The Long Run Show

In this farewell episode of The Long Run Show, we are going to be talking about what stocks are must-haves when end of the world comes and the markets are open.

Hosted By:

Austin Willson

Michael O'Connor

Support this podcast at — https://redcircle.com/the-long-run-show/donations

In this farewell episode of The Long Run Show, we are going to be talking about how you should manage your personal monatery policy.

Who is the Jerome Powell in your brain?

Hosted By:

Austin Willson

Michael O'Connor

Support this podcast at — https://redcircle.com/the-long-run-show/donations

Guest:

Marc Bell - Chairman, Chief Executive Officer and Co-Founder

https://terranorbital.com/

Hosted By:

Austin Willson

Michael O'Connor

It's Marc Bell, chairman and CEO of Terran orbital. How are you doing today, Marc? I am doing great. And so thank you for having me. Great to have you we'll first off the bat. I would love to just learn a little bit about Terran, like the name, the stories around it before we jump into too much long-term stuff.

I just want to know about you guys. Terran orbital started, I started in 2013 and I started as a vehicle. To acquire companies that were working in space. I'm a lifelong Trekkie. So there was 10 years old, always fascinated with space, always wanting to go to space. At some point I realized they weren't putting middle-aged overweight Jews into space.

So I decided to go ahead and start buying companies that I could build things to put into space that don't include myself. And it's been a dream come true. It is, we are now building satellites and we're solving problems from space. And we're the guys who helped invent the cube set. So we're all this whole new space revolution that everybody talks about.

It's all our fault. And so all these new startups and everything else, they're all there because of the technology that we created, a company we bought called tie-back because was about. Austin has a question too. It sounds but I right off the bat, the first question I can think of which you touched on already, like the go space revolution since you guys are right in the thick of it, you've started it.

When did this begin? Because we see at least for me, and I think other people in my generation, we see videos of the space shuttles, and that, that kind of felt like the big thing. And then things seem to sleepy for awhile, but it seems like there's been so much going on in the background to make everything that's going on now actually happen.

What's been going on. Two guys, a guy named Dr. Jordan pug Suare who was a college professor and Bob Twiggs called professor about 13 years ago, invented educational demonstrator called the cube set. This was a satellite. You can hold in the Palm of your head. And the point was to demonstrate that you don't need to build big satellites to do big things.

And if you think about it, you mentioned the space shuttle, your iPhone or Android phone that you hold has more computing power than the space shuttle did. And so things have changed dramatically. And so what used to cost a billion dollars to build? You can outdo for 10 million, but that was the only part of the chip sets costs a lot less.

So cubes. Open the door, but you still had to get these things to orbit. Then came along space X and space X made it affordable to go to space. So between us making payload, making the satellite sheep and space X, making the rideshare. A whole revolution was created of small sets. And now that you hear people talking, the government talks about how 50,000 satellites are going to get launched over the next 10 years.

And if you put that in perspective, you may be have like 14,000 thousands of satellites launched over the past few. Wow. Those are some impressive numbers. That's a lot of, that's a lot of stuff flying up into space around us is is that gonna be a problem? That's my one question. The good news is there's a lot of space in space

you have on earth. You have 40% of the planet is covered by land the, of. You have 3.2 billion cars and on a single plane in space, you have 43,000 miles of Y that 40,000 miles of planes. You have a lot of highways, a lot of roads of space that you could travel. And then what times objects tend to hit each other is when it's intentionally done.

When people want to demonstrate how smart they are, that they can create space junk and. And for those of you who are listeners, if you look at the TV show quark from 1977, you'll get a good laugh, but that was a space, garbage truck. And that's what we need today to clean up all this trash that these guys created.

But there is a, is it everyone says, oh, this is a problem. Not really a problem, a space situational awareness, which is what's called tracking space. Garbage has a fancy name for it is become a bigger thing. And the us, government's doing a very good job of tracking what's in space. And now there are technologies that we're developing that are similar to what airplanes have.

Airplanes have today, something called T cast or traffic collision avoidance system. So you sit in a cockpit and if you're, if something's coming out of the planes going at you, it goes traffic, and then it tells you what to do, what to go, pull up. And if you ever hear the words pray, you're, it's all over, but no one would ever hear those words.

But the goal is on a satellite it'll move. It'll be a lot. We use a lot of AI, so sell it. We'll know something's coming. It'll move out of the. It will calculate the trajectory and then I'll move back to where it's supposed to be and do it all on its own without human interaction. Like we have to do today on the.

That's interesting. Okay. Yeah, because I had heard some concern, of course you gotta have the YouTube sensational videos, so I had, I'd seen one floating around and talking about, oh my gosh, we're going to be shrouded in a trash, trash blanket over, over Earth's atmosphere and the next 10 years.

And I thought it was pretty sensational. So I figured I would bring that up and ask a real expert because I'm sure if anyone would know it would be the guy launched and all that. Spy satellites into space. So that's a reassuring answer to, to hear there's solutions to avoid exactly that, that issue.

I, I do want to ask though about the name as well of the company Terran or orbital. Is there any, anything behind that name? I know has some some connotations. With any company I've started, I've always had a naming scheme of, for lack of a better term. And this case, I went for a science fiction, schema, Taran.

Isn't our fire word for earth earthlings. Terror, I think is the basis of the word are these either the Latin or Greek or something for earth. And so we picked Heron in the, in StarCraft, they use the name terrines and it's moving to the typical Teranova TV show. And there's lots of reference Saifai references over the years.

And prejudice. Our constellation that we're building was Remington will be predator. So predator that it gov trader predecessor. So we try to have some fun as we named things. And, but you'll see, like our stock symbol is LL AP live long and prosper. And we were very excited to do your second exchange, gave it to us.

They wouldn't let us put Spock's hand on the side of the New York side, but we thought it was pretty funny. And and it's it's just, we try to make it, we're, we do very serious work here at orbital and we work mostly for the DOD and the IC community. Though we do some civil work and some commercial work, but we want our people here to have fun and enjoy working here.

Yeah. It's also a good way to to get the suits on wall street to just loosen up a little bit. I give a little live long and prosper hand signal there on the exchange. So that's good. It probably brings some levity to the situation. It does. It does, especially with things going on in this world with Ukraine and everything else.

And we've been very active over there helping the Ukrainian government. We are thrilled to bring a little bit of smile to people's faces

Austin, by the way. I think he's. We might be frozen. It looks, he's looking frozen. So we'll just, we'll we'll let Ashley edit this little chunk out and then I'll continue and he should be able to hop back.

So a follow-up to that, the idea of it seems like space travel, at least in my opinion has always been this this thing that gives hope to humanity. It's this thing. Sparks curiosity. And it's just, it's something that people from countries all over the world, cultures all over the world, love and love to see and experience and think about.

And like talking about things like the Ukraine and everything, there's so much, there's so much bad, bad press all time all the time. And. But it seems like space flight is one of those things that just gets everyone excited. How did you first get into the industry? Was it a curiosity thing from a young age?

Was it like just the thing that built? Cause it seems like something that everyone would love to do. I got very excited about space when I was a kid. It really started when I was 10 years old and got stuck somewhere in a hotel with my dad and it was raining outside and ended up watching a 24 hour star Trek marathon.

And years later, I had a company called Globex or my first comedies and we ran 28,000 miles of fiber around the world as part of the original internet backbone. And we were the world's largest logical. And we were the second largest owners of data centers in the world. And we hosted some of them, we hosted some of Microsoft's original websites, Walmarts, regional websites.

We hosted about half of the fortune, fifties, original websites back in the day. And but we couldn't reach, we, and by being the largest logical pier, what I mean is we connected to more networks than anybody else. So we connected to over a thousand ISP around the planet, but we couldn't reach ESPs in Eastern Europe.

So we started building ground stations and buying satellite transponder space. And that's how we started connecting all these Eastern European ice IPS onto the global internet. And it was very a, and that was my first exposure into a space. And I've been enamored ever since. It's just been exciting journey.

Yeah, definitely get that. What was that? What was that like transitioning to. In an industry setting in a practical setting, transitioning to using space to, to solve a practical issue. Cause it seems like there's so much talk around. I've heard skeptics be like, oh, we're still decades away from, I don't know, being able to colonize Mars and all those things.

And that's fair, but it seems like there's some people who are just. Pessimistic about space being able to solve real issues in general, but it does. What's your kind of take on that. Look at all the things that have been invented that came out of space. Everything from God, perfect.

Ball-bearings certain kinds of glass. There's this, all these man missions to space have CIF created all these technologies that we use today on a daily basis. How they're part of our society and and so it helps us innovate, innovating, and you are right people aspire and dream of going to space.

They dream of it. We see movies and TV shows everything you're fantasizing about it. And it gives us hope, like you said, but there are ponds we can track globally global warm. We can watch icebergs in real time and we come and we can measure the depth of them and measure the decrease them day by day, hour by hour.

If we choose you, can't do that with drones. You can't do that with planes. It's too big. A but you can do it from space and you can do it economically from space. You can measure crop yields from space globally. If you want to figure out where your there's going to be famine ahead of time and where you're going to have to move food suppliers around because you'll know in a wheat field, how hydrated.

There's some amazing technologies that just are not economical to do from the air from airplanes, with drones, but our economical space, but also helps with things like insurance fraud. And, we can map out Florida the day before hurricane the day after hurricane and see whose roofs were missing before the hurricane using AI.

So you, there's a lot of things that are good. A lot of good comes out of space and, human space travel is a desire and colonization of the planets and the moon and Mars and beyond is a desire. And you, we have to, you have to imagine there obviously, Other planets, like earth Goldilocks, planets around the universe.

We're not the only ones. I'm sure if the other ones found us, they ran long ago, they went to Washington and they saw they left. They got scared, in general, there's a lot of a lot of dreaming to go on there.

Definitely. And that's, I think that is something that so many people. I have, like you said, have aspired to, to go to space, to see earth from space, to, see the pale blue dot. And to the curiosity, like we've already talked about that, that inspires. Where do you see, we've talked a little bit about the past.

Where do you see the long run of, we're in the long run show. We're always talking about the long run. Where do you see. In the long run. Even the medium term, I'm really curious even just about two to five years, but certainly 10, 20 years of where Taryn is going and where the industry is.

Yeah. So we look at Taran, I don't want to be in an industry unless we can be the number one or number two player. And if you look at all the businesses, we visit my fifth unicorn, all the businesses we started in the past with rare exception, we've been able to be number one and number two.

And we strive to do that. We want to do it right. We want to be the best. We want to be different. We want to create barriers to entry and what we do, and this case we're innovating, becoming Tulloch technologically superior to other people. And we're building something for a very well used to close to a billion I could build for 10 million and I can deliver a higher quality product for phenomenally less money.

And so it's not evolutionary, but it's revolutionary, but we're working on become revolutionary, was creating the cube set that we did here at Tyvac evolutionary is what we're doing today tearing and going ahead and creating products that will continue to get cheaper and smarter and better.

And we're going to see more and more applications with space today. You're going to see 5g, there was saying that's something everyone's talking about. Cell phones. You go, you're going to see it. You see a lot of internet things, Starlink, everyone's getting, everyone wants to buy the internet bandwidth for space, but you can see that bandwidth is starting off slow, and then it's going to get very fast.

It's just like today. I remember when Globex, we used to sell up 1.5, four megabit connection for $999 a month to companies today, I got 2.5 gigabits of Google fiber in my home for $99 a month. It's a whole different world, and you're gonna see that in space. The images today you get from space are they're great and they're going to get phenomenally better.

You're going to see more and more interesting images and more detailed. And eventually you'll be able to just take a selfie from space. You both to look up, say, take a picture of. You're sitting in the football game and I'll take a picture of you and it to your phone. That's technologically very doable.

It's just about, as somebody wants to spend the money to do it, but that's something that's totally doable. Those are some wild applications there. Mark and I, it brings up some interesting questions for me. I, if you haven't noticed yet, Mike tends to be of the two of us a bit more on the the.

Positive. And I tend to be a little more skeptical most of the time. My, my trash comment earlier, and then also I have another one coming up here, a question for you and in almost more than negative light. But with that excuse that I guess is my preface there. But with all that, This basically mapping of the earth.

And you're just at being able to take a selfie from space, which is a crazy idea. What are the kind of Issues from a privacy and ethical standpoint that you have to think through when we're talking about taking pictures and mapping, people's property, because obviously we have the rules where your property lines don't extend vertically upward.

But they only go up so high. So where's the privacy kind of layer come into effect. I know we've seen some interesting situations with drones, but satellites has just, that's a whole nother. On the other level, it seems because you have a lot more, ability to see things you may not be able to see in any other way, which again, not saying Teran is out to do bad things, but there are plenty of bad people in the world.

So how do we think about this kind of moving forward as we map earth from space, we work for the good people in the world

that, you bring up a very good question. There are lots of laws out there to what we can and can't. And when we can, and can't image a, there are lots of laws today that perk to protect us citizens. Not necessarily global citizens but it is a as they control resolution. So the resolution we can image and the resolution we're allowed to sell are two different things.

So we can sell, we can image super high resolution. We, we can, but we can't sell that to the public. So they learn and that's when national security. Otherwise we'd just be reading the text on your phone as you type. And so it is a it does bring up some interesting questions on privacy.

I have or I have friends who accidentally got taken a picture of. From a satellite of him laying on his backyard. And so we started a picture, we laughed very hard and he was almost laughing. And it's it is going to be, does more and more of these imaging satellites go up there.

Then it's going to have to be some sort of regularly. To protect your privacy, because if you're out in your backyard, sunbathing, and let's say you were going for new 10 lines, you don't want that picture. And then you hop on Google and but I'm trying, I'm sure everybody would be imaging every pool in Vegas if they could do that.

So there are privacy issues abound, and it's going to be, there will be somewhere where regulations, I think drones right now are the bigger problem because you can't get the go over your property. Shoot them down. You can't take them down. You can't shut them down. He came and put a drone net up, you can't.

So it's a real privacy issue of having that, having drones over your property. And now, right now it's a much bigger issue from space then from space and listen. I see drones buzzing around all the time where I live and, we don't like it, but there's nothing we can do about it right now.

Yeah, it is interesting. It's when we get into these new spaces and this is what we've talked about this in crypto, Mike and I have, it's just interesting, like you get into a space where humans haven't really had to think about these problems before. We haven't really been able to just hover above someone's property before it's it presents these interesting interesting problems to, to think through.

But on the positive side, like you were saying, it also presents solutions that we. Ever imagined like the whole crop issue and being able to predict, okay, we're going to have a, have an issue with supply of food over here. Let's move some food around. Let's make sure that this country sells to this country to make sure they're taking care of that.

That's something where I think it seems like the positives could outweigh the the cons, even though I am somewhat skeptical sometimes or can be less positive than a than Mike, I do think in the long run, we're, our human ingenuity is pretty astounding. And the fact that they took a satellite, made it into a cube that is a little bigger than a large Rubik's cube.

Kind of wild to me, so I'm sure we can solve these issues. I believe, I always tell people, who privacy issue does come up a lot. And I tell people just don't do anything wrong. Don't do anything you don't want to see on the cover of the New York post. And you're doing okay. And as long as that's my metric and that's why I lived my life as long as I don't care, if it ends up on the cover of the New York post it's.

Okay. And so you want to make sure that whatever you're doing, you do the right thing. And that, that is cause there's no reason why you should be doing something wrong and just live your life.

A lot of freedoms in this country, you should have. Touching off of that. And we've mentioned a little bit of, the situation that Ukraine right now, but that for me looking at space and go individual privacy and the individual's perspective zooming out to, we've never really, at least since, since decades, at this point, we never really had as intense of a possibility of conflict.

Between two space powers, astronauts from both Russia and the U S and the ISS. So it's like what do you think is there the capability for space war in the future? It's all scifi and everything, but it's something that definitely seems to be interesting, especially now that conflict is a little more sadly normalized.

I don't know. What are your perspectives on the future of space? Defense, he's a space wars person. You said space defense. So we'll tackle it from both sides, and we have a very sophisticated military. That's doing some very sophisticated things and we live a very blessed life here in the United States.

Because it's all the things that don't happen that you never read about that you never hear about is what allows you to live your life. Because if you knew everything that was going on, you'd never go to a shopping mall. You never go to a restaurant and you probably would leave the country for the rallies because of the phenomenal job that the U S government does in protecting us is that we are able to leave the life that we.

And that's on the defense side on the worst side, I'm sure there's somebody somewhere that even the Pentagon building, trying to figure out how to build a death star. I totally see it happening. It's just know somebody's gotta be creative enough to say, Hey, we just build a battleship in space and that's it.

But the reality is nobody wants to do there's no such thing as winning. Everybody loses at the end of the day, both sides lose because those are things as a winner, no matter what the outcome is, war everybody loses. And and what's going on right now is incredibly unfortunate in the Ukraine because there really was no need for it.

And, and all these people are dying for no reason and it's not making the world a better place. It's just destroying. And and that's that's the problem. And, but, we have, we will, I would like to think the human race is becoming more evolved, but obviously not. And the space is becoming a contested domain, just like the Chinese are building all these islands in the south Pacific and it's taken, the Ukraine has taken away.

China and Taiwan conversation, if you know that you're, if the Europeans, really got their act together and cut off north school, And bit the bullet and cough Russia's supply of cash. Then all of a sudden, there'd be some real economic sanctions with some real power who are still, they're still paying billions of dollars a year to the Russians in funding, or they're a military attack cut off their money and they'll stop.

And, but the U S the Germans don't want to do that. And they can't cause they. And so the true lined off, because it's winter time, the waiting the summertime in order to stop a war, which is ridiculous. We have in the U S the Chinese economy relies on us, but the Chinese are, I've never really, I've never been aggressors.

So you had a peaceful handover of Hong Kong, there could be people arguing about freedoms. But overall, it was a peaceful handover in the military. All of the lease expires for the British and the Chinese moved in, but that was their island. They were able to do that Sydney with Macau Taiwan is a different story.

But I'm hoping that will be a piece of resolution at some point in the future and not a conflict which would decimate the island. Yeah. It's interesting. You were, you're saying. To think that humans are more evolved and it is an interesting hole to run down. But you mentioned earlier that, even if we are or are not, that's a totally separate question.

If there were other. Life forms out there on other Goldilocks planets, and they found us first. You think that they would just run away and hightailed away. I tend to agree with you. I think maybe Mike would have a different opinion. What's your opinion? Ever the optimist, maybe I am, maybe I hope they say hello or something that I guess will.

Yeah. If I was smart enough to travel light years, And I found this shit, the shit storm going on, I go right back there. There, there are better planets to go visit. So my question is underlying that people are always asking this question. Are there other earths out there? And you seem, you hinted.

You seem to think there are. It could be very intelligent lifeforms up there as well. I am super open to the possibility. I would love to think that there's aliens out there we could interact with, I don't know if they would want to interact with us, but what is your after launching lots of things into space and studying space, what is your kind of thought process on that?

In whole it's pierced, it's pure odds. It's like going to Vegas and gambling at a rillette table. There are only so many numbers, you're going to win. There are so many planets, so many. I only need to apply in at a certain distance from the sun to have you a Goldilocks planet, to have the right heat temperature for things to be able to grow.

Now, keep in mind, earth is very young compared to the rest of the universe. And as a civilization, we're very young. So they're going to be civilizations that are millions of years old, that hyper sophisticated or ones that never got sophisticated for. There has to be somebody in other people that are out there.

And they're not just going to come here and bring us. That's an old Woody Allen joke from years ago, but they are there is a it's just statistically speaking. There has to be other things going on. But, be careful what you wish for. They could bring a calm, their common cold could be a deadly virus to us.

They could be the friendliest people on earth when they, we always make movies that they're always hostile because that's what sells tickets. You never have a movie that they're all friendly and happy go lucky. And they don't have, they have utopia, that would be nice. And they're just happy go lucky people that just want to hang out and have fun.

But then again, we and then when, again, and again, I go back and, I look at what goes on in DC and I'm like, oh, they're already here. And

yeah, I think that's what I could agree with a lot of wild characters out there. That's for sure. Sometimes they feel a foreign to our planet too. Yeah, it's interesting. I always think of, I always think of. Twilight zone episode to serve, man, have you seen the Twilight zone where it's there?

All the aliens come down and they're very nice and leave. All of these ways to just fix society. And then everyone's all the people are going to the alien planet and they're all getting eaten. That's a cookbook, the whole Sony pictures did a great short called the Chub chubs. If any of our listeners want to download, it's got four minute video, but these little parties, but furry, little funny creatures that just eat you.

And but they're very cute until the youth. And so it's a very funny. Too funny. So I have to bring it back down to earth here to use it, to use a good punter. She'd never that one, mark. So you guys just went public and I believe it was through a SPAC. Is that correct? We did. We did. We decided there are three, as there are three ways to go public and do an IPO.

A direct listing or a spec, and we've done it. And I did this back before my spec was in 2007 called enterprise acquisition. So $250 million back, we deice back to 2009 with 90% redemptions into a company that today is armor ARR in the New York stock.

And I'm with art with AMR on a $25 million beginning equity base. That's what we started off. We've paid out over $1.8 billion of dividends and and returned on the $7 million PO or promote reparented return to significant portions of promote. So it was a hundreds of millions to promote it. So we did.

We created a very good structure that was good for everybody and showed us a house backs can work and there'd be prop and work out. So in our case, if we had tried to do an IPO on February 24th, we would have had what's called a market out. Meaning all the books would have impacted. We've had that happen.

I want to try to price a deal on the day of the Greek debt crisis. And we had a market out that day and didn't go public. And we wanted certainty of close. We created a unique $250 million exit financing arrangement with Francisco partners between capital industrial, Lockheed Martin and others that allow guaranteed.

And we would have a positive back, which is what. And now we're no longer a spec and we never want to hear that four letter word again. They have a very bad rap but I keep reminding people it's just because they bought bad targets. It's all about the company they're merging with and has nothing to do with the vehicle.

Interesting. Yeah, you were doing specs and you said 2007 was the first. Yeah. So you were doing them way before they were cool. They were cool in 2020 and 2021. And that was the hip thing to do was, oh yeah. We're going to go public through a spec and clearly it can be done and it just needs to be done.

Correct. And w it's all about the target? So the, oh, they're all these companies that are emerging into specs that never should have gone public, especially all these new space companies that don't have a re don't have real revenues. They don't have a real backlog. Don't have real management. They don't have a real pipeline.

They don't have real customers. They just have an idea that's called venture capital. And they should never have been allowed to emerge into a spec. And of course they're all missing their numbers. They're all there. They're being investigated. The FCC rightfully they are, it's just, they never, this should've been rules to allow companies like that.

In our case, we announced our over $200 million. We are we are, we announced, reviewed our numbers for last year. I think we're the first space back to we actually beat their numbers. And so we are continuing to continuing to fly ahead on our work speed and we're doing exceptionally well.

And and we continue to build our business at a rapid pace. What do you think? Is it that sets apart? The successful space companies. Cause it's it. I think it was mind boggling for me to see the rise of space X, how it went from an idea to real in there. It seemed like a very short time, especially if you look back at, very old legacy, Lockheed Martin, like you mentioned or the other companies that have been in aerospace for a long time, it's amazing to see companies come into the space realm, which is this incredibly capital intensive.

Space and succeed. What do you think is what separates the ones that do succeed from the ones that, don't get the numbers. So let's take space sex as an example. So what seems like a short time flies Ilan started 20 years ago. It is 20 years in the making and everyone forgets in the early days of space.

A lot of things used to blow up and a lot of things used to crash, but he stuck with it and he innovated and he kept building. So then I look at turnover. We started with young over 10 years ago and we stuck with it and we kept innovating and we kept going. And so we are, it's you learn from your.

And, we're not to the end. You hear all these startups and he's still private and people aren't, people would always tell me that I should have stayed private and I should have enjoyed the being private, but we are in like Ilan we're in a capital intensive business. But because of our business that we're in, it's not very sexy in terms of.

Talking about our customer programs, talking about what we do, because we do a lot of work for the national security. So it's not like we can tell you, oh, we're building this really cool satellite. And and I can see you laying in bed and every new Orleans had been with you kind of thing.

You can't do stuff like that. And so we're trying very hard to we've taught the public markets, give us a better, easier access to capital to continue to expand. Yeah. Yeah, that makes sense. I also wanted to ask you, I know you mentioned, and I don't know if it was when I was researching beforehand or if we'd talked about this before, but you mentioned that you're the ones building the satellites, right?

The keeps hats. And then we don't reduce that to anymore. We haven't pulled the cube setting. Those are okay. Got it. Okay. So you're building the satellites though. Not now. I'll start with that. We build satellites now, the size of your refrigerator in your house. That's got gotcha. But you're not though.

You're not actually building the rocket that launches that into space. Is that. No Eland does a very good job of that. So he builds the rockets. We build the satellites. It's a very symbiotic. Gotcha. Okay. So the question I was going to ask is when it comes to launching other things, I know this is not necessarily specific to what Tara is doing, but just with your experience, when it comes to launching other things like human beings, we've seen a lot of human launches that.

Super they didn't go very far into space, but they were definitely, out into space through blue origin, through space X, when it comes to those types of things, just space travel for humans, not necessarily launching technology up there. What do you think about the kind of the long run outlook for, say Mike or I hop it on a hopping on a space shuttle and going up and.

Looking down at earth. What do you see, do you think that's just going to remain this elite class thing? Or do you think that's going to become a little bit more democratized? Do you think it could? The numbers are hard. I think. Space travel. The cost will continue to decrease.

So it'll become more accessible people, but we say travel, right now. And you're on the road to nowhere because you don't. So they need to build like a restaurant in space or something cool like that, where you can get out, go have lunch, then come back. This is the. And rallies it's going to happen.

Someone's going to build a space station, a private test-based station, and some guy, then you're going to get David Grutman from Miami. He's going to build a restaurant on it cause you're already down. So he's going to go build the rest of the restaurant is on a space station and he's going to make it happen.

He's going to put a nightclub in there too, and then you're going to have a roof. Then you're going to have a real party. They'll let live Miami. And we were trying to, but it's going to be, it's going to, those are probably things in the realm of reality the realm of, going to the moon for vacation, that's a long way away.

And to Mars or vacation, that's probably not in our lifetime. But in orbit. Yeah, I think it's the Costco. You'll see people spending money and you're seeing your wealthy people like Elan, like bayzos on others are able to afford and fund building private space stations, and then they got to figure out how to try to turn it into a revenue generator to sustain.

I think that's a great point to bring up because it seems like. The idea of colonizing or, I think, like you said we're pretty far away from, cause I think people forget just how far even just the moon, how far away the moon physically is from the earth and Mars, especially as it is very far.

And I think people can fall into a tendency to forget just how much potential there is enormous. That seems like a really, maybe an overlooked untapped idea. Is that kind of what you sense from a lot of people? Yeah. I use a lot of opportunity in space, but you also to remember spaces, dangerous, the odds of you coming by you, the odds of you coming back are not great.

And that is that's the scary. Space is still a very dangerous thing. They haven't made, it is not as dangerous as you recall. I still more dangerous in your car. It's Niagara. And if you go to the drive to the airport is more dangerous than getting on the plane, even though everyone thinks flying is dangerous, right?

You have a better chance of dying on the way to the airport, the fly on a plane. You're going to space is very dangerous. It's going to come down. It's going to become less than one, the written with more and more risk-free, you're still, strapping yourselves to audio, a few million pounds of fuel.

And as far as lighting a match and you're wishing yourself luck that's a risk. It's a, it's quite a ride, but still it's your, the beginning. And sometimes they go, boom. But they will make it safer just like they made cars safer and they will, it's going to happen. And and then that's when things started getting really exciting.

Yeah. It seems like there's a lot to look forward to as far as the long run of space and a lot to think about too, as far as, how do we. Work through some of the problems we talked about. And also what are the amazing possibilities that seems like they're almost endless, I'm sure there's some end point to some of these, there's a lot of solutions you can provide by getting essentially eyes in the sky, but more eyes in the space, so for our listeners who are looking at this area of the capital markets, obviously it's. Hot topic. It's always fun to talk about space and space travel, but for our listeners, how should they be thinking? Obviously this is not, we don't give financial advice here, but we like to think, okay, how could we be thinking about space, travel about space businesses?

Like you said, it costs a lot of money. Just to put someone and, or something up into space right now. So it needs to be, there needs to be some sort of, from a business standpoint, there needs to be some sort of revenue driver there. And you guys are doing it from the defense side. It sounds like a bit, but there's also, other companies looking to do to supplement what you're doing.

Elon Musk is building the rocket. So there's a lot of different ways to create revenue. How should we think about that from a business perspective, this whole space area? Part of it is yo, the innovation from space, things like scratch resistant lenses, ear thermometers, shoe insoles, and visible braces for your teeth, cordless tools, tap water filters, memory foam.

