Adam Robinson - A Unique Mind
Album art photo taken by Mike Ando.
Thank you to Mathew Passy for the podcast production. You can find Mathew at @MathewPassy on Twitter or at thepodcastconsultant.com
Please leave us a rating in your favorite app store!
[Business Brew theme]
Bill: I'm super happy to be joined by Adam Robinson today. Adam, I have wanted to talk to you since the interview that I heard with you at the Y with Tim Ferriss and Josh Waitzkin. It's been a long time of listening to you. I really appreciate you saying yes to coming on the show. So, thank you very much.
Adam: You're so welcome. I'm looking forward to it.
Bill: This is an investment-focused show. I hope that we can go into other areas. I'll do my own version of Tim Ferriss’ conversational parkour, if you're if you're up for it.
Adam: Yes.
Bill: I wanted to start out with your thoughts of looking in areas that make no sense, and areas that have been blatantly obvious. That was something that when you said that line, and then you broke it down with Tim, there aren't that many things that I hear that just reframe how I look at the world, and that really was one of those things. Do you mind doing just a little bit of background on it? If people want to get really deep on it, they can listen to your podcast with Tim. But I'd love to hear you riff on it a little bit, and then see if some of your thoughts have evolved or where you're seeing that right now, and just hear how you're thinking through that.
Adam: Sure. We all attempt to make sense of the world. Most of the time, the world does make sense to us in investing. Any investment we make, it makes sense to us in our heads. We have a model, we have some assumptions, we have things we expect to happen. Then, when they don't happen, when things act counter to our expectations, the standard responses, “Huh, that doesn't make any sense.” You'll hear it internally, it'd be your self-talk, you go, “Huh. I don't understand. I shorted that stock and it keeps going up. It doesn't make any sense.” You'll never hear someone on the winning side of a trade going, “It doesn't make any sense, but I'm making a ton of money. Yay.” It's always someone on the sideline, or on the wrong side of a trade.
Sometimes, the way they'll say it is, they'll say, “After all, how much higher can interest rates go?” In other words, interest rates going high is to them not making any sense. The key thing is, either people stay embedded in their position, or they stay on the sidelines, because it's not making any sense to them. What I said with Tim was that, “When something doesn't make sense, really it's your worldview that's out of line with what you're seeing.” On November 6, 2019, which isn't that long ago, but it seems like forever ago, Ray Dalio, this is pre-COVID, remember, he wrote a blog piece entitled, The World Has Gone Mad and the System Is Broken. Which is to say the world has gone mad, doesn't make any sense. You’ve got two choices when something doesn't make sense, and I'm talking now about an investment trend. Either step aside, or get on board it. Don't fight it. Don't be on the opposite side of something that doesn't make sense.
Whenever something doesn't make sense, you have two huge edges. The first is, everybody else is on the sidelines going, “Ah, this doesn't make any sense.” They're fighting it also. I know that when somebody says it doesn't make sense, they may not use those exact same words. When I say someone, a pundit on CNBC, or heck, a Fed chair, they go, “Huh, we don't understand what's going on.” Then, you've got a really powerful trend in place, and that trend has a long way to go until it does make sense to all the people on the sidelines. At that point, the trend may very well be over. By the time it makes sense to everybody, the opportunity largely will have gone.
One of the hardest things in investing, is seeing clearly, just seeing clearly, because we fight, we have confirmation bias. We pick what we think is a good stock or we make a good investment. Again, when we make that decision to buy or to short, whatever it is, it made sense to us when we put it on. You really need to fight confirmation bias. That's such a powerful narcotic. It just totally blinds you to what's actually going on.
This is to segue to another-- we're not off this topic yet, but to introduce another one because I've introduced confirmation bias, which is probably one of the strongest things deviling investors at the very highest level. Munger and Buffett have talked a lot about this. Those are two of the smartest dudes in the world, genius IQs, and they go, “We have to fight real hard to think straight about things.” It's very, very hard, especially when money is involved. The world is complex enough, but when you're talking money, then all of a sudden, your emotions kick in. What you want to do is create anti-confirmation bias. As soon as you put on a trade, you have to at that time, if not before, know precisely what I need to see to tell me, “Uh-uh, I'm out.” Then, all you're looking for is signs of that. I'm just looking for signs that something's gone wrong with the trade. Otherwise, the trade is fine. I'm not going to look for more evidence that I'm right, which is what people do. You have to actively seek anti-confirmation bias.
So, when I make a recommendation to my clients or for myself, I know exactly what I need to see precisely to tell me we're out of the trade, or we're on the other side of it, we're going to reverse and take the other side of it.
Bill: How long are you advising on a trading? Are you short term, mid term, long term just to get a sense of like, what you're looking for, and how frequently you’d update your priors on that process?
Adam: It's really good. It's very hard in the world to get even a multi-month thesis, but sometimes you can lock on to a multiyear. Until last March 20th, I had my clients and trades had them in for six, seven, eight years. When I said my clients, the hedge fund guys, that just motored on. You start with as long a perspective as you can. Now, by the way, I do that because that's the nature of the way I think best, and that's the way my clients invest. You get a long-term trend, and then you might trade tactically around it. But-- this is introducing another thing we'll have to dissect. Buffett and Munger talked a lot about circle of competence. Even all the greats know their edge.
I say greats whether in investing or sports or chess or whatever it is, you’ve got to know really what's your edge. What situations do I do well in? It may be that someone is just a super great day trader. That's just their thing. I don't want to think about the long-term. When I get into a trade, if I lasted a day or two, I'm thrilled. You need to know where your edge is, and what kinds of situations you are optimal in. That's really key, and not to deviate from that. I can get micro. In forex trades, I can look at intraday stuff, but I tend not to. It's more the larger.
Here's a way to think about it, the long term is the climate, and the short term is like the weather. We've got a cold spell. It's a summertime but it's unseasonably cold right now, or whatever. We got a long-term uptrend, but we're going to have a multi week correction here to the downside. It really depends on the investment horizons of whichever person listening in on this, and what's your investment horizon, you really need to anchor on that, and not to deviate too much from that. If you're a medium-term player, then play the medium term. If it's a day trader, play that. Be careful about switching your timeframes. Really throw off your game.
Bill: That's funny that you say that. I was just commenting today that I think that I was reasonably correct on Wells. When I say “think,” if I looked at what I wrote and why I wrote what I wrote, I think that the thesis from when I wrote it is correct. I kneecapped myself because I got a little bit cute with a tax issue. Today, I said this is basically like an asset-liability mismatch, because I had a medium-term thesis, and I got cute with it in a 30-day period, and then the vaccine news comes out, and then it's higher, and then the risk reward doesn't feel as good. I was in positions that I thought were slightly better. It's interesting that you say that, because that's exactly what I was thinking about today, is how I mismatched the original underwriting timeframe with the decision in the middle of the timeframe and how that cost me.
Adam: Yeah. It's really so hard to think straight in investing. I think it's the hardest domain actually because you're up against the most incentivized, savviest players in the world, who are all devoting a lot of brainpower to thinking through these things. Then, you got to look for an edge within that. Then, you got to deal with your own emotions. It's very easy to second guess yourself, like, “Was I wrong?” Really, the important thing is to have a thesis and calibrate your risk properly. What's your conviction level? You hear people say, “I'm bullish.” Well, how bullish? What's your conviction level? To really be nuanced about that, your conviction level. My conviction level, at the highest, its highest conviction, which means my clients chop my head off if I'm wrong, just doesn't get any better than this, down to leaning high conviction or medium high. It's very nuanced until I wait for things to really line up, and then we go, “Oh, we're highest conviction.” To stay away from trades that you're like, “Eh.” There, it's very important to know your conviction level.
Bill: I think that one other thing that is difficult in investing and thinking clearly is, March 2020 comes and you have to be level headed enough to see through the carnage. To see prices confirming fear, but the job of the investor at that time is to think not what is 6 months in front of me, it's what 18 months to 36 months in front of me. To remain calm in the face of that kind of panic, because that kind of panic is where the opportunity actually lies. To be able to act when that loss aversion and all the negative emotions are being confirmed by prices, that was wild to live through. It was one of the things that I'm glad that I had read enough about thinking long, and how the market discounts 18 months forward, even though in that moment, it was looking day to day. I heard a lot of people when the market started to go up, to your point, on things that make no sense. The conversation with a lot of people was it doesn't make sense that the market’s going up, because we shut down the economy, and how could that have been the bottom? Then, I think that what also gets convoluted in the brain is, well, I don't agree with these bailouts. Then, it's almost like putting political thoughts aside and assessing what is actually happening, not what I wish was happening.
Adam: Okay, so let me address both those points. You’ve got to be careful with the long term because-- it was John Maynard Keynes who said, “The market can stay irrational a lot longer than you can stay solvent.” If you're dealing with a 50% drawdown, “Oh, but that's okay, because I'm looking out two or three years.” Uh, I don't think you're thinking two or three years when you've lost half your money on a trade. There's that. The bear markets usually, they end with selling climaxes like that. They end with a parabolic selloff. They don't start with that. That was one thing. To your point, and then I want to get to about the political point, which is an important one, people are saying, “Oh, yeah, this pandemic’s going to shut down the economy. Stocks and the GDP is going to have awful [unintelligible [00:14:28] for the next year, whatever, going forward.”
I'm going to introduce the notion of first order thinking and second order thinking. First order thinking is just like it sounds, the immediate, what would everyone think. Just pandemic, bad. Economy going to shut down, bad, but now you got to go beyond. Most people stop right there. That's the end of their analysis. First of all, that's not a novel insight. Everybody knows that. If everybody knows that, and now all of a sudden, stocks are surging higher, what is it that they know that you haven't thought of? Again, that makes no sense. That's where you'd really want to get on board. There's that. I'm reminded back on August 5th, 2011, Standard & Poor's downgraded US government debt for the first time since World War II. That was a big deal. August 5th, 2011. They downgraded US debt. They said, “US government, less creditworthy. We're downgrading the debt.” Now, the first order thinking would be, “Oh, well, you should sell bonds then, sell them.” I tell my clients, “No, buy them.” Like hand over fist. I said, “They said, “Ah, makes no sense.” I said, “Yeah, but just think through.” The second order thinking is, if things are so bad in the world, that US bonds are getting downgraded, it's really bad. If things are really bad in the world, what's the safest investment? US bonds.
Bill: US government bonds. That’s pretty smart.
Adam: You end up buying them. They were downgraded, but it was a buying opportunity. Again, that was a second order and then, third order thinking and such. You hear so many people, they go-- it's really they limit themselves to first order thinking. People are going to stay home, they're not going to be going on as much, so they watch more Netflix, so buy Netflix. That's really first order thinking. I'm not saying Netflix wasn't to buy, remember, you and I are not making investment advice. I'm just--
Bill: That's correct, yes.
