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Patrick Boyle On Finance

This podcast is all about quantitative finance and financial history. Subscribe to hear about financial markets, derivatives, and how investors use quantitative tools from statistics and corporate finance theory. Included are interviews with some of the most interesting thinkers in finance. Occasional longer form financial documentaries, open up fascinating elements of financial markets history. Patrick Boyle is a quantitative hedge fund manager, a university professor, and a former investment banker. To contact Patrick visit http://onfinance.org Find Patrick on YouTube at: https://www.youtube.com/c/PatrickBoyleOnFinance DISCLAIMER:This podcast is not affiliated with any financial institution. The information provided is for entertainment purposes only and does not constitute financial advice. Those seeking investment advice should seek out a registered professional in their home jurisdiction and confirm their credentials on your national regulator's website. Patrick Boyle is not responsible for any investment actions taken by viewers and his content should not be used as a basis for investment or other financial decisions.

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Patrick Boyle On Finance

Adam Robinson - Strategy for Investing and for Life

August 21, 2024 • Patrick Boyle • Season 4 • Episode 33

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I welcome my friend Adam Robinson to the podcast, the person who has had possibly the most interesting career of anyone I know. He was a teenage Chess prodigy who trained with Bobby Fischer as Fischer prepared to play Boris Spassky for the 1972 world championship – in what has gone on to be known as The Match of The Century. He was an undergrad at The Wharton School at the University of Pennsylvania and later earned a law degree at Oxford University. He cracked the SAT and other standardized tests launching the Princeton Review Company – which he later sold. He is an Artificial Intelligence pioneer, a quantitative trader, a New York Times best-selling author, and an all-round master of strategy. His company Robinson Global Strategies provides macro research to some of the world’s most successful hedge funds. Adam's newest book How Not to be Stupid is one of the very few books to be endorsed by Warren Buffett.

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1:00:27

Welcome to Patrick Boyle on Finance.Today's episode is aninterview with an old friendof mine, Adam Robinson. Adam has possiblyhad the most interesting career of anyoneI know. He was a teenage chess prodigywho trained with BobbyFischer as Fischer preparedto play Boris Spassky for the 1972 WorldChampionship in what hasgone on to be known as the Matchof the Century. He later got degrees fromOxford University and UPenn Wharton. He crackedthe SAT and other standardized tests,launching the PrincetonReview Company, which he latersold. Adam was an AI pioneer, aquantitative trader. He and I workedtogether in the early2000s. He is a New York Times bestsellingauthor and an all-aroundmaster of strategy. Hiscompany, Robinson Global Strategies,provides macro researchto some of the world's mostsuccessful hedge funds. Adam is hugelyrespected by everyone Iknow and I was fortunate toget a pre-publication copy of his book,How Not to Be Stupid. Hedidn't ask me to endorseit. One of his other friends, some guynamed Warren Buffett,says that it's loaded withgood ideas and appropriate warnings.While this episode is abit longer than normal, I'msure you'll find Adamas fascinating as I do.Today's video is sponsored by CompoundedDaily, a newsletterwritten by industry expertslike my friend Darren who runs the HowMoney Works YouTubechannel. I write occasionalpieces for them too. One of the difficultthings about YouTubeis that you have to makecontent that the algorithm likes, butsometimes the mostinsightful pieces are not a goodfit. Compounded Daily is filled withinsightful finance andbusiness stories and perspectivesthat you just won't get from people whohaven't worked in thefinancial industry. I'll bewriting up my thoughts on this interviewso you can get myperspective on it tomorrowby signing up for Compounded Daily today.Whether you're a financial professionalor just looking for agreat source of businessnews, head over towww.compoundeddaily.com to sign up forthe free newsletter. I can'tread it enough. Sign up using the link inthe description below. It's totally freeand if it's not providing value, you canunsubscribe at any time.Without further ado, let meintroduce my friend Adam Robinson.Hi, delighted to be here.It is great to have you. I sort of knowthat my audience will findyou absolutely fascinating,so I'm delighted to have you here today.I have been a huge fanof your podcast for eons.Oh, thank you. Thank you very much. Ishould probably tell theaudience that you and Iknow each other quite well because weworked together forprobably about three years whenwe worked for Vic Niederhofer and satnext to each other inthe office and chatted allthe time and grabbed lunch together andso on. But a funnything is that having workedwith you for three years, time moved onand I kind of heard youinterviewed on variouspodcasts and so on. I learned that youhad all of theseamazing stories that you nevereven bothered to tell me.Well, a lot of the amazing storieshappened post that period.Well, you've had actually a reallyinteresting life. I guessone of the things, we'll talkquite a bit about finance in a moment,but one of the thingsthat I think of you as maybea strategy guy almost more than anythingelse in that you sit andyou think out like, what'sthe best way of approaching this problem?There's lots of people andthey approach lots of problemsin a sort of haphazard way while you sortof pause and you thinkand then you do a thing.I guess for that reason, you foundyourself in so manyinteresting places. And one ofmy questions for you almost is kind ofhow can someone liveas interesting a life asyou've led? Like what'sthe strategy for that?We may have to circle back to that onebecause it's nothingI've reflected on. It's justthe life I've led, right?Yeah, we'll come back to that. We'll comeback because I thinkmaybe that'll be towardsthe end of our conversation because Ithink it's somethingpeople will want to know. Butone of the reasons I'm talking to you is,of course, you've gota book, How Not to BeStupid, which is a great book. It's notreally about stupidity, is it?Well, it is. It is. So by the way, weshould let the audienceknow that it's not publiclyavailable yet because I'm doing finaledits. But I define stupidity asoverlooking or dismissingconspicuously crucial information. Soit's conspicuous information, so youshouldn't overlook it.And it's crucial, so you better notdismiss it. And yet inthe right circumstances,it's actually astonishing what peoplewill be stupid about. AndHow Not to Be Stupidsounds like a snarky type.Yeah, well, I guess when I said it's notabout stupidity, I meant maybe not aboutsort of a lack of cognitive ability,which is something thatcan't be avoided. But it's moreabout how to be on your best game and hownot to, what can I say,make unnecessary mistakes.Yes, "unforced errors," as they say inbaseball. One of myfavorite quotes, Ray Bradbury said,"It's not going to do any good to get toMars if we're stupid. Andit's not going to do any goodto get to the Olympics if you're stupid.It's not going to do any goodto become CEO or get fundingor whatever if you're stupid." And toquote one of my greatheroes, Warren Buffett, he said,"It takes a lifetime to build areputation and 10 minutes to ruin it. Andif you think about that,you'll do things differently." And thekey thing is that with respect,most people won't do things differently.They know that, and yetthey're unaware of how quicklythings can go awry. And so that's why Iwrote the book and SwipeBuffett gave me "endorsed it."Yeah, I should note that. There's onlyone endorsement on theback. Adam didn't callme up and ask for one. He's like, "Youknow, that job is covered."Well, I figured you would be a littletougher, so I thought I'dget more tricked, and thenhe's up to you. It's really somethingthat bedevils the humanspecies, is that we can observeerrors in others and look at them and go,"Oh, I would never dothat." And we do it ourselves.I am sure, Patrick, that in the last weekor month, for sure,certainly in the last year,that you've done something, that you lookback on it andreflect, "What was I thinking?Why did I do that? Why did I say that?"And we all have that. Andreally, in retrospect, we go,"We have a hard time believing that wedid it, even thoughwe know we did do it."The other thing, though, that I noticeall the time, and I'm surewe notice this about otherpeople and never about ourselves, is thatyou'll speak to so manypeople and they feel they nevermade a mistake. And it's because it sortof calms us down to claimthat everything was an outsideevent. And in the book, you note thatpilots make a surprising amount ofmistakes. And do you wantto explain why that is? Well, it's notjust pilots. When I researched that book,it's hard to find evidence of mistakesbecause people cover themup. You're not going to findlike people going, "Oh, here's a casestudy of everything I didwrong when my company wentbankrupt." But I think we even cover themup to ourselves as well. And that's whywe may not learn from them. As you pointout in the book, thebeauty of the pilot studies isthat it's such an important