Now satellite navigation all came about. From things in space, there was a company called maiden space that we had invested in that was on the ISS that actually made things in space, so there is lots of things in space that come out. Engineering-wise, there's lots of opportunities to build things in a zero G environment that you can't build in a gravity environment.

Like I mentioned earlier, perfectly. No gravity, certainly there's certain things. You've been manufacturing space. That's easier and cheaper to manufacture on earth. It's just getting it back and forth right now is the expensive part where they'll fit up. That cost will come down eventually. It's, there's lots of innovate innovation and there's a science, basic science or learning more about our planet, as we're able to watch our planet in real time, we'll learn a lot more about what.

We'll learn a lot more about global warming and how it's affecting us. We build more and more kinds of sensors to study our earth. And the goal is to, stop famine, figure out when storms are coming, sooner to do better weather tracking. It's, the list is endless, what can be done from space.

And that turns into dollars for businesses. You have people like us that are creating businesses that are we're enabling companies are enabling the governments to go ahead and solve problems from space that you couldn't do before economically. Yeah, it sounds like there's, again, a lot of possibilities.

I didn't even think about manufacturing in space. That would be totally different than manufacturing with gravity. That's just blowing my mind right here. Zero gravity would be a completely different you'd be able to build completely differently. And I'm sure, probably like you said, things that you couldn't build here on earth, where you have to deal with gravity because that has to be factored in everything.

That's very interesting. It's great to hear that that you have such a positive view. You keep saying it's going to get cheaper. The costs are going to come down and I have to agree with you. It seems like just what we've seen. At least in my lifetime, and I'm not that old. What we've seen is just spectacular as far as the ability for.

Things to be gotten into space and come back. Sometimes they blow up, like you said, but most of the time not. And that, that sort of long run optimism, I think can definitely help with this innovation here. It's pretty mind boggling to think that not, just flight in general is so new.

I've ever seen a chart, like showing human progress and it's like the Wright brothers. And then it's oh, first space launch is like very shortly after in the grand scheme of things, which is mind boggling. And I I think I'd say as we're running a little bit low on time here, I do have one question that I really want to ask, which is I've heard a lot of people draw comparisons.

To computing and how, we've seen computational technology gets smaller and more powerful and I've heard people say, okay, the space is going to be similar. It's going to go on this. This upward trajectory. Do you see that as a good analogy or is it different? Is it is it more complex?

It's going to take longer to move up that slope? I think you're not seeing things moving at a very rapid trajectory because people are in governments are investing a lot of money to make them. Before there wasn't a lot of investment that went on to make things change. Everybody was happy for 50 years with the status quo.

Now it's, everything's changing and everybody's everyone realizes you can actually do a lot more, a lot cheaper and a lot faster. And we're seeing, I visit a time when you'll literally be able to order a satellite on Monday and get it on Friday. And that, that is, so that is a desire of many to have satellites on.

Wow. That's incredible, mark. Thank you so much for infusing. At least me and I think you Austin, as well as some optimism on the long run of space, and it's just incredible to even just think about it. Thank you very much for having me today, gentlemen. It's been the longer end show with Mark Bell, chairman and CEO of Terran orbital, go check out tearing and all the amazing stuff that they're doing.

This is Michael O'Connor and Austin Wilson from the long run show. We'll catch you next time. .

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Guest:

Stuart Winchester  

CEO & Founder at Marble

Hosted By:

Austin Willson

Michael O'Connor

BZ: Can you explain what Marble does?

S: Over the years, Incredible progress in centralizing standardizing, and making more convenient, the methods of organizing these things for the household and insurances in the last to fall, it's still very balkanized.

You have individual carrier applications or it's in your inbox or email. And I saw this because I used to work in a mortgage company and no matter how much technology we deploy still. Shorten the window. It took to get the right insurance information for the mortgage because people just didn't know where it was, what the sand, what they had, who had it.

So we built this one hub for all your insurance and all your risk. And then we've layered this rewards element in it because rewards in insurance are really not, is also not really a space that's been pushed into. So consumers can have rewards for uploading policies, referring friends, telling us about their assets, their plans and then, cool stuff down the line that we have planned with.

Insurance it's highly regulated industry. Like a lot of, financial industries, but particularly in insurance, there's been this historical concept of rebate law, which still exists.

And that it's, it started for very good reasons in that. Life insurance agents back in the day would give big discounts, typically funded from their commission to people who they want to sell insurance to. And that, the turn of the last century, largely it was like, white men who looked like them.

And that led to much worse pricing for everyone else. Like a lot of regulations, it was written before the internet really existed. Part of Marble's concept is, we've done a ton of research and work with the regulators to say, Hey, Where can we do rewards where can't we cannot, incentivize buying.

We can't make anything cheaper to sell. And also what, can we stay, if we stay blind to who our members are, I would just a really, no sort of biasing impact can we offer rewards? Which is how we brought into it, because to that point, Insurance is you can't turn on the TV without seeing an insurance commercial.

There's so much money in this space and rewards provide this really neat mechanism. If you can be thoughtful about removing the biasing impacts to pull money away from. Sports networks and the social media platforms and put some incentive back in the pocket of people to engage with it.

So that's part of our founding thesis as well.

BZ: The rewards aspect. Do you see that also as a generational thing?

S: Exactly that like we, one of our biggest obstacles in fundraising was finding investors who would come with us on this first leg of the journey to see if we could prove that people would engage with insurance, cared about it more than once a year when, and, if even that really.

I think a large rebuttal that I had in the fundraising process to people who were objecting with this idea that, people don't care about their insurance. I hear that all the time, but it's we ha have we ever really tried, have we ever really delivered an experience basically?

Do they not care about the insurance or do they not care about the ways that we're the tools that we're giving them? Because I do, I would argue that people do care about how they protect. There's stuff. If you frame it on those terms it's something you should care about and people do. But if it totally sucks to shop for it and to manage it, and the apps look like they're out of 2006, if you're, in the same way, you don't want to send a bank wire, you'd rather send a Venmo.

It's the same exact proposition. So we've been fortunate. We see I mean we're not day trading like Coinbase, but we see, 30%, monthly activation rates in the app and thats pretty huge.

BZ: Almost like what mint.com did for budgeting and accounting personally. You're basically doing that for insurance. So are you actually selling insurance and are you an insurance broker for different types?

S: We make money, a couple of different ways. We don't operate as a broker agent today. That's a critical piece as well. Our regulatory position is that we don't touch pricing.

We don't negotiate pricing. We don't solicit or make any representations on policies. We sell leads. We do that in a pretty integrated way. So you don't have to, we want to avoid that thing where you click and then you click again and you enter all the same information twice which we can do because we have all your policy information.

So basically the user flow of Marble, and I'll get to the revenue part of this. As you come in, we built our own sort of plan for insurance. We've also partnered with some great companies who don't do that as our full-time product offering, we'll pull in, we'll like Hoover in, maybe your renter's policy, your auto policy and your pet policy.

We can tell us to take your life policy, whatever you have. We'll write that all to the database securely. Then when you want to shop, if, and when you want to shop, you can click we'll pre-fill everything we can, and then you'll get some rates. We then make $30 to $50 on the lead click.

That's so much money you can make on a non-binding leave click. Why don't we just incentivize people to stay engaged with the platform and put some of that back into rewards pool?

We don't display pricing, we don't inform pricing. And what we also try to do just as a couple of, cause we, we take the regulatory, the worst thing you can do in insurance, I think is not like respect the thousand year old industry that it is.

BZ: What was the process coming up with the idea behind Marble?

S: I spent about two years at Better.com, which has been in the news recently. I did acquisition for the mortgage side, and that was an interesting sort of lesson in acquisition versus retention, because people can refinance and there was some quite big product there.

It was not only getting the most efficient cost of acquisition but then could we stay with people through the first refinance and that'd be a lot cheaper, so that got me thinking about that model. I think. Hopped over and had the opportunity to launch its insurance practice. And that's how I became licensed as an agent. And in that, I was the GM, but I was the first one, the first salesperson and I was on the phone all the time. And it was just so striking to me. Better.com has a phenomenal technology stack and could do your credit verification, income expenses back. Anything you need for mortgage, basically pull it as quickly as possible. Even with a fully digital insurance experience it still would take 5 - 7days to verify.

BZ: What's the pitch to the user. Like why would a user want to engage with you guys? But what's the kind of the, the value proposition for the user?

S: So for us, basically the short answer to this is about 40% of our users come to us because they have, what we would call a more complex than usual insurance picture, which is about 3 active policies we will solve for them the digital frustration of not having those policies stacked and organized, and also written in a way that is like digital and convenient. And we say written, what I mean is like being able to pull the data often and a convenient way of being able to pre-populate if you want to shop and compare being able to share, parts or all of that with a financial advisor, maybe you have a life insurance policy, and you want to share that with your financial advisor.

Again, that's something that we can do with a sort of secure drop a link as opposed to downloading a PDF, attaching it to your Gmail, stuff like that. Again, these things that feel like they do feel a little bit like table stakes when you compare it to other industries, but insurance has just been slow to adopt them, but 60% of people come in for rewards and stay for those other pieces.

And I think where we want to go, or we do plan to go is to add this 3rd Feature set on, which is the more the more active maintenance of your risk, as well as the organization of your policy. So not only do you have all your possible policies in one place, are you earning some rewards where it not only can you shop and save. Full disclosure those leads are more valuable to us if you have more data. Your stuff's more protected. You become more valuable to the insurance company.

BZ: I have two, two last questions:

How do people sign up for Marble?

What's your general advice for the average consumer out there in terms of insurance?

S: To get Marble, you can get the app to make an account. The app is actually live on the app store too. We just went live last week. So we're still doing a friends and family only, but if you're listening to this and you've made it this far, we're now friends and please go download the app on iOS and leave us a review.

If you're going through this and you're particularly if you're transacting, what's the, like the best practices or how to think about it. For me, couple of big things come to mind, apples to apples on coverage is going to be hard to do, but it's really, either using a spreadsheet or.

In your Marble account, make sure you know what coverage you have and when you're comparing, make sure that you're at least getting something pretty, pretty normalized, because those things are gonna change. That'll really affect pricing. Make sure you understand all the terms as well in your coverage, look them up in advance, look them up during things like that, just deductible. Co-insurance just, again, have those handy. So you can refresh, unless you really know that. And finally is like really shop, pull, this goes back to the commoditization point, pull as many rates in as you can, use multiple sources.

If you have the time, really make the market compete for your rates because that. That's it, that's how you get the best price, ultimately that's the service that you can build for yourself. So really cast a wide net, dedicate the time to do that. And then the last sort of caveat is, don't be surprised if rates jump a lot.Until you answer those last final questions, you may be looking at a teaser rate and that teaser rate may change by two to three times at the end.

So just, don't don't get some quotes and think you're done, take them through, and that's going to be the price that you'll have to budget.

Support this podcast at — https://redcircle.com/the-long-run-show/donations

Guest:

Mark W. Yusko

Chief Executive Officer and Chief Investment Officer, Morgan Creek Capital Management & Managing Partner, Morgan Creek Digital Assets

Mark Yusko is the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets. Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office.

Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment

Model of investing to UNC, which contributed to significant performance gains for the

Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation. Mr. Yusko is again at the forefront of investing through Morgan Creek Digital Assets, which was formed in 2018. Morgan Creek Digital is an early stage investor in blockchain technology, digital currency and digital assets through the firm’s Venture Capital and Digital Asset Index Fund.

Mr. Yusko received a BA with Honors from the University of Notre Dame and an MBA in Accounting and Finance from the University of Chicago.

Hosted By:

Austin Willson

Michael O'Connor

BZ: welcome back to another episode of the long-run show. This is your host, Austin Willson, along with Mike OConnor. And today we are going to be having another guest on our show. We have Mark Yusko from Morgan Creek Capital. He's actually the founder and CIO of Morgan Creek capital and the chief managing partner of Morgan Creek digital.

Hopefully I got that right, Mark. And we're going to be good. We're going to be talking about we're gonna be talking about a lot of different things today. Spanning many different aspects. Obviously, mark, you have a lot of experience investing money and allocating capital and also a lot of experience just with thinking about large long run issues which is the name of the show.

M: One of the things that I really don't like is everything is focused on short term and social media. And that just the explosion of content has made it even shorter and shorter. And really, if you think about investing, the art of investing, it really is about the longterm. And it's nice. You're nice to say I have a lot of experience. That's just a very nice way of saying I'm old and I am and that's actually a good thing because it means you survived all the mistakes that you made when you were young. But importantly it goes to. My whole career has been around. Long-term thinking, I a series of happy accidents. I didn't plan to be an investment guy. I planned to be an architect. And then I tried pre-med and none of those things really fit. But I went to work for an insurance company out of business school and the guy who was doing investments retired. And so I was now the investment guy. And what I found is it was the perfect thing for me as a science guy. And science is all about format hypothesis, forming experiment, gathering data, testing the hypothesis, and then deciding if it's right or wrong. And that's exactly what you do in investing, right? You come up with this form an experiment.You, you make exposure and then you test it. You gather the data and the market tells you whether you're right or wrong. And part of the. my aha moment over my career was that time arbitrage. So long run thinking, right? The title of your show is the ultimate win in investing. If you have a long time preference, if you have the ability to think longer term than the average investor, you will make more money. And that's kinda cool. And you don't have to be right as often either. That's the nice thing is you don't have to always be right or prove that you're right. Which is very dangerous and investing. Yeah. So quick. Went to school. I said to be an architect or a doctor then went to business.School, came out, went into investing. And my next happy accident was I went back to my Alma Mater. I went back to Notre Dame and I got into endowment management. And what I realized was I thought investing when I worked for the bond management part of the insurance company and then an equity firm. Was that It was just about picking stocks and bonds. That's what investing does. That's what the TV tells you. You should pick stocks IBM or GM or Ford. And what I realized is those were 15% of the longterm returns. 85% of returns comes from asset allocation. The big picture allocation of capital across stocks, bonds, currencies, commodities within stocks. Do I go international? Do I go domestic? Do I go technology? Do I go healthcare? And those big asset allocation decisions drove everything. So the endowment model of investing, which I learned at Notre Dame brought with me down here to university of North Carolina at chapel hill. Whereas the CIO there, that's what I learned. And all that endowment model means is you have a long time horizon. It's permanent capital. Therefore you have this ability to take advantage of time arbitrage. The second thing is you have to have an equity bias, because if you want to have a long term positive return, you need to outperform inflation and bonds just don't do that by very much. So you have to have an equity orientation, but equity doesn't mean stocks. You mean stocks? It means private equity. It means venture capital. It means commodity equity. There's all kinds of equities. And then the next stage was I left the university back actually now a long time ago, back in 2004, and I formed Morgan Creek Capital and more capital is just about bringing the endowment model to other investors, taking this idea of alternative, thinking about investments to the masses. Now everyone says what do you mean alternative thinking? I'm like I don't like the term alternative investments. People talk about it all the time. Hedge funds or private equity or venture capital. Those are alternative investments. alternative to what? you own stocks, you own bonds, you own currencies and you own commodities. How I own them in a mutual fund, in a hedge fund, in a private partnership, doesn't change the nature that I own. Stocks, bonds, and currencies and commodities. And the problem is whoever thought of the term alternatives, who was not a marketing guy or gal, they were not very smart. People don't like alternative stuff, alternative medicine, alternative music.They don't like alternative stuff. They're afraid of it. . And so what did he do? Tape put 5% in alternatives and 95% in tradition. That doesn't make any sense because if the traditional stuff isn't attractive, why would you want to own it? So fast forward Morgan Creek over the years has migrated from, this alternative thinking about investments to my big aha moment, which was investing in infrastructure around technological innovations. And it's a wave of about 14 year cycle is where the big wealth is created. on Twitter it's my pin tweet. The greatest wealth is created by investing in something that you believe in before others even understand. you will be mocked, you'll be ridiculed and it's worth it. And so back four years ago, we set up Morgan Creek digital subsidiary of Morgan Creek capital to focus on long-term investing in the digital asset ecosystem and having a blast. had more fun than I've ever had my career. And I love every stage of my career. But I'm having way more fun. Now I get to hang out with young smart people. I get to focus on this innovative technology. That's changing the world anyway.

BZ: I love the term time arbitrage. That is just such a great term. And I find it so interesting because like you mentioned, using the that's so interesting, the endowment model, because that seems so foreign to wall street of the last couple of decades, or, having this model that you're actually considering long-term implications. You're not just looking for the next big short or something like that. What's been the reception from others in the field of that. Cause it seems like so much common sense to be able to look at the long-term, but it's pretty uncommon. What's been the reception ?

M: We actually created a vehicle a number of years ago called the endowment fund and it took off, it was the most successful launch of a product in Merrill Lynch's history and everybody piled in and then something happened, gold financial crisis happened. We actually did well relatively well. We didn't do well. Absolutely. But we did less badly than everybody else. And, in investing the most important thing, right? There's three rules to investing rule. Number one, don't lose money rule number two, don't lose money rule number three, don't forget the first two rules and Roy Neuberger coined that phrase.And it's because of math. If I'm down 10, I got to be up 11. If I'm down 20, I gotta be up 25. I'm down 50. I gotta be up 100 to get even, God forbid you're like Russian market. I'm down 95 when it gets back to even which it will. Cause this has happened before. You'll be up 20 fold buying Russian equities. Great idea for the long-term not for the next week or the next month, but if you can buy spare bank at this price, you make 20 times your money, probably over a long-term period because you're down 95%. But that idea of avoiding the downside is what the endowment model is all about. And what happened though is after the gold financial crisis, the FED and other central banks around the world started pumping liquidity into the market. And that changed things. And what it did is it created this illusion that stocks, the S&P or going up every year. And so over the last 13 years has been pretty much a bull market in nominal terms, not in real terms, but in nominal terms. And maybe people not want to be value oriented. They want to be momentum players. They didn't want to take the long-term. They didn't want to make an investment today in a company that might take 10 years to harvest an S&P is up 15% every year. I'll just do that. So the endowment model kind of faded and can got out of favor and, necessity is the mother of invention that led us to say, all right, if nobody wants to think like long-term investors, then we'll find products that are, and the problem there was, we had an asset liability mismatch. We let people come out of the fund on any quarter, but we were making investments for long-term periods of time. And that doesn't work very well. It's like a bank. I give everybody, went to the bank to take their money. That's a problem. Cause there's not enough money for all the. Because they took $1 and lent it out 11 times and made lots of dollars. And there's nothing wrong with that. Fractional reserve banking is not in itself evil. It just, it operates on faith and custom where everybody doesn't run to the bank at the same time. And the same thing is true in long-term investments. If everybody wants their liquidity, they can't get it. So now we raise vehicles with longer-term lockups so we can focus on making those long-term investments.

BZ: Interesting. Very interesting. So this kind of shifts and long-term cycle, or I guess midterm cycle, you were saying the 14 year investing in something that you're very convicted about, how did that fit into the endowment model or was that a kind of the next iteration for you?

M: So it definitely fits into this endowment model of investing. But it was a discovery by being at the endowment actually. So I go back now and it's easy to tell the story because I grew up on the west coast. I grew up in Seattle and my dad sold and installed mainframe computers in hospitals. That's what he did cause they didn't have computers. And so if you go back to 1954, there was this innovation out in Boston, outside of route 128 around computing and suddenly companies could have computers. And 14 years later, there's an innovation out in Silicon valley on a microchip is suddenly computers can be smaller and companies like Intel and Cisco were formed and they did pretty well. Right then in 1982, 14 years later. And why it's always 14 years. I don't know exactly, but it's really because young people invent all the new stuff, because they don't know not to. And they don't know what they don't know. And so they just go ahead and do it. Marc Andreessen, 19 years old, he invented the browser. Larry and Sergei invented this company, Google, which I'll talk about in a second in their twenties. And so it's that young generation that gets innovation going. Cause the old guys are like, I'm fine. My flip phone is fine. I don't need a smart phone. And it's true. Confirmed myself that as I get older, but the key was I grew up in Seattle, many of my friends, they don't work anymore.They went to work for this little company called Microsoft. I was too stupid to do that. Now I defend myself saying if you've seen the picture of the original Microsoft 11, you wouldn't blame. Now there are multibillionaires. I'm not, I shouldn't make fun of them, but they looked pretty funny. We all looked bad in the seventies. Clothes were bad. Hair was bad. But look at the picture tonight, Google the original Microsoft 11, you go, oh my God, I wouldn't work for those guys either. So Steve bomber's mom said, honey, why would you work for that company? No one would ever want a computer in their house. He has 18 billion reasons. He was right. Mom was wrong. So 14 years later, I'm at my Alma Mater. I'm at Notre Dame and I'm working in the endowment office and we had the chance to make this investment in a company called Sequoia at the time. No one, not no one, but very few people knew who Sequoia was. It was not a famous venture capital fund. In fact, it was on the verge of failure because Don Valentine, the famous founder had hired this guy Michael Moritz, Michael was a wall street journal reporter. He had never done a deal before. The other partners like Don, what the hell? We're the future? Why are you hiring this kid? It turns out Michael turned out to be a pretty good investor, Yahoo, Google a few other things and maybe one of the greatest venture capitalists of all time, but we gave them 5 million bucks. They put half a million dollars in Google. And I actually remember. I remember saying guys, I don't get it. They're 20 search engines. There is web crawler and AltaVista and ask Jeeves, what do you need Google for? It's a stupid name. Now it's a verb, right? We totally reinvented search because Larry and Sergei young guys figured out that the way to do search is not to search the whole internet. There are 1.7 billion websites in the world. Half of them are owned by Google. What are you talking about, Mark? Think about it. When you start typing a question. They've set up a website for every question that has ever been asked. And as soon as you start asking the question, it directs you to a little tiny slice and they've already put all the information that you need to know. And sometimes maybe there's some bias, but that's how they do search and it revolutionized everything. And so we put in 500 K and we took out 200 million. So I now had this aha moment. This is a long story for an epiphany, but I had this epiphany that investing was about long-term investments in infrastructure companies around this cycle. And so 14 years later the mobile phone comes along and apple releases the smartphone The iPhone, their stock goes down 46. Think about this for a second. this iPhone and the stock goes down because people are never going to pay $500 for a phone.My flip phone is just fine. My Razor's awesome. Apple's now the biggest, most valuable company in the world. And I remember being back in Seattle at Craig macaws house, he was having an event for venture capital people. And Craig is a very famous pioneer in cellular telephony, the original flip phones. And I'm asked, as I asked his family office, guy said, do you think the mobile net will be as big as the internet? He's mark, you can me ask me if they want a computer? Yeah, whatever, ask them if they want a phone. Like I already have two, I don't need another one. So yeah, it's going to be a big deal. And what it did is it created the first network. 1 phone not valuable at all.2 phones, a little more valuable, 2 million phones, pretty valuable, 2 billion phones, really valuable. And the network effect is exponential and the people are bad at math. People suck at math, but that's just linear math. If I say what's two times two, both of you will say four. I say, all right guys, what's 17 times 23. I'll wait. That is the limit of human intelligence. The average person can not do 17 times 23 in their head. And so how are you at nonlinear? Exponential regression? Not very good. And so I do this challenge all the time. I say, take out a piece of paper, fold it in half, pull it in half again. I defy you to fold it seven times and it was a bag full of seven times. No problem. And they're like, whoa, okay. I can't fold it seven times. If you could fold it 20 times. It would be as high as your house. If you could fold it 30 times, it'd be the atmosphere. If you could get to 50, it'd be to the sun. And 100 is the known universe. So exponential growth is a really big deal. And so the network effect created these massive opportunities and the light bulb went off for me, just get in front of those waves. So buy things and you know how to find them, whatever the old people like me now say, will rot your brain or is a fad..anytime those two terms, come out, just buy it, tuck it in a drawer and go away.

BZ: I love that guy that was going to be, yeah, that was going to be my follow-up ETF. And the 14 year pattern Have you seen that be very consistent?

M: It's incredibly consistent and okay. What's amazing. So you went 1954 was the mainframe and they had four years, 1954 to 1958. We could make a fortune in deck and Wang and it's winching. Then you have a crash. Then 14 years later, 1968-1972 Intel Fairchild, et cetera. Then you have a crash then 1982 to 1986. Everything's great. Microsoft. Wintel. They have a crash then in 2010? No. Then in 1999, then in 1996, around the internet, 1996 to 2000, everything's awesome. Yahoo, eBay et cetera, Google, then you have a crash 2010 to 2014 to 2015. You have a little crash wasn't as big as the other crash, but there was a crash right now in 2024, which is the beginning of the blockchain era or the trust net as I call it. So the internet 1996, the mobile net 2010 and the trust net 2024. It's when everything in the world, everything in the world, everything of value, every stock, every bond, every currency, every commodity, every private piece of real estate, every piece of art, every collectible car, every private business, all $700 trillion of assets in the world will be tokenized. What does that mean? All a token is an entry on a block. It's an entry on a public ledger. That's all it is. It's not super crazy and exciting. It's really pretty simple, but it's code and we can trust code differently than we can trust people. And if you think about this, every technological evolution goes to making that trust in code better. When the internet first came out, people are like, I don't know what this thing isn't. It doesn't really work very well. And Netflix started a company and they're like, all right, we're going to use it. We're going to have video on demand. If demand is defined as four days, it took four days to download a movie. No one's going to wait four days to download a movie. So they almost went bankrupt and it wasn't until bandwidth was increased because South Korea innovated around broadband and suddenly you could deliver it in less than four days as a Netflix done pretty well. Pets.com. I'm going to deliver, pet food over the internet.Failed. It's the poster child of the failure of the internet, chewy.com. It's the same damn company, exactly the same, but we needed GPS tracking. We needed instantaneous access to information, to broadband. So it's these inflection points in technology and why they're 14 years. Again, it doesn't really matter, but it is very consistent. And so 2024, as great as it's been in blockchain and Bitcoin and all this other stuff, it hasn't even started. The players have entered the stadium, they're warming up. We haven't even played the National Anthem. And I was like, oh, it's the third ending? The eighth inning game. the game hasnt started.

BZ:I think that's a phenomenal point because it's amazing how much we're already talking about Bitcoin and blockchain and web3. And it's The current figures are maybe 5% of the world has cryptocurrency. Like global adoption is still so early that it just seems like it's the next huge network effect

M:If you overlay Mike, to that point, if you overlay the internet adoption and web three adoption or blockchain adoption, we're in 1997. Around the time when we invested in Google. And E-bay, I remember taking E-bay to our board at Notre Dame and they're like, let me get this straight. You want us to put money in a garage sale? Really? No. Think about this. So they were against it. The firm benchmark capital, some of the best investors on the planet they put in, they raised an $85 million fund, $85 million, not a lot of money. And they put a bunch of money into eBay, not all of it, but a decent amount. They took out $10 billion. The whole fund was a 96 X the whole fund. So she put it in a dollar, you got $96 back and on a garage sale company because people didn't get it or look at the market cap of PayPal today. And how many of the PayPal mafia are out there doing amazing things. humans are optimistic, right? If you weren't optimistic, you'd literally sit in your house in sheer shuttering because you wouldn't go outside. Cause you could get shot. He get eaten by a bear, all kinds of bad things could happen, but we're optimistic. And so we go on it's I always say, who was the third guy who went out to try to get a Mastodon with a spear? Cause the first two didn't come back. So who was the third guy who figured out, if he hit him right under the chin, you can kill the Mastodon. He was a hero, but, or who was the first person that tried surgery on without anesthetic before we figured that out. So we're optimistic and we try new stuff and that's good. And we have progress, but we're unable to imagine the unimaginable, right? We can't imagine. Right now we are talking to each other. We're actually, we're not talking to it. We're talking to a metal box, right? A metal and glass box. And it's coming in my glass metal and glass box into the airwaves, into a cell tower down through fiber optic cable out another cell tower into the airwaves, into your metal glass box and into your earphones in real time. Are you kidding me? I could imagine that 20 years ago, 30 years ago, no one. So it's really hard to invest for that long cycle opportunity set because you can't imagine. So who could imagine that money as we know it, which isn't money it's currency, the only money is gold because money is something exist in the absence of a liability dollars are not money they are currencies. But who could imagine that all of money will eventually be entries on a book? Not very many people. Yeah. It's amazing to me. And you spoke to this. The thing that we are the worst status imagining unimaginable, right? Cause we have a word for it that, that just goes to show you how big a bias it is.

BZ: We have a word for it. It's unimaginable. And so I think the bias is to go, okay I can't do that. Or I guess the thought process is, I have this bias. I can't really know what's next because I can't see it. So therefore, I'm going to tighten my time horizon. I'm going to look for the short play I'm going to, and nothing against day-trading.I've seen it to be profitable, but I'm going to look for this short, interim intraday play or a week play or month play. At the expense of a longer term play, that may be an investment that may pay off 96X like, like the eBay story. And so it's a great, it's interesting that biting, there's nothing wrong with trading.