Adam: How to think through this. If you're going to make an investment decision based on a thesis like that, you’ve got to go to second order thinking. For example, in that case, people are staying home, they're going to be watching more TV, streaming, whatever. Therefore, Netflix should go up. If I saw Netflix starts selling down with that, that would make no sense. I'd have to go, “Oh, what's going on here?” Remember, you're up against-- I said this when I was with Tim, I said, investing, it's like mixed martial arts. It's the gladiatorial pit. Good luck. You're getting in with a bunch of people who are going to eat your lunch. It's not like you and you're going to make your investment decision. Isn't that sweet? If things go up, you're going to ride along. Well, there's someone else who's on the other side of the trade. It reminds me of Buffett's great saying, “If you're in a poker game for 30 minutes, and you don't know who the patsy is, you are the patsy.” If you don't know what your edges, you're getting taken. You can be lucky, any number of people can be lucky, but over the long haul, you're not going to last on luck alone, just really not.
Bill: One of the squares that I have not been able to circle or circle that I haven't been able to square, whatever I'm supposed to do with those two shapes, is your comment on second order thinking. I accept that as certainly correct. I accept that as factual. However, it has seemed as though over the past 12 months or-- I guess we're at March now that first order thinking has far exceeded second order thinking in a lot of aspects. I guess that what I'm talking about is almost-- I had a reasonably good year last year, and I'm really proud of how I had it. I've had a good-- for myself coming from where I came from, I'm self-taught the five years that I've been doing this, I would put my record up against a lot of self-taught people and some pros. I've been outperformed by all of my wife's friends, they bought Teladoc, and anything that was a stay-at-home education service and all that. They don't know anything about valuation, they don't know anything about what most of the businesses do. Their thought was everybody’s stuck at home, buy Teladoc company, and that has been something that has really been stuck in my side. I would say it doesn't make sense, but I know that my model of the world just doesn't make sense. It's frustrating to me.
Adam: Okay, so good point. Let me resolve that. They were taking risks but they didn't know they were taking them. In the same way that if a professional racecar driver challenges a teenager to a race through residential streets, I bet you the teenager is going to win because the teenager is just going to floor it. The racecar driver is going to be like knowing all the risks and knowing, “Oh, I’ve got to watch out for strollers and five-year-olds running into the street.” That's true, by the way, over the last decade, a lot of amazingly talented, brilliant hedge fund dudes have underperformed the market because they're seeing risks and they're going, “Oh, okay,” calibrate around that. Whereas, if you're not concerned with risk, you expose yourself and as long as the sky doesn't fall, you did okay. Teenager driving at breakneck speeds, it's fine till he gets into an accident, then it's not so good. That's one thing, that you were calibrating around risks that other people were blind to, so they look like geniuses because the market kept going up. It's the long haul, not any given six-month stretch.
Bill: Yeah, I think some of that is definitely correct. I guess that the part that I still can't quite get my head around is, I guess I-- fundamentally what I missed is, I missed how much sense it would make the tech, a lot of the demand would get pulled forward, and this would fundamentally change the world. I think if I had to lay some blame at myself, that’s probably some of it.
Adam: Wait. Hold on. I'm not sure what you mean by that? What do you mean?
Bill: I guess that there was-- [crosstalk]
Adam: [crosstalk] -forward. I don't know what you're talking.
Bill: I guess that I would say that over time, there was a perceived-- I think, amongst some tech investors, a perceived inevitability that software and some of these services would eat the world over time, and that 2020 forced companies and people to make decisions that otherwise maybe would have taken six years got put into one year, and that has created like a step function change in valuation because it accelerated the adoption curve. Probably, I didn't see that early enough, that would be what I would fault myself for.
Adam: Nobody sees everything. There are lots of things that you're not going to see. We're always blindsided by this or that. The key thing is, again, to stay in your sandbox, to know what your sandbox is, and you do really well, your circle of competence. I know I'm mixing metaphors here, but to know what you do really well, develop a thesis, and there are lots of things that the guy don't even think about because I got my head occupied enough with dealing with the big macro trends, like interest rates, where interest rate is going to be, not people going to adopt this new technology or not. That's because I've circumscribed my circle of competence. I know exactly what I need to think about. then that's all I think about. It was Mark Twain who said, “Put all your eggs in one basket and watch that basket.” That's really-- just limit your thinking to a few things, otherwise, you're not-- by the way, kudos to you, five-year apprenticeship and now you're probably like a master. You get there.
Bill: I don't know about that, but I had good teachers. I pray to the altar of Buffett and Munger.
Adam: Yes, we[?] all.
Bill: That has been helpful. I named my third child after Warren.
Adam: Oh, yeah?
Bill: Yeah. I hope that he-- [crosstalk]
Adam: [crosstalk] [unintelligible [00:23:42] - is value?
Bill: [chuckles] No, he's Warren.
Adam: Oh, okay.
Bill: I did it because I really respect that-- I mean, I don't know why they're those men, but my perception of both of them is that they've gone about their life the right way. I haven't tried to demand that my son goes down the path that they went down. But I do want that name to mean to him that he should walk to his own drum and I do really hope that-- he probably would have been named after Charlie, no disrespect to Warren, but my wife preferred Warren and I didn't really care which one I got. I want him to feel like he should think for himself and know what he's good at and be comfortable in his own skin, whatever that means, despite what people may say about it.
Adam: There's a word that crops up in pretty much any interview of Buffett for the last 30, 40 years, it doesn't matter. The word is ‘fun.’ He has a blast doing what he does. If he were in a drumming, he would have devoted himself to drumming, he just has a blast. For him, a blast is finding undervalued stocks. I don't want to say undervalued stocks, undervalued companies because he's an acquirer of companies. When he buys a company, he intends to hold it forever. If you get a good company, why would you want to let it go? Unless something material changes. You realize, “Oh, I was wrong on that.” Okay. Acknowledge mistake, move on. They have a very disciplined-- everything they do is disciplined. That's true, by the way, no matter what the domain to reach it to the top, you have a very disciplined process and you don't deviate ever. Hmm, oh, there's that movie, they're making a sequel to it, or it's getting released, Top Gun.
Bill: Yeah.
Adam: Right. Maverick, his whole thing was, “I'm so great. I don't have to follow any rules.” Remember that, and he was always no pun intended, flying by the seat of his pants. Only at the end of the movie, when it looked like if there was ever a time when you should deviate from not following your wingman, he goes, “I'm not leaving my wingman.” Discipline in process, it's so important. Since this is in investing, really crucial with investing, for example, the discipline of acknowledging a mistake, taking your loss, moving on. By the way, one thing to reframe around because people get stuck with their trade, they go, “Ah, I don't want to sell because I'd be selling at a loss.” Think opportunity cost. When you got that money tied up in that losing trade, look at the rest of the market, look at all your other trades. They're doing great and you've got 10% of your capital tied up in this loser. Why are you doing that for? Opportunity cost is a really good frame to break free of when you get overly attached to a position. You’ve got to be ruthless.
Bill: I'm going to parkour with you real quick. You bringing up Top Gun, I know that you have an affinity for The Karate Kid. Is that because of discipline?
Adam: Well, so The Karate Kid, if you think about it, for many reasons.
Bill: Yeah, I tested out your course. I have a sense of how many lessons you've taken from it.
Adam: Karate Kid is-- notice that to become California State Champion in karate, he had four moves. Wax on, wax off. Paint the fence. Sand the floor. Side to side. And then, the crane kicky move, five. Boom, you just worked that to death. It segues into my what I talked about with Tim about all the greats, they have a hammer. They just look around for like, “Oh, bam, I found another nail.” That's really their genius is just doing that and doing it ruthlessly. Again, knowing what you do best, then-- the Hulk be very bad at gymnastics.
Bill: [laughs]
Adam: That's outside his circle of competence. Crush.
[laughter]
Adam: Okay, wrestling, he’d probably do pretty well, or shotput. By the way, a lot of people don't realize how fast powerlifters are. In a 40-yard sprint, a powerlifter can probably keep pace with Usain Bolt, like over 40 yards. Kaboom, because they're explosive dealing with-- Anyway, Karate Kid, yeah. You don't need mastery of everything, you just need a couple of edges, even one edge, and just play that to death.
Bill: I forget how you set it to Tim. I think you said something to the effect of, “People think that the geniuses look for hammers, but what they really do is they know the hammer that they have and they just look for nails.” They're looking for a specific nail.
Adam: That’s it. [crosstalk] “I know I'm really good at this. Okay, let's find out-- I'm going to just apply that.” By the way, they develop the hammer. It's not any old hammer. It's like Thor's hammer, don't mess with them. It would be stupid for someone to go up against Buffett in the value space. No, but you could probably out day trade them and he’d be happy. “God bless, go for it, kid.” To really know your strengths and your weaknesses, just to do that, stick to that. Again, that takes discipline. It takes real discipline. It's very easy. You go, “Oh, okay, I'm going to be disciplined of this opportunity to Adam. Oh, it's too sweet. I can't let it go.” Buffett and Munger have let go any number of things. This will blow your mind. Buffett and Munger have never used leverage in their acquisitions. They don't. They grew up in the Depression. It's very rigorous. You remember rule number one for Buffett, never lose money. Rule number two, don't forget rule number one. Leverages just increases the odds they're going to lose some money.
Anyway, get this, Munger said, “One day I sat down back of the envelope and calculated what we would have made if we had just applied like little ordinary leverage. We'd be worth 5x what we are today.” They did it right. It's easy to say that in retrospect, but they stuck to their discipline. That's so key. Just think, Maverick in Top Gun, get your rules, stick with that, don't deviate. As long as you're sure the system is, and your processes is viable. If you've got a system and it never seems to work, well, if something's wrong with your system, you're going to have to adjust.
Bill: Yeah, that's something else that you said. I like that a lot. If you don't like the results you're getting, change what you're doing. Don't continue to do what you're doing expecting a different result if the world isn’t giving you the results.
Adam: Yeah. It sounds so self-evident, but we double down, we try harder. “Ah, I'm not doing it hard enough.” No, change what you're doing. Again, it's easier said than done, but you can change any number of things. Like, maybe I should switch from day trading to position trading, and maybe this is not working out for me. As you well know, one of the-- this is a world class ice skater, Lilah Fear, she had a podcast, she brought up a really interesting apparent dichotomy. She said, “Adam, you've said, and I agree, that you can either play to win or play not to lose. My way is to play to win, but you’ve got to be careful.” I talked, for example, about Bobby Fischer, as you know, one of my mentors back in the day, and he would just always play to win. He would not be-- dead draw, he's going to play till the last, he is going to find a way to win, beat you somehow versus playing not to lose. Now Buffett plays not to lose. Remember, never lose money. She said, “How do you reconcile that?” I tried to think about that for a second. I said, “Ah,” and it's a key point, is that when Fischer loses a chess game, or did back in the day, or a chess player loses a chess game, that's okay. In the next game, you’ve still got the same brain. In fact, now you're a little smarter. I learned from that loss. When you make a mistake with an investment, your capital base is now lower. You don't have as much to trade, you're smarter and poorer. Your capital base just dropped 10%, you're smarter, but going into the next trade, “Oh, man, I have less capital to work with.”
