The Judgment Call Podcast

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Maciej Wojtal (Should you invest in Iranian equities?) Aug 27, 2021

Show notes

00:00:20 How Maciej got started with Amtelon Capital and why he chose Iran as a primary investment target? 00:05:33 Why is Iran like Russia (and Eastern Europe ) in the 1990s? Is there a catalyst for Iran making it back to be connected with the rest of the world? 00:14:25 A short story of sanctions against Iran. 00:26:06 How Iranians and the regime in Iran differ? Why is the regime so successful in controlling power? 00:32:32 What are great businesses to invest in Iran? 00:48:11 How Iran avoided the 'Dutch disease' of big commodity exporters. 00:56:08 Is Iran starting to be a new part of an 'Axis power'? Will this hamper the participation of outside investors in the Iranian market? Maciej Wojtal is the founder and CIO of Amtelon Capital which is focused on investing in Iranian equities. Maciej has worked with Citigroup and JP Morgan before running his own fund. Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Torsten Jacobi: Maciej, welcome to the Podcast. Thanks for coming on, really appreciate that. Maciej Wojtal: Yes, thank you for having me here. Torsten Jacobi: Hey, absolutely. You run something really interesting and you are the cofounder and the CIO of Amtalan Capital, which really focuses on investing primarily in equities in Iran, from what I understand. That sounds really cool, really unique. I have never heard about an investment fund out there that actually invests in Iran. How did that happen? How did you get started on why Iran? Why not something that's a little more politically correct, so to speak? Maciej Wojtal: Yes, well, it is super exciting. And when I speak to the local regulator in Iran, they tell us that we are their favorite foreign investor, foreign institutional investor, because we are the only one. There is really no other foreign institutional investor in Iran, so we are the only ones. So I decided to launch Amtalan Capital back in 2016, when JCPOA, the nuclear agreement, was implemented. And the reason why Iran and not something else was actually pretty simple. There was no other market. There's still there is still no other market at this moment in the world with lower evaluations, a higher growth potential, both like a long term structural growth potential, as well as near term growth that will be coming from the reopening of the country or reintegration of the country with the rest of the world. And to be honest, this is potentially the last opportunity of this size. So the type of opportunity, I mean, is a transformational opportunity. So country going from one situation, because it's not from one system to another, I don't expect any political, you know, revolution or transformation there. But the economic situation will change, will change from a, you know, decades of sanctions, where the economy was basically cut off from the rest of the world to the economy that is slowly opening up, catching up with the rest of emerging markets, with everything good that happened in the rest of the emerging markets over the last two decades. And on top of that, no one is there. So Americans cannot touch it. So all the big funds out there have to wait until the primary US sanctions are lifted. So suddenly you get, you get to go to a new market like this of this size and invest before the big US funds go there. It doesn't happen too often. And what I mean of this size, what I mean by this size is, you know, that's another unique thing is that you may have some frontier markets that you can get excited about because of demographics, you know, growth potential, whatever. But usually they have no capital markets. You can go and launch startups, build a factory, a bank, whatever. And here you already have pretty well developed capital markets, stock market with 600 companies. Right now it's around $250 billion market cap. Back in 2016, it was already $100 billion market cap. And right now several hundred million dollars turnover per day. And so, you know, big enough market to be attractive even for big investors. I mean, too big to ignore basically. And for us with a new fund, startup fund that wants to basically focus on this niche and do the initial fundraising and so on. Well, there was looked as an amazing setup with everything that we needed in place. So hence the decision. And, you know, the important thing is that I had no connections to Iran. So I actually had never met an Iranian in my life before my first visit to Tehran. So I had no bias. It wasn't the case that, you know, my, I don't know, half of my family was actually from Iran. So it was somehow convenient for me to focus on this market and maybe travel more, whatever. No, I was able to focus on any market out there. And Iran was just based on the risk reward that I saw there. Risk being obviously geopolitics, but it seemed to be at that time turning in, you know, with the more positive momentum and rewards coming from the lowest valuations in the world. And all this and all this growth potential look to me like, yeah, exactly like the best risk reward out there. Torsten Jacobi: Yeah. So it's either very gutsy or very crazy decision that you made a couple years back. I hope it's the former. One thing that I heard you talk about on another show is that you compared Iran right now to a post 1990s Russia. Eastern Germany that is very low earnings to valuation ratios. You had, where, yeah, just the climate where everyone had this this appreciation of change, appreciation of the future. Entrepreneurship was strong and was really grassroots. I will be seeing now in the U.S. where you need to be a $3 billion. No, it's something where we all fell. Then I was part of that in Eastern Germany, where we all fell. The future is kind of in our hands. I mean, they did this grassroots, massive collabs, grassroots entrepreneurship, as he describes it, what we are missing. And it really drove these in Eastern Europe really quickly into what a decent part of the European community where they are right now, rather than 10, 15 years. It happened really quickly. Why do you say Iran is at a similar precipice? And do you see any catalyst that it will very quickly, say the next 10 years, will be more like a normal Middle East country, which is, you know, the Middle Eastern countries all are, they have quite a bit of turmoil. At least some of them. We just talked about Syria and a couple of episodes ago. What do you think Iran is at a precipice? Maciej Wojtal: Yeah, look, so it is fair to compare it to Eastern Europe in the 90s. It's not the same. It's always different. But what I mean by that is that certain dynamics may be similar. So going from one system that is restricted in some way, in Eastern Europe, it was, you know, socialism slash communism, and this, people were entrepreneurial, but they were not free to really, to really, you know, do what they wanted to do. And then after 1989, all this unlocked. So in Eastern Europe after 1989, all this energy was unlocked, basically, and people started really wanted to work and they started chasing their dreams. And this, and you could see this entrepreneurial entrepreneurship in action. It was quite chaotic in the 90s. You know, I lived in the 90s in Poland, and it was chaos. I mean, there were, you know, institutions were not working properly. It was corrupt. Bureaucracy was a huge headache. It was absolutely a mess in many places. But it worked. And the pace of changes was amazing. So everything was very dynamic. So after 10 or 20 years, Poland changed completely. And the rest of Eastern Europe, it became much more stable, much more easy to forecast, but also hence much more institutionalized in every corner. But hence also the, you know, your expected return also much closer to the mean, let's say, to whatever from, I don't know, investing in real estate right now in Eastern Europe is similar to Western Europe, actually, in terms of your risk reward. So this is what I expect in Iran. A similar growth coming from people who are entrepreneurial and from foreign investment. Because look, the same, the same role as Eastern Europe played for Western Europe in the 90s, for Germany mainly, but also France, Italy, where Eastern Europe was basically a hub, a source of cheap labor, where it made total sense to locate your factories over there, take advantage of this cheap labor force, and then also be ready to benefit from the growing middle class that was showing up there like 10 or 20 years later. And suddenly it was, you know, it became an important consumer market. Same thing will happen in Iran. I mean, Iran, look, Iran is quite a big country. It's 84 million people. They have the largest oil and gas reserves combined, oil and gas reserves in the world. Plenty of zinc and zinc and copper resources as well. But the most important resource is the population, is the Iranian population. It's a well educated society with a median age of 30 years old, where I think it's not, it's unlike the rest of the Middle East. It's not very similar to other Middle Eastern countries. It's, you know, the sense of 5,000 years of history that they have is you can feel that. And this is what's been important for them generation after generation, so this focus on education and so on. So you have very skilled labor force, which because of the sanctions, is right now cheaper than in Vietnam. So, you know, the average salary is probably around $200 in Iran. You can even hire computer scientists, so people who can code for, you know, 800 bucks, whereas, you know, even in usually Novgorod somewhere in the middle of Russia, it costs you $3,000, right, to hire someone. So, right now for you, if you're a big, you know, European or Asian company corporation and want to, looking for a place to manufacture stuff, and then also to start promoting your brand because you will find, you know, you want to be present in the new consumer market, it's a no brainer to go there. But also, you know, it's not only that, it's not only these 84 million people because Iran has very good links with other countries in the region. All the neighbors, so Iran plus all the neighboring countries, it's 500, more than 500 million people. And countries like Iraq or Afghanistan, which is obviously in the news right now, they import most of their products from Iran, the products they consume from Iran, not only oil or gasoline, but, you know, food, cars, car parts, even cement, so things that are not that easy to import. So, companies that are based in Iran are well positioned to export in the whole region. So, this is another argument for big multinationals to go to Iran, as soon as, you know, geopolitics set up. So, this is one, another reason why I think that, you know, it could be similar to Eastern Europe. Of course, the differences are big as well because, you know, Eastern Europe, or at least, you know, Central Europe was on the path to NATO and then European Union quite quickly. So, nothing like this will happen in Iran. But what will, what might be similar, and I think will be similar, is that big investment, big FDI investment should come from European, major European companies, you know, which are already there. A lot of Swiss and German companies and French and Italian companies are already there, have been operating under the radar throughout the Trump administration, just not to get into trouble, but have been, you know, patiently waiting for, for an opportunity to scale up their, their operations. And we are in talk, we are in touch with them with, we're speaking with all of them to understand what's going on. And, and yes, and they're all thinking about expanding their operations, same for big Japanese companies. Torsten Jacobi: Well, when we, we just talked about sanctions, but only briefly, and I think this is, this is a huge catalyst, right? So maybe we, we, we roll up at this story of sanctions a little bit, right? So from what I know, this is very limited, the sanctions were put in place for the nuclear, uranium enrichment, that a lot of countries were concerned that there's a nuclear weapon that Iran will build and use against Israel. I think that was the biggest concern, a really near term concern. And then it was an agreement reached, I think it was under the Obama administration that they stopped doing this. They only use it for civilian purposes for a couple of nuclear power plants. And then once they adhere to this, it would be, and that was, I think the story of the end of the Obama administration, that was basically catalyst for working with Iran with less sanctions, right? So there's still sanctions in place with much less. And then Trump came around, a picture changed in Iran was that the big, big bogeyman, based on the analysis of that administration, that there was a lot of states funded terrorism. And we know that Iran does it through a proxies. And obviously what's terrorism and what's the freedom fight, it's very difficult to say sometimes, right? So we do know that there is a gray line, a gray zone, that we see this in Taliban, with the Taliban in Afghanistan, who were friends, enemies. Now they are like an administration really, really don't know what they are and who they are to an extent. So maybe you can help us understand what happened to these sanctions. Are they justified? And do you think they just going to go away very soon under the Biden administration, which would be obviously huge catalyst? Maciej Wojtal: So there are many different types of sanctions. And those sanctions have been in place for quite a long time. I mean, you know, the first, the first event that influenced the relations between Iran and the US was obviously the Iranian Revolution, 1979. And the takeover of, of, of the US embassy and the American hostages. So, you know, it happened a long time ago. But it's based on what I, what I managed to, to find out and understand. This is something that basically poisoned the relations for the, you know, decades to come. It's, it's, it's actually amazing. But this, this, this one event was so strong that it fueled the, you know, the propaganda on both sides, meaning American politicians were using this argument to, you know, to portray Iran as the, as the bad actor always, and, and, and, and was very much in line, you know, with the recent history and, and with the sentiment in the US. Iran obviously did the opposite. I mean, the same thing, but towards the US in its own country. So, you know, death to America for the last 40 or 50 years. And, and, and, and this is the, the, the big Satan and the whole poll, maybe not the policy, but, you know, the philosophy of the country is very much centered around, you know, the active fight against, you know, the US. So it's a problem because that when they sit down and want to talk, it's just much more difficult because even if they want to make a deal quickly and smoothly and they agree on the principles, they have a lot of this sentiment that is a very, you know, long term and well established on both sides that they need to deal with. So I think this is actually the biggest issue in speaking to each other. Then at some point they also had, you know, more hard line leadership on both…

Full show notes at the publisher

Jared Dillian (From Lehman Brothers to 2021 – how did the financial industry change?) Aug 27, 2021