M:There's nothing inherently bad about trading. It's hard. It's work and it goes to income and passive income and investing, we all work hard, right? We're doing what we do. We either create content or we manage somebody's assets or we make widgets, we all have this work that we do, but you think about it, the return on that, that work pales in comparison that if you can have something, take up a piece of real estate that you own, that someone else pays you rent and you make money while you're sleeping, it's actually a pretty cool or a Royalty. Think about Qualcomm that every time somebody builds an Android phone, they get paid. That's cool. And so they monetize their intellectual property and then you get into investing. Sure. If I can figure out if CEO, Adam tomorrow is going to wake up and do another great deal, like buying a gold mine, maybe I can get out ahead of AMC and it'll go up and I'll make some money, but what if he wakes up and he makes a bad investment, actually gold mines are usually are bad investments, but maybe this will be a good one, but what if it makes a bad investment? And it goes the other way. That's that? I don't have control of any of that, but if I can Intuit that, let's see. All right. Blockchain technology is really just an operating system for this injured, connected everything. Okay. That's interesting. So what makes money. When goods get traded marketplaces exchanges.

So what if I just own a little piece of one of the exchanges like Coinbase, it doesn't matter if the price goes up, price goes down, people got to trade it. They take a cut. That sounds pretty good. If you look exchanges or there's the NASDAQ exchange with London stock exchange or the Brazilian , all of those have been great investments over the long term. Even the LME before they killed themselves the other day, by letting the Chinese billionaire say, "oh, I'm sorry. I know I lost money, but I'm not going to let you take it from me." And they screwed everybody else. Just mind numbing, how to destroy the capital of a business and one easy lesson, but there's time arbitrage. Right? There's short-term thinking I got this angry Chinese billionaire, right? Who's given us a lot of commissions saying he's not going to honor his margin call and I'll just cancel all the trades. That sounds good. Oh, shit. I just killed the golden goose because now no one will ever trust my exchange again, ever. Let's go to a different exchange. That's negative time arbitrage.

BZ: So the way to, and I guess I, wasn't trying to position, day trading versus long-term investing because you're exactly right. They are very different. I guess my question that I was building to is with that bias in mind.How do we look at all of the trends that are out there, right? Because we could make an argument for metaverse right. that is the next 14 year cycle. Not withstanding there's crossover between the two, obviously, not withstanding that crossover. Okay. This is what I'm going to do. Or quantum computing, this is going to be the next large leap in computing technology. We're going to be able to calculate things we've never been able to before. So how do we think through these things that we might be seeing as trends or fads? And I like your rule earlier. Okay. "If some old fart says, oh, this is just a fad buddy, look into it." But how do we think through that? I tend to be more cynical. So I'm thinking, all right, great. We have all these trends. But how do we imagine the unimaginable? Sounds like a riddle

M: it's the question that all of us should be spending at least a little time on, in fact, one of the best things to become a better investor is to spend some time every day or at least every few days just away. Not staring at your screen, take a hike, take a walk, meditate, whatever it is, and actually just think and try to cobble together these ideas because you're a hundred percent right. But the metaverse oh it's just Facebook. No, come on. Just think about that one for just one second. The metaverse is the decentralization of technology and the eraser of nation states and industrial conglomerates. That's clearly what the decentralized world is. So the idea of a centralized organization being the metaverse, it's an oxymoron it's jumbo shrimp, or military intelligence or whatever, and it just doesn't work. but the metaverse is big. Okay. So most, so maybe the metaverse is this next trend? And my 14 year cycle is all about computing power mainframes, microcomputers personal computers, internet mobile net trust net. And to your point, maybe the next is quantum net actually like that. I'm going to think about that a lot. Im going skiing next week with my son. So there are other cycles could be coincidence with the same 14 year cycle, or maybe they could be offset maybe within the 14 year cycle. There's a seven year offset for these other secondary or second order effects. Yeah, the metaverse is clearly something that, that is created out of this innovation around computing power. And so we do have to think, okay what does that mean? Does it mean I should invest in these centralized organizations that are renaming themselves? It's like when we were in long island ice tea named themselves long island blockchain stock went crazy for awhile, but what do you do? You don't do anything in blockchain. you make tea, but it's a great meme play, right? But they did it in 2000 and last bubble. I lived it and I, we invested in a company, true story called art technology group and what they did all this company. Did they help companies change their name to die? Because if you change your name to.com price went up. So these guys actually then listed as a public company. They were consulting company, long story short. We'd put some money in, through a firm called tutor ventures up in Boston. And our cost basis was 50 cents. The stock went public at a hundred dollars. Okay. So maybe 200 times our money. And I called the principal and I said, what should we do? He says, I'm an insider. I can't really talk. But I can tell you two things, revenue is 6 million market cap is 6 billion. And there was a silence. He's mark, did you hear me, Mike? Yeah. I heard you ı was like SELL, GET RID OF IT NOW! Here's the crazy part. It went to four. So it went down 96%. And I think about that at four, it was still an eight. Off our call list, but we sold at a hundred made 200 X. But the thing is that company didn't do anything. And these, so the third part of the question is, so you've got the main wave then how do you have then do you have these other opportunity waves, but then you got the scams that come into it that you want to avoid. So there's lots of crosscurrents and how you try to think about these big themes. But then the other thing is if you spend too much time thinking about it and not enough time acting on it, right yet, paralysis by analysis, you miss all the opportunities. And this is, to me, one of the things that's most, most important about investing is winning investors.Great investors lose more often than bad investors. They do win a lot, but they lose a lot. The reason losers, bad investors don't win or lose. They don't do anything. They're so afraid of losing that. They don't actually commit capital. So to your point, rather than try to figure out, do I, can I figure out which is the one I like to put bets and there are bets in a lot of different places. And then when things start to go double up, most people want to double down, right? When things go against them, they want to put more money in to prove that they're right in the market's wrong. The market is never wrong. The market is always right. You are wrong. And when we make mistakes, it's okay. As long as you Ralph. Okay. And we need to talk about this. Cause cause from Dean Smith and it's March madness and Tarell's play tonight, so recognize them. Not that hard. It's usually right in your face. Here's the hard part. Admit it. Yes. I made a mistake. there was a show on TV a hundred years ago called happy days. And there was this guy, Arthur Fonds rally, the cool guy. He said, Hey, and he couldn't say the word wrong. He couldn't say the word wrong. You got to say, you're wrong. Then you got to learn from it. Most important thing. And thinking investing is with every investment we get richer or wiser. Never both. We either learn something or we make money because when we're right, we don't actually analyze. We just say, oh, look how smart we are. Whoa, of course it was so good when you lose money and then you've got to forget it. And the forgetting is really important. And this goes to the other great coach who is still in the tournament as well. University of duke at Durham down the street, coach K has this great line. He says, you know what? Separates great. Players slash investors from the average? No, he says the greats focus on the next play. Watch the tournament game tonight and see how many times did you, so miss a shot go down and commit to a stupid foul. Cause they're thinking about the shot, a great player, doesn't even remember taking the shot, goes back, plays good, different defense steals A ball makes a layup.

Bad investors they're constantly focused on, oh man, I'm a mistake. And I just can't believe it. It. Got to learn from it, but you got to erase it, forget it and go get the next up.

BZ: Individual plays versus ETFs?

M: You guys probably both play Fortnite. I watched my son play Fortnite. Does he take a shotgun or a sniper rifle? He takes both. Cause a shot is really good in some situations and the sniper is really good at another. So yes, the answer is yes. You definitely want a spray and pray and the whole spray and pray.

I prefer spray and then water, the seeds that start growing. Okay. That's better to me and I pray a lot too, but hope is not an investment strategy. Hope is a four-letter word, particularly in investing, but the sniper rifle a hundred percent. And here's the thing. If you're willing to do the work, the sniper rifles really awesome, because if you actually will do the work that most people won't, then you get a better shot. And if you take that better shot, you can make a lot more concentrated portfolios, make you rich. Every great fortune in the world came from constant. Concentrated stock position, concentrated real estate position, contrary to business ownership, every fortune start with concentration. Now the joke is how do you create a small fortune start with a large fortune and stay concentrated, concentrated long enough competitors will come up and chip away and take all your wealth. So diversification keeps you rich. So if you are in the business of making money, which when we're young, we should be and ice. And I'm really good at talking because I sucked when I was young. I didn't do any of this stuff. I talk about. In fact, I sent a pre out to myself the other day, maybe a year ago, advice to my younger self, all the things that I did wrong, that I want people not to do wrong. And the key somebody asked me, how do you become a better investor in. Like all the time, a lot, like all the time and do the shotgun and do the sniper. And, but when it goes against you just move on, just sell and move on. And when things start going, don't pull your weeds. Don't pull your flowers, right? Peter Lynch has this great line. He says, investing is super simple. You pull your weeds and you water your flowers. But he says, the average investor does the opposite. They pull their flowers. Cause they're so afraid to loosen and they water their weeds because they want to prove they're right. Soros is not whether you're right or wrong. That has nothing to do with anything. It's how much money you make when you're winning, how much money you lose when you're wrong. And if you can constantly minimize your loss. First loss of the best loss and let your winners run and then do that work so that you think about a sniper. You guys have seen the movie sniper? .Does he just like randomly pull the thing out of his bag and then start shooting? No, he plans. He sets the stage. He gets where no one can see him. He's got the stuff, the cammo on. He lines up the shot, he waits and he makes the kill. So it's not like that's planning. And so if you do the work you set the stage, you do the plan, you get the cammo, you get the right rifle. You get the right ammunition. Yeah. You'll make some, you make some great investments. But that does mean an ETF is bad. Now the problem, the only thing on ETS, just make sure they actually do what they say they're gonna do in what you name the ETF. So you could have value ETFs that are filled with 30 times revenue. These is crap companies. Yeah. It's not value now, but the new value when it goes down 95%. But, and again, this personal experience. So when I, my first job, I had a 401k and, we had six options and one of them was the blue chip growth fund. And I had a thesis that the world was going to get lousy. This is back in 1991, 1992. Oh, we're going to have recession. I'm like, I'm going to put my money in the high quality blue chips. So I moved all my money there and we had the recession just like we thought, and this thing went down 40%. What the fuck? Probably shouldn't say that, but what the hell? And I go on, I look and it says in the footnotes though, "the blue chips of tomorrow" What the hell? This is my fault. I didn't read. I gotta pull that prospectus.

BZ: It's interesting. I want to go back to what you said earlier, And I agree with everything you said, and I think it's actually one of, one of the episodes we recorded about two months ago. At this point we talked about just thinking about. How you invest in approach money and what are your biases and knowing yourself. And so for me, I know that I am very bad at acting quickly.I take, and I do the analysis paralysis. For me at certain points and this is one of them right now. I don't have the time to go and research and then implement and act quickly. Cause I know I won't. So I'm just going to buy a bow broad basket for now and hold it. And then like you said, in your answer, there's different ways to double down and concentrate, right? Whether that's your skills, whether that's, I'll say starting a business, right? So there are different ways to think about investing, especially as an individual. And so I, I'm interested to hear what you would say about the asset allocation portion that you said earlier, that's almost more important than picking the winners and losers because it seems like you can build a great portfolio that has a phenomenal asset allocation out of individual stocks, right? And individual positions. You can also do it with ETFs and it might be easier for the individual to do that. Factor in a lot of things. You've got to do your research on those ETFs. You can't be buying on the name of the tick thing, but it's that's the answer more than one or the other, right?

M: Yup. No, you're a hundred percent right. Austin and the ETFs are an amazing tool because they give you big swaths of the canvas. So if you think of a canvas and it's got all the different colors all over and, international and emerging markets and developed markets and equities and fixed income and commodities and currencies and derivatives and leverage and all the things that you need to build a diversified portfolio. Using individual securities, you can do it. It's hard, like super hard because you got to decide, okay, I want autos, but do I want European autos or Japanese autos? Or, what about this Tesla thing? Is that really a car company? Oh, I thought it was a software company. It's a car. It sits out, it collects dust, just like every other car. And, oh, by the way, you're only in your car 3% to 4% of the time. Think about that. You're inside your car 3% to 4%. So I would say don't spend a lot of money on cars unless you're like really into cars. But the interesting thing about all of this is how you build that portfolio is important. So if you think about the four steps of investment asset allocation, manage your selection, portfolio construction and security selection. So the 85% is in those first three, that is the allocation piece. And then the security selection piece is the 15%. So it really doesn't matter over the term, whether you own Ford or GM, it actually doesn't. In short periods of time, it can matter a lot for sure. But over long periods of time, it's less important than knowing should I be in automobiles or should I be in flying cars or should I be in, whatever. So the big picture asset allocation, should I be in stocks or bonds? Credit or equity, should I be in currencies or commodities? Should I be long biased or should I be long short? Should I be fully hedged? Should I be in cash? Should I be in, in emerging markets or international? Where's the growth, all of those big pictures. It's those asset allocation decisions are really important. So that's where I always start. And I try to come up with five big themes 10-year trends that I think are going to drive investment and growth. And one of mine is the middle classification of the emerging markets, right? There's about 3.5 B that live at middle-class or below around the world. Most of them in Southeast Asia and. Most of them are going to move up. And it's just math got to move up. Now, China alone, China took 750 million people out of abject poverty and put them in the middle-class over the last 30 years. I don't know. Maybe those people that want to move up. They've seen Dallas. They want that life. So there's probably some opportunities in retail and consumer in China over the next. Give or take giving us the size of the U S and Europe put together. So that's a big thing. How do you play that theme? I could buy a and have bought this ETF called K web. Why? Because it owns technology companies that are making those middle-class lives better now marked I think is down 90% in the last year. Yup. So I bought it two weeks ago because anytime something's down that much, you gotta buy it. It doesn't matter what it is. If something's down 90%, you got to buy it. And so how else would you play the growth? The Asian consumer commodities is going to be more in demand. So I play it that way. Then you got to say how am I going to implement? That's the manager selection piece. So manager selection. I could do it myself. I, Mike and I could go decide, we're going to go rifle, shoot. We're going to sniper. And we're going to pick the stocks. SoI'm going to buy Alibaba. I'm going to buy jd.com. Totally fine. Totally acceptable. But what if we miss Mae Twan? What if we miss Pendo that K web is going to have them all. So that's outsourcing the manager to the group. That's doing that. Now the challenge with that is you got to pick between the managers and Howard marks has this great line. He says the problem with picking managers and picking people to manage your money is you have to decide between the good person who sounds good and the bad person who sounds good. They don't let the person who sounds bad, make the presentation. And it's so true. They all sound awesome. But then there's portfolio construct. This is, let's say I pick 10 things, either individual stocks or ETFs or hedge fund managers or mutual funds. I got 10, 10%, each 50% to one and 5% to the others that matters. It matters a lot actually. And there's capitalization waiting. There's equal waiting, there's rebalancing or not rebalancing. So all those portfolio construction things matter. Now the nice thing is most of us, we have lives. So it's like the cobbler's kids who have no shoes. We intend to manage our portfolio and we intend to rebalance and we intend to do all the work, if I look at my IRA, I have this little IRA from your way back when, and I look at that relative to the things that I do, or I just put it in my funds that are managed by people in my firm. It ain't close. You have all these great ideas. Why didn't you just put them in your IRA? Because I got busy and I didn't do it. And I wasn't smart like Peter teal to put in, private shares, which is what I really should have done, should put private shares at Morgan Creek. And then I should have written them down to the, basically zero in the global financial crisis like he did. And so then he gets this big basis and it created billions of dollars. Now I wouldn't have created billions of dollars, Peter is a genius. He's a mad genius, but anyway, so it's a long way of saying allocation first, spend your most time there because it's the most impactful. And particularly for younger investors, I have this thing that don't listen to anything I, or any other pundit on diversified portfolios and portfolio management. Under 60 years old, don't listen to that. Just concentrate on venture capital, equities tech. Like I believe it's not hyperbole. I believe it should be against the law for 25 to 65 year old people to own bonds. It is the waste of time and money. You don't need the volatility reduction because your volatility reduction comes from your future earnings. That is your fixed income.

BZ: What are your emotions and feelings looking at blockchain now? Is this kind of is this really exciting?

M:Oh, my God. It's the greatest look. It's the greatest wealth creation opportunity. I'll see in my lifetime and I'm gonna be around a long time. I got an 11 year old still. So I, I have this funny thing, we're a good Catholic family. I joke we had nine. We just skipped the middle six. So we have two older kids and a baby. And so we're going to be, I'm going to be around a long time. We'll be working for a long time. And so I'm not going here, but this is the greatest wealth creation opportunity I've ever seen because we're building on great tech. When you built the internet, you were building on shitty tech client server technology is really bad when you built the mobile net. You're building on pretty good tech. The internet was pretty good, but now you're building on top of an installed mobile net infrastructure. That is extraordinary and blockchain is a technological advance that is not linear, but exponential. So all these things are incredibly powerful. So I look, I got exposed to blockchain and Bitcoin in 2013. I didn't understand it. And so I was not a cryptography student and I missed it. I got blockchain, I got infrastructure my whole 14 year cycle thing and have done quite nicely. We've made good investments in infrastructure but I missed the opportunity of, a generation to really be early in, in behind joke that I got introduced to it the same month as the Winkle vie. And they're multibillionaires and I'm not. but there's a movie called the graduate and the graduate. There's a scene where he's asking his uncle for advice is one word plastics, go into plastics, which was good advice in the sixties. And today I said one word, "Jack blockchain go out to California. He wanted to live in San Francisco, said, go work at Coinbase." And he goes out and he interviewed and talks to people and it's I don't know, dad, maybe it's gonna be a big deal. I'm just going to KPMG safe. Gets me to San Francisco. " you're going to hate it whenever he did hate it. Quit after nine months" Coinbase goes public. Cause I find the right should have gone to Coinbase, but not as bad as you think you are. I might go, oh, do tell. I told you to go to quit, but you didn't lever up the house and put on Bitcoin. I'm like, "oh you a little shit." Okay. That's fair. No, one's crying for my son. Cause he works for snowflake and he's doing great, but, and I'm really proud of him, but I think it's interesting. It's a long winded way of saying I have never been more excited in my life. I've never had this much fun in my whole career and I loved my career. I loved every stage of my career. But my career has been in chapters, right? Chapter one, I work for not-for-profits. I was an allocator. I had fun. I loved it. I got second income working for the universities. Chapter two, I built a really nice asset management company, Morgan Creek, capital chapter three three years into a 20 year stint of tokenizing the world. And I really am having more fun. Now I get to hang out with young, smart, really creative people. I'm seeing technological innovation like the world has never seen. I now spend all my time doing venture capital, which has just so much fun backing founders and watching them build things. And it's, again, back to that long game, if you think that there are only four ways in the world that you can make money, all four require you to take risk. If you leave your money in cash, you get the risk free rate. Hence the name because you're not taking any risks. And unfortunately, if you do that, all your wealth is chewed up by inflation, right? Leave your money in the bank today, you get less than one. Inflation is eight, that sucks. So you gotta take risks. You can take credit risk, first risk.You can buy a bond. Now bonds are an actual claim. If you don't get paid, you can Sue pretty good deal. But you don't get paid a lot. You can take 2% above Risk-free rate not a very good deal. Look at bonds day, 2.4%. Woo big deal. And then you can take equity risk. Second risk equities are contingent claim. Meaning you only get paid if all the bond holders get paid. And so that's, that makes 7%above risk free rate. That's pretty good. So equity should be at the core of your portfolio. Then you can take illiquidity risk, private investments, private equity, private real estate, private equity, private debt, better get 5% more, 12% above risk-free. Awesome. 14, 15% compounded venture capital, even higher. And then you can use structure or leverage and leverage cuts both ways. Sometimes it's good. Sometimes it's bad, but illiquidity and venture capital and innovation as an asset class. And for all the ribbing she's taken, Cathy Wood is exactly right. Innovation is an asset class. It is where you want to invest for the longterm. And that's what I'm doing right now.

BZ: That's amazing. Mark. It's been so good to have you on, I know we're running out of time here. But it's just been an absolute pleasure for both myself and Austin. Thank you so much for the time.

M:I appreciate you guys having me on the show. I love this. That you guys are doing a show on the longterm, instead of all the day trading stuff again, nothing wrong. Day-trading totally fine. But sometimes you got to step back, take a hike, think big thoughts and really enjoyed the conversation to appreciate all your hard work, getting ready for it. And we'll talk again soon.

Support this podcast at — https://redcircle.com/the-long-run-show/donations

In this episode of The Long Run Show, we are going to be talking about energy , how effective the sanctions will be on Russia in the long run.

Hosted By:

Austin Willson

Michael O'Connor

Transcript:

welcome back to another episode of the long run show. This is Austin Wilson. I'm here with my cohost. Michael O'Connor. And today we are going to be talking about energy very timely subject at the, as we're recording this, there's the whole Russia, Ukraine, conflict, war invasion, aggression, whatever you want to label it happening over in Europe and obviously with Russia being one of the top producers of natural gas and.

In the global economic system we thought this would be a very timely subject. We've been wanting to talk about energy for a while though. Mike and. This is just there's a lot going on. There's talks of sanctions being thrown around. And how is that going to impact European countries in the U S and  Western countries.

 So China's role in all that is, there's a lot of moving parts here and some interesting solutions as well, maybe. We don't know all of those. But we'll just talk through that and try to think through what this means for oil stocks or companies and anything related to oil, which has everything.

So it's true. That's a good way to put it. And like you said, we've been talking about this for a while. We've hinted at we've definitely run into your energy discussions, especially in our ESG one the whole. Green energy thing. And then all that, there's a lot of been a lot of different opinions and different kinds of paths that different companies and especially national governments have taken.

 We've seen countries in the last decade, really abandoned nuclear war. I don't know. I pretty severely disagree with it's clean, enormous amount of energy. You're not necessarily reliant on other countries to supply the fuel. Maybe you don't have uranium mines, but you usually can usually pretty dependably get uranium as a national government.

So it's that's a whole thing. I'm a big nuclear guy. I think I've heard that you are as well. So we might, this would be maybe one where we're not really adversaries at all. We're just agreeing and on our soap box, but. Hey, what's a podcast for if not a soapbox. Exactly.

So it's been interesting though to watch okay. We've seen different, like energy has driven. Or it's driven the us going into the middle east and mulling around, over there doing different things. And so it drives a lot of foreign policy but also I think that the less more.

Commodity gas. As far as energy goes, that's very important for heating homes and businesses, and a lot of different things. Obviously oil touches everything.  Just about everything you've touched during the day has something to do with oil because of plastic and parts and.

Yeah, literally everything. My, my phone case here is got oil in it. The cord that's connecting my headphones to my laptop's got oil in it, essentially.  It's  in everything, but natural gas is also a huge factor as well, especially if we're talking Europe, they get a lot of their natural gas, like Poland to Germany, get a lot of natural gas from Russia.

And what is this whole conflict due to those supplies?  It's the middle of winter, so you're going to need to heat your home, whether you're in Southern Europe or Northern Europe and natural gas is is one of the things it's not a lot of people with. At least in Europe that I know of maybe some more in, in the Nordic countries  with their interesting cozy hygienic, he, I forgot how to pronounce it quickly or something like that.

Yeah. Going to pronounce that, but a nice cozy wood burning furnace. Yeah, exactly. So I think of the two almost at this point, as far as energy goes, Natural gas is something that hasn't been explored as much. Now I know that doesn't drive as many economic outputs, but it is definitely from the consumer, like direct directly of consumer impact.

 That is definitely a factor that I think hasn't been talked a lot. What are your thoughts there on the natural. End of things. That's an interesting point because we definitely live in a very oily world. We're very, everything's viscous and wonky   but that's a good point. I In order to so many, I'm a big.

Cooking guy. I like gas more than electric stove top. I'm a big gas ranger fan.  I love my natural gas Austin. I'll tell you what. And so the heat a house or to cook a steak like that is such a huge those are two very basic survival necessities heat. You got to stay warm to stay alive.

You got to eat to stay alive. Now you could just eat refrigerated foods instead of cooking steaks. But what's life that a good steak net here. And again, maybe I'm vegetarian listeners but Hey you could roast some nice broccoli or something with that, but here's the thing.

Even if you're roasting some nice broccoli or eating raw refrigerated foods, your refrigerator uses natural gas. That's a problem and it might be heating your home. So I think it's one of those things where people definitely focus on oil for good reason, but natural gas is also a somewhat of a large resource that I don't think it's enough, quite enough.

And it's w it's winter in the Northern hemisphere right now, too. It's smack dab in the worst, my least favorite part of winter, when Christmas is long gone, it's just cold and you just freeze your nose and you're just sad and just waiting for spring. So this is where it's time for no gas. Exactly.

Exactly. This is about the worst time to have a cold house. So it'll be thing to see what's done as far as sanctions. I know. This is a very evolving situation and I'm sure by the time you might be listening to it, it's going to be different than what we you time. But just a month ago in January, nobody would have been thinking that there was going to be any impact on oil or gas or sanctions in that realm.

And even at the beginning of the invasion, Eh, people were okay. There's going to be sanctions, but commodity markets are going to be. We're not going to see sanctions on oil or gas. That's a bridge too far for Europe, but it looks like the European union is trying to support Ukraine and however they can.

And so it seems like that options on the table and may by the time you listen to this, maybe a thing there might be sanctions out by that point. So what is that what does that do here in the us? I think we're very far shielded from. 8% of our oil imports actually come, we get a lot from Canada.

Like over half of our imports come from Canada and we produce enough oil to be self-sufficient. Now we still important export oil for various reasons. In the U S I don't think we'll be quite as hit by that as they will in Europe. But you're, what are your kind of thoughts on that? As far as what's the.

 As we look at Europe, having trouble with not being able to get enough natural gas or oil coming through their pipelines. Yeah. It'll be really interesting because we've seen a few days ago, Germany stopped the the Nord stream to a big pipeline. And that's interesting that the. I think the invasion was not what a lot of people expecting.

Like you say you're expecting a lower impact on commodities markets, lower impact on economic situation worldwide, less impact. Russia, because I think a lot of people thought it was going to be just a replay of 2014. They go in, they just make a lot of weird statements like, oh we're just protecting our, I said  this is insane.

I  Munitions and rockets on civilian buildings and stuff. It gets, it's very different. This is a kind of a war of attrition style invasion. And which is just so sad to see and so scary to see. And I think the interesting thing is. It's really galvanized the European union to say, Hey, you know what?

We're not afraid to lose out on some natural gas. We're not afraid to lose out on oil if it means having the safety of our citizens and of our neighboring countries. So I think the interesting thing is it's probably going to hurt the sanctions and the actions that are taking place are, I'm sure it's gonna.

Pretty much every country in Europe's and every citizens pocketbook, but I think it's the right call. And I think that in the long run, as we always talk about I think that it will push more energy independence on both the constituents of the EU and the EU as a whole. I think that you will probably be strengthened as a diplomatic entity and they're going to have to say, okay, let's maybe let's figure out.

Some sort of energy sharing program where member states are able to frequent. By cell transmit energy. Maybe I personally, I don't know if this already exists, but I would imagine if it doesn't that this will probably happen where you'll see. I would imagine and hope that a bunch of nuclear energy generation being built France has I think the highest penetration, highest amount of.

 Energy is nuclear of any country in the world, and I'm sure they have the the companies, the technicians the expertise to be able to rapidly scale that in the EU. So I think. A lot of collaborative action being taken, which I think is really interesting because at the end of the day, in the short term, it is going to Jack prices up.

It is going to hurt the pocket books of likely every European citizen. But what Putin's done is essentially galvanize all of your up against him and against his imports and his products. And really become a pariah that you know, is at the end of the day, I think simply going to integrate.

Collaboration and cooperation, especially on energy, which was this Trump card. Trump Putin ironic a Trump card that was holding over Europe. And now it's  all right there, Take it is what it seems like. Yeah. It's interesting because, and we've spoken about this a little bit. How we're we have grown up in, in the last 70 years has been some of the most peaceful times in the entire world and we've grown this interconnected global economy and of course that leads to.

Typically more peace. There's always people taking advantage of it, for sure, but there's typically more peace if everyone's relying on everyone else for resources and trade and imports and exports, but then The winners and losers in all of this, right? You have smaller European countries that are just going to totally pay the price for being dependent on Russia and gas and oil in the short term.

Now, hopefully like you're saying, I really hope that the European countries can figure out a way to satisfy their need for energy in them in a more efficient manner. But my it's interesting because I think energy independence is probably has been up to this point. I think this is a great global example, but it has been an underrated kind of national security protection that most countries have not thought about before.

 But I think they're going to think about a lot harder in the future and I wonder what that does for. This is not a political podcast, but I don't know what that does for relationships between countries, because economics obviously has played a huge role in the piece we've seen in the world over the last seven years.

 And I don't think that is at all by mistake. I don't think that's at all by coincidence. That's clearly been the case, but then  you. It's going to hurt European countries to not have this natural gas and oil. And also in the short term, Russia is creating its own rift with everyone else.

