Podcast Summary
Running other people's money adds pressure and volatility: Investing other people's money can lead to added pressure and volatility, potentially detracting from the enjoyment of the investment process. Some investors, like Joel Greenblatt, have chosen to return external funds and focus on managing their internal capital instead.
Running other people's money can add unnecessary pressure and volatility to an investor's portfolio. Joel Greenblatt, a successful public market investor and author, discussed this in his book "Common Sense: The Investor's Guide to Equality, Opportunity, and Growth." Greenblatt shared that he ran outside money for a decade but eventually returned it due to the concentrated nature of his investments and the volatility that came with it. He mentioned that when you're investing other people's money, the losses feel more significant, and the added pressure can detract from the enjoyment of the investment process. Greenblatt ultimately decided to keep his staff and continue running his internal capital, allowing him to maintain his focus on investing without the added pressure of managing external funds. This decision enabled him to continue his successful investment career while also enjoying the process more.
View the stock market as a business partner, Mr. Market: Focus on buying good businesses at reasonable prices and holding them for the long term to succeed in volatile markets
Investing in the public markets, where daily quotes can cause emotional reactions, can make it challenging to keep a long-term perspective. The pressure to sell winners and hold losers, often driven by fear and greed, can lead to suboptimal decisions. Warren Buffett's teacher, Ben Graham, advised that investors should view the stock market as a business partner, Mr. Market, who can be emotional and unpredictable. To succeed, it's crucial to focus on buying good businesses at reasonable prices and holding them for the long term. As Buffett evolved in his career, he moved away from just looking for bargains and started investing in good businesses that were undervalued. This strategy allows investors to stay the course, even when markets are volatile.
Impact of market changes on investors: The shrinking pool of publicly traded companies and larger market caps increase opportunities for some investors while limiting them for others, and simplified SOC 2 compliance services save time and resources.
The investing landscape has changed significantly over the years, with fewer publicly traded companies and a larger market cap relative to GDP. This shift impacts both types of investors – those seeking bargains and those buying great businesses. For bargain hunters, the smaller pool of companies, especially smaller cap ones, can limit opportunities. On the other hand, the larger market cap of these companies means more capital is at play, making the market more volatile. SOC 2 compliance, a critical requirement for closing partnerships and attracting customers, is simplified and accelerated through services like Vanta, saving time and resources for businesses.
Limiting access to public markets for small companies: High costs and extensive regulations hinder small companies from going public, limiting access to capital and hindering entrepreneurial growth in the US.
The current regulatory environment in the United States makes it difficult for small companies to go public, limiting access to capital and hindering entrepreneurial growth. This is a significant issue, as the U.S. is a global leader in business and innovation. The speaker laments the high costs and extensive regulations that prevent small companies from accessing public markets, and he advocates for less regulation to allow more companies to go public and democratize the funding process. He also shares personal regrets about missing opportunities to invest in successful companies like Apple and Walmart during their early stages, emphasizing the importance of looking beyond current metrics and considering the long-term market opportunity for a business.
Learning from mistakes and focusing on solutions: Embrace mistakes as opportunities to learn and grow, minimize errors of commission, accept errors of omission, invest in education, and protect against risks with insurance.
Making mistakes is a natural part of life and business, and it's important to focus on what you can control and learn from those mistakes rather than dwelling on them. Buffett's philosophy of minimizing errors of commission and accepting errors of omission is a valuable lesson for investors and individuals alike. Education is another important topic discussed, with the belief that those who have succeeded in business or capitalism are often dismayed by the state of education and have ideas for improvement. The conversation also touched on the importance of insurance for businesses, particularly cyber, D&O, E&O, and EPL coverage, which can help protect against potential risks and lawsuits. Overall, the conversation emphasized the importance of learning from mistakes, focusing on solutions, and taking action to mitigate risks.
The education system fails low-income and minority students, but it's not due to lack of ability: Success stories prove that with the right supports, low-income and minority students can excel, outperforming wealthier districts' students
The education system in the United States, particularly for low-income and minority students, is failing, but it's not due to a lack of ability on the part of the students. Instead, it's due to a lack of creativity and belief in testing solutions. Success stories like the Success Academy Network, run by Eva Moskowitz, prove that with the right supports, these students can excel. For instance, their students outperform those from wealthy districts, with over 90% of English language learners and students with disabilities passing their English and math tests. The principal of one of the poorest district schools in Brooklyn, Jack Spatola, also demonstrates this, with 99% of his students passing the math test and 94% passing the English test. These success stories show that the potential for improvement is there, and it's essential to acknowledge the problem and provide the necessary resources and support for students to succeed.
Unfair education system favoring those with means: The education system perpetuates inequality by favoring those with financial resources, with resistance to charter schools and lack of accountability for poor performance hindering progress.
