another angle that has been ruminating in my mind this year. One of the first things we learn as value investors is that whenever you buy a stock, it's a piece of real business. And I know this is going to sound like I'm a very slow learner.

51:49That's probably because I am. Because I always read a ton of books, and that line comes up in a lot of them, as you can probably imagine. The weirdest thing is that, to your point here before, it's almost like you think about it differently. It seems like such an obvious or weird thing perhaps to do, but like, oh, I actually have Warren Buffett working for me. It's a part of the real business. And you think about it, and then you don't think about it. And it dawns on you how incredible it is that you have a financial system that allows you to team up with the best of the best. And yeah, I wish I could say something a bit more inspiring than that.

52:35And I know everyone who are listening to this knows this and have read the same thing. It amazes me every time I read it, and when I really have time to think about it. Wow, isn't that just incredible to think about? Yeah.

52:49Stig Brodersen:And if you put it into a different perspective, let's say the most prominent business person in your town was launching a new company. They have all these amazing connections. They have access to all these resources that you don't have access to. And they give you a call and they ask you if you wanted to invest. Most people would be like, oh, of course I want to invest alongside that person. But when it comes to stocks, people view this as this very abstract thing. It's just this ticker on a screen. It's very random. People might associate the stock market with gambling and whatnot. But the stock market gives you access to even better entrepreneurs, that person that called you, offering you to invest.

53:34Stig Brodersen:And it's open essentially all year round. We're all given opportunities to invest alongside them. Trey Lockerbie Yeah, it's truly incredible. You know, Clay, I often get asked what I learned, like, could you give me your top five, whatever, you know, for speaking with the best investors in the world. And, you know, it's probably me who are thinking way much about, you know, semantics here, but I don't really feel it's through the actual conversation that I learned the most. I do think that the learning, at least from the host position, or again, this is my own bias, is that it really comes from preparing for the episodes.

54:09Also, because whenever you interview hundreds of people, you know where to go. And so you're in this situation where you need to know what they want to respond or how they want to respond, but then you also have to be open if they want to go another direction or if they're really excited about that. So it's a mix between all of them. But I want to ask you, what have you learned in 2025 about life and investing from your interviews? Yeah.

54:38Stig Brodersen:When I reflect on my interviews, some of my top guests are, of course, guests like Franchois Varchand, Morgan Housel. I've just been deeply inspired by Franchois Varchand and his process of buying great companies at fair prices and just holding for the long run. It sounds so simple, but so few will have that discipline to stick with such a strategy. So too often people will ask me what the next hot AI stock will be or where the stock market's heading over the next year. And I'm just like, it's just a bunch of noise. But since we love talking about Alphabet on the show, I went back to my conversation with him in my notes and I asked for his take on their concerns related to Alphabet and ChatGPT earlier this year.

55:24Stig Brodersen:And at this point, the stock was trading down, of course. And in short, he essentially said that all great companies have risks and fears related to them. And many times in history, Alphabet was growing at a fast clip, trading at a great price. And the business just continued to prove that the near-term worries at the time just were not relevant. And if we zoom back to 2011, this is when Roshan first purchased his shares in Alphabet. It was around 15 times earnings. And the concern that people had at that time was whether they would be able to transition from desktop to mobile. And it just seems inevitable that most great companies will come across their fair share of worries or concerns from investors.

56:07Stig Brodersen:And this just serves as an opportunity for us to partner up and buy shares in these companies. And Morgan Housel is, of course, one of my favorite guests as well. In our most recent discussion, we discussed the art of spending money. Spending money is a topic that we aren't really taught how to do. So it's no wonder that I think some people are crazy in my view of how they spend their money. I think that many people are wired to just spend most, if not all, of what comes in the door. But I found that the optionality of having money or having investments is just very empowering for me. Living below my means, having no consumer debt, and having cash and investments stacked up allowed me to transition careers and work at TIP.

