The Smattering Podcast 69: What My Job Taught Me About Investing

Note: All transcripts are lightly edited for readability. We may earn commissions from products purchased via links. Thanks for the scratch.

Jason Hall: Hey everybody. Welcome back to The Smattering where we ask the hard questions about investing. I'm Jason Hall joined as usual by the voice of the people, Jeff Santoro. Hey Jeff, it's, it's been a while buddy for us. It's been, it's been the normal amount of time for our listeners, but for you and me, it's actually been a while.

Jeff Santoro: It has. Every once in a while we do two weeks, two, we record two episodes in a week, if one of us is going to be away. So we did that two weeks ago and it's good to be back. I haven't had a chance to pod with you for, for two whole weeks. So now I feel whole again, Jason.

Jason Hall: Good. Good. Well, you, you, you complete me also. Jeff Giuseppe, don't call me that, Santoro.

Jeff Santoro: Good stuff. Well, happy happy September. We are recording this on September 6th, and Jason and I both had a lot of vacations and short trips in August, so I, I think it's, I don't know, I'll speak for myself. It's good to be back into our, our normal routine, and I think we got a, a fun episode today [00:01:00] for everyone.

Jason Hall: Yeah, my guess is, so I've, I've got a first grader, so this is my first, like, having gone through the routine of school and then like having a summer where everything gets blown up in little blocks of time where it's like the relief of the kid going back to, kids going back to school.

Like, I'm really feel- I love my son. He's a blast, but man, it's nice to have like productive blocks of uninterrupted time again. Parents, parents out there. I feel you. And, and I understand now.

For those of you that don't have kids. Screw you.

 Jeff Santoro: Well, that's a little harsh.

 Jason Hall: It is a little harsh. I'm kidding. It's I'm, I'm a little jealous, but that's another...

Jeff Santoro: there's, there's, yeah, there's two, there's two things to it about your kids in the summer. So the first is you work at home, so it's doubly hard for you because you're trying to get your work done and. You know, your son's home and you're trying to not ignore him and all that stuff.

But the other side of it too, is I always look forward to when my kids go back to school and [00:02:00] they're older. I don't need to spend as much time with them like you do. But I like that they're back into like a routine, right? Like they get up at the same time. They have to go to school. They have their activities. It's just, you know, the summer's great. A lot of beach and pool and iPads, but it's nice to get back into a routine.

So, speaking of routines here is our normal podcast routine. Listeners, friends, we could really use more star reviews and ratings on the podcast apps. We're really, again, trying to continue to grow the show. When people log on to Apple Podcasts or Spotify and they type things in like investing podcasts, we want to be one of the ones that comes up.

The only way that happens is that we have a whole bunch of positive reviews and ratings on the apps. So to do the star rating takes, I don't know, two and a half seconds. And if everyone who we listened, who listened regularly did that, we would have a ton of reviews and that would be super helpful. So just one more plug for that.

And if you want to take a few extra minutes and actually write a review on the Apple podcast app, that would be [00:03:00] cool too. All right. So with that said, Jason, let's tell the wonderful people what we're going to be talking about today.

Jason Hall: This is going to be a nice episode. This is episode 69 and we're titling it "what my job taught me about investing". Jeff's part's gonna be really short. How long is it gonna take you to say absolutely nothing?

Jeff Santoro: Absolutely nothing. And I'm done.

Jason Hall: Thanks for, thanks for listening, folks. It, this is something, I think this is an important, this is an important topic because the reality is that very few people go to school and study finance or go get their CFA or CFP whether they're helping other people invest or they're an analyst or like actually pursue a professional path that purports to give you the skills to be able to analyze companies, find good investments, understand markets, understand different asset classes and make those sorts of things. . So I think it's really important for everybody to think [00:04:00] about their work and the things that they do every day, and maybe look for things that can help that they can use, , use the things that are good. And that you have skill in that can be useful tools.

Jeff Santoro: And you and I both have a similar path in the sense that we found investing at some point in our lives and we became really interested in it. And I think there's a small segment of the population for whom that's true. And for you, it was years ago when you stopped doing your old job and started doing this full time.

For me, it's just something I do part time. But I think, so both of us at some point, we're bringing our day jobs into our, into our hobby, which is investing. You became, you made it into a career, but you certainly went through that transition. And you were in a place at one point that I'm in now, which is it's the thing I love. It's the thing I do on the side.

And I think we both, if we, we stopped to think about it in preparation for this episode, [00:05:00] identified a bunch of things that we learned from our, for you, your previous job, and obviously your current job is involved with investing. But I know there's a bunch of things that, you know, my career in education, I think prepared me pretty well for kind of understanding and learning about markets and investing.

So, so where do you want to start off, Jason, you want to, you want to kick us off here with the conversation?

Jason Hall: Yeah, I think, I think a good place to starts the, the, the popular Warren Buffett quote that, and I'm just going to paraphrase it, that he said, I'm a better investor because I'm a businessman. I'm a better businessman because I'm an investor. And I think it's interesting because we think of Warren Buffett as somebody who really started as an investor. And that's largely true, right? This is somebody that first started getting exposed to equity markets from his father when he was a kid, his father was a broker.