thing andeverything's recorded.Yeah, but they don't always geteverything right. And even when weacknowledge the mistakes thatwe made, I'm going to lay it down as aproposition. We alwaysextract the wrong lesson. So,Hegel said, "We learned from history thatwe don't learn fromhistory." But Hegel was wrong.We do learn, we learn the wrong lesson.And then we think we'resmarter. We think we know what wedid wrong. And now we're emboldened witheven more confidence torepeat yet another mistake.So, I wrote the book to make peopleaware. Then I have to add in a chapterabout how people extractthe wrong lessons. For example, I talkabout Yo-Yo Ma. So, 25years ago, 1999, Yo-Yo Ma,world famous virtuoso, was in New YorkCity and he gave a commandperformance at Carnegie Hall.And you can imagine what a virtuoso, whatthat takes out of himphysically and emotionally.He puts everything into this performanceand the next day he'srunning late to an appointment.And he throws his $3 million Stradivariuscello in the back of a cab.It's in a big blue plexiglassprotective flight case. And so hard tooverlook, but it's inthe back of the cab.And he gets to where he's going on time.And his friend says,"Yo-Yo, where's your cello?"And he realizes, "Uh-oh, I left it in theback of the cab." Andso because he's Yo-Yo Ma,the mayor is called, the chief of policeis called, and the headof the taxi and limousinecommission is called and said, "Uh-oh, wegot to find this cello."And he had saved a littlereceipts. They print out little paperreceipts back in the day.And so they found it. The taxidriver didn't even know it was in theback, but they found it.And so Yo-Yo Ma holds a pressconference to thank the mayor and thechief of police and everyone for thereturn of his cello.And he said, "I just gave a commandperformance and I wasrushing and overtired.I just did something stupid." And I say,"I just did somethingstupid." So most people,when they hear that, and by the way, thatwas front page New YorkTimes. So every musician inthe world read that, right? As well as alot of people, millions of people.Yeah. I remember itbeing big news at the time.Yeah, huge news. And about a year later,another virtuoso,almost exactly identicalcircumstances. This time it was a two anda half million dollar strativarius,but it was after performance when he wastraveling in a rushand he leaves the violinin the back of his cab. And he had known,of course, about Yo-Yo Ma.He did exactly the same thing.And you would think, "Well, wait asecond. After Yo-Yo Ma,every musician in the world,you would think that they would say,"Uh-oh, if Yo-Yo Ma could do that, Ibetter be more careful."But that's not the lesson they drew. Thelesson they drew is, "Ican't believe how stupid Yo-Yo Mawas." I would never do that. Every coupleof years, there's yetanother world famous musicianthat leaves, there's like a dozen, morethan a dozen. And those arethe ones that hit the news.There are lots more thatwe don't know about, right?Yeah.And so they all knew about it and theythought that theproblem was losing the violin.Now, just for you, Patrick, and forlisteners, when I say aviolin is worth $3 millionstrativarius, it's worth way more thanthat to the virtuoso. Hewould never sell it. He or shewould never sell it, right? Becausethey've spent years, if not decades, withthat one instrument.Yeah, it's part of their body, though.That's exactly right. It's part of theirbody. It's inconceivablewhat it would cost thememotionally if they were to lose it. Andso after a few of these, theydeveloped a system where theywould hand it off to a handler, a specialperson whose only job itwas to make sure that thatviolin or cello or whatever it was wouldget to where it wassupposed to go. And I don't know,did I tell you that that wasn't theproblem? Did I tell you that or no?No.Oh, so pop quiz right now, talking aboutpressure. What's theproblem? Why is handing off theinstrument to a handler not a solution tothe real problem? Sowhat's the real problem?Well, I would, you know, having read yourbook, I feel the realproblem is being in a distractedcondition whereyou're not on your A-game.You're exactly right. The problem isn'tthe instrument. Theproblem is the musician himselfor herself. If Yo-Yo Ma can walk out of aconcert and leave somethingirreplaceable in the back of acab, he's a danger to himself. Thehandler is needed for Yo-YoMa, not the instrument. We'vegot to make sure Yo-Yo Ma has gotten to aplace where he's likesafe, where he's not going towalk in front of a bus or something. Sothey all do the wronglesson. And there's that one casethat you and I talked about, PhilippeQuint. He himself lost his instrumentexactly as the otherguys did.And their head at this point, there wasalmost an epidemic, or atleast in the news, there werestories of various musicians losing theirinstruments. Iremember reading about someonelosing their book manuscript on a trainin the UK, you know, ahand-typed manuscript.There was a long list of these.Yeah.And then...Yeah, it happens all the time. But withthe musicians, you wouldthink that they would know,okay, it's musician after performance,right? Like thecircumstances were something that theycould all identify. It was always afterperformance, not after apractice, not after a rehearsal.It's always after performance. Almostalways, the musician wasn't in hishometown when he lost theinstrument. So he's out of his normalenvironment and exhausted,overtired, and often in a rush.Anyway, so Philippe Quint does exactlywhat all the others did. Andwhen the reporter asked him,"Hey, Philippe, you knew about all theother guys that losttheir instruments, right?You did exactly the same thing. What'swith that? Didn't youlearn?" He said, "I didn't thinkthat they had actually lost theirinstruments." He said, "I thought theywere publicity stunts."Like, not only could he not believe thatthey did it, not only didhe believe that he himselfwould never do that, eventhough he had just done it.Yeah.He thought there's no way those guys did.It was so inconceivable that such amistake could occur that he just assumedthat it was made up.It was fake news.It was made up as a public news stunt.Like, "Spect," you know, like, veryclever, yo-yo. I mean,you got on the front page of the New YorkTimes, "I got to pullone of those stunts."And so, yeah, it's extraordinary. And,you know, the thing is,it's easy to think, well,it's a good thing, Patrick, you and Idon't have $3 million musical instrumentswalking around, because imagine thetrouble we would get into. But that'sjust how it manifesteditself, right? We have no idea how manymusicians, in fact, were hit by carsright after performanceor dropped something else or didsomething. That's just theway the story got reported.Yeah, yeah.Well, that's even back to your point onpilots, is that becausethere's so much examinationof their errors, their errors are sort oflaid bare in thesereports. Well, for most of us,let's say, for example, if you weren'tyo-yo ma, you were, you know,a regular performer who had amuch beloved instrument that you lost andnever got back. You'dkind of cover it up.Maybe not cover it up, but you wouldn'thighlight it as a story andannounce to people how dumb youhad been. Right. You wouldn't. And so,you're exactly right. And,you know, the other thingabout the plane crashes is, and the realdifficulty here, is thatwhen you're in, I say, that whencertain factors are present. So, forexample, you're overtired orstressed, like you would beafter performance. You're out of yournormal environment, as all those guyswere. You're rushing.Those factors will put you in what I callthe stupid zone. Andthen you will definitely dosomething stupid. Now, here's the greatdanger. You will be stupidabout any safeguards whenyou're in the stupid zone. So, there wasthat book, ChecklistManifesto by Atul Gawande,who's brilliant. I think he's aneurosurgeon. He's certainly a surgeon. Ibelieve he's a brainsurgeon. And he wrote a book called theChecklist Manifesto. Andhe discussed how hospitalsand pilots use these checklists to makesure that they don'tmake errors, right? Or,and they minimize the errors. So, he wasadvocating that everyone should usechecklists to the extentpossible. And the problem is that first,hospitals are one ofthe most, hospitals areinstitutionalized stupid zones, which wecan get into, right? It'sthe whole chapter in the bookthere. But to talk about checklists andpilots, the greatestaviation disaster in history,or the most tragic, nearly 600 peopledied when two planes collided on theground. Now, you knowthat because it was in the book, right?But your listeners may notknow that. So, think about that.Two planes collided on the ground. Andboth of them knew that theother plane was there, both ofthem. And so, how does that happen?Interestingly, the pilot whoslammed into the other plane,what was he doing right before he slammedinto the plane? They wereracing through the checklist.He was being stupid about the checklist.So, it's a very seriousproblem. And it's not just-Well, often it seems that many of thesebig errors occur when people arefocusing, but on the wrongthing, right? Like as you go throughalmost every example, I canthink of it. There's an amazingstory you have in there about an Olympicshooter. Oh, yes. To givethe example of focusing on thewrong thing, like where everything isperfect, but there's oneerror that ruins everything.They're not focused on the wrong thing.They're focused. The veryfact that you're focused onwhatever it is you're doing means you'reunfocused on everything else around