ANDREW PAGE | from Strawman

In this episode I welcome back Andrew Page, the founder of Strawman.com, an online investment club for investors to exchange ideas and debate on buying companies on the ASX. Andrew attempts to uncover hidden gems in the Australian small and mid-cap sharemarket, blending meticulous research with a community-driven approach. His latest blog post, Four Inches into the Future, was inspired by a quip from former Goldman Sachs CEO Lloyd Blankfein. It discusses the value of focusing on what’s “reasonably knowable.”

From evaluating small-cap growth strategies to managing the emotional rollercoaster of market cycles, Andrew offers practical advice for both novice and seasoned investors. Whether you’re curious about sustainable growth, risk management, or the power of community-driven investing, this episode is packed with actionable insights.

• Focusing on the Knowable: Andrew explains how he evaluates small and mid-cap companies by sticking to reliable data and avoiding speculative forecasts.
• Managing Small-Cap Volatility: Small-cap stocks can be a wild ride. Andrew discusses strategies to mitigate risk while capitalizing on their potential.
• The Role of Humility: Andrew reflects on how staying humble has shaped his investing journey, helping him avoid costly mistakes.
• The Power of Community: Through Strawman.com, Andrew taps into the collective wisdom of a passionate investor community. He reveals how peer-reviewed research influences his decisions, especially in the small-cap space.
• Advice for New Investors: For those dipping their toes into small-cap investing, Andrew shares tips to avoid common pitfalls and build a disciplined approach.
• The Story Behind Strawman: Andrew opens up about what inspired him to create Strawman.com and his vision for its future.
• Staying Grounded: Andrew shares his strategies for maintaining discipline amidst market euphoria or panic.
• Emerging Trends: Looking “four inches into the future,” Andrew highlights sectors and trends in the small to mid-cap space that have him excited.

Shares for Beginners is all about making investing accessible and engaging. Subscribe to our podcast, share this episode with a friend, and join us next time for more insights to help you navigate the sharemarket with confidence.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

It is hard work, it is challenging and it can be very emotionally charged. But understand that plan for that, account for that. It can also be extraordinarily rewarding. You're just not going to get that reward if you're demanding the instant gratification, if you're naive in the, the uh, volatility that you should expect and all of these things. Again, you know, this is really obvious kind of stuff. But there's those that know and there's those that know.

Phil: G'day and welcome back to Shares for Beginners. I'm Phil Muscatello. How far into the future can you really see? Are you a long term investor looking at 5 minute charts? Do you need time to relax more? Joining me today to look at the gentle art of artisl investing is Andrew Page. G'day, Andrew.

Andrew Page: G'day Phil. How are you?

Phil: God, I can't resist that joke. I love saying it like that.

Andrew Page: I love it. Lean into it.

Phil: So Andrew, he is the founder of strawman.comcomm, a private online investment club designed for those passionate about taking control of their financial future. Andrew's built a reputation for uncovering hidden gems in the Australian share market, offering unique insights through detailed research and a community driven approach. Now we're going to be talking about that in and investing in general and the latest blog post. But both of our situations have changed markedly in the last year, haven't it? So I mean I've moved up here to the Sunshine coast in Southeast Queensland and you're in the Lower Blue Mountains just west of Sydney.

Andrew Page: Yeah.

Phil: What's it like?

Andrew Page: It's beautiful. I wish we had done it a lot sooner. It was an economic catalyst for the move and the. So we've been in the Inn west for forever and you know, we love it there. It's a really great seen as you know and, but uh, as you also know things are a bit crazy for the Australian property market. So it was a choice of, you know, pretty ordinary two bedroom unit or a four bedroom house on a big stretch of land next to a national park. And for someone who works from home it was a no brainer. So we made the move and yeah, as I said, it was the best thing we ever did. I just wish we'd done it sooner.

Phil: And I believe bitcoin had a bit to do with the uh, Helping you to make the move.

Andrew Page: Yeah, well, it did. And the share portfolio as well. I'm fortunate enough that it's been a pretty good run.

Phil: It wasn't predic, it preticus, was it?

Andrew Page: Uh, not so much this time around. Prometicus was definitely helped build the business and fund, provide the capital for the business. But yeah, Bitcoin did a lot of, a lot of the heavy lifting on this one. And it was hard to let go as much as look, money, capital investments, it's there for a reason. It's a means to an end. It's not the end itself. But when you're addicted to compounding as I am, it's very hard to let go of something that just continues to compound along. So. But look, as I say, it was uh, no regrets. No regrets.

Phil: And the difficult part, and this is after spending last evening wrestling with a chainsaw. You knowes, you and I, we're both in a Westy kind of guys, we're in a city guys. We're not used to, you know, all of the hardware in this kind of. I mean, how do people live this way?

Andrew Page: Yeah, yeah. Uh, well, you know what? I'm loving all of that hands on kind of stuff. It is something very satisfying about it. It's also been quite educational if I can admit that too Phil. Like just, you know, when I'm toodling about our house and I'm doing stuff because again, you know, I've been a renter for forever. We've talked about that on previous episodes. I've never really been a tool guy. And once, once you start needing to do stuff, you realize how much of a game changer tools are and what a productivity accelerant it is. And it's just I can't help but draw many analogies with the global economy when I'm again toodling about my place going, oh, this is how we as a society get richer. Uh, I can use this chainsaw and I can chop up enough wood for the entire winter in an afternoon. Or I could use an axe and maybe, maybe get enough wood just for tonight. Right? And it's. I know that might be like a little bit of a stretch to draw that metaphor to the broader economy, but that really is it. And when you have those direct experiences, I mean, look, um, um, this is beyond the scope of your question. It is a lot of fun. I love doing all of that kind of stuff. But it's also it, it's also, it was a nice reminder of just like wow, Technology is really the believer that gives Us, everything as a society.