That's why it's so important in investing, that's why Buffett's rule is, only one, “Don't lose money.” That sounds obvious. Like, “Well, duh. No one's trying to lose money,” but they don't trade like that. If your sole goal is not to lose money, it forces you to do certain things, have disciplined processes and systems. Again, you always want to systematize things. You want to have a disciplined system about everything you do, and just apply that ruthlessly. Because as soon as you start to lose money, well, that's a big problem. That's the resolution, is that in the field of investing, when you lose, when you lose, you have less to go forward with. That's a real disadvantage. Sprinter loses a race, okay. Tomorrow, you’re still the same sprinter. You’ve still got your same speed. All that’s the same, but now you're a little while. Maybe work on your starting technique or whatever it is. Investor, oh, that's a big problem, because now you're going forward with less capital.
Bill: Yeah. I think that's particularly acute with Buffett because his strategy involves taking concentrated bets. I've done a lot of studying of the strategy behind what David Gardner uses. He's more of a growthy investor. My perception of what he does, is he's got more of a spray approach in the outset and then things grow. His goal, he says, “I am going to be the last person to ever sell this security. If it goes down to a penny, I'm still going to hold it longer than everybody else is holding it.” What that also enables him to capture is when Amazon goes to the moon, for the right reasons, he's holding it longer than everybody else.
Adam: Yeah, there's a problem with that, however, with respect. I'm not saying it doesn't work for him, again with respect. I mentioned the question, what would you need to see to tell you, you were wrong about a trade? I'm going to hold it means I can never be proven wrong. I'm just going to hold this forever. Okay. Hmm. Good luck with that. I'm not saying it doesn't work for him. I'm just saying that the downside also is, remember, you're tying up your capital, you're the only one in the world thinking-- I had friends who weren't really in the market, but back in the late 90s, and they were shorting Yahoo on the way up to infinity. Going, “Adam, look at this. Yahoo doesn't make any sense, keeps going up and not making any money.” He was shorting the hell out of it. They weren't professionals, they were just lay people. I said, “Why are you doing that?” He said, “But it's not making any money. It's got to come down.” Of course, they were blown out of the water. They started shorting it at $100, I don't know went up $400, whatever. Then eventually, it went back down to $10, or whatever, before it started working its way back up. Just remember, the market can stay irrational a lot longer than you can stay solvent.
The other thing is this, I think this is really another good point. When you're learning from any of the greats, you're modeling like, whoa. What works for Buffett may not work for you. Are you prepared to sit out for the next 20 years with this investment? You may say, “Yes, I am, Adam.” “Oh, yeah. Wait for the first year or two,” and you discover. “Oh, no, I guess I wasn't ready. You and I follow each other on Twitter and stuff, and I recommended Jack Schwager’s books, Market Wizards.
Bill: Yeah, I love those.
Adam: They're brilliant books. Tim kept asking me, “Adam, what books would you recommend to everybody?” I'd say, “Tim, it really depends,” but around investing, I know. Really, all of the Schwager’s books, I said [crosstalk] Ian Schrager is a great hotel ambassador. Jack Schwager, the Market Wizard series. Also, Reminiscences of a Stock Operator.
Bill: Yes, I was going to ask you. That's one of my favorite investing books. I guess it's closer to a trading book. What a book.
Adam: Both. The thing is, the beauty of the Jack’s books, are that you realize all the disparate styles that everybody uses. Each dude has got a totally different hammer, and they are doing phenomenally well. But I can't play those games, and they can't play my game. The beauty of that is you realize that what works for one person may not work for-- almost surely not, because it's tailored around what they do. Which brings me back to one of my heroes, as you know, Bruce Lee, and he said, adopt, just steal, take what works, and add what is uniquely yours. From that, we hone our own hammer, instead of trying to be something that we're not.
Bill: Yeah, I agree with that. Something that I've really internally struggled with is, I do a lot of media now. I'm almost consider myself closer to a media personality than I do an investor. But it's been difficult for me to reconcile that with the perception of Buffett just reading 10-Ks all day, and I think a lot of that is not true. I think some of that's myth. He was still on the phone with his buddies and stuff. All of Charlie's warnings about hammering ideas into your head when you say them out loud. On the other hand, for me, I have gotten an immense amount of benefit out of the network that I built from being very open about my process and who I am and my strengths and weaknesses as a person and an investor that I don't know any other way. For a long-- [crosstalk]
Adam: [crosstalk] I want to make sure I understand what you're saying here. You say you've gotten a lot of benefit by being open and talking about what you do, what do you mean by that? What kind of benefit? I just want to clarify.
Bill: No, I understand. Just so you know, this podcast gets involved in life too. So, I'm going to go there with you.
Adam: Oh-oh.
Bill: For me, I was at a bank, I underwrote commercial loans. The reason that I'm running my own capital was, I had an uncle that passed away in a very tragic way.
Adam: I'm sorry.
Bill: Yeah, it was bad. The way the money that I was making at the bank was not going to change my life in the same way that if I was running a strategy that I didn't believe in, and March 2020 came, and I sold at the bottom, that would be my actual downside financial scenario. After I got my CFA designation, and my wife had to listen to me talk about investments for probably five years.
Adam: Aww.
Bill: She finally said, “All right, I'll support you going out and trying this,” and figure out what to do with our money. I started out, and I was a guy on an island. I was trying to figure out the smartest idea I was reading through Cheniere, this natural gas exporter. I had the whole diagram of the company on my wall. I was going into all these things that I thought I had to out-research everybody, I thought I had to be the smartest guy in every trade. What I realized through Twitter was that maybe there was a different way to look at the world that suited my personality and would enable me to do my job. I wasn't very happy doing that. I'm pretty extroverted as a person. I do better when I'm able to brainstorm with people. In law school, my first year wasn't great. I checked my dad into a hospital, he had a breakdown, so I had some things going on that diverted my attention from law school. But in doing so, I was kind of a man on an island, and between what was going on personally, and not having people to really bounce things off of-- I was dating my wife, but I wasn't a very good boyfriend. Anyway--
Adam: Wait. You were dating your future wife?
Bill: That's right.
Adam: Okay. I hope you're not still dating your wife. [chuckles]
Bill: No, we've been married for a while. I didn't immerse myself around smarter people. What I've realized through all of my learning and how I do things, is that I have become my peers. What media has enabled me to do is level up my peer group in a way that I don't think I would have been able to do just being in an office and calling people without knowing them. I get a lot of benefit. Personally, it makes me happy. I get people that write me that say, “Thank you for putting this content out.” The downside is, I worry that people don't listen to the fact that this is not investment advice. I worry that people are following me into trades. My Twitter account is big enough that I really do worry about retail following me. That's the part that I really don't like about this. But I get a lot of positive feedback where people are saying, “I'm just trying to figure out what's right for me, and I really appreciate you sharing,” and that gives me like a sense of fulfillment in a way that I have not had in the past.
Adam: Okay. There are lots-- Let me address--
Bill: You asked, so I told you. [chuckles]
Adam: No, it's really-- First of all, really beautiful that you are-- you have been on an odyssey, a journey, to learn about investing.
Bill: Yes.
Adam: Self-education process, which every investor has to go through. Unfortunately, for 95% of them, they lose all their money before they've passed Investing 101. You've been in an odyssey on self-education around investing. If you think about it, someone who decides I want to get into investing, it's a really bewildering process, the whole world like, “Oh, what do I do here?” So many books to read. Where do I even begin? Initially, there's a lot of floundering, unless you've got a mentor or something, there is a lot of floundering. The key thing is during that floundering process, don't lose all your money. Don't be making a lot of bets. You discover, “Oh, yeah. Now I'm super smart, but I don't have any capital left.”
The key thing an investor, a trader, however you want to put it is surviving the apprenticeship. By surviving, I mean you’ve got to have capital. You don't want your education to be so expensive. “Oh, now I know what to do, but I just don't have any capital. I wish I'd known that at the start.” To really take baby steps, and to be aware that it's a daunting process. Also, what you've done in establishing this is-- because it's a lonely process. Every investor is by himself, or herself. I say dudes, but it's genderless. It's essentially a solitary pursuit. Then, you have to be careful with groups like, Okay, everyone seems to like gold. I'm going to buy gold.” Don't be a lemming but to be supportive, and to share resources and ideas, then ultimately, you've got to make your own calls. You’ve got to make your own decisions.
By the way, two traders can have exactly the same ideas. One of them is really good at risk management and the other isn't. Well, I don't have to tell you how that's going to end. They can make exactly the same trades, but the person who had good risk management is going to survive and do quite well. The person who overtraded, they're blown out of the water. I think that's really key, is surviving the apprenticeship. For you, I would say most people, hmm, three to five years, really, before you kind of know enough about the investing world and yourself. It's a lot of it is self-education, like, “Whoa, I thought I could cut my losses, but I can't. I’ve got to deal with that.” So many emotional things you’ve got to-- again, our two heroes, Charlie and Warren have written extensively about this about, you need a little IQ, to be sure, but self-control is way more important, like discipline, process. It needs a certain amount of smarts, and then you just need a replicable system.
Now, by the way, that's if you're choosing to outperform the market. It’s different from, “I'm just going to stick all my money in an index fund and go back to my day job.” Presumably, what we mean by investors here, your audience, is people who aspire to be more active in their investing as opposed to just passive. Again, it's a game very few people succeed at. Very, very, over the long haul, very few. I would say 5% max really can outperform. Those who can do it over decades, a few dozen in the world. Your Steve Cohens, your Paul Singers, your Buffetts, Druckenmiller, there are a few superstars, Seth Klarman, Howard Marks, but everyone else you got to survive and recognize the arts.
I just wanted to acknowledge that your mission and your self-education process that you're sharing with everyone because that's investors, you’ve got to do that. You got to learn to have a supportive ecosystem such as you provide, it's really important in that.
Bill: Yeah. I would say too it's been reciprocated to me. I don't know how much you know about me but one thing you and I have in common is a family member that committed suicide. Last year, that kid that committed suicide on Robinhood was my cousin-in-law.
Adam: Wow.
Bill: The way that I was able to shed light on that issue, and the reason the family was able to spread the message. Their point of view is they don't want this happening to anybody else. I don't officially speak for them anymore. That week, I did. It was all because I was open on Twitter before. It was because I had a community of people that rallied around me when I really needed it.
Adam: Yeah, this kid, geez. Wow. Margin call-- Oh, fuck, I-- Hmm.
Bill: Yeah.
Adam: Really tragic. I'm so sorry.
Bill: It doesn't get much worse.
