CHARLIE MEADEN | From gembot.ai
CHARLIE MEADEN | From gembot.ai
Welcome to today's episode, where we'll be discussing the difference between the fundamentals of a business and what the market expects in the future. Charles Meaden is the CEO and co-founder of gembot.ai. We discuss his early desire to be an angel investor to the development of a successful long-short investment strategy.
I started to look at public markets and how could I come up with a worldview that was constructive and worked for how I thought and looked at the world, nd then how could I basically represent that through investments. So I spent many years researching and reading many, many books with many different disciplines in the investing world when it came to, you know, from quants and AI to fundamental value investors to Austrian economics and reflexivity and, the psychology of the market.
And then becoming a real fan and, you know, reader, listener, researcher of history. History is great because, it shows you what sort of market psyche and market behaviors happened in the past, and you can garner a lot of information, from that, recognizing the fact that it's not the same and it's not gonna be like we've had before, but there might be some similarities and some technical kind of wisdom that you can gain from that.
Charlie, a tech investor and entrepreneur, has left an indelible mark on both the gaming and financial worlds. Starting his career as a goldsmith, he ventured into technology and built a highly successful gaming platform that captivated a global audience. Now, Charlie is spearheading gembot.ai, an AI Investing assistant and Modern Wealth Platform that revolutionizes the way people approach their finances.
With an insatiable curiosity and a deep understanding of market cycles and Austrian economics, Charlie's ventures have consistently pushed the boundaries of innovation. His gaming platform showcased his ability to understand user preferences and capitalize on emerging trends, solidifying his reputation as a visionary in the tech industry. Today, gembot.ai stands as a testament to his determination to democratize access to intelligent financial insights, empowering individuals from all walks of life to make informed decisions and secure their financial futures. Charlie's passion for merging technology with financial acumen continues to shape the landscape of modern investing and inspire the next generation of entrepreneurs.
TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE
Sharesight automatically tracks price, performance and dividends from 240,000+ global stocks, crypto, ETFs and funds. Add cash accounts and property to get the full picture of your portfolio – all in one place.
[00:00:00] Philip: G’day, and welcome back to Shares for Beginners. I'm Phil Muscatello. Today I'm joined by Charlie Meaden G’day Charlie.
[00:00:15] Charlie: Hey, thanks for having me on.
Charlie was originally trained as a Goldsmith, and the money from that career helped him get into technology where he got involved in a recycling startup in the US where he ended up building their first product to help incentivize college students to recycle more.
With a bit more confidence. He moved into building a gaming platform called Uproar, which grew to over 400,000 users and was sold. Oh, you say not a major success. Why do you say that's not a major success?
[00:00:59] Charlie: I mean, well, you know, when you start a startup and you, have the ambitions of taking over the world, you have an end state that you want to get to.
And the journey didn't get to the path that, we believed it could have gone to. And you know, we went with an approach that worked for us at the time, but wasn't what we originally envisioned, but we learned a lot along the way. And, you can see other players in the market that took it further than us,
you know, as an example, skills, which is a public company now, which did some similar stuff to us.
[00:01:30] Philip: So you were expecting a unicorn, were you?
[00:01:33] Charlie: Yeah, I mean, that's what we were doing. Yeah. That's why we went out to do it. We wanted to, you know, incentivize gamers and provide, kind of air Mars for video gamers and, a place for them to compete and, basically engage with gaming and eSports.
And we did that. So from that perspective, it was a success. But, you know, did it, become, a $300 million company? No. So,
[00:01:56] Philip: so you've become an investor in the meantime. Then you've focused your intentions on investing. When did that start and what was that transition like?
[00:02:04] Charlie: Yeah, so, you know, leading up to the, acquisition which was like an aqua hire. I had some extra capital and I didn't have enough capital to do angel investing effectively, which was originally what my interest was because of technology and my, Passion for technology and startups and, building businesses and creating.
