TIP846: Stock Picker: How to Live Off Your Portfolio w/ Ian Cassel

In this episode, Stig Brodersen welcomes back Ian Cassel, founder of MicroCapClub and CIO of Intelligent Fanatics Capital Management, to discuss his new book, Stock Picker. They dig into why most microcaps must be sold within 36 months, why Ian never holds a large cash position, and how he arrived at the $2 million that let him live off his portfolio. IN THIS EPISODE YOU’LL LEARN: (00:00:00) Intro (00:12:24) Why Ian's first big win at 16 shaped his risk tolerance for life. (00:24:48) How Ian arrived at the $2 million he needed to become a full-time private investor, and why the number was about pain tolerance, not expected returns. (00:26:48) Why there is no such thing as saving when you live off your portfolio, and the safeguards Ian built to survive consistently inconsistent returns. (00:32:19) Why most microcaps you buy must be sold within 36 months, even the winners, and why the greats had their best returns in their highest-turnover years. (00:40:56) Why Ian never holds a large cash position, and how a 3 to 5% cash buffer forces him to sell his least convicted idea. (00:46:09) Whether Ian would take a guaranteed 20% annual return for the rest of his life. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Mastermind Community⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about how to join us in NYC for our ⁠⁠⁠⁠⁠⁠⁠⁠⁠Intrinsic Value Conference⁠⁠⁠⁠⁠⁠⁠⁠⁠. Ian's new book, Stock Picker. Ian's community, MicroCapClub. Meet Ian in person at a Planet MicroCap event. Follow Ian on X and LinkedIn. Listen to our interview with Ian Cassel about the five core skills of stock picking. Listen to our interview with Ian Cassel about multi-bagger first principles. Listen to our interview with Ian Cassel about finding lightning in a bottle in microcaps. Listen to our interview with Ian Cassel about the big world of microcaps. Related ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠books⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ mentioned in the podcast. Ad-free episodes on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses through ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Check out ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Investor’s Podcast Starter Packs⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Finance⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠best business podcasts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our sponsors: Monarch Plus500 Netsuite Plaud References to any third-party products, services, or advertisers do not constitute endorsements, and The Investor’s Podcast Network is not responsible for any claims made by them. Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

• 0:00Speaker 00

  You're listening to TIP.

• 0:03Speaker 01

  In today's episode, I'm joined by Ian Cassel to talk about his new book, Stock Picker. Ian has never had a normal job. His parents handed him $20,000 at 16, and by 28, he was living off his own portfolio as a full-time private microcap investor. But of course, this is not a story about how life and investing is just up and to the right. This is a deeply personal book, and it's a deeply personal conversation. We talk about the fund manager who insulted Ian at a cocktail party back in 2009, and how the anger kept him going. We talk about his first mentor, and why you should only take advice from happy people. And we talk about why most microcaps you buy should be sold within 36 months, even the winners, which may sound surprising if you're raised in the church of Buffett and Munger,

• 0:49Speaker 01

  like I was. Toward the end, I grill Ian about his fund, his fees, and why he bingesmarks himself against the S&P 500 when so few microcap managers do. Full disclosure, I'm not invested in Ian's fund.

• 1:06Speaker 00

  Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your host, Stig Brodersen.

• 1:51Speaker 01

  Welcome to The Investors Podcast. I'm your host, Stig Brodersen, and I'm here with Ian Cassel to talk about his new wonderful book, Stock Picker. Ian, how are you this morning?

• 2:01Speaker 02

  I'm doing great. Stig, thanks for doing this. I really appreciate the opportunity to tell more people about the book.

• 2:07Speaker 01

  Fantastic. So Ian, I have to start by saying this is a deeply personal book, and I'm kind of curious to hear which story was the hardest to write. And of course, I'm going to continue rambling, even though I just asked you a question. But my guess, now that you haven't asked me, but my guess is that perhaps the essays that opened the book, what is chasing you, it was just, it was very eloquent. And because admitting that a stranger got under your skin, that cannot have been easy. Or perhaps, you know, I just said it was the hardest story, perhaps it was the easiest story, because it sort of like had to get out there, right out of the gates. And so perhaps, Ian, please tell us the story of how a fund manager insulted you

• 2:48Speaker 01

  at this cocktail party back in 2009, and how you woke up thinking about that person for years.

• 2:55Speaker 02

  Yeah, no, I appreciate that, and I think that's a good way to lead off. I mean, I really wanted to write a book that was personal, that was authentic. You know, it didn't read like, you know, be a guru like Ian, or how to invest in my ear caps, you know, like an instruction manual. I wanted to have a connection, so I appreciate that you picked up on that as well. The hardest chapters, I would say, to write were the personal ones. You know, there's a chapter in there about a mentor of mine, which I'm sure we'll get into. There's a chapter about losing my mother. There's a chapter, you know, really the last chapter about compounding, you know, just reflecting on my kids and making an impact on them in a positive way, you know, that has nothing to do about with the stock market. You know, there's were kind of impactful, harder chapters to write. And obviously, the what is chasing you, which was kind of the lead-off chapter,

• 3:39Speaker 02

  kind of fits that same category. It's a, it's a personal one. And I would say it was also equally fulfilling, you know, to write that as well, because it's a chapter that could only be written after, you know, 20 years of going through a journey and kind of looking back and reflecting on the different things that have kind of chased me over that 20 years. And, you know, I think one of the things, you know, and I'll get to the story that you wanted me to articulate on, but I think one of the things early in my career, you know, I made the pursuit of being a full-time private investor kind of my top priority. And I think that's, quite honestly, I think that's a very lonely pursuit. You know, a lot of people that you run into, including your close friends and family,