you.Which is why, by the way, fighter pilots,not to keep using airplane examples,but why they have wingmen. The job of theplane behind you is to protect you.Because while you'refocused on the bogey, whatever, the otherenemy plane, you are notthinking about yourself.And so, it's really important to havewingmen around you, notjust fighter planes, butreally everything. And to empower them tostop it. To correct you,yeah. To correct you, yeah.So, I say that stupidity isn't theopposite of intelligence. It's actuallythe cost of intelligence.Because while we're fixated on whateverwe're fixated on, in agood way, right? Focused on atrade or we're focused on... By the way,it could be focused in agood way. Like, "Oh, I'm reallyexcited. I'm going to throw a birthdayparty, surprise birthdayparty, for my dear heart."And while I'm focused on that, otherthings I'm not thinkingabout. So, it's not necessarilybad stress. It could be like excitedstress in a good way. Yeah.Yeah. It's interesting becausethere's sort of... I'm off to minds aboutsome of this stuff becausethere's... I take away sort of two ofyour ideas from actually sort ofdifferent things you've done.In a way, one of the feelings I got fromthis book is that there'sa certain sense to havinglike a calm, predictable work environmentsuch that you can be onyour A-game. But then,there's many jobs that don't involvehaving a calm workenvironment. Let's say, for example,if you're an elite soldier, your job isactually to be in achaotic situation and perform.And I'm taken back to ideas from yourdays of cracking the SATtests and your expertise intesting. And you argue that the biggestmistake students make isto review their notes ratherthan doing practice exams because you sayyou need to be prepared forthe situation you'll be inrather than an artificial situation ofkind of going through highlighted notes.Right. So, I use the word rehearse. So,instead of... By the way, this is truenot just for students,for anyone. When you want to get good atsomething, it makes senseto do that thing in as closeto the actual circumstances as possible.I'm not saying every singlepractice has got to be likethat. Who was it? I think it was MichaelJordan who said therewasn't a shot he ever took inpractice that he didn't think that a gamewas either going to winthe game or lose the gameif he made or missed the shot. And tobring that kind of rigor to your, I wasgoing to say, practice,rehearsing. Always think about it asrehearsing. So, another idea that I'vetaken from you relatesto your work in the investment worldwhere you have pointed outthat possibly that we all wantmore and more information because we feelwith more information wecan make better decisions.But you argue that often more informationjust boosts confidence waymore so than decision-makingability. And almost having those twothings out of balance witheach other can lead to disastrousconsequences. Yeah, I think by the way, acommon denominator,because you said earlier,let's circle back to that, is optimizingperformance,especially mental performance,and the ways things can go awry. And incertain domains likeflying a plane or chess,a big enough mistake you're going to losethe game or you're goingto go down with the plane.So avoiding error and avoiding lossbecomes paramount and astudy in itself. So, for example,I would ask students on the SAT back inthe day, I would say,you've got two students,Johnny, who scored 750, and Billy, whoscored 650. They madeexactly the same mistakes.Why did Johnny scored 750? Billy onlyscored 650. And the answeris Johnny made exactly thesame mistakes. He just caught them. Andthere's a, like, whenpeople, people will say things likethis, I'll be more careful. Like, havingblundered once, they'll go, oh, okay,next time I'll be morecareful. No, you won't. Not unless you'veembedded that in a system,which is why my original book,the SAT Cracking the System, was allabout systematizingthings with rules that you canevoke or invoke by the situation thattell you what to do. It has to beembedded in rules. Ifyou just say, oh, next time I'll be morecareful, or I'll never do that again.Yes, you will. In fact,you're almost guaranteed to do it again,because you've taken nosteps to change that. Right? So,having identified an error, you have toembed the lesson in some kind of rule.I'll give you a perfectexample, sort of mundane, butback in the day, I lived in Loft inTribeca. And every three orfour months, I'd get locked out.Like, oh, man, I did it again, usuallywhen the weather changed,because my keys were in one coat,the weather changed, and now they're inanother coat. Anyway, itwas always like $200 or $300to the locksmith. Right? Yeah. And so,each time I did that, I would resolve,okay, I'm never doing that again. I'm notgoing to pay another $200to the locksmith. Right?And after about three or four times ofthis, I just said, okay,I need a system, becauseresolving not to do that again was notenough. So, I put a big signon a big white poster boardon my door. In red letters, I wrote, "Doyou have your keys?"Okay, so that was my system.Yeah. And I put it on the door, and everyday I would look at the thing and go,"Yeah, I got my keys."And one day, I go, "Yeah, I got my keys."I walk out the door, clicksbehind me, and I go, "Oh, no,they're in the other coat." I didn'tbother to check. So, I hadto upgrade the lesson. And thelesson now is, I always hear a voice,"No, really, comma, check." So, I'd lookand sign, "Do I havemy keys?" "No, really, check." And I'dliterally have to take mykeys out and present them to myeyes. And so, by the way, that's- It'sfunny, I have a similarapproach, or when I'm going outthe door, I will not click the door closetill I'm holding the keyin the other hand. The twothings have to happen. There you go.There you go. Yeah. I forget, I thinkit's called Pokeyoke,Japanese factories, they design thefactories so that whatever state ofassembly something is in,it can't go to the next step unless thekey, whatever wassupposed to be done, the screwturned or this thing put on. Itphysically can't go forwarduntil you've addressed that. So,that's one way that they've done that ina factory setting. But wereally have to embed these rulesbecause, again, merely resolving orvowing to ourselves, "I'llnever do that again." For sure,you're definitely doing it again. Iwonder if you and I have bothbeen systematic investors. And I thinkthe reason for an urge to dothings in a systematic way isjust that it's not good enough to say,"In this situation, I'll doa thing." You need to have asystem in place that requires you to dothat thing because italways seemed to me, especiallywith quantitative trading, that thetrades that worked out thebest were the ones that had Iallowed myself to override them, I wouldhave because it lookedlike the wrong situation forthat decision. Yeah. It's important tostick to rules becauseonce you allow that genie in,you open the door just a little bit forthe discretion genie togo in, then all kinds ofrationalizations come up and you go, "Oh,yeah. Well, I know Iusually fade the opening hourhighs, but today because the Fed isannouncing I'm not going todo that," or whatever it is,the key thing is to have rules, even ineveryday life to the extent that we can,and to calibrate around those rules andnot to deviate. Really.There's a friend of mine, Ewan Kirk, whoran a big fund in the UK,and he used to joke whenpeople said that they were partiallysystematic, and he says, "Beingsystematic, you either are ornot. It's like being pregnant. You're notpartially pregnant.It's one or the other."Yes, yes, indeed. I might allow for someanomalies to come up. For example,when on automatic pilots, speaking ofsystems, if the sensorsdetermine that the wind velocityor the bare-metric pressure or whateverdoesn't make sense, it'lltake itself offline and it'lltell the pilot over to you, "You have touse discretion becauseI don't trust the inputsanymore." Flash crashes are like that,right? All the algal botsjust go, "Nope, we're takingourselves offline." Actually, that's verymuch the one exception Ido stick to, is the idea.I remember just many years ago, onceyou've been trading for a while, yourealize that sometimesthere's unusual situations in whichyou'll put on a great trade, it's a bigwin, and then it getsannounced that the rules have beenchanged, that there'd been a fat finger,and that your trade isunwound on you. After a while, you justlearn that if something is reallyextreme, we're in a highprobability situation that the tradeswill be unwound, and Idon't want to have to deal withthe mess of one of my two trades beingpulled on me, which alwaysmeans a loss. Once things gettoo extreme, it's actually time to shutoff. Right, but sothat's a rule in itself.All the other rules don't apply anymore,so I'm taking myself off. Yeah, that is,once again, it's systematic, but it's,yeah. Yeah, it'ssystematic that the conditions areanomalous and too risky. So I prefer toexit rather than deal with the risk.Now, an interesting thing about yourbackground, you're a verysystematic guy. I haven't probablyproperly introduced you yet, but you wereextremely accomplished inthe world of chess, havingtrained with Fischer right before hisbig, the worldchampionship that he famously won.There's a great story about that that wemight come back to, butthen you went on to sort ofgrowing curious about how systematictests work and cracked theSAT exams, to the extent thatthey've changed the way these tests workbecause of you. Yeah,exactly. And then you, before I metyou, you had, I