So I started to look at public markets and how could I come up with a worldview that was constructive and worked for how I thought and looked at the world? And then how could I basically represent that through investments. So I spent many years researching and reading many, many books with many different disciplines in the investing world when it came to, you know, from quants and AI to fundamental value investors to Austrian economics and reflexivity and, the psychology of the, market.
And then becoming a real fan and, you know, reader, listener, researcher of history. And history is great because, it shows you what. Sort of market psyche and market behaviors happened in the past, and you can garner a lot of information, from that, recognizing the fact that it's not the same and it's not gonna be like we've had before, but there might be some similarities and some technical kind of, Wisdom that you can gain from that.
So after a, you know, probably three years of reading books I came up with my own strategy, my own systematic strategy that worked for me. Yeah,
[00:03:37] Philip: and it's a long short strategy. So break that down long is like you're buying a share and you're hoping for it to go up. And then short means you're gonna make money if it goes down.
That's right. How did those two forces balance out with each other?
[00:03:48] Charlie: Yeah, so, originally because of the timing of the market, it was very much focused on going long on companies where the market basically, Expected that there was some sort of permanent impairment to the business that was gonna mean they were never gonna be able to develop.
And their share price reflected, that view, that consensus view. And, you know, we were briefly talking about reflexivity before, but basically looking at where there had been a disconnect from the fundamentals where the market participants, the largest group of market participants, basically their expectation had.
Become divorced with reality. And then I would buy the stocks. And I had a very specific way in which I have rules that I go about my portfolio construction so that I can, you know, dollar cost average effectively so I can have, decent position sizing, and I can hold on to these positions and have some volatility in this strategy.
Remember, this is a single strategy. I have other assets and you know, put other money away in other kind of constructions because, that's for, that part of my wealth. Right? But with my active strategy, it's about finding where the market's expectations kind of divorce from reality.
[00:05:06] Philip: Isn't that what they usually call value investing? Just finding undervalued companies.
[00:05:10] Charlie: It's also about price. You know, what really matters? What really matters is what someone's willing to pay in that moment in time. But, fundamentals, they guide, like they're a kind of guide to some sense of reality, right?
So it's a mixture of understanding, not just, okay, what is cheap? But what's the market expectations and are the market expectations gonna grow? Because, you know, look at, Nvidia right now, looking in October, I mean, is it gonna be fundamentally cheap in October? No.
But recognizing that the market expectations could become very, very kind of, creative, right? And you can, compound out really, interesting growth around AI and, you know, hardware. But is that gonna eventuate in a linear kind of 40% a year compounding, for the next five years, for them to.
Validate that valuation, or are a bunch of retail investors gonna end up, you know, holding the bag because institutions have decided to get out.
[00:06:21] Philip: Well let's, break down the Nvidia story. So Nvidia are a chip maker. Basically, they make the chips that power the cloud and, all the computers we use and so forth.
That's right. Is that correct? Yeah. And they've just had a huge. Upturn in price.
[00:06:35] Charlie: Well, yeah. And they're executing well, you know, they're now increasing their revenue because there's a cyclical cycle and an investment into AI and GPUs specifically, that as dominating headlines dominating, investors being like, I need to be in ai because AI is interesting and it is a platform shift in many ways.
But what does it mean for hardware? And, you know, are the trillion dollars worth of CPUs gonna really turn into GPUs? It's the expectations versus reality.
[00:07:06] Philip: Let's just, let's just break that down again, because CPUs are the basic central processing units. That's right.
What's a GPU? And this is more necessary for AI that, suddenly everyone is talking about and wants to be involved.
[00:07:17] Charlie: And GPUs have also been successful in other areas, right? 'cause, they're in gaming, they're in crypto. Obviously because they're in gaming 'cause of how the computation and the graphical nature.
You're also looking at the metaverse. So there are these interesting plays, where you can see, oh, there are markets for these GPUs and people want them. People need them right now, or they definitely feel like they need them. And you know, businesses like Tesla, like any competitors that open ai, Twitter, Facebook, Google, they're all gonna invest in G P U capacity.
