1/39 RYAN (@RyanSAdams): “I want to maybe end on this question, which is: What advice do you have for the crypto natives? Like, again, a lot of people, as we started this podcast listening to Bankless (@BanklessHQ), crypto is really their first experience in investing.
2/39 “They're learning about investing through crypto, which is sort of bizarre. I think they're leveling up faster than they might in the real world. But there are still some timeless lessons that can be applied from traditional investments here. What are those? Share some.”
3/39 MARK (@MarkYusko): “So the first is, to understand the difference between investing, trading, speculating and gambling. None of them are bad or good necessarily. Just like introvert and extrovert; people are like, oh, introverts are not cool and extroverts are cool.
4/39 “That's not what it means. It's how you recharge your battery. At the end of a long day, do you recharge by being with other people, or do you want to be by yourself. Neither one is right or wrong, neither one is good or bad. But societally we attach meaning to words.
5/39 “And so, if I say 'gambling,' oh, that's bad. No, not necessarily. Gambling is gambling, understand what it is; it's partly entertainment, partly excessive speculation. And to define it really, it's where unfortunately the odds are actually tilted against you, so the
6/39 “longer you do it, the more you will lose. It doesn't mean you can't win as a gambler, you can. But the odds are tilted against you. Speculation is where you are putting capital at risk simply based on price; you haven't done any work, you don't really have any
7/39 “conviction, to your point, and you're basically just speculating on movement. Trading is the same idea; you're acting on price movement, but both directions. You're okay with things going down, because you might go short; you're okay with things going up, because you might
8/39 “go long. And so, I can be a trader either way; I can go long, I can go short, I can trade actively. But none of that is investing. Investing is very different. Investing is where you hold an asset because you think the price is different than the value of the asset; you buy
9/39 “things where you think the price is under the value, and you sell things where you think the price is over the value. So investing has lots of theory behind it. Markowitz won the Nobel Prize for this idea, if I take cash — which is the riskiest asset there
10/39 “is actually, it seems really safe, but it's really risky because you're chewed up by inflation — and I add bonds, which are riskier, meaning they have a higher volatility, and I put those together, the risk to my portfolio actually goes down. Well, if I add stocks, the
11/39 “risk to the portfolio goes down. How does that work? Well, it's because the assets are uncorrelated and therefore they zig when the other zags and your overall portfolio return is smoother and your compounding effect is higher. If I can truncate my downside, the upside
12/39 “takes care of itself. And it's the, if you're down 10, you got to be up 11; down 20, you got to be up 25; down 50, you got to be up 100. So if you can truncate those losses through diversification, you win. So the first piece is, understand what you're doing. If you want
13/39 “to have a gambling account, go for it, it's great; just make it small because you're going to lose it all. I used to talk about, there are 3 buckets for an investor. There's the get-rich bucket, and that's where it's your friend's condo deal, your brother-in-law's start-up
14/39 “company, some tip you got from a broker. You're going to lose all of it, so just keep it small. 10% to 15% in the get-rich bucket, go for it. Then you got 10% to 15% in the liquidity bucket, and that's what you need to fund your lifestyle. And it has to be super safe,
15/39 “cash and short-term duration fixed income, maybe a little gold, but stuff that you can get liquid, things you can use. Then you got 70% to 80% in the middle, and that's the stay-rich bucket. Look, getting rich is about concentration. Every great fortune in the world is
16/39 “created from concentration; concentrated stock position, concentrated business ownership, concentrated real estate position, all of it. But a very small fortune comes from concentration. How do you create a small fortune? Start with a large one and stay concentrated.
17/39 “People say, I don't want to pay the taxes. Wait long enough, you won't have to. Cisco went up to 286 times earnings back in 2000, and then it went down 84%, and to this day it's still not back to where it was in 2000. Think about that for a second. In fact, if you bought
18/39 “the Fab 4 stocks that were can't miss in 2000 — Microsoft, Intel, Cisco and Qualcomm — and you held them until today, you're still down. So concentration makes you rich, but diversification keeps you rich. So as a young person, you should have more concentration, you
19/39 “should take risks. And Steinhardt said it best, Michael Steinhardt, the famous hedge fund manager, says, 'Make all your bad decisions and make all your mistakes when you're young, when it really doesn't matter.' Investment is about willing to be wrong. With every
20/39 “investment we’ve become richer or wiser, never both. If you make money, you don't learn a thing. It's like the degenerate gambler; he goes to Vegas — it's like my brother day trading back in 2000. The first trade he made made more than his salary the previous year.