Phil: I think it's also what I'm finding. Well, first of all, not having the pressure of a mortgage, which is great.

Andrew Page: Yes.

Phil: And then of work, even though, you know, um, I, um, bitch and moan about it quite a bit, it does give you

00:05:00

Phil: time to think and it does give you time away from screens.

Andrew Page: Oh, yes.

Phil: Uh, yeah. I think. I think that's why, when I was thinking about the introduction to this episode, is that having time to think and to slow down and to have a much easier, slower pace of life does really help your mental health, doesn't it?

Andrew Page: I 100% agree. Actually, I was having a chat to a friend the other day, and they work in the industry, and one of the pressures with. With the finance industry is that. And in particular in the game that he's in, you've got to deliver, um, recommendations all the time. You know, it's another month, it's another recommendation. What should I buy now? What should I buy now? You've got subscribers, they want content, and. And that's all good and well and perfectly normal, and that's what. What he signed up for. The trouble, of course, is, is that in the market, a. There's not. It's not an. An even distribution of good ideas that come along. You might go for years without a single good idea, and then in a month find 10 great ideas. And between all of that, there is a lot of sort of thinking that just needs to occur. It's why Buffett moved from New York back to Omaha. Right. It's just to get away from it, because we're in a world now where there is no shortage of information. There's an information overload. And just to be able to distill all of that and draw out the signal from the noise is so incredibly valuable. And also just to work on your own schedule, just to wait for an idea to come to you where you can have immense conviction in it, where you don't have to force it, where you can wait for that flower to blossom, so to speak, and then go hard. All in, right? Not all in 100%, but, you know, like, really, really, really know what you own and why you own it and be confident in that rather than, oh, my gosh, it's a new month, another, I need another idea, and it needs to be a new idea. And it's just like, the reality is, I think anyone who's been doing this know that's just not how it is. And it can be very stressful. So the ability to sort of Distance yourself from all of that rubbish and just allow things to take their natural course and not to have to force these things, I think is just such an incredible edge. And yeah, I'm really grateful for. If anyone out there is listening, I would very much encourage you to try as best you can to adopt that mindset. It's particularly hard feel like if someone's had an inheritance or they've come across a little bit of money, you know, redundancy payout or something, you know, and it's just like, oh, I've got to invest this and I've got to invest it now and it can force you to make decisions that you later regret. But just to sort of, as I say, uh, give yourself room for contemplation, give yourself time for those ideas to knock about the old cranium and be ready when they're ready as opposed to when you need them to be ready. And those two will rarely line up. But if you can, if you can have that, that discipline and that patience, I think you're much better for it.

Phil: And uh, one of the great statistics I heard last year, I think it was, and it was, and the figures might not be exactly correct, but you get the idea is that looking at 100 years of ASX data, only 7% of companies have actually delivered returns greater than the underlying cash rate.

Andrew Page: 100%, yep. Absolutely. And the other interesting part of that too, you dig into that, it's of those 7%, it's not as though they were always performing well. Even within that group. There are long stretches where nothing happens or in fact maybe a big drawdown happens and it sits there for a few years. Five years later you look back and it was obviously an incredible return, but it often doesn't feel like that along the way. So this is a game that will, will psych you out again and again and again and you know, you go to sleep, the demons will come, you know, have I got it right? What am I missing? You know, have I got that 7%? And is it reasonable to expect them to perform the moment that I buy them? Or will it just take time? And yeah, I've often thought that the biggest challenge with the game that we're in is not so much the intellectual, but the emotional and the behavioral are ah, really the big challenges. If you can get that part right, you've got a massive edge.

Phil: I just wanted to go back a little bit to you mentioned your friend who works in the markets and who's uh, under constant pressure to come up with a new idea every month. And I mean it's, there's two parts of this. First of all, there's the financial industry that wants to keep feeding people ideas and feeding the beast of financial trends and financial recommendations. But it's not just the financial industry's fault. It's because people want that as well. People want to hear stories, they want to hear about companies, they want to hear ideas.

Andrew Page: Yes.

Phil: Rather than put in the hard work themselves. So a lot of people want to blame the financial industry for doing this, but I also blame people themselves for asking it. And you

00:10:00

Phil: know, I just had a guest on as a financial advisor and he goes to barbecues and of course, you know, he always gets the question what do you think about the market this year? And you mean we all get that, don't we? We all get those people coming up and talking to us about what's the idea, what's going to be that game changing stock pick.