Show notes

00:00:23 How did Jared's path from Lehman Brothers to Internet personality develop? 00:05:06 How did the finance industry develop during the last 20 years? 00:08:18 Jared's experience on writing a novel (and how it compares to his other book)? 00:11:29 What is Jared's view of the deflation/ inflation debate? 00:17:03 Is productivity growth really as low as we assume? What role do stock buybacks play? 00:22:01 Is individual risk taking the key to increase productivity growth? 00:25:01 What are great areas of investment according to Jared? 00:30:01 Will DeFi eradicate banks and most of the financial industry? 00:34:01 Is the banking industry a good indicator for the health and competitiveness of an economy? 00:38:36 How consistent should financial commentators be? Jared Dillian is the author of Street Freak: Money and Madness at Lehman Brothers, named one of the top business books of 2011 by Businessweek magazine. Jared runs The Daily Dirtnap, LLC, which provides daily market commentary and insight to a range of institutional clients. Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Torsten Jacobi : Jared, thanks a lot for coming unto the Judgment Call Podcast, I really appreciate that. Jared Dillian: Yeah. Torsten Jacobi : Hey, thanks for taking the time. And you know, you have a really interesting history, and it's something that's becoming a bit of a theme though, is you started in an investment bank, and you worked for Lehman Brothers, then you wrote a book, you became an author, and now you're an internet personality, you run your own internet business, your own content business. Maybe you can tell us a little bit more about this transition, how this came upon, and how do you feel, was it the right choice looking back, or do you feel like, well, no, I want to go back to an investment bank? Jared Dillian : No, it was absolutely the right choice. It was funny because I was talking to my old boss at Lehman, this is the guy that I worked for 2001, 2002, and he told me a story of, you know, when I worked for him, we used to get the Garmin letter. I don't know if you know Dennis Garmin, but we used to get the Garmin letter at Lehman Brothers, and he had probably the biggest financial newsletter. It was a daily letter, and I used to get this stuff, and you know, I liked it. I didn't, you know, I didn't think his writing was the best, but I said, this is an amazing business. I was like, you can just get paid to write about finance, you know, I'd never heard of this before. So around 2003, you know, I had this idea in my head that I wanted to write a financial newsletter, so I had some ideas, and my initial idea was it would be sort of a retail newsletter. I would charge a very small amount of money, about $150 a year, and I would do personal finance stuff, and then I would do seminars and stuff like that. And I figured if I had 1,000 subscribers, I would make $150,000 a year, and that would be enough. And then what happened was, while I was at Lehman, I was put in charge of the ETF desk, and I was told to just grow the business, because the business was very small. They said grow the business, so my idea was to do that through writing. So I started writing market commentary and sending it out to people, and it was very popular, and it grew, and it grew, and it grew. So by the time the bankruptcy came around, I had several thousand people on my list, and I said, you know, I can easily monetize this, so the day the bankruptcy, I sent out a message. I said, I'm going to start a newsletter, and you know, hundreds of people said I'll sign up. So I quit Lehman Brothers, and I started the business, you know, I formed an LLC, and I got some office space, and about six weeks later, I started sending out content again, and I got a few hundred people to sign up, and that was the beginning of the newsletter. So that was in 2008, and about that time, I was also approached to write a book about my time at Lehman Brothers. There was a literary agent that found me and asked me to write a book about it, and initially I said no, but six months later, I came around and I said yes. So while the early days of writing the newsletter, I was writing this book, and that came out in 2011. So there's just been a bunch of stuff since then, I started writing from Alden Economics in 2014, I wrote another book in 2016, I'm an op ed columnist at Bloomberg, I've taught finance at the undergraduate level and graduate level at school, and I just, I know I had a radio show for the last two years, which is coming to an end tonight, but we're going to convert that into a podcast, and my goal is to make this the number one finance podcast. Torsten Jacobi : So that's really ambitious. Jared Dillian : Yeah, I mean, you're really all in on becoming not just an internet personality, but really making this content machine work, right? Torsten Jacobi : A lot of people, you know, from the VC business, they go into a Substack, right? Jared Dillian : That seems to be the technology platform to use, and also the idea that you pay a relatively small amount, and it's geared towards consumers. Torsten Jacobi : Is that still the model that you're using, or you switch to a B2B model, where you basically do it for hedge funds and other investment banks, small investment banks, from the office? I do both. You know, my customers, I have institutional customers, and I have retail customers. So in terms of substack, I don't use substack, I use a different proprietary system. You know, a substack takes 10% of revenue, so that's a little bit much for me. The nice thing about substack is that they do handle all the payments and stuff like that, so I do that myself now, which is a little bit time consuming. Torsten Jacobi : When you look back, do you feel like the world of finance has changed quite a bit, and thatt here's more knowledge, or people are more aware of what's going on out there, or do you think we're still looking into a similar perplexing environment, as it was 10 years ago? Jared Dillian : Well, I think more people are engaged in finance. But I would say that a lot of people have learned a lot of bad ideas and bad habits. The meme stocks are a pretty good example. I have a Coast Guard friend on Facebook who trades the meme stocks, he's always posting about AMC and stuff like that, and he says these words like I've never heard before. He talks about holding the line and ladder attack and stuff like that. I don't know what this is, but it's not finance. I don't know what you're doing, but this isn't the right way to learn things. So I formed this entity two years ago called Jared Dillion Money, and that was where the radio show came from. I did the radio show under Jared Dillion Money. This is a personal finance platform. So really teaching the basics, not just about investments, but also about debt and credit cards and mortgages and stuff like that. So that's what I've been doing for the past two years. Torsten Jacobi : Well, I think what a lot of people are looking for, and I think this is where the meme stocks came from, is this call option. Jared Dillian : So this is really high, is it beta? Torsten Jacobi : You want something that moves very much, even if the stock doesn't move so much. Jared Dillian : It's more of a big gambling, right? Torsten Jacobi : But gambling not in that sense that the hedge funds always win. It's something where you can actually, we have a weapon that works seemingly enough. We've seen this earlier this year, where you as a 20 year old have a big enough weapon. You can become a millionaire overnight, and the hedge funds give you that money. That's pretty rare, right? Jared Dillian : I don't remember many of those situations in the last 10 years, when it seemed like the hedge funds are at a disadvantage at least momentarily. Torsten Jacobi : No, I think that's a narrative that got put forth after the GameStop incident. Jared Dillian : I don't think, I mean, look, there were a couple of hedge funds that were harmed by that moving GameStop, but I can tell you that retail investors, if you're trading call options on GameStop through Robinhood, people are making money off of you. The market maker behind those trades is Citadel. They have some very sophisticated people who understand volatility, who know how to model a volatility surface, like, I mean, yes, like if you buy a call option on GameStop and it goes up very quickly, you'll make money, but you're at a huge disadvantage. Torsten Jacobi : So it isn't something you can actually win at least, I mean, the odds are definitely against you, right? Jared Dillian : This hasn't changed I think there was a short period of time about four or five months ago, six months ago, when you could win at it, but I think that window is closed. Torsten Jacobi : When you wrote two books by now, you wrote first something that is more of a description of what happened at Lehman, and then it's a novel that you wrote later on that is complete fiction, I assume. Was it harder to write a novel than the accounts that you gave for Lehman, or do you feel it's the same amount of effort? Jared Dillian : Oh, it was much harder to write a novel. I mean, just to put this in perspective, you know, Street Freak, my first book, the memoir, it was 135,000 words, and I wrote it in eight months. All the evil of this world, which is my novel, is 70,000 words, and I wrote it in five years. It was much, much harder, much harder. Torsten Jacobi : Is that because you just wanted to do it perfect? Like, we noticed some Jordan Peterson and his first book took him 20 years to write because he rewrote it literally every week. Do you want it to get the narrative perfect, or because there were so many layers you had to go through? No, I mean, I was a perfectionist about it, but the creative process when it comes to actually dreaming up events and places and people you've never seen before, it's just a lot slower and it's a lot harder. I tell people that book is the hardest thing I've ever done, and I never want to write fiction again, like it's too hard, but at the same time, I'm the most proud of it. I really think All the Evil of This World is an amazing book, and it's the best thing I've ever done. Torsten Jacobi : What is it about? What story are you illustrating? Jared Dillian : So it's about a trade that takes place March 2, the year 2000. It's about when 3Com spun off Palm, I don't know if you remember Palm pilots, but from 20 years ago. So it was a spin off trade, and it's an options trade that takes place on 3Com, but it involves seven different people from a clerk on the exchange to a broker on the exchange, to a market maker in a bank, to a hedge fund portfolio manager, seven different people, and it's just each chapter is their story, and they're all interconnected. And each chapter is written in a different voice as to that person's personality. So each one is written completely different. It was the most ambitious thing that I could possibly do, and the engineering behind it was very difficult, but it worked out. Torsten Jacobi : What's your own personal opinion or something you've learned over time about inflation? Jared Dillian : It's this big debate, and we had deflation versus inflation was actually a big topic, and we now feel the majority has shifted to some form of inflation, and we know how much it is. Torsten Jacobi : What is your personal opinion? Where will this end, and how high will inflation go, or will we just see inflation disappear? Jared Dillian : I'm very much in the inflation camp. Actually, on my radio show last night, I interviewed Peter Atwater, who is at Financial Insights. He really studies behavior and psychology and stuff like that in the markets. And I said to Peter, I was like, I think inflation is 90% a psychological phenomenon. And he says, I disagree with you. I think it's 100%. So what's happened in the last year is we've had a reversal of 40 years of disinflationary psychology, and we suddenly switched to an inflationary psychology. So this is how this works. If you think that there is going to be inflation, if you think prices are going to rise, if you think there are going to be shortages, then you accelerate economic activity. You buy more of things. You buy faster. And everybody doing this together drives prices up. So what happened when Volcker became Fed Chair back in 1979, it was about reversing the psychology. And he had to raise interest rates a lot and crush the economy in order to reverse that psychology. So there's no appetite to do that right now. So inflation is 5% in change. It's undoubtedly going to go higher. I don't know how fast it's going to go higher, but it will go higher. Torsten Jacobi : What I find mesmerizing, and I agree with you, it's definitely, there's a lot of psychology in there, what I find mesmerizing is that we see bond yields that haven't moved at all right there, like 10 year bond is what, 0.2%. If you are somewhat rational investor, how can you, with 5% projected inflation per year, right, so that's at least 30%, 40% of your bond that goes away after a five year period of 10 years, even worse, how would you even think about accepting this rate? Like why does this market even exist? Everybody should have gone away, right? This money should be gone. Jared Dillian : Yeah, I mean, rates should be higher, interest rates are a function of a couple of things, he supply and demand for loanable funds. They're also a function of the supply and demand for treasury securities. I mean, ultimately, like if there's more demand for bonds and like it, it doesn't necessarily have to come from US investors, it can come from overseas or wherever, also from the Fed. I mean, the Fed is still buying $120 billion a month. So I mean, that's where the demand's coming from. Torsten Jacobi : Yeah, we has Harley on and his ETF is kind of a call option for increasing interest rates over the next couple of years and it's a slow moving, like you don't lose a ton, you don't have a huge negative carry, so to speak, where you only lose a little bit every year. And I think everyone agrees with this, but obviously it's down so far, right? Torsten Jacobi : But do you feel like we see much lower rates in the yields first, I mean, effective rates before we see higher inflation price in or we will definitely see interest rates going up? Jared Dillian : I have pretty high conviction that interest rates have bottomed and I think they will go higher. I just, I don't know when that'll happen or how fast it'll happen. I also don't know what the catalyst will be. But I do think rates have bottomed. Torsten Jacobi : When you look into another topic that a lot of people are kind of worried about and I've been very worried, workily on the podcast is we've seen GDP growth relatively slow over the years and we've really seen a population isn't growing as much as the GDP gr…