21/39 “The worst thing that could have possibly happened to him. Because what happened to the rest? He lost everything, he literally lost 95% of his money because he thought that was skill instead of luck. To be able to differentiate between skill and luck is really, really
22/39 “important. And luck is very good. I like luck, I'm a big fan of it, like Thomas Jefferson said, 'It seems the harder I work, the more of it I seem to have.' I love luck, it's very good. But you have to differentiate between skill and luck and about probabilities and
23/39 “possibilities. Part of the problem for most investors is like most of us live in fear, and the trophy — the participation trophy world in which a lot of people listening to this grew up doesn't make it better; we're not allowed to fail, no one fails, everybody gets
24/39 “a trophy. Bologna! My 10-year-old, when he was 4 — I have older kids and a little guy who is 20 years after our first 2, same wife, she's the miracle — he went O'fer [meaning zero] in soccer and they gave the team a trophy, and I took the trophy and I put
25/39 “it in the trash. And my wife said, what are you doing? I'm like, he didn't earn that; you don't get a trophy for losing all your games. This world is about winning. The problem is, we're so afraid of failure that we don't follow Will Smith: 'Fail fast but fail forward.'
26/39 “And winners in investing lose more often than losers, because losers are so afraid of losing that they don't take risks. So they don't do anything and they stay in cash and they stay in bonds and they don't try crypto and they don't this, and then they miss the 2,000%
27/39 “return, and they say, oh, that was just luck. No, it's because you did what you were supposed to do as an investor; take intelligent risks, take risks where you're compensated, build a portfolio of concentrated ideas, let the winners run.
28/39 “Julian Robertson, mentor, friend — I've been very lucky in my life to have great mentors. I think that's a thing everyone should do, to seek great mentors, and actually a podcast makes that easier because you can talk to a lot more people than you could person to person.
29/39 “I asked people, what made Julian a great investor? And they said, oh, he had an uncanny ability to double up. It's the hardest thing to do in the world, which is when something is working, put more behind it. So that comes from conviction. And how do you get courage to
30/39 “double up? Only if you have conviction. How do you get conviction? Do the work. The average person doesn't do the work; the average person is afraid of losing, they're afraid of failing. You probably heard this story, my wife has only heard me speak one time.
31/39 “She came to Vegas for a conference, and at the end of it, she said, Mark, you can't say things like that. Like what do you mean? She says, well, you say things with such conviction. I say, what's wrong with that? She says, well, people might believe you.
32/39 “That's the whole point. She says, what if you're wrong? I said, then I'll change my mind. I'm wrong all the time. I don't mind being wrong. This is the one thing I hate about Twitter. I love Twitter, we're together because of Twitter. I love Twitter. I have friends all
33/39 “around the world, I have met incredible people. I got to meet the president of the biggest bank in Greece because I posted a picture of me in Athens during the banking crisis; a friend called me up and said, hey, you're in Athens, you want to meet the president of
34/39 “the bank? I'm like yes. That was cool. I love Twitter. But the one thing I hate: Don't go through my old tweets from 3 or 4 years ago and say, oh, you said this and you were wrong. I've changed my mind 7 times since then. Please! I'm wrong all the time.
35/39 “It's not about whether you're right or wrong. George Soros said it best: 'It's how much money you make when you're right, how much money you lose when you're wrong.' This game is not about being right all the time. It's about taking risks, risks that you're
36/39 “compensated for; it's about a constant discipline to rebalance, it's about a constant discipline of evolving to new ideas, about cutting your losers fast. If you did something, because you didn't have conviction, you hadn't done the work, and it goes against you, you're
37/39 “not right, you're just wrong, get out and move on to something else. There are so many good ideas, so many good opportunities. If you don't try them, you can't win. And so, sitting back and complaining about everybody else and saying, oh, they just got lucky, that's
38/39 “just lazy; it's intellectually lazy. It's like Taleb, it's going to zero. You've been saying it for 8 years, dude, 8 years. At some point, you just look stupid, actually long past since looking stupid. Look, I think Peter Schiff (@PeterSchiff) does it to
39/39 “get interest, he's a P.T. Barnum believer: All publicity is good publicity. So I think part of it is intentional, and now his sparring with Pomp (@APompliano) is to drive traffic to his site so people buy his mutual fund."