Andrew Page: Yep, yep. It's the same in politics. The re old saying is you get the politicians you deserve. I think you get the financial services that we deserve as well. I mean the old saying Phil, in the industry is when the ducks quack, feed them. Right. And I can tell you because this is sort of the path that I've gone. If you're out there with the service in this space and you say hey listen, it's really hard. Most of the ideas that we generate won't work out. The ones that will work out won't work out immediately. And even when they do eventually work out, it's going to be scary. Do I take profit now? Do I let it run? It's going to be extraordinarily volatile and after 10 years you could probably if do, if you're pretty good at this game, you might get 10, 15% compound per on average. That's not an enticing selll as opposed to hey, come by my service and this thing's going to the moon. We're going to make you rich tomorrow, risk free. Now it's not said like that, but that's very much the offering and let's put out there. And it is because it works know. Do you want the truth? It's like that old New Yorker, uh, magazine cartoon where it's got those two booths. One says easy but wrong answers and complicated but right. And everyone's lined up along the easy but wrong. And we all know this.

Phil: We know.

Andrew Page: No, I'm not, I'm not, I'm not shuding any illusions for anyone listening, but that's just the monkey part of our brain. We want immediate satisfaction. We want easy answers. We want to believe that we can have our cake and eat it too. And of course that's great. I would love to have no risk, high returns, instant returns. But uh, unfortunately it's not the world we live in. It's also why it's an industry where the churn is just unbelievable. So you will have clients come in and then you'll have clients go out. The retention rate is very low. Partly it's because a lot of people out there provide very bad advice. So after a while you think, what am I paying for? You know, this, this person, this service is, this person's not providing a good service. But even when you provide a good service, you'll often see people churn out because they don't fully appreciate what the journey is like. Hey, I've got a bit of money, I want to invest. I've heard the share market can offer some good returns. Sign me up. Okay, I've done pretty well. But I didn't know it was going to be that scary. I didn't know that like 3 or 4 or maybe even 5 out of 10 of the investments aren't going to work's. It's horrible. It's like. So yes, I've made a bit of money, but I'm just going to take it and go into something that's seemingly less risky like property or something else because I don't have to. I don't get a daily ticker, I don't get a daily quote on the price. So it's just the way it is. And again, I'm not saying anything that's new here, but if you can really, really own this idea that it is hard work, it is challenging and it can be very emotionally charged. But understand that, plan for that, account for that. It can also be extraordinarily rewarding. You're just not going to get that reward if you're demanding the instant gratification, if you're naive in the volatility that you should expect and all of these things. Again, this is really obvious kind of stuff. But there's those that know and there's those that know and if you really know what I'm talking about here, you know and understand that and appreciate, know what you're getting in for. It's a hell of a journey, but as I say, it's, it's a life changing one. It's changed my life for the better. I'm not pretending I'm Warren Buffett, but Again, if you can do the sensible thing and you can do it consistently, you don't need an IQ of 180, right? Just. But if you can just stay the courseuse and just consistently apply a reasonable sensible process, you will get there, right? I often liken it to exercise film on the furthest thing from an exercise junkie that there is. But I can guarantee you that if you cut the sugar out, maybe try and do a little bit of exercise every now and again, go for a walk a couple of times around the block, I don't know, do some push ups, you are going to get healthier, you're going to get fitter. It's not like you might, you know, it's like well if I do this, we'll see how it goes. You are guaranteed to get healthier. But guess what, it sucks. It's really hard work and no one enjoys doing it. It's not as fun as sitting on the couch and eating Tim Tams.

Phil: Right?

Andrew Page: But uh, the results are guaranteed and I think it's a really good analogy with investing in the market. I would certainly not use the word guarantee but as close to that word as I could get even if it's just ETF in broad based low cost index fund if I'm just going to consistently save and dribble it into that. Again I can't use the word guarantee for legal reasons but as close as I can get to that word over a 10 year

00:15:00

Andrew Page: timef frame, you know, you're probably likely to on a relative basis do reasonably well. Most people won't stick with the journey as they won't stick with the diet or the excercise because it's hard and it really is. But as I say, if you can appreciate and understand that and you can be persistent, the rewards are there. Super is one of the most important investments you'll ever make. But how do you know if you're in the best fund for your situation? Head to lifeshherra.com.au to find out more. Life Sherpa uh, Australia's most affordable online financial advice.

Phil: I feel like sometimes Andrew, that I'm saying the same things over and over, uh, and over again. And I'm going to do a piece called you've been told. At least you've been told because this is what I want to try and point out to people is that there is not going to be life. There's no easy answer and that you just really need. If I can just get it through someone's bone head once in a while that it's harder than you think. There's no way of just investing in individual companies unless you've got a lot of experience and like you say, doing a lot of exercise. Anyway, I'll get off my pulpit for now.

Andrew Page: It's a hard thing. It's uh, it's a hard thing by 100%. I'll double down on that. Like it is, it is. And the'frustrating thing is you can lead a horse to water, uh, you can't make it drink. So people, people need to be receptive to the message and, and then they need to really own the message and it's hard. But you know, I think most people will come around with've given half the time, but you've got to meet them where they're at and you're at the right time. And the other thing, I mean this is particularly, you mentioned bitcoin before. Like this is, this is most definitely true in that space, right? Like, you know, once you see it, it's very hard to unsee and you just want to sort of tell everyone it's like, oh my gosh, this thing is like so exciting. But 99.999% of the time you just annoy people and they're not ready to hear it and you sound like some weird cult member. So I've learned the hard way that what you do is you just sort of like, you can push too hard. It's like having kids, right? You can lecture them all day long, but at a point they're just going to tune out. So you've got to wait till people are ready for the message, I suppose.

