[0:00]People think investing is a get rich quick business, and it's not. Because this is a tough game, and most people lose at this game. So I would encourage you to just start and just not tell anybody. And then show up 10 or 15 years later with a huge war chest and shove it up their ass.
[0:20]If you're going to start investing, there's like a couple of rules that I think are very important. The first is, I would manually build my own compound interest table. And I'll tell you a story about an incredibly famous athlete. He signed a just a ginormous contract, and I built a a Google sheet, you know, took this this new salary, took out the taxes, what you have to pay for the manager and the agent and all this other stuff. And I showed him a compound interest table, and his mind was blown. And I said, well, let's back all this off and let's assume it wasn't this, but it was 1/1000th of this. And his mind was still blown. And I said, that is the power of compound interest. I remember when I started investing, I did this, because I was told by everybody how that was the game. And so I did it for myself. And it was a very important thing that at least showed me that I'm going to get to these forks in the road constantly, which is about short-term gains and long-term true alpha. I think there are examples of people like Buffett who have just been incredibly patient and allowed compounding to do most of the hard work. I've definitely been a little bit too active at times, buying things, selling things, buying things, selling things, changing my mind a lot. But I think that is the first key step. Build a compound interest table so you understand even with the most meager of beginnings. When you start small, you can post huge numbers if you focus on a systematic process, and these things can grow over 20 and 30 years and you just have to be okay with that. And if you can do that and manage your anxiety or the desire for short-term wins, that's a huge unlock. The second is you have to embrace the nature of what you're doing, which is it is about taking risks. And the further out on the risk curve you are, the odds are that there's the risk of capital loss. And if you don't know where you are out on the risk curve, you shouldn't be there. And you need to understand that. And you need to take complete 100% responsibility for all of it. And if you can't, don't be in the arena. Take your money, stick it into an index fund, just go home. Because this is a tough game, and most people lose at this game. And you're going to be no better than everybody else if you can't do that. I remember, you know, November of 21, markets were just ripping. And I remember saying, you know, it's time to start de-risking and trimming. And the reason was because I saw Bezos and Elon start selling. And I thought, well, these guys are the two best capital allocators in the world today. And so if they're selling, I should sell. I sold a little bit, but I didn't sell nearly enough. Then, March of 2022, the war between Russia and Ukraine starts and the market just starts puking. And there's no liquidity. And so, you know, everything is spearing down. You know, we start to go through a rate cycle. It was a perfect storm. And I thought to myself, when could I have changed my mind? And the honest answer was in November. Now, why didn't I? Because I was also in a period where again, I had confused my growing fame with what I thought was a growing skill. I would be able to tweet, the markets would change, go up, go down based on what I was saying. Part of my portfolio, which was the part in SPACs, was just ripping. And I was too afraid to tell everybody, guys, let's just cut it all. Let's go all to cash. Because I was afraid of what people would think. That was so stupid. Because then starting in March, these things just got absolutely obliterated. You want to try to make decisions that are forever decisions so that you make your life easy. But now I've created room in my mind where the people that I think are just structurally and fundamentally smarter than I am. When they do things that are against the grain of what I've done, I immediately say to myself, I need to do the exact same thing. Now prove to myself why I shouldn't. Number one. And number two is, I can now see when things are just materially different. Wars, rates, commodity dumps, these are things that just have shapes now that I can see a little bit more clearly because I've lived through it. And that's when again, I have to just re-underwrite everything. I go to the point of, everything's wrong. Why do I keep these positions? But I only learned that by, you know, torching $5 billion. It's brutal. Um, but uh, I, you know, I barely survived, but I survived.
[4:53]Four years ago, I went on a vacation. We went to this island called Canouan in St. Vincent and the Grenadines. We were like the Ritz Carlton. Beautiful. And it had a really beautiful golf course. And so a couple of my friends were there, my family and I and I were there. And I love gambling on golf. And so, you know, we were playing a pretty low stakes match because my two older sons were with me. And so I said, guys, we got to keep the stakes low because I don't want them to hear crazy numbers. The two guys decide to get into my kids' heads. And they're like, "$100 bet on the putt." And I was like, you guys can't do that. They're like, let's see. Let's see if the, you know, the Apple falls far from the tree. Then I was like, all right, let's go see what these kids are made of. And so these boys both have $100 over their head. And uh, my eight-year-old was the first up, gets over it. It's like a 15-footer, holes it. My older son got over it, missed it. But I had pressed so much anyways, I won. Long story short, the kids get a couple hundred bucks each. 100 from the bet and, you know, 100 for playing with us. They ask me if they could invest in the stock market. And I always give the same answer to them, to everybody. What do you love? What do you think is good and useful in your life? Let's go find if that company's public, buy that thing. My older son said, nah. Uh, but I I like the price action of this virgin galactic thing. Throws you $100 and makes like 3000. Sells it, buys a computer. He's never to be seen again in the stock market. My younger son, however, says, well, I like Xbox. I like PlayStation, and I like Nintendo. And he bought all three, and he's been a steady compounder. But they both kind of, you know, they they looked at things that they liked. One was much more speculative, but the other one, you know, he steadily, I think he made like a 30% compounded return for the last few years. So I guess the summary of all of that, the long convoluted story is, if you're first thinking about investing, look around you and look at the products that you love, that you think are incredible, that are well-made, that are good, that you would pay for, happily. Find out who makes those things and see if that company is public. That's a really good way to start when