So that's kind of how he learned, but some of his earliest investments, I can't remember which, which of the Buffett [00:06:00] books this was from. I think the Roger Lowenstein book that goes back pretty deep into his, like his earliest days, he and a few other high school kids had a business where they bought like pinball machines.

And they put these pinball machines in barbershops and other places like that. And they, they made money on it. They would put them in there and they would, I don't know if they shared a cut with the owner or they, I can't remember the exact details, but the point is they were operating a business.

It wasn't just making investment. It was actually operating. You had cost of goods sold. You had to, you had capital investments in these machines. You had to service them, you had operating costs, all of those things. So even somebody like Warren Buffett got exposed to the idea of the realities of operating a business at a pretty early stage in his life.

And then very much so in his thirties when he took over Berkshire Hathaway and started running a company that was really it's very much a heavy [00:07:00] operations, heavy machinery, capital investment. You've got employees, risks, markets you're navigating, all of those kinds of things. Competitors you're competing against.

That, that, and I think it's interesting for a Buffett because I think one of the things that's pretty obvious is that he learned as, as an investor, some of the lessons he clearly learned, he's talked about it. Was sometimes you just want to find other people's money that you can invest with as low risk as possible of them taking that money away from you.

And that led him to insurance. The insurance industry with the massive floats and that sort of thing So that's one thing that kind of I think let us both down like the path of this of this conversation. What about you?

Jeff Santoro: Yeah, I mean the Buffett quote for sure and I, I thought about that quote a lot when I started getting interested in investing, because at first glance, it's, it may be hard to see where there's any kind of correlation between doing [00:08:00] something like I do, which is work in public schools as an educator and an administrator, and apply that to something like investing so much of what I deal with and dealt with and learn to do in college and stuff had nothing to do with business or profit or anything like that.

It's a whole different world. But if you're in education long enough like I am you can't help but see where business intersects with the public sector. And also there are incentives everywhere. And incentives I think is such a big driver for understanding the stock market and stock investing.

So once you dig a little deeper, I think I was able to find some places where I had to see through the, through the tall grass to find the connections in terms of where business intersected with what I did. But some of the habits of mind and way of thinking about the world translated really easily for me into investing.

So let's start with you [00:09:00] though. Like when you were still working full time at a full time day job, and this was just sort of your after work hobby like it is for me now, where did you find connections between what you were doing professionally during the day and this at that point new hobby that you were interested in, which is investing?

Jason Hall: Well, you know, I've, I've, this is something I've, I've shared with a lot of our colleagues before. And also it's pretty common that I'll have somebody reach out on Twitter or send me a DM or an email or something that's interested in making the transition to investing. A lot of times it's investment writing, right? It's a popular thing that people want to do. Cause it seems like a lot of fun seems really kind of easy.

It can be both of those things. It can also be the opposite of both of those things. And it's a hard thing to do in a consistent way. But for those that don't know my background before I made the transition a little over a decade ago to full [00:10:00] time writing on investing in markets and, and financial planning was I was a technical salesperson, I guess, is the way to think about it.

I worked in the printing industry, I sold printing systems. The company that I worked for, we had reps that had sales territories and, geographical territories, or they had lists of accounts that they called in and then the company sold all kinds of everything from desktop printers, all the way up to multimillion dollar printers that print millions of images a month.

And it was mostly on the higher end stuff where I would, I would be engaged. These kind of territory reps or list based account reps, they'd find a company like a bank or a manufacturer or a big print operator that there were opportunities or applications they would bring me in.

And the interesting thing about the job that I did, Jeff is that it really trained me incredibly well [00:11:00] for two things. Number one was a little bit of deeper analysis and then the second part of it that in terms of being a writer and now -speaking a lot is probably a lot more than most people want me to - nodding your head works really well on podcast jeff. Jeff was saying yes.

Jeff Santoro: Everyone is nodding along with me. So I don't have to even say it.

Jason Hall: Fair enough. So, but it, the second part of it was taking that information from the analysis and producing a piece of written content that's designed to elicit a response. You get to know a company's business, what their problems are. You talked about incentives, understanding their incentives, right? Is really important.

Not just the incentives of the business, but the decision makers, right? I understand their, their incentives. What are they trying to solve for? They want to look good for their boss. They want to save money. They want to make something really profitable that wasn't. Whatever, you know, whatever it is, you try to understand those things.[00:12:00] 

And then you write up a sales document that communicates that to a, to a client or a perspective client, right? So I was writing dozens and dozens of these documents a year and I would spend anywhere from a few hours to in some cases, a few months with these businesses really getting deep into what they, what they would do.

And what I learned was a lot of the times the people that I was competing against, all they were doing was focusing on the thing that fired their incentive. The hardware, the machine, or the software that came with it, that they were going to be selling. And they were laser focused on the machine that that company had and the machine that they wanted to sell them, the rep wanted to sell them and why their machine had, we called it feeds and speeds. Like what were the technical numbers that made it sound like a better piece of equipment? That's all they focused on. What was important to them as a sales rep.