Besides some countries, China, North Korea Iran, some of their allies  and friends national friends. Russia's kind of creating this rift for itself over the long run. If we want to get back to a more peaceful world, how does it look? And obviously this is not to like, try to excuse what Russia is doing right now, because it's absolutely abhorrent.

But what does that look like? If we get past all this and hopefully no war like global war breaks out, it looks like. Country back into the fold after you've gained energy independence, right? Because Russia, some people have said Russia is just a gas station that happens to have a country connected.

 They're there Saudi Arabia that they're very heavily dependent on oil.  What is, what are the long-term impacts of this from a, both an. Economic standpoint and also a peace standpoint just because  the, those ties, those global ties and interdependencies really disincentivize people, countries, not people but countries and their leaders, whether rational or not to go to war.

  If you need something from another country, probably not gonna attack it. You're probably gonna find a better way to get whatever you're trying to get from it. And so I think energy independence is a good national security kind of strategy, but at the same point, how do you still. Or balance that with being somewhat dependent to be peaceful, it seems to me account everybody just being good pers clearly.

So there has to be some incentive, usually monetary to, to promote that. And here's the thing that has been blowing my mind is imagine 60, 70 years ago, right after world war II, Europe is rebuilding. Asia's rebuilding everything who would have thought that Germany and Japan would be our two.

Primary economic and diplomatic allies in this kind of a situation and the buffers to Russia, which was the ally in world war II. It's it's pretty crazy how in which I think that gives hope that in the long run. Over decades, whole countries can really be brought back into the global sphere.

 Germany is now a leader in European, the European union as a pretty much the diplomatic center of Europe, I would say. And Japan is absolutely economic powerhouse. Both countries have seen. Incredible regrowth and rebirth. And there's no reason why, you know, after all this, even in a worst case scenario, Russia, wouldn't be able to come back and I'm sure that the global community would be happy to receive it.

  Barring some sort of truly horrific apocalyptic event, I think in the long run countries. Are extremely resilient, similar to a person getting a cold or something they can knock you out for a few days. But I think that at the end of the day, the people of of a country. Always attempt to, to come back towards the community.

 The interesting thing in this situation is that just the amount of relatives across so that Ukrainian and Russian citizens are very close in terms of bloodlines and in terms of cultural heritage it's such an interesting situation to see, and it's sad to see such close nations fighting.

   And such aggression from Russia. Can you imagine if we just invaded Canada? It's wild. It's wild to think about. But I think it's also been a wake up call for the world and that wars do happen and it's important to be vigilant and be focused on the long run and say, okay, just because things are good right now.

It doesn't mean things can go crazy things mean things can't go crazy. And a few days think about even just a week or two weeks ago, it seemed like it was all just talk on, oh  it's probably just positioning whatever and that it's real.

So I think it's a good reminder. But in terms of back in terms of energy I think, like you said  going to a. Looking at energy as a national security interest and not to not to go too much on the Ukrainian situation right now is is powerful. Being able to provide energy to your citizens is.

Crucial in this day and age with the amount of infrastructure that relies on it. Refrigerator, washing, machine heating, we're talking natural gas heating. You're getting your house, cooking your food. That's about as basic of a national security interest as it can get almost. Yeah. It's it's amazing when you put it that way.

 It's like a. Pretty much all of the 21st century gins that we appreciate and love are our washers are just wash it. Here are our refrigerator, our clothes drying and washing machines. Those are all rely on energy. And so if you don't have that, you're really launching yourself back hundreds of years.

 If you can't provide energy, clearly a big issue. So let's dive into energy specifically, cause it's the broad term, right? Involves oil Metrocast, anything otherwise known as turbines. Sorry. The you can tell I'm really big on turbines anyways. Wind solar might be a thing.

 Nuclear, you mentioned earlier, you really  there's coal, which pretty much everyone agrees is one of the worst. So there's hydro hydroelectric power. There's a lot of different ways to create energy. We don't have a lot of good ways to store energy. That's one of our biggest issues.

 Humanity a thing. We don't really have a good battery yet to necessarily store  some less reliable forms of energy. But what far as the landscape that I just laid out? A lot of people break it down into like renewables and fossil fuels. That's the normal terminology. Is there a better way to approach that?

Because I feel  I feel like that's not always helpful to just break it down to, oh, this is renewables and green and these are fossil fuels and black and dirty. And. It seems, it must be a better way to, to look at this because from an innovation standpoint, usually you gotta come in and at a problem from a different angle  and approach it in a new way.

And so I like what you were saying about nuclear. I, for one have heard very convincing arguments on its benefits. And on its long run capabilities, obviously we've seen stuff like Chernobyl and what happened, I believe. Japan or it might've been in China with the tsunami hit a large nuclear reactor Japan.

Okay. Got it.  Obviously we've seen those disasters, but it seems  the way nuclear has evolved and the point that it's at now this is a beautiful case. Study run more than 70% of their country's electric grid on nuclear energy. And they're in for the long haul. Clearly they built up a lot of facilities for it.

 And so not just nuclear, but hydro electric power. That's another huge resource that's untapped, especially here in the United States.  Actually I talked with a company that was making  a process to allow fish, to go past dams so that they could hydro and more dams and basically not impact the natural environment around the dam and have free flow.

Wildlife, but also have electric power being produced there and balancing both sides of it. So what are your kind of off the wall, thoughts on energy? Like how do you think about it differently? Because I don't really like being forced in those two boxes. Okay. Green or fossil fuels.

That's the only two. I think it's very unhelpful when it, when we try and look at this problem, I actually really, I really appreciate that because I think. That's pretty spot on because if you just, if you're just categorizing all energy in terms of does it emit fossil fuels or not, or does it emit, does it use fossil fuels and emit some sort of  side effects into the environment?

 It's almost going back to our ESG episode of that's a certain methodology. I think that it doesn't describe what's actually going on at a deeper level. It's a methodology to ease. Look at the broad scope of, okay.  These things and it hearkens to. To design thinking and specifically called a one input system.

So let's say your car on a good day when your car is not breaking down, it's a one input system. So you just input gasoline and it works as a system is at least in terms of your psychological perception of it. Sure. You got washer fluid, you got oil, all those things, but in terms of your psychological perception, it's a one input system which makes it very easy for your brain to get.

Categorize it very well. And when it's working well, you have to use very little psychological energy to keep track of your car. Even better for a, something like a Tesla or an electric car where really pretty much is a single input system, except for windshield washer fluid. I think it's the only fluid in a Tesla.

 So in something like that, it's like a pretty much a true single input system. You put electricity and maybe you've got to worry about the washer fluid every three, four months or something like that. But it's really not that big of a deal. And I think that there's a tendency for both in terms of regulation on the governmental level, down to the consumer level to think of, to try and categorize.

Energy forms in a box and think of them as a single output system, almost okay. Wind and solar that doesn't put anything out. So that's a good, that's putting out like goodness into the environment. That's a net. Good. And then if you like, ah, coal, natural gas, that's a net bad.

That's putting bad things into the environment. And then if you see pictures of nuclear, Power plants. Whoa, what's the, all that like crazy smoke coming up. It's just water vapor. It's literally just water vapor, which always blows my mind. How many people still are like looking at crazy stuff coming out of the nuclear plant over there.

Oh. And you're like, yeah, look at the crazy stuff coming out of your bathroom door. When you're taking a hot shower, it's also called water paper. But your  your other housemates, don't worry about that. Cause it's water vapor. Exactly. Exactly Steve, you can you can, you don't have to worry about it.

I don't know who Steve is, but maybe he's our escape go to the show. But anyway, there's a human tendency to try and simplify these things into kind of single methodologies. And I think that the idea of the black and white of this is good for the environment, quote, unquote, or bad for the environment.

Quote unquote it's it's. At a ground level. You can't there's so much of a difference in nuance in really every single method, because solar it's okay, you only have it half the time. And that's, if you're lucky, if there's no clouds all sorts of stuff, so sure. If you, and they're expensive to build so sure.

If you can get them up, you can get the sun going. That's great. Wind is tough. It's also intermittent. So that whole battery problem is very prevalent. And yeah, with like cold yeah, that's a lot of, there's a lot of stuff coming out of there and there's more and more, they're more and more companies coming out with new and innovative ways to capture or even turn some of those emissions into good things.

But at the end of the day, it's still a process, but I think the part of the danger is. Saying that okay. We need to just shut down all of that stuff like that. That's just not going to work. And that's why I'm a big personal advocate for nuclear because that's nuclear is one of the few. Methods where it's okay.

 We have both the thing needed. We have tons of uranium. We have the capability to use it immediately. It would take, it takes a few years to build an and get a nuclear power plant operational, but it's not like Jesse, just a few years. It's you've read a decades of transitioning to wind and solar.

Like you. Pretty realistically, you transitioned to co like net zero energy production for most of the world, if you use nuclear energy and it wouldn't be that difficult within a decade to 15 years, which is mind-boggling. Yeah. Yeah. Okay. To push back and also support your argument. So  the output effect, I think people over.

 W I guess, value or think about they F they overemphasize. So it came out of  the plants and underemphasize, the inputs going into some of the, for instance, solar panels or some of the impact that it like wind turbines have directly on bird populations and local environment. Clearly bad outputs for both fossil fuels and both solar and wind.

There's obviously outputs that are negative and a negative consequences from hydroelectric. I'd like the company I mentioned earlier, there are some companies looking to solve those issues. I think what's really. Probably the best best course of action. And there's also problems with nuclear too, right?

Like what do we do with all of this uranium that we've used up that you can't really use anymore? And now it's radioactive and that's a problem for humans. Where do you store it? Is there enough space to take it out? Like mine it from the earth, use it and then store it safely. The capability for that whole process.

That's a whole kind of other question that we get into. Clearly every form of energy has some sort of negative output because we're humans and we're running around doing stuff and we're bouncing and bashing into things and screwing things up. Okay. So energy. It's always a problem.

There's always negative outputs. What I think makes the most sense is it. And it's interesting because this conversation always gets very dogmatic and political very quickly. It's oh yes. You're on the left side of the political spectrum. You line up with green energy. If you're on the right side, you just want fossil fuels and then they just go after each other.

 What's what seems like the better angle to come at it from is okay. We acknowledge that each has problems. Worse than others. Probably what we probably should do is take what we have now, whatever that is whatever's in place and make it less harmful. And then continue to look for motivation on the kind of  the solutions based around our current technology and reducing the harm of our current technology while also building.

Completely new technology to harness energy from our natural environment.  And so whether that's making solar and wind more efficient, whether it's companies like the one I spoke about earlier using solutions for transporting fish across hydroelectric dams. Great. Whether that's emissions companies creating solutions to.

Sure. Some of the negatives of  oil and natural gas and coal cleaning up the process while looking for better solutions, I think is probably the ultimate answer, but nobody ever wants to say that. Cause that's a bad sound bite that doesn't look good on TV. It doesn't look good on Twitter.

 But that seems like the best way to go about it. And oddly enough, it seems like the way that would pay off the best. Okay. Because a company, an energy company, who's only focused on one one resource, one way of making energy. It's very risky.  That's completely undiversified. So imagine if you had an energy company where you're yes.

You're you have some oil exposure, but you also have some nuclear exposure and then, oh, by the way, you have a subsidiary that runs an emissions company that reduces the emissions from both your oil and natural gas section and in the nuclear section. No, by the way, you have some windmills and solar panels to boot, it's tough to beat.

It is one of those subjects that will naturally create a tension and there can be contention pretty easily on it. So it's something where energy is a classic, especially in the last 40 even 50 years has been a classic political debate. When I think you're right, I think at the end of the day, it doesn't necessarily have to be, it can be a debate that is ensconced in moderate TISM and the.

It's enabled to be both sides can understand what the other side is coming from. I think that it's exactly like you're saying it just takes a cooler heads to prevail. Now there's an interesting point with the energy companies being diversified. It is really expensive to, especially especially nuclear is very expensive to get a nuclear plant up and running.

I'm sure you're going to, you're going to make that money back over the course of decades and then some, but it is very carefully. Heavy and with all the subsidies that been going on for wind and solar, there's been a lot of development there, but how long is that sustainable? And is that even a good thing that the government is offering subsidies?

Maybe not, maybe better off subsidizing nuclear or geothermal or hydroelectric, who knows? Yeah, there's some interesting there's some interesting. Talk and research and inventions being done on the hydrogen side of trying to create like hydrogen fuel cells to power vehicles or like small theaters.

 So there's some interesting things that we didn't even mentioned, like geothermal, you mentioned that we haven't even talked about that being a, an option as well, but there's Conversation with someone. Yes. Even when you're talking about Iceland, they run most of their infrastructure on geothermal, because it's basically just the one big volcano over there.

So they were lucky enough or lucky enough to live on a keynote. You call them lava land. So the Iceland There you go  the Vikings didn't get that one. But that's okay.  We won't hold it against them, but it seems like there's a lot of options out there. And  I hear what you're saying about the nuclear being expensive and obviously government subsidies planned all of that.

 But it would seem  and maybe we should go consult for some of the big  oil boys, but it seems. If they wanted to, they shouldn't have the margin to go off and try and do a nuclear power plant. But I would imagine that, and it's we were just talking energy for some reason. I really don't understand why, but it gets political at least in the U S very quickly.

And if I bet since oil has had a bad rap for the last few decades here if they went off and did nuclear, it would be the worst PR move. I'm sure their marketing department who would just be in their faces and do the desk going, no, why are you doing this? So it'd probably be a bad PR move, which is why you see a lot of oil companies.

 They're throwing money at wind and solar because it looks good, but it might not actually be. While for them, or they might not even be using reports of large oil companies putting up a solar energy, a field, and then they never connect it to anything. They just leave it unplugged, but it's just a PR stunt.

So they don't care. This is spill a little oil in the golf and build a solar cell, a couple of solar panels. It's all good. Anyways, it seems like maybe the real Kind of brunt of the energy question is look for more innovation and try to reduce the tribalism or political.

Political influencer or issues that arise in that sector. I don't think you're ever going to reduce the influence, but at least try to reduce the politics of it all because  when you get down to it we're talking about things that everyone needs, which is why, again, it seems like.

Interesting that it gets so divisive so quickly because everybody, I don't care how rich or poor you are. You still need a warm house to sleep in.  And that's something that we should all be able to behind. So it seems like it, it just needs to, like you said, cooler heads need to prevail and hopefully  we can see some of this  coming to a head I've seen.

Like with with Germany, we were talking about earlier and versus France Germany has gotten rid of all their nuclear has a lot of nuclear. Like I said, 70% of their grid is from nuclear power. It's going to be interesting to see how this plays out. Yeah. And I think on the international scale  the interesting thing is that France is such an interesting, I love that you brought up France again with the nuclear, because the.

The one other big input that nuclear requires is vigilance as human vigilance, which is not that easy to have. It's, it could, I'm sure it tires out and nuclear engineers to sit in the reactor room and know, you're constantly watching dials. Maybe it changed a little here and there, but usually nothing's going to happen in 10 seconds where everything's, everything matters.

It's the right once in a career. If that hopefully never ending. But maybe it does. It's like that's a really such a unique requirement. And maybe there's definitely been attempts at fusion power becoming realistic cold fusion, maybe as the holy grail of energy.  It's interesting.

And at the international level yeah, we'll see what happens if Germany kind of changes. Course. I think they're going to have to change course at least some direction whether that's nuclear or otherwise. Considering they're pretty much cutting off a lot from Russia, so it's going to have to be some, something's going to have to pick up the slack there.

Yeah. And I think the interesting question when it comes to that is, does this kind of. Increase the innovation that we see in the energy sector, or does this whole situation with just, and I don't just mean Ukraine specifically, but does the whole situation now where it seems that. The ground is shifting partially because of what Russia is doing, but also partially because we've been in this trend towards green energy and I say green, see, I'm using those terms again, but we've been to shift whatever green energy is.

Usually it's like solar and wind. Everybody's been trying to towards that, does this accelerate the trend towards solar wind and. Or does this decelerate that trend and then make everyone look differently. And which I think if the latter is done well if that kind of re-evaluation of what energy is, where we get it from, if that's done well, I think that could be a positive thing.

  I think probably solar and wind have up to, I'm not saying they don't, but It seems like this is a time for reevaluation. Obviously there's a lot more than that we need to focus on is more important.  We don't, I want, I don't want to minimize what's happening in Ukraine and use that as just oh, this is the energy game.

I'm not trying to say that.  But once this is over and the situation is a little more stable, I think there's gonna be a very big reckoning when it comes to the energy sector and how people look at it and move forward from. Yeah, I think that's a good point to bring up because the effects of everything that's going on will not be visible until after  so we're not going to be able to really understand exactly what's what the short, mid and even long-term effects are going to be.

But speaking of the long run what do you think in terms of everything we've talked about? What do you think are some action steps? Because it's interesting in terms of. Investments. I do personally. I have some portfolio picks that I have and I've been looking at that are long run energy plays, but I think even just from the last, the week, the last week of things that have going on, it might be rebalancing a bit.

I don't know. Yeah. Oh, even the, even the big energy companies are rebalancing. BP's divesting from a Russian holding. So is so shell there's some wild stuff happening. If you own those stocks, you're already divesting from some of the political conflict, but what's say is I think and this is my thesis going into it.

Almost if you could phrase it as follow the money. So the money right now is in all the fossil fuels that's where it is right now. Now we may, and I use fossil fuels, meaning oil, gas, coal. That's where the money is right now. There is probably going to be a shift from that. It seems like no matter what, there's going to eventually be a shift.

I don't think it's going to be a hundred percent or excuse me, 0%. No fossil fuels at all. I don't think that's ever going to necessarily happen, but there's going to be a large shift, but that's where the money is now. I think if the companies  that are have the capital. The large oil and gas producers, they're the capital.

They're going to buy up the next energy companies coming up just as a protection measure. And so I think at the moment, and this, I may change my opinion on this going forward come back to it five years later, I may change. But I think. Your long run play is probably better served by looking at some of the bigger names in energy and sticking to those rather than trying to choose, pick and choose  smaller cap energy companies that say they're doing something interesting.

Now, I think. If you are looking at let's say you have a portfolio and you're like, you have a subset that's just dedicated to energy. It would, it might be worth your while to allocate a portion of that energy section to picking some kind of moonshots. But I think what's going to happen is as those companies mature, they're going to get gobbled up by some larger players that have the capital to do  for some reason, see the large players actually being the innovators early, but I see them buying up the innovators.  I think that's just probably going to be their strategy because they'll see it as either competent. Hopefully they'll keep the innovation going. Hopefully they won't just buy 'em up and shut them down.

  And if we start to see that, then I might say, okay, But I think to change my thesis on that, but for the moment, I think that's probably the better long run play rather than just trying to focus on. Okay. Who's the big nuclear player. Who's the big solar and wind Claire. Who's doing hydro.

I need to find that company.  That's what I would be doing just to think through  how this is going to play out in this transition phase. And again, as we see with everything happening politically and internationally  it seems  there's going to be a reckoning of energy somehow that comes out of all of this after the dust settles.

So that would be my thought. But what are some of your thoughts on this? This is funny, cause you're going the risky. Innovation centric, small cap play. And I'm the opposite. So know I'm saying own the large caps because they're going to buy, they're going to buy the innovators. That's a thing.

 I don't know how it would be crazy if you could get in on the small cap ones before they're bought out. But how do you know for sure that's the million dollar question, but for me, yeah.  Putting bones on it, I just recently took a position in general electric.

 I think that their decision to split to break up the conglomerate in the few years down the road is a great idea. The whole list of fundamentals behind that, but essentially G energy will be its own stock as far as I understand if the plan carries forward. And if you just look back at standard oil, you look at John D Rockefeller.

Most of his massive fortune at its height was because of the stock value of the separate companies.  Over after standard oil was taken apart, all the companies still did very well and did better on their own because they were able to a whole host of things. But I think that the GE breakup is actually really good and will be good for GE because I think GE energy might do exactly what you're saying is that once they're their own thing, they might go grab some really innovative companies, integrate them and have a smaller  they're not have be to.

The budget, the big general electric methodology and shareholders it's they could be more agile.  Maybe they're going to innovate on a host of different things. And I think GE is a great play because they manufacture so many durable goods that go into electrical generation in the U S and across the world, whether that's wind turbines or the manufactured, I believe.

Second most nuclear reactors in the world. I pulled up, I Googled what companies build nuclear reactors, and I did that. They came up with the list and Rosa stone, or that's probably not how to pronounce it, but in Russia is built 68 nuclear accurate. So a Russian companies built the most nuclear reactors, but second is a general electric and Hitachi.

So I'm guessing. Joint venture, but together they built 64 nuclear reactors. And third place is very far away with KEPCO, which is a south Korean. But they built 20 themselves. So maybe KEPCO is a good stock to grab to. We'll see. But I personally recently got a position in general electric. I think another energy play that I've been in for awhile, I've mentioned several times.

And at this point I've lost a lot of money on, but I'm still in for the long run. Is I Tron? I think they have really good solutions for industrial electrical inputs and smart. The stock has not been doing. So take it as you will. Maybe it's a buying opportunity now. Maybe you shouldn't buy it.

Maybe you shouldn't dig my advice, but I'm still along. And I try and I'm not necessarily planning on buying more anytime soon, but still long on it. We'll see what happens with GE. Maybe I'll buy more of it before it actually splits up, because I think there's real opportunity there. That is pretty uncommon.

I think that the GE play could be a soft. Long run played like a three to five decade play. Could you make a lot of money on, but that's just speculation, not financial advice, like all this financial advice but yeah I think of a good point in looking towards nuclear. I just think at this point we have to  also.

I guess my reason for not looking to it quite yet, is it hasn't seen mainstream us adoption or like very good PR yet in the U S there's still a lot of people who think it's very unsafe and just, it doesn't have a good image. So until it wins me, not me, but until it wins the hearts and minds of the American people until it wins over one of the largest consumers of energy.

 China's there too, but I'm not looking to them to take on nuclear anytime soon. It, until it really wins some more mainstream adoption. I personally think it's a little far off, but like you were saying, if you can get in at the right time and early enough, you can definitely see some payoffs that are.

Impressive ginormous somites opportunity for alpha is what is, ah, there we go, which is a whole separate discussion because I don't know if that exists, but oh no, he's not. I set my golf. I knew that would put you off. So anyways, I think at this point we've about energized ourselves right out here today, but it's been a better pleasure talking with you, Mike, on this episode, a long road show.

And thank you again for listening. If you would give us a review. That would be amazing. This has been another episode long run show with your host, Austin Wilson and Michael O'Connor. We'll catch you later. .

Support this podcast at — https://redcircle.com/the-long-run-show/donations

In this episode of The Long Run Show, we chat with Richard Chan, Chief Executive Officer, and Co-Founder at CoverRight about customized medical insurance.

"I got into Insurance specifically because that was a space that is about five or 10 years behind lending in terms of innovation."

"Medical Insurance was always kind of focused on the younger population assuming, they use technology more anyways, so we'll create solutions for them."

"There are 10,000 people retiring every single day."

"The statistic is there's going to be 20 million net new retirees over the next 10 or 15 years. And so it's a big population."

"Most of the industry that we're in doesn't believe that seniors can't use technology, which we fundamentally don't agree with"

"The problem that we saw was that the current experiences that are in the market really disempowered consumers, particularly Medicare. "

"What we sold was it's a very high anxiety decision for someone turning 65 for a lot of people"

"health and finance. as you get older, those two topics start to intertwine."

"And so on average, a person has over 60 options to choose. And our goal really is to build a, we call it a digital concierge model and sort of internally we call it TurboTax of Medicare, where it is sort of a concierge service where you can start online, get educated, be part of that decision and really empowering the consumer to own that healthcare decision that they're making, which is obviously important one as you get, get older."

Guest:

Richard Chan

LinkedIn: https://www.linkedin.com/in/rkfchan/

Website: https://coverright.com/

Hosted By:

Austin Willson

Michael O'Connor

Transcript:

Hey everyone. And welcome back to another episode of the Long Run Show. This is Michael O'Connor here with the lovely Austin Willson.

That's me the lovely Austin Willson

And here with our extra special guests today, we have our second guest-based episode. I am, I am loving this. I'm loving the conversations Austin.

Q: We are here with Richard Chan CEO and co-founder CoverRight. How are you doing today, Richard?

Richard: I'm well, and thanks so much for having me on the show. I'm excited.

Great to have you. I know that a lot of, a lot of the discussions we've had recently have centered around psychology have centered around a bunch of, kind of. Broad topics. And we just had an episode about insurance. So the timing seems to be perfect, to really pick your brain on CoverRight. Pick your brain on insurance as a whole, where you've been, where you're going. Uh, so I'd love to just start off with like, you know, who are you? What's your journey?

Richard: absolutely. So in case your audience is wondering, accent is from Australia. So grew up in Sydney, been in the states for the last five or six years. but started my career really on the financial services size and capital markets, and providing, advice to companies in the financial services and FinTech it tech and consumer sectors. I'd always been. You know, fascinated about how important the five natural services industry as a whole is to both the economy and in everyday lives. And I think- the issue is not everyone understands it well. And so I was really drawn to FinTech at my time, covering these financial services companies the ability for technology to help the broader population on items like personal finance.

And so in 2017, I actually left that career to join a company based out in San Francisco. That was actually tackling a very interesting problem. on the other side of the demographic spectrums, what I'm doing now in the student loan space which I found fascinating at the time you know, there's been this whole wave of student loan refinancing.

The company is credible.com is one of the first student loans refinance marketplaces at the time. It was, you know, you guys probably remember I know. And it was like just after the financial crisis and just prices were really low. Uh, and, but the federal rate for student lines was like high single-digit.

And so it didn't make sense. It was kind of a weird dislocation. And so that's how it goes. when FinTech that company ended up, selling a couple of years ago. And, you know, I wanted to dive in and do something else in, in sort of the personal finance space. And we looked around, insurance specifically because I think that's a space that, you know, it was about 5 or 10 years behind lending in terms of innovation. landed on, on, you know, CoverRight which is in the Medicare space. the same use demographic, primarily, as like a super interesting problem that, that, that really hasn't been solved yet. It's like the textbase is always kind of focused on like the younger population assuming, they use technology more anyways, so we'll create solutions for them.

So what was the, what was the impetus behind going after kind of the. kind of older demographic and making a solution that's FinTech based, obviously it has a tech solution to it. So it's going to, you're going to need to make sure that they're tech savvy enough.

Q: What was the, what was the impact?

Richard: I think a rapidly changing dynamic, in the way, people who are aging into 65 today, I in the digital savviness compared to those a decade ago, the demographics that are aging of 65 and English statistics and the 50% more of them had a college education. And then also the fact that one of them has spent the last 30 years within the workforce and have actually been part of this whole internet boom. And so it's really no longer the case in my eyes that people turning 65 are not digital savvy. I think everyone's got a smartphone from my own experience, on CoverRight. People are going through these experiences. I think there's a little bit of differentiation between the millennial generation, where there is sometimes still a. need for a concierge type service versus purely digital. And that's kind of what we cater for. but I think what we're seeing is a huge change in demographics.

There's 10,000 people retiring every single day. There's been no technology really to seniors at all. It's been a very overlooked part of the industry and frankly, most of the industry that we're in doesn't believe that seniors can use technology, which we just fundamentally don't agree with. Right. I had a little bit of background, in the kind of financial services space myself in a financial advising firm for about a year and a half.

And, and it was the case that, the underlying assumption was always the case. they don't want to use E forums. they don't want to use e-signature and free clients out, you know, and I think there probably is some truth to. Some of these advisors, you know, they had a 20 year old practice. So some of their clients would not be comfortable with that.

But I would say probably the newer ones definitely be comfortable with that. I mean, like you said that a lot of the folks that are retiring right now, I've been a part of this big boom in computing and the internet, and that they've been in the workforce during those, those kind of addition years. So they've been a part of that.

Q: So that's a good insight and probably a good, a bias to check. At least on my end, I would probably assume like the rest of your competitors in the space, you know? Oh yeah. Seniors. They might not, they might not like that. And I probably shouldn't even say seniors, that's probably insulting to some of your clientele.

So lead us through insurance. We were talking about this last time.. it seems antiquated a lot, especially when it comes to health insurance, life insurance. It's always very difficult. So what was, the idea we want to make this like a one-stop shop or is it more we want to kind of basically facilitate via technology and easier experience for Medicare?

Richard: it's a bit of both actually. And so the problem that we saw was that the current experiences that are in the market really disempowered consumers. And so the way health insurance, particularly Medicare. So there's either a field agent comes to your house, sits at your kitchen table, which obviously not happening as much the last 18 months.

typically that agent might only represent 1, 2, 3 plans. And so you never know if you're getting a full, comparison to the most. The second experience settings that is prevalent in the market is like tele sales. And, you know, I'm sure you can imagine, like how that goes. Then you say you see these ads on TV, you call in and kind of get sold a policy.