Full show notes at the publisher

Stephen Clapham (How to spot a good investment – and a fraud!) Aug 27, 2021

Show notes

00:00:33 How Stephen got started in the world of finance and what motivated him to write his latest book. 00:10:05 What is the basic premise of Stephen's analysis of financial statements (forensic accounting)? 00:21:01 What is the fine line between fraud and creative accounting? 00:27:22 What is Stephen's analysis of the Wirecard fraud? 00:32:27 How well do the current accounting standards actually work for provide transparency into profits/ losses of banks? 00:39:51 Where does all the printed money (from Central Banks) actually go? What is the best option to 'weather the current low growth environment'? 00:51:10 How 'money printing' at this huge scale seems to be deflationary instead of inflationary? Stephen Clapham is a retired hedge fund partner who now trains stock analysts at some of the world's largest and most successful institutional investors. Stephen is also the author of The Smart Money Method: How to pick stocks like a hedge fund pro and hosts his own podcast. Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Stephen, thanks a lot for coming on the Judgment Call Podcast. I really appreciate it. Wow, thank you for having me. I'm looking forward to it. Hey, absolutely. I'm sorry about my improvised setup here today, but I hope you can still manage that. So you run a company called Behind the Balance Sheet and you also recently published a book that's called The Smart Money Method. And both I thought are really interesting and we want to dive a little deeper into both of the topics that you illuminate there. Maybe you can give us a very quick intro into how you got into the financial world in the first place and what inspired you to write the book and what's kind of the 30,000 feet view of what's in the book. Okay, so nothing inspired me to get into finance. It was purely accidental and serendipitous. I had accepted a job at a very senior level, one of the largest companies in the UK, where I was reporting to somebody that was reporting to the CFO, Finance Directorate. I was interviewed by the CFO for the job at a relatively young age and they gave me the job and they were delighted to have me and I accepted the role and they then called me up and they said, oh, we made a bit of a mistake because you're too young. You can't be this grade until next year and I said, well, what do you mean? And they said, well, you know, don't worry, only a little bit less money and there'll be a slightly fewer benefits and we'll make you up next year. And I said, well, I'm very sorry, but you know, as far as I'm concerned, we had a deal and I'm not allowing you to renege in that deal. If you have such a stupid philosophy that somebody has to be a certain age before they're qualified to do the job, then I suggest you go and look elsewhere because I'm not really interested in working for an organisation where merit doesn't overcome age. And I was recounting this tale and a friend of mine said, oh, well, that sounds a bit upsetting, but why don't you go into the city? And I said, well, don't be stupid. I don't know any of the cities for people with privileged backgrounds that won't suit me. And he said, well, no, I think you'll find that things are opening up and I said, well, how would I do that? Well, I don't know. How would I get? I don't even know where to start. And he said, well, I don't know either, but my secretary's husband, he works at a stockbroker and I bet you he'll see you and explain, you know, what sort of things you might be able to do. And I said, well, that'd be fantastic, so he called up his secretary at home and she said, oh, yeah, of course, he would be delighted to see Steve of Egan come in next Wednesday at 8.30. So next Wednesday at 8.30, I rock up to this stockbroking firm and this very nice chat Bob Carl spends half an hour telling me what it's like to be a research analyst. And I'm thinking, oh, man, that sounds like fun. And he says, well, why don't you come and work for us? And it was, you know, I hadn't gone there to get an interview, I'd gone there simply to learn and understand what the city was about. And I, you know, I went to work for him and it was a brilliant job. I really loved doing it, found it incredibly interesting, incredibly exciting. And I never really looked back. And so my career spanned the sell side where I was an analyst covering various sectors for many years, and I then was asked by one of my clients, a big hedge fund, if I would go and work for them. And I did that and I thought, oh, wow, this is even more fun because I'm doing the work that I really enjoy, which is, you know, researching companies. And I don't have to deal with a pesky clients because when you're an investment bank or you're on the sell side, there's a reason it's called a sell side because you have to sell to people. And although I really enjoy the relationships, the marketing part of it was, you know, a bit dull, you know, I mean, I remember one firm I worked for, you were given a big cardboard sheet every month and you did it all the days of the month and tick boxes and you had a list of clients you had to call and you had to make a hundred phone calls a month. Surely not anything to say, you know, I thought you shouldn't call people unless you had something interesting to say. Anyway, so I moved to the buy side and it was really an amazing journey, absolutely fantastic fun. And I then ended up setting up my training and research consultancy behind the balance sheet in 2018, the fund that I'd worked for, we decided to close it with the performance hadn't been very good and it really wasn't a lot, it really wasn't much fun coming in every morning at 7.15 and leaving at 7 o clock and not making any money and we decided to close it. I had assumed that I would just get another job, I found it more difficult because nobody wanted to employ an analyst aged 50. So I set up the consultancy and it's been fantastic fun and, you know, why did I set up the book? Well, I started the book because I've been doing all this training and I thought, well, maybe people would, you know, find the book helpful, I could write a book that was interesting and I had the basis of it and so the book was published in November last year and somewhat to my surprise it's been really very popular and, you know, loads of people have emailed me saying, oh, this is the book I wish I had when I was started in investing. Loads of people email me saying, oh, this is fantastic because we now understand what we should be doing. Some people email me saying, this is brilliant because you convinced me that I don't want to do my own investing because it sounds a bit difficult, but I've had all sorts of very positive feedback and the book, essentially, it's kind of got some of my actual real life experiences woven through it, but it's really a book about the process I developed as an analyst at very large hedge funds to research companies and so it's something like a how to guide, but it's a more practical how to guide. We don't really talk about any of the theory at all, we just go through how do you invest and how my process developed and how do I look at a company, so how do I start, how do I find an idea and then once I've found an idea, what do I do with it, how do I examine it, how do I explore it, how do I look at an industry, how do I look at a company and I then go through, I don't go through in great detail with the financials, you know, obviously I sell training courses which help people how to read a balance sheet and how to understand a set of accounts and that could be a whole book and I wanted the book to be something that anybody could pick up and that they wouldn't be turned off by it, that they wouldn't be put off because it was all about reading balance sheets, so we cover a bit about the balance sheets, we cover how to look at management and also stuff like how do you think about the macro, we put in, I finished writing it just as COVID started at peak, so I probably made June last year, I finished the book and I thought I really should put a paragraph or a chapter about COVID, started out as small and then I ended up doing a whole chapter on it which with the benefit of hindsight, I'm not sure that I should have included that, I think the book would have had a longer validity, a longer shelf life without it perhaps, but some of the points that I made there, initially they didn't look that smart because I had been talking quite a lot about the issues in supply chains because when COVID happened I felt that supply chains would get very stretched and it was interesting, you know, now I hadn't anticipated how long it would take for that to feed through into the system, but obviously there's huge supply chain pressures now. Yeah, I mean that's a whole other avenue we could talk about, but I love how positive you see your own career over the years and how you combine that part of that's what I love to do and obviously we know the financial industry pays really well and the interesting way you found your way into it, I think that's pretty unique, that's really awesome. I think one point that you're really famous for is being in forensic accountants, so looking into a company and just from their financials and whatever they have in their public reporting to see if this is a company that maybe makes things look a little bit too good to be true or is probably on the verge of being fraudulent, and we know there's a couple of really active investors who kind of do this all the time and there was a bunch of cases with Rebian where a lot of people said, well, this is the biggest fraud ever, there's so little technology, there's so much potential opportunity that everyone who is investing into this company basically doesn't want to see what's actually going on, it's empty promises and the balance sheet is basically, it's all cooked up and the technology as well. Maybe you can give us a glimpse, what are the things that you're looking out for when you do this? How do you determine there's a pattern of fraud or there's a pattern of something fishy going on? It's very kind of you to say that I'm famous, I don't think I'm famous at all and the forensic accounting is only one aspect of what I do and the thing is that I don't understand I don't believe you can be an effective investor or as effective as you might be without having due regard to the financial statements. Now, obviously in today's markets, there is a lot of stocks that are making very large losses that are very highly valued and people aren't really paying a huge amount of attention to today's profitability but you do for a very large number of companies, a very high proportion of the stock market, you do have to understand how the company makes its money, how it generates cash flow and even for those companies that lost making today, you do have to think about how they're going to generate cash at some point in the future and I know there's lots of people who invest without even opening their accounts, a funny story was I was approached by a group of private investors in London to do a course, an in person course for them and these are a group of value investors, they invest predominantly in small cap stocks and I agreed to do the day with them because I had some clients that paid for a day and I didn't have enough critical mass and so I put the two groups together and I said I'm going to go through a particular example, bring a copy of their accounts because they normally when people did this in my office, I would give them copies of the accounts but these people being value investors, they were chiselling me on the price and they didn't want to do it in my office, they wanted to do it in their premises so I didn't fancy carrying bags, the accounts are quite long right, so you've got 250 pages of accounts and you've got multiple copies, it would be quite heavy to carry with your laptop and everything else, these guys came, two of them came, they didn't bring their accounts, they brought the preliminary release and these two people were full time professional investors and they didn't even know what a set of accounts was, which I find this just bizarre, now they would argue that they'd been perfectly successful and they'd done well and they didn't need anything more than this, obviously if you're in a bull market and we've been in a bull market for over a decade, you can get away with shortcuts, however it's my view that no analysis, no proper research can be done in a company, it can't be complete unless you look at the financial statements and obviously if you're a professional investor and the bulk of my business is doing training for professional investors and every single one of them have a fiduciary duty, they can't not look at their accounts, so their accounts to me are central to an understanding of a business because of a financial representation of what's happening in that business and I can go through a balance sheet and I can tell you, if you showed me a balance sheet today right now and you didn't tell me the name of the company, I could tell you with a surprising degree of precision what sort of business it was, just by looking at the balance sheet, well without looking at being now, without looking at the cash flow and I think people just underestimate the power of financial statements, they're very much less used than they should be. But aren't they, and you outlined a couple of those ways in publicly, aren't they, and I think this is where I come in, I always feel we have all this regulation in financial markets, but it's kind of a, it's a tug of war between the regulatory fiat that's out there and says, well this is how you should construct your own balance sheet, this is how our gap works, right, there's certain accounting practices that are important to you and we have public accounting companies and we have regulators, but it seems like it's a cat and mouse game, you can always hack this, you can always come up with a way where you defer losses, where you bring profits into, that will be future profits, you bring it into the present, it seems like it's so easy to fake that a lot of people are discounting it and say, well, why don't I even look at this, if the company's basically can, well we know that Tesla has very strange cash flows that are definitely not positive, but they're suddenly making enormous profits and made it in the S&P 500, if something is at odds there, I mean the stock price was only moved because they went into the index, not because they suddenly made millions, billions of profits. Yeah, I mean obviously, you know, when you prepare a set of accounts there's a certain amount of judgement involved, there's a certain amount of estimates involved and of cours…

Full show notes at the publisher

Mike Green (The gravitational force of passive investing on capital allocation and geopolitics) Jul 21, 2021

Show notes

00:00:31 How Mike researched and developed his theory of a market bubble in passive investing/ index investing? Are markets about information or transactions? 00:08:01 Is the bubble of investing just a (bigger) change of the NIFTY fifty or the NASDAQ bubble in the 2000's? 00:13:53 Does Mike's theory of passive investing predict higher volatility due to the changes in market structure? 00:19:22 Is our low productivity growth linked to inefficient capital allocation due to passive investing skewing investments? Is the Fed to blame for the asset bubbles? 00:26:57 Is the Fed's own forecast model broken now that markets follow a flow model much more than a valuation model? 00:31:01 Is our retirement model the problem or the solution? Is a future crash inevitable? Is the small enterprise dead forever? 00:39:13 How should contrarian investors position themselves? How committed can one be to an 'impending bubble'? 00:47:45 What is America's contribution to the world? Does China now have the better approach to capitalism? Can we ever come up with companies that do things cheap and better (instead of just better)? 00:55:05 Are societal changes solely to blame for changes in productivity growth? 01:01:01 Can longevity research (and the ability to live forever) change how the world will grow? 01:09:01 Should we always be 'smart investors' or is 'going with the crowd' often better? What are the dilemmas of the contrarian or cataclysmic investor? How do high profile investors deal with this? 01:21:10 What other bubbles does Mike see in today's market and how can retail investors trade against such a bubble formation (if they choose to do so)? 01:26:48 Will China start a hot war in Asia in the next 15 years? Will trade (and China's trading partners) matter? How is the chess board stacked towards such a war. What are China's incentives? Mike Green has been a student of markets and market structure for nearly 30 years. Mike works with Simplify to create ETF products that give retail investors an edge. Before that Mike has worked with Logica Capital Advisers and Thiel Macro. You may watch this episode on Youtube - #100 Mike Green (The gravitational force of passive investing on capital allocation and geopolitics). Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Torsten Jacobi: Mike, welcome to the Judgment Call podcast. Thanks for coming. We appreciate that. Mike Green: Thank you, Torsten. It's a pleasure to be here. Torsten Jacobi: Hey, so your claim to fame is really the passive investment bubble, and you also recently joined Simplify, one of the most interesting ETF creators out there. My first question is for listeners out there who haven't heard of this particular bubble that you've been describing for a couple of years now, what are the core tenants of your thesis there, and what do you think is wrong with passive investment? Because a lot of us think of this as a very safe and potentially very lucrative investing stone. Mike Green: Well, I think this is one of the challenges that in terms of my theory and what I've observed about the market and how it's playing out is that for most investors, there's a natural attraction to being in a passive vehicle. Your objective is very much to just try to match the return of the market, and so it feels like it is the right choice, and you're seeking out lower fees, you're seeking out broad exposure, you're diversifying as you would expect, etc. And so it is a winning combination from the investor standpoint on an individual basis. The problem is, like many phenomenon, when you expand it and it becomes the dominant feature, it becomes a tragedy of the commons. And so the first place you have to start with passive investing is to understand that the basic theory behind it is predicated almost referred to as the efficient market hypothesis. And so the efficient market hypothesis was a theoretical construct that was created in the 1950s and 1960s, most closely associated with Eugene Fama. The idea is very straightforward. The prices in the market represent all of the information or the best estimate, the best intersection of information that exists across the market. And this is the idea that prices are set on a fundamental basis. So I as a single investor look at Microsoft, I make a forecast of the cash flows, I estimate what the future performance is going to be. I make some estimate in terms of what I expect it to be worth in the future, and then I compare that versus my cost to capital, discount that back to the present value and buy Microsoft. So the theory is that millions and millions, potentially billions of people doing this contribute to a market in which it is extraordinarily difficult to gain an information edge. And that's a really important component is that the expectation is that prices reflect information. There's an issue associated with that, which is that prices don't actually represent information, prices represent transactions. So when you look at a market, what you're actually seeing is not where the price is right now. It's where the last transaction happened. And it's a presumption that we're making that the next transaction is going to be close to that price. There are few events in history where we have seen that not be the case. The crash in 1987 would be a great example. The crash in 1929 would be a great example in the volatility space, the events of Allmageddon, February 5, 2018, where the next morning you woke up and the price of a security XIV had fallen 95%. We've seen this in a couple of different situations. That is a good indication of this phenomenon that it's not actually information, but it's transactions that are occurring. And once you recognize that that's happening, then you recognize that passive players violate the actual underlying philosophy of what a passive player is supposed to be. According to the work of Bill Sharp, which is used and cited for the rationale for why passive outperforms an aggregate, the idea is very straightforward. An active investor is one who transacts, who trades off the information. And a passive investor is simply one who holds all the securities in the market. The problem is that leaves no mechanism for how you get in the market or how you get out of the market. It's effectively a pure paper portfolio theory. If I were to track the market, which is what an index is designed to do, then I would meet that criteria. But the minute I begin to participate, I change the underlying structure. That's the flaw in the ointment, because now what we have is we've grown passive to the size, the passive investment strategies, the vanguards, black rocks, even the fidelity, Schwab's, etc., of the world who increasingly rely on S&P 500 indices or total market indices. They are every day in the market representing the lion's share of the net transactions, the buying that is occurring. And when that happens, you need to actually start to disaggregate and say, okay, what is the mechanism that these vehicles are trading off of? And they don't trade off of information. They trade off of flows. The rules for passive are incredibly simple. Did you give me cash if so, then buy? Did you ask for cash if so, then sell? Nowhere in there is there any information about the performance of an underlying security. And within the indices themselves, you also get an inversion of the traditional process of price formation. So one of the things that I did as I began to develop this theory was I went out and I surveyed active investors, people like myself, discretionary investors. And I asked them a very simple question. When you receive a new inflow or you receive an outflow, what is your propensity to invest given valuation? So a Schiller type valuation, zero times or one times earnings up to 100 times earnings, what's your propensity to invest or to sell stocks when you receive an instruction from your end investor? And what you found in that is as you would expect, the discretionary investor is more willing to sell at high prices or high valuations and less willing to sell at low valuations. They're more willing to buy at low valuations, less willing to buy at high valuations. When you run a system that is built on those rules, then it's a mean reverting system. As valuations rise, people become less willing to deploy capital, valuations retreat. Passive works in the exact opposite fashion. As valuations rise, the incremental marginal capital, because you're doing so on a market cap weighted basis. So how does something get to high market cap? It rose in price. If its price is not directly tied to the fundamentals, as is rising in price, its valuations are rising. And so you end up with the perverse dynamic where the market becomes very momentum weighted. Effectively, the dominant flow of capital is money coming in on a momentum weighted basis, which means that the largest companies receive incrementally more capital. The companies that have risen the most receive incrementally more capital. And those that are lagging behind really aren't receiving any significant marginal inflows. It gets even worse than that because as we begin to switch from the active managers, firing the active managers, discretionary managers, and replacing them with the index or passive managers, that signal becomes amplified. The value based or marginal forward return based process of the discretionary manager is under redemption, meaning the stocks that they like are getting sold, the stocks that they hate are getting bought back. And the passive players are dominating it. And in my analysis, this is what's going on in the markets today. Torsten Jacobi: I wonder, and this is very fascinating. And the first time I heard this, I'm like, well, now it finally explains why value investing, and the whole idea of value is really rare, because it simply has made a ton of money the last 20 years. And that's kind of where I come from is where is this margin of safety, right? But where can I see low valuations that potentially rise in the future? And usually that's not what happens in the market. It's kind of a continuous trend following that we see out there. What I want to do is, is that a bit of a maybe bigger follow up to the nifty 50, right? So we saw this in the 60s, 70s, there is this information gap that you just talked about, there is market players on the market that see the whole market, right? They see all the investment opportunities. But there's a lot of people in a not so informed public out there who don't have the time for it. And they just go into the big names, right? They know that used to be Nasdaq in the 2000s. And we just want to be in Yahoo, we want to be in Petz.com, because it sounds good and we heard about it, right? That's the only reason we invest in it. We really don't care about valuations because we think about the future. And in the future, these companies will make a ton of money. And is it just on a bigger scale now that we see these valuations rise so much in the index investing that was kind of a theme that Warren Buffett gave us, I feel, and this will fall apart because the sharks, the smart investors so to speak, they are already circling passive investing and they will come down in it sooner or later, because it's just not such a smart idea to keep buying Apple the same stock, irrespective of the price. Mike Green: So there's a lot to unpack in that observation, right? Everything ranging from people seeking out safety to Warren Buffett. Let's hit each of those in turn. So a recreation of the nifty 50 in the 1970s, right? The nifty 50 in the 1970s was a group of roughly 50 stocks that people basically just said buy at any price, right? They were the Polaroids, the Codex, et cetera, the world that represented effectively unlimited growth potential. I think that there's an element of that in that you see the market narrowing and concentrating, but the question becomes why, right? Is it because people are objectively looking at the top 50 stocks and saying these represent a unique feature and was that the case even then, right? We kind of hear these things filtered through history, right? What I would suggest was likely happening in the 1970s was that you had a broker approved list that they were able to go out and tell their investors. This was also a time period where there was a change in what's referred to as the ERISA rules, right? Which govern all of the retirement pension accounts, et cetera. And so there was in all likelihood an approved list that people didn't have to seek out approval on an individual basis to trade those names. And so the market naturally concentrates there, right? It's a little bit like if you have a teenage son and they need to come to you to get permission to go with their friends in a car, but they don't need to get permission from you to take the car and go out, right? What are they going to end up doing? They're going to end up driving their car to a parking lot somewhere, leaving the car there and then hopping in their friend's car, right? Because they want to remove the frictions associated with it. Ultimately, that I would guess is what happened in the 1970s, right? I spent less time actually studying that dynamic of the market than I have in other areas. Today, you have an even more concentrated variant of that where the money that goes into retirement accounts in the United States, primarily through 401Ks and IRAs, we've introduced a series of rules that make it very difficult for a corporation sponsoring a 401K, right? Which is a defined contribution plan or for a registered investment advisor offering investment alternatives to their clients. We've made it very difficult for them to do anything other than the cheapest, lowest cost index solutions, right? They're actually exposed to liability and being sued by their clients for putting them into products that violate what's referred to as the fiduciary standard, right? Which is a standard that says, ultimately, was their best interest at heart rather than something else, right? Now, whether they're actually guilty of violating that when they put money into something other than a Vanguard product or into a State Street product or into a BlackRock product, I'm very skeptical that that's the case. But having been through legal challenges myself at various points in time, the correct strategy is to avoid litigation risk, right? And so everyone is kind of being forced into these strategies, regardless of whether they think it's a good idea. And then the last thing that I would say on that is, when we talk about the dynamics of value investing or the Warren Buffett margin of safety type approach, the problem is that we know in history this worked, but it hasn't worked for give or take the past 10 years or 20 years, right? It's a little bit more in debate if we include the dot com cycle. But people are ultimately forced to say, am I willing to pay for this theory or do I want to believe my own eyes, right? And increasingly, people are opting o…

