Preston Pysh  4:25  

I completely agree with your point there, Stig. We’ll go on to the next question. 

For people who don’t know, Mark Cuban went on past this and ended up buying an internet domain called broadcast.com. If you actually type in broadcast.com today into your web browser, it will take you to yahoo.com. That’s because Mark sold it to Yahoo. 

Just so people understand what broadcast.com was, it was going around and basically syndicating radio announcements of various sporting events. If you wanted to listen to a certain football game or you want to listen to a baseball game, it was all being syndicated through broadcast.com, early on when the internet was just being stood up and before any of this kind of stuff was possible. 

This was a question in reference to that sale to Yahoo. 

Interviewer  5:09  

You sell and they pay you in stock. Post sale, Yahoo struggles with the acquisition. They don’t really know how to….

Mark Cuban  5:18  

No. Okay, so let’s put it in context here, right? We sell the company, and I don’t remember the exact price of the Yahoo stock. It was like $250. From my perspective, this was April 2000, when it closed, and I don’t see the stock market just going up forever. The NASDAQ just passed 5000, which is where it was back then in 2000.

Like I said, I traded stocks and started and sold a hedge fund. I understood what happens in the market and gravy trains don’t last forever. I said, “Look, this is crazy. It’s always been a little crazy, but it’s getting even too heated.” 

I had to wait six months before I could hedge my stock meaning by an offset in case it went down. I literally took every penny I had and 20 some million dollars in cash. I put against an index and against the entire market. That put was for six months, but if the market crashed prior to that, I was as good as I could be. 

The market didn’t crash. I lost every penny. However, the minute I was allowed to, I hedged everything.

Everybody thought I was an idiot. There’s literally a CNBC interview where he said, “Mark, don’t you feel stupid? Yahoo’s stock is up another hundred dollars.”

By this time, I’d already sold the Mavs and I remember sitting on the team bus talking to our then coach and one of our coaches, Dale Harris. He said, “Look at all that money you left on the table.” 

Literally, in one day, the stocks were jumping so crazily. In one day, I paid for the entire Mavericks in the stock move of one day.

They said, “You left all this on a table.” 

Then I said, “Patience.” 

I did an interview on CNBC and he said, “Don’t you feel horrible that you left a billion plus dollars on the table?” 

It’s on tape and I said, “Yeah, I feel really bad flying around in my G5s. Just horrible.” 

But everybody thought I was an idiot, even people who worked for me. I told everybody. Some people did and some people didn’t because every single person who would work for us for more than a couple months was at least on paper a millionaire. That was 300 plus people. 

We had a lot of smiley faces around the office and I said, “Look.” They would go, “See you are wrong and stocks are going up.”

Then, the bubble burst. It’s unfortunate. A lot of people got crushed. However, because I had hedged everything, I actually benefited in some respects and came out further ahead. 

From there, the problem with Yahoo and what happened afterwards were not so much what we were doing. It’s once Yahoo stock went from $300 some to $5 to something crazy. They freaked out.

Preston Pysh  8:06  

This is a really interesting comment on many levels. The thing that I liked about it was he was really talking about this idea of getting the trade perfect versus getting the trade good enough. 

Although, he talked about the first six months with the stock not going the way that he thought, he had a much bigger idea of how to position himself for safety. This wasn’t a position for making a ton of money. This was a position to protect himself, when everyone was being greedy in the market, and we all know that Buffett saying.

When everybody in the market was being greedy in 2000, Mark Cuban was trying to be very conservative. Play it safe. Protect his investment. Really interesting how he was thinking about this. There were so many people, especially the people on CNBC, asking him questions on how he left money on the table. Of course you’re going to leave money on the table. 

To predict the top of the market or to predict anything when it’s exactly going to happen is a fool’s errand, and you’re going to get yourself in a lot of trouble trying to do stuff like that. It just has to be good enough. I think that’s what he was really saying. 

Stig, I’m curious what you’ve got on this one.

Stig Brodersen  9:16  

I would like to talk a bit more about the strategy of buying put options. What Mark Cuban is really doing here, just to be sure we are all on the same page, was he was paid in Yahoo stock. So if that dropped, he would basically just lose all that money.