And it's never a great experience. What we want. What we sold was it's a very high anxiety decision for someone turning 65 for a lot of people. It's the first time you're sort of leading group insurance and having to pick your own individual insurance plan. There's a lot of red tape because there's public and private programs in Medicare.

And so on average that a person has over 60 options to choose. And our goal really is to build a, we call it a digital concierge model and sort of internally we call it sort of turbo tax and Medicare, where it is sort of a concierge service where you can start online, get educated, be part of that decision and really empowering the consumer to, to, uh, own that healthcare decision that they're making, which is obviously important one as you get, get older.

The best way to think of us as a digital concierge service, it is a one-stop shop. We help you understand, we educate you and we advise you on which, which plan is best to you. So this being the long run show, obviously you must believe in kind of the law. The long-term adoption of a more technology based model for selling, uh, Medicare insurance and specifically Medicare insurance in this case.

But you can speak to other insurances as well. have the background clearly in FinTech .

Q:So do you think that, what, what do you think, or I guess where you think we're at, uh, Sort of adoption phase. What are you seeing with your platform as far as you know, how many users versus, you know, market share out there?

I'm sure since it's a, it's a fairly new, you're still breaking in, but, but where do you see kind of the, the entire space going? I know we've seen robo-advisors in the last few years. Um, there's a lot of debate around whether those are going to replace or compliment regular financial advisors or financial planners.

Richard: We've seen into it with, with TurboTax. when it comes to insurance, what are we, what are we seeing as far as kind of where we're at in the adoption phase of the FinTech solutions there? There's always like a few different ways., insurance, you know, for, from our perspective at coverright, I, we obviously believe this next decade of people who are aging into this 65.year old phase of their lives is going to be much more digital. And our goal is to actually follow them through that process and continue to be a partner and have a conversation around health and finance. Because obviously as you get older, those two topics start to intertwine. I think taking a step back in terms of, you know, where insurance is, uh, we're starting to go through this first wave, which we saw in lending as well as, um, digitization of the distribution and the consumer experience, which is where coverage sits as well. It's already happened, you know, a little bit earlier within other types of insurance in auto, uh, in life through companies like PolicyGenius. Um, and it's, you know, Medicare for us, it's kinda like one of the last frontiers really, because no, one's really focused on the demographic.

I think where you go from there similar to other pots is, um, FinTech is the next wave of InsureTech will start coming from areas that are more behind the. Uh, more sort of infrastructure based, uh, improvements where there's, you know, interconnectivity issues at the moment or the inability to share information or underwrite quickly.

Q:I think that's where, you know, as we move over the next decade as well, you'll see this first site, which is tackling the consumer part and the second wave is really tackling infrastructure behind it. Gotcha. So it's almost like we got to build out the infrastructure now that it's like, okay. Proof of concept people like.

And insurance, I would have assumed that because it makes it way better. It makes it a far better experience. So then it's like, okay, we've, we've proved that the consumer likes it. Now, the, the companies are willing, or the investors with the capital are willing to, to put capital behind the solutions for the infrastructure side.

Richard: I think that's right. Cause the, the, you sort of solve the consumer issues. That's really what, a lot of cases, the first problem, uh, it's going to be a better consumer experience and you kind of, um, allow some of the accumulation on the backend of the process that you kind of take that away through a digital experience.

Q: That's nice. And then over time as a consumer drives what the experience needs to be, you start figuring out like, okay, we really do need to build some of this infrastructure to enable that to be a much better excuse. And that's, what's going to continue driving eventually. That makes sense. So another kind of tangentially connected question, cause, of course, this being the long run show, how do you guys see or position yourself or future changes?

Because, you know, you're, you're planning, you're going to have to be planning years and decades into the future. Future changes with, uh, when it comes to the political landscape. Medicare, because that plays into the insurance world a lot and different administrations, different political powers have different ideas of where to take that.

So how do you, I guess, almost hedge against the risk there, the political risk involved in the, in the space it's kind of almost baked in.

Richard: that's a, that's a good question. I think, I think for the listeners who don't know Medicare, just to cover that, that base is the federal program that basically provides health insurance when you're 65.

So whether you are taking it directly from the government or through like a private plan through United health care, that's kind of the general. Grouping of sort of these Medicare plans. there's, there's a few reasons for that. I don't think Medicare is going away and that's one thing. And secondly, I don't think Medicaid baggage is going away. private Medicare plans that are become. More popular. That is expected to increase about 70% and the reason for that is this strong bipartisan support works.

I think that only plays into our platform because there's more choice for. there's more players who want to increase in terms of the benefits that they're brand new consumer, like how they position themselves and more choice in my eyes is always better for the consumer. So I think that basically enables us to have add more value because you need more of navigation through that.

There's some other things that also are tail winds. You know, the current administration wants the Medicare to succeed, The digital savviness is everyone who's sort of going onto the platform. there's talk about, you know, adding routine dental, hearing and vision care into regular Medicare, which again, we think is better for the consumer and it will drive the private plans to innovate in more.

So they, a lot of these plans over the last few years, dental vision and hearing have been like a great. extra benefit that the provide that the default government program doesn't have. but if that becomes standard, then they really have to start innovating on other areas to provide better services to the consumer.

we get asked about Medicare for all. I think, I wouldn't say I'm qualified enough to talk about the fiscal budgeting issues around that, but obviously that, that would change the scene entirely. I don't think it's really going to happen.

That's kind of my, my sense on, the landscape. It's hard. And I don't think for a single-payer system, you know, you look at the, you look to the UK where they have an NHS system, and it's really just, you end up with a system where you get average health care for everyone, which is probably not necessarily solution.

Q: I think it's a great point on both. I like, because I like the question Austin , those political, it's such a unique spot that you guys are in. Um, because it's like, you know, there's almost a, kind of a classic idea. Have a working tandem with government of like defense contractors.

Some, this is, this is so different, but, but, so that's an interesting spot where, and I mean, correct me if I'm wrong, but I feel like there hasn't really been innovation where you guys are in decades. I mean, is, is this kind of, I I've never heard of anything in the sector and I mean, I've got older family members who could use your as services.

I mean, correct me if I'm wrong, but it seems like you guys are really the prime movers here. Yeah, it's definitely an industry that has, um, that hasn't had innovation. There's actually a few good reasons. Not good reasons. A few reasons. I think that that's that's happened. One is it's an actually a mandatory decision.

Uh, Medicare, when you turn 65, if you're not still working. Uh, and so what that allows is the, the incumbents basically go, well, they're going to have to make this decision anyway. And no matter how hard it is, they have to go through it and do it. So there's actually no impetus to actually innovate, uh, on that experience with they're going to come basically.

Richard: that's kind of exactly why we think, you know, building what we're doing right now is, is the right time. Like we think we consume. Mindset for that age group is, is changing rapidly. Um, and alongside this whole theme of consumerization in healthcare, um, you know, people want, they're only going to be looking for better experiences and they got to really vote with their wallets really over time in health care and in health insurance.

Q: Yeah, and I love the idea of bringing more choice architecture, um, because that's, I mean, I didn't even know that that was a mandatory decision. You just, you just forced to choose, make, make a decision. So that's having. Having that for the consumer is, seems just like a no brainer, but I mean, it makes sense that there's been constraints.

There's been less incentive to innovate. do you think that's kind of a, where insurance as a whole seems to be trending? Cause we've talked about, you know, we talked about specifically with Medicare, but I mean, Austin, like we talked about a couple episodes ago of insurance going more digital, more choice centric, consumer centric, seemingly

There's kind of these broad currents that are moving insurance in general, more than that direction.

Richard: Yeah. I definitely think choice is going to become a huge thing, particularly, uh, in health insurance in general. So the current dynamic in the health insurance market is the shift is there's a shift in the burden. the cost of healthcare that is moving towards the consumer. I think the statistic right now is like over 50% of people gain employee group plans are in high deductible health plans, which means consumers pay more, um, for their health care and. The healthcare system in the us has historically being one where there's been a lot of inertia because of The prevalence of group insurance.

And so what that, what group insurance does is the person who decides what you do with your health and the person who pays for what you do and the person who gets the benefit of 3g, different entity. The person who decides is typically your doctor, who, you know, you have to go to the doctor within that health networks choice.

The person who pays is the health insurer and the person who gets the care is the ultimate test is basically you. That's not the case in anything else that is consumer product. Those three are the same. And so as the burden shifts, you're going to see a healthcare move to a more direct to consumer model where people are going to start.

Like I said before, voting with. and we've already start starting to save. These people are circumventing the healthcare system going to health insurers like direct primary care models. One that one medical is like that, where you pay a subscription, just get access to primary care. And what I think is going to happen over time is, and I think, yeah, you guys actually mentioned this in your last episode, health insurance is going to shift to catastrophic coverage

And you're going to see employers going to provide more benefits, uh, that, uh, relate to these direct consumer, um, experiences. And it could be, you know, uh, and that's because, you know, people are going to want to be able to compare like how much the knee surgery from here from A versus B overtime, if they're gonna be paying for it.

whereas before, if you're not paying for anything. Th the insurances is working with your employer directly. Then you have, you have no say in where he's at to get that care. But I think I'm always going to stop start changing rapidly.

Q: It's really interesting. I've never heard the breakdown into those three categories of the person who decides what you do, the person who basically pays for it. And then the person who perceives the care. It's a three different. Um, and that's very different from even, even other, other insurances, right? Like auto insurance, you can shop around. You're the one paying the premium and you're the one also receiving the service. you're obviously not the.

Yeah, right, but you're, you're the, you're the person directly choosing right?

We're in healthcare. I think that's really, probably the only product that I've ever have. Where three different entities, all involved in that choice. What's driving the shift. What's the, what's the leverage point there. Uh, you mean as in the shift to, uh, the consumers or paying more or what's driving that, that shift in the burden you were talking about?

Richard: I mean, it's really, um, again, it's, it's the way the system is set up. So if you think about employers are trying to shift the cost more to employees, because the cost is. And then cost is going up because the person who is paying for it, um, uh, you know, the, the providers, basically, when you go, when you go to a doctor, they basically charged the insurer. The insurer doesn't want to pay. And so you have this perverse incentive where the provider will start pushing up the prices that they're quoting to, to the provider. So you have this negotiation in the background. And so there's this whole, uh, opaqueness around what healthcare costs are, which are drive overall dry. No, just healthcare costs in general. And so people are now going well, we can't really afford this. We have to push this into the consumer. And I think as that burden such shifting more to the consumer, then, you know, consumers, then that sort of alignment between the person who decides specific pays and benefits starts, you know, consolidating again. And that's where we will start seeing, you know, people again, like circumventing some of these, uh, insurance. Networks to go get care and direct primary care is a good example. There's like startups like RO and like these men's health, where people are paying out of pocket themselves. and I think an interesting thing that will happen over time is as, consumers take on more of the health burden health will actually become a bit of a financial asset to people, right? Because the healthier you are, the less you have to stand. And I think the services. Help you stay healthy. Uh, are going to be the ones that, that are going to win and what you're going to say. Like I said, particularly in over 65 insurance where we play is kind of slightly different, but I think under 65, I think you'll probably start seeing, and it's already happening because it's high deductible health plans, catastrophic coverage becoming where the health insurance play in. You know, I I'm, I'm from M&A capital markets, like a very well with this really plays out, you know, 10 years down the line. You could probably say some of these insurers acquiring these direct to consumer health services and really health insurance becomes an ancillary product at the back, the catastrophic coverage.

Q: Interesting. So over time, do you think we're going to see, as, as we see these kind of tectonic shifts in where, how everything aligns with health insurance, do you S do you think we're going to see that? Um, I guess maybe a better question is how are we going to see that chain when it comes to employer benefits? Is it gonna go like completely away from employers trying offer that. Fit and so much so that it's, you know, it's such a super biotic. Now we get very far away from group, you know, over the long run. Is that where we're headed? Um, or, or do you tend to see it as maybe a complimentary situation where the consumer has their own direct to consumer product plus some benefit from their employer? I would imagine there's some transition process in between, but yeah, the long-term and.

Richard: I think it's, it's, it's hard to say exactly because you know, I've done, it depends on how the incentives play out over time. But I do think, and I think it's already starting to happen. You're already starting to see employers provide these ancillary benefits that are not.

Typically like health insurance land and et cetera. And so I think one medical actually has a program within employees is, is, is an example. And so I think you might see employees because of the cost burden is increasing start to ask for some subsidization or some of these direct to consumer experiences.

And then that means the role of the health insurers starts to narrow as well. I think that's, that's probably the dynamic I think we'll start playing out over time. but you know, It's hard to say. It's like, it's, it's, there's a lot of moving parts in the healthcare system.

Q: One question I have kind of going off of these, you know, we're seeing these big changes in a lot of these large systems. What do you think generational differences has to play in that deep? Because one thing we're always talking about, you know, boomers versus millennials versus like, do you think that it seems like as we've seen, I mean, pensions are another kind of example, just talking about moving away from the employer on the consumer, is there a. Especially as we move through the generations closer to more of the digital generations. Do you think a lot of these trends will continue or kind of shift? Or do you think a generational differences is playing a part in this?

Richard: I definitely think generational differences. Um, do play a little. Into this because you know, you, and I I'll say more open to having these direct to consumer experiences. And, you know, as the, the, the generation that is growing up in these sort of high deductible health plan environments, like, yeah, like I do want better care, better quality. I don't want to have to go down to, you know, um, X plans specified doctor. I would rather. You know, like a one medical, I keep saying that name, but all these other direct primary care as well. I know I have access. Like I pay $100 a month. I'll have access to it. If I can get that subsidized by my employer in bed. And these services are proactive, like educating the healthy like there's using technology to talk to me. over time, like if, if this all works out correctly, You know, health care should move away from this model where there's this huge, basically these huge real estate companies, where you have to go to the hospital, the one centralized location we should be, you know, staying healthy monitoring our health outside of that whole system becomes much more. I think that's kind of, I think that's kind of where it said,

Q: yeah, that plays into something you just said, being more proactive with your, with your health. And I think that's something people probably over the last two years, of course, nobody wants me to say COVID, but I said it. Okay. But, um, as to, you know, two years, all this craziness has really put like your health and. And how you're treating your body and how you're prepared to fight off diseases or pandemics or any of that. It's put it into everyone's front of their minds. Right. Because it's just been there for everybody. Right. And so I wonder if the, the shift from healthcare being more kind of reactive, proactive, Well kind of, direct to consumer model where the consumer is looking to be more proactive and preventative with the care, because it seems like to me, whenever I've kind of looked through a health, health benefits at an employer. It's always been kind of more on the reactive side, right? Like, oh, you need care for this. Okay. Well, we'll get you care. You're broken. We'll fix you, but let's prevent you from getting broken. That'd be, that'd be a cool idea. Right? Obviously breaking an arm skiing. That's different, but let's, let's prevent you from getting sick. That seems to be like an afterthought in general, across healthcare at the moment. Um, so maybe that may be part of this is, is kind of spurred, who knows what, what long-term, you know, shifts we're going to see coming out of the pandemic and how people just following up on Austin's thought there. I love the Warren buffet quote. and I'll paraphrase a little bit, but that your, your own body is one of the most important assets has missed the most important asset. You have that to take care of it and to, uh, to keep it running fit and fiddle is, is so crucial. And I, yeah, I have to echo what you were bringing up, Austin.

It seems like a lot of healthcare is that, that reactionary mindset. Um, do you see that as a trend coming up that proactive? And are you seeing pushback? Because it feels like there's a lot of incentives for maybe, maybe I don't want to, I don't want to speak too, too, too harshly, but it seems like there's a lot of incentives for the big insurance companies and a lot of the legacy players to kind of keep things the way they are.

Richard: there's definitely, uh, incentives to do so, but you are seeing them starting to move in that direction. Uh, and I said earlier that I think, you know, there's some differences between under 65 and over 65, because I think, you know, over 65 they'll always be a Medicare program. But what you're seeing is that the Medicare advantage providers, which are these private plans are focusing a lot more on preventative benefits and they are competing a lot more as a plan themselves as a consumer product. Because they want people to select them and use them for, um, you know, also use them as their benefits provider and use their systems and things like that. And so, you know, there is like a whole,world of sort of health campaign or value based care that is starting to take its own sort of. Form and traction across the country. And people are focusing on it more because people assigned to realize that this old model of service, where it's really, you get paid for how many operations or surgeries you have in the, in the hospital, like doesn't benefit the consumer.

Q: Going off of that a little bit, you know, looking at the ecosystem that you guys are in right now, um, pushing that change forward, pushing, you know, for the productivity, what's the long run view for cover, right?

Like what do you guys kind of have in the pocket right now? And what are you excited to do in seeing the.

Richard: Yeah, we're really excited about, uh, one of the buildings, counties for product within the Medicare space, as a navigation platform, to help consumers through this difficult decision and high anxiety decision where we see a lot of opportunity is no one has really built a platform that follows through on this phase of people's lives, across personal finance.So Medicare is a very interesting conversation for us because one, we get to build a brand new relationship with a consumer because, you know, The positive for the 65 to, we have an interesting angle because we're talking about insurance. Uh, and what we see within the technology space is there are a lot of companies building in FinTech and health tech for this population.

And I think if we over time, what we're excited about can become this concierge. We just kind of where we started in Medicaid and help guide them through. Okay, these are some financial. Product of situations that we can help you with give you some advice or like, you know, even on the health side, Hey, these are some services preventive services that you should be using.

I think there's a really interesting conversation for us to have with that. Consumer has the agent to, uh, you know, this retirement phase of their lives. And that population is only growing. I think the statistic is there's going to be 20 million net new retirees over the next 10 or 15 years. And so it's a big population.

Q: That's crazy to think about. And to, I mean, globally, it seems like there's a lot of, uh, talk of aging populations, uh, around the world and kind of the need for better health coverages, insurance, you name it and it's, it's a, it's a growing long-term problem. It seems that needs, uh, needs smart people like you guys working on it and kind of to follow up on that a little bit. 'cause talking about the kind of the here and now, like how did you guys get to where you are now from the past? Like what, what did it look like? The journey from, I mean, a ground level to, you know, operating the way you guys are right now. It seems like a big leap. How did it, how was that journey?

Richard: Yeah, I think like, every startup founder will probably tell you it's it's like a. Eating gloss, sometimes trying stay up as a startup company. It's been a, there's a lot of twists and turns. Um, you know, at the end of the day, like we're a small company and we have to work with these big carriers that are in the space. And not only that there's insurance regulation, there's Medicare regulation.

And so there's a lot of navigating around regulatory pastry on the carrier piece. And then not only that we have to build the platform. Um, behind it. And one big difference that I think a lot of FinTech or insure-tech firms would tell you is that, and even health tech, like it's unlike, you know, e-commerce or these other consumer products, you can't deliver something that is broken.

Because you lose a lot of trust and everything in financial services is just about trust. And so it was a long, like a long we knew what I'd say. It's been, it's been an up and down journey. There's a lot we had to do, um, you know, the platform, you know, kind of, I think we currently take in about 23 million data points on benefits, available, , and.we got, uh, 12 carriers, uh, which represented about 20 brands across the country. And so, yeah, it's been fun, but it's a, it's been a hard journey as well.

Q: Definitely. I can imagine that one thing we always try to do in the show is we, uh, try to pull something, pull something out for the listeners of actionable tips or, uh, just kind of stuff.

So like what, what would you recommend for the average. The average listener, who is either interested in the healthcare sphere, what's going on, what you guys are doing, um, learning more, or, you know, if they're older getting involved or for like loved ones, what would you recommend this kind of action steps for, for anyone who's interested?

Richard: And obviously I want you to print out and promote ourselves too much, but you know, if you're turning 65, it is, uh, it's important to find a partner that can help you through that process. And obviously say, come to coverup.com. Um, I actually think there's an interesting, um, conversation in for those who are under 65 and maybe you're making a decision for your parents. Like you said earlier. There's a, there's a lot of people who helped with that decision. Um, I think, you know, if you're interested in, in healthcare in general, there's a lot of problems to be solved out there and a great place as a book. , I think it's called unhealthcare. Um, that is a great place to start it's by,a partner. I think who's at general catalyst who just said venture capital fund and they talk about where they see the world going. I think that would deliver a lot of inspiration. If anyone out there who's. Trying to figure out like where we've been, where we're going in terms of healthcare.

Q:Awesome, awesome, great resources and kind of, uh, just a final personal question that I had. Like, how did you, how did you get from Goldman Sachs? You know, the M&A all of the finance deep in the trenches to, to insurance, because it's such, it seems like such. A wild leap, but I mean, you know, like I said, it's financial services at the end of the day. It makes sense. But I'd love to just hear a little, a little backstory on that.I find that fascinating.

Richard: So, like I said, when I was at, in sort of in, in banking and M and a, I was covering financial services. So I did sort of have a more traditional view of, you know, banks and insurers. And I also, at that time, FinTech was starting to become hot. This is sort of early in 2012, 2013. So Pfizer was starting to come out and so. I just got really fascinated in FinTech in general. And to me, you know, whether it's companies like a buy now pay later companies that are really popular, whether it's infrastructure companies like plan, like I'm fascinated by all pots in tech. And I think, you know, I would say I actually, uh, came across Medicare just by accident.

Cause I was looking at insurance in general. I spent a lot of time. Uh, property and casual, a lot of time in commercial and, you know, coming from Australia, we don't, we don't have a program that's similar to this. And so I just thought this was a fascinating, um, a fascinating space. And then too, like I do think, you know, with 10,000 people retiring every day, there is the need for technology for this demographic.

And so someone wants, needs to go and build it. I think we have a really exciting, interesting conversation to have with people who are going through this retirement.

Q: Awesome. Awesome. Thank you so so much, Richard. Uh, this has been a great episode, loved the conversation, loved to be able to deep dive a little more into health insurance.nSpecifically, we get to talk about insurance in general, but now hopefully for our listeners, they have a lot deeper understanding. please go check out all the things that Richard Chan is doing over at coverright.

Thank you so much for being on the show today.

And this has been The Long Run Show here with my co-host Austin Willson.

Support this podcast at — https://redcircle.com/the-long-run-show/donations

In this episode of The Long Run Show, we chat with Matt Gaser, Chief Executive Officer at Fabricated Madness about the future of NFTs.

 

"I think the creative side of NFTs is just a small portion of the kind of utilities that NFTs will bring"

 

"Your medical records will be an NFT, your mortgage is going to be an NFT because it's totally encrypted."

 

"I think NFTs are going to be an integral part in the sale of goods, the transfer of  funds"

 

Matt's impressive resume includes well-known projects such as CG animated TV series Star Wars: The Clone Wars.

 

Matt recently left his career of 20 years to start his own business in the NFT world working on many projects, one of which is The Chronicles of Dr.Zammys where a fantasy doctor in a whimsical universe called Gallagan, fights a virus coming from another dimension.

Dr.Zammys is also planned to be an animated TV series.

Guest:

Matt Gaser

LinkedIn: https://www.linkedin.com/in/mattgaser/

Project Website: https://www.drzammsy.com/

FAQ: https://www.drzammsy.com/faq/

Links to purchasing our NFTs: https://www.drzammsy.com/get-nfts/

Personal Artist site: https://www.mattgaser.com/

Wax Blockchain: https://twitter.com/WAX_io

FAQs: https://www.drzammsy.com/faq/

https://wax.atomichub.io/

Hosted By:

Austin Willson

Michael O'Connor

Transcript:

So welcome back to another episode of The Long Run Show. This is Austin Willson, along with my cohost, Michael O'Connor.

Matt: Good to be here.

Q: We actually have our first guest today. We're gonna be talking about NFTs over the long run and our guest is actually deep in the space right now, creating NFTs is he's got quite the resume to back it up too. He's not just a guy in Microsoft paint, making pictures. He's got quite the artistic portfolio.  I'd like to introduce Matt Gaser. He is a part of the project of The Chronicles of Dr.Zammsy.

So Matt, welcome to The Long Run Show.

Matt:Hey guys. Great to be here. Thank you. Appreciate it.

Q:Our first guest on this is wild, right?

Matt:Hey there's always a first, I'm happy to be be here and talk everything about NFTs, the future of NFTs and yeah, it's an exciting time.Totally amazing time for this kind of thing.

Q:Yeah. It's wild. It's bubbled to the surface over what really the last two years here. So you're in a very exciting space right now. What's it? What's it like finding your way 

Matt: Very adventurous. I quit my job, doing what I did for 20 years to jump full steam into this. My partner convinced me about this time last year, Ralph. He helped found fabricated madness with me. And last April, we launched our first real NFT project that I incorporated trading cards as NFTs. And we sold. In April, our first set within an hour made 200,000 and we were like, oh, okay. This is real what's. Wow. What? But but it was a fascinating year last year. We learned a lot about the space. We learned a lot about what collectors are looking for. And it's changed drastically since that launch in April. And it's just insanely challenging. And the growth is exponential, but it doesn't come without its challenges. And yeah first time business owner out of this  I've got a staff now it's, we're partnered with a bunch of people and venture capital is involved. It's just a crazy time. And  we've got multiple projects in the works right now.

Q:Wow. That's fantastic. Yeah. So it's like you said, 2021 we're in 2022 now. So 2021, I know that flew by quick, but it was a wild year for NFTs. And you said your first sale was, it was 200,000 for how many NFTs were included in that drop

Matt: 5 different unique trading cards, but there was sketch cards, animation cards. Variants like epic, common, uncommon, legendary, and mythic all those kinds of things. And the collectors really grabbed on that, on the Wax Blockchain, by the way, we were on the wax blockchain. Okay. I think it's @WAXP if you're looking for investing into that crypto, but  yeah it's a specific. Blockchain, that's really geared towards gaming and FTS and no gas fees.And it's carbon footprints pretty low in fact almost non-existent.  It's but beyond all that, it's just like a fascinating place to sell NFTs and create games that are relating to the play to earn model. Yeah. So it sounds like there was a bit of a concept behind it, as far as like playing cards, 

Q:Pokemon Mike, I think you might've had experience with Pokemon growing up.I have always been a I've been a trading card guy, my whole life. I love the Pokemon cards and then did a little, a Hearthstone in my teenage years.

Matt: I'm an artist from that I've actually painted illustrations for Hearthstone. Imagine.  It's been a, it's been a really weird twist to be on the production side instead of just being a hired artist for those kinds of things and hiring other artists to do art as well. I just never thought that would ever happen. I thought I'd just be painting stuff for people and their movies and things like that forever. But yeah, it's been a really cool experience actually hiring other artists and getting them work colleagues of mine that I've known for 20 years and some new guys as well.  And employing them. It's just such a weird concept, but yeah, that's, what's going on.

Q: it seems like really from the story that you've already had from the founding of fabricated madness and the trading card collection, everything, that's just, I love that you immediately jumped and you're like low carbon. No gas fees, everything. It really feels like you guys are already, you've already taken the long run approach to you want this to be a trading card game that is around for years. It's not just a pump and dump NFT thing. It's not just a short-term thing. How did all that come about? What was the process for you of creating that, I guess a plan 

Matt: it came out of survival. The moment we launched our packs in April and sold out the first thing, all the collectors said was like, where are you going to be able to, what am I going to be able to stake your name? Where's your game, where's your white paper. Where's your game design doc. And we're like we don't have any of that. I thought we could just sell stuff and you'd collect it. And so we had to radically change our business model and it totally, re-invest almost everything we made back into production for two different games. So we're making a 3d adventure game. We're going to be releasing videos of that production here at https://www.drzammsy.com/

And then we partnered with some good long-term friends longtime friends of mine that have a gaming studio called robot Cmonster games. And we asked them to take our trading card line and convert that into Flash Royal style video game. And so you're going to be able to collect our NFTs. I won't get into the whole details unless you want me to about the game, but it's just, you essentially play your cards in on this cool table. And they convert to actual 3d characters and they battle each other. And yeah.  The idea for the game came from Ralph and I but the actual implementation of the whole production of the game is through our partnership with robot Cmonster games. But we have an entire team of 3d modelers, character artists animators that are helping us as well. So it's a really cool collaborate.

But the 3d adventure game. We hired a tech guy right out of school, out of Scotland.  Our 3d team is working on Dr. Zammsy laboratory and you get to shrink down to the micro realm.

Dr. Zammsy is basically a fantasy doctor in a whimsical universe called Gallagan, and he's fighting a virus coming from another dimension. So he goes down into the microscopic level and fights these weird internet soldiers that are attacking his world, spreading this virus. So it's really timely the concept because it has to do with COVID in a way, but it's told in a fantasy star wars, Indiana Jones kind of setting Harry Potter kind of thing.

On top of all of that, we partnered also real quick with a friend of our ours called his name is Matt Lyon. He's a creative director in the Hollywood world. And we're, we've actually structured a 10 episode treatment and a pilot episode, a script for this to actually be an animated series.