56:58Stig Brodersen:And it gave me the optionality to do things like start a business with my brother. And it's a business that he was really passionate about. And this philosophy around money helped me drastically improve my lifestyle by opening myself up to opportunities that I just couldn't foresee beforehand. Saving money is also easier said than done. There's pressure from society to live a certain way if you have money. Even if you don't have money, you're encouraged to take on debt to live that lifestyle. Having your spending under control just gives you a level of freedom that, in my opinion, is just invaluable.

57:36Stig Brodersen:The other thing from the interview with Morgan I keep telling myself is, a lot of the things that people spend money on might just have a marginal impact on your happiness. So for example, here in the States, a lot of people in much of society is pretty big on buying cars. So the price of the average new car here in the US is around$45 ,000. But the$45 ,000 car essentially accomplishes the same thing of getting you from point A to point B as the$15 ,000 car. Now, what you get is the pride in owning an expensive vehicle, maybe more comfortable seats, more safety features, a bit smoother ride, etc.

58:19Stig Brodersen:I'm not saying any of these things are bad necessarily. So I love cars as much as anyone, but it's one of the many ways to easily cut back on expenses where other people are happy to finance a new car and try and impress other people that don't necessarily care about them. And our friend, it reminds me of our friend, Robert, who hired me here at TIP. He actually loves cars and he's happy to spend on cars. So if that's what makes him happy, then that's great. And there's likely other ways in his life that he could figure out how to use money to make him happier rather than falling prey to these societal pressures.

59:01Stig Brodersen:And it really just ties back to Buffett's internal scorecard. If you're buying things to play the status game, it's just a slippery slope that you'll never be able to win because the neighbor with the nice house that you look up to is looking over at his peers and who have an even nicer house. So I think the big takeaway is to find the few big things in your life that will carry the most weight in optimizing for happiness. And I think there are a lot of things that can make me happy that costs little to nothing. So maintaining a healthy lifestyle and a healthy body isn't crazy expensive to do.

59:42Stig Brodersen:Getting eight hours of sleep, spending quality time with friends and family, doing meaningful work, etc. So money, of course, plays a role in happiness. But I think the big point that I picked up from Morgan was that most people overestimate the importance of money when it relates to happiness. Let's take a quick break and hear from today's sponsors.

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1:01:38Stig Brodersen:For a lot of people, that partner is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10 % of all e-commerce in the US. We're talking everything from huge brands like Gymshark and Allbirds to people just getting their first store off the ground. Here's what I really appreciate as someone who runs a business myself. Shopify puts everything in one place. Plus, if you ever get stuck, Shopify has award-winning 24-7 customer support. They are always around to help. So if you've been sitting on a business idea wondering what if, it's time to turn those what ifs into with Shopify.

1:02:12Stig Brodersen:Sign up for your$1 per month trial today at shopify.com slash tip. Go to shopify.com slash tip. That's shopify.com slash tip. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why Vanta is a game changer. Vanta automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, Vanta keeps you secure and keeps your deals moving. And here's a number that really stood out to me. Companies like Ramp and Ryder spend 82 % less time on audits with Vanta.

1:03:04Stig Brodersen:That's not just faster compliance, it's more time for growth. I love that over 10 ,000 companies from startups to big enterprises trust Vanta to handle this stuff so they can focus on what actually moves the needle. Get started today at vanta.com slash tip. All right, back to the show. I love the point you had there before, whenever you talked about some people are crazy in your view of how they spend their money. And I think we all look at other people from time to time, why? That makes absolutely zero sense. They do what they do. Probably what happens is that they optimize for different things.

1:03:45I was speaking with a friend the other day, and he's very successful in what he's doing, makes half a million dollars a year. And we talked about his business. And I had all of these ideas of how he could raise his earnings to a million a year and adding employees. And there were a few things he could do. And he's also in financial space. And so I was like, So we did this in GAP, and then you could do that. And he was like, wait, wait, wait, I don't want to have employees, he said to me. Because like, no, no, no, that's not fun. I basically, or I, as in this friend said, he basically wanted to work the least amount of hours so he could play around with his son.