1/13 MARK (@MarkYusko): “I do get angry about this, because the average person has everything stacked against them, the average investor has everything stacked against them, from accredited investor rules, to the inability to access talent, to the inability to access the best
2/13 “assets in the private markets. They can't get into Sequoia and Kleiner and all the great venture capitalists. They have no chance to be involved in private real estate or private energy, except in crypto. #Bitcoin is a venture capital investment; it is a D round
3/13 “of a late-stage venture capital investment. Why? Because if I want to own Amazon — Amazon is not a company, Amazon is a network. Amazon doesn't make anything, they are a search engine; they match buyers and sellers and they take a cut, and they take a very large cut.
RYAN (@RyanSAdams): — “which is such a pain point, I think, for many of our listeners that does not
2/16 “exist in the same way in crypto."
MARK (@MarkYusko): "It's a scam. Look, it's not intended to protect you from the ravages of the scammers. It's created to protect the rich. The rich created the accredited investor laws not to protect the small investor. That's a crock.
3/16 “I know plenty of people who aren't rich who are really smart, I know plenty of people who are rich who are not very good investors and vice versa. So 'accredited investor' is to protect the wealthy so they get access to the great deals. It's like why companies stay private
1/47 RYAN (@RyanSAdams): "And, Mark, the 'life imitating art' I think is actually a really good way to illustrate the fact that people understand what's going on, maybe not as explicitly as you have stated it, and that's why we've brought you on to the podcast, to explicitly
2/47 “state things. But people feel this; young people feel discouraged, they don't feel included, they feel lost. It's not just young people, but it's the majority of the United States. And this is the same through line that we saw in the Roman Empire, where the people of the
3/47 “world, they knew that things were corrupted, they knew that things were wrong. And if we take a historical perspective, people saw — inside the Roman Empire, it was hard to see it fall in real-time, but if you look back in hindsight, the writing was on the wall.
1/14 RYAN (@RyanSAdams): “I think so much of the infighting between left versus right is very media driven, not to get on politics. But I think every American, at least that is not among kind of the elite, is anti-corruption. Like we —
2/14 MARK (@MarkYusko): “Amen. And, Ryan, I'll sum it up for you. I don't mean to cut you off. But this is my thing: There is no left, there is no right, there is no Republicans, there's no Democrats. Remember, there was Democratic Republicans, the Hamilton thing.
3/14 “There is no left or right. You're right, it's just the media. There is in and out. That's all there is. And when you're out, you do or say whatever it takes to get in. Ronald Reagan, Donald Trump, lifelong Democrats got in by being a Republican, being Republican. Ha-ha.
1/29 RYAN (@RyanSAdams): “I guess my question to you is, Mark: What is the central bank's next move? Because the framing of the macro is, we're in an era of money printing and we've been doing a ton of it. What happens next? How do we get prepared for this decade?
2/29 “What's Powell's next move?"
MARK (@MarkYusko): "He's going to print more. Look, the history on this is very consistent: All empires fail, every single one, reserve currencies end. The final throws of those empires is rife with this type of cronyism, this type of taxation
3/29 “without representation, so to speak, this type of rampant inflation and money printing. Go back to the Roman Empire. So the Roman Empire, there are some quotes from Marcus Aurelius that could have been written yesterday, literally; they just talk about rampant government
1/29 RYAN (@RyanSAdams): “I think what you’re saying is, basically a fiat currency, modern monetary policy, is the root of this warping effect that we see across all assets. But you said something different, and this is the part that was most explicit to me, and it maybe
2/29 “came out in a tweet I recently read from you, which you said: The Fed (@federalreserve) has only one goal, just one goal: —