Q: Wow. So yeah, very long run approach. You've got a lot of a lot of moving parts and it, I appreciate, especially in the NFT space, I appreciate something. That's a project unto its own and has things that, that can branch off of it rather than just. A collectible item. That seems to be where it seems to be, where everything's moving. There was obviously the big craze at the beginning of 2021. Everybody was like, oh, look at these collectibles. Just sell it for millions of dollars. Yeah. And I'm sure there's a space for that. But. I took some, I didn't buy an NFT until last fall. And it took some very heavy convincing by my co-host Michael to actually buy NFT

 Matt: It comes down to utility. That's a big word in the NFT space now. And know a lot of people don't just want to collect art. They want it to work for them. And have some kind of value. So  real quick, you can actually stake our NFTs on the site called whenstaking.com. And by staking our NFTs onto that system, you can actually earn void and you can go to our FAQ on our website to learn more about that. But but it's so bizarre how you can actually. Purchase an NFT and then make money by just putting it somewhere. But the benefit of that is a utility, like I said, and that's why we're making two games and wanna wrap NFTs around our animated series. Our concept is that once each episode airs you'd be able to collect limited NFTs from the show after each episode. And then those would also be playable within our two games. So it's this like circular. Ecosystem that's involving our project in, in, on different platforms and

Q: something that just jumped out when you were talking about staking, these NFTs specifically with trading cards is a mind boggling proposition. Cause if you're talking like Pokemon cards or anything, like those have gone up so much in value, and if you're in house able to provide the means. Like renting those cards out to other players or selling them in your own ecosystem. That's huge. That's insane. 

Matt: That's yeah. All ownership is a big deal. If you think about it, like Fortnite, you put in hundreds of dollars as a player and you don't actually own those skins or guns that you're buying in this ecosystem in this space for at least for wax regarding NFTs and gaming. And you can either sell that on the secondary market, if you've grinded and beefed up that item or you can keep it for yourself or whatever, but you actually, there's true ownership in that. And a lot of games they're really, they can be really popular. You can shell out hundreds of dollars being up your character's assets, and then maybe the game goes away or you just. Have any interest in that game anymore? The idea about the metaverse is really interesting too. The long run is that I'm sure there's going to be  partnerships with other projects where  a gun or a car from one project can be shift shifted over to a different game because you own it. And then you're still playing with the same assets in a totally different game. I don't know how cool that would be, but that's the idea is true ownership.

Q:Yeah. Yeah. And like you said, the circular nature of your ecosystem seems to be a that right there is interesting because you can not only do the players and the participants and the NFT owners, not only are they able to drive some of the value because they're playing it and it's becoming more popular, they're spreading it, but you also can drive value through creating more common. Based on that same IP to use an old kind of term there. So that's really interesting. What was the impetus to that you said at the beginning, some of this was survival to create the game and all that aspect, but creating this kind of circular. I almost value stream. What was the impetus there? 

Matt:  For the animated series, that's actually was my original vision 20 years ago for this project. So Dr. Zammsy came out of me, graduating from college at art school and just, I had this cool idea of this world and this universe and this character, it didn't really go anywhere. I just had lots of ideas. Until this NFT thing hit. And Ralph was like, man, we gotta make an animated series. And then our fans were saying make the game first. And  over the course of the year, we made a lot of great connections and really. And Matt lion, when he came on board was just like, look, I got the animated series thing give me all your notes, give me all your bios to the characters. Give me all the art. And we literally just finished the pitch for that  last weekend.  It's looking absolutely freaking beautiful. And we're really hopeful with all our contacts that we can get into a streaming service and get this into production. As far as the game.  We, as a Fabricated Madness is we started the 3d adventure game first, but then it seemed easier to actually accomplish the card game first. That's kinda why we ended up doing two games at the same time because we shifted gears. We're still working on both, but the card game is our highest priority right now, because that actually incorporates  our product that we sell a weekly. We do weekly drops cards, utility cards that are based on the game as well for a limited time each week. And then  it's just Positioned to offer a game that's relating to a direct product to our customers. Yeah. But yeah. Yeah.

Q: What a story too. Cause I love, especially in the long run we're talking about long run stuff. You it's a perfect example because you left your job. You said this is your first time starting a business. You obviously believe in this sector in the long run. What are your thoughts on NFTs in the long run? Like the whole thing. What's your, where's your mindset?

Matt: I think the creative side of NFTs is just a small portion of what of what the kind of utilities that NFTs will bring. I think when you buy a house, your mortgage is going to be an NFT. Your medical records are going to be an NFT. Things you would even expect are going to be NFT as receipts because it's totally encrypted.  It's on the blockchain, it's there for everyone to see and track. And  I just think it's. Decentralized system for information.   But big talk in terms of the metaverse I think NFTs are going to be a integral part in the sale of goods, the transfer of  funds all kinds of things like that. Crypto's obviously gonna be a massive player in the metaverse as well. I just can't wait. I want. Metaverse of Dr.Zammys and the world that we're creating here. There's giants, crazy vehicles, airships slug pirates. You name it. I just to be around that crazy metropolis cities that are multilayered for different scaled creatures and from three-inch little dudes to 40 foot giants and all living and working in the same space.

To actually play a game where you're in that environment and maybe even making money in that environment, it just be Wild. It's basically ready player one. So yeah,

Q:we have arrived.

Matt: I know. I didn't mean to blow your brain there,

Q:but yeah we love getting our brain blown. That is wild.  I've never been that into video games.  The kind of idea of the metaverse is quite enticing.  And also really what to me is most enticing is like what you were talking about, these different worlds that you can go into. I don't think that'll be the initial application. I'm sure it'll be some boring business thing where we have meetings virtually. That'll be the initial one. The businesses will be like, oh, we got free cash to spend. We'll spend it on some virtual headsets and everything. Exactly. But we'll get there. Yeah, exactly. We're in avatars with no legs. Yeah.

Matt: But a good example of where this could be applied is actually I don't mean to plug this, but there's like a daydream festival, a huge EDM concerts that I designed their posters and stages for. I'm actually in talks with them about a metaverse concept where if you can't afford to fly over to Europe and see these massive  EDM concerts maybe you can jump into the metaverse and see it live that way either virtually or entirely built out in a whole new way where a avatar. Of DJs that are like, that are playing at the event are in a totally original world spinning live. And you're one of the avatars in this virtual space. So  the ability to engage with the world real time through a virtual experience could be really beneficial.

Q:Yeah. Yeah. I've heard some really interesting, that's another very interesting application for this kind of VR slash like metaverse meets universe collide. Those sort of those sorts of solutions are really interesting because there are a lot of people that, where yeah. They might not be able to fly over there, but they could afford a headset and. The ticket price to just get in.

Matt: Exactly. Yeah. So there could be very interesting and that event's really interesting because they have actual campgrounds. It's like a two day event and you actually stay there for a weekend. So maybe I can only imagine the eye strain, but maybe you're there for  essentially two days porting in, on and off. Yeah. Pretty wild stuff. Yeah. Yeah.  I do think Ready Player One the movie is a perfect example of where this is all heading.

I know it's very SciFi and all that, but the power of gaming, the power of the technology is just getting so good that I think in the next five to 10 years, it really is going to be here easily.

Q:Yeah. And that's something that we've seen. The last decade you've seen e-sports. Oh, it's this incredible niche thing to more people watch a specific game, final world championships things on the super bowl.

So it's it's more popular than the biggest sports, normal sports events. Yeah.

Matt: league of legends. Actually, I worked for them. Like almost 10 years ago, back when it was just a very small game. And then I moved on a bunch of other different things, but Morgan Spurlock on his show had an episode about gaming and he referenced league of legends and they like they full on  have an entire audience in a football state All watching these gamers and it's just huge millions of people pouring in to watch these matches. So yeah, e-sports is massive. It's pretty wild.

Q:And I think one thing that, that boggles my mind too sometimes is like you were talking about using NFTs for receipts, for tickets to these types of events. I think probably 99% of people. If they know what an NFT is, they think it's just a piece of art or some image, some JPEG that you can right. Click on whereas it's totally. It's just a method of ownership on the blockchain and that's so powerful. And I think a lot of people just haven't necessarily seen the power of NFTs yet. What do you think? Do you think the timeline on that is it everything's going to start coming together soon. It's okay, shoot. People are going. Seeing what's going on or do you think it's more of an evolution?

Matt: I honestly, it's a really tough sort of hurdle to get over. I think the technology has a long way to go to make it easy. You gotta get your crypto and you got to get your wax cloud wallet and you got there's all these different things that got to click into place, move your funds from your bank account and turn them into crypto. And if you're not computer savvy, I can see that hurdle. But when it gets as smooth as Apple Pay and going to whole foods and blame just paying for a a bag of lettuce. But instead it's an NFT somehow. I think that's when everyone's going to jump on board right now it's a very niche market. The people that are involved understand do their, do the due diligence and read the FAQ's on these sites and learn about what they want to collect. A perfect example of the use for an NFT that's different other than just collecting his physical goods. So I did a lot of Comicons for about 10 years, and I have a ton of merchandise that's just stored in my garage because of COVID. I can't get to as many Comicons to sell my goods anymore. So a lot of our fans are interested in. Turning digital NFT into almost like a redeemable receipt where they can then summon the physical good whenever they want. So if they don't want it right now, they can hold onto it. But then I'll get an email that will say, Hey, this fan that bought this NFT wants your toy or whatever. And or a book, and then I can ship it to them. It's like a. A totally new way to look at a, an industry that I've been involved in. That's not accessible anymore, but through NFTs, I can somehow sell goods through NFTs. It's just a, it's a wild experience, but that's what's on the table right now. As well with music too. We partnered with Yoshi drops, Michael blues company. I'm not sure if you've heard of them. They're all music based like MP4s and we're doing a whole other separate project away from Dr.Zammys that involves my world building art with  generative  art that you would see through  board a yacht club.  But it's also done through original EDM music that Michael blue wrote for each piece.   NFTs as music

.Q: Yeah. Yeah. I've seen those. I've actually really liked those art pieces where it is some sort of sound and picture in a loop, some sort of animation that's super engaging to me. I'm a musician have been for a while. So the concept of the musician not having to necessarily go to a record. To sell their IP and just being able to release it direct and then own it. That's a wild concept for music because traditionally there's so many gatekeepers in the music industry and yet streaming sort of level the playing field, but then it also just completely wiped out the ability to sell records for any amount of money as  an artist, a single artist, right?

So now you have this ability to. I can go create a song right now. You can go create a song. We can all go create songs right now. We have the technology to do that digitally very easily. We don't have the technology to own that. And sell it. So that's a really, that's a very interesting application. I wonder what the world will look like when the big, bigger companies realize they don't, they can't necessarily just buy an artist anymore. The artist can sell themselves direct. 

Matt: I think. Bigger picture too, is that you have a lot of creatives that are very talented about with storytelling and all that. And if if the sale of their NFT gives them more cash in the pocket, more capital, I think if they play their cards like I'm doing it opens up more doors to actually provide the world with more entertainment, more content. I read an article like streaming services. Basically tasks with creating the same amount of content per year. That would be the equivalent of every movie and TV show created from the eighties and nineties all at once, all in one year annually.   A lot of these studios and also gaming companies too, are just constantly struggling to to fulfill that demand.

But I think if NFTs can create a whole. Brand new sector of creatives that are, we're just work for hire that are now creating content and managing it themselves. I think you're going to see an explosion of new TV shows, new games the likes of which we've never seen because that capital is being reinvested in people that really understand that space.

Q: So that's actually, that brings up a really interesting question for me is you've been on both sides. Now, you're now owning a business, running a project, you're building it out. You're now hiring people that you might've worked with on past projects. And I also looked through your LinkedIn, you have a very impressive resume. In fact, I got to say, you worked on my favorite star wars movie of all time. I love Clone Wars. It's the best.

Q: What would your. Advice, I guess be for people looking to do that who are on the creative side of things and want to make that journey. What does that look like?  

Matt: First off you just have to have good high quality art. I think there's not enough. Good high quality art out there. Although the market has proven that high quality art doesn't, it doesn't have to it doesn't have to be amazing art in order for it to sell. It just has to be marketed properly. I think the marketing hurdle on these things is super massive right now.  Factor that has been a struggle of ours all year long, but we've overcome that many times but then gone back to square one. Finding the right marketing team and the right marketing channels we use discord telegram. I didn't even know what these things were before I got into NFTs. And now they're my everyday source for connecting with fans, releasing information  and the fan base. The people that collect these things, they're super passionate about it. So they, they want engagement. They want, there's a lot of our time, isn't just about building new content. It's about engaging with the fans and they have a million questions and you have to just always invest that time every day into that. I'd say I wouldn't have gotten into NFTs if it wasn't for my partner, Ralph, he was collecting NFTs back in 2017. He's super involved in the wax blockchain. He knows all the major players that are getting involved or that, that are running that, that ecosystem. And so it was a natural step for us to go into that blockchain, but there's so many more there's flow. Etherium all these different ones. So pick the one, maybe that you have connections with.  Or it's easier to dive into if you don't know anyone, just do your research, do a lot of reading. Go to Benzinga.  All these different places on the internet have tons of resources to get to the information you need. I'll say if you go to https://www.drzammsy.com/faq/, we have an FAQ and it explains everything on there on how to get a wallet. We're more than happy to share information. That's one thing we learned is that it's a place where everyone's just giving away information. , it's not this secretive world where everyone's like really protective on how they did it. That's how we got into the game is by asking a lot of questions to our competitors. And they turned out to be friends.   It's a pretty cool space. In the past before NFTs, everything's so secretive. If you wanted to learn about a game and production, it was very secretive. Now everyone's releasing the entire Bible on how they're making a game in real time. All they're making it. So it's just so different. It's very transparent, but I think that's  the vision for crypto and the vision of the future is transparency.

Q: And that's one thing that I don't know if you've noticed this too, Austin, I'd be interested to hear your thoughts, but. In terms of just crypto in general transparency  the very form of blockchain itself, but then devs like crypto devs are some of the nicest people they'll share the whole code block with. You have to do it. Like it's amazing to see the crypto devs and then the people. Artists in the NFT world. It's incredible. It's like the best people from every industry. Just come to a discount to crypto and blockchain.

Matt: Yeah. I've yet to meet a, an evil person or someone that was rude or anything. Everyone's been so nice. I think we're all just so excited. Cause it's totally brand new. You can get really successful. And just sharing information. I think if someone had Dr. X. And instead of a virus, it was something similar. And they wanted to do a project with a character with a top hat. I'd be a little reluctant to help them cause it's directly ripping us off. But but that hasn't happened yet. And. Know, we're just so happy to have everyone get involved in this whole new system.

Q:  Yeah. Yeah. That's, I don't know that you'll probably have that cause you've got first mover first mover advantage there, Matt. So you're probably safe if you're listening to this and you're making a doctor. Just don't come and talk to my man. He's about to crush you. So usually what we do at the end here, Matt, is we give a somewhat of a, like a portfolio tip or action item. Again, we don't give investment advice obviously, but we do want to put some meat on the bones. We talk about a lot of use a very good term. Concepts here.  And very very abstract stuff. So when it comes to what somebody listening to this episode, what can they do to get involved? It sounds like buying a, NFT is probably the first place to start just dipping your toe in. But even before that, how can they get comfortable with NFTs? Even with your project how does someone just dip their toe in and figure out this space,

Matt: My experience is just directly with wax I would go to again, our website read our FAQ. It explains exactly how to get wow. How to create a wallet, how to put that wax in your wallet. Once you have your wallet in place, you go on to these markets you find the entity you want and you connect your wallet to the purchase and boom, suddenly it's in your wallet and you have an NFT in there. It's a little more complicated than that, but that's in a nutshell what the process is like.

And and then if you get lucky, maybe you collect an NFT that goes up in value for whatever reason. And then you go back onto the secondary market and https://wax.atomichub.io/ is really great for that, where you can sell the NFT you bought for maybe a higher price. And then that's where the game changes. You've actually invested in something that's gone up in value and you're making a little money. Plus a wax is so volatile in a good way. And if you, and this goes without saying in terms of just crypto in general, but you always want to sell on a high and a and buy on a low. And th there's there's a great advantage to that.   When it seems almost too good to be true in terms of its value, sell it.Yeah. May go up even another dollar you missed out, but inevitably it always comes back to. There's a massive crash and then it goes back up again. Maybe someday it will never go up. And then that's when entire system just fails, but I hope not, but as it stands right now, I really do think it's the future. And and just to answer your question. Yeah. It's as easy as just doing the research. Our website's great. Benzinga is another good one, honestly for learning all these things. And then there's other ones that I can explain, but I'd rather not because I'm on your show, but if you just do your research, you can find tons of information on all the blockchains that are out there. The ones that are specifically related to NFTs and how to get in.

Q: Awesome. Yeah, I think the education component is key. It took a lot of, for me, I'm a very like cynical, kinda old at heart and kind of guy. So it took a lot of convincing for me to even buy my first like NFT art piece. And it was an interesting experience, but it took a while. Like conversations with people reading a lot to understand the process. And so I think you're right, that the education piece is definitely the first component to start.

Matt: I was just gonna say there's a lot of scamming out there and I can see why people are fearful. I've had friends that gave away their wallet information in a way where, you know, everything you had was stolen. So you really want to vet people that are trying to poke at you. Double check those emails that come into your inbox that are saying the claiming Hey, if you get, if you do this, we'll give you this. And then it ends up being you're just wiped out  just make sure if you do the right research that won't have. It's just, be really frugal about it just keep your cards tight in terms of your personal information. I think you'll be fine, but people that just think of this as just like a hobby and they're just kinda toying around, they're going to get hurt. You got to take it really seriously.

  Q:Essentially it's it seems like it's different folks have. Different ideas and different ability to just jump in. Like for me, it was, I was buying stuff on nifty gateway last April, and telling Austin all about it and all sorts of stuff and constantly, and he's trying to get to do the research.You got to read up on this, I gotta do this. And then so it's definitely. Different strokes for different folks, and it's, it is a, it's an amazing world to be a part of right now. Like we've talked about where the majority of the world doesn't even use crypto yet and we're getting there. It's rapidly increasing. So it just seems like that kind of long run. Wild world to be in right now.  

Matt: To your point  it was so bizarre to have contractors that were paying to do specific things for us on our projects. And they're asking to be paid in WAX or get paid an ETH or something like that. And. It's just crazy. Cause you know, we have plenty of that. We have cash too, but it's just so much easier to just to send crypto to someone and  you don't have to pay for a wire transfer fee or something like that.  I'm slowly seeing that at least in my industry more artists are accepting crypto as payment. So it's yeah it's changing fast and it's here. It's literally right now.

Q:  Awesome. That's about all the time we have today for this episode, the long run show. Matt Gaser. Thank you so much for coming on our first, our non-real guests and what a guest to have on today.

Matt: Very honored. Appreciate it guys. Thank you.

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In today's episode of The Long Run Show, Michael and Austin talk about insurance.

• How people think about and approach insurance.
• which insurance life, health, auto, electronic device insuranc edo you actually need?
• Using Options to insure the investment portfolio
• The origin of insurance? How did insurance companies come about?

Hosted By:

Austin Willson

Michael O'Connor

Unedited Transcript

Hello and welcome back to another episode of the long run show. This is your co-host Austin Wilson and Michael O'Connor. And I have to say right off the bat, I don't know if anyone else has noticed, but we've got a snazzy new intro outro combo.

Big shout out to Nick Thomas. One of our lovely British writers on our TV, that the good graces to provide a little color commentary at the beginning. And I just love it. What are your thoughts, Austin? Oh, I love it too. I feel like we're at the BBC every time we every time we do the show, it's just a, it's just a grand old time.

And also shout out to our amazing producer, Asli. She did a great job putting that together and coordinating everything so that we sound good and we look good. You can't see us, but we look good anyways. Today we are going to talk about and hopefully do an interesting. And compelling job talking about one of the most boring topics ever, which is insurance.

Okay.  We thought this was actually a great fit for our podcast because this show's all about the long run. And there's nothing more long run than insurance. Insurance is all about risk mitigation. And you're talking about some, sometimes decades, long risk mitigation, some of the risks that are a hundred percent going to happen, like your death, or sometimes it's risks that may not happen like flood insurance for your house.

So we're going to cover all of that today. Maybe even get into what might be dubbed insurance for your portfolios, with the options. We went, talk about that as well. But right off the bat, Mike, do you want to say something real quick and then we'll hop into the different types of insurance and kind of lay some groundwork.

Yeah, I think this will be a fun one because this is one where you definitely have. The more optimistic view on the subject matter, which is a little flipped, I think, compared to some of our previous apps I'm a big game theory guy. And 90% of the time insurance is a bad bet for the insurer  it's if they weren't gonna make money off of it, why would they be offering it?

So it's a really unique value prop where you have to, at least in my opinion, you have to have psycho economic benefits that outweigh. The cost, which I think is a hundred percent there and life insurance, or fire insurance for your house, car insurance, stuff like that, where it would be just absolutely awful to have something happen to not have insurance.

 But I dunno stuff like electronics, insurance, appliances, stuff like that. It's really hard to make a compelling value prop in my opinion, but I am excited to dive in and yeah so I think you're, you might be right on the surface. We may have some different. Or flip-flopped I guess opinions here usually I, you can go back and listen to other episodes.

I'm usually very pessimistic when it comes to things or at least at the very least cynical or noxious.  Yeah. So this is right up my alley. Now I think it would be important to just define some of the different things. So we usually, when people think of insurance, they think of like auto insurance that's the first thing they think of something you're required to have by the government.

 It's just there it's a necessary. Yeah, I guess evil is some people might I've. I have been in a couple accidents. I will tell you it's pretty nice having having auto insurance. Even though we are required to have it to drive  in the U S at least. So that's probably the first thing people think about insurance.

 W when the topic comes up auto insurance. Okay, cool. There's a lot of other ones out there's renters or home insurance. People are very familiar with that. Then of course, you've got the life insurance side of things, which is it's whole other beast. It's its own monster in and of itself.

 You've got people saying, oh, it's an investment. Oh, it's a, it's an insurance product. Oh, it's this. So it's that I can do 10 different things at one time.  That's a wild world. And then you have the other insurances, like. Where it's insurance for like electronics. Like I've been tried platforms, try to upsell me every time I buy an electronic, whether it's through best buy or Amazon or eBay, they're always like, oh, you want to ensure this electronic device?

And I'm like, oh no, thank you. I don't really want to and Midwestern insurance selection  I think they know their customer. I'm pretty sure they they've got my IP address and have geo-fenced me in with a different. Voiceover anyways, I digress. So you've got those like device or appliance based insurances which never I never get them.

I'm not that cautious, so I've never gotten them. And of course you've got health insurance, which we, that is such a big topic in and of itself that  we can touch on it, but we're not nearly going to scratch the surface on that today. So those are the main consumer insurances.

Now there's really funky things that happen in the insurance world. So there's actually a subset of insurance companies for insurance companies, which is wild. There are insurers for the insurers. So they're insuring the risk that the insurers take on. I know that sounds very meta and ridiculous, but it is a thing because insurance companies, if they don't pay.

On a legitimate claim of some sort of, whether it's let's say a death claim for life insurance or some sort of health, insurance claim or  house insurance claim, if they don't pay out on it that really ruins their reputation. Most of insurance is about trusting the company that you're with.

 Because you're  there's a higher level of trust because it's an ongoing transaction. You're paying premiums usually monthly or yearly for the insurance on whatever it is. And that's different than. Then a one-time buy or even a subscription product where you're getting a magazine monthly or an email monthly it's very different.

It's intangible. And a lot of the value is based on trust. So there's that subset, which is other part of the insurance world. And then of course there's really interesting things like life insurance companies do really interesting things with their portfolios where they will use options to basically ensure or guarantee a return on a portion of your dollars  put into the premium dollars, put into the policy.

They'll guarantee a portion of that. So there's lots of moving parts within the insurance world, but that's the main breakdown did I miss anything there?   I always enjoy the origin story of insurance. When the the east India and Western Nia trading companies and the, all the big shipping companies were dominant any smaller player, they could maybe afford one or two big trading vessels a big sailboat sailing ship.

And if it's sunk in a storm or got looted by pirates or something, the company would just go bankrupt, you'd be completely hosed. And so the very first insurance companies were for merchant vessels and to ensure, so if you get sunk by a storm, everyone doesn't immediately lose all of their livelihoods and go bankrupt, which I think is it's so wild.

And that's where Vanguard's logo comes from  the ship with the so the, at least I believe that's originally their story behind the logo. These, I think it's a fascinating thing where you have the, this idea of a cataclysmic event. It's such insurance is such a human thing.

And I mean that in like only, it's such a unique Like all of the idiosyncrasies and funky heuristics of humanity just seem to come out and insurance, like it's such a unique and just I honestly think it's fun to talk about even how boring most people think it is. It's like the psychology and the ramifications of every layer of insurance are just so interesting to me, at least.

 Yeah. Yeah. And it's, and I've seen  I, in a past life was a financial advisor for awhile and that sometimes involved insurance and there were more there were advisors in where I worked that were, we're selling more insurance than others.  Some didn't do hardly any, or they found it out to a different advisor or something, but I've been in meetings.

Talking to clients  watching advisors present to clients and it is always the insurance conversation is all of money is emotional, but the insurance conversation is more emotional than pretty much any other part of the whole financial planning or financial advising kind of conversation.

 And so it's really interesting that you bring that up because it definitely is a human thing. Like only us humans can abstract enough to think into the future to go, oh, that might be a horrible situation. Can I get away from that somehow? Or can I like lessen that future potential blow to my, whatever.

Appliance or life at legacy  w can I lessen that we have we have a ridiculous ability to abstract and think into the future. And so it is interesting. You bring that up because  the conversations that I've seen just on a personal level and on a human level are always very emotional.

So that kinda makes sense. It's just about the most long run topic we could even talk about  in terms of human long we could talk about the heat death of the universe if we wanted to but in terms of the long run show, being about people and finances and everything, and I think it's just about the epitome of long run than we could talk about, because it requires in order to even perceive a benefit, you have to take a very long.

Look at things and imagine your future self reacting to things you can't imagine your current state engaging or losing something you have to step out of and have empathy for your future self, which is extremely interesting. Yeah, it is. It is very interesting. The different topics here are the different pieces of insurance.

I laid out what let's go through those because you have an interesting view here. You said you don't think insurance is worth it 90% of the time. So I guess first explain yourself and then second let's walk through those different pieces of insurance and see which you think might be worth it or not worth it.

 Cause it sounds like there might be different kind of arguments with each one. So go ahead and explain yourself, Mike. Yeah. That's I think the best way I can explain it is with an analogy to blackjack if you ever played blackjack, there is this almost always. I've never seen a game where they don't have it, but there's always a bar with just as insurance.

And so that's, if the dealer is showing a, an ACE or a 10 card you can buy insurance. And if they get a blackjack, you get a payout from that. So it's a way to bet on the dealer having a blackjack. So you're instantly gonna lose. So it's this kind of psychological benefit to, to it's oh shoot, he's got a blackjack.

 I gotta make some money off this or not lose all my money. And it's the probability is always, it's never in favor of taking the insurance near all. You're always significantly better off by not taking insurance. And that's a, just how insurance works and the broad scheme of things.

Because if you think about it, no, no insurance company could be in business. If it didn't work that way the B there'd be no way to, if everyone was crashing in their cars all the time, insurance companies wouldn't exist because he couldn't, or the premiums would be so incredibly high that only only a very small segment of people could afford it.

So you have to. And this isn't necessarily a bad thing. So it's, I think a qualifier to my statement of I think most, most possible uses of insurance out, there are not a net benefit for you. Like it's not necessarily, it doesn't necessarily make sense economically to engage in it.

So like a classic, like appliances phones a lot of stuff that computers, a lot of stuff, and that stuff has come out more recently that more and more companies are pushing that because at least from my perspective is because okay, you can make a lot of money charging premiums.

 When, whenever anyone buys an iPhone, just charge them three bucks a month or 10 bucks a month, whatever, it doesn't seem like much. But the probability of them breaking that over the course of the plan without it's very low comparatively. So you can make a lot of money with insurance because you're playing on that loss aversion  those kind of natural human tendencies.

And on the other side you have the really big stuff like life insurance, home insurance car insurance, where the effects  if you run into a situation that you would utilize it, the effects of not having it or are very high and the health insurance is a great example.

And that's something that very can be a very political discussion, can be all over the board in regards to how health insurance works in the United States versus other places and everything. But I think just to sum it up very briefly is it's a very interesting scenario where  it's another situation.

Where things can go very wrong. And in the, I think the psycho economic benefit, so the kind of deep understanding of value in the human brain that's outside of dollar signs or anything like that kind of understands the value in those kinds of insurances. And I think that is significant and not necessarily to be disregarded.

So I, I definitely, I've definitely met people who say never do any kind of insurance because of just the probabilities, like never, ever do anything insurance, like you just, if you're gonna do life insurance, just save the premium instead and then give it to your kids or something like that.