Phil: Okay, so getting back to the blog post. And again, this is all about what we can do and what we can't do. And it's called the blog post is 4 inches to the future. Which is what I'm going to name this episode as well. Just because it's a cool name. In a 2014 interview, Lloyd Blankfin, the CEO of Goldman Sachs and part time Bond villain look alike. We'll find out about that too. Was asked a simple question. How far into the future can you see now? Given Goldman's reputation for spotting market trends before most, you'd expect a confident answer. Instead, he deadpannned, I don't think I could see four inches into the future. Now I know we're mixing our measurements here, but it was really, I mean, sometimes people in the financial industry aren't that honest. You know, I know a lot of commentators who seem to um, they're quite cavalier in making their predictions.

Andrew Page: Yeah, it was a really profound statement that he was making here. And I've come blank on the interviewer now, but, uh, they'basically saying, listen, Goldman's got a really good reputation of making the right calls. How. And look, at the end of the day, investing is making a bet on the future. You are literally putting money on in the hope of a certain outcome or a set of outcomes, uh, coming to fruition. So it's a very logical thing to think was like, wow, these guys are really good at predicting the future. And he wasn't being coy. He went on to say, and I hope I try and convey this in the article, is that he's saying that it's more about scenario analysis and contingency planning. So why wedge yourself to one particular vision of the future? Here's the situation as it currently stands. By the way, that is a hard first step. Like it's called nowcasting as opposed to forecasting. Where are we now? What is the current state of play? Which is not easy to always figure out. But then from there it's like, what are the possible futures? You're never going to predict every possible future. And of the futures you do predict, you're never going to get it right. But you're trying to sort of think, where could this possibly go? And you're gaming it through in advance, going, well, you, let's take the tariff, for example. Maybe Trump doesn't blink and he increases it. What does that mean? And then what? And then what? And then, okay, well, what if he does? Okay, well, what does that mean? And you've thought it through. So when the future becomes the present and that those outcomes crystallize, it looks like you've predicted the future. But what's really happened is you've just been very quick off the mark. Oh, this has happened. Okay, right. That means that this is the scenario. We're going down this path, okay? And these are the positions we're putting on. Everyone else is going, oh my gosh, this just happened.

00:20:00

Andrew Page: What does that mean? Okay, now we've got to figure it out. I guess we should, you know, start thinking it through. Whereas if you've pre thought it through, it feels like prescience. And I'm very big, I've been harping on about this for forever, but I'm very big on this idea of trying to, especially in terms of risks, what can go wrong with my investment? What are the things that I need to look out for? And if they happened, what does it mean? Is the Thesis completely busted. Is it a bit of a speed bump? And we will go on. It means that you don't know if these things are going to unfold in the way that you've accounted for but if they do, you can act instantly, very quickly. It's better than forecasting because otherwise you're saying I need this specific set of outcome to occur and if it does I'll make money and if it doesn't I won't. And that's a ah, much more difficult bet rather than just sort of saying listen, I think this is going to happen but this could also happen and this could also happen and if these things happen, here is my plan of action. I've uh, basically I've got a battle plan already worked out and as I say it looks like prescience when you do it well and it's just about thinking through all these different scenarios and then as I say sort of like having a very high level of situational awareness to let you know which path we're heading down. It's just super powerful. And that's what Goldman has been very, very successful at. And as I say it looks like they're just great forecasters, they're just great contingency planners.

Phil: It's interesting that you're sort of looking at situationally like if you're going to try and work out what's going to go on with tariffs or anything you the now casting that you're describing you could drive yourself crazy and y there's no guarantee that you're going to be right about anything. I mean you might feel something but there's no guarantee on that. I was talking to another investor recently and it was quite interesting the way that he was putting. Because he only works basically always on the company fundamentals m all of his investings based on what he can read in the annual reports and the company reports and the quarterlies because he's doing US stocks as well. And it's interesting that it seems like what would seem to be top down trends can be identified out of the bottom up approach out of those numbers. Like for some reason he's quite overweight shipping stocks at the moment and it's only because the numbers are saying that here is a trend that has appeared out of the numbers rather than someone thinking o out of the tariffs. Well, shipping stocks are going to be undervalued. You know sorry, I'm getting a bit confused here in trying to explain but you know what I mean. Yeah, the numbers themselves might actually show what is happening. Um and affecting these companies in the real world. Yep.

Andrew Page: I mean it'it's very scientific really, isn't it? This is how science works. Here's my hypothesis and I go to look for confirming evidence that confirms or deny it and then I can hopefully build up a reasonable theory that expl things around that. I mean it's all narratives. We're story driven creatures, you know, so I can tell you about a stock or investment that I like and I ll give you a pitch but I'm really just telling you a story here. And you know the way the human brain works is that you know, we don't gravitate towards necessarily what's right. We gravitate towards what's compelling. So you've got to have a good story. You know, a story can be good and wrong or it can be good and right. You know it's right. If as the future unfolds there's more and more evidence that confirms it, I think this is going to happen. Here's my narrative of the future. Here's the framework that I'm working at now. Rather than just go, I am right because I'm God's gift to investing and you know, I'm a genius and this is the only way it can go. I'm just going to look for evidence along the way that refutes it or confirms it for refutes it. No uh, harm, no foul. It's investing. It's a probabilistic game, got it wrong, I'm out, you know, or oh no, actually this turns out that this is the case. I did think that they had a good product, you know and now I'm seeing in the latest quarterly there's been some good sales momentum there. Customer retention has gone up. Average revenue per unit has going on. These are all signs that confirm um, that you are on the right track. There's no guarantee. Um, so yes, I think that's a very good approach. Of course all of these things in any fundamental based approach are always backwards looking, right? They tell you what has happened. We measured something, here it is, we're presenting it to you. This is what happened last quarter, last half, last year. And of course you can't go back in time so you're buying shares today and what's, what's going to, is going to keep happening. But if you can fit a narrative around the facts and they fit really well, like any good, any good theory should uh, accommodate all the variables really well. Just, it's just something to give you a ah, boost of conviction. And know that you're on the right track. Unfortunately, the easiest person to fool is yourself. And I'm a sucker for this as well. So I thought this has happened. The evidence comes out in a way. It's like, gosh, it's really not confirming what I thought. But you would be amazed at the mental acrobats that one can do to preserve one's ego when is