But you know, that's also gonna lead to competitors driving into the space and trying to take some of NVIDIA's margins. 'cause right now, obviously Nvidia has a huge. Market share, but that tends to mean that there's more competition, not to mention software and the deflationary effects of optimizing the code, optimizing the models, finding new ways to run these models, on bare metal, repurposing CPUs.
Potentially, we don't know where the technology is gonna go, but what we do know is that. Nvidia is like a staple for artificial intelligence and what it means to kind of. Move into that era.
[00:08:37] Philip: So is that kind of, I mean, we always hear about the picks and shovels story that, you know, you don't wanna invest in the vibe of something like artificial intelligence or lithium, but then there's other companies that will profit by, companies pursuing those kind of, trendsetting aims.
[00:08:54] Charlie: Well, I mean, Nvidia definitely is a, you know, is the shovel, right? In many cases. So, from that case, they're [00:09:00] gonna benefit greatly. The question is, are the revenue expectations. That the market has in line with what will actually eventuate. And these things, like I said, are cyclical, so there's a heavy demand.
People go, you know, they try to invest very quickly and then that cycle's done and their revenue's technically down still year over year, so, we know that these things happen in cycles. And, people get very excited about investing themes, and that drives prices.
And sometimes that drives prices to a point where expectations misaligned with reality. And then there is a repricing in that asset.
[00:09:38] Philip: Hmm. So what was the actual numbers? How much did it go up by? And this was only like two or three weeks ago, I believe. Yeah, I mean, we're recording today on the 15th of June, 2023 just to timestamp
[00:09:49] Charlie: NVIDIA right now, year, today is up 200%.
It's not bad. I mean, it's an incredible run. You know, driven by a very, poor year last year in the market, specifically in technology, very oversold environment. And then some really good news for the industry that they're in. And they do have that competitive advantage right now. So, we can obviously see from their stock prices, a representation of people's excitement for the potential of artificial intelligence.
Is that going to collide with, you know, the economy reality and reality or other variables? Right. Which basically adjust. Expectations and the reality around those expectations.
[00:10:33] Philip: Hmm. So how does that compare with the nasdaq? 'cause the NASDAQ's been pretty good since the beginning of the year as well, so That's right.
Relative to that.
[00:10:41] Charlie: Yeah. Well, so if you look at the trade right now, it's about seven names that have dominated the performance. You know, the SS and P is barely up. If you take out the seven names that have driven the rally, it's clear. And we saw this with the nifty 50 back in the day,
[00:10:57] Philip: is that The Indian Stock Exchange, or
[00:10:59] Charlie: No, it was, the stock market, you know, I think it was in the sixties.
Yeah. And the, staple companies, the largest cap companies dominated the market. You know, there was no price too high for them. Mm-hmm. And now no price is too high for big cap, big tech and AI and you see this at the end of cycles, there's a perceived safety in. The largest companies and it creates concentration and it creates, a more crowded trade.
So for me, I love reflexive cycles, but I personally prefer to trade where no one else is trading, or where the trade is relatively contrarian. Just because I don't want to be caught into a very, crowded trade.
[00:11:43] Philip: Hmm. So you said reflexive in that answer, and we're gonna talk about reflexivity.
So where did the idea come from? How did you discover it and how
[00:11:51] Charlie: so? You know, I've not invented anything here. I have just learned from others. Right. I'm sitting on the shoulders of giants. Yeah. In many cases. And in our strategy, [00:12:00] that's how we've taken my personal expertise and kind of unique take on the world and then merged that with, A systematic approach for one with my background in, programming and, then utilizing, very smart investors' experience and wisdom to then, create rules around how we invest.
And reflexivity is by George Soros, and it is a basically reinforcing market expectation that leads to, drastic moves in price action. Which then, when the expectations divorce from reality, very similar to mimetic behavior, which then leads you to memes and meme stocks, and it's the perfect example of a reflexive.
