TIP578: Fundamentals of Stock Investing w/ Daniel Pronk & Jake Ruth

You're listening to TIP. On today's episode, I'm joined by Daniel Prank and Jake Ruth to cover the fundamentals of stock investing. Daniel and Jake are the founders of Stock Unlock, which is helping transform everyday people into successful investors. Daniel's also very popular on YouTube as he has over 200,000 subscribers on his channel. Daniel and Jake are the perfect guests for the show to help make stock investing much more approachable and easy to understand. During this episode, we cover the key investing lessons they would teach their younger selves. Why compounding is so critical to understand as investors? Why the best investors aren't those with the highest IQ, but those with the best temperament? Why growth isn't always good for a business? Daniel's three main criteria for investing in a company. Why most companies are doomed to have their mode disrupted, as well as the unique tools that Stock Unlock provides and much more. This was a really fun episode to record as we reminisce on the biggest mistakes we made as newer investors in what we wish we knew when we were first starting out. With that, here is my conversation with Daniel Prank and Jake Ruth. You are listening to THE Investors Podcast. Where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to THE Investors Podcast. I'm your host, Clay Fink. And today I'm joined by two guests, Daniel Prank and Jake Ruth. Gentlemen, welcome to the show. Thank you for having us. Great to be here. Thank you so much. Huge fan of the show. Listen to it all the time. I love it. Well, in today's episode, we're going to be doing something a little bit different. Daniel and Jake, they're entrepreneurs and content creators within the investing community. And we decided to bring them on to help us take a little bit of a step back and unravel some of the basics for those who might be newer to the show or maybe serve as a refresher for those that aren't long-time listeners of the show. So I think it could also just serve as a really good reminder for many of the listeners and just get back to the basics because it's so easy to get into the weeds on a lot of this stuff with individual stock investing. And you guys just do a wonderful job simplifying these concepts and making just investing much more approachable, I think, to just your common everyday person. So to get us started here, how about we just have you guys talk a little bit about your background and what got you guys so passionate about investing in the first place? Yes. So my background, I actually have no formal education about finance or anything like that. How I got started investing was just a genuine love for investing. I love money. I love numbers. I've always been good with numbers. So it's always interested me. And then previously before I started my YouTube channel and started creating content, I had a photography business that was growing and producing a good amount of money for me. And it got to the point where I had this money sitting in my bank account and I wanted to put it to work somehow. And that's really when I got started investing. And then started off, made a bunch of mistakes investing on my own, which I'm sure we can get into a little bit later. But it really started my investing journey. And I learned by watching YouTube videos about Warren Buffett, Peter Lynch, Charlie Munger, and just listening to all of the lessons that these amazing people had to share. And basically using that is my education to get started with investing. And then also reading the intelligent investor, which is a very challenging read, especially if you're a beginner, but there is no better book out there for investing in my opinion. Yes, my name is Jake. My background is different than Daniels. So I have been a software engineer for a while. I've always been into numbers, solving puzzles, and things like that. As investors like to say, I had a lot of dry powder on the side from working at startup engineering companies, working in New York City. And I always looked at stocks. They were always just confusing to me with my upbringing in the US education system. No one really told me how they worked. And you could look at the price and go to Yahoo, financial, things like that. But nothing really clicked. And where both of our stories start to converge is I was hiding in my New York City apartment from COVID, working from home, watching YouTube videos. And I finally stumbled upon this person named Daniel Prunk. It finally clicked to me when I watched a playlist he had called reading financial statements for beginners. Until that point, I really did not understand what made a stock price move. But I always had an understanding of numbers. So my passion, although I was investing before that in just mutual funds and not individual stocks, really got ignited. When I saw someone just break down, here's an income statement. Here's a balance sheet. Here's a cash flow statement. And here's how you can value a company's market cap relative to those financials that's producing. I'm getting goosebumps as I say this because it was such an amazing, huge moment for me. That really kickstarted a different path of investing for me to start looking at individual stocks and getting extremely nerdy and passionate about understanding individual businesses, modes, financial performance, management. It was really taking a lot of the things I had done across solving problems with Rubik's hubes, the weird unicycle stuff and coding. And I feel that all of that set me up to just be a huge stock investment nerd. I have a pretty similar background to you guys where a lot of my learnings and lessons came from learning online as well as just making a ton of mistakes on my own along the way. If you guys could rewind the clock and re-teach yourself some of these key lessons that you guys talk about and all the content you put out, what are some of the most important things you guys would highlight and tell yourselves if you were to start over again? Yeah, so for me, one of the main things would be to buy a business and not buy a ticker or a stock price. Behind every stock, there is a real business that is producing cash flow or hopefully producing cash flow for its investors and you are investing in the business behind the stock and that business, what it produces for its investors, is how you're going to get a return at the end of the day. So instead of looking at, oh, well, this stock is going up today or what do I think that this stock is going to do over the next week or month? Instead, just focus on the business behind the stock and if the business is going to do okay, then over the long run, the stock should follow it and as that business grows and makes more money and can return more money to its shareholders, then the stock should follow and you should see higher returns on your investment as well. For me, a lot of it comes down to really understanding what you know and I'm going to try to embody a little Peter Lynch in me right now. If you can explain a stock that you own to a five-year-old, I really don't think that you should be investing in it and something that really grinds my gears especially with Gen Z and millennials is we will do so much research on things we buy, experiences, things like that and you hear about a stock at a bar or something and as Peter Lynch says, people just go and throw their entire life savings into it. I've seen friends lose money, I've lost my own money, unlike others I did not give up and it's just really important to know that the information is out there, it's just a little hard to find and it's really important to have the self-awareness over understanding what you own. A great way to figure this out is if you buy one or two shares of a stock and you are not sleeping well at night and you are thinking about it all the time, that's probably a good sign that you should do some more research. So a lot of what Daniel and I completely nerd out on is really taking deep dives on businesses and like we said before, understanding management, financials, the moat, the future growth of that business and looking at other companies in the sector to really make intelligent decisions on how to invest that cash. Now you can't be perfect but that's way better than investing blind because your friend told you that hey we're squeezing AMC, we're all going to make a hundred X just pile your money and they don't worry about it. Now when I look back at my own journey, one of the things that really got me hooked on this concept of investing, it was really came back to Alice Rotor's book which is called The Snowball. It's a 700 page massive biography on Warren Buffett and I'm from Nebraska so I naturally just like hey, how this Warren Buffett guy gets so rich. So in that book, it talks about how Buffett was raised in Omaha, Nebraska and he built a fortune for himself by investing in stocks and investing other people's money in stocks through the partnership that he had early on in his career. And I think back in one of the big takeaways I had in that book was really understanding the power of compounding very early on in Buffett's life. I remember he talked about how whenever he saw a dollar, he always thought about eventually he can make that dollar turn into $10 or even even more than that and that was through harnessing the power of compounding and harnessing the power of investing. When you think about the stock market, it's pretty amazing honestly that anyone is able to utilize the stock market and then harness the power of compounding through it. And I'm sure you both came through a very similar realization in your own journeys. So how about you talk a little bit about the power of compounding and why it's so critical for newer investors to understand? Yeah, Daniel, I think you're reading that book. I'm going to throw a little on fact in here going back to investing principles. So the classic example of the power of compounding since the human brain can't really comprehend it or at least that's what science tells us. Would you rather have a penny that doubles every day for 30 days or would you rather take a million dollars into which and we'll tell you that if someone's asking you that trick question, you should probably take the penny, but it is still really hard to visualize what the outcome of