00:25:00

Andrew Page: necessary. Particularly if you're male. Right. Girls are much better at it. But yeah, we're rather pig headed as males. And so it's something that I'm constantly on the lookout for is like, you know, there's just a fine line between conviction and stubbornness, I think. And you've got to have that intellectual honesty to kind of go, listen, it's just not playing out the way I thought. It's time to rip the band aid off here. It's hard to do.

Phil: Yeah, Just another tortured analogy that I've thought of while listening to podcasts, doing uh, garden work because I'm fascinated by black holes. But the amazing thing was, was that they were predicted in 1916. Someone took Einstein's general theory of relativity and this was a mathematician who was in the trenches in World War I, who was a colleague and he was sitting there just playing around with the maths and said, you know, what happens if a star sort of collapsed in on itself and all of its ma was at a single point and just doing a mathematical game. And it turned out that was the maths that predicted black holes. Now, you know, that's the sign, I guess the analogy, the tort. Yeah, the tortured analogy I'm trying to make here is the same with investing is that the maths can show you something that might be confirmed in the future.

Andrew Page: Yes, Ah, absolutely. I mean that, that is the, I mean look, a good theory should describe what you see, but a really good theory should be able to make predictions and unexpected predictions as well. So that is, that is why I think we can look at something like the general theory of relativity and say, ye, look, it's not, it's not perfect.

Phil: It's amazing how much it's been confirmed in so many ways just from thought experiments. You, the power of the human mind.

Andrew Page: Unbelievable. Unbelievable. You know, and so you wonder why people get to a point of, you know, it's just like, o no, this is right. This is a very accurate, maybe not complete because we don't have a complete description of nature, but a very in the domain that it tries to explain in the realm of the very big general Relativity is an incredibly potent Y.

Phil: Let's not get into Quantum.

Andrew Page: Yah. But Quantum too has got some very interesting. So my background is in science. You shouldn't have set me on this path. I've got a degree in microbiology. I love science and I've spent a lot of time thinking about like you, I listen to a lot of science podcasts and stuff as well. But yeah, with Quantum, I mean that, that predicts all kinds of weird stuff, but it's Right. And just to bring it back to investing, that's. That's the sign of a good investment thesis as well. Right? It's just sort of like if you've got a good vision or a good mental model of the world and you've been able to position a company within that and reasonably estimate some likely paths that it would go, you know that you've got a good model. Right? You kind of have to. Because if your worldview is that wrong, any predictions that come out of it must also be wrong if you've got a good understanding of the world and the way it works and the human world. I'm not talking about like the fundamental forces of physics and nature here. It should have some predictive capacity to it. And that's why I've always found investing so fascinating because it goes beyond. It's often sort of seen as some degenerate gambling kind of activity. But I find it fascinating because I've always had a deep hunger, I suppose, for the truth. And as I've gotten older and as I've invested more, I think my understanding of the world and business and the economy has gotten better and better and better, which helps me get better returns. Right. So there is a purpose to it all too. But it also, you can look back on it and go, gosh, I mean, my understanding must be broadly true, otherwise this is the most, you know, improbable set of results that could possibly. If you've got a really bad vision of the world, but you keep getting good returns, like you're just extremely lucky, more likely is you've got a good returns because you've got a good vision of the world. That's why I think when, when Buffet or how it marks or any of these great investors start talking about what they think in terms of policy decisions for the economy. And I listene to them far more than any ivory towered economist working at a major bank who has never owned a business, who has never been in the real world. I mean, these investors clearly, clearly have a good understanding of the way things work because if they didn't they wouldn't have the right returns. So it's a lovely comparison and it's one of the things that particularly more later in life it strikes me as some of the very dominant theories in economics are still uttered with a straight face because they have been so demonstrably to my mind shown not to be true by virtue of the fact that all the economists who subscribe to these philosophies are just consistently wrong in their forecasts. I mean uh, that to me, that just to me says well you're wrong, right? Like not that that particular

00:30:00

Andrew Page: outcome that you predicted was wrong but they're like they're almost always wrong. So therefore you're theory in your hypothesis and your understanding must also be wrong. And it's really striking. It really is amazing. Like some really bad ideas are uh. So pervasive and dominant still in spite of this massive wall of evidence to the contrary. It's frustrating but at the same time I think it's quite exciting because if the world was a purely rational place operating under a very accurate model there wouldn't be much opportunity for outper performance. So we should be grateful that there are misconceptions of the world because as us as direct investors it provides alpha, it provides opportunity.