He wanted to hedge that by buying this so-called put option. The way this works is very simple. If you buy a put option with a strike price of $20 and the underlying stock, say it’s trading at $19, then you will have $1 in profit. That was really what he was thinking here. 

When you are dealing with options and you are buying, you cannot actually also be selling. 

However, if you’re buying in this situation a put option, you can still make multiples of what you put into it. So, he put $20 million into it. That is the premium, so you would pay a premium for the right to exercise an option at a given strike price. That was what he was doing. 

Therefore, if he was right, he would be making a lot of money, or you might say he would still be losing money on the Yahoo bet, but he would be gaining a lot of money on the premium. 

Also, when you talk about options, it is always about the market’s expectation. If everyone expects Yahoo stock to continue to go up in price, then the strike price you could get as an investor would be really attractive if he had the feeling that it will go in another direction. 

The other thing I really like about this example is that a lot of people have been talking about Mark Cuban being being lucky and just selling at the right time. Why would Yahoo buy broadcast.com just before the crash or almost before the crash? Of course, I’d say that there’s an element of luck to all billionaires, or at least most of them.

I think this example shows a lot about Mark Cuban’s financial literacy. He knows what he was doing. He was not trying to…well, he was actually trying to predict exactly when the crash would happen, but just as he was thinking in terms of hedging himself like that and being so active in the financial markets, I think this was a very interesting conversation to have. 

Preston Pysh  11:16  

I was going to say that if he got anything wrong, I just say that the duration of the options is what he got wrong by doing six months. I’ve personally just had bad luck with short-term options, anything under six months. 

Today, if I buy an option, it’s always a two-year option. I’m sure there’s a lot of financial people out there who could tell you why that’s maybe not the best approach or whatever. 

However, for me, I’ve just been so bad at forecasting timeframes, when something’s going to happen that if I do feel pretty good about it, say in the next six months, I usually give myself a two-year runway to see if that’s true or not true. That’s just my personal opinion on options. 

I don’t do put options on individual stocks at all. I refuse to go short on individual stocks. Now, I will short an index using maybe an inverse ETF or something, but I don’t short individual companies simply because you have no idea who’s going to maybe buy them out or what’s going to come up.

It could drastically change whatever narrative you got on a specific company and for me right now, Tesla would be a perfect example. I’m not a fan. I don’t think Tesla should be capitalized where it’s at. I think the price should go down, but I would never short that company.

Stig Brodersen  12:28  

We’ve been running this show for four years now. We’ve probably been talking about Tesla being overvalued for three years or so. 

Preston Pysh  12:35  

Exactly. 

Stig Brodersen  12:36  

We might have been right in the fundamentals, but we’ve been wrong about the timing if we kept buying six months puts.

Preston Pysh  12:42  

Absolutely. You’re right about the use by Mark Cuban here to protect all those shares he was receiving. It was an absolute smart decision. I just think that maybe he should have done maybe a two-year kind of deal. I’m sure he would tell you the same today. It’s easy to look back in time and call that one.

Stig Brodersen  13:00  

Preston, I don’t know if he was because he couldn’t sell stock after six months or after the acquisition was made. I just think it was something like that because it seems like a short period of time for something like that.

Preston Pysh  13:12  

Well, I bet you that’s probably what it was. He probably was protecting himself until he got to the point where he could just sell the whole position. Who knows? 

The next question that we’re going to cover is when Mark was approached to do Shark Tank, all the opportunities that he was given with entrepreneurs, and all that kind of stuff. This was his response.

Mark Cuban  13:32  

Mark Burnett put it together in the United States. It actually is a concept that started in Japan, and then went to the United Kingdom called Dragon’s Den. Then, Mark Burnett brought it to the US and turned it into Shark Tank. 

I originally talked to him about it the first season, and they didn’t cast me. I came back in the second season as a guest. 

Honestly, when I went on the show, they had bounced it around to different nights, and I’m thinking this business show has no chance of surviving. I go on there to do my three episodes as a guest, and I’m just buying every company no matter what. 