that will be. If a penny doubles every day for 30 days, that will be over $5.3 million on day 30, which is of course five times the million dollars on the other end of that. Yeah, the snowball is an incredible book. I would definitely recommend everyone read that it's really eye-opening about Warren Buffett, but compounding is very crucial to understand for multiple reasons in my opinion. So if you understand the power of compounding, it causes you to view money entirely differently. So as you said, Warren viewed every dollar as 10 when he was younger because if he could invest that dollar, it'd be worth 10 years into the future. And if the average person can adopt that mindset, then it will allow you to think more deeply about the money you're spending today and what you are spending your money on because something that may cost you $100 today could actually end up costing your future self $1,000. So if you understand the power of compounding and how it really works, then again, you can just view money entirely differently and hopefully save some more money and just be wiser about how you're spending it. And then also, it's important to understand that what the power of compounding, it works amazingly well over the long term and the average person doesn't need an incredibly higher rate of return to become wealthy by their retirement. If you do the math, if you start early enough and putting away money in your 20s or even in your 30s, you only need an average annual return rate of around 8% to end up wealthy by retirement. So if you can understand that compounding works very well over the long term and you don't need these crazy higher rates of return and taking on this massive risk, then you can hopefully avoid taking on a lot of that risk and avoiding some of the hype or speculation that unfortunately a lot of investors go down. So I guess the main takeaway there is just you don't need to chase higher risks through compounding to end up wealthy by retirement. I will poke a little bit of fun at us here, Daniel. We might not be the most fun people to date because of this. So I think we've had this conversation. You're out at dinner, you're with your partner and your partner wants to order a bottle of wine, right? And you're like, okay, the way Daniel and I think about this is, all right, this $60 bottle of wine, that's $60 today, what would that be if I would let it compound in a publicly traded wine company, for instance, assuming their financials are great. So it's a real mindset shift and something Daniel and I are very against, although we have friends like this, of course, we get along with people. What we try to shake it out of them is, oh, life short, I'm going to go get a Ferrari and spend eight or $900 on a car payment. When all those people really want to is be rich and have capital to spend, they're actually taking the actions that are prohibiting that because they're lowering their own personal cash flow. I would argue that they took time to understand businesses and took time to understand how cash flow worked and combined that with compounding, they'd realize that all the dreams and desires that they had if they can just sit tight for a second and make some sacrifices could really be rewarded by changing how they view a dollar. And just like we said before, Warren Buffett said that he knew a dollar can turn into ten. That is exactly what we're talking about here. And it is a little bit frustrating seeing the lack of people that think about money that way. It's one of the people I gravitate towards the show because you bring on so many great money managers and people who have really mastered the art of compounding. And the best part about it is there's so many different angles on going to the stock market. There's different types of investors. There's just a small cap companies. You can just be in the index and let that compound and be more passive. That's totally fine. You could be like Daniel and I and nerd out on individual stocks and being a really deep understanding of businesses that we could then explain to the five-year-old as we like to say. So a little bit of a rip on that. But yeah, change how you view money and you can change your life. Yes. So many good points there. I think the first one that last point you made Jake with like, you know, people going too far and things like car payments, you know, when it comes to investing, it really doesn't have to be an either or type saying either you save like almost all your income and like live like a bare-bones life cycle or you're investing nothing. It really just 10, 15, 20% over a really long period of time adds up. And I was recently reading Peter Bevelin's book. It's called Seeking Wisdom and he talks about Charlie Munger's psychology of human misjudgments. And one of these misjudgments that people have or these biases or tendencies is impatience. A lot of people are just hardwired to be extremely impatient. And then again, tying into the penny example you had, Jake, where one penny if it doubles for 30 days, it ends up being 5.3 million at the end of 30 days. On the first day, you're only getting a penny. And then the second day, you're only getting two extra pennies. But the 30th day, it's doubling over $2 million you're compounding in just that one day. So not only is like the power of compounding amazing from day zero to day 30, you gain so much of that compounding effect, but a lot of the gains of compounding they're seeing at the tail end. So people might, they might start investing and then they look one, two, three years and they don't really see much progress. It's very linear. It's very incremental. It's very small. It feels very small. But what they're missing is it's a crucial part of understanding that long term compounding effect where you have to put in those early years to really be able to reap the benefits of compounding in those later years. Yeah, and I think one of the, I guess you called the problems with compounding as Jake said is our brains aren't naturally hardwired to understand compounding. We think very linearly. So at the beginning when you're investing the first five years, you may not see that much growth. You almost just have to have faith that the numbers are going to work out and that all of this stuff that we're saying here on this podcast and what Warren Buffett says, Peter Lynch, you kind of just have to have faith that it is going to happen for you at some point in the future. And that could be a hard thing to get over. It could be a hard thing to grasp. Yeah. And you made some other great points in their clay to clarify the spending of the bottle of wine. I think it is the balance of the most important part. I don't think people should live frugally to the point where they are making sacrifice over there having no fun of course going power well in the other direction. You also don't want to be overspending. So there's definitely that happy medium. And as you said, 10 to 15 percent I think is great. And before we beat this penny example, like a dead horse, I believe and I'll have to fact check myself here around halfway through. So if you go day zero, one, two, once you get up to around 15, I think it's around $1,500. It's still like very small and point being most of it comes in the tail end and the patience is the hardest part because although even farther on the mind training, I think that society is set up, commercials are set up, all the inputs that we deal with every day from corporation selling product to getting you to live in the now and to spend your money because it drives the economy. I'm not saying that's all bad, but unfortunately a lot of people aren't taught these principles and it leads them to be blind consumers that overspend. And then they end up in debt or they end up in really unfortunate situations. And it just kills me that a lot of that I really believe could be solved by including courses like this and including fundamental investing principles. So I think when a lot of people, they think about investing or they hear other people talk investing, they think that it's something that's extremely complex and complicated. I think some people just use all this jargon and it just doesn't make any sense. So they think maybe they're just not smart enough to learn how to invest. And I wanted to pull in one of Warren Buffett's quotes here. He says investing is not a game where the guy with 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble with investing. So I just want to throw it over to you guys here. What do you think Buffett means by this quote on investment temperament? Yeah, so it's funny because at the beginning of the intelligent investor Warren Buffett actually writes the preface to the book, he says something along the lines of the intelligent investor will supply you with the framework of investing and then it's your job as the investor to supply the emotional discipline and it's the emotional discipline that is arguably more challenging than understanding how investing works and a framework of investing. So the more you can control your own emotions and have emotional discipline, the more successful you will be as an investor. You can be the smartest person, Isaac Newton as a good example actually. He invested in a South Sea, I forget the name of the company that he invested in, but it was a long time ago. And basically this company's stock was going up and up and up and up. It was the bubble of the time and he bought into it, bought a little bit, it continued going up. All of his friends were making so much money so he bought more right near the peak of the bubble and then the stock crashed and I believe he lost something like a million dollars if you work it out into today's capital. And then he said something along the lines of, I can predict the movements of the heavenly bodies, but I cannot predict the emotions of people. Basically saying that no matter how smart he was, the smartest guy arguably to ever live, he still could not predict what was going to happen in the stock market or the emotions of the crowd and of the people. So having emotional discipline and having that ability to not get caught up in the hype or falling in love with a stock or falling in love with a story and really thinking logically and controlling yourself, I would argue it's more important than just simply being smart or having a high