1:04:26To him, that is freedom. And then I have another friend who was saying, oh, not having kids, that's the ultimate freedom. I have a third friend. And this is not Robert, I should say for the record, but for him, it was like having a really, really nice car. To him, that was freedom. So whenever he was off work and he was like, work is good enough, but the good time starts whenever he clocks out and then he would just drive around in a really, really nice car. And to him, that is freedom. And so we might talk about the same things, but we call it different things. I think that's probably one of the reasons why it might sometimes become a bit confusing.

1:05:03But on a somewhat related note, many people are introduced to the value investing space because they want to learn how they invest their money. And then they stay perhaps because of the wonderful relationships that they form in the value investing community. So Clay, could you talk a bit about the relationship that you have built here in the value investing community?

1:05:24Stig Brodersen:Clayton Yeah. Getting involved in the value investing space has just been such a blessing in terms of the relationships it's brought me. There are just so many high-quality people in this space. And what has amazed me most is just how generous and collaborative the community can be. People are genuinely willing to share their insights, their time, and their mistakes. And it's also a space where long-term thinking naturally attracts these long-term friendships. And this is something I've just really come to deeply appreciate. And it's also become an avenue for me to just surround myself with people who inspire me to be a better person and just continue learning.

1:06:07Stig Brodersen:And indirectly, it's also taught me the power of reciprocity. So many people listen to our show and have done so for many years. And hopefully, our content has been helpful in one way or another. And the more we give, the more it can come back to us in unexpected and meaningful ways. And this ties into the idea of compounding goodwill that Guy Spear talked about in his book. I always think back to one of the first personal development books I read. It was back in college. It was this really simple book. It was titled The Compound Effect by Darren Hardy. And in it, he talked about the growth versus the fixed mindset.

1:06:48Stig Brodersen:And I found that people in the value investing community just tend to have this growth mindset and truly embrace lifelong learning. And it's just no wonder that you'll run into so many successful entrepreneurs and many other successful people when venturing in this space. So it was the growth mindset that allowed me to eventually truly embrace value investing with open arms. And this led me to discovering TIP and then launching our mastermind community, which just introduced me to many wonderful individuals. And Clay, speaking about the mastermind community, so you gave this wonderful presentation here the other day about how value investing changed your life.

1:07:31And I was curious about if you could sort of like give us a rundown about how has it changed your life? How does relationship play a role and paint some more color around that? Yeah.

1:07:42Stig Brodersen:Looking back, it's just pretty amazing to see how the chips have fallen and how things have really shaken out. So first off, I just feel so grateful to be a host here on We Study Billionaires, a show that I listened to several years back. And the journey really started with having that growth mindset that led me to the value investing community. So like many people, I was introduced to it by wanting to make some money in the markets and ended up wanting to stick with it for the long run because of just the opportunities to continue learning and interacting with just some great people. So one gets into value investing.

1:08:20Stig Brodersen:They inevitably read about Warren Buffett and Charlie Munger. And Buffett just made a tremendous impact on me. So a few of the lessons that really stick out to me from Buffett are living by an inner scorecard, doing work you enjoy and working with people you admire. So you might notice that these really have nothing to do with investing. So living by an inner scorecard just really empowered me to look internally and recognize what I really wanted out of life. So I previously worked in the insurance field as an actuary, and it took a lot of work to get to the point I was at. But when I looked at the people that were one or two steps ahead of me, who were in the position I would be in down the line, I eventually realized that it just was not the life that I wanted for myself.

1:09:12Stig Brodersen:So I started exploring these other opportunities and this led me to apply to join TIP. And had I not lived by an inner scorecard, I would have continued with that good corporate job that just didn't give me that level of fulfillment that I was looking for that my heart desired. And in making the switch, I needed to stick to my values and my beliefs because not everyone in my life thought it was a good decision to take this remote job that was an entirely different and unrelated field. I think if you ask most people, actuaries aren't going to make good podcast hosts. And what really gave me the comfort to make the jump was Buffett's idea of the inner scorecard.