Phil: That's amazing isn't it with economists that they so many of the theories assume that people act rationally.

Andrew Page: It's just what am evidence do it need righth? No, it's absolute pure madness. But you know they say science progresses one funeral at a time. You know it's very hard to change the mind of someone who's dedicated for to years that their life to a particular ideology or philosophy in economics. But you know, we'll get there hopefully. Some of these ideas have been kicking around for a long time and they refuse to die. And it uh, frustrates me in the sense that you on one hand as I say it's good if you're looking for out performance. It is frustrating because it is these things very much have a real world impact on our standard of living and the way that we allocate very scarce resources amongst our population and you know we've done very well as a species. But I. It's frustrating when you think that we could do so much better if only our politicians and institutions and powers that be had a better grasp on on reality we could avoid a lot of unnecessary pain and a lot of unfairness. But this is the system we've got.

Phil: So when scientific Andrew is looking around at the share market and looking at different companies, where is the absolute beginning of where your filtering process starts? I mean, do you have a checklist or something?

Andrew Page: Not really.

Phil: Do I mean. Or you just sort of browsing around.

Andrew Page: Or you looking at Vibe Investing, Phil?

Phil: Yes.

Andrew Page: Good. Good to see Vibe investing. Now, look, I used to be a very formulate kind of investor. I'd like to look at various ratios and numbers and very strict. It a very. Had a certain appeal to it. But as I've gotten more experience. It's not that I don't. I mean, absolutely, I look at all of the numbers that I possibly can. But you realize, I suppose, that the really important things are never to be found in a spreadsheet. It's the qualitative things. Uh, and look, I'll rattle off some things and I'm sure you'll. You'll be in 100% agreement. You like quality management? Without quality management, what? You just, you just have to have a business and institution that's so robust that it can withstand such idiocy. So it's one of those things that everyone goes, oh, yeah, quality management, I want that. But that's. That's not obvious. There's no metric for that that directly relates to that, you know, or I want a deep moat. You know, a strong competitive advantage is like. Again, there are signs that indicate that there might be a moat present, but there's no one specific measure that will tell you these kinds of things. So they're all qualitative kinds of things. So I think what I really do these days is I try to stay in my lane because the world is a very broad, complex place. And I just. My circle of competence isn't that huge. And as Buffett says, it doesn't. You. You don't need a big circle of competence, but you need to know where the boundaries are. And over time, I've just learned that there are some things that I just don't have the capacity or the skill to divine with any great accuracy. Things like mining, things like biotechnology, you know, they're just very, very, very difficult places to invest. Not because of any malfeasance or incompetence, uh, that might belong to a particular sector. It's just that it's a very, very difficult game to play. What's the price of silver going to be next year? I've got no clue how much is going to be found. What's the cost of production? What are all a thousand things that I have to guess, right? It's super hard. I do better in areas where the business has a far more, or at least the capacity for far more resilience and dependability in earnings and where the economics is very attractive. And while I said before, you can't go backwards in time, there is at least some evidence to show that the strategy is working. The product, the service is desired by the market. People are buying more of it, they're sticking around, they're paying more for it and management are doing it in a way that's highly efficient and uh, acc creative to shareholders. And I guess what you're trying to do is pattern match. You're looking for pattern recognition. What is it that I really want here? And it's just, it's something that again I to go back to our initial conversation, it's not something you can force. So generally speaking, ideas

00:35:00

Andrew Page: just land on my lap because someone is talking about it and you'll go, uh, oh, that's interesting. Maybe I'll learn a little bit more. O that's interesting. And you just keep going, you follow your curiosity. I'm really bad if someone says okay, you need to look at this company and if it's not interested in it or it's there's a few heuristics that are going off that just make me again through experience, you just know this is a tough industry in a tough sector, uh, ultra competitive hyp cyclical, massive capital intensity. All of the things that you just really don't want in a business. It's hard to sort of go on and do the work with that kind of stuff. So you know someone, you here at a pub, you a barbecue, you friend's house online, listening to podcast or YouTube and someone just mentions a stock in your ears or just prick up and you'just keep scratching at it until you either get to a point was like, now I'm really interested, I want to own this thing or no, I'm not interested at all. And so it's something um, I'm all over the place and my answer here, Phil, but I'm really just trying to sort of say it's a very organic process for me. It just uh. And it's just a question of following my curiosity, applying some high level heuristics and just keep going until I each want to reach one of those two end states of either not interested. I not interested. Might just be I kind of, I'm fascinated. But I don't understand it. It's just uh, you know, it's too hard basket. Most of the things that I come across are just too hard for My small feeble mind to wrap my head around. So it just goes off or I'll come to a conclusion that no, I'm pretty high conviction on this and I'm also, I'm also a pretty concentrated investor. I'm not afraid to hold less than 10 stocks. And at this point in time I've probably got more than half of my wealth in just two assets at this point in time. Not by design, but just the way things have gone. But I'm comfortable with that. I recognize that the good ideas are rare and when you do find one and you do see increasing evidence that it is executing well and it's just. It is not a you horse you want to get off anytime soon. And rather than being someone who has a portfolio of 50 stocks and I'm sort of like a jack of all, trade master of none and know a little bit about all of them and you know, it's just, it is not appealed to me. So again, I just. I uh, let it come to me every now and again. It is a rare thing. And every now and again you will come across something which just captures your imagination and fires you up. And, and then, yeah, then, then you go hard. There's. There's no point, there's no point I in my mind of doing a bunch of research and then allocating 1% to it. You know, it's kind of like, well, let's say 10 X's. Like it doesn't really move the dial for you, does it? I want something recognizing how rare a good investment is. If it goes well, then it, it's going to have a material difference to my wealth and my lifestyle. And I'm not saying I bet the farm and they're all on flyers and that, but it's quite buffered. Again, he talks about deersification and it's very. It's a sacred cow that I feel like I'm killing here. I'm not.