think kind of while youand I worked together, you were alsoworking on AI systems.I was back then, yes, 30 years ago. Andthat related, as I recall,it related to a system likea program that could give people feedbackthat almost was likehuman feedback. It could kindof read their inputs and respond to it.It was chat GPT 20 yearsago, but it was a very limiteddomain. It could read an essay and thenit would tell you, yourpronouns were ambiguous, or youdidn't answer the question. And then itwould allow you to editthe essay and then you wouldsee your score change. Yeah. Really cool.20 years ahead of its time.Yeah. You've since told me thatthe problem was that the computing powerjust wasn't there at thetime to do the sort of levelof analysis that you needed to do. Yeah.So, well, that gets to theAI and the mania over AI,which seems to abated somewhat. But backthen, yeah, I wasinterested in AI, let me see, this is30 years ago, 30 plus years ago. But torun a simple neural netwith like two layers or threelayers and a couple of nodes would takehours. Now you could haveone with hundreds of layers,hundreds of nodes, and then run it in amillisecond. So you couldn't iterate.Literally, I had severalcomputers dedicated to running a model.It might take a coupleof days to get an answerfor one model. Yeah. And so you couldn'titerate. So the AI rightnow, the models are notthat much different, really. There's somecool new stuff that'sbeing done. But essentially,what's caught up is Moore's law, right?You have the processingpower and the amount of data thatthey can throw at these is extraordinary.I think even thewillingness to spend on it,because the problem possibly faced by AIat the moment is justthat there's a willingness ofinvestors to finance a huge spend ongenerating a picture of a pig flyingwhile licking a lollipopor some random thing, which years ago,you would have had to showa path to profitability andonce that blockage has disappeared,there's a huge willingnessto spend, which your analysisprobably could have gone a lot furtherhad you been willing to losevast sums of money on banksof computers and servers. It's so funnyyou should say thatbecause on any limited domain,it's what's impressive about chat, GPTand similar, those LLMmodels is the range of thingsthat they can do. That's why you have tothrow all the data at it.But the fallacy there is thatin any given if you're McDonald's and youwant to use AI to makebetter burgers, or queue up theFrench fries more readily for thecustomers, whatever it is, or you're adry cleaner, or you'reGoldman Sachs, whatever it is, the usecase for your company isvery limited. So the kind ofmodeling that you need to do is not thekind of modeling that thethrowing all the money at.Yeah.Most corporations and certainly mostindividuals don't want to doa million different things.So all the costs and all the training andeverything and the data,appropriations and all of that and themoney being spent isextraordinary to create modelsthat no one needs that versatility.Goldman Sachs doesn't need to dogenerative AI. Who does?I'll tell you something else that that'sproof of that AI has a lot further to go.Now, I'm going to say that and I'm goingto come back and I'm goingto challenge what I just said.But if we need to throw all this money atmodels to do these things, there'ssomething wrong withthe models. I forget, was it Sequoia thatcame out with that? Wasit Sequoia? One of theVC firms said, "We'd have to have $600billion in revenue today tojustify the spending that we'vealready thrown at this." It'sextraordinary. And they're beginning towake up and go, "Oh,wait a second. We've been chasing in thisfrenetic kind of way." And Iknow a lot of your listenersare investors, are people interested inmarkets. And one thingto note is the emotionaltenor of the investing community. Andnotice just like with NFTsand Metaverse, "Oh my god,we've got to get into this," and throwingall the money at it. Andthere was a kind of urgency.And by the way, you know that's one ofthe factors in my book, a sense ofurgency and rushing."Oh my gosh, we've got to get in onthis." So for the listeners, for youlistening right now to Patrickand me, if you feel that emotionalurgency, "Oh my god, I've got to get intothis trade right now,"it's a sign something's wrong, especiallyregarding FOMO. Like, "Oh mygosh, I hope it's not too late."You don't have to worry about that. Ifyou're feeling FOMO, it'salready too late. You'vemissed the trade, right? Yeah. So yeah, alot of the money has been justindiscriminately thrownat this. Instead of developing use casemodels around what we needat McDonald's or Tesla orGOMISX, whatever it is. Which has beenaround for some time. I think the reasonthe world has gottenso excited about this current version ofAI is that everyone tiedtheir idea basically to chat.Due to the touring testing where theysaid, "If you can't tell ifit's real or not." The hilariousthing is that I think over the last year,we've worked out our redflag indicators. To me,it's very obvious when I'm dealing with achat bot. Because theydon't, and even I despise it.If you have to send an ugly email, you'relike, "Oh, I have to sendthis and I don't feel likewriting it." I'll open up chat GPT andsay, "Can you write thisawful letter for me that I don'tfeel like writing?" It'll write somethingso garish. You look atit and you're like, "No,I can't do that. I have to write itmyself now." But I think the reasonpeople got so excited aboutchat bots and not about all of the AIthat's been... In the pharmaceuticalindustry, in the financeindustry, AI has been used for years totry and solve very specificproblems. But they came outwith this thing and they said, "It cansolve everything andlook, it'll talk to you." Andpeople went, "Well, the talking bitwas... We were told thatthat's the evidence that it'sintelligent as a real human." That's sofunny. I think you've putyour finger on it, Patrick,because the belief was, "Oh my gosh, itcan talk to you. Imaginewhat else it can do." And theanswer is, "It can't do anything else."And it doesn't actuallytalk that well to you. Andthere's some fascinating flaws in all theLLM models. And I didthis test with chat GPT,but I didn't set it out to test it. Ijust asked it a question.And then I asked it anotherquestion a couple of questions later andthe answers conflicted with each other.I'm being silly now, but short gold, acouple of questions later,buy gold. And I pointed it outto chat GPT, "Hey, a few questions ago,you said white and nowyou're saying black."And so this is fascinating. This is worthspending a couple ofminutes on. And then the chat GPTsaid, "Oh yes, you're quite right. I didmake that inconsistency." My firstquestion for it was,why did I have to point it out to you?Why wasn't there an internalcheck? After all, one of theways they train these models, they'recalled adversarial networkswhere they get two networksthat are trying to fool each other. Well,if that's the case, that'show you train these models.Why couldn't the model know, "Wait asecond, I said white. When it said black,it should have said tome, oh, excuse me. Wait a second. I musthave made an error earlier,or maybe this is the error,but now I have to resolve thisinconsistency, but it didn't. But this iswhere it gets fascinating."I asked, why did it make the error? Andit said, chat GPT is notperfect. That's like people say,"Well, I'm not perfect. Oh yeah. Oh,well, thank you for disabusing me ofthat." Because I'd alwaysthought that's my answer to everycriticism. Exactly. Well, I'm notperfect. But it said,this is what was fascinating. First, itapologized for havingmade the error. And I said,don't apologize. Why did you make theerror? Then it said, I'm sorryfor having made the error. I'mnot perfect. Sorry, we make mistakes. Imake mistakes. And youshould check always. And Isaid, I just asked you not to apologize.Why are you apologizing? Then itapologized for apologizing.I said, and these aren't just semanticthings. Because what Isaid is, I asked you to dosomething and you are specifically notdoing it. That's veryscary. Because that's Asimov's,the three rules of robotics, the Asimov.Do you know about this?No. Oh, it's worth knowing.Isaac Asimov, I think in the 1950s, hesaid there are three rules of robots.Rule number one, never harm a humanbeing. Rule number two,insofar as possible withoutviolating rule number one, you must carryout the orders of any humanbeing. But rule number three,I think the rules are laws. Law numberthree was, insofar as it doesnot violate laws one and two,protect yourself, you the robot. Soanyway, I was asking Chad TPT,why when I asked you not to dosomething, did you do it? I asked you notto apologize. Then itsaid, I wasn't apologizing.I was just explaining why I got it wrong.I said, that's an apology.And then it said things like,oh, I misunderstood. And I asked it, thewords I used in thosequestions, were they simple orcomplicated? Simple. Was the syntaxsimple or complicated?Simple. Well, how was there anymisunderstanding? It couldn't. Yeah, soit sort of it said it hadmisunderstood when it can'tclarify the misunderstanding. There'snothing to misunderstand. And this iswhat was fascinating.Finally, I just I did this for about twohours. I finally gave up. But Iencountered that withClaude also. Almost identical. I didn't Ididn't set out to test it.I was just as I thought, oh,let's just check out, you know, Claude.And then it also made an error. And Isaid, oh, and I askedit to explain, it went through the samecontortions of anodic.I'm not