1:09:57Stig Brodersen:Buffett has a quote, would you rather be the world's greatest lover, but have everyone think you're the world's worst lover? Or would you rather be the world's worst lover, but have everyone think you're the world's greatest lover? I also think that Jeff Bezos' regret minimization framework could have also been used in this example. I knew that I would have beaten myself up if I didn't at least give myself the chance to be a host at TIP. And because I knew that if things didn't go as planned, then one year later, I would just be back in the position that I was at the time. So funny enough, after I submitted my resignation letter to my employer, they told me to give them a call if I ever wanted to go back, which made the jump a bit more relieving.

1:10:42Stig Brodersen:So had I continued to live just based on other people's expectations of me, then I just wouldn't have made that jump. So in a way, Buffett, just from that one principle, just made an enormous impact on my life. And I really value that experience because I know that there are going to be other points in my life where I'm just going to have to make difficult decisions that other people just aren't going to agree with. And it's just so important to live according to your values, no matter how difficult it is to do. And another concept from value investing that played a significant role in my life was the margin of safety concept.

1:11:24Stig Brodersen:So I applied this concept to my personal finances when making the switch to TIP. So at my previous job, I was making north of six figures, which I felt was pretty good for being based in the Midwest. I was in my mid-20s. I could have easily bought a nice house, a new car, and quickly experienced lifestyle creep after living on practically nothing while in college. And I certainly had the temptation to fall prey to lifestyle creep, but something inside of me told me not to lock myself into these big monthly payments because that would require me to sustain that high income to continue with that lifestyle.

1:12:06Stig Brodersen:So when it came time to make the jump to TIP, as you know, I took nearly a 50 % pay cut. And looking back, maybe I should have asked you for more money from the beginning, Stig. And I don't want to make it sound like TIP doesn't treat their employees well. They certainly do. It's just quite the opposite of that. But if I didn't apply that margin of safety to my finances, it would have been impossible for me either emotionally or financially to make that jump. I didn't have a car payment. I lived in a reasonable one-bedroom apartment. I had no consumer debt. And I should also mention that I've just been dealt very good cards and I've just been very lucky in life.

1:12:48Stig Brodersen:I think as Buffett puts it, I feel like I won the ovarian lottery. So I've been lucky to live in a low-cost-of-living state. My parents were kind enough to cover my undergrad degree and send me to a wonderful school growing up. So we all just need to make the most of the cards that were dealt. What we do here and what we want to do is to be on a journey with the best people. And in life, in business and investing, if you can be on a journey with really high quality people, it's just so much more fun. And the last thing I would want selflessly is to work with someone who needs to check off something on the resume for like two years.

1:13:31Now I've been with this company before I went to this company. And no, that's not what it's all about. But it has to be a two-way street. So I remember whenever we hired Kyle, for example, and there was a unique backstory that perhaps we will talk about another day whenever we onboarded Kyle and you were very much included in that. But I remember I was having a one-on-one conversation with him and I said to him, you know, Kyle, I can't really afford like a$100 ,000 employee. And you can just tell like his heart was sinking, but I can afford$200 ,000. And I think at that point in time, he was like, this dude is crazy.

1:14:10Like, what is he talking about? Why does he want to pay double? That doesn't make any sense. And so I think I probably partly have a bit of a bias where I like to shock new employees with a bit of unconventional business practices. And so I sort of wanted to tell this story, both for the listeners out there who are employees, but also to the many employers we have in our audience. Because I think what I've learned from an early stage was that, and I started my first company when I was 26, and I didn't think well about having employees issued at the time. But a lot of employers are thinking, let me pay my employees as little as possible.

1:14:50That's how I can win. And it took me a long time to realize that you usually get what you pay for, which sounds intuitive, but at least whenever I was younger, it sounded very counterintuitive. It basically seemed like money that was just thrown out the window. And if you pay the right people well, you can really focus on growing the pie and then divide it so everybody wins. And I think if you allow me to put some numbers on this, and you can take this as metaphorically as you want. If you pay someone 100K, you might make 150 together, and then you end up pinching pennies, and it comes at the expense of the relationship.