Cycle that turned out to then shift and reality had to change and those assets repriced dramatically. So that's kind of a very short way to jump from reflexivity to mimetic behavior, which is a riot and starts in a football stadium. But it started from two people having a conflict, right? And then that moves you on to memes and meme stocks because.
These were social movements really. And a very great example of a reflexive cycle that ended up in, you know, drastic up and then a drastic down.
[00:13:22] Philip: Yeah, I was at a riot the other day and a soccer game broke out.
I'm not sure if we'll leave that in, but that's one of my favorite lines.
Okay. So when you're saying mimetic behavior, are you referring to the GameStop saga of a couple of years ago as an example of that?
[00:13:40] Charlie: Well, yeah. That is an example of that mimetic behavior can be outside of investing, of course. Right? Yeah. So,
[00:13:45] Philip: I know we've all seen the memes going around.
[00:13:47] Charlie: Yeah. That's right. There's always those memes that you have an affinity with and a meme that will remind you of a time. Mm-hmm. But also, it's that sharing of that meme. It's the resonating of that meme, that creates viral posts. Right. What does a viral tweet. It's basically a meme, it's mimetic behavior.
It's people being like, oh, yep, I agree. Right? And you see that with, obviously politics, right? Being so, kind of divisive in the modern era. And it's because these mimetic kind of cycles with the internet, can be very fierce and very quick.
[00:14:22] Philip: So do you believe that the speed of this mimetic behavior has increased because of, social media and the internet in general?
[00:14:30] Charlie: Yeah, there are just more nodes, right? And the thing about AI and generative AI is, you know, those are new nodes. Those are new nodes in the game that are gonna affect outcomes because they're participants in the game. For me specifically, I can use agents and algorithms. And just systematic approaches to have, six different views on the market, and allocate in six different ways.
And that's essentially six nodes doing different things along with me on top of that kind of being the, kind of composer of that.
[00:15:03] Philip: So let's just bring this back for beginners. Yeah. For a moment. From what you've learned, what should newcomers be aware of and beware of?
[00:15:12] Charlie: Hmm. Yeah. So,
[00:15:15] Philip: have a minute to think about that if you want. I know, yeah. I've thrown that out of left field.
[00:15:20] Charlie: No, it's a good question. And, what you need to be asking, you know, what I believe or let's say what I ask myself, right? Or how I would say, you know, I approach it, is that I think about, is this behavior somewhat rational?
And can I then take it back to first principles? So basically, Saturday Night Live Bitcoin at 60 odd thousand Elon Musk going on to Saturday Night Live. Is he gonna talk about cryptocurrency and Bitcoin or is he gonna talk about space and electrification? Probably space and electrification.
So when like bitcoin's at 60 or thousand, I'm thinking, oh, this is very exciting. This price of this asset's going up and this guy's gonna have this TV show. Like, what changes you know, before and after the TV show, right? And how does that go to a hundred thousand or whatever the expectation is.
And the best way to do that, or the best way I've found to do that is taking it back to the fundamentals like, Okay. If I'm interested in Ethereum, and this is kind of getting into crypto, which I'm not necessarily bullish on, I'm not at all, but just a quick example is can I compare Ethereum to a traditional business that makes revenue?
And if I can, then maybe I can work out what price I'd be willing to pay for that. And that's the same with any asset when there's a lot of excitement, right? Is okay. When I look at the revenue of Nvidia, in five years, you know, where will it likely be? And am I okay with paying, a trillion dollars for a company that might do, I don't know, 30 to 35 billion in a year? Maybe not. And. Am I gonna be the person that could potentially be holding the bag on something? Right. There's a lot of excitement there.
There's a lot of momentum and fear of missing out. But the great thing about investing is, there's two things that I love about investing. One is me and you can take completely opposite sides on a trade at exactly the same time, and we can both be profitable. That's one thing I love about investing. And the other thing I love about investing.