IQ and it comes to investing. Yeah, those are all great points. I was actually just recently reading the story of the South Sea bubble with Isaac Newton. He had early in the bubble, he doubled his money and he was happy because he got out and doubled his money in literally just a couple months. And then the emotional side just really, really hammered in on him where he invested three times the original amount practically at the top and then within weeks lost 70% of his money. So, you know, it's really that someone really smart can understand when something's overvalued but when they see all their friends and all their neighbors just giving rich by literally just hitting a buy button on their cell phone is the way it works nowadays. You know, it can be really hard to just sit back, stick to your own process and not going to processes or investing processes or approaches that really don't make sense to you, don't make any sense, you know, logically or fundamentally. And I'm also reminded of Buffett during the late 90s. He was like highly criticized in the media and everyone's kind of harping on him because Berkshire Stock is down 50% while all these hot IPOs are doubling overnight and all these value managers are essentially getting rich just like the South Sea Bowl scenario, but Buffett. He understood his process. He understood what has worked for him for decades and he just knew that there's going to be periods where his approach isn't going to work for maybe a year, two, three years, but it's focusing on that long-term approach, you know, not hopping on the bandwagon when every other value manager is doing it. Just really, really great points there, guys. Yeah, one quick thing to add there. Investing is so oxymoronic. There's one phrase in life where they say, oh, you missed 100% of the shots you don't take, just go for it. The thing is the exact opposite. Talking about Warren Buffett, you could sit there, pitch after pitch after pitch and just let it go by you and the fun part is you can't strike out and investing. You can see a thousand pitches and just wait for your perfect one and it's one of the things I love most. Daniel and I see this all the time is what we talk about on our channels all the time. People run towards these hype stocks, these mean stocks, these SPACs and sure maybe a couple of them are good, but when you ask them why they invested it, usually the answer is I'm going to buy a Ferrari next month or I want to get rich or everyone else is doing it or a common boomer. What don't you see here? Yeah, I just wanted to add that. Yeah, that Warren Buffett example is just perfect. I believe when the tech bubble was also bursting, Berkshire Stock was rising. He stuck to his principles, stuck to his fundamentals and it's exactly what he writes at the beginning of the intelligent investor is supplying the emotional discipline. He supplied the emotional discipline to not chase the hype and stick to his fundamentals and what he believed in with investing and yeah, he may have underperformed for a few years, got criticized for it. He was missing the big tech wave, whatever, but in long run, I mean, just look out, play it out, look how worked out with him. If you do not have that emotional discipline, then you'll kind of just be attracted to whatever is currently hot or whatever people are currently talking about. You will not really ever form that core fundamental process of investing that you need to succeed over the long term and something that you can actually stick to over the long term as well. Let's take a quick break here from today's sponsors. As a person with a very deep voice, I'm hired all the time for advertising campaigns, but a deep voice doesn't sell B2B and advertising on the wrong platform doesn't sell B2B either. That's why if you're a B2B marketer, you should use LinkedIn ads. 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Go to shopify.com slash WSB to take your business to the next level today. That's shopify.com slash WSB. Alright, back to the show. Since we're thinking back to how we invested maybe when we were starting out, I can't help but think. One of the big mistakes I made when I first started investing was just simply assuming that revenue and earnings growth is an amazing thing and it's always good. All three of us know today that this is a very dangerous assumption and can get a lot of investors into trouble. If this is happening to you, don't feel bad. It's happened to me and it's happened to many, many other investors. People just see the headline of X company has beats revenues, beats on earnings and just to see them. Oh, that's an amazing thing. This stock should be going up and I should buy into that stock. Can you guys explain why growth is not always good for business? Absolutely. I actually have a saying that I use on our YouTube channels and it's that revenue growth is not the holy grill of investing. As you said, when you first start investing, you think, okay, if revenue is going up, it must obviously mean that this business is growing. If the business is growing, that should lead to the stock price growing. What you'll actually see sometime is a business report is earnings. It's quarterly results. Revenue is up, let's say 30%, and then the stock drops 20%. Everyone puts their hands in the airs and says, investing is a scam. This doesn't make sense. This is gambling. So no, what it is is a revenue growth is not, again, it's not the holy grill of investing and what you need is profitability growth or profit growth. So what I really look for is a business that is able to grow profitably and grow its cash flow or its net income as the revenue is growing. I want to see both things growing over time. A good example of a business that grew its revenue and produced zero stock price growth is actually Snapchat. It IPOed in 2017, since its IPO, its revenue is up 9x. However, the stock is down 60% from its IPO. So there's tons of examples like this in the market where businesses will grow their revenue massively, but their stocks will not go up. The reason is because these businesses don't create shareholder value and what you want is a business that is going to create shareholder value over the long term and give shareholders something and grow their profits and the amount of money that they can return to them. In Snapchat's case, it's not, I don't believe it's producing profits and if it is, it's a very small amount and they're just doing so much dilution diluting their shareholders. So yes, the revenue grew, but they haven't been able to actually return any of that revenue and the form of profits back to their investors. So for me, I really just want to see that cash flow growing and really understand how is this business going to return that cash back to me? Warren Buffett actually says the number one thing that investors should ask themselves is how much cash can this business produce and return to you as the shareholder? And I mean, a business can be growing its revenue, but if it can't return cash back to me, then it's not really one that I'm personally going to be interested in. I like to think of revenue as a massive flowing river. And you can imagine that as this river flows, there's different parts of the river that branch off and it will take some of the river away. So what a lot of people who have not looked into investing before don't realize is there's many different lines on the income statement, and this is all public data that you can look at for companies that's available online, they will tell you how much of their revenue becomes profit. So we could talk about gross profit, operating profit, EBITDA, et cetera. And each one of those line items because of business has to pay for employees, expenses they might be buying office space and things like that. And all of those are little parts of the stream that go out. So to what Daniel's saying, Snapchat has a pretty big river, but when you get to the end of it, it is a little trickle or it's completely dried up where there's other companies that are expanding their earnings. And another really good thing to point out here that took a while for me to grasp was the difference between earnings and free cash flow. I forget if it was 2017 or 2018, but the SEC made a change for how companies report net income, which Daniel and I really are not the big fan of. Basically one-time sales and things like that can be reported on net income. So companies, they can game things a bit. So if you have a one-time sale or something like that that was unexpected, it might look like they had a huge earnings beat because the net income can be affected by one-time sales and things like that. That is pretty unfortunate where Daniel and I find the most value, although businesses are very multifaceted and you need to look at multiple angles of it. One very important one, as Daniel is mentioning, is the free cash flow. There's very simply of all the money that they're making after they pay their cat-backs. How much of that is actually profits because they could use that to reinvest back into the business. They could pay a dividend. They can do share buybacks. There are so many things they can do there. And at the end of the day, this is a capitalist society. If a company is not making money, they're going to get money from a few places. They're either going to have to raise debt. They're going to have to dilute shareholders by selling shares on the open market. So it's really important to watch this and we can go on about this for so long, right? You have companies like Amazon that reinvest all their free cash flow back into growth. So it's not as simple as saying which company has the most free cash flow. That's why every business is unique and it's meant to be analyzed individually to really understand where that cash is coming from, what their growth prospects are, etc. To expand on that a little bit more, Jake, there are some businesses out there too where they will spend, there's one example, I won't name the company, but it's spent something around $100 million a quarter on marketing to grow its revenue. And so that's $400 million a year that they were spending on marketing. Year over year, the business is revenue, I believe it was somewhere around $9 million. So you have to think about that logically for a second. Yes, the revenue is growing, it grew by $9 