1:15:27Or you can pay them 200, and then you can make a million together, and then have a lot more fun in the process. And at the end of the day, I think it's about playing this game with people of the highest integrity, and where you have this high level of trust. Later this year, as this episode is coming out. We're celebrating 10 years with the first employee here on TAP, and I'm running around trying to figure out which 10 gifts to give to this person to symbolize each of the 10 years he's been with us. Someone out there is probably thinking, Stig is a terrible capitalist, and you're absolutely right.

1:16:03It's not good for business. If I had shareholders, they would tell me to, I don't know, focus on optimizing for shareholder return or something that's a bit more sensible, but I don't have any shareholders. And finding the right gifts for our team is just incredibly meaningful to me. And so I think at this stage of my life, I don't focus too much on the dollars, or at least as much as I used to, and perhaps can afford to focus a bit more on purpose. And it's going to sound like a cliche, but there's this tap dancing to work. And you do that whenever you can do it with wonderful people. And then next year, we're going to have another two people that's been with us for 10 years, which is quite remarkable whenever you're thinking about how young of a company we have.

1:16:47And so being with TAP, and sorry for all this coming across as so self-serving, has just created some of the most meaningful relationships in my life. I wanted to also talk about you, Clay, which I didn't do a good job of so far. I can't believe how lucky we are on TAP that we work with you. It's absolutely incredible. And I've sort of typed up here in my notes, I wanted to tell you that TAP wouldn't be TAP without you. And I don't know how otherwise I could say that. You're doing so many things behind the scenes that people are not seeing at all, and you're making it work. And so I know that was not necessarily intentional in this episode.

1:17:30I just want everyone to know how incredible you are. And thank you. Can you just say thank you for trusting TIP with your employment and taking such a leap of faith with such a cheapskate like me? So just thank you, Clay.

1:17:43Stig Brodersen:Well, thank you for saying so. I can 100 % say it's certainly been a win-win for me to work with TIP and I no longer make what I did back when I started, I should say. And in a sense, I've just gotten paid to learn. And I feel that there's just still so much more learning to do. And some people believe that to be successful in business or successful in your career, you need to take this manipulative or Machiavellian approach where you're essentially trying to get the most out of a relationship and take advantage of the other person. And then you go and learn about people like Warren Buffett or Nick Sleep and realize that there's just an entirely different way to go about it as long as you're teamed up with the right people.

1:18:37Stig Brodersen:Guy Spear referred to this concept as compounding a goodwill and how there's just this powerful effect of being a giver instead of being a taker. And the paradox is that you end up receiving much more in life by giving than by taking and just by helping others. You end up helping yourself too. And I feel that that perfectly describes my experience with TIP, even in a world that might seem like it's a dog-eat-dog world. And it often is in many cases. And there are still people out there who want to do business in this manner. And I think for those in the audience that feel like they're in a dog-eat-dog situation, that there are other opportunities out there that offer this type of business relationship, which I've been lucky to come across it myself.

1:19:27Stig Brodersen:And this is also one reason why I teamed up with my brother to start a company on the side. I handle much of the back-end financial stuff that's honestly quite boring that he just doesn't want to do and he handles operations. But a big reason why I got into that was to just go on this journey with him. And he's just a giver in so many ways and has many of the same values. And it's just so fun to run a business with him. And it also reminds me of how Robert and I were talking when I visited him about a business opportunity he had where he had a chance to make a lot of money partnering with someone who certainly would not be a great business partner.

1:20:07Stig Brodersen:And I told him not to do it because it was just going to bring in so many headaches. But he was looking at the dollars that were there that he could potentially make. Guy Spear talked about this concept extensively in his book. I just wanted to share a brief quote from it. He goes, when you're surrounded by people like this, all of them trying to help one another, it sometimes feels like heaven on earth. They are the keepers, the people we want in our inner circle, the people we should fly across the world to see if they live abroad. Of course, this is what I need to be for other people, end quote.