Phil: I know we're all supposed to be diversified, but I mean you've got a great deal more expertise than many people. Many people use diversification as a way of managing risk, you know, where it's.

Andrew Page: A hedge against ignorance, they say.

Phil: That's a great way of putting it. But you, I mean you've got so much conviction because you have actually put in the work o.

Andrew Page: Still wrong. Very different. Let me, let me be clear on that. I can be high convict. I've been wrong on very, very high con conviction ideas. But yes, like, you know, I do think you, uh. I got to be careful Here actually, because there are different horses for courses, right? Different people have different approaches, have different levels of interest, have different resourcing in terms of their time, et cetera. But for me, I very much like to be very concentrated. I very much like to have a small bask, but one that I watch like a hawk, rather than having this sort of nebulous portfolio full of all kinds of things that I've sort of half interested in and then lost interest in over time. I just, I've been there, I've done that even when the odd one comes along and it's just an absolute cracker. It's just, it was too small to ever make a difference. And it's sort of like if I'm going to do that, but just buy an index and you go well and, but you just don't have any of the work or any of the stress with it, right? So, um, I want to outperform the market. I feel as though I need to be to, to a degree, reasonably concentrated. And if I'm going to be concentrated, I need to be super, super, super fussy. I need to put a lot of effort into it to make sure, at least increase my odds as best I can that I'm at least, you know, along the right path and be hyper aware of what being wrong looks like so I can back to our original point, be act quickly in case the future doesn't unfold in the way I foresaw.

Phil: So when you're finding something that you really like, do you then wait for the right price? What's your process there?

Andrew Page: Yes, I do. Well, uh, I've got to be careful here. I'm not waiting for a pullback, I'm not waiting, I'm not looking at the current market price and going, I want it to be cheaper. I've got no idea where the market is going and no one does. Anyone who tells you that is lying to themselves or to you or both.

00:40:00

Phil: You can't say four inches into the future.

Andrew Page: You can't. I mean, I've been this game for 30 odd years now and I've met all of these people and the soothsayers just're wrong all the time. Except in fact they're right to the degree that you would imagine. You know, random probability to make you right. Like'm we roll a dice a bunch of time, we roll a dice 1,000 times, I'm going to call it correct. One in six times, like that's just probability for you. So no, I'm not trying to predict the Share price. But I very much got a very keen eye on value. You can do really bad as an investor by buying the best company in the world if you overpay for it. You know, Is Nvidia a good stock? A good company? Yeah, it's a fantastic company. Is it worth $30 trillion? No, it's not. Is it worth a dollar? No, it's not. You know, logically, somewhere between a dollar and 30 trillion is to pick a stupid number, there is a price that makes sense. And so I want to figure out what that price is or more accurately what those range of prices are. Cause I'm never going to be able to work it out. So yes, I. That's a whole other conversation, but I do do a lot of one. It's the final step of the process. The first part of the process is what is this thing? Do I understand it? If I can't understand it, there's no point going on. If I do understand, think I understand the business, how it makes money, then it's a question of saying, well, do I think it will continue to succeed in the future? And then if I think that's true, then it's, uh, okay, what price is a sensible price to pay? And it's only at that point, having done that work, that I'll go look at the market and go, okay, I like the company, I like its prospects. I think this sort of ballpark price, all lower is a good deal. What's M Mr. Market offering me? Oh, he's offering me something that's, you know, 40% above what I think is reasonable. So'in that instance, to answer your question, yeah, I'll wait, uh, I can wait a long time. It might be that m Mr. Market's actually offering me a huge discount. Oh, he's just, you know, more or less in the ballpark of what I think is fair. And in which case, absolutely, I'll buy it. I'm not going to nickel and diam it. You know, I'm not going toa worry about, geez, I thought it was fair value or intrinsic value as people like to say, was $4.32.3. And uh, I's said, you know, $4,50, I'm not buying. I mean, it's so closest to be, you know, uh, silly at that point. But if it's a dollar, then okay, that's a little bit out of this. I'm trying to be. What am I trying to say here, Phil? I'm trying to say you want to be generally right as opposed to Specifically wrong. And this is a game where people love false precision. Again, imagine you and I are both selling services here, right? And your client comes to. Do you like this? Becausees I do. I've done a hyper detailed discounted cash flow model. I've done a big industry and competitor analysis and I've worked out that this stock's true intrinsic value is $6.87.9 cent. Whereas I go geeez, I really like the business. I think it's got a good future. It's probably good value somewhere around $6 give or take 20, 30%. I mean just it just sound, it sounds too reckless, it sounds too vague and believe you me, I would far prefer a far more precise understanding of value. But it's something that you can never know because you can't know the future. Value is predicated entirely on understanding the future. If you know any model that you want to present to me for evaluation, it's garbage in, garbage out. The model is the model is the model. Right. But I, if I'm plugging in growth rates that are unreasonable or a share count or whatever variable I want to put in that's nonsensical, I'm going to get a rubbish answer. Uh, but it will feel I've done the right thing because I've built this complicated spreadsheet and I've put in my best guess of these assumption. It feels like a rigorous process, it feels scientific. But the world is not that precise. The future is not that clear. So I'm just'm look I've always thought if I buying and ah, I like my small cap sort of growth companies. If I'm right on this thing and it's say at a dollar a share in the future it's going to be 5 or 10, $10 a share. I mean do I really care if I buy $0.50 or if I buy $2? I mean anywhere in that range I'm going to get a really good return. By the way, if I'm wrong and this thing is going to go bankrupt, well again if I buy it at 50 cents or $2 it's going to zero, it's 100% loss on there. So you know this false precision. And again I've learned this the hard way more often than not just kept me out of wonderful investments or make me take profits on wonderful invest. You mentioned Prometicus before'got way too, way too obsessed with value on that thing. And again you don't want to disregard value but you will get yourself in trouble if you' this False specificity will get you wrong. So yeah, generally right, not specifically wrong.