So there is some very, there's some very interesting takes out there that are like, oh, never do any insurance, which if you're purely looking at the statistics, like sure, like purely looking at it or probabilistic way, but at the same time, it's I think that there's real value in that that the psychological side.

  Okay. I'm just confused by the guy who said don't ever buy insurance ever. And because I'm like if anyways, the probability of that person who's told you that dying is a hundred percent. So he's looking at this, that's beside the point. We don't need to argue with an imaginary person. Who's not part of this podcast okay.

So it seems like what you're saying is insurance, for things that can be pretty easily replaced and, or things where you you're not going to get rid of car insurance. You're required to have it by most states laws. In at least in the U S here. So you're saying like, okay, barring anything that you're required to have or anything that would be.

 Easy to replace, then you can look at getting insurance and then it's really just a cost benefit from a  emotional perspective.  Is that what you're saying? Pretty much is a good way to sum it up. I would say so, because the same thing with I just recently I traveled pretty routinely.

I never, ever booked travel insurance. I never had before, but then I just recently did purchase travel insurance for a big trip coming up just because I was like the cost benefit of. Okay. If this gets canceled and you gotta you can take risk into account. There's always the risk of COVID lockdowns or flights being canceled, et cetera.

So it depends on  the full scenario of risk as well. So that was the first time I've ever bought travel insurance and never buy like a U haul insurance when moving or renting any objects or anything like that. And so I think what you said is pretty spot on because it's the you have to have kind of an internal conversation and say, do I actually consider this worth the extra?

And I think one of the, one of the really important ways that insurance can masquerade itself as this, just like a no brainer kind of thing, even on small products like that is because if you're looking at a phone, like if you're getting a new eight, $900 iPhone and they say, look, you can just add on insurance on this full coverage for 10, 15 bucks a month.

Something like that. It sounds, oh my gosh, like $15 a month compared to $900. That's so little money. I don't care about that much money compared to the 900. So it's okay that's a great deal. Who knows? I might break it. I don't wanna have to repay the $900.

And then the next day you could be buying a meal for $15. And so  it's, there's a lot of anchoring that goes on as well. That makes insurance seem cheap when you know, the product itself is expensive. And I think that's a very common, psychological phenomenon as well. It's like that's an easy way to create a subscription plans towards just the psychological benefit of not worrying about whether it's going to break or not, which is, I think it's a really fascinating for now.

Interesting. Okay. Yeah. That's fair. So I would probably agree with you on like phones and appliances. And I think it, like you said, depends on the whole situation, but like for a long haul move using U hall, I might just buy the insurance cause I'm like I've had an accident before, so maybe I'm going to have one again.

Maybe I'm just that bad of a driver. I'm like don't tell my insurance company, but the thing is okay, maybe I would do that, but that's considering my scenario. And so it's not necessarily true for everybody. I did want to go back though, to something you said in your explainer of, oh if if there was.

  If the insurance was actually worth it, insurance companies, wouldn't be making a buck. And you said something about premiums would have to be super high  for there to actually be any, if everyone was crashing their cars and using the insurance premiums that have to be super high because everybody would be using it.

And so since not, everyone's using it, therefore no one should get it. And that was that was kinda what I heard. So please correct me if I'm wrong. But the, that thought process for at least some insurances, so I'm thinking  let's just compare apples to apples. So let's go term and term life insurance, which term life insurance you pay usually a monthly or a yearly premium for.

15 years of coverage or 30 years of coverage or 20 years of coverage during that term, if you die, you get paid out the amount that you're insured for. So term life insurance, car insurance, renter's insurance, home insurance. Let's compare those because they're all the same. You're paying for a term you're paying usually some sort of monthly or annual premium price for that.

 The reason, so to push back on what you said it's, it doesn't work because it's not worth it because they're taking advantage of you that the in life, the insurance is taking advantage of you because there's just more are there, people are not using it enough, therefore you shouldn't get it.

Hopefully I'm not strong. Meaning you've stepped in if I am, but pick a little bit, but I'm interested to hear what you're about to say. The idea behind it is that. Actually what you brought up at the beginning where the ships were insuring each other on a long voyage because they if one of them, or many of them lost the ships that were in their fleet, they didn't want to have to basically bear the brunt of that all themselves.

They wanted to spread that burden out across multiple people. Th the same idea holds true that the, what you were saying about yeah. If everybody was crashing their car and using the insurance claims then you know, the insurance company wouldn't be making a buck, you might be really getting the best out of your insurance.

You might be getting a new car for a couple of hundred bucks in premium. But there would obviously be opportunity costs there anyways. You might be getting a new car, but then the premiums would all just have to go up. The idea with having a large pools of people insuring one another is that you spread around the risk and the burden.

 And I guess what I'm saying is that the idea that, oh the it's just  the insurance company making a book on a low probability event that is somewhat true cause they do have to make a buck, but also the main the main mechanism for that to happen is not that the event is low probability or the risk is low probability, but it's, there's enough people to spread the risk around so it can reduce the burden for any individual risk.

It can reduce the burden where as if they didn't have the risk spread around or the burden financial burden in this case spread around, it would be a full a hundred percent. Whereas it can maybe be 10% of that burden. Does that make sense? No, definitely. I, and I totally agree with that.

It's something. It's similar to a credit union where you have a conglomerate of individual players that creates a situation where the risk is significantly lower for everyone. So it's I definitely agree. It's I guess maybe I threw my perspective out a little too harsh in the beginning of, I think my perspective is more just if you simply take like the individual's perspective from each like each individual player in that whole games perspective sometimes it can be a hard sell  to be willing to take on the risk of the group as a whole.

  But it's a very good point. It's I don't. I think that insurance companies are fraudulent or just taking people's money or anything like that. It's not, I definitely agree that  insurance is a necessity in this day and age and it's it's a good thing. It's not at all a bad thing.

 And I, maybe I came off like that a little too pessimistic, like short term insurance companies. Definitely. Don't, that's a bad as the good thing, you're not anti insurance, otherwise you might, I don't know. Maybe you disappear insurance coming true. It's like messing with the fed big pharma and insurance companies.

It's just let them be there doing their thing. Anyways. That's a whole, maybe a better qualifier to my original statement of 90% of insurance. I think I meant more like 90% of the offers for insurance that you'll come across over the course of your life are not worth it. So the kind of, a lot of the.

More like substandard like regular events, like getting a new phone, getting new appliances, getting new products moving, traveling, the kind of insurance is that ironically almost a weird negative correlation between the amount of times that you would use the insurance in your lifetime compared comparatively.

It seems like the amount of times, if you're only used at once, like life insurance or hopefully your house only burns down once it burns it down at all.  Like insurance is that you would worst case scenario only use one, maybe two times I think have the most intrinsic value and are probably the best, like the best value, both simple economically and psychoactively as well.

Whereas the insurance that you could end up using many times you could break your phone many times  the possible risk to the insurance company of someone who is is maybe just drops their phone a lot. And they have to average that out. So they probably have people who dropped their phone a ton of times are the outliers on one end.

And the vast majority of people don't, but they end up having to pay extra for that. And that's a whole funky situ situation. So I would amend my statement and say more like the number over the course of a lifetime, most of the insurance, most of the possible insurance things that you'll be offered are not worth it, but does that.

 That I could see where you're coming from on that, because I guess I would probably agree mostly with what you said, or I would greet most with what you said.  There's almost a weird negative correlation where if you're going to use the insurance a lot, it's probably not worth it.

Whereas if you don't use it a lot but I guess actually, let me go back let me say this. I think it's actually, if the burden of the risk of that thing happening, it's not necessarily that thing is likely to happen, but that if it did happen, it could be catastrophic. I think that's when insurance makes sense, rather than if there's a high probability or low probability.

 Because there may be a higher probability that. I'm going to get in a car accident rather than my house is going to burn down, but both are still really bad. And they would both be very damaging and burdening if they happen. So I want to ensure both of those risks. Yeah. So it's almost like a burden, like what's the burden of the risk, not what's the probability of, Ooh, that's an interesting definition.

I like that. How does this, because we know there's a lot of ways to have quasi insurance on your investment portfolio, whether you're using hedging tools, whether you're using a funky options plays whether you're buying interest rate swaps or treasury swaps, or there's a lot of different ways to have quasi insurance in a portfolio or over the course of a lifetime w we still didn't get to, I want to dig more into your you're comparing, contrasting each of the, more common long run insurance.

 Things, but what you just said, it almost makes me think that it's maybe not a great play to, to be regularly insuring your portfolio, ensuring quote unquote using hedging tools that perhaps may be reducing your upside. So it's an interesting if there is that kind of actual correlation between the amount of use, like the amount of times, if you're hedging, and this is just financial tools and instruments in general, there are so many hedging tools out there.

 You gotta think about the premium involved and that's say it again, but it's like this if these tools are being used extremely regularly   maybe they're a funky value prop going on there. So that's just a thought just to put meat on those bones, I think you're probably right.

 Because I just read through a. An ETF. I was doing some research on this ETF company and they basically offer some ETFs that will try to basically ensure whatever you put in the ETF for 12 months. So they want to ensure or reduce the downside. They don't use insure because they can't, it's an ETF company, but they want to reduce the downside to basically shave off the first 10 to 12%, excuse me, downside for that year.

So the idea is they're all pegged. They basically use option strategies on the S and P 500. And they're pegged from, let's say February one, two of 20, 22 to February 1st, 2023, same thing. They have 12 of them for each month of the year. And so you can buy this, buy into the strategy, essentially through an ETF where you can insure against the.

10 to 12% of the market dip. However, the rest of that, let's say the market drops 30% of the year. You're only going to save the first 20 or the first 10%. They are not going to be able to save you from the huge drops. So their idea is we can, and again, this is, it's an ETF, so it's very hard.

They use a lot of qualifying statements, but essentially their idea is we want to help you with the little  smooth out the bumps in your portfolio. And we want to help you with the little downswings while maintaining upside rather than totally protecting you against the largest bear market that we might have in that 12 month period.

 So an interesting. Thing, because I don't think they were close to 1% for the expense ratio. And I was like, yeah, I don't think that would really be worth it if they're not going to fully protect the downside. If they're only going to protect the first 10%, I don't think it's really worth me paying them 1% of all the funds invested for that insurance, because it's not the biggest risk.

The biggest risk is a 30% downturn like a 2008 or something. And so I would want to protect against that risk, which there are other products out there, usually an insurance where you can do that. You can basically have zero downside with a cap on the upside, which is really interesting. The only reason they do that is because they think they have a lot of money, so they can ensure that that, that.

Kind of floor and ceiling approach, but they also use options. But they're very effective at it because they have a lot of money. So the options and the fact that they have a lot of capital behind it, make them able to offer those sorts of products, but a very interesting kind of scenario there where it's yeah, this isn't really worth me insuring quote, unquote, that the first 10% of my losses I don't think that would really make sense.

That's a really, yeah. That's a really interesting situation. A very interesting ETF. Cause it's like on the one hand it's so interesting. Cause it's I wonder who first thought of that. That's a very unique product to where  that is very unique and  maybe worth it if you're very convinced that this is not going to be much downward volatility in the market.

  If you think the market might go down 5%, but since was such an awful. An odd way to think about it. Cause I think the majority of retail and a good portion of institutional, like you said, watch for the 20 to 30%, you just want to not be in the market when that happens, is one of the easiest ways to consistently make big returns.

So that's a very interesting, and maybe it's a thought process of if you see it getting towards that 10% bound and you pull out, you say, oh, perfect, okay. This is right at I'm about to not be insured anymore. This is what I sell or I don't know exactly how it works. Yeah. I didn't dig in hard enough, but I don't think that would be the case because it seemed like it was a reset.

It was a 12 month window that reset exactly 12 months later. So they couldn't guarantee the insurance in between that period because of the option strategy they were using. Eh, I, again, didn't see the value in it, but that just is putting some meat on those bones of it's probably worth looking more at the burden and less at the probability that should probably be your first impression or your first factor that you consider is what's the burden of the risk here.

Not what's the probability that this risk is going to happen. I think that's probably maybe third, the probability factor maybe third, second, or third in the list. But the burden has to be the first part for sure. In determining if it's worth it or not. That makes since to me. And I think that cause otherwise you go go down the weeds of Monte Carlo options, pricing, and all sorts of fun, fun equations and stuff that  a lot of the times it works.

  For the average. So the average investor if you want to have relatively safe blue chips with covered calls is pretty classic. Get a little extra premium on the side from the pharmacy. Want to be going a little crazy, but   yeah. That's definitely a good positive, but that's not really, that's almost a risk in and of itself like you may if you're doing a short-term, if you're writing a short-term call, I guess it's not gonna be that much risk if it's far out of the money, but cause we've got a lot of Robin, Hooders sorry for anyone who use Robin hood.

 But got a lot of Robin hood is just buying way out of the money options companies. That's what it should be. We got a lot of hoodies because there were a hood I'm just kidding. We're insulting our audience. No no, it, that in and of itself could be. As well, because you could have to sell based on how the option plays out, could up sell if you're writing the call.

So you're losing out on some upside possibility. Possibly, but if it's far out always, there's always chances of everything in the long run that is the best quote ever. There are always chances of everything in the long run. My, my long run, my, my long run forecast for you, Mike is that there is a as a high chance of everything and not financial advice, but general advice.

I would say none of this is financial advice, but that's life in general advice, all the high probability of anything at any time in the long, pretty much that's that's just life advice there who knew you were going to get, be getting a grandfather wisdom from Mike and Austin here on the line.

Exactly.  I want to jump back. We talked a good bit about the stock stuff, but I want to jump back to your example of the contrasting kind of the more standard insurances that everyone is probably going to be looking at whether or not. Hoodie or you're active in the market. Maybe here, your problem might be looking at life insurance or already have it and optimizing it.

And that's a lot of stuff that I'm not as well versed as you are. So I want to hear what you were talking about and get a little compare and contrast for our listeners before we have to wrap up relatively soon. Yeah. So the  the nice thing is we don't have a hard commercial break Mike, so we can just, and go and folks you're a long, we can make this, the longest episode that the long, long running, it would probably be appropriate with insurance.

 No.  Just to sum it up. So let's go through them relatively briefly. And then you can ask questions where you think would be helpful. So life insurance kind of its own behemoth, but essentially two different types. You got the term which we just discussed. You pay a premium for a period of coverage where you'll be paid out the better.

Of dying. You'll get paid on a death benefit if you die during that term period during the coverage period. So you're just paying for you're basically just paying for coverage during a set amount of time 20 years. Let's say, if you outlive the term and you're not covered anymore, then there is permanent insurance, which always pays out.

 Th there's actually never been a life insurance policy. That's not ever paid out. Every insurance policy always pays out as long as there's a legitimate death claim filed. It always pays out. Now, some people don't file a death claim. Totally separate. Maybe insurance companies make it hard to file death claims on purpose.

I don't know, but I like living. So I'm not going to go tread, tread too far into those weather. No, but so you've got the permanent insurance, which always pays out when you die. You're paying into the policy the whole time. There's a lot of different calculations that go into that. If you're buying a policy, when you are, let's say 75 or 80 versus buying that same policy, when you're 35, you're going to be paying a different premium because the risk that they insure you for is adjusted over the life of the policy.

But the initial, like your personal risk is determined when you start the policy. So at 75, you're going to be way less healthy than you are at 35. That means you're going to pay a larger premium at that point. Sometimes it doesn't make sense to buy insurance because they know that they're going to have to pay that insurance out very quickly.

And like you said, at the beginning, they're not going to make a buck on it. So if you're paying premiums in for 40 years, from 35 to 75, then they're going to be able to make a buck on it because they're going to take some of that money and invest it. And then also have some of that earmark to be able to pay your insurance your insurance claim, your death claim when you pass away.

Now, if you set it up  the amount you pay in from 35 to 85, let's say, or 95 over that 50 to 60 year period should be less far less than what you get in return. And the reason that works is because they could take that money and invest a large portion of. There's also going to be people that live far longer and actually get less.

There's gonna be people that live live a shorter life and actually get more compared to what they paid in. It all tends to even out, but you should be able to make more on the death claim than you paid in premiums. If you didn't, no one would buy insurance. Now, some people will still buy insurance because there's really good scam artists out there in the insurance world.

It's very unregulated compared to financial advising very unregulated. So you can read some wild stuff. And it gets very annoying because they also can just call themselves financial advisor because that's not a. Like a regulated term. So a person can be a quote, unquote, financial advisor, but they only sell insurance.

And  if all you have is a hammer, everything's a nail. So everything gets solved by insurance for those guys. And that's not necessarily appropriate. So that's life insurance, there's permanent and term permanent. You're going to get paid out at some point term. You may or may not get paid out depending on when you die.

Then you've got the home or excuse me, I should back up. So on in my estimation, usually it makes sense to do some sort of life insurance usually, but you want to optimize it. You pay in far less premium than you get paid out. And you want to be aware of how the whole game is played in that world.

Usually it helps to have someone walk you through it. Who's independent and can look at a lot of different options for you. And so that in my estimation usually makes sense whether it is some sort of term product with the option to become a permanent product later, or it's some sort of permanent product.

 Again, like we've said in a couple of other instances in this podcast, it depends on the whole scenario at that point, determining if it's a good fit or not. But usually there's usually, there's a reason for life insurance. Now, the only reason there wouldn't be. Is if you had no risk. So if an example of that, which might sound weird because everyone has a hundred percent probability of dying, but there may be no burden attached to you dying other than I'm sure an emotional burden for some people, right?

I would hope you have friends and family, and it's emotionally difficult when you pass away because you were loved. But there may not be a financial burden attached to you passing away because maybe you are you don't have a. Necessarily kids. You never married. You just were riding that single wave all the way into your nineties and you pass away a happy, jolly single guy.

Okay, fine. Then you don't really have anything to insure because there's no burden there. You're not leaving behind a spouse who needs some more money to be able to live the rest of their life. Not leaving behind kids who need to be taken care of or kids that are adults, but you want to pass on some sort of legacy to them.

 At that point, if somebody is single, sometimes people will write an insurance policy on themselves and use it to pay for an endowment for a college to, to fund some sort of charity. You can do a lot of things with insurance, but there may not be a super good reason if there's no burden, which is why I think burden is the number one factor in determining the usability or the value of insurance.

And then probability, there is no burden. You don't even have to talk about the probability. Yeah, I would say for most people, life insurance will make some sort of sense  in their life home insurance. First, let me stop there and you can ask questions. Did that make sense? No, that makes sense. And  I liked that definition of looking at the burden right upfront  which brings in an interesting one because it's that's a tough call.

If you're very young and single or then you might not imagine you, you're not, you don't have burden in the moment, but like you said, if that's the easiest, the cheapest way to get good insurance when you're young and healthy. So it's a, it's an interesting conundrum. Yeah. It's. It's almost go ahead and you insurances, like when you really need it, you can't get it.

And when you don't need it, you can get it really cheap. That's pretty much all insurance, except for phone insurance. Sometimes you can just buy that and then be like, oh, sorry, I dropped my phone anyway. So I would say that there's probably, for most people, there's probably a situation where life insurance makes sense, home insurance.

 We don't really probability may be very low, but the burden of you being in the street and homeless might be pretty high. Now, if you have multiple properties, maybe you've reduced the amount of coverage depending on the property and the utility it has for you as the owner. Maybe I put less on my vacation now, cause I don't really care.

Or maybe I put more on my vacation house because it's worth more. And I actually really care about it. It's a family heirloom passed down five generations and I really want to make sure that it doesn't. Dye, and then I die. I'm still there. It doesn't get destroyed and I can't pay to repair it. Somehow death of houses is always a sad thing to see.

It is always a sad thing to see. So that home insurance, I think the burden is pretty steady there really interesting one. And it's almost a subset of this renter's insurance is interesting. Sometimes it's required by your landlord sometimes not. And I don't know. I think it's a personal thing.

I, I think it also depends on the scenario. If you're living in a situation with other roommates or your, in a huge apartment complex, may definitely be worth it to have some renters insurance, because then there's more risks involved. There's more potential risks involved because you have more humans and humans are inherently risky.

 So then it maybe makes sense, but if you're living in a house by yourself and you're just renting the house, maybe it doesn't make sense at that point. Like you don't own the thing. Yeah. You have a lot of stuff in it, but you're the only variable or you and your wife or husband are the only variable or what have you then probably doesn't necessarily make sense because  the at that point, yeah, the risk is high, but the probability is far reduced.

  And maybe even the burden isn't that high either.

So that, that can be  Kind of a sticky wicket that's, again, case by case scenario for that one. You, have you have anything to add there, Mike, as far as like home or renters or what would you do for renters? Yeah, that's an interesting cause I do, I actually have renter's insurance, but I w I'm actually planning on canceling it.

So that's an actually really timely, a timely thing because it's it's interesting, like you said, it's all about the variables and the risk factors involved and  And it sounds like we at least from my perspective, I've definitely taken a very pessimistic view. It sounds like I'm taking a very pessimistic view over this episode of insurance, but I think it, it really is in some ways similar to investing in that it takes a lot of self knowledge of your risk profile.

And if you don't have house insurance, will you be constantly worrying about how did I leave the, that I leave the stove on? Is the gap there going to be a fire? If you don't have life insurance, you got constantly be worrying about it. So it's something where I think  like we talked about, I think in the previous episode of knowing yourself and understanding your risk profile, understanding the things that you value, the things that.

Going to worry about or not worry about is really important. I think for, I think the majority of people, like you said, it's a lot of those long-term insurances, home insurance, life insurance. It really makes sense because it's it's things that people will likely have to deal with at some point.

And are you going to be worried about it and constantly thinking. Yeah. It's almost yeah, like you brought up at the beginning, there is some psychoactive value to it as well. It even if you decide that yeah, the burden is catastrophic and I need to ensure this risk.

Yes. It may happen. The probability is enough that I shouldn't share it. Okay. Also, there's just like the mental strain associated with it. That could be very valuable to, to mitigate. Or it could be a relational thing  oh my goodness. If I die is my, are my wife and kids going be taken care of?

 That's like a common one for young families.  That's a very common worry, especially if  you're the primary breadwinner. Or even if you have two two spouses working, you still got to take care of the kids. Somehow they got to go to daycare. There's an expense there.

 So it definitely. Mental strain as well to think of as far as the other types of insurance auto insurance and the next one that comes to mind that I think probably everyone's going to run into that. You have to have it. I've I tend to be more cautious. I'm interested to hear what you think about auto insurance.

I tend to be more cautious just because I, this is a mental, this is a perfect segue because this is a mental thing for me. I've been in a couple accidents before. And so I know that, okay, having insurance to be able to pay for this vehicle and or damages outside the vehicle, if it's property or hopefully not.

But if it's people, if someone goes to the hospital and I'm at fault, if I need to if I could get sued for that, then that makes sense for me  to reduce the mental strain and concern to have a larger amount of liability coverage on. Policy, but that's me, I'm more cautious.

And again that's my scenario. And I value that insurance probably differently than other people would because I just have a different history, a different experience with driving. So that's weather, whether good or bad, that's just how it is. And so I probably value having a little bit more coverage.

I don't know  what's your perspective on that? Yeah, I think I'm actually in a similar boat to you on this one of a for car insurance. I think I had a similar experience where not driving and been in an accident and been driving and been in an accident and never in a, an a fault situation.

I haven't run any red lights. Like it's never I've never been the cause of an accident, but it's interesting to see what if you didn't have car insurance and you didn't cause an accident  and then some states are no fault. And it doesn't matter if you caused it or not.

If you're not getting the payout from the other person where some states are where you'd get covered, but that's scary, especially if you're traveling across state lines regularly if you're moving around at least for me I'm in a similar situation where  I'm willing to pay the extra money to have a better coverage.

 And I think car insurance is oddly in a similar situation as health insurance, because health insurance has. So both car and health insurance, there's so many different options, at least the variable. Exactly. At least in my head home and life insurance are similar in that there's one kind of thing that can happen.

  You die or your home is destroyed and maybe there's different levels of. Moderate damage to a house. I don't, I thought you were going to say different levels only, mostly dead only what's the princess bride girl only, nearly he's only nearly dead, something like that. Only nearly dead.

Yeah. But but I think that car and health are in this interesting category where there is a lot of different costs, possible, a lot of different variables possible. And for me, I'm actually, I would say I'm probably more on the cautious side, similar to what you're saying on both where  I would rather spend a little more on, on both car auto and health insurance and have that added protection.

Yeah. Just for the edification of our audience. I'd looked up that quote it's mostly dead is slightly above. Nice for those who are trying to string the quote together. There you are. Yeah. I see what you're I see what you mean, thinking of them similarly   they do seem to have some kind of cross over there and health insurance.

Everybody's going to probably bump into that at some point. I've surprisingly had different experiences than I thought I would have with health insurance. Not and this is just me, probably just being a young guy and not having used it a lot yet, but I haven't yet seen the value of it, even though I totally understand it.

 And definitely pay a premium for it. I pay a premium for good health insurance, but. I haven't really seen the value yet just cause I haven't used it. But I've seen it in other in others or family members or friends that, that sort of scenario seems again, most of this stuff it's  yeah, health and health insurance is its own behemoth, but it seems yeah, it's probably makes sense.

 As far as the other pieces of insurance I don't think appliances are, we've been over this appliances devices. It doesn't really make sense to me. It sounds like it doesn't make sense to you either. That was when he said insurance, I was thinking like life and auto and then you S you brought up the devices and appliances.

And I was like, where I forgot there was insurance on those. Cause I think it's so dumb. I never used it and best buy insurance or apple insurance or any of those companies feel free to send us. Stats on LinkedIn or started arguing with us or that could prove us wrong. I'm more than happy to change my mind on something, but for me, it's like that kind of insurance, which is so common.

 You're going to be buying so much of that stuff, especially as phones have become more and more disposable, you will just get in your phone so often or planned obsolescence. Exactly the thing to exactly. Be careful with those updates folks. So I think travel insurance, a case-by-case scenario, I'd never used it.

I don't see the point, especially now post pandemic. A lot of airlines are just essentially offering you insurance via vouchers are really flexible, change rules all of that. So it doesn't seem to be super valuable. Lastly, before we let these fine folks go, the portfolio side of things, the investment side of things, it seems like maybe we should.

I think that is super valuable. I guess I'm speaking for both of us here. My opinion would probably be that everything I've seen thus far seems like  the premium would probably outweigh the benefits of ensuring any sort of like downside risk because you're going to have to reduce some of the upside.

 There's no, holy grail that's like zero volatility and a hundred percent of the upside. That's just not the thing. So that's just where I stand on that. But maybe there's scenarios where. I wouldn't really call it insurance for your portfolio, but maybe adjusting the riskiness of your portfolio based on other factors like timeline, as far as when you're going to use the capital.

 That probably makes more sense to me that I don't think there's that the re the reward is far smaller than the premium you'd pay for it. In my, especially if we're talking in the long run, it seems like if we're talking about short-term, if you think of the next three months, something crazy is going to happen.

Maybe you put some shorts on something, put some shorts on

come on and then go for a dip, go jump in the lake. But it seems like insurance in terms of a portfolio perspective is usually for short term actions. If you're talking in the long run. If you think in the long run, the market is going to keep going down. Why are you in the market? Either you need to, your strategy should either be you're shorting the market over the long run, which would be your strategy.

And so if you want to insure against that, then you just buy some of it. So you buy it is, I think the long run methodology, I think almost insurance for portfolio is maybe all investments, maybe it's real estate, maybe it's wine or it's  those kinds of cool alternatives seem like a better form of quasi insurance where diversification is kind of insurance in one way.

 It's not necessarily tendered by a company that is offering you a payout. If something happens, it's more of you creating your own insurance by diversifying and changing your risk portfolio to. Different things. So I think in terms of a portfolio, it seems like the best insurance from my perspective is diversification.

According to how you perceive your own, a bit of ability to handle risk in different scenarios. Yeah. And I think also it might be helpful to zoom out from. Thinking about your portfolio in terms of your one log into your investing account, your portfolio should include, if you're taking a, taking everything into account should include the cash you have in the bank, and your emergency fund and all of that. So maybe the insurance in air quotes that you would be using for your portfolio is, could be dubbed like a war chest of cash sitting on the sidelines, ready to go by when everything else dips. And yes, your portfolio is going to dip along with that, but you've got cash to go in and buy it at fire sale prices.

So that would be the only thing I can think that's close to some sort of insurance other than of course, diversification and spreading out among different risk profiles and asset classes. But that's the only thing I can think of that would be quasi insurance for your portfolio. That would actually be.

 Yeah. Again, not financial advice, but would love to hear opposing perspectives or agreements or anything. So feel free to drop us a line and let us know what you think about the world of insurance though. The wild, wonderful world of insurance, the wild, wonderful world of insurance. That is quite the alliteration and we're going to have to put a pin in it there.