And what I've quickly found is that the more you focused on understanding [00:13:00] your client, understanding your customer, understanding the decision makers and talk about the things that are important to them. Not the things that are important to you. Things are important to them. The more likely are you are to get the response that you want.

So, it meant that it meant that-- when I realized this, it meant that I needed to start asking other questions, right? And not focusing just on this apples to apples, sell a printer versus a printer, was really understanding their applications. Who are their customers? Who are their competitors? How profitable is this area? Then sometimes you have to get non disclosures that you have to sign, but how profitable is this for you now? How profitable do you want it to be ? Really start digging into those stuff.

So if you've ever spent any time learning about a company as an investor, You're doing a lot of the same thing, right?

Jeff Santoro: Yeah, yeah.

Jason Hall: Who, who is, who is this company's biggest competitor, right? Who is Amazon's [00:14:00] biggest competitor, right? What, what are their competitors better at? What is Amazon's most profitable business? Where are they losing money, right? Where do they have moats? Where are they trying to build moats, right? What are the incentives of the people that are running the business? Whether it's their compensation plan or whatever it may be.

You start understanding those things. And I had absolutely no idea that, you know, I spent 10 years doing this, had absolutely no idea how, how lucky I was. When I made the transition that a lot of the skills that bluntly, Jeff, a lot of people that do what you and what I do full time and what you do for your side gig still don't don't really have.

They still focus on the feeds and speeds. They're not really focused on the audience that they're writing to.

Jeff Santoro: I think that level of flexible thinking is something that I'm going to try to keep pulling this into like what not only you and I, but what possible our listeners could possibly make connections with.

And I think. Any kind of job where you have to [00:15:00] be a, I don't know, like a thinker, or challenge your thinking or ask different questions or, you know, just be flexible in your, like the way your brain works is probably going to set you up well for this. Cause like you said, you keep use the same analogy, like it'll get you away from the feeds and speeds and more into like asking the deeper questions.

Because the reality is you can find all of that feeds and speeds information anywhere. That's, that's almost like a table stakes for anyone doing this work. So you have no advantage. There's nothing you're going to bring to the table by knowing the numbers, that anyone else can't also see. So I think like being able to look at it--

Jason Hall: It's pretty easy to figure out what was the operating margin for Trex over the past three years. Everybody can do that.

Jeff Santoro: So let me ask you this. When you were doing that work, cause this is a, this is the first place I thought of when I was thinking about my own experience. When you were doing that work, did you ever have to look at or consider or understand actual financial [00:16:00] documents like a profit and loss statement or anything like that?

Or was that sort of not in your, in what you had to do?

Jason Hall: To, to a certain degree, and, and it depended from client to client and situation to situation. But for example, if we were proposing one of the things that we did was we would actually operate facilities for customers, for customers too. So we would have labor that was part of the deal.

And a lot of times they would come to us with a number, right? This is, this is what our number is now. And we would have to make a, some sort of a financial case for it, right? So you, you have to be able to get to a point where your proposal makes sense, but also from, from a financial perspective for your client.

But also there's margin there, right? There's that you're, you're, you can make, you can make good money there too. So "I guess" is the best way to think about it.

But the biggest thing is because I spent so long thinking about the financial [00:17:00] implications of, you know, you're, you're talking five and 10 year agreements that you put in place with these customers and having, having annual escalators in place and all that kind of thing.

So you have to be able to understand basic finance. But the big thing that it allowed me to do was having a level of comfort of the fact that, again, it was all kinds of different companies I called in. I sold printing systems to, to unions, to, to banks, healthcare industries, to commercial print, like all, you name it, law firms.

So you've got all kinds of different things that you're dealing with that are important for every single one of those. That mental flexibility was a big one because it, what I learned was as much as things might be different from one to the other, it's still a lot of it's the same, so you don't, then when you take that and there was an overlap there the last few years where I started getting comfortable doing things like reading a, an S-1 filing a company filing to go public [00:18:00] or a 10 K.

And then you start to realize it's like, you know what? Yeah, from industry to industry, you need to think, think about them industry specific. But at the end of the day, it's how many dollars come in and revenue and how many dollars go out to cover all your expenses, right? You really start to simplify things and don't get too boiled down or too bogged down in, you know, the fact that this industry is different from that industry

Jeff Santoro: Yeah. I think that's a place where I don't want to speak for every single profession because I don't I'm sure people listen our listeners probably do hundreds or thousands of different types of jobs, but one of the things that I noticed since I started being interested in investing is I know I'm finding all the places in the world of education where I can pay more attention to the business side of things, because, like, even a school district has a budget and they have line items for different things and money comes in in the form of, you know, [00:19:00] tax revenue and government funding and money goes out to pay salaries and buy supplies and all that kind of stuff.

So there's absolutely a financial, I mean, we have a whole financial department in our school district. So that exists. It's just something I ignored for until I saw the relevance and got interested in it. So that's one thing I think our listeners can probably, if they're really interested in investing and they're listening to our podcast, they're probably working for a business and that business will have all those same things like you were just talking about.