Adam: Really so sorry. It goes to the heart of why you need a supportive system around you and to know that these are pretty high stakes. I was going to say to think clearly, but when it's happening to you, it's so hard because you're like, “Oh my God, what do I do?” Yes, even though ultimately, investing is a gladiator sport, but it's good to have an ecosystem. Even the gladiators trained together and tried to stay alive in the ring. Share ideas, support, so important.
Bill: Yeah. I think too. I guess the thing that I just wish-- for him, his mind just went to a place where, “I've ruined my family. The only way to help my family is to martyr myself.” I just wish that he had called. I wish that I had called him more often. You go through the things and you have the questions to ask the person, the person's not there. There's almost not a day that goes by that I don't think about, “Could I have done something different?” Or, “I wish that he had called.” I'm hopeful that by speaking about it and talking about some of my dad's struggles and what I've gone through personally, that if somebody else out there-- Tyrone V. Ross was on an episode of mine, and he had shared a story that I was someone-- [crosstalk]
Adam: I was just talking to him today.
Bill: He's a great guy. He had shared a story that I was someone-- I didn't know how I felt about running it. We were talking offline. He said, “Look, I'm not concerned about the person that this story offends. I'm concerned about the person that needs to hear this story.” When he said it that way, I was like, “Man, that's so powerful,” because it takes the focus-- at least what it did to me, is it took the focus off of what might this do to my product and my audience, how might they be uncomfortable, and it put the focus on the person that needs help to hear it. That, at the end of the day, is what it's all about. Hopefully--
Adam: Yeah. I just want to tell you there's nothing you could have done. Absolutely nothing. In that moment, you weren't aware of what like, “Whoa,” this is something that just hit him. “Ah.” Very few young people, or even people twice or three times his age deal with shocks like that. Like, “Oh my gosh, what am I going to do? My life is over. How can I? The shame of it, what did I do wrong?” There's nothing you could have done because that was very fast, his emotions took over. Again, it came, of course, out of the blue. Now, by the way, it's all tragic, some people put themselves in that position because they've overleveraged themselves or done something, but that wasn't the case with him.
Bill: Yeah. This is not legal, but just you and I talking. The thing that really put him over the edge was, allegedly, I haven't seen it, but it's in the complaint that he got an email from them that said, “You need to come to the table with $170,000 cash.”
Adam: That's what I mean. [crosstalk]
Bill: Yeah, so capital call I think is what really got him just sent into space where he couldn't think straight anymore.
Adam: Right, exactly right. “Oh, my God, margin call, I don't have anywhere near that money. What am I going to do?”
Bill: Yeah, “I didn't think that I was trading that kind of exposure. Now I owe this. What in the world am I going to do?”
Adam: I'm not going to say anything, because it's an ongoing issue, a law issue and stuff, but I'm fully on your side on this. That was a foreseeable consequence. You tell someone, “Oh, margin call.” How the heck was he allowed to get exposed like that? Certain safeguards, that should have been in place, hopefully will be put in place. But to realize their -- you can get shocks like this. I tweeted because as you know I never give investment advice. I tweeted just very carefully to the Reddit boys. “Hey, be careful. You guys haven't dealt with a stock gapping down 30%.” You wake up one morning and, “Oh, it blew through my sell stop. I thought it was a 2% loss.” “Oh no, you can't get out. It's a limit down.” “Oh fuck.” I'm sorry.
Bill: [laughs] I mean that is the feeling. We curse here, it's okay. [laughs]
Adam: Okay, good. Well, bleep, bleep, bleep.
Bill: I prefer authenticity to all else.
Adam: You get those shocks. Again, it's all part of the learning process. Is the Argentine-- oh, shoot, I'm forgetting his name. Some say the greatest Formula One driver of all time. Argentine guy in the 50s, say no one's ever better. I'm just blanking on his name anyway.
Bill: I should know this.
Adam: “To finish first, you must first finish.” You’ve got to finish the-- like, whoa.
Bill: Especially back then in that sport.
Adam: Another racing icon, Mario Andretti, said that his father gave him the following advice. “Win a race as slowly as you can. You don’t have to grandstand, just win it as slowly as you can.” A lot of it comes back to emotional control. Bruce Lee famously said, “One of the most important lessons in life,” certainly in investing “is to master the ability to remain calm.” I don't mean calm in the face of panic. Calm in the face of, “I just doubled my money overnight.” Calm, always calm. Again, the beauty of what he said is, you have to master that. It's not something, “I'll just resolve to be calm.” No, you've got to work at it every day. One way to keep your emotions in check is again to have a system, especially when things go chaotic, and just stick to my system. I'm really profoundly sorry that hit so close. When I heard about it, just as someone in the investing community, wow. I can only imagine. But many lessons to be learned from everyone and I'm sure that safeguards will be put in place and really should be-- I don't want to comment because I know it's legal--
Bill: Yeah. No, I understand what you're saying--
Adam: I'm fully on your side [crosstalk] just want to know.
Bill: I appreciate it. I think the moral stance is objectively true. The legal thing is their own-- I'm not a party to the case. Don't have standing to even be one. It's one of those situations that had I seen it to anybody else's family, I would have been equally as offended. It just happened to land directly on my doorstep. I guess the hardest thing about it now is, I talked to his dad-- I was a lot closer to his dad than I was Alex, because Alex would be the kid that we would go to Thanksgiving, I would tell him, “Can you look after my kids?” My kids thought he was a hero. He'd be playing with them all the time, and I would be able to hang out with his dad. Now, it's just hard. I don't want to say it's hard to have a conversation because that's not a fair comment, but it always feels like a lingering issue. My grandma has buried two children, life's just never the same. There's no conversation that can be had that doesn't have that overhanging it.
Adam: Right. It will always overhang, and yet from that, like an oyster creates a pearl around an irritation, piece of sand covers over, the years will create something. But also, I'm sure they'll set up a foundation, this will be a mission. This is not going to happen again.
Bill: Yeah, the pearl thing was very nice. It was a very nice illustration of what you were trying to say. I like that.
Adam: That's what goes on. It never goes away, won't for him. They'll remember fondly, like you remember, Alex take kids and goofing around with him and stuff. Shoot, I'm forgetting the guy’s name. It was Tuesdays with Morrie, I'm forgetting the author's name, but he said, “Death ends a life, it doesn't end a relationship.”
Bill: Yeah, that’s nice.
Adam: It's more than nice, it's truth. It's the reality here. Who Alex was, was clearly someone that kids loved, and he had his life in front of him, and this thing hit him. In the process of addressing that, other lives will be saved. We try to extract what meaning we can, as best we can. Life is tough, and yet it's full of joy. The same way that you smiled and said he would watch my kids.
Bill: No, it's nice, man. He was a good soul.
Adam: Yes, he was. I'm sure he's snuck some candy.
Bill: [laughs]
Adam: Okay, we're going to get away with things. A beautiful soul. Anyway, it goes to the heart of your mission, and other investors and traders, this is such a hard-- Really, I’ve said it before, there's nothing harder than investing, because you're putting it all on the line. It requires mastery of your mind, and the world and your emotions. It's whoa, and so much is in play, always. You said before, this is really about life. That's what investing is about. It's about life. It's all it is. Everything that Buffett and Munger ever said, or any of the greats in investing, can be said about life because there you're investing your years, not your capital. It's a limited resource, your years. Yes, everything that can be said about investing can be said about life.
Bill: To segue a little bit you had written a book, Winning the Great Game.
Adam: Well, An Invitation to the Great Game.
Bill: Okay, my apologies.
Adam: Oh, no. I’ve got to release it, I wrote that four years ago, and I’ve got to get it out. I will. I really promise I'll release it this year. I'll tell you why I didn't, is I wrote it in a week, a full book in a week. 10 days, actually not a week, 10 days. Give me 10 days to write a book, and then I've sat on it for four years. It's a beautiful book but I realized that I left out some things that I could have put in, like some deeper philosophical things. I thought, “Oh, should I include them?” I just decided about a month ago, and I just didn't have the time to do that. “I’ve got to come back to this.” I'm not going to include it. I've decided I'm not going to, because it's a beautiful story, just in and of itself. I'm just going to get it out there. As you know, I wrote a book called How Not to Be Stupid that Buffett endorsed. I've been sitting on that for two years because I have to rewrite that also. We'll get into How Not to Be Stupid, there's so many topics here and stuff. Anyway, but you brought up the Great Game.
Bill: Well, it seemed to me that the premise behind that-- I've only heard about it through what you talked to Shane about but you thought that society was at a little bit of a breaking point, and this was in 2018, I think that a common thread of what I think-- It's been interesting to listen to you over the years, because it seems to me that the event at the Y, you came out with the three principles and delight everybody. It sounds like maybe you ruminated on that, for call it a year, whatever.
Adam: No, I wrote that book right after--
Bill: Oh, right after.
Adam: Yeah.
Bill: Sure enough.
Adam: Yeah. In between that one of the other podcast I did with Tim. The second podcast I did with Tim is a little over four years ago. I said, “Oh, yeah, I'm going to see Warren,” because they were releasing the movie, HBO, it was a premiere [unintelligible [01:04:13]. I went there with the premiere and stuff, and I said, “Oh, yeah, I'm going to give Warren a book,” and I hadn't even started it. I had 10 days to write, so I wrote it in 10 days.
Bill: That's a fair amount of stress. [laughs]
Adam: I know exactly. Put yourself behind the eight ball, and is that publicly say you're going to give someone something and then, uh-oh, and be held accountable. The Great Game-- which brings me to the world, state of the world. As investors, it's really important to understand this. The entire world to really understand it, the modern world was never sustainable. I don't mean in an eco way. We go back to 1945, what was that 75 years ago, 76 years ago? The world had to rebuild out of the devastation of World War II and the Great Depression. Horrific. People are moaning about one year coronavirus. Imagine going through six or seven years of-- and impact of Depression started before that. That was ‘29. Imagine going through from ‘29 to ‘45, 10 years of economic depression, and oh, now we got a World War.
The modern world, this is going to beyond 100,000 feet. This is to really understand what's actually going on in the world, everything. The world is not viable, hasn't been for 75 years. To rebuild out of World War II, it was rebuilt out of the American dream. The GIs coming back, world rebuilding, and America was the least-- wasn't done here. We didn't have to deal with any of that. We didn't have our factories blown to hell. Anyway, so the American dream was “I want what mom and dad had, I just want more of it. I'm willing to go into debt to get that. An apartment, I want a home, if that a small home, I want a bigger home. In fact, I want two homes, I'm want two of everything. I'm willing to borrow to do it.” The American dream was born, and it's one we export to the rest of the world, which is, “If I have enough stuff, I'll be okay.” We lost touch with family values, and we lost touch with the interconnectedness, the joys of like, “Oh, if I have enough stuff, I'll be okay.” It made sense for the world because we had to resurrect the world. But we kept piling up the debt, and debt works if you can grow your way out of it. A business owner takes on debt, because he or she expects to expand the business. You better because otherwise you got to service the debt. So, we kept piling up debt as individuals, as corporations, as nations. Kept piling up the debt. That's okay, because we're going to keep growing, and at growth at all costs. Growth comes from two primary sources, population growth or consumption growth. The whole modern world, everything has been built on, we’ve got to keep growing because we piled up all this debt on the assumption that we would keep growing, and it never occurred to anyone to think, well, what happens if we don't?