Is that you don't have to do anything. You know, and this is where, stock market for beginners or stocks for beginners, the stocks matter to a degree, but it's like the environment you create that's really gonna dictate that your success in investing. And that's how do I reduce my expenses?
[00:17:59] How do I continue to purchase assets? You know, those are the two things is can I reduce my expenses and can I take that excess capital and can I consistently build my asset base?
[00:18:12] Philip: And presumably, manage risk as well, and to cut your losses as well, is a big part of it.
[00:18:17] Charlie: And that depends what approach you want to take.
For me, I like to manage my own risk and I put a big emphasis on, you know, the strategy that I've built because it manages. A large part of my liquid net worth. And that's how I want to represent, my view on the market. However, I do have. Dividend based investments and a, pension or a kiwi saver, right?
So I have those as well that I contribute to that generate that also has its own role. And because I'm an active market participant and I love investing and I love markets, Then that reflexive strategy is, you know, where I expect to kind of put my active effort in. And obviously I've automated as much as I can and I use generative AI and different tools to reduce the amount of time I'm spending, to manage risk and find new opportunities.
[00:19:06] Philip: When we first chatted, you also sent me an article that you'd written, was it on Medium or ck? Yes. Medium. I think it was Medium. Medium, yep. And that's about a coming debt crisis. Tell us about that. Why are we heading towards a debt crisis and what's that mean for all our investments?
[00:19:22] Charlie: Yeah, so well, okay.
Yeah, this is cool. So the memo was probably one of the, just I happened to be in the right time with the right head space to gain a view that was kind of consistent with what you know. Then obviously proceeded to play out. And the title was How to Fight Inflation in a Deflationary World and the point there was, Basically we are gonna have inflation 'cause of all this money we've printed and we've just, destroyed, kind of the integrity of, currency and, productivity in general by, distributing out lots and lots of liquidity into the market that took assets up very, very quickly and created a mimetic.
And reflexive cycle of asset, appreciation, mixed with the fact that you're also gonna have a lot of automation, ai, and deflation long term, right? So jobs are gonna look very differently, most likely in five to six, you know, five to 10 years. But right now, obviously in 2021, we had inflation that was going to make.
Managing debt much more difficult. And that's what we're seeing now. And what we're also seeing, of course, alongside that is that certain parts of inflation aren't going down. So it's a very complex time. And you know, if you look at any famous investor right now, they're saying, this is the most difficult time in my life, not my life, specifically in their lives, to actually allocate risk and buy assets.
So what does that mean? I mean, obviously a lot of time has passed. It was September, 2021. I encourage obviously people to check it out 'cause I do think it was, a valuable insight. But obviously the time has passed now and it's irrelevant, right? Because all of that has happened. So what's next? And I think how you treat your investments and capital right, is based on your goals and objectives.
If I'm a, you know, running a systematic strategy and I'm trying to generate alpha. That might look very, very differently to someone that's accumulating to three ETFs that align with their risk profile, right? So I always encourage people to learn about investing and gain wisdom and knowledge because that's obviously the third thing you can do other than, saving, reducing costs, saving regularly, but it's also gaining knowledge.
And obviously generative AI is creating an opportunity for people to learn quicker potentially, and gain context very fast, specifically as well about history. And if you have an insight to history, you have an insight to human behavior, and that may help you be wise in managing risk when it comes to markets.
[00:22:10] Philip: I've got two questions now. I always end up with that. Okay. So you use the phrase allocating risk. Yeah. And that's a different way of looking at investing in a company, isn't it? Yes. 'cause you are you are exchanging your dollars for taking on some of that company's risk. Is that the case?
[00:22:29] Charlie: Allocating. Yeah. Okay. So allocating capital, let's say. Mm-hmm. Right. Allocating capital while managing risk. Yeah. What does the big picture mean? I think it's really important to have a good understanding of like, money, right? Because that's gonna obviously be how you exchange in assets. So understanding you know, when devaluation of currency is happening, that's helpful.