So to whatever degree people have access to that information, maybe it's shared with the whole company in just a couple of times a year, like quarterly. And maybe in the past you just filed that away. Like that would be a, I think a place to put the two things together.

And then I know I've thought a lot about where I sort of interact with that budgeting aspect of things in my job. And I, again, it's made me a more interested educator because I'm interested in investing and maybe a better investor because I'm paying attention to those things as an educator.

So [00:20:00] I guess the next thing I'm wondering then for you is is there anything that your job as a, and this might be an obvious question, but I'm just curious where you go with it. So you stopped doing the sales thing and you became a full time contract writer and doing other things for the Motley Fool.

Did you find that, I'm sure that process made you a better individual investor, but are there any specific ways in which that made like your day job in, in the world of investing made you a better investor? Did it cloud things up for you in any way? Did it make it harder? I'm just curious, like what that was like.

Jason Hall: Yeah. So that... a couple of things. So number one, anything that you spend more time doing, you're going to get better at it. ? So, when I made that transition from a few hours, a few days a week to, this is what I was doing 40, 50 hours a week. You have the ability to consume more information and to learn more, right?

And it's just like taking free throws, right? The more free [00:21:00] throws you take, up to whatever your maximum skill level is, you should get better at taking free throws. I think one of the things that it did teach me was the importance of looking for more easy shots, right? Because... If you're not a very good three point shooter, it doesn't matter how many three point shots you take, right?

You're you can only get so much better, but layups layups are easier for everybody. So at some point you start to learn where to find easier opportunities. And like the saying that I probably stole it from somebody else, but I'm going to claim it until somebody else proves that they said it before me.

The market does not give bonus returns for degree of difficulty. And sometimes I think as investors, we fall in love with an idea first, and then figure out [00:22:00] how to show that we're going to be right. That power of confirmation bias is, is just amazing. The mental gymnastics we'll put ourselves through.

And at some point you have to like figure out the two, the two hard pile. And when you do see those obvious opportunities, you don't screw around. And I'm going to cherry pick a super obvious one, but it's one, a lot of people missed.

And that was March 2009, and then March, late March, early April of 2020. These were obvious times for long term investors to be buying stocks, right? That was the bottom of the financial crisis in 2009, and it was the bottom of the pandemic, the coronavirus pandemic in 2020, these were obvious, obvious times to anybody that had any inkling of what the market would do.

And a lot of people are saying, all right, Hall, it's an [00:23:00] awful lot of hindsight bias. Sure. Sure. But: History has shown us that anytime you get a market decline that much, sure it may fall a little more in the near term. But eventually that purchase, maybe it's five years, maybe it's 10 years down the road is going to look really, really, really smart. . So that's an example.

And then deep industry knowledge. Again, cherry picking and a little, the recency bias here, but the whole banking situation, this, this spring to me, somebody that's studied banking. I know you say F banks, that's fine. I understand that. But somebody that's studied the banking industry for over a decade coming out of the financial crisis, clearly an opportunity to, to acquire some really high quality businesses for very discounted discounted prices, right?

And history's shown us like every, this, this is always the time to do it. And you just see more, you just see more of those.

Jeff Santoro: So I'm glad you mentioned industry knowledge, because that was one of the things I had on the [00:24:00] outline here I wanted to ask you about. So when I got into investing, the one thing I knew for sure is I had absolutely no industry knowledge advantage.

Jason Hall: Yeah.

Jeff Santoro: The only thing I know is, is, is education. And even within that, my expertise lies within music education. And there's, yeah, there's not a lot of that on the public markets. And you had a little bit of everything in your job cause you were selling to all different types of companies.

And a lot of people come to investing with business backgrounds or medical backgrounds or financial backgrounds. And they can maybe look at med tech stocks or pharmaceutical stocks or banking stocks and have a little bit of an advantage. Do you think it's an advantage or a disadvantage if you get into individual stock investing and you do have industry specific knowledge in, in some sector that where there's a lot of publicly traded companies?

Jason Hall: I think it's absolutely both. Just as, as a, as a clear example. Again, recency bias cherry picking a little bit, but look at [00:25:00] the auto industry, right? If you're somebody that's worked in the auto industry for a long time, particularly if you worked for an automaker, you worked for a dealer you worked for a company that did automobile service or whatever it may be.

It would have been very easy to say anytime over the past five to seven years, really past decade, that EVs are just, they're not going to really work out. Eventually somebody is going to figure it out. It's probably going to be big auto when they figure it out and it'll just be the same thing.

And of course we've seen Tesla just runrough-shod over the entire auto industry by taking a completely different approach. And most of the people in the auto industry, absolutely did not see that coming because everything about the way the auto industry works says it's, it's just, it's, it's going to take forever and it's going to be expensive. And eventually somebody is going to figure it out and it's going to be one of the big companies.

And it was Tesla. And Tesla figured it out by freaking taking laptop [00:26:00] batteries and duct taping thousands of them together and sticking them under the car to make cheap batteries instead of a high automotive grade battery. So, and they said, hey, let's go after the hundred thousand dollar, BMW five series and seven series and Mercedes. Let's go after that market, where there's money and where there's margin.