• 4:22Speaker 02

  they might not understand what that even means, you know, they'll kind of push back on that, you know, because they don't really understand it, or your desire to achieve it. And, you know, some people will, you know, say you're an idiot, you should be, you know, doing a normal career, or working for your dad, in my case, or all of the above. And, you know, I think it just kind of gives you more fuel for the fire to really ultimately, you know, reach, reach that goal. And because I think it's a goal that can be rather lonely, at least the pursuit of it in some ways. You know, the other side of that is, once you achieve it, it kind of all boils up inside you, and you want to kind of prove to the world that you were right and they were wrong. And, you know, over that journey of 10 years,

• 5:05Speaker 02

  you, you see other kind of younger people that you may have graduated with, or know or don't know, and they're receiving accolades because of their career journey. And you're just kind of sitting in the corner of your basement, trying to trade stocks or invest in companies and, and create kind of long-term wealth for yourself. And finally, when you finally make it, it's just, you know, screw you, like middle finger to everybody that said I was wrong, or I couldn't do it. And so that's kind of like the negative side of kind of that isolationism of chasing a pursuit like that. But, you know, so yeah, so I think that, that early story, which was probably around April of 2009, a fund manager friend of mine invited me to a cocktail reception in, in New York City. And, you know, I think there was around 20 folks invited,

• 5:49Speaker 02

  and they were like either fund managers, analysts, investment bankers, brokers. And I'd like to say they were probably the last 20 people that had jobs at that point in time, that point in 2009. I don't think the bottom was, was quite put in at that point in time. But I remember, you know, just being honest, I probably had, and so did everybody else there, have a little bit too much to drink that evening. And I got in a heated argument with one of the fund managers that was there, and I forget what set it off even, but, you know, he kind of quickly kind of gave me the snarky tones about, you know, so I guess you weren't good enough to keep a job, because I told him I didn't, wasn't really working for anybody, and I was kind of pursuing being a full-time private investor. And he just kind of snarkly made a comment about me not being good enough to actually keep a job.

• 6:31Speaker 02

  And I remember firing back to him pretty quick. I just said, you know, you know how you, how I define a fund manager? Someone who isn't skilled enough to support themselves on their own capital. And I remember just like kind of walking out the apartment, and walking down to the street, and walking back to my hotel, which ironically enough was the Waldorf Astoria in New York. And I was kind of laughing about this. I didn't put it in the book, but I think, again, this was April 2009-ish, you know, I think it was like $130 for a room at the Waldorf Astoria, because like, nobody was going anywhere.

• 7:02Speaker 01

  Wow.

• 7:03Speaker 02

  You know, and now it's probably 10 times that, you know, at night. So that gives you kind of an idea of how bad things were back then. But anyway, for years, I would think about that guy, you know, for the last three or four years, you know, just kind of added to the anger, and that anger sort of chased me in that pursuit. It was more the fuel. And we could argue whether that was good fuel or bad fuel, but I think at different parts in our journey, you know, different things do fuel us. And so that was, that was just some of the feel for those early years, was just thinking about that guy and how he disrespected me.

• 7:34Speaker 01

  No, I think a lot of people listening to this very much resonate with that. It also sort of like ties me to the next question here, because you, you write about forgiveness quite a few times in your book. And I'm sure that forgiveness makes for a better life. But I also can't help but wondering, now that you've told this story, that, you know, having someone chasing you perhaps makes you a better stock investor, because it, it lights that fire inside of you. And so if you will allow me to project some of my own biases onto you, and then you can, of course, tell me that I'm all wrong. You know, I used to be so broken in so many ways, and, and out there to prove myself, and having my own demons. And I was perhaps in the top 0.1% in terms of competitiveness.

• 8:19Speaker 01

  And I've milled a bit over the years, or so I hope. Of course, I'm still broken. But hopefully, less so after meeting my wife. And, and so, you know, just to put some numbers on it, because as a stock investor, it's really difficult for me not to put some numbers on it. I don't know. Let's say I'm top 1% in terms of competitiveness for the population. But also, we're, whenever we are professional stock investors, you know, all of us are top 1%, which means that you're, perhaps you're top 1% and top 1%, which is certainly not the case for me. And I can feel how I'm personally losing a lot of the edge I think I had whenever I was younger, because I've, I just started to be a more chill, to be honest, about a lot more stuff and letting other stuff go. And I would probably argue that it makes a better life.

• 9:04Speaker 01

  But, you know, I just want a silly example. I don't do as many 16-hour workdays. I still do once in a while, but not as many as I used to. And I just don't have that drive anymore. And so let me project all my biases onto you here, like I mentioned, Ian. So do you buy the premise that forgiveness and not having a chip on your shoulder may lead to losing your edge in stock investing? And again, I kind of consider stock investing to be the ultimate game of capitalism.

• 9:32Speaker 02

  Well, that's a very loaded question. And I appreciate, and I'm sure your wife does too, that you mentioning her. And I think marrying the right person, you know, is extremely important. You know, you and I are both extremely flawed individuals, and having somebody love you in spite of that, I think, adds to the fuel or motivation. It doesn't take it, take away from that. But I don't think kind of competitiveness and forgiveness are sort of mutually exclusive, you know. And in fact, for me, I think forgiveness, if you want to look at it through this lens, kind of allows me to, to run faster, you know, because I think we all store up so much negative energy, you know, whether that's worrying about something, or waiting to forgive somebody, or, or someone forgiving us, you know, and having those conversations.