you're first learning. And then number three is, have a backup plan. And the backup plan in the United States is incredible. Which is your losses don't really hurt you. And the reason your losses don't hurt you is you get these carryforward losses that will offset future gains. Indefinitely. They don't have an expiration date. So, when you lose money, because it's not an if, but it's a when, take the time to understand why. Were you too greedy? Were you too short-term? Did you think it was a safe investment and you oversized it, but it actually turned out to be a much riskier investment and so you had too much money in it? What was the reason why you made the mistake? And then know that all of that money will come back to you if you can course correct that decision. So let's just say you lose $1,000. Guess what? You get a $1,000 carry-forward capital loss. Next time you make 1000 bucks in profit, you don't pay any taxes. The number of people I see who are just blather on about losses, I think that they're lying or they're a bot. How else could you not know if you were an investor that you get this? I think that people think investing is a get rich quick business, and it's not. It's a get rich slow game. It's an infinite game. It's a game that requires unbelievable amounts of patience. Every time that people want get rich quick schemes, they stop thinking for themselves. They start looking for answers from others. They invariably blow up and then they blame others. Don't do that to yourself. You are responsible. So don't make decisions you can't justify as your own decisions. When I first started investing, I did not follow my own advice. I was looking for get rich quick schemes. I looked for max leverage, max exposure in things I didn't know, but I was told by others were about to pop, and I didn't do any diligence. I remember putting $10 or $15,000 when I was in my early 20s into a gold mining stock on the Toronto Stock Exchange. That is basically as close to the stupidest decision that you one could make. And I lost most of my money. A couple years later, I actually started to take my own advice a little bit. I understood technology at the beginning of the dot-com bubble that a lot of the people around me did not. And so, when I would see these IPOs, they would open, they would go crazy. I had a really good sense of which ones were real and which ones were not real just by reading the prospectuses, which I would do. And then that portfolio just crushed. And I was like, wow, I could be a pretty decent long short equity investor if that's what I wanted. The problem was that I was just much more fascinated by technology and so I really wanted to get on a path to eventually work at a venture fund. My first few forays into investing were largely about public market equities. They were all horrible, shitbag shitcos. And I lost my money, which is the right thing. You're probably not going to make a lot of money in the early days. And there's just a good chance that you're going to lose money. It happens to all of us. The question is how you rebound from that and how you create the structures to soften the fall. I think the most important part of investing is what the goal is. When you're young and the risk of ruin is low, you have more freedom to play for very large upside. When you're older, probably want to make sure you always fade the risk of ruin, because starting over is exceptionally hard. So then as a younger person, you can generally take more risk. As an older person, you probably want to take less risk. As a younger person, you can then be more concentrated in fewer things, so that if you do your work correctly and those things really explode, you absorb the positive entropy of those changes inside your portfolio. When you're older, you want to make sure that your position sizing in such a way where there is nothing that could blow a hole in the portfolio. Now, instead of saying old and young, you can also reframe this in just in terms of your personality. There are some people that independent of their age, much prefer to be far out on the risk curve. They are fine dealing with the vicissitudes of the market. Then there are other people that just can't deal with it. And those people just need to be highly diversified. And so I think part of it is knowing yourself. And then also knowing your stage in life and your goal. And if you know those things, then you can do portfolio construction properly. For me, I think of my life as a barbell. Where on one end of the barbell, I have the overwhelming majority of my capital in extremely concentrated, highly asymmetric bets on technology. And then on the other side, I have it hedged with what is effectively cash. You know, people ask me a lot, like, why did I invest in the Warriors? You know, I was one of the six or seven people. We pooled our money. We bought the team. I own 10% of it. I bought 10% for about $25 million, which today feels like a steal because that 10% is now worth, I don't know, $6, $7, $800 million, $900 million probably. I sold it for 500, but. But why did I do it? Because I was like, well, I need to structure my risk barbell. I'm going to go out here on the risk curve and make a bunch of concentrated bets in technology companies. They could all go to zero. And I don't want to start my life from zero. So worst case, I'll have this $25 million investment that I thought at the time would effectively be totally uncorrelated to tech and effectively compound at the rate of inflation.
[13:33]There's absolutely nothing you have to sacrifice in investing. Nothing. Zero. Zilch. If you feel like you're spending too much time, you can modify your investment strategy to give you more time. I mean, Buffett talks about this all the time. He sits there, he reads, he plays chess, he plays bridge, he makes phone calls, he goes home, he gets a good night's rest. He's been doing it for 80 years. If you believe that investing is like an incredibly physically taxing thing that takes away from other people, you're doing the wrong strategy for you. I think one of the most important things in investing is to just start. It's kind of like making a baby. You just got to start. Talking about it doesn't actually help you make a baby. So if you want to be rich or if you want to be financially secure or if you want to, you know, accrue capital that you can invest in the things that you believe in, the causes you believe in, you need to just start. The thing about starting is, there's this incredible trick that people will play on you. Which is the only people that care how much you start with is other people. And if you think about that for a second, what they want to do is they want to feel better about their decisions. And this is what stops people because they think, oh, what's 50 bucks? What's 100 bucks? Well, to others it seems meager and not worth it. So I would encourage you to just start and just not tell anybody. And then show up 10 or 15 years later with a huge war chest and shove it up their ass.