There's a blog called Economica. I forget the economist’s name, I think it's Hamilton-- anyway, brilliant dude. His specialty is demographics. He talks about a global population collapse. He's got all the numbers. When you look at the numbers, you go, “Oh, man, we are in trouble.” In the United States, in every country in Europe, Australia, Canada, Japan, essentially, I hate this word, the developed world, shrinking, more people died than are being born. That's problem. Remember, because we piled up this debt assuming we're going to keep growing. It didn't occur-- If you think about people, you have a beautiful wife and you're a family man, but you look at people who are just a little younger than you, those who don't yet have kids and aren't yet married, how many are rushing to have kids, get married, and buy a home? Not many. This guy traces it, the global economic collapse, that's his words, and he's got the numbers to prove it. Just to show you how serious this is, as you know, China has had that one family, one child policy, which is very shortsighted, not a good idea, not smart, because what it left them with 40 years, 50 years later is too many young people to support too many old people. Plus, a surplus of guys. I forget the exact stat, but it's something like roughly 11 single guys for every 9 women. Oh, that's a musical chairs thing, that's not going to work out.
Bill: It's a competitive environment.
Adam: Yes. China recognizing that the shortsightedness of that policy-- I see why they thought it made sense back when they were-- but then, no, not a good idea. Anyway, they have been jawboning their young people, “Get married, have kids.” It's your tax incentives everything. Despite all that, China had its lowest birth rate in modern times last year. That's despite, “Oh, my God, we got to get kids, we’ve got to get back online.” Essentially, the world doesn't work. That's the starting thing. We've piled up a massive amount of debt. Periodically, we have these crises and the only way that the central bankers have been able to go is just pile up more debt. We’ve just got to keep this thing going. They don't recognize the game is over. I don't mean like the Great Game, like we were talking about, but the engine of growth, oh, no, it's reversed. It's actually gone the other way. The demographics are written in stone. We can't change this for about 20, 30 years. That's written in stone. We know how many people are going to be born, we know how many people are alive, how many women are childbearing age, some rough little assumptions. We know what-- Ooh, we're going to be shrinking for quite a while. The only areas of growth in the world right now, population growth, are Africa, the Middle East, really. All other areas are shrinking big time. Even though Africa and the Middle East, they're still growing, the second derivative of that growth rate is slowing down. It's not negative yet, but it's slowing down. I think this Hamilton dude, Economica guy, I think he said, another 10 years, that'll go negative also. Really, what we've got is a world that awash in debt, and people are also reaching the end like-- what the pandemic has taught us is, “I don't need to have everything. In fact, I don't even need half my clothes.”
Bill: Yeah, certainly not have lives this way. I need about two outfits. [laughs]
Adam: Exactly right, two outfits. I would just wash those to death. The problem is that we’ve still got the debt, like we can get by with a lot less, but wait a second, the whole modern economy, everything in the world is predicated on continued growth. We've got this embedded obligation, if we don't grow, oh man, we're in trouble because we still got the debt. We're not going to return back to normal, because even normal was never sustainable, really. We have some hard choices to make. That's the backdrop, that's the mega climate, is we're dealing with a 20- to 30-year shrinking population. demographics is destiny. You can't get away from that. It's not a matter of encouraging young people to have children. Okay, they will or they won't, but even if they decide to get married today, it’s going to be 15 or 20 years before that pays off really. Now, in such a world, the investment opportunities are incredible. In the worst of times-- and by the way, it could be the best of times, but we have some real tough choices to make, navigating here, as a country, and as a world, really got to get our act together, as a world, as a species.
Within such turmoil, there are incredible investment opportunities and different ways of applying that, either as investment opportunities as traders, investors, and also the venture capital, entrepreneurial opportunities. There are always opportunities. Always, always, always. But that's the backdrop in the world. I said this on another interview, another podcast, it's really a spiritual crisis actually is what's going on in the world. All the economic problems at root are a spiritual one. We kept thinking, if we just have enough stuff, enough Instagram likes, or if I make enough money, then I'll be okay. That's a big problem we need to come to grips with, but also, these are perilous times in the world, because we've got all this debt, a lot of problems. Even within the United States, a lot of anger from everyone. Anger on so many sides, and it’s not really constructive, obviously. I understand the source of the anger. Benjamin Franklin said, “Anger is rarely without reason, but seldom a good one.” There's always a reason to be angry. Ultimately just cost yourself. It's a time for all of us to-- we either come together or we don't. Then that's not good. I'm not talking Kumbaya, like unity. We got to decide what it is as a country care about and what are the values. We come back to first principles.
Bill: Yeah, I think what hurts the common principles too is the polarization of the country, which I think there's a direct overlay to when social media became fairly prevalent in everybody's lives.
Adam: We haven't done this, you and I. I'm going to invite everyone to do the Google experiment with me. If you go to Google right now, you can do it on your laptop or your phone, so anyone listening can do this. You go to Google, got to be the search bar, type in-- it's about a year and a half ago, I was curious what do people want to learn how to do? I went to Google, and I wanted to see what it autofilled I typed in, “how can I learn to,” so do that. Don't let people do it on their own, and you're going to see one thing that's going to pop out at you, that's going to just blow your mind.
Bill: That's crazy. It's the first thing.
Adam: Yeah, don't tell anyone yet. Tell them what number two is, like, how to learn how to sing or something--
Bill: Sing, that's exactly right. Sing, speak Spanish, trust again, draw, code, drive, play chess.
Adam: Whoa. Go back to trust again. Look at that.
Bill: Yeah, that’s deep. Yeah, that's--[crosstalk]
Adam: That’s already very scary. How can I learn to trust again, but it's number one that really blows everyone's mind.
Bill: Yeah. How can I learn to love myself? That is incredible. The number one thing.
Adam: The number one thing people want to learn how to do. They go to Google, imagine, now mind you, someone who ask that--
Bill: How lonely must that be, that you're asking Google?
Adam: Exactly right. You'd be too ashamed to tell your best friend, how can I learn to love myself? Because you'd be ashamed. I'll tell you, so I was so shocked by this. I sent this over to Tim. I said, “Tim, do this.” He went, “What the fuck?” He said, “Is that just me?” By the way, at first, I thought when I first stumbled on that--
Bill: Yeah, what's wrong with me? [laughs] Why does Google show me this?
Adam: Oh, man. Google's like, oh, [crosstalk]
Bill: [laughs]
Adam: What must Google think of me? I told a bunch of friends, 10 friends, I texted, I said, “Could you just type this into Google?” Each one of them one by one said, “What the fuck?” Adam, what!? What!?” Then I typed in, because you mentioned social media, I was curious-- I was heartbroken. Then, I was concerned about the feeling state. Then I typed in, why do I feel so? Type that in, why do I feel so? Don't hit enter? Why do I feel so? I know what number one response is tired. Tired is a euphemism for depression. If you look through the top 10 fills, half of them are going to be energy related. Why am I tired? Why am I tired all the time? Why don't have any energy-- [crosstalk]
Bill: Bloated, alone, nauseous, weak, empty. One suggestion is hot. You think they mean like sexy hot or you think they mean like temperature? I'm kidding. [laughs]
Adam: You'll notice that a lot of them are-- a few of them are related to eating disorders. There's so much self-hatred going on here, because someone who says how can I learn to love myself, it's not a self-improvement. I really like myself, but how can I learn to love myself? No. It's you hate yourself.
Bill: I shouldn't laugh. The delivery of what you said is what's cracking me up.
Adam: Yeah, of course. You and I are making light of something that's really tragic. If you ignore the eating disorder of things, basically, why do I feel so depressed? That's the tired, all those permutations, lost and empty. Empty is the worst. That's an existential, like whoa. Now type in, why is everyone else so.
Bill: Oh, boy.
Adam: Yeah, type that one in. Now ignore the first one. You'll see it has to do with eating. Look at all the rest of them. Why is everyone else perfect, happy, skinny, pretty in a relationship. You've got people who are suffering, crushing, depression, loneliness, and a sense of isolation and just lost. When they look out at the world, they think everyone else is having the time of their lives. This is all social media. If someone wanted an engine to create evil, wow, we're just going to twist everybody, we're going to isolate them, make them hate themselves, and think everyone else is having the time of their lives, which only amplifies your sense of-- you're such a loser. Look at everyone else, they're doing great, but everyone's feeling the same thing. Which goes back to the tragic story that you've shared, but it plays out in so many countless ways. We've got to--
Bill: Do you think psychologically that some of this has to do with a little bit of-- I got the thought from Tony Robbins, it's not totally unique. If you're walking by a newspaper, and you see something that's scary, that's going to grasp your attention. Is there something in humans that draws us to things that make us feel bad about ourselves?
Adam: Okay, so I'm going to tell you, it's worse than that. It's the internet itself. Remember, the internet is designed to hijack your attention. Really to hijack it. We're going to rivet you here and get you to click on things. Well, how do you get to people to click on things? Anger is a really good one. Just like, “Ah, hmm, I'm going to read that story.” Or, that confirms your current view of things. “I knew it. Those guys are jerks,” or whatever it is. Internet is designed, designed mind you, not the internet but the technologies on the internet, the social things, is designed to capture, hijack your attention, and it manipulates you. It's this massive confirmation bias, which as investors, we know to watch out for. That's all the internet does. It discovers what you're interested in or what you think about the world, and then it'll just reflect it back to you.
I was in Dubai a few Thanksgivings ago in a Formula One race-- let's go back to racing and stuff. I met someone from New Zealand there. I didn’t know anyone from New Zealand, and we exchanged business cards. 15 minutes later, on my phone and started getting invitations from New Zealand Air, whatever, booking flights, like it already knew. “Oh my gosh, Adam doesn't know anyone from here and he just met, so, boom, let's just give them these flight things. He probably wants to go to New Zealand.”
Bill: Yeah, that's pretty scary.
Adam: It's very scary, but, of course, we all know that, that's what goes on.
Bill: Yeah. It's just a very tangible example.
Adam: Right. If you really want to get scary, do this, talk about something with a friend, this is going to freak people out, over dinner, both of you leave your phones on and talk about something you've never-- like peacocks, or something random.
Bill: [laughs] Start getting served ads for peacock fan groups.