• 10:17Speaker 02

  And I think the quicker that you can resolve conflict, the stronger you get, not the weaker you get, because it takes less energy from you. It takes all that negative energy away from you, and you can kind of refocus that on competitiveness, on positive things. It's almost like selling a loser out of your portfolio, and then focusing the effort and capital on the winners in your portfolio. There's this great Abraham Lincoln quote that says something to the effect of, "Do I not destroy my enemies when I make them my friends?" And I feel like that's a good framing of kind of forgiveness and how to, and how to look at that. And I do think it also changes when you have kids. You want them to see the type of person you are, not just the type of fund manager you are, stock picker you are, business person you are. And I think you need to be the example to them too, about how, you know,

• 11:02Speaker 02

  it isn't impossible to be a good person and a good investor. And so I think, I think I can live in both of those worlds, and, you know, still beat the S&P 500 over the long term.

• 11:15Speaker 01

  I love that you say that. And you know, I very recently had this conversation with someone who's very important to me. And he talked about how he felt that you could not be a good husband and a good father and then be very good at your job. And to me, they're not necessarily mutually exclusive. But I think a lot of people would agree with him that you can't be both. And so I'm kind of curious to hear, how do you think about that today?

• 11:42Speaker 02

  I think as you mature, you get more reflective on what your strengths and your weaknesses are. And even in spite of that, as your capital grows, it allows you to invest in other people or tools to be able to fill those voids or weaknesses that you have that allows you to scale. I think a good example is, quite honestly, about some of the greatest stock pickers, you know, the way they started their careers is not how they ended it. You know, it's like Buffett investing in, you know, turning over cigar butts in the 1960s, now investing in, you know, quality companies. But you could also argue he is not just a long only, or Berkshire is not just a long only shop. They give debt, they're private equity, you know, they're everything

• 12:23Speaker 02

  under the sun. And they also, those managers, they go from playing every instrument in the orchestra to leading the orchestra, which means finding good people to put around you, and putting the right people around you that allows you to scale your abilities, you know, where you just don't have to work the 16 hours a day. It's because you have the means to afford to put great people around you and accomplish those goals even faster in spite of that.

• 12:48Speaker 01

  You know, I think you're absolutely right. And there's also something to be said about intensity, you know, I think there are these stories about, I don't think there are stories, I actually think it's true, like Buffett, when he married, he, on his honeymoon, he did different scotch butt company visits, you know, it's like, and isn't that the honeymoon everyone is, is hoping to get. So I think there is something to be said about proving yourself intensity, but also, you know, making sure that you prioritize your energy the right way. But Ian, I want to set a new scene. Let's go back to 1997. So this is your 16th birthday, and your parents sit you down and offer you a choice. So they have saved up $20,000 for

• 13:30Speaker 01

  your education, and you can decide what to do with it. And in your infinite wisdom, can I put it like that? You put $5,000 into a tech stock, and it doubles in two months. I mean, how amazing is that at 16 to be able to do that?

• 13:44Speaker 02

  It was that easy.

• 13:45Speaker 01

  And it was that easy. You know, so you write in your book, I was hooked. But then a page later, you also say that you didn't realize at the time that it wasn't skill, it was luck. And this is your words, not mine. So I'm not trying to be derogatory when I'm saying this. But you said, like, a monkey could have picked winning stocks in that environment.

• 14:06Speaker 02

  And they did.

• 14:06Speaker 01

  So, and that's true. So, I know you have a very interesting take, that your first double, it was actually good for you. And it's kind of interesting, because we have so many investors on the show who talks about, you know, the best thing that happened for them was to lose money early. And there was a gift, because it taught them how to protect their downside and respect the market. And your first lesson was the exact opposite of that. So how do you think about that?

• 14:34Speaker 02

  Yeah, I'm glad you picked up on that in the book. You know, I think, I think making money early in my life, you know, was a, was a huge driver of my progression. And it wasn't just that I made money, it was just that I made quite a bit of money in a percentage terms, you know, taking that 20,000 to 120,000 from like 96, 7 to 2001, really the peak of the bubble. And it didn't matter that much that it was luck, even kind of looking back and reflecting on that. And I was lucky in a bunch of ways, you know, first, I had parents that had saved for me $20,000, you know, that was lucky to begin with, you know, I was lucky that they actually handed it over to me with no strings attached. There was no, you need to spend this at one college, or you need to do this. I mean, I could have just bought

• 15:16Speaker 02

  a new car with it. And that was it. Like, they gave me that autonomy to give me that that choice. And I feel like that was lucky, too. And I could have easily just incinerated that capital, if I did invest it into a bear market instead of a bull. But I did invest it. I ended up kind of getting lucky, making a decent amount of money. And it didn't really, and when I reflect back on that, things could have been totally different for me if I didn't, you know, in so many ways, you know, like if I would have, if my first loss, if it would have been a big loss instead of an early gain, you know, I'm sure that it would have impacted the next decision I would have made about where I would go to college or my career path. Maybe I ended up working for my father instead, you know, but I didn't, I made a lot of money.

• 16:00Speaker 02

  I'm sure it would have put me on a different rung if I would have lost money at first instead of made a lot. I'm sure it would put me on a different rung on the, on the risk scale, you know, because I made a lot of money upfront. I've kind of been permanently kind of on a higher risk tolerance scale than if I would have lost money. Maybe it would have been down into the deep value camp or something like that, you know, trying to not lose money is my first way, way to look at a business. But I wasn't, I kind of made money in a story stock world. And I think, when I did lose 90% of that, when the dot com bubble crashed, I still had enough of this self belief or self confidence in the tank, that I believed I could make it back, because I already made money before, you know, and so that kind of

• 16:45Speaker 02

  pushed me through the collapse in the portfolio, to really strive to make it back. And so I think, I think all of those things were huge and instrumental. It's one of those things, you can't, you don't really understand it. And yes, I'm reframing it in a way, because it's beneficial to me to reframe it that way. But I think it's true in how I've evolved, you know, ever since then. And it was big, because I could have been, I could have went anywhere after that. I'd maybe be working for my dad or being an accountant somewhere. It wasn't for that first big win.