You don't need to become an expert, but it's good to just. No, if you can, you know, and asking those questions, what it actually means, and what it means. So, and as your pool of capital gets bigger, you then start thinking about risk and hedging, and how you want to allocate your capital and allocate your assets.
So I think about, when allocating, assets, when I'm buying, companies, I'm thinking about how productive. Is this company and is it gonna be, increasing that productivity for the next five years? Mm-hmm. And it's a bonus if the market hates it. Right? If the market thinks, for example, when I was buying Tesla in 2018, the market thought they weren't gonna be able to ramp their, car, their model three a mainstream vehicle.
And they have that absolutely done that. In an incredible fashion, and they have one of the most spectacular revenue curves, you know, in history and obviously mixed with that. You've got a lot of interesting opportunities long term. Potential for that business. And they know how to execute.
They know how to be productive. But for me personally, now, the trade you know, is way too crowded. The price is not where I want it, it's not my style of thing, but I can recognize that they are productive. But does that align with their, valuation or what I'd be willing to pay?
Because ultimately it's what I'm willing to pay. Does that align with, you know, how I get view the world or the data that I look at? Cause I look at a number of indicators and a number of ratios that dictate whether I would be even interested in an asset.
[00:24:29] Philip: Do you consult charts and have a look at where the price is going as part of your strategy?
[00:24:34] Charlie: A big, you know, for me, I take on themes, really? Mm-hmm. I take on groups of assets with themes and I'm willing to let that play out over nine months, a year. I do some technical analysis. I do kind of look at it, but ultimately it's not the main driver. The main driver are thesises and themes.
That are gonna play out over a period of time longer than, you know, a four minute candle or a four hour candle. But I use the technical analysis as context because I shouldn't be ignorant to the price movement of the stock. But I'm definitely not gonna be like, oh, well, because it has a certain shape, it's absolutely gonna do something because market participants might defy that.
[00:25:23] Philip: Hmm. Yeah, there's very little predictive quality and technical analysis, but it's a good view, way to just have a look at where the price has been and,
[00:25:31] Charlie: I think systems are great, right? Mm-hmm. Like a framework when you are investing, you know, a framework around your risk, around your goals, around how you believe you have an edge. If you think you have an edge or how you are just going to, invest and get a return on your money. A framework and some kind of heuristics and rules around that.
[00:25:52] That's great. I think, you know, that's awesome. Another great, piece of information is again, it's kind of like, context is king because, if you track your transactions and your disciplined with your transactions, you will save about 4% a year.
[00:26:06] Philip: How does that happen?
[00:26:07] Charlie: That's what the studies show is. It's about $2,000 a year. And if you look at the median income, it's basically three and a half to 4%. But it's kind of that intent, being intentional about that view.
[00:26:17] Right? What's going in, what's going out. Same thing applies to investing. If you have a framework, then when it gets difficult, you can. Kind of lean back on the education that you've done for yourself and history to kind of get through that volatility.
[00:26:35] Philip: But that's a difficult part for a beginner, isn't it? Working out what that framework is going to be. What are some of the questions you would suggest that they ask themselves to work out?
[00:26:46] What framework suits their investing style?
[00:26:50] Charlie: Yeah. So I usually start things off with the goals. You know, what do I wanna achieve? What's my objective? What's my immediate objective? What's my, immediate objective, intermediate long-term objectives. Cause that can then help me, work out, okay, how much of my income am I gonna invest?
And then beyond that, for me, I start thinking about, okay, well how much of this pool of capital do I want to do? And how much do I want to delegate off to someone else? Whether it be a super or KiwiSaver, you know, or fund, an E T F or an E T F. Exactly. Yep. Exactly. Or a modeled portfolio, for example.
Mm-hmm. And then how much do I wanna allocate? To my own active investing to try and generate, you know, nonlinear returns, should I say. Right.
So putting in, you know, some rules around how big you want positions, how diversified you want to be, how much you want to actually allocate yourself. And then really leaning on, people that have come before you. And they don't just have to be investors either. A lot of the insights I've gained and that I've applied to investing have come from non investing advice.