The current education system in many areas is unfairly skewed towards those who have the means to afford better schools, creating a cycle of low-income students attending underperforming schools. This issue is compounded by resistance to charter schools and a lack of accountability for poor performance. The education system functions much like a Soviet-style system, rewarding those who do not produce desired outcomes. With the education sector being a trillion-dollar industry, it's a challenging battle to change the system head-on. Instead, the focus should be on finding innovative solutions, such as corporations like Google, Microsoft, Amazon, and JP Morgan investing in diverse workforces and potentially playing a role in education reform.
Investing in Private Companies with R Crowd: R Crowd offers accredited investors early access to invest in promising private companies and startups, with investment options starting at $10,000 for individual deals and $50,000 for funds. Their investment professionals' expertise and networks potentially lead to successful IPOs or acquisitions.
Our crowd, R Crowd, provides accredited investors with the opportunity to invest directly in promising private companies and startups, even before they go public. This early investment access, combined with the extensive networks and expertise of R Crowd's investment professionals, allows investors to potentially benefit from successful IPOs or acquisitions. The platform offers various investment options, including individual company deals starting at $10,000 and funds starting at $50,000. R Crowd's investor relations team also offers access to deal memos and information, making it easier for investors to make informed decisions. Additionally, Joel Greenblatt, author of "Common Sense: The Investor's Guide to Equality, Opportunity, and Growth," suggests that successful tech companies like Microsoft, Google, and Amazon could consider alternative certification methods, such as tests or certificates, instead of requiring a college degree for employment. This approach could help broaden the talent pool and provide opportunities for individuals who may not have a college degree but possess the necessary skills.
An alternative certification system could disrupt traditional education: A new certification system, inspired by successful companies, offers accessible, affordable skills training and could replace the need for a college degree
An alternative certification system, modeled after successful companies like Google, Microsoft, and Amazon, has the potential to disrupt the traditional education system and provide more accessible and affordable opportunities for individuals to gain skills and enter the workforce. This system could involve ISAs (Income Sharing Agreements) or other financial devices, as well as online and community-based learning, and could span various fields beyond just technical areas. The success of this model has already been seen in the developer space, and with the backing of major corporations, it could become a viable alternative to a college degree. This could lead to a more efficient and effective education system, providing opportunities for those who have been underserved by the current system.
Setting standards and creating accessible education platforms: Creating accessible education platforms using technology and cloud solutions can lead to a more competitive workforce and reduce the need for high minimum wages.
Setting standards and creating accessible platforms for education and training can lead to a more competitive workforce and a reduction in the need for minimum wage increases. The use of technology and cloud-based solutions can make education more accessible and affordable, leading to more people entering the workforce and filling roles in industries with labor shortages. Additionally, programs like the Earned Income Tax Credit can incentivize employment and reduce the need for high minimum wages. The discussion also touched on the role of competition in driving wages up and the potential drawbacks of minimum wage increases.
Investing in wages and earned income tax credits could save the government money: Increasing wages and reducing childhood poverty through earned income tax credits could potentially save the government money in the long run by decreasing social welfare costs and increasing tax revenue.
Increasing wages for those willing to work and reducing childhood poverty through earned income tax credits could potentially save the government money in the long run, as opposed to spending on social welfare programs and dealing with the consequences of poverty. The speaker argues that everyone should be paid well if they're willing to work, and suggests that a trillion-dollar investment in wages could lead to significant savings through reduced social welfare costs and increased tax revenue. Additionally, addressing the economic root causes of poverty could help reduce feelings of systemic rigging and social issues like crime and incarceration. The speaker also mentions that the pandemic provided a glimpse into the potential benefits of income support through the distribution of stimulus checks, but acknowledges that more research is needed on universal basic income.
The importance of productivity, purpose, and work for human well-being: Productivity, purpose through work, and building societies distinguish humans from other mammals. Lack of these elements can lead to mental health issues and even radicalization. UBI may lead to idleness and substance abuse. Education choice is crucial for success.
Productivity and purpose are essential for human well-being and mental health. The speaker believes that humans differentiate themselves from other mammals by building tools, being productive, and creating societies. Without these elements, people may experience depression, mental illness, and even radicalization. The speaker also advocates for the importance of work and employment, as it provides purpose, skills development, and financial stability. The speaker's concern is that Universal Basic Income (UBI) may lead to idleness and substance abuse. The speaker also discusses the issue of education and the importance of school choice, arguing that people should not be forced to attend failing schools. The speaker admires individuals who are dedicated to solving problems and making a difference, and believes that investing in such people can lead to positive outcomes.