• 17:15Speaker 01

  You know, my favorite chapter, and there are so many great chapters, I should say, but I have a soft spot for chapter five in your book. This is about mentors. And your first mentor was called Skip. And you met him on the message board back in 2002. And he taught you how to talk to management. And you also said he was the most convicted investor you ever met. And you write that you and Skip eventually diverged in life philosophies. Tell us about Skip. How is he a mentor for you? And also, a mentor is there for a reason, a season, or a lifetime?

• 17:49Speaker 02

  Yeah, it's a great question. And I really enjoyed reading that chapter as well. Yeah, Skip was my, I would say, the most influential kind of mentor, if you will, and probably because he was the first one I had in my early years. And he was in his kind of mid 60s when we met. And he came from an accomplished military background. His father was a lieutenant general at West Point. I think his uncle was also a lieutenant general somewhere. And Skip himself went to military school before he kind of started his financial career, which he worked at a few different financial firms. And then I think he started his own brokerage firm. And his main role across his career was to train stockbrokers. And specifically, you know, to train stockbrokers on how to sell stocks. And what I mean by that is to

• 18:34Speaker 02

  sell them to clients to buy them. And so he just had a gift for gab. And he was just a brilliant salesperson. And he's the type of guy that could sell snow in an Eskimo, or Santa Desert, or whatever analogy you want to use. But he just had this very likable, personable personality, and had this baritone voice that you could hear across the room. And you walk into a room, and you just like, just look right in his direction, because you'd probably hear him first. And he just had that type of character and presence about him. And a lot of his investing experience occurred in the 1970s, 80s, and 1990s. And, you know, he was kind of cut from the cloth of that era, an era of kind of loud, opinionated

• 19:14Speaker 02

  men, flashy personalities, you know, wearing gold Rolexes, you know, that type of era, you know, taking your clients to Vegas for the weekend, you know, that type of era of Wall Street, which, because I was around him, I kind of grew an affinity for that type of character. Sure, you know, it's, it's not one you see very often anymore. It's not like, back then, it wasn't like it is now, where we can all win together and, you know, and move on. It was more of the, you know, I'm right, you're wrong, kind of Michael Steinhardt type of personality traits from that era. But, you know, when I was 21, I met Skip on a, on a public stock message board. It was called Raging Bull. That was a very active one in the early 2000s. And the way he wrote an investment thesis was almost exactly like

• 19:58Speaker 02

  how he spoke. I think it was very authoritative. And I don't know if I was consciously or subconsciously kind of looking for somebody to amplify kind of my micro cap skills. But, you know, I ended up trying to reach out to him. He didn't respond, reached out to him again, didn't respond. Finally, I saw a company that I knew he owned, and I did some research into it, and found some nuggets of information that were additive to what he thought he didn't know about it. And instead, I kind of showed value to him. And then eventually, he reciprocated and reached out to me. And that started sort of the relationship that I had with him. And so, you know, the one thing, getting to the seasons part of mentorship, you know, when

• 20:39Speaker 02

  I was 21, when I was really close, and he was kind of mentoring me. And the way he mentored me too, was mainly on kind of the Dale Carnegie, how to win friends and influence people, like the qualitative art of having a conversation, how to even form a management conversation. I would go on my first site visit to a micro cap company with him. And he was just likable, which obviously, when you like somebody, you tell them more information, you know. And so it was kind of those types of traits is what he taught me. Also, how to pitch a stock correctly, how to do it in a minute or less, you know, all of those things. And, you know, the one thing that I would say is, his personal life was all over the place. He was married three times, lived in like, three or four different states. But that was okay, because

• 21:20Speaker 02

  at the age of 21, I wasn't really looking for mentorship on how to be a good husband. That would come later, 10 years later, when I would have another mentor that, when I was the age of 30, then, I was ready for, to see that, you know, and to find somebody that was a great investor, and also a great husband and father. But at the age of 21, you know, Skip was what I needed. And for that time and that season.

• 21:43Speaker 01

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• 24:51Speaker 01

  All right, back to the show. I love that. And you also mentioned that you should never take advice from someone who isn't a happy person. And it sounds banal, but could you, could you please unpack that a bit for us?

• 25:03Speaker 02

  Yeah, no, it's something that I wrote down a long time ago. And, you know, even Skip, he was extremely happy. You know, I spent a lot of time with him. And he wasn't pers- he wasn't perfect on the personal level. But, you know, I think that you can, once you get to know somebody, you can find out if they're truly happy or not. And he was a happy individual. And I think there's a lot of people that, yes, they might be rich, but they aren't happy. And I think also, kind of when you're looking for a mentor, you know, especially me wanting to be a full-time private investor, you know, trying to learn from somebody that has already done what you want to do. You know, he was already a full-time private investor. He got there differently than me, but he was kind of living

• 25:47Speaker 02

  and breathing and paying bills off his portfolio, you know, in micro-cap stocks. So, you know, I kind of believe in those two things. I can only follow people that are happy people and only really take advice from people that already did what you were trying to do.