Full show notes at the publisher

Thaddeus ‘the Catholic’ (Pluralism, Liberalism, Postmodernism, Idolatry, World Government) Jul 19, 2021

Show notes

00:01:00 How Thaddeus got into philosophy and theology in the first place? 00:05:45 How political pluralism should work? Is the US actually pluralistic? 00:12:23 Has liberalism built a super structure of metaethics on top of religions. Are religions (too) boxed in by the liberal structure? How has our consciousness already been changed by this structure? 00:19:13 Is the treatment of religions and reality comparable? How should philosophy deal with quantum physics? 00:30:03 What did postmodernism contribute to the current state of philosophy? 00:35:03 What did Friedrich Nietzsche really try to tell us in 'Thus Spoke Zarathustra'? How much of his depression should be attributed Christianity? 00:39:03 Why are so many people falling out with active Christianity? Is it connected to the different role of idolatry (the replacement of the divine) between the older Abrahamic religions and the New Testament? 00:45:02 What kind of love is the most fulfilling - self-centered or selfless? 00:51:02 How does Ayn Rand's philosophy (Objectivism) fit into the high regard that is given to selfless love by philosophers? Is altruism self love or selflessness? 00:53:01 Why do we have this endless potential of addiction? Is addiction a coping mechanism for reality? Does it help us reconcile long-term and short-term goals? Is it better than being stuck in place? 00:57:34 Is religion a system of societal error correction? Do religions give you better life goals (and free you of addictions). Have religions become too lazy and are not challenged enough? Has postmodernism shown us how uncontested religious ideas are a problem? 01:07:13 Is the catholic church a good model for a 'world government'? Thaddeus Kozinski is a professor of theology and philosophy at the Divine Mercy University. He is the author of Modernity as Apocalypse: Sacred Nihilism and the Counterfeits of Logos and The Political Problem of Religious Pluralism: And Why Philosophers Can't Solve It. You may watch this episode on Youtube - Thaddeus 'the Catholic' (Pluralism, Liberalism, Postmodernism, Idolatry, World Government). Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Today's welcome to the judgment call podcast really appreciate thanks for coming You're welcome. Thanks for having me on torsten. Hey, absolutely I looked into you a little bit and there's two books that you wrote and it stood out and got quite a bit of recognition One is where you talk about what role does religious pluralism have in society? How nation states should actually be a construct and is that even possible which we all think it is right? So that's kept I guess the consensus and the other book that I took a quick look at is How Catholicism really fits into modern society and what what happened to Catholicism? Because it went through so many changes at least the public perception during the last 100 years So i'm excited to talk about this and you're also just in that before when we spoke earlier you mentioned A couple of other topics that I think are really relevant to today's discussion about what's going on in the world So maybe like my first question is how did you start with philosophy and how do you select those topics? So why are certain things closer to your heart like those topics? We just talked about and others that you come across from what you feel others are not as relevant to you You just leave them by the wayside a little bit well, I I started out in college as a pre med major math and science Towards my junior year I was reading And I wasn't practicing religion at this point. I was kind of a Nietzschean In my in my behavior and thought even though I didn't know who Nietzsche was, you know what I mean? I was sort of uh, I was a de facto Nietzschean living for extreme extreme experiences trying to defy uh the status quo you know Trying not to be a conformist all that and I was searching though at that point And I I actually read one particular book which sort of opened up a whole new world to me And was called the screw tape letters by c.s. Lewis Have you heard of the book? I have not no I have not so the screw tape letters are fictional letters written from uh a devil in hell called screw tape To his nephew wormwood and the whole book is about how to How to get this one particular individual into hell and so what lewis does is he incorporates a lot of uh social commentary and spiritual truth in this But what happened to me when I read that was I thought wow, this could be true There really might be the spiritual world out there of of truth of comprehensive metaphysical spiritual truth And I I really felt the the the reality of that from this book It really it really floored me And so at that point I got really interested in reading reading these things. Um reading spiritual works of lewis and uh other other theologians and That got me interested in moving away from the sciences into philosophy and theology and so um I then uh Enrolled in a program called uh saint john's college uh in anapolis, maryland, which teaches the great books only They're one of the first great books colleges and I took the master's program there and read through the whole canon of great works All the philosophy theology literature history that I didn't really get uh undergraduate Um as I was going through that program. I discovered playdough who became uh, I just fell in love with his writings especially the republic And what really floored me was his discussion of democracy and book eight of the republic Where he basically says that he depicts democracy as a kind of relativistic Carnival of everyone doing their own thing and everybody's happy and self satisfied Except that it's the beginning of tyranny For playdough because what happens is is in that vacuum the tyrant Is born and the tyrant is completely a slave to his passions and makes everybody else enslaved to his will And that just floored me. I never I never read anything like that and it he also described the way in which the political order is Uh, a kind of macrocosm of the order of the soul And that was also uh new to me and that got me interested in political philosophy And uh, I had also become interested in the catholic intellectual tradition, particularly its philosophical tradition Combinating in st. Thomas Aquinas So I went to catholic university and and took 12 courses Uh in for my phd. Uh, a lot of them on st. Thomas Um, I discovered allister mackentire's writings at this point and his radical critique of secular liberalism Um, and I also discovered the social encyclicals of the popes, especially leo the 13th Um, where he talked about what a christian political order looks like and should look like and how it connects to the truths of the gospel And so at that point I decided I wanted to write um, my dissertation on Uh, what I call in my in my book that came out of that the political problem of religious pluralism um Looking at plato looking at Aristotle looking at Aquinas looking at jack baritain allister mackentire john walls Um and seeing what the problem really was Uh in our culture And and that's what I tried to um Figure out in that book. Yeah, that sounds fascinating. I mean those are I I feel I've only even heard of the subset of those books And I've only read a couple um of them as well. Um, this sounds really fascinating when when we look into Let's say a popular opinion is that political pluralism So the the the ability to To and compass all kinds of religion into one nation state kind of what the what the u.s. Um It kind of isn't because it's kind of based on a on a christian philosophy, but it kind of Um prides itself in disability to it. So any anyone with any kind of religion and have anyone that have a guaranteed ability to To practice that religion and bring it into this this microcosm of what's modern, um america First question would be do you feel america is? Pluralist is really pluralist as you would perceive it and be what do you think it's not working out so well? Uh the answer to the question of whether we have a genuine plurality of And even and even from the beginning of the founding is genuinely pluralist is is no Um, and you have to sort of think about what it means to be pluralist. Um Uh, you know John Locke in his letter on toleration Um said that uh, the the true the mark of the true church is toleration Uh, he also said every church is orthodox to itself And in his uh Other writings maybe including that one as well. He He forbid uh, both atheists and catholics to be part of this New enlightened, uh, social contract. The reason he did that is because he had a suspicion there that Neither the atheists nor the catholic could actually abide by Uh, the kind of implicit rules of the social contract and what the rules are there is a sort of religious relativism Um, in other words, uh, you could you could practice your religion your philosophical doctrines Whatever you think about values, uh, in the civil sphere in the sphere of private life But when it comes to public life when it comes to the laws Uh, when it comes to the the sort of life of the common good, it's the civil society that determines these things Well, what that means though is that the civil society the political, uh, authority has decided that no religious truth or institution such as the catholic church Has any political authority whatsoever has any authority to determine Um, you know Uh Reality, uh, it's like like he says every church is orthodox to itself So, um, in my opinion lock was was pretty much an atheist. Um, and his his christian noises were superficial and rhetorical What he's really setting up was the first secularist purely secularist state And that is indeed what we have in the united states. It's not a christian, uh, nation It may have been full filled with christian citizens from the the colonies But uh, insofar as you have the constitution and declaration what you really have is a secular regime Uh, where religion is, uh, ultimately privatized And and the church has no political, uh, moral authority whatsoever And so what I mean by saying that pluralism doesn't mean that it's not a christian nation Pluralism doesn't exist is that in order to, um, you know, live in an american culture You have to kind of adopt at least de facto or a modus fivendi A kind of strict separation Of your deepest held beliefs And and the and the common good in the political order, but this is this is a very, um Uh, distorted and perverted way of understanding, uh, your religion Um, the catholic religion for instance has things to say about the common good about the truth and about the purpose of human life It has things to say about, um What political authority is where it comes from and how laws should be made and what and what they should be ordered to It's not a private institution In fact, it has a higher authority than any state because it was instituted by god himself Now when you when you go around and interview catholics about that issue Um, and I was first introduced to this way of understanding political theology by reading leo the 13 Specifically his encyclical called immortale day on the christian constitution of states Most catholics and christians and theistic believers in general um When you ask them the role of their religious beliefs their practices their church um In relation to public authority political authority the culture they will give you an answer That is more or less lockian Which means that we're all lockians now, which means that we're not really pluralist Okay, we have superficial differences in our religious confessions, but we're all accepting a certain understanding of the relation of church and state of the supernatural the natural of reason and faith of nature and grace of um Of the sacred and the profane We're all basically accepting a more or less lockian enlightenment Uh liberal view and I'll just finish with this. Alistair McIntyre says um, what we have in our society are Radical liberals and conservative liberals, but we're all liberals and there isn't a place in public discussion where Liberalism itself is put to the critique is put under scrutiny Because what what's really going on is our our religion is big l liberalism and most people are Are basically practicing denominations of big l liberalism Catholic liberalism protested liberalism even muslim liberalism Atheist liberalism, but the problem is is that the the the main architectonic mode of understanding your own beliefs The relation to your life the relation to public life Uh are all filtered through this ideology Which is antithetical actually to authentic traditional um religious and metaphysical truth Yeah, so if I follow this correctly What and this is this is certainly interesting What do you say we don't have the pluralism because the flow of the religions on its they don't really stand on its own they're not able to To express all the knowledge that they have they stop short of this and we have this this the super meta meta Physics on the method ethics on top of that that actually determine the place of religion So religion cannot grow out of its place of boxing and every religion is hope it's in a similar box So to speak but the actual That the the meta ethics that we have accepted is liberalism and that is something we don't really see right So this is something that came off the enlightenment when we talk about religions all the time But we all feel and I I see this slightly different But I think the popular consensus is this is something that helped the old people It doesn't help us as much anymore. It's still around but the utility has gone down That's kind of what I get from most guests here on the podcast They say if it even has the utility it's so small we can ignore it. I I see that differently I feel there is quite a bit of utility still left But the actual superstructure now is how do we We how do we determine and I mean there's a nation state. There's a global government something that we all expect to happen in The year let me just sit on top of that, right? Let me just jump in with the way you frame that it's very interesting Um, most people don't see any utility now in religious belief and practice. You see more utility That's exactly liberalism liberalism, uh makes everything a means to an end Even those things that are ends and so the idea of looking at religion As a useful thing like even george washington or john ams. I forgot who was said, you know Um religion is good for you know, uh american culture keeps people good and you know, okay The whole idea of religion Of truth of god himself is that it can never be Merely a utilitarian good it is that which everything else is ordered to including the political order Uh, and so but I'm just reading i'm just reading nicolas weight. That's something I I and I think it it goes to the quarter I'm just reading nicolas weight and uh, I think he's getting to the heart of it as as well as as I I couldn't he's really going into so what is the survival value? What is the utility value not just…