The Role of Educational Choice and Fair Taxes: The speaker supports educational choice and charter schools, is optimistic about online learning, opposes wealth taxes due to economic consequences, and emphasizes fair taxes and the importance of state autonomy.
The speaker is in favor of educational choice and optimistic about the potential of charter schools and online learning to improve education, while opposing wealth taxes due to their potential negative economic consequences. The speaker believes that the failure of wealth taxes in the past, combined with the mobility of people and businesses, makes it an unworkable and impractical solution. The speaker also emphasizes the importance of fair taxes and the role of the 50 states in providing different options for citizens. Additionally, the speaker shares a personal story about discovering the security of revenue-backed municipal bonds.
Lessons from Australia's Successful Pension and Immigration Policies: The U.S. can learn from Australia's successful pension and immigration policies, including a thriving superannuation system, point-based immigration, and an employer-driven immigration system, which could lead to significant tax revenue, entrepreneurship, and economic growth.
The United States can learn valuable lessons from countries like Australia in managing pensions and savings, as well as immigration. Australia's superannuation system and point-based immigration policy have proven successful in creating thriving cities and economies. The U.S., on the other hand, lags behind in welcoming skilled immigrants, missing out on a profitable opportunity. For every skilled immigrant taken in, the U.S. makes between a half a million and a million dollars in taxes. Immigrants also contribute significantly to entrepreneurship and productivity growth. A more effective solution for the U.S. could be an employer-driven immigration system, ensuring a one-to-one fit between job openings and skilled immigrants. By implementing such changes, the U.S. could improve its pension and savings systems, as well as its approach to immigration, leading to economic growth and prosperity.
Improving Retirement Savings with an Australian-style System: The US could adopt Australia's superannuation system to incentivize saving and provide a safety net for retirement, complementing Social Security for those with lower wages.
The United States should adopt a system like Australia's superannuation to improve retirement savings for its citizens. The Australian system, which mostly relies on private savings and takes advantage of compound interest, has a supplemental system to ensure individuals have enough savings upon retirement. While Social Security remains important, it has limitations for those earning lower wages. By implementing a similar system, the US could incentivize saving and provide a safety net for those who may not have enough savings otherwise. Additionally, the discussion touched on the importance of skilled immigration and the potential benefits of taking in more skilled workers, while also addressing the issue of illegal immigration. Overall, the conversation highlighted the need for solutions to improve retirement savings and immigration policies.
Encouraging Early Saving for Retirement: Wealthier individuals should continue saving, but a percentage of their savings could be used to fund retirement for those in need. This approach encourages early saving and takes advantage of compounding to help address the retirement savings gap.
Early saving and compounding are crucial for building retirement savings, especially for those in lower income brackets. The current situation, where nearly half of working-age families have zero retirement savings, is a problem that requires action beyond Social Security. The suggestion is to allow wealthier individuals to continue saving, but take a percentage off the top to fund retirement savings for those who need it most. This approach, which encourages early saving and takes advantage of compounding, could help address the retirement savings gap. Additionally, implementing a system similar to Australia's superannuation, where a percentage of income is automatically saved for retirement, could also be an effective solution. By promoting financial literacy and enforcing savings, this approach could help ensure a more secure retirement for all.
Focusing on accessible financial education and culture: Encouraging financial literacy through accessible resources and culture may be more effective than mandatory programs.
While mandatory financial literacy programs for retirement savings like 401ks are ideal, realistically, such a requirement may not be feasible in the current political climate. Instead, focusing on accessible and affordable educational resources, as well as encouraging a culture of financial literacy, may be more effective ways to help individuals make informed decisions about their financial futures. The speaker also emphasized the importance of starting early when it comes to saving for retirement and the role of education and fortunate circumstances in one's financial success. Additionally, the speaker shared their passion for writing and teaching, and their plans to create accessible investment programs and continue their work in school reform. The conversation also touched on the importance of clear and concise writing, as well as the value of listening to audiobooks read by the authors themselves.
Cautious Investor's View on Overvalued Market: Investor expresses caution towards smaller overvalued companies, but still sees potential in successful businesses and is interested in Peloton.
The speaker believes the market is overvalued, particularly in smaller companies that lost money last year. He uses the analogy of a frothy cappuccino to describe the risk of investing in these companies. However, he also expresses his admiration for successful businesses like Amazon, Google, and Microsoft, which he already owns. He also expresses his desire to invest in Peloton, despite its high market cap per subscriber, comparing it to a high-end car brand. The speaker also shares his admiration for Bill Gurley, who is known for his investments in tech companies. Despite his criticisms of the market, he acknowledges the difficulty of making investment decisions and expresses his frustration with the current political climate. Overall, the speaker's perspective is that of a seasoned investor who is cautious but still willing to take calculated risks.