million, however, they spent $400 million on marketing to do that. So as the shareholder and as an investor or if you want to even look at this business as if you are trying to buy the entire business, you got to ask yourself, is that a good use of the company's money and is that actually creating shareholder value? And Warren Buffett actually says that not all growth is equal and that growth can actually be a detriment to shareholders. And that is a perfect example. If they're putting in all of this money and they're not really seeing any actual value creation because of it. Jake, I love the point you made there where if a company isn't profitable, it's going to have to pay for its operations in some way, shape or form, you know, they're losing millions of dollars, okay, where's the millions of dollars coming from and oftentimes it's coming from debt or it's coming from a company issuing shares. And I think a lot of investors don't realize they're essentially, you know, if the company is not well run, the managers aren't good stewards of the shareholder's capital, oftentimes you'll find out that managers are essentially fleecing shareholders by continually, you know, issuing shares. And essentially these new shareholders that are buying these new shares, they're just funding, you know, the operations of the business through these, uh, the share issuance and then these managers, you'll see they're making millions of dollars for running a business that isn't even profitable. And I wanted to tie in a question here to talk about profitability, Daniel. I've watched your YouTube channel for quite some time now and I've been really enjoying it. And from what I can tell from your approach, it seems that you typically only want to invest in profitable companies and companies that make money and they have a consistent history of doing so. I think this is interesting because a lot of newer investors they can get sort of, uh, get attracted to these businesses that are maybe in their earlier stages, they're not really designed to turn a profit because they're, you know, investing and building out their market position, they're trying to gain market share and not so much focus on the profitability in the early stages of their business. So talk to us about why you focus most of your time on profitable companies. Yeah. So as Jake was saying, if a business is not making money, then the two main ways it gets money is debt or dilution. These are other people's money and Charlie Munger actually calls these businesses OPM businesses, which literally stands for other people's money businesses. They don't self-sustaining themselves. They are not organically producing any cash for themselves. So they are constantly issuing debt, leveraging up the balance sheet, putting the business into more risky financial spot, or they're consistently selling themselves to the public market and diluting their shareholders. So if you do not have a business that is producing any organic profits within itself, then you as the investor have to ask, okay, well, how is it keeping its lights on them? Where is that money coming from and how close is it to actually producing profits organically? So for me, I follow what Charlie Munger says when he says, if it doesn't have cash flow, just say no, just don't even go there. Because basically if a business does not have cash flow, then you as the investor are buying it with the hope that it will be able to become cash flow positive or start producing profits for you as the shareholder before they run out of money or need to need to sell themselves to the public forever or something like that. It's just a much riskier bet in my opinion when you're investing. And I think that a lot of newer investors get drawn to these businesses that are losing money because these businesses do have to go out and dilute, which means that they need to sell their shares to the public market and they need to sell those shares to new investors. So how they do that is they create these very compelling stories. They promote themselves very well to the public and they create this kind of hype around themselves. And that's because they need to keep that up to continue attracting capital. So I think that's kind of why newer investors get so attracted to these businesses because they're always trying to sell you something. I mean, it's hard to kill a company with no debt. I think that was here last, if I remember correctly. Yeah, there's a couple of companies like this right now. I sold a position of AT&T back in around 2019, 2020. And the reason why I did that is I didn't really like what management was doing. They did a couple of acquisitions that they ended up selling later for a loss. Also, the amount that debt this company has, I don't care if the maturities are going out to 2090 or whenever their debt is bigger than their entire market cap right now. I'm not going to go out and say sell AT&T. This is a huge business, right? They could have a turn around. It's not a call that I'm willing to make on this show, but it's just really important to be aware of that. Another thing that comes to mind here in thinking about what trips up newer investors, I think a lot of people sort of get lost in the complexity of all these different investing approaches. You know, a thousands of different companies, there's many different ways one can be sustainably over a long time. They can be a successful investor. There's a lot of big name investors that do this. One investor takes one approach, they do really well, and another investor takes a totally different approach, and they do well too. So to use an example within the value investing community, there's sort of the debate of should you focus on cheaper valuations or should you pay up for quality, you know, some investors, they do really well focusing on companies that are some of the cheapest companies out there. But they're trading far below what Buffa would call the intrinsic value, and then there's other people who would call themselves value investors where they focus on really high quality companies. But at the end of the day, both of these investors, they're value investors, they're trying to purchase a company for less than it's worth. So I'll throw it over to you guys here. How would you guys describe your investment styles? Yeah, so I personally believe that all intelligent investing is value investing, which I believe is what Charlie Munker has said as well. I actually don't really believe in growth investing versus value investing versus momentum investing or any of those things. I think all of it is one thing. It's all just investing. And then what that being said, I like to view myself and Jake and I, he might have a different opinion on me, but I like to view myself as more of an opportunistic investor. So if I see, for example, if I see a business that's trading for five times cash flow, which is a 20% free cash flow yield, and I believe that that is sustainable and it's going to return that cash to me, if it's at that price, it's low enough to a point where even if it's not the most high quality business, simply the free cash flow yield and the amount of cash that it can return to me as an investor is attractive. I mean, even if that business lowers or it sees its free cash flow declined by 50% over the next three years, it can still deliver 10% to me. So in those situations, I think those can be attractive investments. But on the other hand, I also think that businesses with incredible management teams, very high quality businesses trading out more expensive valuations can also be great investments over the long term. So I just try to look for opportunity wherever I believe I have an edge and wherever I think I am being adequately compensated for the risk I am taking on. And that's really what it comes down to for me. I own high quality businesses that I never want to sell. I also own businesses that I think are just ridiculously cheap, way too cheap for me to ignore. So I kind of just do whatever I think is going to produce me the most returns at the end of the day. As for me, I like to keep things pretty simple. If I can explain a business I own to a five-year-old, I will not buy it. I love founder-led businesses. I don't really look for just small cap or just large cap. So some good examples here. I love Google, but the stock price was always very high for me. The price to free cash flow of Google at the end of 2022 dropped to around 18. And the price to operating cash flow was around 12 to 13. That's when Google was trading for around 80, 90. People were saying stuff like, oh, chat GPT is going to take away Google search. That's where they get all their ad revenue. And it's important to know where your edge is. So, for example, my background is in software. I like to believe that I have a much better understanding of software where it's going. I can make profit off of it, how you can define a moat in software than the average person. So I take that edge and I like to invest in companies such as Google where I could easily understand their cloud business, their advertising, look at a lot of their big bets, and also understand where AI is going, understanding and seeing where all the consumers and businesses like ours are building on top of their cloud. I think it just goes to show that you don't need to pick one single lane. I think it's more about understanding what you feel comfortable with, having that self-awareness, and making sure that you do a lot of the research and education beforehand. And I'll end up with saying, we are talking a lot about individual stocks. There is nothing wrong with buying index funds or ETFs. And I will say that until I'm blue in the face of all my friends. If you don't have this stomach for investing in companies or analyzing financial statements, you should at least try to learn, don't tell yourself you can't. But if you really try and it's not for you, don't force it. Because as you're saying, there's so many different styles. And I think Daniel and I just represent a small slice of a bigger pie for the amount of investing styles out there. They say that the most important investor to study is yourself. And you guys mentioned how you need to study these different approaches and figure out what approach makes most sense to you. What's the approach you can stick with to let the compounding work