• 26:00Speaker 01

  You know, I could ask for advice, like what kind of advice you give to young people who want a stock investing mentor? And I listen to a lot of podcasts, probably like so many others listen to this podcast, and that question is often floated around. But I wanted to turn the tables, just because I can't help myself. And so, if you want to know Ian's response to that, you can, you can pick up the book. You know, that's, that's going to be my, my pits here. But let me do it the other way around, because I think that there's something stepping in the shoes of Skip here. Whenever you, whenever you wrote about him, I was thinking, I think he really enjoyed teaching to a young man some of his life philosophies. But he also works with scarcity. Like, we all have scarce

• 26:44Speaker 01

  resources, whether it's time or money or whatnot. And so, I'm sure he wanted to make sure it was the right person, in this case, you, that he was, he was mentoring. And so, I'm sure hundreds of young, typically men are asking you to be the mentor, and you just can't do that. But you also probably don't want to attract a lot of young men who are basically asking for a shortcut to where you are today, just, you know, faster and with not as much work. And that's probably not. But assuming that you actually want to pass on knowledge to the next generation, perhaps have that personal relationship, what kind of advice would you have for experienced stock investors who want the right mentee, whatever kind of way you want to define right?

• 27:28Speaker 02

  Well, I think that's an interesting way to invert or reframe that. I don't think I've ever thought, you know, I could really use a mentee. You know, like, I need to go find one. I think if you're somewhat accomplished, whether that's in business or in investing or stock picking, I think eventually younger people will be pulled into your orbit. You know, and it happens naturally. And, you know, eventually a younger person goes out of their way to, just like I did to Skip, how I got his attention. Eventually, some younger person goes out of their way to add value to you, and you take notice. And they do it again and again, and you just can't help but reciprocate, because you almost feel bad if you don't, because they've kind of added so much value to your life. And I think the whole thing of the whole mentor-mentee thing just kind of happens naturally. It's

• 28:11Speaker 02

  a normal, kind of reciprocal relationship that doesn't necessarily have the label of mentor-mentee. It's not like, you know, you wake up and you're like, you're my mentee now. You know, it's just a normal relationship that could be kind of put under that umbrella of mentor-mentee that you both know. But it's not like rigid. And bringing it back again, I do think a lot of younger people approach this kind of the wrong way. I think a lot of younger people, they, they look to somebody like you, Stig, or maybe me, or whoever it is, and they kind of look at it as a way to extract information from an accomplished person. They kind of look at you like a piece of software. They can just download your brain and then learn whatever you've done, and then they can apply that to their life. And, you know, more of a take, you know, and that's not attractive to a

• 28:56Speaker 02

  person like you or a person like me, you know, which I'm sure you get emails, just like I do, about this type of thing. You know, what, what is attractive, and it happens subtly, is kind of the way I described it. I think eventually some younger person adds value to you, and they do it time and time again. And then you just start reciprocating. And then that's just how it blossoms from there.

• 29:19Speaker 01

  I think you've done, Ian, what a lot of young people and perhaps also older people are dreaming of, you know, living off your, your portfolio as a private investor. And for you, the number was $2 million. Of course, everyone listening to this now or in the future, you know, they also have to understand, like, what time this was in, $2 million. Today is different than it was 20 years ago, or would be 20 years from now. But please tell us, how did you come up with that number? And, and also perhaps talk about some of the pains and pleasures of living off your portfolio, especially about the surprises?

• 29:52Speaker 02

  Yeah. You know, when you're, when you're talking about full-time private investing, at least the way I've experienced it, I kind of view it as a goal that one makes. And you usually make the decision to do it before you probably should, you know, which means that you really need to achieve above-market returns, so that you can still get above-market returns minus your expenses. Because the goal isn't just to take all your gains and plow it into your consumption. The point is to support yourself and still grow your capital minus those expenses at a greater rate than the S&P. That's the goal. You know, I do believe that kind of being a full-time private investor is the pinnacle of financial success and achievement, you know, because you have, you have autonomy, you have no

• 30:37Speaker 02

  bosses, you have no clients, no investors. But you also have no 401K match, or no healthcare, at least here in the US, you know, that is paid for. You know, so you have no safety net when you make that decision. Your success and failure is sort of 100%, kind of what you eat is what you kill. And so, I don't want to downplay how hard it is mentally and emotionally, especially, you know, to make that decision. And, you know, I was, I never really had a paycheck, per se. You know, I never had my healthcare paid for by an employer, so I was never anchored to a safety net. So I think that made the decision a little bit easier for me. If, if I was, it would probably be a harder, just emotional, let alone financial, you know, decision. You know, the other funny thing about being

• 31:22Speaker 02

  a full-time private investor, and I remember reflecting on this when I was, was, you know, people talk about saving. You know, it's important to save and invest. And like, well, when you're a full-time private investor, there's no such thing as savings. You know, it's just different degrees of spending. You know, he's just flexing up or down. And so when I, when I did it, you know, I was single. I was very frugal. I could live off $2,000 per month. You know, I kept my fixed costs low and my variable costs variable. You know, I did buy nice things from time to time, like the story of the Porsche that I bought, but I also got rid of it, you know, and another 12 months after that, I was never anchored, you know, to those nice things. Because, you know, full-time private investing, if it's really your goal, you know, the goal

• 32:07Speaker 02

  is independence, not consumption. Independence comes first. You know, I mentioned a bunch of things, I think, in the book, you know, about different areas, about full-time investing. But, you know, I think it is easier for those that are kind of shorter-term traders to just to make the mental and emotional leap, because, you know, if your average hold period is days or weeks, you know, that win can kind of mimic getting a paycheck in the mail or, you know, every other week or month. You know, so I think it's easier in that room. But if you're kind of longer-term, like I was, you know, with a typical hold period of six months, or 12 months, or 24 months, a longer-term investor where, you know, the stock could easily go down before I make money, it could easily go nowhere