And they took an entirely different approach than the way the automotive and that's how disruption always works.

Jeff Santoro: Yeah, that's a really good point. I wasn't, I wasn't even thinking that originally, but I think that's the biggest way industry knowledge can be an impediment for someone is if they're not willing to keep their eye out for the possible disruption.

Jason Hall: It's the innovators dilemma, right? You look at Microsoft that is an example, right? This is a company that was just, was not going to cannibalize Windows. Was not going to cannibalize that business and completely missed the mobile computing wave .Completely missed it.

So, so, but with that said, I do think that you, [00:27:00] if you are a molecular biologist, there's a very good chance that you're going to have an, have, have a leg up in understanding biotech and knowing whether companies are, are, is it snake oil or is there something legitimate there?

I think there are very real things... if you come from the tech industry, you work in security, you're probably gonna have a better understanding of which cybersecurity companies really have durable moats. Things like that. I think that's, that's important.

Go ahead. No, I think the key is like, it's when you're, when you work in an industry that you're selling against all your competitors, or you work for a company and you're an expert in an industry and you deal with lots of different vendors, that's where your expertise can be really, really valuable.

Jeff Santoro: I agree with all of that. And I think it probably boils down to the person more than anything. But the thing that I, and maybe this is me trying to make myself feel better at the fact that I know nothing about anything. I do think that it, it's almost an advantage sometimes to have none of that, because it [00:28:00] does force you to just be a little bit more careful and to also not fall back on what you know.

So for --this is an assumption, but I would not be surprised if a molecular biologist who is an investor has a portfolio maybe a little bit more weighted towards biotechs than I would. And I wouldn't be surprised if someone who works in security has a few more cyber security companies in their portfolio than other things.

So I think that or maybe it's the other way around. Maybe they realize how difficult it is to be the winner in those spaces and they stay away. I do think there's a little bit of an advantage as a generalist because it forces you to learn a little bit about everything and not rely on any industry background.

But I don't know. I just thought that was an interesting way to approach it .

Because I think from in terms of like formal training, you both you and I didn't come into investing with any specific industry knowledge because you worked in sales, but you were selling to a lot of different companies, it wasn't like you, you, you [00:29:00] went to school to be like a banker or anything like that.

So one of the things that I wrote down on my list that I think is a, I don't know how many educators we have listening. I know of one because he reached out to me on Twitter. One of the things that is a challenge, but also kind of fun about working in the world of education is that it's constantly changing. You know, you, you know this because you're someone who went to school and someone who has a first grader in school.

School is very different in a lot of ways, in some ways, it's not than it was 20, 30 years ago, and that will continue to happen over time. And if you're a teacher or work in education at all, you have to constantly adapt. And so I think that idea of being flexible and adaptive and also just being a lifelong learner where you are, you realize like me at 22 when I enter this profession is going to be very different than me at 32 or 42 or 52 or 62. And that idea that I don't know at all that I have to keep learning that things change, that the world is going to [00:30:00] be different now than it, then it is in the future.

And I think a lot of industries are like that. Very few things are static for an entire career. So I think, for anyone listening, I think just that again, that mental flexibility of adapting to your own works change over time is something that can help in investing. I don't know. What do you think about that?

Jason Hall: Yeah, I think so. I think there's a couple parts of what you're saying that I want to emphasize and add a little bit of my thought on too, and that's like the, the adaptability part of it, but also the, when, when you think about those, things are always changing and are in flux. You have to ask questions, right? You have to understand what's going on. And, there's the old saying that you know, lawyers never ask questions they don't already know the answer to.

And that's only in court. Lawyers are asking lots of questions in the real world. In my experience, people that went to law school generally are some of the most intellectually curious people you will ever meet. And when [00:31:00] you meet one, you'll know it because they ask you 500 questions before you get to ask them one. And it's, it's remarkable to me.

It's remarkable. And I think one of the things that carries over across professions that tends to make good investors are either the professions that you're training are really about asking questions and the pursuit of, of understanding or the pursuit of knowledge. So engineering, I think, is another really good example of that. The sciences generally, I think you get a lot of the, the same thing. Frankly, I haven't dealt with a lot of people in the humanities besides a few English grads that you, you may have heard of Jeff. But that, that pursuit of questioning, right? Always be questioning is so incredibly important. Like it's like that intellectual curiosity.

I can't emphasize enough that if you work in a profession where you're constantly asking questions, [00:32:00] you're probably going to be a really good investor. I really think that that's the thing that carries over.

Jeff Santoro: Yeah, I would agree with that. And I think too, there's, I, here's another one that I want your thoughts on. So in some professions, no one wants to fail at their job. But in some professions, I think the process of failing and starting over and trying things Is part of the gig, so if you work, yeah, it's baked in, if you work anything in the creative arts, like if you're a writer or, whether it's like a writer for art of articles or a writer on a TV show, you're throwing a bunch of stuff at the wall and seeing what sticks and you're constantly revising and changing and adapting.