Adam: Exactly. I'm telling you, it's really freaky, and you go, “Oh my gosh, they got the voice recognition.” It's not like they've targeted you, don't worry. It's just algorithms. Our perception of the world is distorted by the internet massively. We don't come close to an understanding of it, not even close. Any one of us, really. We're all flying blind, which is why Buffett is isolated himself in Omaha, and it's nice town, and you got to stay away from media and things. Again, there's a difference between the information sharing that can go on and in a healthy ecosystem around sharing of ideas, investment ideas and such, but you’ve got to be careful. It's part human nature, but the internet just exploits all those worst aspects of us.
Bill: Then, 2020 is lighter fluid on that, when everybody's stuck at home. My mom, for instance, is alone, and she has called me a reasonable amount of times, more depressed than normal. I shouldn't say more depressed than normal, because she found happiness over the last couple of years, but 2020 has been really difficult on her. I think part of the reason is, there's no one to talk to, there's nowhere to go to, or there hasn't been, now that things are opening, maybe that's changing. I think she gets on Instagram. Then it's like, why is everybody else's life so great [crosstalk] good.
Adam: I know.
Bill: To which I tell her, “Mom, I promise that one picture that you see the three kids smiling is representative of that one second of the day.” We didn't post the other 23 hours, totally sucked. I shouldn't say that but there is some truth to that.
Adam: It's such a distortion. We don't present the world all our flaws and things and we try to put the best face on things. I'm going to shave before this, am I going to show up totally--" I’ve got to comb my hair, but I'll make certain--[crosstalk]
Bill: I could have shaved. [laughs] I didn't feel great when you use that. My apologies. [laughs]
Adam: If you looked totally clean shaved, I wouldn't know. Anyway, but that's the world we're in, which brings us back to the Great Game. It was about four years ago that I had this revelation about people. I discovered them, because I'd always been an introvert my whole life and succeeded because of my ideas, a thinker. And then I had an epiphany, I don't even know, it wasn't for any particular reason. I just went, “Wow, there are people in this world. I can have a lot of fun.” Then I set about just to having fun and went about it with the same zeal that I would attack ideas. Now, “Oh, let's have fun with people.” If you think about it, really the key to life are others, and the key to succeeding is enrolling others, is to have a positive compelling view of the future, vision of the future. Say, a vision, where you can paint with pictures, “This is what I want to do.” Other people, whether it's an individual in the case of a marriage, or investors go, “Yeah, I want a piece of that vision. I want a piece-- I want in on that.” With your mom, the thing is to be engaged with others, and not observe them via Instagram because, “Oh, that's, ooh, you're just going to feel more isolated,” but really being engaged.
Bill: I had listened to you say that, and one of the things that I wrote down when I've heard you speak about this. I said, what is this podcast? I've been trying to figure out what do I want to do with the podcast? Do I want like a business out of this and whatnot? What I really figured out is, I am at my happiest when you and I are roughly 40 minutes into a conversation because I think that's when conversations really get flowing until the conversation ends. When I am truly focused on what you're saying, and we're connecting as humans, that's when I'm at my happiest. When I start to think about like, “Well, what are the numbers of the podcast doing?” Or, “Should I be focusing on ads down the road?” Or, “Why should I be doing this?” The funny thing about all of those questions is much of that is actually insecurity driven. I have this incredible thing that I'm building, that people are enjoying a lot, and is doing way better than I ever thought would but there's an insecurity part of me and I think some of it comes from the fact that I inherited what I have, that I'm not worthy of it. That I feel like, “Well, if I can just turn on a revenue machine here, then no one can take that from me.” Ironically, I think that thought which comes from insecurity could cause me to ruin what I'm building that I love that's great. I have just said, “Screw all that insecurity stuff. I'm going to just have fun with this and work on delighting the guests.”
Adam: Exactly right. That's the great game. That's what you do. You mentioned insecurity. Michael Jordan once said that he never once in his whole life, his career, thought about missing a shot, never once. Never even occurred to him. Why? Because his attention was solely focused on what he had to do to make the shot. Once the ball left his fingertips, it's out of his hands now, literally, out of his hands. It will either go in or it won't. It's outside his-- your attention should only be on one or two places. It should either be on the task at hand, or the person in front of you. If you're with others, like right now, my attention is totally on you and the conversation we're having. I'm not thinking, “Oh, is there food between my teeth? What do they think of me? What's going on?” My attention is totally on you and the conversation. There's no room for insecurity. There's no room for confidence, either. You should be so immersed in what you're doing that it just takes over, it's just the joy of it. Then, from that, you'll create magic and incredible things. Then, you'll create that success, but it's not going to happen if you're worried about it, because then your attention is elsewhere. Again, insecurity or any negative emotion, it just like, oh, self-doubt, whatever, really, all those negative emotions always involve yourself.
Bill: Yeah, focus on me is where all my bad decisions in life have ever come from.
Adam: There you go. Of course, you want to think about yourself. Of course, you’ve got to think about yourself. But to succeed in life, really it’s all about connecting with others. Even your own the well-being of an individual comes from getting outside yourself. The word ‘ecstasy’ literally means to be outside of yourself. The word ‘enthusiasm’ comes from the ancient Greek, meaning to be filled with God. You're caught up in whatever it is you're doing. Again, if I'm alone, my attention is totally on the task at hand. It might be just I'm just goofing, I'm just reading a book or daydreaming.
Bill: It's enjoying the moment that you have, whatever that moment is.
Adam: Whatever that moment is. As soon as someone's in my presence, my attention is totally on them or they don't deserve to be in my presence. I don't mean deserve to be in my presence. Otherwise, I should be in their presence. If I want to be introverted, okay, be introverted. Go back home, Adam, and there are times when I do want to go back home. Always, if someone's in my environment, doesn't matter who it is, they will have my full attention. Always. If I get into an elevator with a stranger, they got my full attention because I also know that that's where magic is, it's fun better way to be.
Bill: I was driving yesterday, you're just triggering this thought, and the music was off, and my kid was talking to me. I realized that I hadn't been present as a dad long enough. It had been something where if he walked into the kitchen in the morning, maybe I was messing around on Twitter or some garbage like that. He was struggling in school, and it was something that I didn't even realize was going on. I think he's been trying to tell me for a while. It was a lack of presence. We've had a couple moments over the last two weeks, where I've been like, “Wow, I've got this really beautiful child here that I probably have underserved my attention to, and that's a thing.”
Adam: It shows what a great dad that you are to realize that you haven't been a great dad.
[chuckles]
Bill: Well, maybe. [laughs]
Adam: I'm just teasing you both. That's really beautiful, though to acknowledge like, “Oh, I got the son--” Shoot I remember, golly, it was day before Father's Day, two years ago. Saturday morning, tomorrow was Sunday, and I saw a dad in a restaurant with his young son, must have been six, two of them. I thought, “Oh, that's so sweet.” Dad out. mom's probably sleeping late on Saturday morning, and both of them had, I'm not kidding you, their phones, neither of them was interacting with-- there was just no interaction. Each of them. Literally, their cell phones were a few inches away from their noses. Heck, if I walked by that table, I would have had more-- I would have engaged the kid. He was a cute kid, I would have said, “Hey,” I would have said something silly and got him to laugh, because that would have been fun for me. You're such a good dad to realize that, “Oh, I’ve got a beautiful son here. I've got to give him more attention here.”
Bill: I’ve got to change what I do, and then I can be a good dad. I will say at least I was present enough to recognize.
Adam: Yeah. The thing is, people say, “Adam, how do you remember? How are you always so positive?” Because I know that's where the joy is. Of course, my attention is going to be on other people. That's why I have fun. There's nothing calculated about it. know that's where the fun is. I'm very much just in search of fun. So is Buffett. Remember, it goes back to fun. You look at anyone, Stevie Cohen with his Mets, and his art and everything, he's just having a blast. I don't care who it is at the top of their game, they're having fun. Sure, a lot of hard work to get there. Ultimately, you’ve got to be having a blast. Otherwise, do something else.
Bill: Yeah, well, you only get one life. Maybe. [laughs] It depends on--
Adam: Maybe, maybe not. But certainly, we have to live it like that.
Bill: Yeah, it's a reasonable assumption to maximize joy.
Adam: Exactly right, in this realm.
Bill: Yes, indeed.
Adam: In this realm, we've got one shot at it. Ultimately, what it comes back to is people always want like how to books, like, how do I do something, little technique-y things. It's really just a question of, who do you want to be? How do you want to be in the world? Then, everything flows from that. Instead of what do I want to do? Who do you want to be? Then, a lot of things will flow from that. I think it's really much simpler life ultimately. As you get older, you realize more and more, “Wow, it's really so simple,” but you had to go through years to realize, “Oh, it actually is pretty damn simple.” Have fun, engage others, stick to what you're good at. It's really a few principles, really-- and we're in it together. When you're investing and trading and everything, you got to be connected to a larger purpose.
See, you've gone through those questions, which is really beautiful. A lot of people, like, “Who am I in the world?” You've been on a personal odyssey, and you're sharing it with others, and that's really very beautiful and good. That's really great. Everyone should do that, connect to a mission. You can't have any insecurities because I'm doing a bigger thing. I'll tell you something, if there's a building burning, a fireman doesn't have any insecurities, like, “Oh my God, I’ve got to get those people out.” There's no room for insecurity. “Oh, I wonder if I'm a good enough fireman.”
[chuckles]
Adam: No. Okay, you're going to get the ladder up there, and that cat on the fifth floor, got to get her down. In doing that, in shifting your attention to others, the pain, loss of-- the parents-- is Alex, was that his name?
Bill: Yeah.
Adam: I'm going to say ‘was his name,’ Alex is his name. Alex. They’ll find others that reach out, and it's all about connecting with others. Life is full of pains and joys. Either way, you’ve got to be connecting to others and that's the secret to self-happiness, secret to success. I don't care what you're doing. You can get away with things for a while and you can be a jerk and succeed in some level. But ultimately, you're not happy and you're not doing yourself any good or the world any good. Everything you're saying and the journey in investing, and you said this is about life. Yeah, sure is, if it's done right, everything should be about life.
Bill: Yeah, I think one of the things that was beautiful that came out of Alex's family being willing to go public with the story was they got a ton of letters from people-- I mean hundreds and hundreds from people that were saying how he did something that was nice in their day, that they remembered that he--
Adam: Oh, it's beyond nice.
Bill: [crosstalk] -out of his way to do something.
Adam: He saved lives there. I'm getting teary here. They saved lives by doing that. It's way more than nice. He saved lives. That’s the anchor on that. They've saved lives. Anyway, so there, beyond nice. That's [unintelligible [01:40:39] I know what you mean. It's way more than that. Good. Yeah. that's exactly right. We're here to smile. Have a good time. Next topic, we’ve got so much stuff.
Bill: All right, I thought that the parts that we had discussed about insecurity and the pandemic dovetailed nicely with your thoughts on avoiding stupidity, and that might be a nice thing to explore for a couple minutes if you're willing.