• 32:48Speaker 02

  for a year or two. That puts another kind of emotional and financial kind of constraint on yourself. And so you have to just set up these kind of safeguards in your portfolio, depending on the type of investor that you are. I think a lot of people, they look at it during a bull market and they think it's easy, you know, because everyone's taking their Excel spreadsheet and taking last year's 25% performance and just mimicking that for the next five years. And I can just shave four or 5% off this and pay for my bills. And that seems easy, you know, but the first year that you're down 25%, then you have to sell 5%. And then guess what? When you're down 25% and you sell 5%, you're already thinking about, what if this happens again? What if I'm down 25% more next year? And

• 33:31Speaker 02

  that's where you crack. So that's where I kind of feel like making the decision right after the GFC, in my case, was very beneficial to me, just because it kind of already proved that I could kind of make it through a 50% drawdown. And for me, coming up with the figure of $2 million, in my case, was more a reflection of not what I expected my returns to be for the next five years. It was what was the pain I was willing to endure? You know, what was the amount of money where I can sustain a 50% drawdown and doesn't change the type of investor or my strategy? And so that's really where the $2 million came from, you know, for me.

• 34:10Speaker 01

  So how did you explain this to your future wife, the first time you met each other? Like, you know, it's a little bit easier to be like, I'm a carpenter. Okay, I have so much an idea why that is. What did she say whenever you're like, so what do you do for a living? I'm a full-time private microcap investor. Was she like, what, what, and what is microcap? Or?

• 34:33Speaker 02

  Yes, it's a lot of what's.

• 34:35Speaker 01

  That was how it started. No, and the reason why I also ask, and like, I met my wife when we were students. So at least that I had sort of like that going for it. But I paid my way playing poker. And, you know, I remember a few days in talking about the number of big blinds per hour I was, you know, budgeting for. And it was not the typical date talk, apparently, or so I hear. So how did you, how did you, you meet your wife? And how do you tell someone you really care for that that's how you provide for yourself and hope to provide for her, perhaps?

• 35:07Speaker 02

  Yeah, I mean, you know, how I explained to her was probably different than other people that I would run into. You know, I found the most excruciating thing to have a conversation about with new people was telling them what I did for a living, you know. But obviously, my, you know, but your wife's a little bit different because she probably doesn't think I was a drug dealer or something like that, just sitting in my house.

• 35:27Speaker 01

  Isn't that just better than being a full-time private microcap investor?

• 35:31Speaker 02

  Well, I mean, that's what I would tell her, like, we would go to, to events where I would meet new people, that type of thing. I'd be like, listen, just tell, just tell people I'm unemployed. I don't want to have to, I don't want to have to have an hour-long discussion about this, you know, or out meeting new people. And she would laugh and she would literally say that sometimes when we both smirk back, back and forth to each other. But I think, I mean, she was, she was pretty smart. I mean, I think she understood what I was doing. I think it took a couple of years for her to get used to the volatility in our personal finances, you know, how that, that gets reflected, because my returns have been consistently inconsistent, you know. So, you know, you might lose a couple hundred thousand one year, you break even the next year, and then you make a million dollars your third year. You know, that's kind of what it looked like. And so you just

• 36:16Speaker 02

  need to, again, have those safeguards in place. For me, it was always having two years of cash in my personal bank account. So I would not have to sell stocks down at a bad time. You know, just setting up those, like even like our bank accounts, I would cover the fixed costs, she would cover the variable, you know, and that's how I would kind of petition off, okay, we can flex this up or flex this down. So we, I had all these like kind of mental kind of safeguards set up and literal ones, you know, but she got used to it. I mean, she met a lot. I mean, she met Skip, Skip and his girlfriend at the time. Of course, Skip was probably like 75 at the time, and he had like a 32-year-old blonde bombshell on his arm at her wedding. Again, just a, just a character, you know,

• 36:58Speaker 02

  she got a chance to meet him. And, and it took a while. But again, getting back to the savings part, too, like you're, you know, as you're a young married couple, you know, everyone's like, well, I'm saving for this or saving for that. I'm like, and she's like, shouldn't we be saving? I'm like, there's no such thing as saving. Like, it's just,

• 37:14Speaker 02

  it's just about how much are we going to spend? You know, that's like what it is, you know, because what I do for a living is build our portfolio. So it's like, there's no such thing as savings.

• 37:24Speaker 01

  I love that. All right. So Ian, you, you put a warning label on this sentence here in your book, whenever you wrote, "Most microcaps you buy must be sold within 36 months, even the winners." And I, I just found that to be so fascinating. And perhaps the audience who are tuning in thinks the same thing, because they are, you're raised in the church of Buffett and Mungo, right? And you're supposed to buy and hold, and typically also invest in, in larger companies, many of our listeners. So whenever they hear a sentence like that, perhaps they're like, he's saying what now? So could you please paint some color around that?

• 38:03Speaker 02

  Yeah, I mean, I think the first thing is investing in a small business versus a large one is apples and oranges. You know, so investing in large caps versus microcaps is two completely beasts. You know, they're totally different. You know, microcaps are small businesses. And because they're small businesses, they're filled with different varieties of concentration risk. And what I mean by that is kind of on the management level, you know, the CEO, you're kind of a key person risk, you know, because the CEO or the founder, they wear so many different hats and they're making so many more decisions, you know, themselves, you know, that's a risk. You know, what if they get hit by a bread truck or whatever? There's also with small businesses, customer concentration

• 38:45Speaker 02

  risk. You know, like every small business probably has one large customer, or maybe it's a customer that kind of buoyed them, that got things kickstarted. And so there's always this customer concentration risk that you're dealing with, and small microcaps as well. You know, there's also kind of geographical or jurisdictional risk. You know, maybe they only sell their products or services into one type of end market, you know, and what happens if that end market, something happens there? You know, and so with microcap companies, you're dealing with all this concentration risk coming from all different angles. And it just leads to a high percentage of bad outcomes, you know, because of that, because they are fragile, not anti-fragile, in most cases, on the average.