If this thing’s gone, I want to make my mark and this TV show because this is ABC. It’s a network television. Kevin, Daymond, Barbara and Robert, they’re looking at me like I’m crazy. It’s just like when I went to the NBA, right? 

They must have thought, “What the hell are you doing?” 

I said, “Let’s just have some fun.” 

The next thing you know, the show starts taking off, and it really starts getting a base of viewers. Now, we start next week, a week from today. We start shooting season 10. But along with that, which is cool. Can you imagine? Eight seasons of Mr. Wonderful? It’s brutal.

The good part about it is that so many companies have come on there, and we’ve picked them and missed them. I’ve invested as you said in 85, but I think now we’re up to seven of those that have sold. 

We just sold a company out of Atlanta that went on Shark Tank, Cycloramic. They had the iPhone that used the buzzer and you ran this app on it. It just turned around and took panoramic pictures. Well, they changed the format of the iPhone, which is great. This is a great lesson for entrepreneurs. 

This guy came in with this really cool app, works with an iPhone five, and it just turns around and takes panoramic pictures. It then stitches them together. It was a cool picture, so I gave them $250,000 I think for 20% of the company or 25% of the company. 

Not four months later, Apple changed the iPhone and got this rounded thing underneath, and we said, “Oh, what are we going to do?”

But the guy was smart. One of the things I always look for companies coming in is what’s your unique advantage? What is the one thing you have that differentiates you from other companies? 

For this guy, the product was interesting, but as I said on the show, the ability to program video and use what became computer vision was a unique skill that was hard to find. We worked with him and actually brought in another CEO.

 

They used that same technology to be able to scan cars. Now if you go to websites like Carvana to buy a car, and you see how you can turn the car around just right there. That started with their software.

The guy’s name is Bruno. We just sold his company for $22.5 million dollars a couple weeks ago. I walked away with 25% of that. I thought, “Yeah, Shark Tank.”

The point of it is all these companies come on, and there are some rules of thumb that I thought were smart going in, but it really turned out to be true moving forward. 

One is sales cures all. Lots of companies come in and say, “I have a great idea” or “I have a company, and we’ve got some sales, but we only need to do this. We only need to do that.” 

You talk to the entrepreneur and say, “Why aren’t you selling? This is your whole company. There’s never been a company in the history of companies to survive without sales.” 

Now, as more and more people watch Shark Tank, they’re seeing it. But if it’s your company and you can’t sell, you’re not going to be in business long, particularly when you’re starting up and it’s just you. There are principles like that.

The other thing is when people get some momentum, they want all of a sudden to go big, right? Particularly, that’s kind of a dot-com thing. Let’s buy our customers and raise a ton of money. 

One of my buddies Howard Tolman says it best, “You got to nail it before you scale it.”

If your company doesn’t work, making it big won’t solve your problems. It will just add to your problems. 

Another thing that we try to convey and I’ve learned and tried to convey to our Shark Tank companies is that raising money always seems to be like the big thing to entrepreneurs coming in. 

Well, if I can only raise this money, raising money isn’t an accomplishment. It’s an obligation and the best equity is sweat equity. What you can do? 

Seriously, if you’re putting in the sweat, and you’re putting in the time, and you’re not out there raising money…then you’re grinding it out, and you’re hustling. So many companies, I mean… 

To me, that’s part of the problem of Silicon Valley. They’re so all about raising money, and they forget that that just creates an obligation. 

When I give you my money on Shark Tank, what this is, just like, “Okay, here’s your hundred grand, call me when you’re not so busy?” 

No, I gave it to you for a reason, right? I have expectations, and I want you to communicate with me. It follows a normal distribution. I’ve had some really great companies, and I’ve had just some pure out idiots. 

It’s almost like drafting in the second round of the NBA. Athletes will come in and just give you the best song and dance, and you think they’ve got it together. I had this one company, and they did these… I tried to get people to paint their faces to come to mask games. Kids will put on paint, but when you’re done with it, it’s a mess. 

This company Game Face, they had these things. They got surgical tape and they had to reformat it, so that you could just cut it up, color whatever colors or pre buy the colors you like, and just poke the holes and cut them and put them on your face. When you’re done, you just peel it off and you’re done. It was great. 

