My First Million
00:05:30 · Shaan Puri
[00:05:30] S1: Now we've had a couple of different types of investors on the podcast in the past. We've had like the Howard Marks, Ray Dalio types, And I would say a lot of what they talk about, there's kind of three ways to win that I've picked up. So one is superior temperament. So, you know, the kind of Buffett model of, you know, be greedy when others are fearful, be fearful when others are greedy, people who can handle swings better than others, and that led to superior returns. The second one was like an informational edge. They understood something about a technology or a market and where the puck was going, and they understood the implications of it better than others did. And then the third is just straight up arbitrage. You know, I'm buying a ETF, and I realize that the underlying 100 stocks underneath it are not priced exactly in, you know, in sum to the ETF price, and I could just kind of with no risk make a spread here, and I'll do it until that arb disappears. Were you one of those three, or were you a fourth way of making money?
00:06:23 · Bill Perkins
[00:06:23] S0: I would say we were one and two. We weren't the arbitrage. We were one and two. So the idea is is that, you know, the market is comprised of a lot of people who who are, you know, some people punting around and just just straight gambling. People that need to hedge, and then people who really, really understand the market very well, study every single aspect that drives supply and demand. Right? And then what may happen, and then we'll have a position based on that irrespective of your superior knowledge. If you are not stoic about losses and can handle that, your prefrontal cortex will not work while your amygdala is going crazy. Right? Or you're thinking about, wow, I lost a bunch of money, or you're that type of person that needs five wins for every loss because that doesn't exist in trading. And so no matter how how bright you are, you need to have that temperament, that stoic temperament, that ability to handle losses, or be robotic about trading.
00:07:28 · Sam Parr, Bill Perkins
[00:07:28] S2: But your temperament is a little bit different, and I kind of find it more interesting. So like we've had, like you said, Howard Marks, let's say. Howard is sort of an academic. He's like part philosopher, part academic. Same with Ray Dalio. Like they're sort of this very unique type of thinker. Your attitude from just reading about you, you appear far more Texas cowboy. Like when I read books about like H. L. Hunt, you know, one of the guys who like got oil going in Texas in the mid, you know, 1900s, It seems like you have that energy because it seems like you are way more risk on than some of these other guys that we've mentioned. Is that accurate? [00:08:10] S0: To certain, it depends on the product you're pushing, right? Like our product is like a high vol product. And so like, I always say that, hey, this is a fund to get rich, not stay rich, and get rich is concentration risk. So it comes off as yeehaw, but it's really a thought out thing. Can invest in my fund and you can lose 100, but my fund can also return 300, right? So like, it's really the expected outcome and what are you trying to do here? [00:08:40] S2: Did you ever almost lose it all? [00:08:41] S0: Yes, couple times.
00:08:41 · Bill Perkins, Sam Parr, Shaan Puri
[00:08:41] S0: Yes, couple times. [00:08:43] S2: Hey. This is one of those episodes. So I don't wanna show you my notes, but just imagine this is full of notes because the other pages are. Shaan and I have been sitting here taking notes for this episode. And whenever that happens, what we decide to do is make life easier for you and put all of our notes into a document that you can just click here in the link below and download. It just makes your life a lot easier. So no need to take notes. Just download what we did. And we made it pretty actionable, very easy to understand. Click the link below and get it. Now enjoy the rest of the episode with Bill. What were the what were the swings in numbers? [00:09:15] S0: Down 50% to plus 250. [00:09:18] S1: On how much money are we talking about?
00:09:18 · Shaan Puri, Bill Perkins, Sam Parr
[00:09:18] S1: On how much money are we talking about? [00:09:20] S0: 100 and something million, 200,000,000, you know? So a 100,000,000 to 250,000,000. Yeah. But, you know, in a year and then we go through the winter, we build that up, we chop wood, and we go there. And that's why I like to, you know, we say... I said the name of the game is to stay in the game. You know, we're in a market that provides edge to people that really study it and keep their wits about them. And so if you are able to not completely blow up and get knocked out of the game, you will eventually have outsized returns. It's the same thing with insurance. Right, like you're saying like, oh, they're cowboys. These insurance insurance guys wrote these insurance policies against hurricanes, and then two hurricanes came, and they have a terrible year. Like, some almost get wiped out. Right? But then they keep writing insurance the next year. The insurance goes up, and they just print money and print money. And so unless you're in the arbitrage game, you will have a bad you will have a very bad year. [00:10:13] S2: Shaan, this seems like your style a little bit. How does it look? [00:10:17] S1: Do enjoy myself a little gamble. Now, let me ask you a question. You seem today like you're a pretty chill guy and you have all these hobbies and interests and friends and a kind of well rounded life. But everything I know about traders is that they... I asked one guy, Were you kind of a maniac back in the day? He's like, dude, we were pissing [00:10:36] S2: in Coke bottles on the floor.
00:10:36 · Sam Parr, Shaan Puri, Bill Perkins
[00:10:36] S2: in Coke bottles on the floor. [00:10:37] S1: You don't... You know, it was intense. Like, the intensity of trading is crazy. You know, you wake up at certain times to check what's going on in Tokyo and blah blah blah. [00:10:46] S0: Yeah. [00:10:46] S1: Were were you... Did you have a decade of your life where you had to be a bit of a maniac or no? [00:10:50] S0: Yeah, you become obsessed with the puzzle and that obsession helps you to have informational knowledge edge or to think about things that could happen that other people are not thinking about and scoop up the money. And so I think that happens to all traders to whatever they're trading, right? Like, it is a very, very difficult thing to do, it's complex, there's many variables moving around, and you have capital at risk, so you're always whenever you have a position, you're always working. You're never off, right? [00:11:22] S1: Knowing what you know now, would you have advised your younger self to go into that field or would you have said, Hey, just build a company that's gonna sell a product? [00:11:29] S0: Knowing what I know, I would've went into equities. It's just much bigger. And it's... You know, guys have $6,000,000,000 funds, $10,000,000,000 funds, right, with, like, what I would consider okay track records. You know what I mean? Or not that exciting track records, and you get positive drift on your side from the stock market. [00:11:47] S2: Does the skill set translate? So equities meaning you would you would evaluate different companies and figure out which ones are