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Max Wiethe (The state of financial industry and financial media) Jul 19, 2021

Show notes

00:03:30 What regulation should we employ in the financial industry? Does it make us more safe? 00:10:57 How Max got into his current career and what he has learned from his interviewees. 00:17:01 Is the world going crazy? Is the 'attentionalism' already changing people and is the financial industry a good showcase for this? Is 'career risk' actually the most important part of financial decision making? How should 'risk taking' work in the financial industry? 00:27:00 What is the state of financial media? Why is holding up better than other parts of journalism? 00:36:01 Which opportunities are available in the finance sector? Are entrepreneurial opportunities in other sectors of the economy really harder to come by than a few decades ago? 00:41:16 Will machines take over everything but marketing and sales? Are humans competitive vs. machines in terms of making complex decisions? 00:56:16 Will we see the 'rise of independent curators' in the financial industry? 01:10:30 Have preferences for earning money changed? Is quality of life more important than high earnings? 01:20:11 Will exploring new planets (and the possibilities of discovering assets) change the society on earth forever? You may watch this episode on Youtube - Max Wiethe (The state of financial industry and financial journalism). Max Wiethe is an editor and journalist at Real Vision where Max hosts a weekly series of interviews with financial industry heavyweights. Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). I actually saw something yesterday, a guy who was talking about like, go on zero hedge and there are articles that are promoting stocks. And he actually, he said back in the 80s, he got a call or his dad got a call from basically a boiler room broker telling him that it was the height of Billy Crystal, if you know the comedian Billy Crystal, his career, he said, this company is making the next Billy Crystal movie and got him to invest $2,000 and he ended up losing all of his money. Not a ton of money, but in the 80s, $2,000 was a good chunk of money and he was basically saying these websites where you can promote a stock and then they'll just have a little disclaimer down at the bottom, it's like so and so may have received compensation to write this article. Like that's the same guy as the people in the Wolf of Wall Street who were calling you and saying like, I've got Aerotine international investment and like when you see it on a website, it doesn't feel like it's a broker because it's not a broker, but that person is being compensated to write that article about that stock and if you can't tell, if you can't see those little things, you might not understand the biases of that information. So there's lots of things like that that I think are important. I mean, happy to just talk about content in general and how I think about it. I think you'll find... I want to get into this. Yeah, I said I think you'll find once you get me going, we will have no problem filling time. Yeah. Well, we don't want to just fill time, but I'm really curious about your insight and you've seen the industry from a different point of view than most of us. And maybe you can just go there right now. One thing that a lot of people in the financial industries or industry are very much involved with it, but they're also passionate to an extent with it is regulation, right? So there is a ton of amount of regulation with financial industry. It seems so easy to innovate new cars and just come out with something completely new. And over the century, the last, what is it, since the late, probably since the beginning of time, but we really see what's still left since I'd say that the 18th century, there's been a lot of regulation that prohibits certain behavior, like you just gave us an example about zero hedge. I don't want to put zero hedge. I just like use them as an example of a website where it could be anywhere, right? What I'm trying to say is from where I come from, and we should get into this topic a little deeper, I always feel there is a lot of regulation that's so complicated to enforce that creates so much red tape that it's probably not worth it. If you have trust in the investment, if you have trust in the active participant in that marketplace in the financial industry, maybe people just have to wise up. That's where I come from, where I feel like, well, if you fall for this thing, that's your problem, right? So there shouldn't be a Soviet state that protects you from it. It's called capitalism. And to a large extent, people will always push the boundaries and you have to look at this. The government and the SEC cannot help you. Yeah, to an extent, I would tend to agree with you that there is a certain level of responsibility. And where regulators fall into this, the fact that they have to disclose, for instance, this example that I gave of what seems like an article, a nonbiased editorial article, which is actually a promoted piece where that company has hired this person, whether they paid them in stock, whether they paid them in options, whether they paid them in cash, they do have to disclose that at the bottom. So there is some layer of regulation already in there, or else they probably wouldn't disclose that sort of thing. So their fingerprints are still already there. And there is a level of like, you have to... But is it necessary, right? Is it even... Doesn't it promote a false sense of confidence? Because all these disclaimers under restrictions, they don't do anything. I mean, I don't feel that there is... Unless you have a really strong prosecution and a real way to enforce it, that probably makes it worse. You should only have laws you can enforce 99%, 100%. And most of these laws are barely enforceable, like inside a trading, right? That's basically not enforceable. We hear these every 10 years. Yeah. I mean, it's... And it's generally... I mean, we have... You've got all the news about Nancy Pelosi and the congressmen who are able to trade off of what they know. It's not illegal for them to know that Facebook is only going to get fined $10 billion and that the market is probably going to rally on that and then they can buy call options or something like that. That's not illegal. Yeah. Why would she buy so many call options otherwise? What? Yeah. Well, what's the alternative explanation where she's buying so many call options on these things? I mean, I haven't looked at the specific case and I don't think the Facebook example that I gave is exactly what happened in this case, but the basic premise of that there are two sets of rules. And that actually it's generally easier to go after lower level people than it is higher level people. And I think even the IRS has said that when it comes to going after tax crimes, that it's much easier for them to go after the guy with a small business who's maybe worth a couple of million dollars, who made an honest mistake in trying to navigate the incredibly complex tax system than it is the guy who's worth $200 million dollars, who's actively trying to circumvent the laws through loopholes, which are not intentional. It's much harder for them to go after that guy than it is the guy who's worth $2 million. And I think the same is true a lot of times with financial crimes that would fall under the realm of the SEC, that it's just they're going up against people who, one, know the regulations and two can afford to fight these sorts of things. So it often comes down to the little guy, like there was a story about some junior guy at a bank a few years ago who he made $80,000 off of his insider trading or it was less than a million dollars and like he was one of the people who got prosecuted and think about all the trades that happen out there that people make so much more money on and those are the types of scraps that regulators are going after and not because the right laws aren't in place, but they don't have the resources and if they did have the resources, would it be worthwhile for them to allocate the resources to fighting these fights, which are much harder to win? I mean, it's just it's the sheer intensity is an information problem, right? So we won the laws of Valentine that and I fully understand where the notion of protecting the consumer comes from. And I think this is all good, right? But what we end up with is a massive amount of law that is very, the enforcement is very uneven. That's what I'm trying to say. So you, I'm not sure if I prescribe to the thesis that it hits the little guy. I think it just hits random people. So it's kind of like littering on the on the freeway, right? So the fines are so high because it's basically unenforceable because you would have to have a camera everywhere and, you know, take pictures of the license plates. So that's what I feel we have with the financial regulation. There's a lot out there, but it creates mostly red tape. And I don't think the world would be different if insider trading would not be a crime. I don't even know if it is a crime in other countries. I actually doubt it is in many other countries. Yeah, I would tend to agree with you, but it's not politically palatable to go backwards in that way. Like I just, I just don't, I just don't think it's, I don't think that the average American really understands how, how the whole financial system works. And you know, that's part of the reason that companies like Real Vision and podcasts like yours exist is because people don't want to know. And there's a subset that do want to know. But they either, I think a lot of people don't have the time. They care tangentially, but they really aren't that interested in it. My argument is the entire financial services industry exists partially because people don't really care. Why else would you outsource the most important thing, your financial future to someone else? It's because either one, you don't have the time, two, you don't have the horsepower or three, you're just not interested in it. And I think it's probably mostly a combination of two and three, or I mean of one and three there, that people don't have the time and they don't have the interest. And I think the amount of people who aren't interested in it is surprisingly high. But I mean, just imagine if they took away insider trading laws, how easy of a populist sort of cry of like, can you believe that they did this in a sort of Occupy Wall Street sort of way? A politician could jump on that, whether it would really have the type of change in the way people are actually conducting themselves. I'm sure things would get a little bit more egregious in the fact that people wouldn't be as big into hiding how they distributed this information. But it would be pretty easy for a politician whose consumer or whose voter base were not the traditional financial markets people to seize on that and use it. And so it would be politically, I think, unpalatable for that sort of thing to take place. Yeah. Well, I mean, a lot of people make that argument that, and that's very specific to this is if insider trading wouldn't be a crime, then we would see less volatility if new news come out. Like the market would be slightly more predictable, but less volatile because the insiders would know first and they would buy, and then the markets would move a little more smooth. So that's just one argument for it. I don't want to get stuck with this. You work with real vision and you interview a ton of really smart people. You see what they think about the financial markets where there's options to make money and also to lose a lot of money. Maybe you can give us an idea of how you got into this whole career for you now into that job and what did you learn from people that you interviewed? What do you feel is their sentiment right now? Do they think the world has gone crazy or has it always been crazy? It's just a little more crazy now. Well, I mean, to go all the way back to sort of how I got into it, I was a real vision subscriber fan before I was an employee here. And it started back when I was in college. I was a physics major. I went into school, was very good at math and science, and I thought I was going to be the next great scientist. And you realize very quickly, I think at least if you're self aware, oftentimes that there are certain things where either one, because you don't love it as much as you thought you did, or two, that you actually don't have the same horsepower as some of these other people. And I tested it into basically the highest level of math that you could. And I was passing, but it wasn't easy. And there was a 15 year old in my class, and in the US, we start college at 18. So I was 18, there was a 15 year old in my class, and he was getting hundreds, and not really paying attention all that much, and I was just kind of, it's like watching somebody dunk a basketball. And you realize, I'm probably not going to play in the NBA when you first see that person do that. It's a whole different level of skill than I will maybe ever have. And I kind of quickly realized I'm probably going to have to do something else with my life. And I found that a lot of the skills I was learning in physics were probably transferable, pretty transferable to finance, economics, those areas. And I wanted to probably do that after school, but I didn't want to give up on my physics degree. I really liked what I was learning there, but I realized I needed to learn something outside of what I was learning in school to be able to make that transition. I was fortunate enough that growing up, my dad worked in finance, and he really taught me a lot. And to this day, he's still just like an incredible resource to be able to call and ask, and there are things that he doesn't know. And he's generally pretty honest with me about what he doesn't know, but it's a huge resource to be able to have that. And I definitely can't say that he was super influential because he actually showed me real vision. So he sent me real vision and said, if you really want to do this, you should start watching these guys. And so I started watching real vision. I got out of school, kind of took a dead end job, and something opened up here at real vision. Actually not on the editorial team, it was more on the business strategy side. I was really interested in how to make the business grow. I thought it was a great business, which I really thought I understood the customer and the potential audience and how I could help make it grow. And I was probably under qualified for that job. And so they ended up not giving me that job, but they liked what I wrote. I wrote a cover letter that they thought was interesting and clever. And my first boss took a shot on me and made me a sort of editorial assistant position. And I was low man on the totem pole, and now almo…

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Julio Maria Muhorro (Tales of Entrepreneurship in Africa) Jun 16, 2021