All of a sudden, one day I’m getting a report. The way I like to do it is I like to get weekly [reports], depending on how good the company is. Weekly, bi weekly, monthly or quarterly. The better the company, the longer you can wait. 

But I always want bad news first, because I invested in you; because I expect good news. However, when there’s a problem, I want to know about it because I want to be able to help you and get through it. 

With Game Face, I got my reports and all of a sudden the money was gone. I said, “What did you spend all this money on?” 

He decided that for the surgical tape mask, he decided we need patents around the world to protect it. I said, “You’ve barely sold anything. What are you protecting? There’s no good reason to patent something that sucks.” 

If you can’t sell it, then it sucks. If you can sell it, then you can talk about it, right? 

In this case, it wasn’t that it sucked. It was actually a good product, but the guy went through all the money. I said, “So what are you going to do now?”

He said, “I don’t know. We’ll start small.”

Then, we got together, sitting there drinking iced tea. I said, “I’m going to do you a favor. I own 33% of the company, and I’m going to take over it and run it. You can go get another job. You can hang out with your kids. I’m not going to lie. You don’t have to do anything. Please don’t do anything. I’ve got my 33%.” 

I think this can be big enough. Just seeing what I could see like going to sporting events and the World Cup was coming and things we could do there and selling sponsors.

I said, “Just chill, right? Here’s the beer. I’ll send you beer, whatever you need. Just chill.”

We shake on it. So we’re grinding it out, right? Sales are going great, so this was working.

Six months later, I got an email from one of my guys, “You’re not going to believe what he did.” He created his own new gameface.com or whatever it was to compete with me. 

Look, as an entrepreneur, you guys are entrepreneurs, you’ve got to have a screw loose. Yeah, be a little freaky somewhere along the line. That’s just the nature of the beast, because it’s so competitive and there’s so much at stake. But come on, man, it was just…They ran the gamut.

Preston Pysh  21:58  

Obviously, a hilarious exchange here on some of his stories dealing with Shark Tank. The last one doesn’t surprise me. Everyone who’s listening to this has stories of people like this that just do not get it. They come up with a great idea and just don’t understand the business part of it at all, whatsoever. 

I liked his comments about the patent stuff. So often people think they’ve just got to file a patent for everything, and they’re not cheap. They’re really expensive. Tens of thousands of dollars in most cases with patents. 

I’ve got a real quick tip on patents. If you ever have a really great idea, and you want to license something, read this book called “One Simple Idea.” It will save you a ton of money. It’s basically how to file a PPA, provisional patent for like a couple hundred bucks, and then to go float the idea without having to spend all the money, and then once you get somebody to bite on the idea, you’re able to have them pay for the patent, and then you collect a royalty off of it. It’s a great book.

Really fun conversation. I didn’t realize that about the beginning of Shark Tank with his first season, where he was just basically trying to make as many deals as possible because he didn’t think the show was going to make it. That’s pretty surprising. I didn’t realize that.

Stig Brodersen  23:15  

Yeah, I absolutely love this exchange. Anyone who’s been raising capital, they’ve been speaking to people who just don’t get it and don’t really get what it’s all about. 

I was doing this consulting for this guy. It was probably a few years ago, and he was trying to raise a few million dollars. It was about sponsorship for football clubs or something like that. 

I was going over his case at this point in time, and he was just starting up. He still had a job on the side. I asked him, “What is the money for?” 

He said, “Well, if I raise $2 million, I can quit my job and hire a salesperson. That would be so nice.” 

I wondered really because it would be nice if you could quit your job and hire a salesperson, but it’s not a business. You are the salesperson. You are the business. What are you going to do? 

To really just tie this back to what Mark Cuban was saying, this was in one of the other audio clips that we didn’t do here today. He was talking about how they met up at 1:00 AM, when it was convenient for the buyer. It’s not convenient when you try to raise capital. You don’t raise capital because it’s convenient for you. You do it because it’s convenient for the investor. 

If you raise $100 million dollars, you have 100 million obligations. The thing is really as simple as that. We studied multiple billionaires here on the show, who’s been raising capital and who deeply regretted it, even though they had enough money already.