• 39:27Speaker 02

  And so because of that, you know, they just have shorter shelf lives. And when they do have a winning season, it's usually a shorter winning season than what you would think. You know, they, they get a large contract from one large customer and it, you know, the next quarter, they grow 30%. Well, they can put up 30% growth for the next four quarters as they surpass their old comps. And then what happens after that to replace that or get an additional large win to make sure that growth continues? That's a winning season, that's four quarters. And there's a whole bunch of like examples of that. So like, most microcap winners like have this kind of six to 24-month, 36-month, like winning season. You know, and so a lot of times when you're looking at a microcap business that maybe

• 40:11Speaker 02

  just had a good quarter, the most important question to ask yourself is how long will this last? You know, and be honest with yourself about that. And in most cases, it's shorter than you think, not longer than you think. There's always going to be those outliers that have great management, that do all the right things, that can compound that growth past, you know, one, two, three years, onto five or 10. But that is very, very few, you know. So it's important to live in the reality and not overlay some belief that you hear in the media or on podcasts about coffee canning or things like that, and put that on top of this asset class of microcap investing, because it doesn't work. The goal is to find

• 40:52Speaker 02

  those that can compound for 10 or 20 years. But just like Buffett did across his career of owning hundreds of stocks in their public portfolio, today he only holds 10 that he's held for 10 years. So 10 out of hundreds that he's owned over decades. You know, it takes the greatest stock pickers in the world, even those that invest in mega caps like him, 50 years of investing in hundreds of stocks to find a handful, you know, that are worthy of holding long-term. And so when you're looking at microcaps, just think about how much more turnover it would take to find them.

• 41:27Speaker 01

  Yeah, well put. I want to double down on one of the things you said there about the high turnover strategy because perhaps that lends itself better to be a full-time private investor, because these small, more frequent gains could resemble getting a paycheck. But then, whenever you also alluded to that, I was also a bit surprised in the sense that I probably play too much poker, like I already mentioned here. But you know, I remember from my poker days, I generally wanted to have as many winning sessions, obviously, as I could. And one of the reasons why, especially whenever I met my now-wife, is that she always like asked, like, "So how did it go?" And we weren't necessarily talking about big bets per hours or whatnot, but like, I would be like, "I won or I lost." And it just feels

• 42:08Speaker 01

  better to be like, "I won." And so what happens, especially if you are, has such a bad temperament as me in the world of poker, is that you take a lot of winning sessions. And what I mean by that is, even if you beat the game, there's a lot of volatility. So you can take winning sessions in the sense of, you can cut them shorter, there are a lot of risks that you don't take because you want to win. So in that case, you might be winning, I don't know, a thousand bucks, but your expected value, if you actually played the way you should, was $3,000. But then they came with a lot more volatility. And so if you continue to do the same thing over and over again, you know, you probably don't want to have winning sessions. You want to have the highest expected value, as long as you size your

• 42:50Speaker 01

  position accordingly. And positions could be your bets, but in the stock market or at the poker table. So anyways, I'm going to a long, a long way around this, but how do you think about that in terms of getting that paycheck? Or perhaps some of our listeners would be thinking, "Well, just buy those quality compounders and then, I don't know, sell down 4% or whatever of your portfolio and that's the way to sort of like get paid."

• 43:16Speaker 02

  Yeah, I mean, I don't think there's one way to do it. And like I said, I'm particularly giving people kind of my thoughts of micro-cap investing. I think you can certainly take a longer-term approach when you're looking at larger, more robust businesses, you know, when you're looking at even larger small caps or midcaps or large caps. You know, I think you can have more of a buy and hold philosophy. There's no one way you can do this. I mean, that's what the, that's what the greats have taught us. But I think the other thing the greats have taught us, you know, even looking at Buffett and Greenblatt and all these people that everybody looks up to, including myself, is, you know, they're, it's hard to get around this. Like, their peak return years were also the years they had the highest turnover, you know, which kind of counters what a lot of people do. And I think even in today's

• 43:59Speaker 02

  culture, I think even some active managers, they point to their turnover rate, you know, it's 10% or 5% or whatever, almost like a badge of honor, like it's even better than what their performance is. And so I just kind of like to make sure that people understand what the greats were doing, even those that today might look like buy and hold investors, how they got there was a little bit different than what you think. And I think for anybody, you know, I think as long as your temperament fits your strategy, you know, whether that's day trading or coffee canning large caps, there's more than one way to do this. And you just have to figure out the way for yourself that fits your personality, your temperament.

• 44:35Speaker 01

  Yeah, I love that you say that the best returns came with the highest turnover. And I think there's probably a lot of different reasons for that. Part of it is just pure chance, you know, that's, that's one of them. But people generally follow incentives. And as a fund manager, it makes a lot of sense to tell people to buy and hold, because whenever you're going to have a down year, and all fund managers have down years, then you can point back and say, "I told you, like, to, to keep your money in my fund." And so it's like, it sort of like makes sense. Or one of the classics are, you know, whenever people get asked about their mistakes, they're like, "Oh, you know, I sold this 100-bagger and I only made 8X on it." You know, it's like, now you're actually just bragging.