Show notes

00:00:36 How Julio's entrepreneurial journey started? 00:06:29 How do opportunities for entrepreneurs in Africa stack up currently? 00:13:45 How knowledge based and digital content businesses are faring in coastal African countries. How staggered access to digital innovations delays opportunities outside of the US. 00:20:48 How to find early adopters for your startup? Can you find them in a 'non early adopter market'? 00:24:35 What is the 'correct idea' of a risk-taking entrepreneur? 00:29:01 How will we get to nine billion brains and innovating entrepreneurs in the future? 00:36:34 How will we deal with the enormous amount of 'cultural download'? How difficult is it to identify opportunities? 00:40:14 How do we identify and allocate future revenue streams (that look more like TV/film royalties)? How do we stabilize resource allocation for micro entrepreneurship? 00:45:01 Why the 'platform economy' is a short term 'trap' for most entrepreneurs. But is it a good intermediate stage? 00:54:01 How do we set the right framework and incentive to encourage and foster entrepreneurship (as an example in Mozambique). 01:01:01 Is valuation the only USP of an investor? Are secondary variables more important? 01:04:01 Is negative or positive motivation the 'better motivation' for creating the desire to 'improve the world'? 01:09:10 What are the best countries to invest in in Africa? Do the 'nation states' even matter much? 01:16:15 Is Crowdfunding a solution to the funding problem of African startups? You may watch this episode on Youtube - Julio Maria Muhorro (Tales of Entrepreneurship in Africa). Julio Maria Muhorro is an entrepreneur and business coach based in Mozambique and South Africa. Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Julio, thanks for coming to the Judgment Call podcast. We really appreciate that. Thank you so much for having me. I'm so excited to have this conversation with you, man. Hi, same here, same here. We spoke a couple of months ago, and we were just chatting about that. There were a couple of things we really wanted to talk about, and you are a very successful entrepreneur. You're quite young. You do all this for Mozambique, and now you're in South Africa. Maybe you tell us a little bit about yourself, and what really motivated you to become an entrepreneur so early in your life? Sure. It all started for me when I was just about to graduate for university, and I realized I didn't have a job afterwards, like many people. One of my friends, he was already an entrepreneur doing some transportation business, and he wanted to go into developing short term courses. He had all the entrepreneurial experience, but he knew nothing about academia, per se, or knowledge based businesses, but there was my jam. I was a lecturer at a university to help pay for my scholarship and my fees, and the university I was studying in, and my parents were teachers. Education and knowledge based stuff was really my jam. We joined forces and we started this company out of scratch, two young people, and I remember we really went over what we thought it was right, because I had no experience developing courses. My experience at the time was just delivering courses. I remember I had to Google how to build a session plan for a workshop and stuff like that, but then in three months, we trained almost 600 people in total. For you to think this is like a startup that no one heard of, and the key of our success early in the stage is that we were quite doing a lot of interactions with the market. We did all the research piece, we asked students what they wanted to learn, we kept their contact details, so when we launched the courses, we sent them SMS and all that stuff, and the energy was just cool and vibe. I mean, I was giving teachings and classes like eight hours a day, and I didn't want them to be boring, so I really made sure that it was interactive and fun, and people really appreciated. From that place, back in the days in Mozambique, business mentors, advisors, there was not even words we were used to it. It was at a time in the business where I felt I was making good decisions, but I wasn't making great decisions, and I just didn't know how I could make that leap. It made sense to me to get a job while my co founder was still running the business, and that's what I did. I joined them as a mechanical company called Idea Lab. They are major in supporting entrepreneurs in a more of ecosystem level, so they work with different stakeholders to support entrepreneurs, and they work with entrepreneurs directly with trainings, with events, with advisory, and I joined them to work on marketing, and then because of my background, I became a business advisor and mentor to the startups and a trainer. In two years into that business, they invited me to launch the very first business incubation program in Mozambique, so there for me was huge because I was usually the generation that heard that, well, you should start businesses, you should do stuff, but we just don't know how young people, we just don't know how to do those things, and I was given the chance to be in a place where I could help other young people to follow their dreams, so they were super cool, and in two years, their business grew, and for me, what was growing was this sense that I should be able to do more, like I wanted to do more, I wanted to explore the world, I just didn't know how back again, and it really went home when I was in Bahrain in the Middle East, we were doing a speaking engagement there, the Global Entrepreneurship Congress, which is one of the biggest entrepreneurship events in the world, and after speaking, this bunch of one up guys, they come to me and like, Julio, can you just have like a small talk with you after, you know, the big session, we really want to get deep into some stuff, I went there, we talked with them, and I remember the guy told me like, Julio, now I know what I need to do with my life and my business, like, I have, I'm clear, so clear, deep down, I was just feeling empty, like, I was literally just showing up, I was so depleted, because I knew I wanted to do more, and I wasn't doing it, that it was really starting to, you know, down, way down in my productivity and stuff, so that led me to launch my current business for Knowledge International, where we focus on helping entrepreneurs and executives directly, by offering power coaching, training and speaking engagements, and for the corporates, we offer them knowledge consultancy, so we help them harness the power of knowledge of their people, so they can start growing their business from a place that really feels good to them. There was a very long story, the shortest I could tell you. I mean, this seems that a lot has been going on, and, you know, you have your own venture, you already worked with an incubator, and now you're doing your second venture, so this is also what I think a lot, including me, and a lot of people are interested in that is, you know, Africa is kind of, as a bigger destination, and then Southern Africa, Sub Saharan Africa, is always hailed as this enormous potential, and we, in terms of investment opportunities, and in terms of what knowledge based business models could do for the large population, and I had Daniel Gross on who runs a completely virtual incubator pioneer, and he's had a lot of investments that he did in South Southern Africa, but also including Nigeria, so there's a lot of potential. We sometimes, it's hard to grasp this, right? It's a big population, its connectivity is increasing quite nicely. The last time I was in Mozambique, what was interesting for me was I was in Maputo, and most of the internet connections I could get out of hotels, or coffee shops were really slow, but then I just tapped into LTE, and it was like a hundred ambit everywhere, all over the countryside on our holy smokes, so I didn't see that coming. I was super fast and super cheap, it was like a dollar for a gigabyte. Anyway, so there seems to be a slightly different way that each country obviously goes, and maybe it's a different kind of connectivity. What I'm trying to get to, when you look at the opportunities that you see for entrepreneurs, how does this stack up, and I know you've been awarded one of the most prominent entrepreneurs in Africa a couple of years ago, give us an insight where you feel these opportunities are real, and they may be just made up. For sure. I guess we need to start taking a step back, and just put Africa in a bit more of context for our listeners. So the first thing is that when you look at the world map, you see this huge chunk of land altogether is Africa, and unlike other continents like Europe or America, or North America or South America, even though it's a continent, it's all together, we couldn't be more different, even though we have so many similars. So that's the first point, and each country has slightly different nuances in terms of cultures, and what people value, and what type of business can flourish. But something that I found that's quite different from African markets than we have from any other markets, it's how mobile our money is. I mean, if you look at countries like Zimbabwe, they really don't have yet money anymore, and they just use mobile money. And mobile money, it's not like you transfer yourself on PayPal, it's the money that is associated with your mobile phone. So you can transact using your mobile phone. That's a huge difference from the rest of the world when it comes down to Africa. And the original Bitcoin, right? It came from Kenya, right? Yeah, yeah, from Kenya. First, I forgot the name to be, what is it called, in Kenya. I forgot the name. I forgot, but in Mozambique and Tanzania, it's in PESA right now, and it's owned by Vodacom, or Vodafone in other countries. I think that's the one, the original Bitcoin, or the African PayPal. It is, it literally is. And I guess Molotov foreigners, they sort of get stuck with that, like how is it possible? That's one of the main differences. And the other difference is, in terms of logistics, even though it's our all continent, and you will think that, well, it will be so cheap and easy to travel and, you know, travel only people, but also, you know, merchandise, or stuff, travel around the continent. That's not the case. So there is a lot of opportunities and challenges within logistics per se. But to really go to your point, Africa is literally the land of opportunities. What you really need to do to tap into those opportunities is start looking at them from the lenses of the local people, right? So Africa has this whole story of, you know, being colonized by different European countries, and then people finding their independence back again, and then with globalization, we're trying to sort of like align the rest of the world. It's very important that as someone that comes from outside Africa, or even just a different country within the continent of Africa, that you allow yourself to have the empathy with the locals and understand what they're coming from, and what really matters to them. And they will say it's the main reason why a lot of foreign investors, they fail when they come to Africa, is that they try to replicate, you know, either based on the weather, because the weather in subparts of Mozambique can be compared with California, and they think that the same way people operating in California in the US is going to be the same way they're operating in Mozambique. So no, there are opportunities, but really look at them from the perspective of the locals. Yeah, yeah, absolutely. It's interesting that you mentioned the weather. I think that's when you think about a couple of episodes ago, we talked about impact investing. When you talk about pure agriculture investments, I think those are something, when you think of enabling local farmers, have organic products, those are investment ideas that are very popular. I don't feel they are, they're not easy to pull off, let's put it this way, because of the issues you just described. It's possible, I know there are stories in Malawi, for instance, but it's hard to scale them, so you end up with relatively small farms, and it's a patchwork, and logistics is a huge issue of getting anything out. For instance, I was dreaming to become a nuts farmer in Malawi. I talked to a couple of people in Malawi, and they have those, what is that called, the really high nuts, oh my gosh, I forgot about those. Anyway, so this is another one. It's grown in Hawaii. Macadamia? Macadamia, yeah, sorry, couldn't come up with the name. No worries. So there's a big internal market for macadamia nuts, so there's a bunch of farms over there, it's very fertile grounds, but getting those macadamia nuts, and it's apparently extremely cheap to grow them, compared to anywhere else in the world, but getting those nuts out was incredibly difficult, because even just small quantities like the FedEx or UPS, which are present, it was a logistical nightmare. So sooner or later, you can get them for one fourth of the price that you're waiting for, if you have even small quantities and their high quality. So if something is missing in between, this missing link is something you just look at certain variables, and then, well, I gave up becoming a nuts farmer in Malawi. Maybe this was a good idea, or maybe not. I still love the idea. But you know, there's also something both mentioned. So for those who doesn't know, Malawi is a country that sits almost in the center of Africa, so there's no straight link from any port or shore to Malawi, unless it's the Lake Malawi, and it's a huge lake, but then it's a lake, it's not the sea, you don't have connections to other places in the world. They're making hard for logistic companies to really work on, that's one, and also there is the whole political tension, and I guess the Lake Malawi is a great example. So it's one lake that in Malawi, it's called Lake Malawi, in Mozambique, where I'm from, it's Lake Nyasa, which is the province that the lake sits on, and in Tanzania, it's Lake Tanganyika. So there is a lot of this ownership over different African assets, I'll say, and sometimes it can be hard for all the countries to agree. One of my clients is working to build a railway, they were supposed to connect Malawi, Mozambique, and Tanzania. But even then, we don't have a railway link in the entirety of Mozambique, for instance, in the same country. So yeah, there are challenges in that, but also there are opportunities on how we can be creative in building those bridges and building those links. Yeah. Well, one thing I feel that strikes me as coming with great potential and relatively limited challenges is digital content. So the internet connectivity has gone up quite a bit. The last time I was in Akra in Ghana, I probably hit the fastest internet, I was like 3, 400 mbit in any random location,…

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Alexander Bard (The philosophy of everything) Jun 15, 2021

Show notes

00:00:30 How Alexander and his co-author Jan have managed to produce such an enormous (and prophetic) body of written work over the last 20 years 00:04:43 What Alexander thinks about postmodernism? 00:09:01 What are 'Netocrats'? How is the world changing due to the Internet? Who is ready for the digital future and who is not? 00:14:01 What is the future of (representative) democracy and politics in general? What is a 'sensocracy'? 00:19:30 How should a 'world government' work? How much subsidiarity will it allow? What role will 'charter cities' play? 00:24:15 Will we be able to switch between city state benevolent dictatorships (i.e. will countries/ cities be run like companies) as part of our life? 00:27:01 Why was Jesus Christ actually killed & the surprising utility of 'empires'. 00:30:42 How our future laws are already emerging throughout Internet. 00:34:31 Is competition increasing for companies? Should we react with more collaboration to improve our competitiveness? 00:42:31 What role do Internet platforms play? Do they actually have a monopoly? 00:45:21 Is marketing as a whole evil? How has it changed over the years and how it is connected to 'attentionalism'? We will abolish advertising soon to protect our 'sacred space'? 00:51:01 Why is productivity growth so low? Are we not daring enough? Is the focus on marketing ('useless products') to blame? 00:58:43 Why wars (as terrible as they are) are good measures of productivity and ideology. 00:59:55 After the 'Death of God' and the 'Death of the Individual' how are we now orient ourselves? 01:07:32 Why 'native tribes' don't see a crisis of meaning or depression currently? Why some religions are more static than others. 01:11:23 What is our best bet for a future religion? Is it likely to emerge or will we have to live with many parallel truths? Will we see 'weird activism' instead? 01:18:11 Why the world will look more like India and Singapore soon? 01:24:12 What surprised Alexander the most (compared to his predictions) the within the last 20 years? 01:26:58 What will happen in 2038? Will AGI actually emerge by itself? 01:31:01 Are we (co-)created by an alien intelligence? Is the multiverse theory useful? Should we investigate spacetime more thoroughly? You may watch this episode on Youtube - #96 Alexander Bard (The philosophy of everything). Alexander Bard is a musician, author, lecturer, artist, songwriter, music producer, political activist and philosopher. Alexander is co-author of a number of books incl. Syntheism - Creating God in the Internet Age, The Futurica Trilogy and Digital Libido. Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Torsten Jacobi: Alexander, welcome to The Judgment Call broadcast. Thanks for coming. Really appreciate it. Thanks for taking the time. I know you're busy. Alexander Bard: Well, thank you for having me. Torsten Jacobi: Absolutely. Hey, so you are a 21st century philosopher, and I feel after reading two of your books, you wrote a couple of those over the last decades. I actually read Fruturica Trilogy and The Digital Lividone. I started with Sintiism. I feel they're very, very accessible. It's a philosophy that's relatively easy to read, which is, you know, not easy to find. And I feel like you've seen the future, and now you just write about it. So how did that happen? How did you make yourself so aware of the future? Alexander Bard: Well, I should first of all honor my co writer, Jan Söderkvist. He's very experienced and extremely learned. And we're the same age. We met about a year before we started writing together, but I would say the accessibility in our work, and I'm glad if they're accessible. We do our utmost to make velocities as accessible as it possibly can be without losing any of the quality. We don't compromise on the quality. And I think Jan is the guy who really does a lot of the work in making the text in Swedish and German language as accessible as possible. But we don't compromise on the quality. And these are, of course, this is philosophy. I mean, the philosopher is the guy who tries to observe the world at the furthest possible distance. But if somebody's even further behind the philosopher trying to see the bigger picture, that's the philosopher. So the philosopher is always the guy who tries to look at the world with the biggest possible picture. And of course, then also the biggest time scale. And that's what we try to do as philosopher. And of course, we are humans ourselves and we write to humans. So we are discussing the human condition constantly, but from a very large degree. Torsten Jacobi: Yeah, what I love about your books is that, you know, you go come from really first principles from very abstract principles, but you make really concrete predictions. And that's something that I admire with the records while he goes from very abstract predictions and come or thinking frame of thinking and he goes down to very specific predictions. So it becomes way more accessible. I think this is pretty rare. It's pretty awesome. Alexander Bard: Yeah, our first three books were redistributed or actually relaunched as the Ferturica trilogy. And the term Ferturica actually is a new literary term. It literally means the mixture of philosophy and futurology. And when you think about if you're going to do futurology really deeply, you're also going to discuss things that do not yet exist. Because obviously, there are new things happening constantly in history. And since you have to speculate on that which does not exist yet, you are going philosophical because you're actually philosophical the same day you use a new term to describe something. So philosophers are when they're good, they're really good at just nailing something you have a sense of, but suddenly there's a word for it. And because you have that word, you can start discussing it. I give an example, in our first book, The Net of Crest, we discovered that there wasn't really a term for using resources in a sustainable way over time. So say you're trying to you have a certain resource here, and you don't want to exploit it because if you exploit the resource, you're basically exhausting it. What happens if you actually have in your mindset, you're set that you're going to use a resource, but you're going to refurbish it, you're going to replace it again, it's going to turn back against you can use it all over again. For example, you do that in agriculture, compared to mining and mining, you take the ore out, you take the metal out, and you throw in the garbage cans, where in farming you actually have to renew it because you have to use the same earth the next year. And there wasn't a word for that. So we started using the word exploitation as the opposite explanation. And then it became a standard term in sociology and anthropology. And now it's a widely used term. These kinds of things you want to do as a philosopher, you want to find these new words, where you actually nail something that people have already considered, but there isn't probably a possible term for it yet. And that's what we do as philosophers called the invention of concepts. Torsten Jacobi: Yeah. Well, we often associate, at least in the current time, making up new boards with postmodernists, right? And they are also, that is kind of the prior generation of philosophers, right, the last 30, 40, 50 years. And they have been really interested in the human collaboration and about themes that are inside our human existence that are governing us, but they, we don't really know they're there, right? So they've been criticizing them for the longest time and trying to find out what is actually, why are we here? What are those themes of human interaction that are governing us? But none of us really consciously knows about them. From reading your books, I never really found out what is your thought on postmodernist. Do you think they were spot on or did they were right at that time frame or they are just wrong? Alexander Bard: No, I mean, I mean, you make, you make your priorities and philosophers do too. And yeah, I read Baudrillard and Lyotard, they were great, certainly Derrida, they profound work that I find very useful. But a lot of the so called postmodernists were very obsessed with the symbolic. And this will live in a very medialized world to the media is very, very important to us. They would then go through, for example, history of literature and then describe the work of literature and have a critique on that. And they stayed very much in what's called the Symbolic Order. Now, what I found fascinating though, when I started working in the 1980s, this was like 20 years before I started writing, because you have to think through your philosophy properly first before you write it. And I'm 60 years old, and I debuted when I was 39, but I had a career in music industry before that. But most philosophers should actually have another career first of some kind. And I was an economist and a music producer. Then I became a philosopher because you have nothing to say when you're young. And the young philosophers are right, brilliantly when they're young, they have to regret it the entire life, even Heidegen and Wittgenstein regretted their works of their youth, their entire life. So it's a good thing to do like a monocon, just work hard and then wait and then publish everything in a few years. That's important. My career moves were very smart. But anyway, so what I did in the 1980s and 1990s, when I started exploring the idea, maybe I should be a philosopher after all, was to discover that the two major revolutions in human society in the 10th century, which were cosmology, we suddenly discovered that cosmos was huge, right? And also on the micro level, we discovered of course, philosophers didn't deal with this. A few of them did, of course, and some of them even inspired the quantum physicists and the cosmologists like Alfred Jordan. But the vast majority of philosophers were stuck in big academic institutions, most in France, Germany, the UK, and they were only about going through the texts and going through the hermeneutics of what we're finding in monocon. Whereas our entire worldview is rapidly changing, both in the cosmic level on the microsoft. And at the same time, the new technology came along, what we call the internet today, which is data talk for zeros and ones, and not only were there zeros and ones that could be processed at almost, you know, enormous speeds and make the world more intelligent itself, but also this was happening globally. And now we got the satellites everywhere, we got this one thing, like the world has now become one huge computer. And that's what the internet is. And nobody was writing about it. It's just like, it's just flabbergast, which is like, why aren't philosophers spending time in cosmology, quantum physics and digital, when these are the big new themes of our times, we're actually philosophers should come to be. So I was, I'm kind of, I don't, I'm not part of the postmodernist agenda at all. I found the overcoming of modernism also kind of dated and not too exciting. And I wasn't really interested. I agree with Bruno Latour. He, he wrote a little, a clever little book with a perfect chapter called We Were Never Moderns. And, and in a way, human beings have not changed at all. And over the last 10,000 years, we have not changed. If anything, we become more stupid, but our environment around us has changed. Environment is becoming increasingly technological, increasingly informative. And that's something we have to respond to. That means the human condition is changing. The proper philosophy for the 21st century deals with the time it's asked me to what it means to be human, and then rapidly changing aspect, what it means to be human within a highly technological environment. Torsten Jacobi: Yeah, that's what I love about your books. You, you talk about the netocracy. So the, this emerging change, and it's been a class struggle, a power struggle that comes upon, I think they already see this when we, when you talk about that, is that the intention that goes to only very few accounts in this, in the very active nodes of this social network that we all are plugged into. And I've been criticizing this for a long time, is that, you know, 99.99% of the interaction of the engagement social media go to a very, very tiny amount of accounts. Everything else doesn't really exist out there. Those are the ones with the power, right? Those are the ones that are favored in the next 10 to 20 years. Alexander Bard: Yeah, the telecom companies all sold us the light 30 years ago that the internet will be accessible for everybody, which it is to a certain extent. And then we somehow power will be dispersed equally for everybody. And of course, that was not the case. It wouldn't be the case. We have different types of talents and some people are just very, very sad to witness the media. And it's a lot about being able to network and collaborate. And that's why the old ideas, for example, being an atomic cell, being individual or dying, because that's no longer a functional strategy in the internet world. You have to be incredibly collaborative. And we shouldn't be too impressed with the things we've seen so far, because a lot of the things we've seen so far, for example, the influencers who came along in the 2010s, they will evaporate and disappear in no time at all, because they're actually using old ideas and old ideology, which is to promote myself at all times, very American, always be ready with a sales pitch. But they're actually doing an environment that eventually will kill all of them, because that's not what the internet is about. You have to sort of figure out how does the internet work? And over time, what will pay off? And over time, what will not pay off in this kind of environment? And we wrote the netocrats the first book 21 years ago, we basically said we use both marks and each and we started looking at the internet society and sort of the digital age and how this would be different from previous periods of history. And when we did that, we discovered that it's almost like being in Paris in 1789, knowing that the old paradigm are all out in Versailles having a party. And none of them can read or write or count. They're just old money. They're not even old money. They're just old titles, old entitled, right? And they have a party out there and they think the future is going to be precise. They're all locked up there, 40,000 people. Whereas in Paris, you have hundreds of thousands of people who can read, write, and count, and read tabloids, newspapers every day, and start to read encyclopedias, which are like works of everything that's ever could be imagined from A to Z, you know, the precursors to be completed today. Yeah, that's the story of this information, this knowledge. An…