Ted Turner started CNN when he was doing the merger with Time Warner. He regretted it. Lately, also Elon Musk.

There are a ton of things you can do if you don’t raise capital, but most people go into entrepreneurship because they do not want a boss. That is exactly what you’re getting when you are raising capital. There’s nothing wrong with raising capital. It’s not a freebie as I guess some people might mistake it for.

Preston Pysh  25:10  

I absolutely love this point that you just made because people become entrepreneurs because they don’t want to have a boss. They’re in the grind and they’re doing their thing. They’re like, “We got to raise money. We got to do a funding round, because that’s what everyone does. They raise money, they go out and get a million dollars.”

I think they get caught up in that idea and so they go out and they raise the money, only to find out now not only are they working for somebody else, but they’re working for somebody else and probably the highest stress environment you could possibly create. All the sudden it isn’t their baby anymore, depending on how much equity you give up during the funding rounds. 

However, you go out and grab a million bucks from somebody. Typically they want to have control. These are just some thoughts. If you are starting your business and you’re talking that kind of stuff, we totally get it. 

We understand why you want to raise money because you want to move fast, but this is what I’ll tell you. If you’re trying to move fast just to move fast, you’re setting yourself up for failure. 

If you’re trying to move fast, because you literally have people breathing down your throat, that are trying to steal your market share, that’s a whole nother thing. It’s probably something that you do need to do to stay alive. 

If your business is highly dependent on network effects, say you’re in some type of software or something like that, if it’s highly dependent on network effects, and you have to be first to market and take the majority of the market share to really make it, then you do it. 

However, if you’re just going fast to go fast, you’re going to be working for the man, and it’s not fun. I just tell you those are some important things to think about if you are in the startup plan. 

This next question gets further into this idea of selling and of taking responsibility, just an overall mindset. We thought that this was a really good exchange for people to listen to, so here it goes.

Mark Cuban  27:05  

Being an entrepreneur is being a problem solver, right? What is selling? Selling is not convincing. Selling is helping. As tech entrepreneurs here, if you’re going to a customer, whether it’s a consumer or you’re in B2B, either you’re making your customers’ life easier, you’re reducing your stress, or you’re making it harder and you’re increasing their stress. 

Over the years, I think some of the things I’ve come to learn, trickily dealing with some of the Shark Tank companies, is one of the greatest skill sets that an entrepreneur, employee, and salesperson can have is reducing stress. 

If you find that when you go to work, stress increases. The minute you walk in the door, you’ve got a problem. If you have an employee, and the minute they walk in the door, you have a problem and they have a problem. 

What I found is the best company and the best employees that I have, the best investments that I have are the people who reduce stress because those are the people we don’t want to give up. They don’t make the most noise. They don’t always get the biggest paychecks. They always closed the biggest deals. However, when there’s problems that need to be solved, they’re already working on them before you’re even aware of them. 

If you set your mind, it goes as an entrepreneur for your company. One, keeping your selling and keeping your customers very happy. Two, stay ahead of the curve with your competitors. Three, reducing the stress of everybody around you, all your stakeholders, you’re going to be successful. 

Because if you think about all your personal experiences, would you rather do business with somebody who creates stress? Or do you want to do business with the person who reduces stress? It’s easy to answer, but you’d be amazed at how many people don’t follow through on that. 

Then, part two to that is nice. [It] is way undervalued. Particularly in this day and age, if you turn on the news, everything seems like it’s going to get blown up, right? Being nice just makes life so much easier.

I learned the hard way. I had to have my partner Todd come to me one day and he goes, I like to curse. He goes, “I don’t care about cursing, but you curse too much. Not everybody’s as accepting as cursing as you are. Calm down.”

I took that to heart, not so much the cursing part, but it became apparent to me that the nicer I got, the more effective people around me got, the more productive they got, the more sales we had. I was undervaluing nice. 

I started my first company after I got fired from a job. I was 24. I was always go, go, go go, go, all consumed. Live it, eat, sleep, and breathe it. I knew people couldn’t keep up or work as hard as many hours as me, but I wanted them to. We were successful and we didn’t have much turnover, but I could have done a better job if I were nicer. 