I think that's sort of baked into a lot of the creative things, right? And that's a world that I live in.

But I do wonder there are some professions where it's a little bit more concrete, or at least I would think so. You don't want to fail too much if you're a brain surgeon.

So, but I do, I do wonder if, if you, if, if someone listening works in a [00:33:00] profession where failure and learning from it and iterating and changing and adapting is part of the gig. I think that could be a helpful skill for investing too, because you will fail as an investor. You will, you will pick a stock that will not go up. It's inevitable, unless you just pick one and stop and you're lucky and it's a good one. You know, you're, you're, you're somewhere in your portfolio there will be failures.

And you have to be able to understand that that's part of the, that's part of the whole, the way it works. Or else you'll drive yourself crazy and get depressed and quit and stop investing. So I think understanding failure and how to, how to learn from it and understand that this is part of the process. If, if, if anyone has a job where that's sort of part of that, I think that can be an advantage too.

Jason Hall: Yeah. Well, I think I'm going to push back a little bit. I think broadly, that's very true because when it comes from a mindset [00:34:00] perspective, people very often walk into investing and they either get lucky or they blame the market for being rigged, right?

And they get lucky, meaning they pick something and it goes up quickly, right? And they weren't good. Maybe there was some skill, right? In picking a company that was had the potential to go up. But the luck is always what happens in the short term, right? There's just the fortune of of of the timing there.

And then By blaming the market for being rigged, it's, it's the other side of the coin and just the market goes down to stocks, individual stocks go down and the, the, the concern, it gets back to that kind of that mental flexibility is if you don't go into the markets understanding the role that luck plays in the short term, right?

And maybe luck isn't the best word, but just the reality of volatility. That it is there and that it's a, it's a feature, not a bug of investing in equities, but if you go into it, understanding [00:35:00] that's, but also applying. ...so if you're a brain surgeon, if you work for a manufacturer or whether you're manufacturing drugs or you're manufacturing automobiles or injection mold and molded plastic flamingos, the failure rate can be just a little bit, there's a different margin of error across all of those, right?

But understanding within your chosen profession, the margins of safety, right? That you put in place to limit negative outcomes I think is really important, right?

Because if you're, again, if you're a surgeon, you have a process you go through to limit potential exposure to pathogens, to yourself, scrubs, all the things that they go through and then the tools that you use, the training that you have all of the backup procedures in case things do go bad, like all of that stuff is there and you, as an investor, you have to go in, right?

And if, if you're wired the same way to invest the same way [00:36:00] then you're going to be more of the value investor type where you're going to build in a margin of safety, right? You're going to understand the importance of valuation in those cases and, rule number one, don't lose money. Rule number two, see rule number one, talking about Buffett again.

The idea is that, yeah, individual investments are going to be losers, but in the aggregate if you follow the right same process for having margin of safety and thinking through the volatility and making sure you buy the right price and you hold for the appropriate amount of time, In the aggregate rule, rule one's going to work.

So that's my only pushback on that is that it can, you, you have to, you have to invest according to, like how you're thinking about approaching the markets.

Jeff Santoro: Yeah. Yeah. I was talking, I was talking mostly about the mindset of it, and being able to sort of handle when it happens, but yeah, for sure, in any profession, even one that is very filled with failure and trying things, you're always [00:37:00] trying to over time learn how to fail less and be more effective.

So like, for example, one, one industry that I know you and I both know people who work in is like the pharmaceutical industry. And so much of that is like running test after test after test, and a lot of them fail. And you just you learn from it and you adapt and you learn from it and adapt, but that's sort of like that's that's another industry I think we're like some degree of failure is baked in, but you are doing-

Jason Hall: Lots of lots of failure is expected until you're manufacturing a product for patients.

Jeff Santoro: Exactly. Yeah, right. There's a lot of caveats to this. I'm just trying to find like broad brush things. I think it was really, this is what I'm trying to get at generally with this whole podcast is when when I, at least for me, when I sat down, when we decided this is gonna be the topic. And I started to jot down some things.

As I thought about it, it was like, all these light bulbs went off and a bunch of things I never really thought about as being transferable. I actually started to think were. And then as I thought more beyond just [00:38:00] me personally, I feel like there's a lot of these things in a lot of different professions. And I think recognizing some of those things that are just there can be really helpful.

So like, here's, here's another one. If you do anything, if you stay in one profession long enough, you learn that you're way better at it now than you were 10 years ago. You don't necessarily have that perspective when you start. And then-

Jason Hall: Muscle memory alone is an incredibly powerful.

Jeff Santoro: Right. And the, the, there's two sort of correlations, I think, to investing that popped up when I had that realization.

So one is that If you're going to be an individual stock investor, especially an active investor, meaning not just index funds and leave it alone, you should be learning continually and you should be getting better and you should be a better investor now than you were a year ago and better a year ago than you were two years ago and so on and so forth.

But the other thing too is a little bit of life perspective helps you realize, no, you don't get good at your job quick. It takes time. [00:39:00] And unless you're lucky, you don't get rich quick either. So I think that's another kind of life lesson that people can pull from, from work.