And wisdom, you know,
[00:28:02] Philip: have you got an example that you can share?
[00:28:04] Charlie: There's a book called, yeah, it's not great for the stock market gambling kind of, stereotype type. But there's a book by a professional poker player, in the US and she's amazing at poker but she's a business coach as well, and she talks about, thinking in bets.
I do this not just with investing, but this applies to anything, where there's incomplete information. So, you know, but it's all about am I happy with the decision I made and I'm not connecting that to the outcome? 'cause the outcome might not be desirable. But did getting to that, decision, like you've gotta be okay with kind of getting to the decision.
And then if you disconnect the outcome, then it's easier to make decisions within incomplete information. Because what I wanna be happy about is based on the information I had at the time, did I make a decision I'm happy with? And if not, why is that with the benefit of hindsight
[00:29:05] Philip: and what new information may have presented itself in the meantime.
[00:29:08] Charlie: Yeah, yeah. That's right. And if something's changed, then obviously I have to reassess and make a new decision that might then have some outcomes that are desirable and not desirable. But it's about, you know, really disconnecting from the kind of. Identity of outcomes and decisions, I guess. 'cause it's the outcomes that tend to affect us more than the decisions, if that makes sense.
[00:29:34] Philip: It does. Now, as we were hurriedly putting together the topics for this, yes. Podcast before we started talking and, hit record, you mentioned an Austrian economist and I can't remember his name. Was it Schrager?
[00:29:46] Charlie: No. It's Marks Spitznagel.
[00:29:49] Philip: Mark Spitznagel who's associated with Nicholas Nasem Taleb, I believe.
[00:29:53] Charlie: Correct. And they run a fund together. Mm-hmm. And they do tail risk hedging.
[00:29:59] Philip: Yep. But just to start off with this though, I just, reading The Black Swan by Taleb Yeah. Was something for me that changed my life. Just the idea of the Black Swan is that it's an unexpected event. You don't expect, you know, there's something that so totally unexpected and it made me so realize how unexpected, unexpected events can be.
And, he gave the great. Example of, what was it? The M g m casino in Las Vegas in the book. Right. And how they insured themselves up the wazoo for everything. But, for example, they had those line taming, the line taming team they ensured that a line would not attack someone in the audience, but they had no insurance that the line would actually attack and kill either Siegfried or Roy.
I can't remember which one it was. Right. They also didn't realize that one of their employees, rather than. Putting in a piece of paper that had to go into the gaming board each month he wasn't doing it. And for years he was just putting him into a filing cabinet and no one knew, and they had no idea that this action was gonna cost them hundreds of millions of dollars in fines.
And it really brought it home to me for what a Black Swan event really is. It is that unexpected that you can't foresee
[00:31:16] Charlie: well, interestingly, so I love the Black Swan and I've read it. Mm-hmm.
[00:31:21] Philip: Was I correct in that, in those, that characterization that story?
[00:31:23] Charlie: Yeah. Yeah. It was really good actually.
And, it talks about the unknown event, however, you know, if they could have easily, rationalize that. Right. Because it was a problem in plain sight. Right? Yeah. So there's another book called The Gray Rhino, which is by Michelle Wacker. Hopefully I pronounce her name right.
And that kind of, it's like the black swan. Very similar, but it kind of is saying, no, these are actually not black swans. These are gray rhinos and they're stampeding towards us and we just choose not to look at it. Hmm. So you know, I like the Black Swan, approach and I like what they've done at Universa, which is the funds that they're a part of Mark and, the to lab and they buy insurance.
Right, so they buy on insurance all the time, and they buy insurance so that when a event happens that is unexpected and a black swan, then they might be able to benefit from it, and that's where Austrian economics comes from. It's all about buying insurance so that these events that aren't supposed to happen, that always happen.