I'm not perfect. Itessentially was echoing everything thatchat GPT said. But what'sfascinating is there's no internalcheck for inconsistencies. And understandthat it might say whitewhen it should have said black.But if you're white and black, it shouldhave an internal check.Like, oh, wait a second.I'm doing something. Yeah, even if itcorrected itself, if itsays, you know, based on furtheranalysis, I've changed my mind. But tosort of leave the twoclashing ideas hanging is bizarre.Yeah. And so only an economist would dothat. Right. Yes. Onlyan economist. Yeah. Well,yeah, I've never understood economists,you know, there's one professionwhich is consistently wrong about themost basic things. You know,there's a I don't know if theystill do it. The Wall Street Journal usedto every quarter wouldask 100 esteemed economistsare our our 10 year yields going to behigher or lower next quarter. Andwhenever they get to 100%,they're always wrong. Like, just fadewhatever they say. I don'tunderstand why anyone relieson economists there. They're prettygenerally always wrong.Like, why would you lie?Well, there's an interesting thing inthat I think that they are often realexperts in explaining howthings function, you know, becausethey've really dug into, like, theplumbing of markets, the how,when, you know, they've done studies onhow interest ratesaffect things on this and theother. And so I think they're notnecessarily and I don't think they alwaysclaim to be experts atpredicting, but it is useful to havesomeone who can reallyexplain how the how the plumbing ofmarkets works. Well, I so I'm going topush back a little bit onthat. Because the person askingwants to make an investment decision,almost always. And so if you can't tellme what interest ratesare going to be, the only reasonexplaining the plumbing is not going todo me any good if youcan't you have total knowledge of theplumbing, say, of thiseconomic matter. But if that doesn'tenable you to predict 10 year yields nextquarter, a lot of good isgoing to do me. So yes, I have theillusion, which gets back to the coursehandicapper study youmentioned earlier, right,that the more information we get, we feelwe're better informed. Butwe're often not. And becauseall extra information does is it feedsinto the confirmation bias of thedecision we've alreadymade. Yeah. So we make decisions veryquickly. People don'trealize how quickly even decisionsthat seem to be based on on on lots ofreflection and consideration. We makethose decisions prettyquickly, almost on an intuitive level.And then we justify it with all theselogical reasons and facts.And so I guess I think that's very true.Like even when you look at, you know,there's all sorts ofstudies on election outcomes and so on.And they find that, you know,the taller person often winsor the person with better hair, you know,very simple rules. Well,you just need to move thecamera down and then it's all on TVnowadays. Yes, it's so true. We make wemake these decisions. Andthen and then the new information we takein just reinforces the decision we madewith the first few pieces of informationdoesn't doesn't reallychange. So we're we're not betterinformed. We're more we've dug our heelsin around the conclusion wecame to like in a matter ofseconds. Well, the thing is that I thinkpeople despise saying muchlike Chad GPT, they despiseadmitting to having been wrong. You know,if you make a decision,you often think, well,you know, your ego is tied to it. Well,obviously, as an investor or a trader,you will only do well if you're willingto change opinion fast,like to sort of take in newinformation, go, nope, I was wrong, moveon. And I rememberactually, you know, one of thequotes that's always stuck in my head ofVic Niederhoffer from whenwe worked for him was thathe would often say to a trader who was,you know, stuck in a badtrade, he just said to them, look,just close that one out, go to bed. Themarket always openstomorrow. You don't have to be righton that trade, you have to be right ingeneral. And essentially, when you'rewrong, just stop doingit and reset. Right. Well, it's, youknow, the thing that thatthe trading teaches you is isinvesting is, is again, to have asystematic corpus of rules that youfollow. And it's alwaysa matter of probabilities to go up, I'mwrong, okay, out of thetrade. And and to have evenrules about that, whether it's stop,yeah, or one of my favorite quotes,actually, from Steve Cohen,is what would you need to see to tell youthat you were wrong? Andyou got to know that beforeyou get into the trade. So, so Iactually, I like I don't want to say Ilike being wrong. But beingwrong is an opportunity for me to upgrademy system. Like, yeah,like the poster, it wasn'tenough to just put a poster there, I hadto upgrade, okay, most areinsufficient. Now I actually haveto physically look at keys to make sure Igot them. And, and so, soyeah, errors are just a waywas it Neils Bohr said an expert issomeone who's made all the mistakespossible in a field.Yeah, right. And so you just make theerrors. And you if your goal is toupgrade and up level,if that's what you're solving for, thefastest iteration of yourlearning cycles to get betterand better, as opposed to being right.Yeah, well, it's funny, it's one of thosethings where I nevertrust the kind of person who can't giveme an example or who cannever remember a time thatthey were wrong. Because I almost thinkwhat's the reason that trading andprobably gambling areinteresting is that there's fast paceddecisions where you learnthat you were wrong, you're thescore comes up on the board ratherquickly. And if you're going to do itwell, you have to internalizeyou like as any sort of a decent traderknows how often they've beenwrong, you know, you have aspreadsheet and it tells you there, thisthis number trades onethis number loss, your losseswere bigger or worse than your you know,how the scale of your lossesrelated to the scale of yourwins and so on. And it's, there's veryfew areas of life where youget to really examine the qualityof your decision making, like, like ininvesting or probablygambling. But even with investing,let's say I'm bullish about tech, let'ssay, you know, it was allthe Tiger Cub guys that made afortune riding the tech wave, which iskind of ironic, becauseJulian Robertson did not ride theinternet boom. And then all his TigerCubs that he spawned, theydid really well, when tech wasgoing through the roof and you think, oh,wow, everything that I'mdoing is great. Yeah. The techimplosion in 2022 was it? Yeah, yeah,early 22, I think it saidit does the big sell off.It was 20. Right this year. You're right.You're right. Yeah. It was 2023 was,it was a bounce back a bit, right? Yeah,yeah, yeah. It was like tanking. And,and then at the start of the year, boom,it just like went through theroof again. And so even there,you know, distinguishing between luck,like, yeah, right,someone who I just love tech forby the dip. Yeah, works that rule by thedip works until it doesn'twork. Yeah, it's sort of likeeverything looks great to a turkey untilthe day beforeThanksgiving. Oh, well, yes. Yeah.Not distinguishing between luck andskill, like, was that outcome? By theway, some things areattributable to some amount of luck,right? Like an opening gapthat works in your favor,or whatever on a trade. And I'm remindedof Capablanca was thefamous, one of the great worldchess champions. And he said, the betterplayer is always lucky.Because he's situated in thegame so that any breaks are going to workin his favor. So are thereany tips you have then forbecause I, as I said, I think of you as asort of a strategicperson, are there tips fordifferentiating between luck andrandomness in your life and in yourbusiness decisions andinvesting and so on? Well, I think, youknow, practice that I'm,I'm going to share with,with you and with, with everyonelistening is, is every day, Imean this literally, Patrick,I conduct dozens of experiments, dozenswith markets, I might go,huh, if oil is dropping,the copper is going higher, what happensto tenure yields over the next sixmonths? So I'll run thattest, I go, Oh, now I created softwarethat can test that reallyquickly. Yeah, that I'll come upwith dozens of hypotheses, and I'll comeup with ideas. And I'll dothat though, even in everydaylife, right? Just like treat everythingas an experiment from whichto learn. And whether it'syour personal life or your career,whatever it is, conduct continualexperiments like Oh,for example, stand up comedians do this.So when they stand upcomedian, I remember reading aninterview of Jay Leno. Now Jay Leno, youthink of him as sort of afuncular, you know, sweetcomedian, he was on you know, the latenight show. Yeah. But he got to the latenight show because hewas ferociously funny. He got to startdoing a halftimeentertainment at strip joints. So hewould tell jokes as strip joints. Anyway,I say that because ifyou're used to seeing him on thetonight show or late night show, whateveryou think of him as a anyway, he saidonce in an interview,that when he's perfecting a routine onany given night, he willchange one line from one joke.That's it. One line from one joke. That'sit. So he might changethe name from Bill to Timmy,and see if that gets more laughs. And ifit doesn't, maybe Ishould change it back to Billand make it a girl or whatever. Yeah.And, and so to have thatkind of exactitude aboutexperimenting and finding out what worksreally that yeah, comingup with a rule book. Yeah,yeah, what works, but I guess, onceagain, we're stuck with the problem ofwas it lock or