1:20:43Stig Brodersen:And that's why I just applaud you for building up just such a wonderful culture here at TIP where traits like truthfulness and radical transparency and just people who do good work are just the default. I really appreciate you saying that, Clay. I truly do. I was having this conversation with my wife here just before. And And so we're recording this year around Christmas. And so we talked about how whenever we were kids, we were told by our parents that giving gifts was so much more fun than receiving gifts. And I remember as a kid, I was like, what do you mean, mom? That's like, no, getting gifts, that's the best.

1:21:27Like, why is it fun? And so it's just remarkable how some of the things we learn, how that it's the same, but it's not. You know, it's the whole thing about, you know, the man can't cross the same river twice. It's not the same man. It's not the same river. So it's a wonderful thing to be able to give. I guess that was my point. But you also need to be ready for it. You know, I wanted to address the thing you said here about the culture. And a few examples comes to mind. I should also say for the record, this is not a job ad. We probably should make that disclaimer. I don't know how we, it was probably my mistake, how we all of a sudden came to talk about being an employer and how it is to work here.

1:22:09And it's not because we're looking for any new employees here for TAP, even though it's probably going to sound like a long sell, but we, or perhaps I should not pull you down to my level here, Clay, kind of like felt it would be fun to talk a bit about corporate culture and the joys of compounding, really. And, of course, the joys of compounding comes across both with the people you work with or your investments or however you want to quantify it. A few examples comes to mind. We were super, super lucky to work with William. I mean, talk about a high-quality person. And I think every accountant who's worth his salt, he would just be so confused about how it is to work with William.

1:22:56So I'd like to think that TAP or William are directional correct in the framework of how we do conduct business, but we are 100 % wrong down to the last dollar. And so we have a certain agreement, but then there are multiple expenses that would be advantageous for me to include in that calculation that I don't, which is to William's advantage. And then vice versa, there are a ton of things he would be able to invoice and he doesn't. And then once in a while, a few times a year, I just sent him a big check, which is roughly the amount of money he probably should be making with TAP. And that's it.

1:23:32And I know that's not how you run a business and it doesn't scale. But whenever you team up with the right people, it's actually a quite liberating way. And I think it really, I can't help but mention it. And I think the reason why I can't help mention it is because earlier this week, I got a message from a fund. We're doing another episode and they have a compliance department. They're managing trillions of dollars, this company here. And so it has to go through compliance. And then can you say this? And can you do that? And it's just like, it's a different way of conducting business. And this is not my way of saying that there's anything wrong with compliance, or you should break rules or anything like that.

1:24:12Clay, the call I have with you here today is the only thing I have going on today. And that's because I don't take calls from compliance departments who wants to talk to me about what I ask and what I don't. And that goes back to your point about being aligned with your inner scorecard. What is it that you want to optimize for? So we do do episodes together, but we don't really that often jump on calls together. And I kind of feel like they could come across as passive aggressive. That's not my intention at all. It's always a lot of fun to chat with you, so don't get me wrong. I think the way I would phrase this is more, if I needed to check up on you too frequently, we were probably both being big trouble.

1:24:56And I know I'm the oddball here because the way that we do business here on TAP, it's not how the corporate world works. And I also think that's why I enjoy so much, it takes so much joy in a mastermind community. To me, it's this wonderful intersection between investing, business, and life. And I was on the call here the other day with a wonderful member of a community, and he asked me multiple times because he's awesome, how he could add value for me. And I remember I was a bit confused, not in the sense that there's anything wrong with that because why wouldn't you ask how you can create value?

1:25:35But I think I was quite mindful about, I didn't want the relationship to be too transactional. And I don't really know how this comes across because I actually, quite coincidental, I actually started another company with a member of a mastermind community, which you can probably say in its own way, it's quite transactional. But I think there was something about the type of relationships you have, what the intention is, and how you start them. And there was never the intention with the gentleman that we started a business. It was just like, we have a lot of values in common. And then we were like, wouldn't it be fun to start a company?

1:26:10Let's start a company. So one of the wonderful things I've learned from William, and there are so many things, he's really a role model in so many walks of life. He talked to us about this idea of not to do business with your friends until you're 40. And then after you're 40, only to do business with friends. Now, I don't think you have to be too particular with the exact age whenever you're tuning in, but I do think it might be directional correct. You need some experience in life and in business to know yourself well enough and perhaps also to know your friends well enough, whether or not you should go into business with them.