I've been doing the same, not the same job, but I've been in the same profession for 23 years now. And now that I've done that, I have the perspective of, wow, I really have learned a lot over 23 years. I'm still awful at it, but I'm way less awful than I was two decades ago.

 Jason Hall: 'm nodding my head right now.

Jeff Santoro: Yeah. Yeah again, no context needed. Anyone listening, well, anyone who knows me is nodding their head too. But, and I think it's the same kind of thing with that time frame, that, that acknowledgment of decades and progress you've made, there's a correlation there between your portfolio and, and that it's going to take 50 years to accumulate the kind of wealth that we talk about a lot in terms of being able to control your future and retire when you want to and all those sides of it. That's just another kind of place that it, as I was thinking more, it jumped out to me. [00:40:00] 

Jason Hall: Yeah. A couple of, a couple of thoughts just to kind of, kind of build on that, where it does take time to, to build out that knowledge. It's the same with anything.

You also have to be careful to avoid the biases that come with working in a particular job, have too much weight in your, your investing journey, right? It's easy to, to just make assumptions about how things are. So just as an example, working in an office environment in a particular industry making assumptions that the way that your company or your industry operates and the inefficiencies or problems are, are unique to you guys and everybody else has to be better, right?

Or the other way around. And we're really, really good at this and nobody else is. And that causing you to have bias either [00:41:00] for or against your chosen profession in terms of whether being an investable opportunity, right? It's just those, those biases can be really, really strong and can sometimes kind of, you don't even realize it's happening, and you can... it's kind of start limiting your ability to find better investments as a result.

Jeff Santoro: Yeah. That's good. Cause the last thing I wanted to ask and you kind of answered, it was like, what are some ways your job can teach you a wrong lesson about investing? And I think that's absolutely one for sure.

All right. So let's leave that there for now. We'll take a quick break. Everyone stick around because we are going to do a brief portfolio update. The Smatterfolio we'll do a quick July, July wrap up, sorry, August wrap up. It is September now. We're going to do an August wrap up, talk quickly about where the portfolio is to finish out today's episode.

So stick around. We'll be right back.

Jason Hall: Hey, Jeff, we're back, buddy. Let's talk about the Smatterfolio.

Jeff Santoro: Let's do it. So we're not going to go too deep. We decided a few months [00:42:00] ago that we'll just do quick monthly updates and we'll save the deep dives for the quarterly. We got one more, two more quarters we have to get through.

No, we have one more month, right? We have to get through September to get to the end of the next quarter. So we'll talk about August real quick. So here's just-

Jason Hall: Not a lot of math in your area of education.

Jeff Santoro: Absolutely not. This is, this is, we should edit this out, but we won't, I will, I will just put it out there that I can not keep my numbers straight in my head right now.

All right. So at the end of August, here's some quick headline numbers, and then you can tell me what you're thinking about it. I have some thoughts as well. At the end of August, the leading portfolio is yours, Jason. Good job. As of July 30, I'm sorry, as of August 31st, you have your portfolio is up.

Jason Hall: Should I be speaking the words right now, Jeff?

Jeff Santoro: No, I'm going to, I'm going to, I'm going to pull it together. At the end of August, your portfolio was up 41%. This is including dividends. That's how we're calculating it.

But here's the interesting thing. Second place at the end of August is within a [00:43:00] percentage point, between my portfolio, which was up 31.84%. I had to go to the hundredth place in order to get this. Team audience at 31. 82% and the unportfolio at 31. 6%. So I just thought that was interesting that they were also bunched up at the end of the month.

All right, best and worst performing stock at the end of August. Meta this is year to date through the end of August up 146% and the worst was Blink Charging down 64%. So good job, Jason. You chose Blink in the unportfolio and bad job me because I chose Meta in the unportfolio.

The best and worst performing stock for just the month of July the month of August. So this is August 1st, August 31st. Lemonade actually up 38% just in the month of August and Outset Medical, which has been just a continual loser for me the whole year was down 6% in [00:44:00] August. A lot of that's because of when they're the news around their earnings, which we can talk about later.

And the best and worst performing portfolio just for the month of August. So not year to date, just August 1st through 31st was yours, Jason. Your portfolio was up 18% in the month of August and the audience had the worst August. Their portfolio was only up 0.2%.

Jason Hall: Bad audience, bad, bad audience.

Jeff Santoro: So, those are just some headline numbers and me saying July instead of August over and over again. I don't know, I don't know what you're thinking about the portfolio as we, as we sit here in the beginning of September.

I'm still blown away, two things stick out to me and then I want to hear your thoughts. One is that, again, I would have signed up if I, this is a portfolio that I would sign up for every year. They're all doing well. There's only like three or four stocks out of the whole portfolio that are down for the year. Everything else is up. Some of them are up huge. Never would have thought that was going to happen this year.

And [00:45:00] it's also a pretty volatile collection of stocks, which I think is interesting. You're, we're getting some ridiculous one month and quarterly swings from some of these companies. Very few are just steady through the whole year. So those are my two observations.