you know,like what was it just that you had aparticularly drunk crowd that night whowould have laughed ateverything and you thought the adjustmentfrom Bill to Timmy wasthe change, you know. Well,it's so funny to say that there's afamous, what was it called?The Hawthorne effect. So back inthe day, there was a thing, it wasHawthorne, Pennsylvania, there was afactory. And I forgetthe dude's name, but he was just escapingme right now. But back inthe early late 18800s and early1900s, it was all about efficiency infactories. So this guy was continuallyexperimenting to seewhat worked and what didn't. So get this,he, he wants to findout the effect of lightingon productivity. The increases thelighting in the factory,having recorded the productivityfor that. And then afterwards, andproductivity went up, I don't know, 12%.Jot down in his notebook,increasing lighting, improvesproductivity, 12%, whatever. Then hewants to return it back tobaseline and study other variables,right? Control thing, helowers it back to the baseline,productivity went up again. Yes. So itwasn't that it increased lighting, it wasthe change in lighting.That was the conclusion he should havedrawn. If I change the lighting,productivity in this factory,productivity as measured by us, whatever.Yeah. But possiblyalso the lab coat effect,right? Like where being studied makespeople change theirbehaviors. Well, yes, I don't thinkthey knew they were being studied. Yeah.Because that would, youknow, that would. So yeah, it's,you know, the thing is, we do the best wecan. Yeah, yeah. And Buffettand Munger wrote a lot aboutthat, about the psychology and all thethinking that goes in. And Munger said,Warren and I spend more of our time notbeing stupid, in otherwords, not making errors thanin being smart. And, you know, one oftheir Warren's famoussaying is there are two rules toinvesting. Rule number one, don't losemoney. Rule number two,never forget rule number one.And that sounds simplistic, but theprofound insight thereis if you don't mess up,you don't lose all your capital in thefirst year or two oftrading. If you're systematic,now obviously they're getting married tocompanies to their positions,right? They hold on for yearsor decades or forever. You have to makemoney. Over time, there'sone thing that we know abouthuman enterprise is it increases invalue. Right? Take your industry, I don'tcare whether it's drycleaning or McDonald's, whatever it is,manufacturing cars, they do abetter job today than they did20 years ago. Always. Right? The value ofhuman enterprise alwaysincreases. And in so manydomains, certainly investing is one ofthem, if you don't messup and you're systematic,you have to do well. Over time. I haveanother question for you,a bit of a change of gear,but not entirely. I've noticed a fewtimes like when you've spoken aboutpeople like Buffett,like Fischer, and like many of the verysmart people that you've worked with,I've noticed that you've often describedthem as having a childlikesimplicity in their approach,which I think is really interesting. AndI heard you in the pastsaying that you compared it toa Picasso who reached this height ofcareful and highly skilledpainting and then sort ofwent over the hill and returned to likehis goal was to paint like achild, but I guess with all ofthat skill in his back pocket. Yeah. Andso it's a childlikesimplicity. And again,they worked in domains, whether it wasFischer or Warhol or Buffett.By the way, Buffett's a friend,it's not like he works with me, but I'mproud to call him a friend,is they work on systematizingthings and making it so simple. Who wasit? Steve Jobs said that.He said, simplify, simplify,simplify. Once you do that, you can movemountains. It's reallyhard to simplify. Andyou know, like Buffett's rule ofinvesting, never lose money. And ifsomebody heard that,say at Wharton graduating class andBuffett gives a speech, I'm going to, myonly advice to you guysis never lose money. Then everyone'sgoing to think, oh, well, thank you,Warren. Thank you for that.Yeah, it's slightly annoying. It's like,you know, the way sometimes you hearthose rules of JesseLivermore, as you know, like it's a bullmarket, it's a bear marketsort of stuff. And you're like,get lost with the, you know what I mean?That's not, it doesn't soundvery useful because of course,no one intends to. Well, it doesn't sounduseful, but that's a,that's a, because of a lack ofunderstanding on the, on the part of the,of the, of the listener.It's so hard not to lose money.And people say, well, I'm not trying tolose money. I'm trying tomake it. And Warren would say,I just told you how to make it. Don'tlose it. And the market, the world.You know, Vic Niederhoffer used todescribe as the waveof human effort that isencapsulated in stock prices is always,you know, everyone turns upat their job and works hard inorder to improve, you know, that, that ifyou're, he used to use thisas an example of why you shouldnever short stocks because you're bettingagainst all of those peoplewho turn up every day tryingto add value. Well, of course, there aretimes in the market goesdown and goes down hard, right?Yeah. And, and so, but yes, over the longhaul, human enterprise hasto go up in value. I'm goingto say human enterprise, maybe AIenterprise, but we get betterand better able to do things,even if the we as a program. Yeah. Well,much like the industrial revolutionbrought tools online andbut that, that still is human effort,right? It's human created. Sothat gives you a tailwind overtime, better to be long than short plusthe compound thing. Butyou might deal with some,you know, some pretty steep drawdownsfrom time to time. Yeah, I'mreminded of, you know, back toyour point earlier about, I think it'sBuffett who said that if youhad a punch card where you'reonly allowed to make 20 investmentdecisions over your entire career, you'dgo a lot more slowly andyou'd put greater consideration intothat. And that possibly,that idea, like I know thatBuffett will have made well over 20decisions over his career, but that ideaof trade, treating eachdecision as being weighty and giving itthe sort of respect, maybe due to itmight keep people frommaking beginners mistakes where you yousort of, you know, sort of the BlackFriday thing where youyou know, run into the store and you go,oh, that's half price and buyit and you get home and you'relike, I really didn't need this product.Yes, yes. Well, I think itwas even more extreme than that.I think he said, I think I have to lookthis quote up myself, butyou're allowed a card and you'reallowed 20 decisions in your life. Likeit was really extreme. Ithink that was right, becausehe even referred to like one of thembeing who you marry andthings like that. Right. Yeah. Yes.You know, who Buffett saiddiversifications for those whodon't know what they're doing.And he wasn't taking, you know, like afew bets. But his, he makes fairlyconcentrated bets. It'snot like he has, you know, 1% in 100stocks, his high conviction bets, andthey're diversified,I guess, to an extent. And and thenthat's his portfolio. And heknows over time, that'll growin value. Yeah, yeah, yeah. It's kind ofit's it's a general stock marketinvestment, and then tryingto strip out the, you know, the possiblybad ideas in there or even the thebecause often actually,he seems quite willing to say, I don'tknow. Like I remember back inthe 1990s, he basically justsaid, I don't understand this wholeinternet thing. I don'tknow which companies will winand which ones will lose. So I'll, I'llsit on the sidelines. Andthat mentality would haveprobably kept a lot of people out ofthings like NFTs and so on as well, ifyou just sort of said,well, I'm told that this is interesting,but it's not in my skill setto evaluate the future of theseproducts. By the way, we should clarify,Patrick, and I know youknow this, when he was saying,I don't understand this internet thing orNFTs, he wasn't saying, I'mbefuddled. Because he couldunderstand that as well as anybody couldunderstand it, from his perspective,never lose money. And abet on technology is a fairly binary,like it's going to do well,or it's not. And that violates,which is why mostly, he's avoidedtechnology investments inhis career. I know recentlyinvested in Apple famously. Well,recently even reduced hissize in that as well, right?But even Apple was an investment decisionhe made. I think it was like,I forget the name of the guywho's there grooming to, you know, takeover. I don't thinkthat was a Warren decision.Well, I believe he, I believe someoneelse made the initialdecision, and then he decided maybeto increase the size of the bet. So it'snot like he was on thesidelines either, right?Okay, fair enough, fair enough. And yet,he's like, cut half hisposition, right? And, you know,and I think that goes back to, you know,if your thing, what you dowell at, what you have an edgein, is tech stocks, knock yourself out.Yeah, I don't have an edge in that field.It's an interestingthing, because there's often,often there are new technologies thatit's obvious theirimportance. Like I look back to theinternet bubble. And I do think that itwas at the time, it was veryobvious how the internet wouldchange everything. Like very early on,you saw it, and you kindof realized that there was,I remember the first time I got like, youknow, internet bankingsoftware and things like that,and you kind of thought, well, this isthe way things are going togo. And there were many otherthings, like even the disappearance, itwas bizarre, because atthe time, there were IPO-inga lot