Adam: Sure. Of course, I'm willing, why wouldn't I be? So, How Not to Be Stupid? Munger once said, “It's amazing how much mileage Warren and I have gotten over the years, not by being smart, but just not being stupid.” By the way, that's profoundly anything Munger and Warren say, you've got to really dive deep. It's not on the surface. When Buffett says, rule number one in investing, never lose money. Really, you could write books on that just on that one thought right there. Which brings me to, I think, possibly my favorite quote of all time, it's Munger’s. He said, “Take a simple idea, and take it seriously.” That's all you have to do, a simple idea. Which goes back to the hammer concept. You just take an idea, whether you're an entrepreneur, or you're getting married, whatever, simple idea. Just take it seriously.
How Not to Be Stupid. what I did is I spent a lot of time in researching the idea. I was giving a talk a few years ago on-- I was invited to give a talk at this elite investor group down in the Bahamas by a friend of mine who was organizing it, a lot of named people and stuff there. They said, “Adam, you can talk about anything but not investing. Just pick a topic.” I blurted out, “How about how not to be stupid?” He laughed. He said, “Oh, yeah, that sounds like a lot-- do that. They would love that.” Having thrown it out, I then had to do some serious research. What does it mean to be stupid? I defined stupidity as overlooking or dismissing conspicuously crucial information. Overlooking or dismissing conspicuously crucial information. By the way, it took me the better part of a month of really hard thinking to come up with that definition, because I knew it wasn't the opposite of intelligence. Then, how not to be stupid? Be smart. Okay, closed. Okay.
Bill: Can I ask you real quick? I don't mean to interrupt you. What is really hard thinking--?
Adam: But you do mean to interrupt me.
Bill: Well, I do. You're right, I do. What is really hard thinking mean to you? What does that look like for you?
Adam: In the same way that you can see an Olympic powerlifter, like you see, “Argh.” Or, you see it in any sport, athletic pursuit, you see the energy that goes into that, you can put that energy into thinking. Another one of my favorite quotes was by the physicist, Niels Bohr, one of the great titans of the last century, easily Einstein's peer. Bohr was chastising a younger colleague, and he said, “No, no, you're not thinking, you're just being logical.” Whoa. Oh, man. Hard thinking is hard to say-- it's a full frontal assault, and you begin to-- you have to analyze everything, especially around definitions. It transcends logical thought. I've spoken about this elsewhere. Key insights, truth, whether it's insight about a relationship or an insight about the world, on a personal level or even on a scientific discovery level, on any level always comes about not logically. It pops into our head. Then afterwards, we can figure out the logic of it, but it didn't arrive logically.
I’ve spoken about this other times, think about training, we think about training our body, about anything, or we can think about training our mind, but also you can train your unconscious, you can really learn to use that. Hard thinking, boy, it's not a definition of it, but you'll recognize it. A lot of it, by the way, is just waiting for something to become clear. You attack things logically as much as you can, and then all of a sudden, boom, you get an insight, and you go, “Oh,” but it doesn't seem to come by logical process. A lot of is just gifts from heaven, from God, or the universe, however, in someone's cosmology, they want to put it.
Anyway, back to hard thinking, on account with that definition, overlooking or dismissing conspicuously crucial information. This is the key insight. In other words, it's crucial information, so you’ve got to pay attention to it. It's conspicuous, so it's literally in front of your nose. Either you look at it and go, "What if?” Or, you don't notice it. When certain conditions are in play, you're literally blind, but you don't realize that you're blind. You're literally, literally blind. I isolated seven factors, and these are the seven factors in no particular order.
Information overload. A feeling of urgency, rushing, that doesn't have to be urgency in a bad way. It could be like, “Oh, I can't wait, I'm going to a party.” But a feeling of urgency is another. Being outside your normal environment, is another. Being in the presence of a large group, that's another. Being in the presence of an authority. Or, if you yourself are the authority, you're in big trouble, because you're smart about that but you're blind actually about a lot of things around you. Any activity that requires an intense amount of focus. And there's one more, oh, physical or emotional compromise.
You don't need all seven factors that will put you in the stupid zone. This is the thing, once you're in the stupid zone, you won't be aware of it. You'll just do stupid things. It won't be clear till later. Then, afterwards, how many times have we ever-- we look back and say, “What were we thinking?” Well, we were in the stupid zone then, but now we're not. Which is why when we see other people do things, they're in the stupid zone, but we're not. We look at them and go, “I would never do anything like that. Never.” Yes, you would, if you were in the stupid zone. The key thing is when you realize these factors and how-- when I say blind, I'll give you an example. There was a-- I'm forgetting the flight number. It's about a dozen years ago from Buenos Aires to Paris, overnight flight. The plane went down, and hundreds of lives were lost. There were three pilots in the cockpit, and this is the thing. When they recovered the black box, the recordings, they could hear everything. A stall alarm was going off. It was an Airbus 330. The Airbus 330, even though it's a European manufacturer, the stall alarm is in English, which is the universal language by default kind of. The stall alarm literally-- I'm saying this for a reason, is stall, stall. Now, by the way, when you hear a stall alarm in a plane means, “You're going to die. You're going to die. Take action because you're going down.” Three pilots were in the cockpit. Three experienced pilots, not one of them mentioned the stall alarm. How's that possible? Not one of them realized that the stall alarm was going off.
Now, if you and I heard a fire alarm, if a fire alarm went off in your apartment right now, I'd say, “Hey, you might want to look behind you, there's a fire alarm going off.” But you yourself would hear. Not if you're in the stupid zone. The thing is, when you look at those seven factors, they're ubiquitous in modern life. They're really present in emergency situations by definition, because you're outside your normal environment, it's an emergency. There's a sense of urgency for sure. There are always authorities. Big problem. Usually, emergency involves a group of people, or a nation. Stress, physical, emotional stress, like all the factors are in play. It's super important to recognize that when you're likely to be in the stupid zone, not to make any decisions.
If we look at the typical warning label on a medicine bottle, it says, “Warning, this medication may impair your cognitive or physical functioning. If affected, do not drive or operate heavy machinery.” Well, yeah, but why limit yourself to that? Don't go hang gliding. Don't do any cutting with a sharp knife. Now's not the time to be fixing the roof. Now's not the time to post to Instagram. Now's not the time to tell your boss off. Now’s not the time to ask someone to get married, not in this state. There are a whole list of things you shouldn't be doing. Not just drive automobiles and operate heavy machinery, as if that those are the only two ways you can fuck up your life. You can do a lot. Buffett once said, “It takes 20 years to build a reputation, and 5 minutes to ruin it.” If you think about that, you'll do things differently. Life is so really just-- it only takes a split-second wrong decision to really mess things up.
Anyway, so to recognize that when you're in the stupid zone, you're going to be doing stupid things. The thing is you won't realize that you're in the stupid zone, so you have to anticipate it. One way to do that is to have people around you that you really trust, say, “Adam, buddy, you're in the stupid zone right now. Time off. Don't sign any contracts. Don't do anything that’s irrevocable.” It was Thomas Jefferson, who famously said, “When angry, count 10. When very angry, count to 100.” Even if you're not-- the ability to count 10 before you do things, just to pause before taking an action-- you can be sure that a surgeon before they're taking that final-- brain surgeon, “Let me pause, make sure the scalpel is not at the wrong-- I don't want to cut that artery. Whoa, close call.” So, the ability to pause, to recognize that you might be in the stupid zone. If so, take no action. I would say that the biggest ones are being outside your normal environment, so like you're traveling, or even just unusual business conditions, something that's throws you a little bit out of your routines, because that puts a massive cognitive overload. You add that, and say a little physical or emotional stress, and then add on top of that, to throw the match into the thing, a sense of urgency, like, “Ah, I got to do this now.” That's the biggest catalyst, a sense of urgency.
Bill: Basically, we've all been living in the stupid zone through COVID and a sense of urgency is the catalyst that really being stupid or something like that, right?
Adam: At the very beginning, we keep going, “Oh my God, do something, do something, do something.” The politicians are going, “Oh my God, okay, we're going to do something, we're going to show we mean business.” Wait, wait, pause. That's the Hippocratic Oath, first, do no harm. Whoa, before we impose these things, let's be sure about the risks, the benefits. Yes, we've all been in the stupid zone and you need to be able to step outside. It's hard when we're all in the stupid zone. I think the first thing is just take no action. If you think about it, the Hippocratic Oath, first, do no harm, which gets back to don't lose. Whoa, even that makes you pause. I think that's really important, training yourself to pause for taking an action. In chess, it's amazing that you'll find world champions, mind you, making blunders that ranked beginners wouldn’t make. You go, “How the hell did they do that? He's the champion of the world. How could they have missed that?” It's so obvious, because they were in the stupid zone.
In chess, are so many variables, so many things to think about. You get fixated on something, and then you can forget something else, and you make a blunder really a ranked beginner would never make. The Russians had a lot of psychologists around this, since the 40s, and 50s, when they were winning everything in sight before Fischer took it away from them, is they develop the following technique, which I think is a good one, is before you make a move, because once you make the move, you can't take it back. Once you touch a piece, you’ve got to move that piece. Think about the move you're going to make, do all the analysis. Then, before you make the move, write the move down on your score sheet and then look at the look of the position one last time. It was a built-in pause. It's amazing how many times when you do that, you go, “Whoa, no, not doing that.” That ability to pause. Again, it’s count 10 and or count to 100, maybe even longer than that. “You know what, I'm going to sleep on this.” Beware of anyone that forces you to make a decision quickly. Come on, you're in the stupid-- they're putting you in the stupid zone. “You know what? Get back to you on this tomorrow. I just got off a long flight. I'm outside my normal environment, and I'm tired. It can wait till tomorrow. If it can't wait till tomorrow, it's a no.” To train yourself to do that, it's really-- I say train, in the same way that we mentioned, Bruce Lee, one of the most important abilities is to master is the ability to remain calm. It's not something you can summon on demand. “Okay, I'll be calm. Whenever I have to be, I'll be calm.” No, no, no. You have to train yourself. It's so hard.
Stupidity is to recognize when one or more of those factors are in play-- it's actually a very deep topic, and I could go into it, but that's the key thing, is to recognize that someone in the stupid zone will do stupid things. I can't remember whether I finished the thought on that flight. Three pilots, the stall alarm was going, “Stall, stall, stall,” and the plane went down. Not one of the pilots said, “Hey, Charlie, we're going down.” They knew something was off, but they didn't know they were actually crashing, even though the alarm was clear as day, stall, not one of them, three pilots, three experienced pilots, mentioned it.
Bill: It's got to be some combination of groupthink and deferring to some authority.
Adam: Well, you're very insightful. It's part of that, but it doesn't so much matter, it's just that when those factors are present, you are going to be blind. The greatest air disaster, the most tragic ever was in Tenerife, some islands off the coast of Spain, and 576 people died on the ground. Two planes collided on the ground. Wait, it gets better than that, daylight. [crosstalk]
Bill: How does that happen?