for you? Because if you switch from one thing to another to another to another for not really good reasons and you're just kind of chasing what's hot, then it's not going to end up working as well in the end. And really sticking to something that's proven and something that's consistent to improve and to deliver that compounding is really, really important. Now, since you guys are entrepreneurs and you're in the content creation space, I think you're pretty good people to ask about mistakes that investors make. So what are some of the biggest mistakes you see retail investors make in all the work you've done? For me, I would say getting caught up in a lot of the hype and a lot of the stuff that is currently working and by currently working, I mean the stock price is currently going up. I have seen so many countless examples, especially in 2021, we were kind of at the peak of these speculative bubble that was going on. There was so many fundamentally poor businesses and they would have their stocks running 500% within a few months. And on my YouTube channel, you know, I'm sitting here trying to be like, these companies actually don't look that good when you look at the business behind them. And I got to the point where in the comments, people would just say, all, well, that doesn't matter anymore, you know, valuations don't matter. The stock is going up. It's going to continue to go up. And I think a lot of newer investors and a lot of people in general get really caught up in watching what stock price is going to go up and then trying to predict how far it's going to go and how much money they can make really quickly without actually taking a look at the fundamentals of your business behind that stock. And it can be very, very scary sometimes. And then additionally, I think a lot of newer investors fall in love with stocks. They fall in love with a stock ticker. They for some reason get this emotional attachment to a business or to a ticker and they will just ignore so many red flags that are, if you just take an unbiased look at the financials, there are so many red flags there, but because revenue is growing, because the story is so compelling, because the management is putting on such a great story to the public, they just for some reason fall in love with this business. It can do no wrong and they just hold on to it forever. Even when all the red flags are there, the stock ends up going down, fundamentals are declining. They just continue holding on and just maintain that hope and love into that business for some reason. So that's another thing I see all the time. I think a great thing to remind us of here is people listen to these shows, they look at great investors and they say, oh, they never miss. That is so not true. And one of the saddest things I see is when you get into investing, you have to have an accepted failure rate. People also make the mistake of putting in too much money into fast. So the message to the listeners here is you will make mistakes. You should expect to make mistakes. Make sure that you're only playing with money that you feel comfortable with at first. And the worst thing you can do is give up before you made a mistake. If Daniel and I gave up after our first mistakes, we would never be where we are today. We'd never be having this conversation with you today, quite frankly, quite. And it's just a really good thing to keep in mind. I'll repeat something. Daniel says all the time in our business that we're building is one of my favorite quotes that he says, nothing is a mistake if you take a lesson from it. If you learn something from your mistake, there's no such thing as a mistake. They're just learning opportunities. And that could not be more true for investing, especially when you're first starting Yeah, to make it clear as well, I was definitely one of those investors who was falling in love with businesses when I first started. And I was ignoring all the red flags. Definitely lost a lot of my initial capital, but as you're saying, Jake, you have to take these mistakes or these failures if you want to call them that and turn them into lessons and then apply those lessons to your future. And then that's how you can make these failures or these mistakes pay you dividends over the long term. And I'm happy to say that, you know, at the time when I first started investing, I actually did what you did or what you were saying, Jake, and I put 80% of my portfolio into a very speculative position that I fell in love with. I had no business doing that. And I ended up losing way too much money. I probably about 50% of my portfolio. And at the time, it was completely demoralizing. But I knew that there's something to this investing thing. It can work. I'm just clearly doing it wrong and I need to learn why. So I learned from all those mistakes. I applied them to my future investing and now they have paid dividends. That amount of money that I lost on that total failure of an investment, I have made back and more on single stocks now. Just don't give up. If you have those mistakes, take the lessons, apply them to your future and allow them to continue paying dividends for the rest of your life. Let's take a quick break here from today's sponsors. You want to speak a new language, but haven't quite got the hang of it. Meet your language learning match, Babel. You get a whole kit of effective learning methods that have been developed by real teachers in over 200 language experts. You're taught useful everyday phrases for everyday conversation and you can test your pronunciation too. 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That's NetSuite.com slash study to get your own KPI checklist. NetSuite.com slash study. Want to keep up with the financial markets, but just don't have the time? Trust me, we definitely know the feeling. That's why we created the We Study Markets newsletter. It's the five-minute daily email that 30,000 people just like you read each and every day. The We Study Markets newsletter highlights the three biggest financial news stories each day, and it keeps me in the loop of what's happening in the world of finance, markets, and investing. Make staying up on the markets easy by signing up for free at theinvestorspodcast.com. Join 30,000 other readers today at theinvestorspodcast.com. All right, back to the show. One item I've thought about recently is checklist, and in relation to checklist is thinking about, if I buy this stock and it were to go down 50% over the next month, how would I react? What would I do? Would I sell it? Would I be excited and want to buy more? If something's more speculative and you're nervous about it falling 50%, maybe your sizing shouldn't be as big, or maybe you shouldn't be entering that in the first place. Another unrelated point is, Jake earlier you mentioned AT&T, and I think about so many investors bought into that stock. Maybe some investors bought in it for really good reasons, and I know a lot of people pretty much only bought it because it had a really high dividend. And next thing you know, they're cutting their dividend, the stock's getting crushed, and buying it for the dividend ended up being a big mistake. And I think dividends is another really important thing that a dividend might look really attractive, but oftentimes there's really a good reason that there's a lot of wisdom in the way markets price things, a lot of times prices are at where they're at for a reason. So you have to consider why is the dividend so high and why haven't other investors picked it up yet? Yeah, there's a lot of examples of that. A recent one is actually Intel. When the CEO came out and basically said, we're committed to maintaining this dividend. Even while the company's cash flow, it's totally gone. It was losing $10 million at one point in the trailing 12 months, and they said that they were committed to maintaining that dividend. As the investor, you got to ask, how are you going to pay that dividend when your business is losing $10 billion a year? And the answer was they were taking on debt leveraging of the balance sheet. Now for me, when I saw that personally, I thought that was not the wisest fiscal choice. I thought that was actually a very poor fiscal choice that eventually was just going to blow up in their face because what they're essentially doing is maintaining the dividend with debt which is ultimately leveraging up the business and its risk, and eventually that's got to stop. And in my opinion, what they should have done is just cut the dividend away sooner and protect the business as financials and it's financial health and not just take on all this debt to continue paying it, which the end result was they ended up cutting it anyway. So by the time that they cut the dividend, now the balance sheet has leveraged up, that's there now, and they could have avoided that sooner if they just cut the dividend and did not take on all that debt. So if you're taking a look at dividends or you're attractive to very high dividend yields, just always, always, always ask, how is this company going to maintain it? Are they able to maintain it? How are they affording it? Because it's real cash coming out of the business. And if it's not producing that cash organically, and there's a problem, and as you said, Clay, the market is actually pretty wise most of the time. So for me, when I see dividend yields get up to 7, 8, 9%, it's actually a red flag for me, because that's in that range where I'm like, the market's saying something here, like that's a pretty freaking high dividend. Something's going on here, the market's doing that for a reason. So yeah, for me, it's actually a red flag when I see dividends up there. Yeah. Okay, so going back to what you said before, Clay, if you buy a stock and it goes down 50%, what would you do? Well, I will tell you how Warren Buffett would think of this and Daniel and I will never even fill a fraction of issues, but we do our best. So when you buy a business, you must be pretty darn sure that you think that you are getting a good price for that business. So for example, the business is trading at $100 billion market cap. When you buy that, there should be a very good justification and investment thesis based on a lot of research that you did that is a very good price to pay for that business. If that business falls 50%, and you don't want to start