Anything stick out to you as we do a quick little August update here?

Jason Hall: Yeah, no, I think that's the big thing. And, it's interesting even looking at the, the Team Smattering portfolio, right? The one that you and I built together, which is down for the year. If I was deploying capital right now, I would, I would not think twice about buying Boston Omaha and Simon Property. DataDog is up 33%. Wonderful company. I'd buy, I'd buy that too. So even the one that has not done well, I still feel pretty strongly about the quality of the businesses that's in it.

I think as like a business first investor, you look at these and you're like, these are, these are still great companies. Even though in different episodes we've done are like, what would you do different? Pick different, you know, all that kind of stuff that we've gone through.[00:46:00] 

I, I probably the last, my last observation is like, I think looking back five years from now, this is still going to be who, by the end of the year, we've talked about this before. This could, these great results might not look so great by the end of the year. I think you're still going to be happy on them, but I think five years from now, 10 years from now, this is still going to, this dozen companies is going to, or what was it? Nine. Was it nine companies? No, a dozen companies, a dozen companies, three times four is 12. See, I'm also bad at math.

It's gonna stand the test of time. I really believe that.

Jeff Santoro: Yeah, I agree. I would not, I wouldn't change my three, to be honest, even the Outset, which has been down the whole year. I still have a lot of faith that they're just, it's just really early for that company. I could be wrong.

Maybe that's my bias of loving what they're trying to do that's clouding my judgment. I keep looking at the results each quarter and trying to make sure that like I'm not missing something and everything seems to be in place. They're doing exactly what they should be doing. They're, they're growing and [00:47:00] slowly getting more profitable and all that kind of stuff.

So I, I agree with you. I, even the ones that are down in this portfolio, other than the unportfolio ones that you picked, I wouldn't own them. They're all great businesses, I think. And it will be interesting.

I mean, we did a one year contest because we wanted something to like talk about throughout the year and we thought it would be fun, but it will be really interesting to look back on these, on this portfolio and any future portfolios we do, two, three, four, five, six and more years from now and just see how they shook out over the really long term.

And just speaking of that, if anyone is interested. In, in the show notes of every episode is a link to the port, the Google sheet that has the portfolio. If you want to, if you're new and want to see what we're talking about.

I encourage people to check that out where it's a contest we do each quarter to raise money for charity. For those of you that listened to last week's episode, The Magnificenter 7 where we chose companies related to the magnificent seven that we [00:48:00] thought would be interesting alternatives. I added a tab to the spreadsheet that compares the actual magnificent seven to the seven that Jason chose and the seven that I chose as of the day we recorded that podcast, which was August 22nd.

So if anyone wants to check that out, it's on the same spreadsheet. It's another tab. Just to give a quick update. Since that the day we recorded that the magnificent seven stocks, which again is Apple, Amazon, Google, Meta, Microsoft, Nvidia, and Tesla are collectively up 3.8%. This is only about a week or two of, of returns here. Jason's alternative portfolio is up 2.7% and mine is down 0.5%. So early days, but that'll be another fun one to just keep an eye on. I don't know that we'll give updates on that, but be another interesting thing to check in on as we go through the year.

Jeff Santoro: Jason Hall: So I have, I have noticed one thing, Jeff, we'll get this caveat in there. We're recording [00:49:00] this on September 6th. There was one mistake in the starting price for AMC. They did a reverse stock split.

Jeff Santoro: Oh.

Jason Hall: The starting price was up. So yeah. Yeah. All right. Jason's portfolio is the overall leader and the two stocks that I picked are both getting for the unportfolio or both getting the crap kicked out of them.

I'm really good at this ,Jeff.

Jeff Santoro: You're so good. I just, I love how much you mention it. I will say one more thing as we wrap up here. I want to thank our listeners. This, that the episode from last week where we did the magnificenter seven.

 Jason Hall: Yeah, we got a bunch of people.

Jeff Santoro: We got a bunch of responses. So we got a few people who actually commented in the Spotify app, there's a question and answer feature that we don't really utilize, but some people do leave us comments there. So thank you. I have yet to figure out

Jason Hall: Over in excuse me, over in YouTube too Jeff. We've got another one in YouTube.

Jeff Santoro: We got one in YouTube. Someone emailed [00:50:00] us and we got a couple in Spotify. So if you go to that episode and click on the Q&A tab for that episode, you can see some of the listeners comments and thoughts and, and some people offer their own seven. So it's, it's been fun to see how everyone else has given theirs.

So maybe we'll figure out a way to put those together somewhere or do some fun, something fun with that moving on. But so just another cool portfolio thing for people to check in on as time goes on.

Jason Hall: Awesome. Alright, Jeff. I think that's it, right? We did it. We did it.

Jeff Santoro: We did it.

Jason Hall: Okay, everybody. As always, we love to give our answers to these hard investing questions out there. But it's always up to you, dear listeners, to find your answers to those questions. You know what? We've been doing this for over a year now and I continue to believe in you. You can do it, people. You can do it. All right, Jeff. We'll see you next time.

Jeff Santoro: See you next time.