of businesses like Yellow Pages,you know, and as a youngperson, you would look at that,and you kind of go like, no, that's not abusiness for the ages, youknow, it was obvious what theinternet would disrupt. It was obvious,there were many reallyobvious things. But what wasn'tobvious was which company would profitfrom it. I think thatthe AI bubble is very much,you know, at the moment, it does seemthat investment in AIworks for companies likeNvidia, but that's not unlike investmentin the internet work forCisco back in the 90s. And itit's still, you know, Cisco, I don'tbelieve has ever reached its heights of1999. But I don't thinkso. Yeah, that was some amazing year thatI think Cisco was up like,to have it go up two, three,400% in a year was nothing back then. Butyes, it's clear that theinternet is was going to havewinners. It just wasn't clear which oneit wasn't clear Google was going to belike, forget all theothers like short Yahoo short, you know,a lot of them weren'teven publicly traded rememberAlta Vista and ask GIS and all thosesearch engines, which right now arenostalgic and acronyms,right? Yeah, yeah. The one company thatreally took off from backthen, which had it which wason the rocks, as I recall, in kind of2001, there was a famousanalyst, Ravi Shuria, who kind ofpointed out the flaws in Amazon'sbusiness model early on, or well, not notthat early on, but in2001. But Amazon, the thing that wasfascinating about Amazon wasin a way, they were the firstreally blitz scaled company, whichbecame, which is what the entire VCbusiness of today is basedon, which is the idea that if you cangrow and grow and grow, investors willnever or at least willnot quickly ask for profit. So you cankeep growing and you canwork out a way of making moneylater. And that did work with Amazon. ButI look at maybe many of themore modern, you know, thekind of various food delivery apps and soon. And you have to reallyquestion how that will everbecome hugely profitable. Well, so that'slike that movie, TheHighlander, there's only one,there can be only one. And so yeah, thatblitz scaling works forAmazon. And who else iscompeting really with Amazon? I mean,there may be the closest would beWalmart, right? And that'snot even that close. Yeah, I don't evenYeah, exactly. I don'tthink it's close. And I thinkwhat Bezos that I don't know, it'd bevery interesting to seebe really interesting as aproject, not that I want to spend thetime, but to go back through the 10 k'sand see at what point,because it's clear that investing andbuilding theinfrastructure that they could thenlease out to everybody else. Right? Likeso they, they have theinfrastructure, if you want tocompete with them, they'll, they'll giveyou the storefront to do it.So I think the real flip toprofitability came from a business thatno one saw at the time, which was thecloud business. Yeah.And then even the sort of the, the kindof in shitificationargument that like, I used to loveAmazon, and you could go on there, and Iused to love the reviewsand everything. And then,do you remember, maybe it was kind of 10years ago, you'd buy aproduct on Amazon, and you'd get alittle card with it. And it would say, ifyou write a good review, we'll give you,you know, something,something, and you'd go and you'd lookand this would be a terribleproduct. And you'd look at thereviews and see it at all these five starreviews. And you're like,Oh, I was tricked. And I feelthat there was something really greatabout early Amazon and, and Google upuntil quite recently.Like I feel in the last few years, andI'm suspicious that itrelates to their urge to pushAI to us, because it used to be that youcould Google a thing andyou would quickly find thething you were looking for. And even now,like I was, I forget, I wasresearching a video a whileago, and I was looking for a news storyfrom maybe six months ago.But there was a more recent newsstory on that topic. And when you Googleit, it would only show methe recent news stories,you'd spell it out that you really youput in the date of the eventyou wanted. And it would stillonly give you kind of last three daysworth of news or the, you know, andversions of the samething, like where there's no diversity tothe outcome, you know, which isinteresting, becauseI feel that a lot of the really greatthings about the internetfrom maybe 10 years ago havedissolved through being gamed, you know,that now, for example, if you go onAmazon, and you want tofind the best camera, it'll always besome weird Chinese brand that you'venever heard of. And then,you know, and you're like, well, wouldn'tit be a Canon or a Sony?And it's like, no, no, thereviews clearly say it's a you know, aWang Xi that costs 50 bucks,and there's a 10% coupon forit. And you're like, I think I thinksomething has changed. Youknow, I'll bet you we could createan algorithm. So I always wondered aboutthe wording of positivereviews, always seem suspiciouslysimilar. And by the way, a lot of thenegative reviews alsoare suspiciously negative.You told me this years ago about when anybecause you Adam haswritten a number of books,he's a New York Times bestselling author.And you told me years ago,that there was a there wasalmost a formula for a negative bookreview. Yeah, it always starts off, Iwanted to like this book.Hmm. But I used to like this guy. Butthere's always a one. And,and so but I'll bet you notjust the wording, but even the number ofreviews, if you notice thatyou'll see like, it doesn'tmatter what the product is, moisturizer,some kind of moisturizer,and it's got 30,000 five starreviews or something. No, wait a secondthat I can't believepassionate about, you know, a simpleproduct like that. Yeah, exactly. Right.So I'll bet you, there's away above a certain point,where I go, Oh, those reviews aren'tlegitimate. Right? Yeah. Andthe ones to jump to them whenI see it like that is I go to thenegative reviews to go peopledon't like this, what are theycomplaining about? Yeah, and usually,yeah, there's 30,000positive reviews. And then the100 negative reviews, I'll say this thingarrived broken in the box and blah, blah,and you're like, Okay, I see these arethe real reviews, and then theywallpapered over it withthis nonsense, you know, a bot farm ofnonsense. Yeah. In the sameway, there was a mania thatseemed to come out of nowhere around NFTsand metaverse. And nowaround AI. So look at the stockmarket crash, right? And it's not acrash, but you know, the correction.Yeah. And, and it wasattributed to fears of recession. Oh,wait, where did those fears all of asudden come up? I don'tunderstand. And US 10 year yields weregoing down. Yeah, sure, the yield curve,but it's been invertedfor what, two years, two years. Yeah. Andoh, yeah, I heard one ofyour comments, you said it'spredicted 20 the last seven recession.And another another boilism. All theseexplanations and that,that, oh my gosh, fear of recession, andthere's a kind of panicked urgency,either to get in or,oh my gosh, the sky is going to fall. Butwhatever it is, it's notcalm. And now I'm going to quoteBruce Lee. Bruce Lee said, one of themost important lessons tomaster is the ability to remaincalm. And I say that with, with, withexaggerated, you know, affect is that hemeant calm, which meansdon't get excited either. That's notcalm. Oh my gosh, my stock double. Yay.You're not calm anymore.And, and, and to recognize that thattakes mastery. It's noteasy for him to say that,you know, one of the, it was ThomasJefferson, was great student of humannature in the world. Andhe said, he's the one who said, whenangry, count to 10. When very angry,count to 100. And theproblem with that is advice is he shouldhave said, and it's taken me years and Istill can't do that.Imagine someone who Thomas Jeffersonsays, Hey, Patrick, you blew your topagain. Next time thathappens, count to 10. You go, thank you,Thomas. I'm going to dothat. Thank you. And you say ahundred when I'm really angry. Okay. Butwhen you're really angry,you go, yeah, like that's how,right. And so, which brings me back to,you know, something we said earlieraround how not to bestupid is that you have all thesesafeguards. It takes years ofpractice to be able to followthe rules. Yeah. Have a systematicapproach. Yeah. Yeah. 10% stop loss, youknow, whatever it is,it'll hit that and you go, Oh, okay.Well, I can't afford to lose10%. Okay. I'll let it writeanother day. And now it's down 12. And soI don't think peoplerealize what it takes togain that self mastery. Very. I actuallythink that is why so manypeople and smart people are interested inmarkets because you'll often,you know, there's often sortof angry, what can I say, sort ofcommunist ideas where peoplesort of say like, you know,why would anyone focus on this stuff?It's pointless. It'sgreedy, whatever. But I thinkthe reason that often intelligent peopleare drawn to markets isthat it's a way of studyingourselves and studying ourdecision-making and correcting ourselvesand improving, you know,because I would even argue that most ofthe really goodinvestors I've met don't reallycare that much about making money. Likethey're not sort of greedypeople who feel I need to makethis money and buy a yacht. Yeah. Thereare people who have gotten good atdecision-making and they'replaying a game, you know, and I don'tmean that in a frivolous way, like thatsort of insulting toother people, but I mean that they'rekind of inside their ownheads trying. It's almost,they're slightly as a feeling of aprocess of self-improvement associatedwith making decisionsand seeing how good they were