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Imran Lakha (How to use option strategies to improve your market edge) Jun 09, 2021

Show notes

00:00:38 How Imran found his way from Wall Street to teaching option strategies at Options Insight. 00:09:42 What retail traders should learn before trading options. Why meme stocks options are such a 'rational choice' right now? 00:14:42 Where are the best opportunities for trading options to still have an edge? 00:24:45 What is Imran's view on the delation/inflation scenario? Are commodities a good hedge? 00:29:35 Why does a 'rational investor' buy negative yielding bonds (or very low yielding bonds) at all considering the inflation risk? 00:36:35 Did Softbank successfully manipulate the stock market for mid-tier tech stocks in 2020? 00:43:19 Is there a 'low risk' strategy to buy/sell volatility? 00:48:56 What are excellent, low risk hedging strategies for a portfolio? Can a option based 'hedge' actually make money? 01:03:15 What is the strong relationship between low interest rates and money losing tech companies? 01:08:10 Is there are place for 'value investors' left? Why does the investment world basically just 'bet on more free money' instead? 01:13:14 What is Imran's strategy to use options trading Bitcoin upside/ downside? You may watch this episode on Youtube - #95 Imran Lakha (How to use option strategies to improve your market edge). Imran Lakha has been working with Citibank, Bank of America and Credit Suisse trading options. He now teaches options strategies at Options Insight. Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Torsten Jacobi: Yeah, we love to have you on and we know your specialty is option trading. And do we also know you've been all old, all street, different banks, credit, Swiss, city bank over the years, and you've been doing this for a long time. And I was curious, what attracted you to the financial industry in the first place? And then why did you leave Wall Street at some point? Imran Lakha: Okay, so in terms of what attracted me to Wall Street, I guess, you know, I did mathematics and economics at university. I was the son of an accountant. So my dad was in finance, both my brothers were kind of in finance as well. And so because I was always pretty decent at maps and had those quantitative skills, it was like, what career can I go into and utilize the skills that I have? And, you know, going to London School of Economics set me up to be able to, you know, be attracted by those big banks on Wall Street where, you know, as a 20, 30 year old, you can you can make good money and, you know, you can get some decent security and live a good life, right? That was the kind of goal when I originally started. I was brought up to be very motivated to get myself secure and comfortable in life, right? So, you know, my dad struggled, you know, he moved here. When he was 20 years old, he struggled through various jobs that he would, he was quite skilled, like in terms of knowledge and stuff, but he had to do jobs that were kind of, you know, maybe a little bit basic for him. And he didn't want us to go through the same strife, right? So he, he kind of taught us that, you know, work hard at school, get the skills, get a good job and make set yourself up, basically, right? So it's very Asian, very Asian mentality. But it kind of worked, right? It was, it was certainly worked on a materialistic level, like allowing me to earn enough money to get myself comfortable, you know? Torsten Jacobi: Yeah. Why did you end up, and I know you changed positions for different banks over the years, but I know you took a break a couple of years ago, and then you left Wall Street once out. Imran Lakha: So actually, you know, a lot of that initially was driven by my wife. Yeah. So she, she was really keen on traveling before we had kids. So we were married for about, you know, seven years. We weren't in a rush to have kids, but we were like, you know, if we're going to have kids, she really, really wanted to see the world a bit and travel. And because my career was going pretty well, you know, I hadn't really taken the plunge until then. And, and it just came to a nice point in my career where I was feeling pretty burnt out. I've been doing it for about 10 years. And she really wanted to travel before we had kids. So I was like, you know what, I'm going to put my hand up, take voluntary redundancy, and let's use the money I get to travel the world. So that's what we did before we had kids. It's amazing. Torsten Jacobi: Yeah, it sounds a bit like Jim Rogers, right? He, he took his money, he went on this two year long trip, you know, I think he did two trips around the world, both of them were around two years old. And then he ran his own shop after that, right? So he, he joined the ranks of the legendary investors who run their own shop, the company, the publisher, publishing newsletter, we know this is something that is as a business model, really, really popular right now, the stack exchange. Is that something that you, where you felt like, well, I can either make more money, or this is just fits my lifestyle better? How did you, how did you transition this way out of Wall Street at that point? Imran Lakha: Well, my, my actual transition out of Wall Street happened later. So when I came back from traveling, I wasn't desperate to go back to banking. I was, I was kind of fishing around to see if there were any hedge fund opportunities, didn't manage to find any, and then ended up joining an old boss of mine at Citibank, and actually got back to banking, which was slightly annoying, because I was kind of enjoying not being in it. But it was only later after I had kind of, you know, had my little go on the buy side, you know, satisfied that sort of itch, scratch that itch as it were. And then it was only then that I was okay, now it's time to maybe try something else. And that was the teaching, because I'd always quite enjoyed the idea of teaching and I'd always in, you know, throughout my career at banks, I'd always trained people that came through, and, and that was something that I really liked to do. And I found that I was quite effective at it. So then I was like, okay, so I've got a bunch of knowledge on a subject that's quite niche, and I've got a lot, I've got a big network of contacts that I could probably, you know, turn into clients, you know, ex colleagues or whatever that I might have. So why not give it a go? So that was the night when I created Options Insight. Torsten Jacobi: And Options Insight help us to understand that a little better. It's really about trading options in the market, what's available to the retail investor, or does it go in a different direction? Imran Lakha: No, well, when I first started Options Insight, it was about how, how do I leverage my network, right? So I've got a bunch of old colleagues at banks, some of them are asset managers who are old clients of mine. I've got some brokers who I used to be their clients, all these people who have, I've probably have staff, junior staff who need proper training, and probably don't get proper training, right? So it was actually at the start, it was more of an institutional product and an institutional offering that I was giving, because that was the contacts that I already had, right? And no one, no one in the public sphere, no one in retail knew me, right? So, so it was very much the first couple of years, just leveraging those contacts, building up my content, building up my sort of product suite. And it was only post COVID, really, that I realized that, you know, the people who really need the education and are still out there looking for it, and are more consistently always going to be there, are the retail traders, right? And as the growth in retail trading exploded in the last couple of years, particularly in options, and I was seeing some really basic sort of errors or mistakes that I think, you know, novice option traders kind of make, I was like, these are the people that I need to try and educate, right? So then it was a case of try to build that sort of profile that I'm not just for institutions, even though I've been on Wall Street for 20 years, and those are the people who I know and know me, I'm happy to teach the retail people, because, you know, it doesn't have to be only professionals, you can, you can teach this knowledge to anyone, right? So that was the goal and that was the idea. Torsten Jacobi: Yeah, I feel like they should make your initial course mandatory on Robinhood. I was really surprised, you know, I had a portfolio for, I don't know, 25 years, first eTrade, you know, that was the first online broker a long time ago. Anyway, from the minute I started, but Robinhood, about two years ago, 18 months ago, I was really surprised that the approval to, for option trading used to be a pain, like it was possible, but you needed to file some documents and you need to text something, you needed to validate your ID. I think that's all true with Robinhood too. But I feel like I was instantly approved for options trading, and I couldn't believe it, I could suddenly, I could, I could sell calls, I could buy points, it was amazing. But from, and I think I know what I'm doing, well, we all think that, right? But I do have 20 years of experience with the subject, not in detail. But I was really surprised that Robinhood really opened up options trading to the masses. And I had this suspicion, that might be just me, that most people have no idea what these options actually do, right? Why are they so different, why are they different than the equity that I'm investing in? What is all this game about, why would they decay? That seems to be not really open to the retail investor, at least from what I see in the Robinhood app. Imran Lakha: Yeah, I mean, that's a no brainer. I mean, I actually, the regulators should make it compulsory for platforms that offer the use of leveraged products, like options, to make sure that those, those people using that platform have got a minimum level of education, because you're totally right, you know, people can lose all their money in a week with some of the crazy things that they're doing by buying one week call options on a, on a crazy hot meme stock. I mean, it's insane. Yeah, so yeah, I totally agree. I mean, I think that's the problem. Like, people just, you know, get into fads and trends, right? And the fad and the trend was, okay, what's the next hot stock like Tesla or whatever, that's going to explode? And how can I turn a small amount of money into a large amount of money? And, you know, on these, on these Reddit forums, they all got excited and they all started doing the same trades and it became self fulfilling, I guess to an extent. But yeah, I would love to be able to, and it's not, it's not because I want to necessarily, you know, capitalise on this, right? But I just don't like the idea that these, a large part of a large percentage of these people at some point are going to lose all their cash, right? And if there was a way of preventing that, that would be a good thing, right? Because the idea of all these retail traders losing the 10 or 20 grand that they have to play with is not a nice thought really, right? You know, banks can afford to take it on the chin and lose a few billion here and there, because they'll always get bailed out by the government, right? But the retail guy won't. Torsten Jacobi: Yeah, I found it quite mesmerising when they, when the data that I've seen about raw trade is extremely young, it's most likely male. And they bet a relatively small amount of money, between $500 and $1000. Yeah, I think it's a little bit, you know, we, I've been talking on the podcast a lot about the dearth of opportunities. This generation probably has the highest overhang from the previous generation in that, in, in, in mainstream thinking that is hard for them to, to break out and use new opportunities. Yes, you can drive for Uber, but it's not going to, not going to change your life, right? Do you know there's a level, there's like a glass ceiling, so to speak, as an Uber driver, and it makes cash. And I think from that point of view, I actually feel it's kind of smart what they do. They take this bet that most likely won't go anywhere. But if it pays off, you're going to have a few hundred thousand in your portfolio, just two days later. But worst case scenario, and most likely scenario, your money is gone. And this, this virtual casino, what the odds are certainly probably better than going to Vegas to get, if you're thinking about $200,000 or a million dollars that you want to, want to, want to bring back. I think this is actually a pretty, I almost want to say it's a smart way to make money. I know how crazy it is, right? But if, if you don't have enough opportunities to get to these levels, because most people, you know, under 30, they can never buy a house in San Francisco. I don't, I don't know if it's ever going to change. Imran Lakha: I guess, you know, another way to think about it is they're all buying a lottery ticket, but you can have multiple winners and they can share, share the payout basically, right? And the more, the more people they get to buy the lottery ticket, the more likely they are to get paid out, right? So that's kind of the game that they're playing, which, like I say, it's fine. And it's great when it works. And, you know, I wrote an article, one of, one of the things that I do occasionally is, is write articles about the market and just, just to sort of put my thoughts down on paper and they go on my blog on my website. And I wrote an article about the retail army, because I was loving what was going on with the retail army and how they were, you know, sticking it to the, to the hedge funds and stuff and creating short squeezes and stuff like that. And it's great, but it's great while it works. But then when you, when you get these problems, like, oh, you know, your account just got, your account got frozen because we've got margin issues on our side. And now you can't do anything. You know, had they had the foresight or the knowledge to be able to maybe do some smarter trade implementation, right? Then maybe they could protect themselves against that tail risk. I don't know, right? I don't know for sure. I mean, trade, even if you know how to trade options well, it doesn't mean you're always going to call the market correctly. But it's just, you know, the trade, for example, the trade that I was doing when the GameStop stuff was happening was quite funny. It was in one of the other stocks, BlackBerry. And BlackBerry was kind of following the AMC and the GameStop price action. It was one of the meme stocks as well. And it was, I think it was at like $26, $27, something like that. And I was like, you know, this thing might just keep going. It might do a GameStop, right? So, but the bowl is absolutely on the moon, like the bowl was in the hundreds. Okay. So I sold, I think the stock was at $26, $27. I sold the $15, $10 put sp…