1:26:51And this might sound a bit odd because today I only want to do business with friends, but that's not the same as me saying, I want to do business with all of my friends. That's two very different things. And I'll be the first to say, for example, with the mastermind community, someone's tuning in, it's like, yes, this sounds awesome. How do I sign up? I do want to say for the record that there is a cost to it. And please don't quote me on this, Clay, because it doesn't sound good if it's quoted for sure. But at this stage in my life, the cost is, to a last extent, also a reflection of identifying friends who are future friends who are serious about forming relationships, and also a bit of a signal that they've been fortunate and had some professional success, and want to speak with others who also had a bit of success, whether it's in business or investing.

1:27:43And yes, we do talk about stocks, I should say. But I would also say that personally, nothing decides me more than having these, I don't know, borderline philosophical discussions with thoughtful people about value investing and then this intersection of business, investing and life, and then just see where the conversation takes us.

1:28:04Stig Brodersen:Yeah. I mean, I would just close out the discussion by just saying that getting the right people into your life is just so important. The wrong people just had this stress and anxiety that is just always there. It's always lurking and it just doesn't make life fun. And just to use one example, I would attribute much of my success here at TIP thus far to how you, Stig, have just continued to lift me up, encourage me, offer me guidance, and just be willing to have the hard conversations since day one. And since people are generally wired to take the path of least resistance. It can just be hard to find people who are willing to have those hard conversations because people tend to not want to tarnish what they already have.

1:28:53Stig Brodersen:TIP has just given me an avenue to hang out with many people better than myself. And if you do that, you just can't help but improve over time. I just really enjoy giving other wonderful people in our audience that same opportunity to just hang out with other great people. So here coming up in May, we'll be hosting a few social events and dinners in Omaha during the work weekend of the Berkshire Hathaway annual meeting for our Mastermind community. And we're also opening up a few paid seats for those in the audience who aren't in the community, but would still like to join us. So to learn how to join us, we've included a link in the show notes for you to add your name and your email to get in touch with us, or you can just email me directly at clayattheinvestorspodcast.com.

1:29:39Stig Brodersen:Again, TIP has just brought me so many wonderful friendships, and it's given me an avenue to hang out with many people better than myself. And if you can do that, again, you just can't help but improve. And I can assure you that we'll have many wonderful people joining us in Omaha for you to meet and just have the chance to spend plenty of time with and really get to know them and make the most of your weekend in Omaha. That's absolutely wonderful. And in case that someone haven't tuned into it, I just want to tell everyone again, Clay's amazing. I know I've said it once or twice, but I just want to make sure to say this.

1:30:16It's incredible, all the things that Clay is doing for TAP. And there's this wonderful quote, and with all those quotes that's floating around, it's always hard to tell who actually said it, but there was this quote that's saying, quality is what's happening when no one is looking. And that's so much you, Clay. All the small things that no one's paying attention to, you make sure that that happens. So just for everyone to know that you're just so fundamental to everything we do, and I don't think you get enough credit. So I just want to end by giving you credit for being so amazing to work with.

1:30:50So thank you, Clay.

1:30:52Stig Brodersen:Preston Pyshko Thank you, Stig. I appreciate the opportunity to work with you and the rest of the team here at TIB. Thanks for listening to TIP. Follow We Study Billionaires on your favorite podcast app and visit theinvestorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs. Investing involves risk, including possible loss of principle and past performance is not a guarantee of future results.

1:31:24Stig Brodersen:Listeners should do their own research and consult a qualified professional before making any financial decisions. Nothing on this show is a recommendation or solicitation to buy or sell any security or other financial product. Hosts, guests, and the Investors Podcast Network may hold positions in securities discussed and may change those positions at any time without notice. References to any third-party products, services, or advertisers do not constitute endorsements, and the Investors Podcast Network is not responsible for any claims made by them. Copyright by the Investors Podcast Network.

1:31:51Stig Brodersen:All rights reserved.