Broadcast.com, I got a little bit nicer, right? But then once I got to the Mavs and some of these other companies, Todd reminded me that nice works. When you find yourself going to work, when you’re finding yourself dealing with customers, when you’re finding yourself making decisions, we all get that agitation, that feeling in our stomach, that tenseness, that stress at various points of times that we all have to go through. 

However, sometimes you just need to calm down, right? Take a deep breath, and be nice. If you reduce the stress to people and you’re nice, you’re going to have such a huge advantage. No matter what your technology is, no matter how it compares, even if it’s a download for an app, people will still have to deal with you. Your culture will come through. 

Being nice, being supportive, reducing stress that all comes through even in an app.

Preston Pysh  30:54  

This was such an awesome exchange. This idea of a person walking through the door and stress level going up versus going down, I wish you could have taken a screen capture of my face when he was talking about this. The look on my face was, “Thank you for saying this because I’ve never been able to describe that idea in such a concise and accurate way.” 

I know from my own work experience, sitting in an office and a person walks in, and it’s just like, “Oh, thank God, this person’s here. They can pretty much solve anything and they’re amazing.” 

Or the feeling like, “Oh my God, this person just walked through the door. What drama is about to be created right now and what issue are they going to bring me with no solution?” 

We all know who these people are. 

The thing that I think is really important for us isn’t necessarily identifying who those people are in an organization but how are we being perceived when we walk through a door? If you think it’s because you’re the low stress person, I would tell you just not to jump to the conclusion so quickly. Really think hard about that because maybe you aren’t. Myself included. 

I think it’s super important to really test that idea and to think about that idea because he’s hitting on something that’s way deeper than just stress. He’s hitting on effective teaming. He’s just hitting on a whole range of topics there. I love how he put that. 

One thing that was really subtle there at the beginning, he mentioned it briefly was this idea of convincing people in sales, versus finding a win-win and really kind of tailoring the solution to the person that is the potential buyer. Anyone who is a great salesperson is doing the latter and not the former.

I’ve received so many sales pitches from people over the years that they come in and you can just tell it’s canned. They’re just spewing the routine, if you will. They’re not necessarily trying to understand what it is that I need as the customer first, and then trying to tailor their pitch to those needs. Those desires that I personally have, they’ve never even taken the time to try to understand what those things are. 

If you want to be effective at sales, that’s where you always start. You really do your market research and try to understand who your customer is at a very fundamental level. Then, you adjust your sales pitch to that.

Stig Brodersen  33:27  

The thing that I really took away was the thing about stress. I guess that as you said, I have never been able to pinpoint it like that. It sounds so simple when he said that but apparently not simple enough for me to grasp before. 

The way that I often look at working with other people is are they problem identifiers or problem solvers? There are 100 to one of the people who are problem identifiers. I mean, this is wrong and then that is wrong. There’s so many things in life that’s wrong and that’s just the way it is. What is the solution? 

If I have a person on the team that will come to me and say, “This is the problem, I have identified two different solutions. Which one do you prefer here? There are the pros and the cons.” That’s a person who I would like to work with, because it reduces stress. 

“Give me the bad news first,” as Cuban said, and then two options to choose from, or even better if that person just took care of it, that you don’t really pay attention to that. I love that. 

Unfortunately, I didn’t have too many things to add. I just really wanted to play this question, in case people were as oblivious as me in terms of increasing or alleviating stress and how that works in the workplace and whenever you are aiming to create win-win with the people around you.

Preston Pysh  34:44  

Well, we enjoyed covering some of this Mark Cuban stuff. I could play a lot of his stuff all day long. I’m a big fan of his work. At this point, what we’re going to do is we’re going to transition to a question from our audience. This question comes from Colin and here we go.

Colin  34:58  

Hi, Preston and Stig. Before I ask my question, I just want to say thank you to you guys for putting on the podcast. I listen to your show every Monday morning on my drive to work. It’s really helped me learn more about the world of investing and also the world of business as a whole.