Phil: I've got to get back to the chainsaw and being. Being a stubborn male, I'm trying to work out how to put the chain back

00:45:00

Phil: on, um, which I spent hours wrestling with last night. And so, uh, being a stubborn mail. I'm going to read the manual this morning.

Andrew Page: Can I, can I give you. You've probably figured this out, but I was a bit slow to the party. Sharpen the blades. They.

Phil: This is a brand new blade. But uh, yeah, I've got a blade sharpener. I've got a Dremel with a um, blade sharpener tool on it as well, which I enjoy. That's a really nice little job to do as well. Nice peaceful kind of job.

Andrew Page: It's very Zen. Andah. It's very.

Phil: I've got a workbench. I've got a workbench now too.

Andrew Page: It's so cool, right? I mean it's very Lincoln esque, you know. Uh, what does he say? Give me six hours to chop down a tree and I'll spend the first five sharpening the blade.

Phil: That's right. Yeah.

Andrew Page: It's, it's so, it's so true in so many things. But I'll leave you after this. But it's very true in investing as well. You know, spend most of your timeen the blade, sharpening the blades, you know, then pull the trigger. We're all too keen to just start whacking at the trunk of the tree with the axe, you know, and it's just sort of like, no, no, no, no. Do the preparation first and then when you get to the business end of things, it'll be so much a better process. So yeah, keep the axe. Ch.

Phil: So tell us about Straw man quickly. How can people find out more? We've had you one many times before, of course, but we get new listeners apparently sometimes.

Andrew Page: Yeah, just go to. Go to strawman.com. like I never give it a hard sell. The reality is, Phil, it's not for everyone. We're uh, just shy of 500 members. So here's the pitch, right? I said to you before that there are certain pitchures that generally don't work too well in the market. My pitch is join Straw Man. It's rather expensive. We won't give you any advice. In fact, we expect you to share a bunch of your ideas and your research. But uh, if you collaborate.

Phil: Intuitiveity.

Andrew Page: Ye, yeah, but I mean like, that's why I say it's not for every. If you're the kind of person that just wants a hot tip, you know, it's not for you, you know, but if you want to engage and collaborate with some pretty smart investors and it's all very transparent. We track everyone's portfolios. We want to be a meritocracy. If you want to share ideas, challenge ideas, that's why it's called strawman. It's, you know, I set it up so I could put my dumb ideas out there and people could, could knock them over because one way or the other, if they're wrong, they're wrong. And I can find out by losing money or I can find out by someone telling me that I've made a miscalculation. So, yeah, we're just an investment club. And if that sounds of interest to you, check it out.

Phil: Yeah, I love reality. Re just being really blunt about things as well, rather than doing hardcore marketing.

Andrew Page: Oh, absolutely. You get the clients you deserve. I think, you know, some place is that that do the big hard sell and their churn is like 90% because they get people who are there with unrealistic expectations that can never be delivered on. And I've just, I've been there, Phil. I've done that.

Phil: That's another warning for listeners. That's. It is another warning. There are so many people trying to get money out of your pocket by promising riches.

Andrew Page: Yepah. Absolutely. Those that can do. Those that can't teach or something. Is that what it is? Or maybe just those that can't sprue. You've got to be wondering why. Like, that's one of the rules for me. If there was ever a fund manager who didn't have the majority of the wealth in their own fund, that's an instant pass for me. You know, it's just. It's sort of like, well, how can I. How can I be expected to dedicate any serious capital to something that you yourself won't do?

Phil: So, yeah, yeah, I was. My wife is a remedial massage therapist and sometimes not to do with her work, but there's other times because she's always in the garden and, you know, I'm trying to record a podcast and I'm hearing some sort of chopping or hitting or whatever. I said, well, I'm just, I'm trying to record a podcast and well, haven't you got a mute button or something? And I said, well, you know, I try and be quiet when you've got clients. And she went, don't bother. It's not a day spa. And I said you should have that on your website. Blah blah blah. Remedial massage. It's not a day spa.

Andrew Page: Love it.

Phil: Okay Andrew, great to chat again and enjoy chopping and sharpening. I will sharp in every aspect in your life.

Andrew Page: Absolutely. And you too. Thanks for having me on, Phil. It's always fun.

00:49:12

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