Are then covered. And you know, a lot of them are spending kind of 3% a year, I believe, on that insurance and taking a lower return during good years, and then in very bad years not having that drawdown, which the drawdowns can really affect your portfolio, right.
[00:32:50] Philip: Hmm. And that's the point. I mean, we're talking very theoretically here is but the point is, is that these kind of events do affect markets.
Yeah. And you dunno where they're gonna come from. How outta left field, you know, we didn't expect a pandemic in 2020. The start of 2020. But these things do suddenly happen and nobody expects the Spanish Inquisition.
[00:33:08] Charlie: Exactly. Yep. Absolutely. But some people do. Some people see these things coming and they just happen to see them.
Not everyone's gonna see them, but some people see them and they get an inkling and they're like, oh, maybe I should do some digging. Maybe I should do some, kind of research around this and look into, you know, what are the potential unintended consequences of, what's going on. Around, like for example, credit card debt that's going through the roof in America, right?
What are the unintended consequences of that? And is that gonna affect anything else? Is that gonna affect my portfolio? I guess is, you know, what a lot of people ask. But it's about personalized, goals and kind of approach. So, you know,
If you wanna buy growth companies and hold through long cycles, you are gonna have a lot of, volatility, most likely in your portfolio over the long term. But if you know, if you are right, in your picks and your approach, then that could compound that a great rate over a long period of time.
Doesn't necessarily though mean that, you won't have some drawdowns. Yep.
[00:34:10] Philip: Everyone wants to feel like they're Michael Burry and the big short, don't they?
[00:34:15] Charlie: Yeah. Stanley Druckenmiller said this interesting thing the other day in an interview. He was like, shorting is a lot of fun. But I'm not sure I've made much money from it.
Mm-hmm. And you know, if you're shorting, there are a lot of people that are incentivized for your short to fail. Yep. And. It's a great way to represent a view. But when it comes to shorting, it's costing you money to be in the trade and you may end up, Putting yourself through more harm than you need to.
Right. Yeah. Making it too complex.
[00:34:47] Philip: So tell us about Gem Bott and, is it still in the stage, it's you're tinkering in the shed with it? Or how far off are you launching?
[00:34:55] Charlie: So, you know, we are taking on customers that, are a great profile for us that we wanna work with and basically help people manage and execute their investment strategies and be essentially a AI investing assistant and wealth management platform in your pocket.
So, wealth managers cost two and a half thousand to, you know, $10,000 plus a year. Can we help people, basically manage their own strategy for their wealth, and then, allow them to execute that and, learn, use the generative AI and use, systems to gain more insight and, kind of.
Marry that with your goals and your risk, appetite to then make investing easier, but also, saving time and making sure the cost is low because without, you know, financial advisors and wealth managers, you're able to bring the base cost down potentially. And then only engage with those professionals perhaps when it's the right time without having this huge kind of blowout of costs.
'cause in the early days when you're trying to accumulate, you need the cost to be low and you need consistency. And ultimately, gem Bot aims to help people, get rich slowly.
[00:36:09] Philip: Okay. So what's the web address if listeners are interested in finding?
[00:36:12] Charlie: Yeah, so, if any of you're interested in becoming more systematic and utilizing AI and automation, Into your investing journey, then come to Gem bot.ai, and join our wait list for our multiple features and I'll most likely reach out to you personally and show you through the product and get your feedback and get what your issues are.
As investors in this market and what you need solved so that we can help, you know, train our, agents and train our, AI investing assistant to fulfill that better for you.
[00:36:49] Philip: Fantastic. Charlie Meaden, I think we've got an episode out of that with very little preparation. Thanks for joining me.
[00:36:55] Charlie: Thank you.
Really appreciate it.
Any advice in this blog post is general financial advice only and does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs before acting on the information. If you do choose to buy a financial product read the PDS and TMD and obtain appropriate financial advice tailored to your needs. Finpods Pty Ltd & Philip Muscatello are authorised representatives of MoneySherpa Pty Ltd which holds financial services licence 451289. Here's a link to our Financial Services Guide.