One of the common themes from your show is that many billionaires and business people believe the best way to create wealth and success is creating value for society and entering into win-win situations in terms of negotiating. 

Your podcast is an excellent way for the two of you to create value for society while focusing on what you love, which is investing in finance. 

On the other hand, investing in the stock market is a zero sum game. So every time we make a good decision as investors, someone else has to be making a bad one and vice versa. 

My question is, how do you think about the stock market and investing in public equities as creating value for society? As a young person considering a career in the space, I’d love to hear your thoughts on this. I’m not sure if I could pursue a career where I’m the only one winning. Thanks again.

Preston Pysh  36:03  

Colin, I really like your question. I guess I look at it a little bit differently than the zero sum game kind of thing. I think if you’re trying to strategically do something from a quant standpoint, I can see how people would maybe go in that direction. 

I look at it just like this. If I were going to go out and buy a business on Main Street, if I held that business for five years, and I own the entire thing, and then I sold it to somebody else, I don’t really necessarily see that as a zero sum game. 

I see that as just me having a business interest, owning that business and selling it off to somebody else. Then me taking the capital and employing in any other way that I want, if I want to own another business or whatever. 

The stock market’s the exact same thing, only it’s done on a micro level. What’s great is it allows people to take ownership in businesses that they could never afford if they weren’t divided up into tiny little shares. 

For example, if you want to own Nike or you want to own Under Armour, you want to own whatever, you can own those businesses. You don’t have to be a multi billionaire to own those companies.

If you want to buy that and hold it for 30 years as if… Buffett would tell you to buy something and hold it forever with a punch card of 20 picks. If you’re investing that way, which we highly recommend that people invest this way, that’s going to be beneficial. 

I think when the market starts to be treated as if you’re not owning businesses, you’re just doing things to trade pieces of paper that don’t mean anything to try to turn a profit. That’s whenever I think you turn from using the market from what it was really intended for, to something that’s different. Maybe what you’re describing as a zero sum game. 

I would encourage people to think about the market in that regard that you’re owning a fractional piece of a business that you really have a belief or passion behind that you think is doing good for the world. I think that you’re going to find that your yields do return when you start investing in companies that you really believe in and that you think are adding to society’s benefit.

Stig Brodersen  38:00  

I don’t know, Colin, if you refer to that being a zero sum game, like the market will yield 7% for someone to gain 8%. Then another person would have 6%. I don’t know if that’s how you look at it. There’s definitely some truth to that and then you also have to pay commissions and other fees. 

However, in terms of the zero sum game, as it is not making profit, you would still be better off as an investor, even if you unperformed the market by 1%, instead of holding cash, simply because the stock might yield. In the long run, that is all the best companies, all the profits that’s distributed back to the owners

Look at the public market as playing an important role for society. Think about saving up for retirement. Your parents might have invested in stock and done so say 30 years ago, and now they’re looking to retire so they would sell off their stock and then buy a fixed income. 

It might be some of the same stock that you want to buy being a new investor going to the market, because you have another risk profile. 

I think the stock market is really good at distributing utility across society. Then you just have some of the other important factors like raising capital for companies to increase production, create employment, and generate tax income for society. 

Definitely, whenever you watch CNBC or whatnot, there’s definitely dark sides to the stock market. Though in general, I think it’s a very good thing for any country to have in terms of creating wealth.

Preston Pysh  39:33  

Colin, I like this question. This is a really good question. It forces people to really take a look at what is actually fundamentally happening. 

As a token of our appreciation for asking such a great question, we’re going to give you access to one of our paid courses on TIP Academy. It’s going to be our intrinsic value course where you can determine the value of a business. You can access this course at tipintrinsicvalue.com. We just really appreciate you calling in and leaving such a great question. 

For anybody else out there, if you want to get your question played on our show, go to asktheinvestors.com. There’s a little button there where you can just hit record. It’s the fastest thing ever. It’s really easy to do. Just go to asktheinvestors.com and you can record your question. If it gets played on the show, you can win a free course on our website. 

Stig Brodersen  40:22  

Alright guys, that was all that Preston and I had for this week’s episode of The Investor’s Podcast. We will see each other again next week. 

Outro  40:31  

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