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Erik Lentz (How to build an actual warp drive) Jun 02, 2021

Show notes

00:00:14 The short history of Erik's discovery (and theory) of faster than light speed travel. 00:06:20 How Faster Than Light Speed travel would actually work? 00:16:20 How much energy would be required for a warp drive propulsion? Is there enough energy in the universe to make faster than light speed travel feasible? 00:25:29 Why the 'twin paradox' will be solved with a warp drive? 00:32:47 Did Stargate get the 'warp' drive idea right after all? 00:39:13 Are Black Holes a form of cosmic pollution left over by 'misconnecting warp drives'? 00:44:50 Is time the same for everyone in the universe? 00:50:10 What compels us to be pioneers? 00:53:05 Do we live in a simulation? 01:03:43 What are other 'faster than light' phenomena in the universe? 01:14:34 How does 'dark energy/ dark matter' work? What do we know about it? 01:25:10 Are there more dimensions than the four we can easily interact with? Does time exist without a conscious observer? You may watch this episode on Youtube - #94 Erik Lentz (How to build an actual warp drive). Apologies for the sound quality during the first few minutes - it gets much better after the initial five minutes! Erik Lentz is a Ph.D. physicist and focuses on the theoretical, computational, and experimental aspects of searching for dark matter as well as faster than light travel. Big Thanks to our Sponsors! ExpressVPN – Claim back your Internet privacy for less than $10 a month! Mighty Travels Premium – incredible airfare and hotel deals – so everyone can afford to fly Business Class and book 5 Star Hotels! Sign up for free! Divvy – get business credit without a personal guarantee and 21st century spend management plus earn 7x rewards on restaurants & more. Get started for free! Brex – get a business account, a credit card, spend management & convertible rewards for every dollar you spend. Plus now earn $250 just for signing up (Terms & Conditions apply). Torsten Jacobi: Eric, thank you so much for coming on the podcast. I really appreciate it. Thanks for taking the time. Erik Lentz: Oh, thank you for inviting me. Hey, absolutely. Torsten Jacobi: Eric, you changed the world recently and you gave us faster than lights if you travel, at least theoretically, right? You published a paper recently where you outlined the options, how we can achieve that. And it's been so long and I had many people here on the podcast who were very, very convinced that this barrier can never be broken. So I'm really curious about your thoughts and maybe you can help us a little bit more, how you came up with this, what did you do before and what makes you so confident that this could actually be a possibility? Erik Lentz: I mean, I've been interested in this field for decades. I think a lot of people who get into STEM as a profession, we're all fans of science fiction in one form or another as children. And for me, it was definitely Star Trek. And I was really fascinated by the whole world that was set up by all the series and movies and whatnot. And I really resonated with the technology that seemed to facilitate all these things. And one that really stood out to me, that was really the physical link between the interstellar community possible was the warp drive. Otherwise, you'd be spending tens of thousands of years just trying to communicate across this vast network of civilizations. And so this seemed to be a really key point. And as it became older, it became obvious to me that someone would have to invent such a thing. And so it's been a fascination to see if something like one of these plot devices like the warp drive technology would actually be possible in the real world. And it took some time in order to build the technical acumen in order to be able to pursue that. But the desire was always there. And so what happened that, say, 2021 or really 2020 became the year that this paper came out for me is that I found the time to actually really delve into the topic. And we can, I guess, thank the pandemic for that because I found myself sitting at home with a lot of free time on my hands trying to find a way to fend off cabin fever and this project that I really wanted to do. And so I built into the literature to see what the status of people who had passed had been because, as your listeners may know, there is some existing literature on the concept of warp drive. You could say it kind of started seriously with Al Cubietti in 1994 when he was still a graduate student. He made this Al Cubietti drive this first example of a mechanism that could transport observers like you or me, people who move primarily through time rather than space, find a way that they could move effectively through this manifold of space time effective papers in the decades since then. And like you said, the literature seemed to indicate that this was while you could create such imaginary geometries, they were not really feasible because they had all sorts of problems, namely having to do with what sort of matter and energy would be needed to force them. And so this was something that was still problem in the literature when I looked back into the spring of last year. And I wanted to see if there were any loopholes, if there were any stones left unturned in all of the possible solutions to Einstein's relativity. That would allow for both a mechanism that could transport things at arbitrary speed, including faster than the speed of light as well as – that not necessarily need these exotic sources of energy and matter. And so the process that I undertook to do that was essentially just start to delve in the different types of geometries that would provide these properties that I would use that I would use that I would use that I wanted and constrain down, come up with a set of rules that would narrow down that set of solutions and these other constraints like positive energy and other things. And eventually, I found this vision set of rules that I could construct via a computer simulation how one of these geometries would take the example of one of these geometries and that's what you saw in the paper last year and what's been circulated in the past few months in the media. So this is all very exciting. I don't know if I'd say I've completely changed the world yet because there are still a lot of challenges ahead to this sort of research, but it is very exciting. Torsten Jacobi: That sounds fascinating, Eric. When you published this paper and it's been a couple months since then, when you would have to explain your theory to a 13 year old, how would that work? Maybe we can be in that same position. How can we actually get to that point where we can travel faster than the speed of light? What is necessary and what effect are we taking advantage of? Erik Lentz: Well, we're taking effect of the advantage that unlike special relativity, special relativity is usually what we appeal to when we think of nothing can move faster than the speed of light. That's relativity. That's actually not quite true in the context of special relativity and the principle of special relativity says that two objects cannot move relative to each other at a single point faster than the speed of light. So this is a very local statement when we bring it into the context of general relativity. So because moving from special relativity where we're all moving on this flat background space time and Kosti space time, and we make that space time in the context of general relativity dynamic and reactive to the matter and energy that lay on it, there are a few tricks that we can take advantage of. Namely that if we separate bodies, there's now no longer a principle that says that the bodies cannot move away from each other or towards each other, being at two different points effectively faster than the speed of light. In fact, we see a phenomenon like this, we believe, in our own universe, namely this acceleration quantity, the fact that galaxies very far away from us appear to not just be moving away from us, but accelerating away from us. This is a phenomenon called inflation. There's also a period that we believe in the early universe where a much more violent form of inflation happened where objects moved away from each other at a rate that increased exponentially with time. And as it becomes further. Torsten Jacobi: Some of those outer galaxies and planets, from what I remember, they move away faster than speed of light. So we can never catch up, never see that galaxy. Erik Lentz: Precisely, precisely. And by virtue of them being further apart and this acceleration mounting with that increasing separation, eventually they start moving away from you faster than the speed of light and they fall out of what's called causal contact. It means that you can't communicate with them anymore via something like a light beam. And they fall behind what we refer to as a horizon, an event horizon, of a different type than say you'd find around a black hole, but similar in effect that you can no longer communicate between these two bodies. And we're essentially doing something similar with the warp drive. We're taking advantage of something that kind of looks like inflation, a much more complicated form of inflation because it doesn't necessarily just inflate. It also contracts. And use this to our advantage in order to effectively make some motive device that propels us through this space time. The alkybietic metric is maybe the most intuitive form of this concept in that when you calculate what's called the extrinsic curvature, it's the form of curvature. It essentially tells you how space is being curved in the presence of the higher dimensional space plus time manifold. But what it tells you is for the alkybietic metric, you have this nice picture of what almost looks like a wave. And this is what is propagated in the media very often, that you have some flat region in the center of this warp bubble. Also can be referred to as a soliton because it's nice and compact in size. And in this center flat region is where you'd put a ship or some such thing. In front, on the leading edge of the bubble in the direction of travel, you have this dip in the graph that's most often circulated. And this tells you that we have a relative contraction of this extrinsic curvature. It's kind of telling you that the space is being compressed in front of the bubble. And behind, we have this peak in the extrinsic curvature which is telling us that the space behind is relatively expanded. Now, the combination of these things kind of gives us an intuitive feel that we are kind of making the distance to our destination shorter and the distance from our origin point longer. This is not entirely accurate because this region of locally contracting expanded space does not extend all the way to the destination or from the origin. But it does give us a nice intuitive feel for that you're essentially dragging yourself along by pulling yourself by contracting space in front of you and renormalizing it behind you by expanding it. Now, other solutions are a bit more complicated in that and the interpretation becomes a little less clear. But most of these solutions do have similar, all of the solutions have curvature of one form or another. The particular type of curvature that's put in this plot of this nice acubiety drive wave shape, most of them are nonzero but not all of them. There is one example, one well known example called the Natadio drive where that particular form of the curvature is zero everywhere. Torsten Jacobi: Yeah, well, I know that was mentioned in what I read about the white paper. It would reduce the speed of travel, say to the next star system, to a few years or a few dozen years instead of, I think, a current propulsion systems that we have would be a few hundred years, a few thousand years, right? Erik Lentz: Well, current chemical rockets, they're limited by their exhaust velocity and how much fuel you can carry, which the limit is, the entire vessel is made of fuel. And at that limit, you are essentially, I believe, limited to about twice the exhaust velocity, instantaneous exhaust velocity. So with current chemical rockets, we're talking about some tens of kilometers per second, which translates to tens of thousands of years to get to Proxima Centauri, which is a bit excessive. There are somewhat fewer terms. Torsten Jacobi: There was recently a story about that. I think it was three generations, right? I don't know if you watched that movie. What do you think? They had children. They basically had children that were born in a traveling rocket, so to speak. And they were primed and raised by themselves and no parents around. There was one parent around, but he kind of dies early. And then the idea is that they will, their grandchildren will actually be at the same age when they reach their destination. It's only about 100 years, right? That's not super long. And then the whole ship kind of falls apart until then there's a lot of struggle, and eventually they make it. So it's a good movie, though, it's well done. Erik Lentz: But I believe the rocket probably used in that movie was a nuclear rocket because their exhaust velocity is much, much higher. The energy levels able to be utilized from nuclear fuel, whether it's fission, fusion's obviously much better. The utilization percentage is much higher. But I believe, yeah, there have been some studies to say that, say, with a nuclear fusion rocket, it may be possible to make the trip to speed one ship up to some tens of percent of the speed of light. Of course, that would take some time. And so the journey would take maybe a generation or two. Torsten Jacobi: Yeah. Freeman Dyson worked on the Orion spacecraft. He was one of the co conspirators. Right. And they had supposed to have micro explosions, nuclear explosions, and that would propel them if they were controllable. Also, depending on how much material they take with them, unless they go close to a star and refuel, I don't know, that's so feasible. But at least it sounds faster, it sounds more and more sustainable. But it never, because of the nuclear arms treaty, it never went into any testing from what we know. Maybe it's hidden from us, that part of history. Erik Lentz: Perhaps I knew though that there were some tests of fission rocket systems, I believe, all the way up into the early 70s. But those were also discontinued. There are some, I guess, small collections of engineers and physicists who would like to resume those tests. Just because the specific propulsion of those engines is much higher than chemical rockets. But I don't know what the status of that is. Torsten Jacobi: Yeah. Well, there's people who say we have these bases on Mars. In the movie, we communicate with the aliens there. And that's where we build all the rockets, on the dark side of Mars, right? Well, maybe that's a little bit too much of a conspiracy. Going back to what you came up with, it generally seems so with the precedent that lights we traveled initially, it all sounds relatively easy until we realized, whoa, the amount of energy that's required. And often, that seems to be bigger than the sun. And that's where the discussion ends, because we don't know how to harvest even a portion of the sun properly, the solar cells here. But we are really far away from harvesting the full sun power. Fremant dice was working on something similar. How does that work with your theory that you are suggesting? Erik Lentz: Well, my theory is, I guess, also impractical from a total magnitude of energy viewpoint. The previous studies, previous warp drive studies, required, y…

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