Adam: Exactly right, because the pilot of one of the planes was in the stupid zone. All the factors are present. I wrote about that in the book. The key thing is this, because when you hear about that, you’d say, “How is that possible?” Or, “I would never do something like that. Surely, I would have heard.” No, the real takeaway is, in certain situations, when the conditions are present-- and these, by the way, are pretty easy conditions to get to in modern life. Information overload, intense focus on something, where everyone's always in a sense of like, “Oh, I’ve got to do this right now,” you're already in the stupid zone, and you're going to be doing stupid things. There's so many built-in redundancies that save us, we don't realize, but they've saved us. Don't worry so much about the why, just recognize that when those conditions are present-- again, two planes collided on the ground in the daytime, nearly 600 lives were lost. How the heck? You could see in traffic, two cars dinging each other, but two planes colliding? That takes a lot of effort, in the daytime, on the ground.
Bill: Yeah, that's amazing.
Adam: Yeah, that's how powerful these factors are once you're in the stupid zone. Again, they affect us all. It’s just most of the time, we're not flying planes, we don't have to deal with that, or even taxiing planes. Most of the time, the decisions we make, there's not a lot on riding on any one of them. It's not often we get into those. But an investment decision, for example, you’ve got to be really careful, because around investing, same thing, you're dealing with information overload, which is why it's really important that you have a process, so you could be in the stupid zone but the process is going to save you. Okay, I've worked out all the parameters here, because I know once it starts going, if it's going against me, my emotions are going to kick in and I'm going to be looking for confirmation bias. Navy SEALs know you don't ever enter a territory until you know how you're going to get out of it. You've already got an exit plan. That should be true with any investment. You know how you're going to exit it. Even if it's exiting at a loss, okay, got to know that. Yeah, that’s stupidity.
Bill: I like that. I appreciate you so much sharing your thoughts. You're one of the people that I've wanted to talk to, I said it earlier, for so long, because the way that you frame how you think has really actually changed my life. It may sound silly to hear on your end, but I hear a lot of--
Adam: That’s very nice. Thank you.
Bill: Yeah, I hear you a lot in my head in different ways. One of the things that I've wondered is whether or not you're experience as a boy, for people that don't know you, you were stuck in a hospital bed for a long time, what, two years, right? Or a year and a half?
Adam: Two and half years. Yeah. [crosstalk]
Bill: Do you think that that enabled you to develop, like supernormal brain power in a way because I was listening to-- Tim Ferriss and Josh Waitzkin were talking about how superpowers and the negative things in your life are very closely almost interconnected. It's a thought that I've had as I've listened to you whether or not that experience in your life trained you to escape to your head in a way that a lot of us don't have to.
Adam: Yeah. Well, I was in a hospital bed for two and a half years, between four and six and a half. It was Blythedale Children's Hospital, which was started by Eleanor Roosevelt, because her husband had polio. All the kids in the hospital had long-term illnesses, like me, but I was one of the few stuck in a bed like. I couldn't even be in a wheelchair. I had to be in a bed. Remember, Forrest Gump? Remember, in the beginning he had braces on? I had those braces on, but I was in bed, I couldn't walk. I was in bed. I had to wear those braces. Anyway, so I just looked out at the world because that's all I could do. I could just look at it. Think about it. With Josh and Tim, it's true, a lot of superpowers come from dealing with the situation. I talked about this actually-- I don't know that I've ever actually fully ever fleshed it out but the superstars in any domain were never the most talented. You can't be. There's some defect that they had that forced them. Who has better fighting ability? The Hulk. Now, you go back to Hulk or Bruce Lee. I'll tell you Bruce Lee does because the Hulk doesn’t need fighting ability, destroy.
There was a great film, shoot, it's called in In Search of Greatness or In Search Excellence, but it deconstructed Gretzky, Rice, I'm trying to think the other two, Michael Jordan, couple other people, and all of them, their abilities were dealing with things that were actual weaknesses. For example, Wayne Gretzky, few people have ever dominated a sport the way he did. In the Oilers-- No, Gretzky was, I don't know, 6’1”, 6’2”, still pretty strong guy to make it to the big leagues, was the weakest guy on the team. He knew starting off, “There's no way I'm going to survive. My career, I'd be crushed. It's just too brutal.” So, he developed a style of play that involves avoiding contact with the others, going behind the goalie. His dealing with that, in other words, dealing with like, “I can't deal with the brutality of it,” forced him to develop a skating style, it was the best. Certainly, one of the top two or three ever. Who was it? This was before your time, but there was a guy, Dick Fosbury, who invented the Fosbury Flop. The way high jumpers go over the bar now, they used not to do that. They used to go over at belly first, but Fosbury couldn't do that, he couldn’t master it. One day he decided, “I'm just going to go over on my back,” and then set a world record because he couldn't do it the right way.
Your superpower, interestingly, can evolve out of a weakness, or overcoming a weakness. I couldn't interact with the world, but I can think about it. Okay, so that's what I'm going to do. Josh and Tim, we talk about that. A lot of times it comes from overcoming a weakness, or the weakness itself reveals like, “Oh, I’ve got to develop something, a workaround.” The workaround winds up becoming your superpower, no one else can-- I'm thinking, Muggsy Bogues was 5’1” in the NBA. You think a lack of height would be a problem, but it wasn't because it was a problem for the big players. “Oh my God, how am I going to deal with this guy? He's going in between our legs.” What most people would perceive like, “Oh, you're 5’1”, there's no way you're going to make it in the NBA.” Like the average height is, whatever. “Okay, I'm not going to play that game. They're going to play my game.” He was the best free throw shooter, because he knew, “Okay, if they're going to follow me--“[crosstalk]
Bill: I’ve got to get my free throws, yeah.
Adam: They're going to follow me a lot, but because I'm 5’1”, they're going to stumble over me. He was the best free throw shooter. A lot of it comes out of either overcoming a weakness or you develop a workaround that becomes actually your strength.
Bill: Well, I'm glad that you developed it, because I had alluded to some of my personal-- I guess growing up, I had a better than many, but I've had a fair amount to deal with. Some people have said, they think that I have higher-- a very high EQ would probably be my superpower. I think that without what I dealt with, it would have been impossible to develop. The other way that I learned to cope with some of that stuff was to talk about it. I didn't know how to deal with a lot of the pain keeping it in. It turns out that I think what a lot of people like what I'm doing is, I talk about some of the parts of life that other people are maybe not willing to talk about that are in the industry, or it's uncomfortable, or something like that. It's been an interesting hack. I've always wondered that about you whether or not you thought that that moment in your life created, some of the greatness that we get to enjoy now and I just I appreciate you so sharing it because I mean it, man, from the day that I heard the very first podcast that you did, I like the way that you looked at the world. I've consumed a lot of them. I really appreciate you doing it.
Adam: Well, and so you're doing the same. It's all about connecting with others and passing on what we've learned, and you’ve still got lots of learning, and I do too. Wow, really. Even just in the last year, I look back and I go, “Wow, I was a rank beginner last year.” I thought, “Wow,” that final thought, one of the greatest directors of all time, the Japanese director, Kurosawa, at the age of something like 82, or 83, was accepting an Oscar from his two biggest fans, George Lucas and Steven Spielberg. They were awestruck. He is accepting the award, but he said, actually, through a translator, he said, “I do not feel I've earned this award.” He is one of greatest directors of all time, “because I'm just beginning to get the hang of my craft.” At 82, he's saying this, “I'm just beginning to get the hang of it, but I'm going to accept this award as an inspiration to myself that one day I might, in fact, merit it because I'm just getting the hang of things.”
Bill: What a wonderful outlook on life. To say that at that age, it's amazing. I hope I say that.
Adam: You will. You're still learning and sharing. Like me, I learn all the time. My birthday is coming up, in fact, it's on Sunday. I use birthdays as a time of reflection. Where I've been the last year, what milestones, what have I learned, what are the mistakes I have made? Then, think about the next year going forward. It's always a process of learning and synthesizing, and just like Kurosawa, just like, “One day, I'm going to get the hang of this.” Life, It's always a never-ending journey. You're always learning. Even Buffett and Munger, they learn stuff. That's all they do. You're quite right. It's not that they spend all their time pouring over 10-Ks, but they are looking for ideas, and new insights and stuff. They do spend all the time thinking and reading.
Bill: Yeah, that has been, I think, one of the differences between-- I mean, there's a lot of miles difference between me and them, but one of the differences is, I consume via audio a lot, but I am always constantly trying to find ideas. I guess what I'm saying to you in different ways is, you have planted more ideas in my brain that I've heard it and just something has clicked. I've thanked you, I mean it, and I had you on the podcast, and I'm just so thankful that you said yes and came on. [crosstalk] I hope that I can add some-- Yeah. Well, I hope that I delighted you a little bit. I wanted to have a conversation that you would enjoy. I know that I had that I enjoyed. Thank you.
Adam: No, really, thank you for the candor and sharing that you did and, for the work that you're doing. It's really important, because the journey that you're on is one that a lot of-- men and women go through different things. A lot of young men especially, because we're not used to talking about things, we think, “Oh, well, that's a sign of weakness. I shouldn't be feeling that.” One of the great things I love about Tim, is he’s utterly fearless. I wrestle with this every day. He's gotten other people to speak out. I was on a podcast, I'm going to the end on this note, I think, is with a couple of vets. I was talking about that and what vets have to do coming back. It's really brutal. First, even going into the military and what has to go on to become a soldier is brutalizing, and of course, battle is even more so and then the veterans dealing with incredible mental health issues. We all do, especially. One of my friends, Steve Cohen, gave $250 million to mental health for veterans. It's such a key issue. The reason I'm saying that is, they said, “Soldiers were not used to asking for help.” I said, “That's not true. In battle, you have guys on your left and your right. That's what you're there for. It's always together.” When you're battling mental health issues, think of it like that, you're in a battle, and in a battle, of course, you ask for help. You're not alone, that’s the whole point.
What you're doing and the honesty with what you shared your own story, including the candor, even just like, “I haven’t been that great a dad,” which means you're a really great dad. It has to be more sharing. Remember the Google experiment, everyone thinks they're all like, “Oh, it's just me.” No, it's not just you, no. Just the importance of sharing, and coming together, and knowing that you everything that you're feeling, there's a group, a lot of people feel exactly the same thing. We can come together on this and share and support each other and have fun, which is really what it's all about it. Have fun. Great. Thank you for sharing. Thank you for everything, the opportunity, I had a blast.
Bill: Well, that's good, and I look forward to future conversations. Hopefully, we have-
Adam: No doubt.
Bill: -kindled at least an associateship and maybe a friendship. We'll see how it goes. But so far, so good.
Adam: [crosstalk] For sure.
[outro]