buying it hand over fists because of how much cheaper it's gotten, I think that you should really go back to your original investing thesis and ask yourself while you bought it. And of course, there's snagged in this, right? We have been saying this whole time, no one's perfect, you're actually wrong a lot of the time. So there might actually be something you miss. So what I think investors should do if they buy a stock and it goes down, it's a twofold question. One, did I miss anything here? Was there a part of my research and investment thesis that I didn't see? Let me go back to the books. Let me go back to their financials. Let me understand the thesis. So why other people are selling this? The flip side of that and this is how the market works. Depending on what the stock is, you have huge pension funds and they stocks, you have big money moving around. People could be buying and selling stocks for reasons that have nothing to do with the business. And that's why we keep on preaching patience here. When you are a patient investor, and this is what I did with Airbnb, you could ride those market fluctuations and track the valuation and just wait for your buy and opportunity. I'd say for people that don't want to watch the market that much, the other thing you can do, which is very popular, look up dollar cost averaging. This is a very, very calm way to invest. It's also very good for index funds. It simply just means you allocate a certain amount of money every week or every month and you just regularly buy into security. We're not gonna run through the statistics and math here. I think we lose most of the audience, but you could look it up if you're curious. If you run the numbers on the dollar cost average approach, first trying to quote time the bottom, which is very hard to do, timing the stock market in general is a little bit risky and hard, you end up getting a better average cost usually than the person who's trying to sell. Because once it falls 30%, well, is it gonna fall another 30%? If it fell 15% before that, you're gonna feel silly because you haven't bought it yet. And those are all the questions that people don't realize will run through their head. And that's just why I love that question. It's a great thing to add to your checklist because you need to run yourself through these future scenarios. It's a great way to do that. Just another one of those future scenarios. How would I feel holding the stock? Yeah, Clay, it's funny you mentioned the 50% question as well. Because it's something that I do myself and it's something that I tell people on my channel that they should do as well. They say that in hindsight, everything is 2020. And by asking yourself those questions of, how would you react if the stock falls 50%, you can try and get yourself some foresight and it helps you develop that emotional discipline and get you thinking about that emotional discipline before that actually happens because the reality is, every investor is going to be down on a position at some point in their life. For that not to happen, you would have to buy the bottom on every stock every single time you buy for the rest of your life. Not gonna happen. It does, man, okay. But everyone is going to be down at some point on a stock that they buy. So having that foresight and asking yourself these questions can help you avoid selling or becoming extremely emotional when ultimately these drawdowns are going to happen on your positions. Something I also do, this is a good example, it was when I bought Meadow when it was down below 100 and then I sold it around 190. I got asked all the time if I was regretful that I sold a little bit too early. And my answer was no because I also did this on myself on the upside. I asked myself, okay, well, how am I going to feel if the stock runs on other 25, 30, 50, 100%. I asked myself that question and at that point, I was like, even if it runs, I'm okay with this point. I've made a good amount of money in a very short amount of time. It's at the point now where I don't necessarily think it's that cheap. So based on everything I believe about fundamental investing and my own investment principle and my initial investment thesis in that business, it all worked out dang near perfectly for me. So I got out, I stuck to my principles and the stock ran. I lost out on potential gains but I was totally okay with it because I was asking myself that question ahead of time before I sold the stock. So I think about a lot of investors, they start earlier on in their lives, maybe they get interested at age 18, 20, 22, whatever it is. Obviously that can be really dangerous for people because a lot of people jump in, they have no idea what they're doing and they're just bound to eventually lose a lot of money. But on the other hand, I look back at my own journey and I think about how many of the best investing lessons I learned were just through the mistakes I made. You make a mistake, you reflect on it and figure out, okay, where the heck did I go wrong here? So I'd love to get your guys' take on, how does somebody know when they're ready to get started with stock investing? Well, I think that this is a trick question clay. The reason why is this is not a zero or one and on or off switch thing in my opinion. I like to think of things in terms of spectrums. So we also want to define what investing is here, right? So I think in order to start investing in an index fund or ETFs, that is a lower amount of education or knowledge someone might need as opposed to going and investing in an individual stock. So investing in an individual stock obviously takes a lot more research. So a lot of people working in the United States, this is what I'm familiar with. At any company I've been with, they had 401k options and I was able to put money into those 401k options. You should look at what those holdings are but they're generally target funds. They are index funds, things that will move generally with the market. Those don't take a ton of effort to really understand and if you want to be diversified and not staying cash, that is something that I'm not a financial advisor but at least in my opinion, I think everyone should at least be looking into. Do I have some more color on the individual stock investing which is probably the more important and interesting piece of this since it's what we've been talking about this entire time. I will speak from my own mistakes. The things people should know are financial statements. So once you understand financial statements, another great part is valuation. So you hear investors talk about price to earnings ratios, price to free cash flows, all that. That in my opinion is the way that you should be looking at the value of a stock. It's not the dollar amount the stock's trading for, it's not the market cap, it's looking at the financials that this company is producing and tying it back to its cost. For me, one thing that I've seen in my own personal life is I know people with a lot of credit card debt asking me if they should be getting into the market and if so, you know what stock should I buy, blah, blah, blah. I don't ever tell anyone what to buy but the overall thing there is, I see people with a very high credit card debt trying to invest in the stock market. In my opinion, and mathematically, it actually makes more sense to just pay off all of your credit card debt or all of your high interest debt before you ever even think about investing. Credit cards, I believe, are carrying somewhere above 20% interest rates on them now. So that is a guaranteed 20% return that you are getting by paying off your credit card debt and you are not gonna get a 20% guaranteed return in the stock market. That is Warren Buffett level returns right there. I don't think a lot of people are Warren Buffett. I think there's only one Warren Buffett. It's much easier for you to get higher returns by actually just paying off your high interest debt. Now, you can go down the conversation if you have a 3% mortgage. Yeah, that's probably okay to keep. You don't really need to pay off your mortgage before investing. So for me, I try to tell people are close to me just pay off that credit card debt first. It's setting you back. You're not gonna make up for that debt in the market consistently. It's just not going to happen. Next thing, I would say people should probably have an emergency fund because if something happens in life which things tend to happen all the time that we just don't see coming. Life is forever uncertain. No one knows the future. I have a lot of expenses that come up in my life all the time. And if I don't have a cushion, the emergency fund acts as a cushion between life's uncertainties and your investments. So if let's say you don't have an emergency fund, you have 50K invested and some 30K expense comes up. What you're gonna have to do in that situation is sell your investments to pay off whatever expense came up. And if the market is down at the time, it's a very bad time to be selling your stocks. It's actually probably the time where it's better to be adding to them. So if you don't have an emergency fund, you're basically making yourself a victim or a potential victim of volatility. So having an emergency fund, having that buffer between life's uncertainties and your investments, I think is very important. Also, I have a friend right now who is saving up to buy a home. This is first house, he's very excited about it. And he was messaging me asking me, okay, well, where can I put all of this money that I'm saving up to buy a home over the next one or two years? In my opinion, I told him, I don't think you should invest. If you have money that you are relying on, that you absolutely need over the next one to two years, I think it's a bad mistake to put it in the market. Because again, the market is volatile. There could be some sort of black swan event that happens over the next three years, over the next two years, stocks could go down. It doesn't matter how strong their fundamentals are. The volatility of the market can bring those stocks down 30, 40, 50%. And at that time, when they're down, if you need to pull that money out to go buy a house, it's going to be a bad situation. So I think investing money that you absolutely need is a bad idea. And that's the exact same thing I told him. And also imagine, like, imagine