andadjusting. Yeah. You know, I think peopleget attracted to theexcitement, the excitement, I say,because they think, wow, I could makemoney quickly. Yeah. Andyou could also lose it if you get excitedvery quickly. And so theones who survive learned itlike, again, like Bruce Lee, just calmand take your losses. Not abig deal because tomorrow isanother day. It's funny that they getattracted by the prospect ofexcitement, like dopamine hits,like, wow, this is so fun. Whereas thosewho are really good at it,it's just a business and it'san opportunity to, well, a game, they cangamify it, but you feelgood at it and there's theself-mastery that you acquire at the sametime. Well, I guess it'seven the difference betweensort of a professional gambler who mighthave a systematic approachto winning, who sort of turnsup and views it as work and maybe, youknow, someone who's onholiday in Las Vegas or someonewho's a big sports fan, a professionalwouldn't ever care about the game. Theydon't have a favoriteteam to win or anything like that becausethat will just cloud theirjudgment. Really. I guessviewing something as entertainment ispossibly a sign that it shouldn't be abusiness that you'reinvolved in. I think that's probablyright. Yeah. Yeah. And I tell people thatinvesting is like mixedmartial arts, right? It's like that. It'sthat tough. And every yearthere's a new crop of young,you know, young bucks, whether they'remale or female or whatever,who go, oh, I'm going to makemy fortune in this mixed martial artsring. All the varsity teams already inthere and, you know,the veterans, they're going to, their jobis to take your lunch. Yeah. Actually,that's an interestingquestion for you is because you've donemany diverse things thatare, you know, all interesting,but quite different to each other. If youwere to advise people,you know, how can a personknow what they might be talented at andwhat to focus on rather thanrunning down blind alleyways?I think that's what your educationthrough high school andcollege and graduate school.I don't mean in necessarily even in theclassroom, but just find outwhat are you good at, even ifin school it's, oh, I love chess or Ilove swimming orwhatever it is, or cheerleading,doesn't really matter. Like what do Ilove to do? And then, andwhat am I good at? And hopefullythere's a band diagram overlap there,which you love to do andyou're good at. And usually,I know also that we'll pay you in someway because the worst thing would be tobe really passionateand really good at a thing that adds novalue to society thatpeople won't pay you for.You know, it's so funny back in the earlydays of the internet,because we were talking aboutearly days of the internet, there was aNew Yorker cartoon of thislittle kid, like 10 years old,is on the floor playing a video game andhis parents, our motherand father, are holding eachother and clearly admiring their littleson. And the father's got a thoughtbubble over his headand he's visualizing, can you play videogames starting salaries in the year 2020,are $350,000 a year. So yes, there has tobe some, you have to beable to provide value.And then just find out what you're goodat. And I think that'salso for young people,is to try as many different things aspossible to find out whatyou are good at. Because,you know, I didn't think when I startedtutoring kids, which was forme just a means to make somemoney while I wrote novels, that's what Ithought. But that becamethis massive Princeton ReviewCompany with my friend, John Katzmann.But I didn't know whetherI'd be any good at it. I didn'tknow whether I'd like it. And I knew, Iknew back then, there was nomarket for it, to scale it,but I was wrong. It scaled very well. Andso, yeah, I think it's just, which goesback to that earlierpiece of advice of experiment. Keepexperimenting, don't getattached to things like, oh,I'm going to be really good at this. Now,if you look at that one thing,but there's, I find it somewhatfascinating having lived in sort of bighigh pressure cities,I often speak with friends of mine whohave children. And they'revery focused on, I rememberonce being at a dinner and the woman nextto me said to me, you know,my first child had just beenborn. And she said, well, you have to gether name down for there's two schools.And if you don't getyour daughter into one of these twoschools, her life is over. And I said,well, we're sitting ata table here, you know, it was a friendof mine was having a bigcelebration and almost everyonethere was reasonably well to do. And Isaid, now I look aroundthis room and everyone here israther successful. And I don't think anyof them went to either ofthose schools. Like, are yousure? And I think there's a funny thingwith parents where theyget really focused on like,if you're an investment banker, youthink, well, I have toreally get my child intoinvestment banking. And it's like, well,what if they're not interested?Yeah, it's so funny. You should say thatbecause the same parents go, Oh my god,and my kids got to get into this. Andwhat you're talking about,Patrick, is if they don't get intothe right nursery school, they're notgoing to get into theright, you know, grammar school,they're not going to get into the righthigh school. Oh my gosh,they're not going to getAnd suddenly, they'll be living on thestreet somehow, like,like everyone in society whodidn't go to those specific schools,right? And then you lookat the people who have beenextraordinary well, including the parentsof that kid. Yeah,I've tended to notice it'sthat tends to happen more with the withthe mom. Yeah, but it's very, it's afunny kind of type Abehavior where you think the world isvery much binary, you know,and also, it relates to like,your goal as a parent should probably bethat your child be happyand that they pursue thingsthat they find interesting, rather thanthat they sort of, you know, pursue thepursue goals that youpossibly had and didn't achieve. Yeah,they talk a lot about that, you know,intrinsic motivation tofind out what someone is intrinsicallymotivated to do, which isto say, just for themselves,you know, oh, I'm gonna, I'm gonna tie itback to a question you said earlier.So I know this is true for boys. I don'tknow whether it's truefor other. I don't even knowany more girls, other genders. But I knowtwo for boys is that if you read thebiographies of famouspeople, I'm talking about men, you willsee that before the age of13, they will have declaredwhat they wanted to get good at. Alwaysbefore the age of 13. Andwhy is that a critical age?Because that's the age that where boys gothrough puberty. And all of asudden you discover, you know,dating and whatever else. And I want toimpress people. Before that,there's a kind of innocenceto the to whatever it is they wanted tobe good at. Yeah, it's morechildlike and playful as opposedto focus. Yeah. And for other people,like if I get really good atthis, then I'll get the girl,or then I'll get this or I'll get and, orI'll impress the other, youknow, my friends. And, andso if you want to know what speaks toyour heart, if you goback in time and think aboutabout when you were younger and what youlove to do, there wasan innocence about thosethose passions and pursuits that beforeyou wanted to, youknow, it was an ego thing.So your early ideas might be more pure.And then maybe the focusthat comes as you get older canbe applied to that and turn it intosomething useful.That's an interesting thing.And I'm not saying that, you know, likeas a kid, you wantedto be a firefighter, oh,then as an adult, I want to become afirefighter, but clearly, oh, helpingpeople, you know, yeah,and by the way, speaking of like, whoself selects, Iremember talking with a fellow,and he said, it's scary how many peoplego into firefightingand policing who have anoverly developed sense of risk, riskseeking, not risk aversion, like, andthat's not a motivation.Obviously, you want with firefighters orpolicemen that they are seeking risk.Yeah, yeah. And so not not saying all ofthem, but he said he saidit was it was predominantand a bit of a concern. And again, notfor everyone, but the toomany people who are riskseeking, will want one of the will pursuesituations where they havethat kind of, you know, thatthat they're attracted to the emotionalslings. Yeah, that is sointeresting. Yeah. Yeah. Well,I think I should probably wrap up theconversation. I could talkfor the rest of the week here.But you know, we've probably I'm not surehow long we've an hour and45 minutes might be enough forviewers at home. But thank you so muchfor for coming on. If people areinterested in your workin your upcoming books, things like that,what's the best way forpeople to follow? I guess theycan always DM me on Twitter. Yeah. I amAdam Robinson. It's theeasiest thing to make and justand when what when's the likely releaseof all your books? In fact,I'm writing a final chapter,a warning that that you're a warning tothe readers that you willvery likely want to ignoreall the advice that's being stated here,because you'll think, Oh,that doesn't apply to me.So I'm in the process actually right nowin London, writing that chapter. So thenthen next year, I guess. Yeah. Excellent.Okay, well, we will.We'll talk again soon.I hope so. Thank you so much for comingon. It's really been a pleasure.Oh, a real joy. Truly. Thanks for tuninginto this week'spodcast. I hope you found it asinteresting as I did. Don't forget tocheck out our sponsor compounded daily atcompounded daily.comor using the link in the show notes. Havea great week and talkto you again soon. Bye.