This has been another episode of the long run show. Hopefully you will join us next time.  One of the future episodes we'll be talking about, actually what we just talked about in the last five minutes. Some of the more personal side of investing and thinking through what it looks like what your whole situ situation looks as a investor now, You're one login to your one investing account.

 So that's that look for that in an upcoming episode. But until then drop us a five-star review. Like I said, last time, if you want to drop a one-star, don't go to LinkedIn and argue with us there. Hopefully publicly, if you're rude, I just won't answer you, but I'll answer, I'll be the dedicated answering Mike.

Michael definitely answered but no, feel free to drop us a review that definitely helps out and share the podcast. If you know somebody who's has questions, we have some we have a decent library building up here. So if people have questions like crypto, they have questions on inflation questions on NFTs all that sort of thing.

What is value? We did a show on that. Definitely share, share some episodes insurance. Obviously you're here. If you liked this episode, share it. Getting the word out definitely helps us out. So if you found this valuable, please feel free to. And what will be a little exciting aside as well. We'll be having some guests on, in some of our future episodes as well.

It should be a lot of fun  branching out and bringing in perspectives and looking forward to not just the two of us rambling on, but having some fresh perspectives and fun discussions. Exactly. Maybe we'll find a another cynical bloke and another, a optimistic bloke to join the wild show that this is awesome.

 As always, thanks so much for listening. We'll catch you next time. .

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 "As much as people joke about it, saying investing is like gambling. It's not, but you can have very similar experiences with it."

"Any trader or investor should understand how they perceive losses or gains."

In today's episode of The Long Run Show, Michael and Austin talk about the psychology of investing and how to manage FOMO and impulsive trading.

Hosted By:

Austin Willson

Michael O'Connor

Transcript

 Welcome back to the long run show. Austin Wilson. And I'm here with my co. Michael O'Connor and we are going to be talking today about the psychology of investing and  we might broaden them a little bit more into the psychology of money as well.

 There's definitely a lot of interesting biases and psychology. Problems and downfalls and pitfalls and a whole roller coaster of of things when it relates to how we think about investing, how we think about money, how we relate to it. So this topic kind of has coming up. We decided to talk about this because of the pullback we've seen in the markets recently.

 Just, it was actually interesting timing wise, because I think it's been almost precisely a year since since GameStop. I think that was last week. Was the one year mark of the game stop mean stock craze. And then this January, instead of a crazy meme, stock rally, we're having a little bit of, a little bit of red on the ledger.

  It's been been an interesting couple of months after all the run-up of 2021 nothing new here, but if we do start dipping down into a bear market territory, there's definitely some Ways, different ways that people react both positive and negative. So we're going to cover all of that today.

And I think this is an episode that we've done so many similar episodes. Like it's weird because we've talked about what this is the psychology of investing. We've talked about value, like all these things we've touched on. So many of these points that I feel like this is a great episode to dive deeper into that because it's something that.

I think any trader or investor should understand how they perceive losses or gains or knowing what they're going to do in the future. Understanding how you can be affected by that is so important. And we've just, we've touched on a lot of these topics. We haven't taken the time to dive deep and I think that's really helpful, like you said, at a time like this.

 So I'm really excited same here. And actually I'm going to call you out. You have a little bit of like a, like an insider expertise, upfront, close knowledge of the crazy psychology. Of investing cause you did a lot of day trading back in the day, back in high school, I think, and a little bit in college.

 And you were doing like crazy diametric trading. You got into some wonky stuff but you like definitely experienced that firsthand. And I've since through. Whether good or bad we'll call it neutral influence I've ventured into some more speculative kind of trades myself recently.

So I'm just like slowly dipping my pinky toe in the kind of speculative end of things. And it's interesting. But I've definitely experienced some of the. Oh  the call I bought is up 134%. This is amazing. Then the next day is down 40%. I'm like, wait, what's going on here. So I've definitely experienced that before, but you were experiencing that like on a daily basis for a long while.

  What were some of the kind I guess we'll go with like key downfalls you saw whether in yourself or in  the traders that you were talking to and learning from it as well. That's a wild, I like that question because, and yeah, like you said I did a lot of trading When I was younger and to be honest, I burnt out of it.

Like nowadays I, I do research, moderate amount of research and then pick a stock to hold for anywhere between four months and three years. It was my horizon now. So I'm too busy and too tired too. My joints are too creaky to me. But that is it's. It's. There's an element that it's just, it's fun.

  I enjoy playing blackjack at a good casino, as well as as much as people joke about, oh, like investing is gambling. It's it's not, but you can have very similar like experiences with it. And I think that ties exactly into the biggest downfall for myself. And what I've heard from other people is the problem is you can have gains and bigger gains.

But it's never going to be, unless you set it somehow you set, if the mental aptitude to set a goal, like I'm going to make this percentage a day or this amount of dollars a day or across months or in a strategy, you're always, it's so easy to go and make a ton of money and then, oh, okay. Shoot. I made all this money.

I gotta make more. And it's super, super easy to only. Appreciate a little bit when you have a big win, whereas whenever you have a small loss, it's a bad day. And if you have a huge catastrophic loss, you're really having a hard time and that's just baked into human psychology is the loss of version where people surveyed would rather get, sorry, would rather lose.

Wait a minute, they would lose like $50 than if it was a 50. Okay. That was a bad essentially the experiment where people would rather lose less money than they could gain. If it were. A chance. Yeah. Essentially my mind was all good. I mentioned diametric trading and you went back for that time.

You're like, oh my gosh.   No. So yeah the loss of Virgin prior. So like you would rather lose 20 bucks than have the possibility of making like 50. Oh. Excuse me. No, this is great. This is great. So if you had, oh my gosh. Okay. So if you had a situation where someone gave you an option, say I'm going to flip up.

And you can play this game or not. If the coin lands heads, you win $50. If the coin lands tails, you have to give me $30 or something. There's some specific calculation. I don't know if the hand, but most of the time the people will choose to not play the game because of the risk of losing the risk of losing last month.

Even though it's technically a 50 50 shop for the same amount of money you should because you have, because there's a difference in the money. You should play that game a hundred percent of the time, according to game theory, but because of loss of version, People discount the value of future money and value and increase the perception of the value of losing.

 Which is a very interesting thing, but it makes sense. It makes some   ancestral, you got to worry about the tiger behind the rock rather than, oh, I might get a handful of berries over here. Yeah, the tiger will eat you and you will not have any more decisions to make. So it doesn't need a, yeah.

You have to wait that pretty high. Yeah, that makes sense. And it's almost like getting caught up. There's a, we've had a lot of weird acronyms and like memes and all sorts of stuff come out of 2021, but the one that there's two that are really. And relating to investing is FOMO, which has been around in other places.

But it's been used a ton in the last couple of years as FOMO and then FUD fear, uncertainty and doubt. And the FOMO, the fear of missing out, it's almost   you would rather you would keep you and want to keep playing, but the FOMO and then the loss of version. Make this weird cocktail where it's you want to keep playing, but you don't want to lose any more money, but you're really scared about missing out on big gains.

And so it seems like that would cloud your judgment between the two of them alone would very much cloud your judgment.  And did you find that was more the case. Did it matter what the overall market was doing or did it really, you were just focused on one stock and so it just mad at what that one stock doing.

It depended on.  As I got more sophisticated, that'd be doing diametrically opposed trades. So on like Vicks leveraged Vicks. Versus a leveraged ETFs or even single stocks. But essentially playing both when  if you've got some sort of thing that's going to be the inverse or short sells or options, you've got calls and puts on the inverse and you have a volatile enough security.

You can be pretty sure if there's enough applied volatility, you can be pretty sure that you can buy when it's down and. Then sell whatever you have that would correlate to it being up. So you're essentially saying when this one thing that is valuable when the other thing is not valuable and not valuable, when the other thing is valuable, I'm going to buy both.

I'm going to, I'm going to simultaneously have both, but not necessarily at the same, not with the same weighting. And so you're essentially, you're going back and forth as volatility goes up and down as the price goes up and down. Yeah. Really in some ways you're counting on volatility and change, but the market is always changed.

So there's always going to be movement right now. The key with that is that was in a pretty flat market, which you need, you can't have a stock that just dives and you're buying the inverse thing expecting. So it doesn't no strategy is perfect. But to get back to your question, not to dive, we could dive way too deep to get back to your question.

 It's an interesting point because I think. Even in a strategy like that's pretty quantitative. It could really be easy. To pull the qualitative elements of the FOMO, the FID like  it's very easy to pull those things back in as a human being. Even if you start off with a plan and say, this is just a quant thing, and this is what I'm going to do, it's so easy to hear someone say, oh this thing's going to go way up.

And sometimes it's a game stop like that should have listened, which I listened to that more, but it's very easy to get sucked. A specific plan and start doing your own thing without actually looking into it. And you oh this could work over there too. I don't want to miss out on this.

So there's a lot to that. And it's something that  that's part of the reason why I stopped being so like, I, it, it takes, I, I believe it takes a psychological energy to keep yourself from. Falling prey to the biases and the heuristics and everything, because you're constantly having to check yourself and say  no, hold on.

And I, at least for me, that takes up energy every time you're doing that.  It's draining and tiring. Yeah. And there's only so much willpower that you can have in a. Day or I don't know necessarily, we said in a day, but probably around the day or a week time. So you're using up a finite amount of willpower every time you have to check yourself, but that strategy like that.

So that makes sense. And some people are great at it. I mean like the top traders in wall street, they're probably just incredibly good at. Understanding themselves and willpower and how to mitigate stress and take quantitative opportunities, but also way exterior information. So there's so much going on.

So it's it depends on your personality too, which I think is the reason why the vast majority of people just go with financial advisor or an IRA with ETFs or something like that, because there is energy that's required to be in those kinds of things. Yeah. And I it's, it is always interesting to me.

 People are like   I want the like quant returns. I want the wall street returns, but I don't want to do anything. And I'm like  there's a premium, you pay to get those returns, whether it's a financial premium or like you're saying an energetic premium you have to pay a premium to get that.

 Yeah it's always interesting to see that. And that's also just Everybody's looking for the the pill, the easy fix, easy money. And if it was easy, we'd all have six packs and be rich billionaires like there, there is a, there's a reason willpower is hard and sticking to a strategy is hard.

 So in a bear market like this, where it seems like we've walked, excuse me, we're not a bear market yet. I'm not calling it, but in a  a, in a market like this. You now have what, like what I just said you have headlines saying, oh, it's 2022 going to have a bear market. What's really interesting to me is.

 It wasn't like 2021 was a great year. As far as catalysts, there was a lot of craziness happening. We broke records on inflation. We had all sorts of COVID scares and relaxed downs and opening back up and then shutting countries off and just a trade craziness. There was a lot of turmoil in 2020.

And so what's always interesting to me is when you have a like a market reversal where you're going really hot, it looks like, oh, stocks just go up. And that's what the  when you're, when your barber is like giving you a financial advice and then something a little wild.

 But when we're in that situation, and then we have a reverse. And we start seeing some down days and those days string into weeks and the week stringing a month or two. And we start seeing this reversal. What's interesting to me is how much is how, and I don't know whether we can answer this question, but I think a large amount of that is driven by some, of course we've got the invisible hand of the market.

 But some of that is driven by just like a collective psychology around where we think the future. Is going to go. And what's interesting to me is what's the catalyst there because it's not necessarily, certainly not the talking heads on TV. It's not us bozos on the podcast here.  It's no, pundant that definitely goes ahead and just says, oh yeah this is where the market's going. And then boom, that crashes the market. No one thing. It's not necessarily interest rates or the easing or it's not necessarily one thing. But it does seem like there's some collective. Mind, but this goes okay.

Yep. We're going to go left now instead of going,  what's your take on that? Is it you, do you think we could ever really understand what the catalyst is for that turn or that turning point? Or is it just  theorial, it's going to be it's one of the mysteries of the market, if you will.

That's another really good question. And it's like the, there's almost it's almost a hive, mind, the marketing, the different nodes, and it's a whole colony of ants that are all noodling around. That's a good point of what are the catalysts of that? It's I see. We haven't seen, for instance, earnings have not been that bad.

And some companies have been very good earnings calls the last couple months. It's not necessarily, I don't necessarily see a gigantic oh my gosh, everything is so overpriced. It's every good thing is going to go down 50 to 75%, something like that. I really don't see that happening. I see certain stocks very well.

  If they're getting caught up in psychological things going on, they very well could. And I definitely think I've definitely heard a lot of people saying, okay, this is going to be more value stocks, more old school, gold miners, Goldman Sachs banks stuff. That's just pretty darn normal and makes returns and pays dividends.

 Even just personally, I've shifted a lot of my strategy because of the market have shifted a lot towards those more value stocks, low like lower priced good dividends, solid methodology good for selling covered calls and just riding around. Yeah. That's a kind of a. Point you were saying, you're just buying like traditional value stocks and then some uncovered calls on them, which is not a bad way to go have some quote unquote free income for those stocks.

But it is interesting. It's like maybe it's a shift in mentality and with a crowd it's so hard to pick out like, okay, what was the catalyst for this? So it's an unfair question. I know that going in. I knew that but it is interesting because. There definitely seems like it's a shift, but of course, just like the six packs and being a rich billionaire, if everybody knew when it was going to shift, we'd all make a lot of money, but then that would feed the shift because it just wouldn't chip.

Yeah. You know what I mean? Like it's like the passive versus active rebate. Can't be all active. Can't be all passive. Otherwise neither strategy would really exist. Yeah. And this is a good question though, because. And we can dive in a little bit, because I think that what we're seeing, because it's not this massive drop, it points almost to more of a grinding pessimism.

It's not necessarily a, oh my gosh. We're screwed. It's geez, like COVID is really dragging on. There's just the supply chain is as far as I know, not doing a ton better. It's not. In a crisis mode, as far as I know, but we're not seeing oh my gosh, everything is great. And I think a lot of individual people and institutions thought that by now, okay, everything's going to be pretty solid, like we're back in the upswing.

 So it feels more like a kind of rare. Grinding pessimistic market, rather than what is talked about, which is a big crash or something like that. That's interesting.  The headlines have to be, if it bleeds, it leads, right? So the headlines have to be catchy. So that's why they go for the big crash and all this red and blah, blah, blah.

 But it is interesting what you're saying a grinding. Pessimism I think is a good way to put it because I was looking at the, just the one-year chart from today back one year. And if you just look at the one year chart it is not quite  it's pretty impressive, but it's not quite as impressive as when you zoom out, look at five-year chart, or if you looked at the two year trend, obviously that would be very impressive.

  The run-up I think in 2021, Pretty outrageous, but that might just be the reference point of having that huge catalyst of COVID happening and everything shutting down. And you see that UV, but in 2021, it almost looks like we were hanging on to to parallel your pessimism. We were like hanging on to a grinding optimism and oh, don't worry.

We're gonna get back through. And now people are just like tired of. And they're tired of being so optimistic, which is a very sad thing to say. I don't mean to be such a downer, but it seems like people were. Begrudging and that'd be gradually, but hope hopeful and very optimistic.

And we're like really trying to push that. And now it's just oh, okay. This is a calendar year turn. It's 2022. And we're still dealing with this. Are you kidding me? I know for me, just personally, like 2021 was such a weird year. It almost it almost seemed like it didn't happen in a way.

Because it was very similar to 2020 in some ways, but very different. And  it was in this weird Twilight zone. So maybe that's a, maybe that's a collective thing too. And people are  getting out of the Twilight zone and going, huh? We don't like wanna reevaluate here. I don't know.

 But that is interesting that you said it that way. It's like a grinding pessimism instead of this catalysts that just. Yeah, it makes us deep V in the chart   it is interesting. So in a situation like this, I've noticed myself even going dang. Like I. So in the cryptos that I hold a small amount of crypto that I hold, there's one cosmos that's really booing the whole thing up.

 Cause everything else has just dropped. And in the stock side of things I don't really hardly look at most of that. Most of that's just long-term and an IRA. But I have made like some a call position recently just cause it was very nicely priced. In both of those sections, like the crypto side and the stock side, it's very interesting to look at it and go, dang.

I bought in at this price and now I'm way below that. And it makes me. At first, my first reaction is, oh, wow. I should not find anymore. But then I think I stopped myself and I think through it, I'm like, oh, actually, no, that means it's on sale. I should go buy more right now if I believe in the underlying asset, obviously.

 But if I don't believe in it, I don't know why I'm holding it. So it is interesting. Do you think there's more than just that more than reminding yourself? Okay. This means everything's on sale. I should go buy. Again, this isn't, we're not telling you to buy, you can do whatever you'd like, this is not financial advice, but you think there's more than just reminding yourself okay, this might be a buying opportunity.

 Is there something more how do you qualify that? Okay, this is a buying opportunity or no, I just need to hold. And I think it's probably a prudence thing. And so part of it, I think was probably a prudence thing where you need to evaluate what the goal is for that pool of money and then see how you want, like how risky you want to be.

 Yeah. And I think the really unique and interesting thing, which I haven't seen it talked about a ton yet, but the fact that interest rates are going up. Obviously that is most likely going to cause a lot of institutional money to go out of stocks and into bonds and into a true more interest rate focused things because now they're actually viable again.

So there's a question of have stocks just been. Artificially propped up by the fact that you just can't make money on anything else. Because that's really a serious problem. There were preferred stock funds that were paying really nice dividends that looked far more attractive than a bond fund, which is weird because it's an underlying, it's an equity it's going to be volatile.

It be very volatile. So that was weird to look at in 2020. Huh, I would rather buy this, the stock fund for my bond portion of my portfolio. This doesn't make sense. So that's a good point. Maybe that's part of the rotation.  I don't know that's been fully appreciated yet. But usually the market is pricing in future returns, not today's returns.

 So maybe that's some of the sentiment underlying and just hasn't been spoken up loud yet, but that's the point. Yeah. Cause I think th the sequence of events that's occurring right now is very unique in that even just psychologists looking at my own psychology book, Hey, how do, how am I planning out my my next moves in whatever market it's okay, I would love to have more liquidity to buy more stocks since it's going down.

Yeah. But with inflation things are getting more expensive and the stocks are going down at the same time. So this bad double negative going on there. And so it's weighing that comparative to the, okay. Should I be throwing this in a bond or in a high interest savings accounts that I. Extremely liquid.

If I need it, should I be going heavy into these value stocks? Because I'm going to go back up. Do I need to be using less liquidity? Should I just keep things in cash for a little while and see what happens? So there's a lot of different psychological inputs that are going on because it's a very complex situation and you've got COVID and supply chain, difficulties.

Yeah. All sorts of other stuff going on. So there's a lot of uncertainty in the market right now. Yeah. So uncertainty, we've got the FID fear, uncertainty and depth. To out necessarily right now, a lot of things that fall into place, I think before the fed made their moves clear, there was a lot of doubt and people were not sure where the direction was going to head.

 So I think there's less doubt and uncertainty, but there's definitely fear. And just a general uneasiness going into 20, 22. So when I look at that, I go, okay  for my strategy of long-term just buy and hold, just Hoddle and on the SMP baby.  When I look at that, I'm like, okay, great.

It's almost just a it's just an opportunity for me to get in at a low entry price, honestly. Most of it's automated. So I just think to myself, oh great. My, my by this month is going to be cheaper than it probably would normally be  so that's nice, but is there a certain  throwing in all of, obviously there's many different  classes of stocks and different different sectors that we could look at, but throwing in different things too.

Like the alts, like we mentioned Vino vest before that's like a wine investing platform NFTs crypto, do we use. To those in a situation like this, where there's a lot of uncertainty because you hear the term like risk off mentality. And I think that's being used a lot to explain the crypto sell off.

 And it's been wild to notice how tightly correlated. It seems stocks and cryptos are when there's no. Underlying fundamental connection. That's been interesting, but we were looking at the NFT space like few days ago and that was still booming. And maybe it's because like my thought is maybe it's because a lot of those are built on Ethereum and when you transfer, you have gas fees.

Now that theory comes down. Okay. There's more gas fees. Or excuse me, there's less gas fees. So it's easier to transfer their more market activity and therefore it's booming.  Looking at this without thinking of our own biases and our own psychology, we would go, oh, okay. I need to be afraid.

I need to hoard more cash. Don't put it to work. But is that the wrong thing to do? Should we be looking outside of stocks and crypto and be thinking about it differently? Maybe the maybe the option is to. Put some of your cash to work and buy a house. I don't know. What are your thoughts there?

Like coming at it from a different angle, realizing we've got some psychological biases going on. I think that's really important thing to note an important question, because we've talked so far, we've talked mostly about what's going on, right? But as the name of the show, it's the long run show.

So stuff like this will happen as the years go by and over again. So I think it'd be helpful to have a framework around exactly when it comes up again what to do, or at least what questions to ask, not necessarily what to do. Yeah. And I think that it's a really interesting  the kind of realm of alternative investing seems to really have boomed in the last like year and a half.

It's funny because you would think that would boom, when stocks weren't necessarily doing well. They're like, oh, I need to, I need a alternative, but it's really seems more oh, I made a ton of money on these stocks. They're probably going to have to go down at some point. So I want to take that, take the return and put it somewhere else.

So it's a very interesting chain of events. And because of that I think that there's gonna be. I think there's possibly going to be less alternative investing as the market trends down because there's going to be less returns for people to take and say, I've made good money on this. I'm going to put it in all rather than I think a lot of people are going to hold or buy more stocks as they dip theoretically, which will, I think paradoxically is going to reduce the amount.

Maybe not the value. I think the value of an alternative investments could continue to rise, but I think less people will. Investing in alternative investments because oftentimes there is a liquidity problem and in a situation with high interest rates with well, higher mission, essentially, no, the high end, this is not a high interest rates, higher Israel relative.

It's not really what you think with a slightly increased interest rates and relatively interesting inflation. I think that there's this there's a liquidity and gonna have to get all Keynesian and the liquidity trap. I don't think, I think we're okay. Nothing like that, but there is a liquidity problem with a lot of alternative investments.

Yeah. And it's, it varies that's the premium you pay for non-correlated asset. So it makes sense. I do. A lot of the time alts get alts is like a lazy way to just say real estate. So I don't want it. I don't want people to think we're just thinking, oh yeah. REIT or buying and holding your own real estate.

Cause there's more than that. There's I don't know if I would necessarily call crypto and all. I don't know, I'm still unsure on that, but there's Vino vests. There's buying art. There's even some art funds like Beano vest there's platforms out there where you can buy like a portion of an art piece, like masterworks and stuff like that.

So there's things that are very uncorrelated, but you're right there probably is going to be the problem of, okay. Do I want to tie my money up in this for five years while I don't know what's going to happen? One year.  And I think if it was just a choppy market or a down trending market would be different, but it would be very like it would, people would look at it and go, yeah, maybe I'll throw some money in and also to diversify and get away from this choppy market.

But I think with the inflation, that added factor, that's something that everyone's actually.  Especially like you go to fill up your car and it's more expensive than it was six months ago or eight months ago. And so that's something that everyone's noticing and actually directly feeling, whereas interest rates a ton of people refinanced in 2020 when interest rates went down.

So they're locking in those loan for 10, 15, 20, 30 years. They're not going to feel the interest rate. Directly they'll feel another ways obviously, but they won't feel as direct because they refinanced and their interest rate is now like one and a half percent or something stupid. So they're not going to feel it as much as inflation, which adds to the uncertainty.

And so if they hear spooky headlines coming from wall street and they see inflation impacting their lives directly, I think that makes people even the most.   I don't want to say advanced, that's not the right word. That's not the word I'm looking for. The most sophisticated, like investor is going to be thinking about inflation and they're there.

I don't care how much money you have. You're probably going to notice it somehow. And so I think that adds to this kind of like uncertainty of do I want to put my money elsewhere and lock it up when I don't know what I'm going to need it for. In the near future. Because inflation is just like a spooky thing.

I've talked to a few people recently about it, and it's just a spooky thing to a normal person who doesn't think about finance as much as we do. It's really spooky because they're like I put my money in the bank and now you're telling me a year it's in a year, it's going to be 7% less in value.

Like it just sat there. I didn't do anything with it. What the heck? And so that, that is that like psychologically is terrible.  To think about your money losing value without you doing anything. Yeah. And I think that what you just touched on, I think comes back to the psychological principles and saying, okay, if we're, if we for thinking like psychologically people might be selling their stock and putting money in alternative investments right now, or something like that.

Using reverse psychology or figuring out those psychological trends and saying, all right, I'm going to be a contrarian. Usually you can do pretty darn well. And so stuff like the markets, like if you buy the dip, if you buy the baby in March March 23rd. Yeah. You would've killed a huge potential.

So maybe there's a, in terms of your long-term, how you think about your portfolio of the markets and. I think that there is real value to taking a contrarian approach of because even just in the situation that were just talking about, let's say you have real estate holding, we'll see all alternative holdings.

When is your time horizon for you're going to sell? Because maybe the best thing to do is sell that now and buy a bunch of stocks as they're trending downward. Maybe not. That's just an example, but in a situation where your kind of first instinct is to say, oh, I've got to get out of stocks. Also good.

They've been going up for awhile and then jumping to ALS, maybe you've made a lot of alerts and you're like, I have a lot. I Real estate. Market's been crazy. When do you pull out, when do you take the return on that? Yeah. And then what do you do with it? I think that, so that kind of leads me into to our takeaways, key takeaways for the, for this episode and mine are not necessarily oh, look at this sector, look at consider this innovation or whatever.

My key takeaways from all of this conversation are when you see. A lot of uncertainty and you see a lot of red in the market and maybe we're trending towards a bear market when you see that happening. First thing, take a deep breath or five chill out a little bit. And that's hard to do. I'm saying that kind of glibly, but that's hard to do chill and then ask yourself, okay.

What is my goal for the money that I have that is at risk? And so that could be in your stock portfolio. That could be crypto. It could be . It could be real estate. It could be the money in the bank and you're considering inflation. What's the goal for that money. If you don't, if you don't need that money for 10 years at the shortest.

You really, probably don't need to worry that much. If it's a long time horizon, you really don't need to worry. Now if it's within a year and you're saving up for a down payment and you're really concerned, and you have it in a stock portfolio and it's coming close to the time where you're going to need to plop that down payment in cash.

Okay. You probably want to make, have a plan of action, but understanding your goal for the money that you're concerned about, I think is the number one. Question and then you can get into, okay. Once I know the goal for that money, how do I want to react to what's happening? But that's my biggest takeaway here is ask what's the goal for the money that's at risk and that you're concerned about, what's the goal for that money and then go from there.

Yeah. And I really liked that because that's your understanding. And I think that gets back to when something positive happens when you make a ton of money. Cause we've talked a lot about the negative. Yeah of psychology, but just stuff on the positive a little bit, it's having that plan of  when you buy Bitcoin at a hundred dollars a coin and it goes up to 60,000 like having a plan of okay, I'm going to, I'm going to take the return or not, or whatever.

 Again, going back to the goal of the money in a positive scenario, you're oftentimes gonna naturally think it's just going to keep going up. Or  there's a whole, there's a whole host of different ways that you can trick yourself. So I think the classic adage of know thyself.

Just crucial in life in general, but definitely in the markets as well. And in good times, and in bad, just taking the time to understand what's going on. Like you said, it's exactly that. Do you park in your stack? You can't take it with you.  But having that, I really liked what you said in a good time, stepping back, taking five breaths.

Yeah. Saying, okay, is this enough work? According to my plan, according to my, what I'm the goal is? Do I sell because maybe it's not yet  maybe it could make a much more, maybe it doesn't. So there's so much interplay there that I really liked when you said, take a step back, take five breaths, take five minutes.

If you need to  thyself. Yeah. And I think that also pairing it with. Getting an outside opinion that you would trust? That can be invaluable because you can definitely get caught in your own head again, with those own biases of, oh, it's just going to keep going down or, oh, it's just going to keep going up.

I need to stay invested. You definitely having an outside person come in and say. Hey, have you thought of this? Cause they're going to come at it from a different angle. That's really helpful. And also all of this is underlying having the willpower to do that, having the Boulevard at step back to know what your goals are and have a plan behind it.

And that's not necessarily something that everyone's good at. Sometimes I'm not very good at. And so like I, a lot of times have to talk to people who are smarter than me and go, Hey, what should I do here? And so the. That's something where I think having just a little bit more awareness around why you're doing what you're doing with your with your money.

I think that helps out with the psychological biases, whether good or bad that you said could be in the positive direction, could be in the negative direction. Yeah, that sounds about right. Awesome. This has been another episode of the long run show and definitely tune in next time. If you can't leave a rating and review on whatever platform you're listening to right now, that would be fantastic.

Definitely.  The five-star reviews help. If you want to leave a one star. Just don't come pester us on LinkedIn. That'd be fun if you really want to leave a one-star just message us on LinkedIn. Find us. We'd be happy to understand why you wanted to leave one star unless you're rude. And I just want to ask you, but other than that, we appreciate it.

Appreciate you.  We'll look forward to having another discussion next time. Thanks for listening. And we'll catch you next.

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