if he put his money in the market, lost 50% of it, and then had to go and tell his wife that that's a bad, that's a really bad situation to put yourself in. Okay, so all those things are covered. Now when you get into the market, I've really tried to simplify my investing down into three things. And these are the three things that I've noticed all of my top stocks have, and the things that I really value. And I did this subconsciously by accident, but then when I took a look at all of my holdings, I found they had these three things in common. They all had strong management teams. So management had a large positions in the company there was a little stock-based compensation going on. And they were very protective of creating shareholder value, and overall just protecting shareholder value. So strong management is something I really look for now. Additionally, moat. That's the second M is a moat. I want to make sure that a business has a moat because moats protect it from competitors and they protect it from invaders. What that also means is that business is more likely to continue growing over the longterm. So if a business has a moat, there's a much higher chance that my investment is going to be protected. Even if I am wrong in the price that I bought it at, if that business can continue growing over the next 20 years, the growth should hopefully offset my mistake by paying a little bit of a premium for that business. And then the third thing I really look for, the last M is a margin of safety. And I define a margin of safety as a business has to have an earnings yield or a free cash flow yield above what bonds are currently offering. Or in other words, that business has to produce more for me than what the risk-free rate currently is. The risk-free rate tells you exactly what you are getting before taking on no risk. So if the risk-free rate, which I think is a 10-year bond yield, if that is giving you 5%, then me, I will not buy a stock. If it is not at least offering me a 5% free cash flow yield on cost. So I want a little bit of a margin of safety there. Because if I am buying a business at a 3% free cash flow yield when bonds are 5%, then I'm actually paying a premium and I'm getting lower returns for taking on more risk, which I don't really think makes sense for me. So those are the three M's that I really take a look at, the moat management and the margin of safety. And those are the things that I look for in my own investments. And I wish I knew them when I first started. And I wish I knew how to look for them and kind of the metrics that would give you a hint or give me a hint that those things exist in the businesses that I am ultimately buying. I wanted to mention here that just based on my experience, investing in individual stocks, especially and even the market, overall stock market, index funds, whatever, it's a really humbling experience. I was recently reminded of this study done by the Center for Research and Security Prices. And it concluded that since 1926, just 4% of stocks accounted for essentially all of the gains above the US Treasury rate. And I think that's just so humbling to hear that just 4% of companies accounted for outperformance over treasuries. It's so humbling because it's a reminder that capitalism is absolutely brutal. So you might look at a company and think it has a strong load today. But there's a decent chance that 5, 10 years down the road that moat may be in jeopardy. It's also a reminder that over the long run, almost all businesses are doomed for failure. So it really makes you careful about celebrating when your stock has gone up or celebrating when your business has done well because eventually the odds just aren't in your favor as an investor, especially when you're first starting out and you don't really know exactly what you're looking for or what your approach is gonna be eventually. So I will mention that on the other hand, I also think that stock investing, especially in individual stocks, it's such a rewarding experience. At least it's been for me. It's taught me a lot just about life. It taught me a lot about human psychology and then just the world in general and studying businesses. And personally, I just absolutely love it. And I just love that I get to speak with amazing people like you who have very similar passions. Yeah, it's like a hold and verify strategy. So don't just buy something and then I know the thing is like buy a stock and hold it forever. But the reality is you should hold and verify and make sure that your investment thesis is still intact. And just make sure that your businesses are still okay because that stat you shared Clay is honestly pretty wild. That basically says that 96% of companies are gonna lose their vote over the long term and be disrupted. So watch out for it. Let's transition here to talk about some of the work you guys are doing. You two co-founded a company called Stock Unlock. So talk about what this tool is and what inspired you guys to start it. Yeah, so on the call that Jake and I had when we were not knowingly starting this business, one thing that we really connected on was how the education system does not teach people about investing and then more. So even fundamental investing and what actually makes investing work over the long term. So from day one of building Stock Unlock, we made sure that it was very beginner friendly and had education embedded throughout the entire platform. So we have a toggle right on the platform called education mode, you click that toggle and all of these little question marks pop up on every single piece of data. So if you do not know what a piece of data means that you're looking at a little check mark or sorry, question mark will pop up beside it. You click on that, it has the definition how to calculate it, why investors use it, how they use it, tips on how to use it. So every single piece of information is well explained in a way that a beginner can understand because that is what we're trying to do is help people learn about investing. Additionally, if you are pretty well versed in investing, you can simply just toggle that off and then the platform is a full on stock analysis and portfolio tracking platform. And one of the great things that we do is something called our insights scoring system. So throughout this podcast, we've been talking about looking at the revenue, looking at the profitability, balance sheet, debt, how is everything doing there, how is the management doing, this is a lot of work. Jake and I, we started off building spreadsheets and I would do all this work manually. So him and I basically decided, well, we could just add this into the software. So for example, if a business's current ratio is below one, that's typically not a good thing. It's kind of a red flag. So we built the software to just point that out and say, hey, on the balance sheet, it's current ratio is below one. So now instead of a going manually through the balance sheet, what I can do, is simply just go take a look at stock unlock insights and it gives me a financial health score card of the business, breaks down current ratio is below one. It's got a lot of intangible assets, it's got a lot of debt, debt to EBITDA's very high and right away within 15 seconds, I can get a full view of all the metrics that I would take a look at as the investor and come to a conclusion very, very quickly. And it just speeds up the research process and investing so much. So we get, I mean, we'll see stocks with insight scores of under two. You go and take a look at the insight scores and it's just like a wall of red, it's clearly screaming at you like, this is a risky business right here. There are diluting you, the balance sheet is not good, revenues declining, there is stock based compensation is 200% of revenue like yikes, you know? So all these things are clearly pointed out on the platform. One great analogy here because we are friendly for beginners and experts is think of a bicycle at training wheels. We already, you already talked about clay, you can be 18, download an app, I mean, trading stocks in seconds. That's actually generally a great thing, access to financial markets is great and if you go back in time before the internet you needed your own broker when brokerages first came online in 2000, as I'm told because I was too young to trade at the time, $50 to trade, then $20 to trade, so the company's coming in and lowering this to zero. That is a really great thing, like clap, clap, thank you. What is not a good thing is when you're given access to that without the tools you need to succeed. So going back to that bicycle analogy, education mode is like training wheels on a bicycle. You can turn it off or on very easily and I definitely recommend leaving it on for the newer investors on the site. Building on top of what Daniel's saying on these insights and what our users really, really begged us for was can I search stocks based on these numbers? So we added that feature too, we have portfolio tracking, we have discounted cash flow calculators, we have a tool called freeform where you can put in as many stocks as you want, take whatever financial metrics you want, there's over 80 and graph them in one single graph, slide the date range, look at the compound annual growth rates, highs and lows for all these stocks. One important thing to point out about the insight scores, this is not meant to be a buyer or sell. You need to do more research, it's meant to help you save time and screen for businesses and to avoid the things Daniel was talking about, such as the company that's doing way too much stock based compensation, tons of debt and all that. So the insight score, that is something I wish I always had. So kudos to you guys for putting that together, I think it's super helpful for investors. I also think about, I'd love it if we could just narrow a stock down and just do a single number, how good a company is on a scale of one to five, but of course the world is extremely complex, you can't just boil things down to a number, there's plenty of nuance when you talk about a lot of these things. So how about you guys talk about how you can mix this sort of quantitative factors with the qualitative? Yeah, I definitely agree with you 100% that you cannot boil down the quality of a stock to a single number. I think it's impossible or next to impossible. So it's very important to recognize that these insights, the insight scoring system is definitely not a buyer or sell recommendation. It's meant to be a quick overview of the key things that most investors look at when they're analyzing a business and it's meant to save you time at the end of the day and kind of give you a quick overview of the things that you would look for. So buying a stock just because it would have a high stock and lock insight score as someone who made the platform, I think is a mistake. It simply just cannot cover everything that you need to know. So it's a great tool, again, for speeding up the research process, but there is unfortunately no real way to know if a business has a strong vote or a durable competitive advantage over the next 10, 20 years. By looking at anyone metric or a handful of metrics, as we said earlier, businesses get disrupted all the time and I don't think that you're going to see that in a business ROIC immediately or it's revenue growth immediately. These things can happen over time and they can sneak up on you. So definitely, unfortunately with investing, there's always going to be some amount of manual labor that you have to do. So coming to understanding the business, what industry is to do and what are its competitors, et cetera, et cetera. The insight score, again, it's just a very good place to start and screen or if the business has the fundamental metrics or aspects that you're looking for. And additionally, a stock on a stock unlike may have an insight score of 3.5, let's call it. And then you look at another stock with an insight score of 3.5 and the fundamentals of how those scores are made up can be totally different. So for example, one business can have kind of a trash balance sheet but still have a 3.5 score because it's growing very quickly or it has a great management team with low stock base compensation. So those metrics can offset the bad balance sheet. Whereas another company may have a phenomenal balance sheet, 3.5 score overall, but it has very little growth, maybe revenue is declining in a management is doing more stock base compensation. So a 3.5 and a 3.5 can have totally different make ups of their metrics and how the business is operating, how the management is operating, how its financial health is. So it's not a one score fits all type situation. And it's definitely something that investors should still consider and look at and kind of look for the things that they value more and their own investing. One investor may want a stronger balance sheet, one may want more growth. And as Jake was saying, we built a screener that ranks all of these different scores. So if you want a business with a perfect 5 score on growth, you can screen for that and put that as a higher priority than the balance sheet, for example. So that's one way that we can kind of also help break down our insights more and help users find exactly the stocks that they're looking for. Yeah, the whole purpose of this is equipping people with tools that they need to make informed decisions. So whether you go out and still buy AMC or if you buy things on your credit card, please, please just be educated. That's all we ask for. And these are the tools we wish we had before we went and made mistakes in the market. And quite frankly, we would have made way less mistakes and lost money because this is almost more about avoiding bad stocks, right? Then just finding the good stocks is the whole spectrum. So we wish we had this and we're really happy that we can build this software, build off the backs of the giants of AWS Stripe, financial data providers that are now available that are giving us the opportunity to provide this to consumers. One of the most annoying things for me personally in managing my portfolio is being able to look at the big picture of my brokerage account, at my Roth IRA, 401k. Those are retirement accounts in the US. And then I have other assets that sit outside of those accounts. And I'm sure you guys have written to the same problem because you actually created a feature that fixes this. You can link in your accounts and track your portfolio. So I'd love for you to talk about this as well. What's really great about the year 2023 is as time goes on, financial data becomes more and more available. So stock and lock is built on the latest tech, the latest software. And just as you said, Clay, you can come to stock and lock, connect multiple portfolios. We have a brokerage connection feature. You can reach out to us if your broker just not supported and we are supporting more and more every day globally. You can use stock and lock to combine all your portfolio into one view. And quite frankly, our dividend analysis, breakdown analysis of your holdings are tying into the insight scores. We are always improving this. This last question I have here in the outlines of fun one. If you guys could go back to your 18 year old self and hand them one investment book, which one would it be? So mine would be the intelligent investor hands down with one caveat that it is a dense and difficult read. So it's a book you need patience for. It's a book you cannot really just skim over and you kind of need some stamina to really grasp all of the value that it can give you. It's actually a book I've read eight times now and every time I read the book, I learned something new. So it's one of those books. It's definitely one of those books that every time you read it, you learn more and more and I believe that you'll become a better investor every single time. But that being said, it is a very challenging and intimidating book. So even though I think it is the best book, I actually would start with Peter Lynch's one up on Wall Street. I think that gives you a great overview of the market, how it works, what to look for in a very digestible way. It's like, for me, it's like a warmup to the intelligent investor. So those are the two that I would do. I have an interesting answer for you, Clay. So I think the most value I could give to your users here is actually resurfacing a book that was mentioned on the Richard Weiser happier podcasts on this very show. I think with all investing, money is meaningless if your mind's not right. And I have complained on this show that part of the education system really does not impart with us any investment knowledge. I think other knowledge that I put in that category as well is mindfulness, meditation, understanding how the human brain works. There is a book called The Genie Within and I would not have heard of it if it wasn't for this show. I'm getting goosebumps as I say this. I am 30 years old. I did not really end to mindfulness until later in my 20s and you don't need to think of yourself as a meditation guru. You don't need to vision yourself in robes, going to a monastery. That's not what this is about. If your mind's not right, your life's not right. And if you get money and you're not in a proper mental state, you're going to be just as miserable as you were as when you were poor. So it's a weird answer to what's the best investing book where I really believe that if you don't also have those principles down along with the books that Daniel recommended, you could learn as much as you want about investing, but it's all going to be for nothing. There's lots of other attributes that come in here and there's nothing that's helped me more. Then really learning to forgive yourself, learning how your brain works, visualizations, calming your mind as an engineer and I'll end this there. There have been so many times where I lay to bed, my mind's racing. I've had trouble sleeping for a while. We're bombarded with so much input in the world that we live in of advertisements. People yelling things there, yelling things back and forth. I live in New York City like I get it. Do not sleep on those books. Be a genie with them and thank you to this podcast again. Really changed my life. Daniel, Jake, thank you guys so much. This was amazing. It was a fun chat and I'm sure many in the audience are going to find it really, really helpful. You guys are doing amazing work at Stock Unlock and all the content you guys put out on YouTube. So please keep up the great work. It's very much appreciated. Before we close out the episode, how about you guys give the hand off to Stock Unlock and what you guys are doing and the special offer you guys have for our audience? Well, we are very excited to give back to the community here. Like we said before, Daniel and I are regular viewers of this show and there's nothing we want more than to give back to the audience in the show that's given so much to us. We are lowering our ready very competitive prices even without this deal. With the code WSB for we study billionaire, it's just three characters. If you enter that in on checkout, you will get 30% off for 12 months. We offer a monthly and a yearly plan so that applies to both and it's worth noting. You can use Stock Unlock for free. You can make an account for free. We are a non predatory company run by people not in suits and you can just go enter in your email. We're not going to ask you for your credit card up front. You can connect your portfolios. You can use 100% of everything we built because we're putting everything on our sleeves and truly believe in the value of what we're providing. And again, that code is WSB and we really, really appreciate the opportunity to come on this show clay. It has been nothing short of a pleasure to have this conversation. Just thank you so much. It's incredible. If you would like to connect with Stock Unlock after this show, you can go to Stock Unlock on YouTube. We have our own YouTube channel where Daniel and I have a weekly live show. If you are more into a podcast format, we do cross post that to Spotify, Apple Music, where you get your podcasts. You can follow Daniel Promk on YouTube. He is Canada's number one investing YouTuber. This is a humble guy, folks. He won't say it, so I have to say it for him. Just way too humble. Guys, thank you so much. It's been a pleasure. Thank you, Clay. It's been awesome. Thank you for listening to TI-P. Make sure to subscribe to Millennial Investing by the Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision consult a professional, this show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or re-broadcasting.