• 45:17Speaker 01

  You're like, "Oh, but it was an area of omission, you know." So even my mistakes actually shows like, it's like whenever you go to this job interview, you're like, "Oh, my biggest mistake is that I worked too hard and I cared too much." Yeah, okay. So anyways, but I guess my point of that question was also that there were the facts and then there were the stories. And sometimes it's easier to fall in love with the stories.

• 45:39Speaker 02

  Yeah, and it's, I think it's easier for all of us. We look at, reality is different than our perception of it. We would have put our own beliefs and thoughts, whatever we're going through right now, our belief system around how, what investing should be on top of everything. And it just doesn't work that way. You know, it's like every kind of way of investing is somewhat in smaller, big ways, completely different from another one. And, you know, you shouldn't be taking a coffee can lens and applying that to micro-cap per se. I mean, not saying you can't hold them, but it's, I think that's where people get, get into trouble, is trying to say, "Well, Buffett did it this way at the end of his career, and I'm going to apply this to my path and my investing style and strategy."

• 46:21Speaker 01

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• 49:24Speaker 01

  All right, back to the show. Yeah, and it also takes me to the next question here, because I found this next paragraph where you talk about cash positions to be very insightful. So you don't believe in lots of cash positions, because, you know, it basically means that you're a market timer who wakes up hoping for a crash. And for someone who tried that approach, it's a very stressful way of living your life. But you talk about holding enough cash to buy half of a new position, and then you had to fund the other half to, it forces you out of your weakest conviction. And I kind of felt that was such an interesting framing. I haven't seen it like that before. And it also goes to the point you had here

• 50:05Speaker 01

  before, where we just have different temperament. Like, the first thing I thought to myself was like, "I wish I was wired the same way as Ian. I would get so stressed. I wouldn't be able to sleep at night if that was the way I did it." But then it's like, intellectually, it makes a lot more sense when Ian is doing, and I mean stressed in a good way, because, you know, it forces you to strike the balance between being active and inactive. So anyways, please walk us through that mechanic.

• 50:31Speaker 02

  Well, and maybe to parlay that a little bit, and then I'll get to your actual question, is like even, you know, getting back to that point about the best stock pickers in the world, their best returns normally occurred when they had the highest turnover. I think that a stock picker is almost in their best mindset when you're winning. I know I am. You know, it's like, when you're winning, it actually frees you up to sell your losers easier. You know, the portfolio, because they become smaller, you know, your P&L is up on the year, you know, it's easier just to shave off your mistakes and kill them. And it's easier to do that in up years. In down years, you're more tending to hold on to them longer, wait for another quarter, justify holding on to them because they're

• 51:12Speaker 02

  cheap, you know, doing all these things that string you out. So it's such an emotional and mental game, stock picking and portfolio management.

• 51:20Speaker 01

  You're so right, though, especially if you've gone through the motions. Like, it's so painful and you're absolutely right. That is the way one should be doing it. Sorry for interrupting you just by telling you how right you are here, but you are absolutely right about that.

• 51:32Speaker 02

  Well, it's actually a mental hack I use in myself sometimes to kind of, again, like, stay true to the portfolio. It's like, hey, if I was, if I was up 30% this year, year-to-date, instead of down 10, like, how would I position myself differently? You know, being honest with myself and genuine with the portfolio. Like, well, the truth is, I would probably cut this thing immediately. And so it's like a good way to reframe the lens. But on the cash position side, you know, I talk about the five skills of stock picking in the book, and the first skill is identifying, which means finding actionable ideas before others. And I think good stock pickers always find actionable ideas, whether you're in a bull market or a bear market. And so I've always disliked this notion of holding a large cash position, because I do think in general, you're making a macro

• 52:15Speaker 02

  bet if you're holding a large cash position, or you're admitting that you can't find good ideas. And neither of those are good in my eyes. The reality is you just aren't looking hard enough. You haven't developed that skill. You know, there are great ideas all around us all the time. It doesn't matter what type of market we're in. And I think, you know, the really good stock pickers find them. And so I've never believed in holding 20% plus cash, you know, as a position in the portfolio. Because for me, it's like, if I would do that, it's basically me, because I can always just invest more into my best ideas that are already in the portfolio. So if I'm holding 20% cash, I'm basically saying my best ideas can outperform cash over the next one or two years.

• 52:57Speaker 02

  So I just philosophically disagree, you know, with that type of mindset. You know, at the same time, you can't hold zero cash, you know? And so I found like the right mix is sort of like this three to 5% cash. You know, it's enough that allows me to buy, you know, half of a large new position or all of a small new position. It allows me the freedom to be able to pull the trigger. Because as a stock picker, you just don't want to be in a place where you can't execute on a new idea. And that's just not a good mental spot to be in. It's like cutting off a bull's, you know what? You know, it's just not good. So I always want to have enough cash that I can execute at least on a new idea.

• 53:39Speaker 02

  And if I want to add more to it, I'm forced to sell my least convicted idea. I've found over the years that that's a great way to keep my portfolio honest, because I'm not just adding positions to the portfolio for the sake of adding them. It's forcing me to make a decision, to make a choice. And the other thing about having just at least a little bit of cash on the sidelines, and I experienced this through many of the drawdowns, you know, is you just feel helpless if you don't have cash to be able to execute and take advantage of the drawdown. You know, if we're all being honest with ourselves, you know, if you at least had some cash when the market's going down, it doesn't feel that bad, because you're able to execute and take advantage of that drawdown.

• 54:24Speaker 02

  Where it becomes just really disheartening is when you can't buy any more of the things you love lower. And what I found too, is it doesn't even need to be, quite honestly, a material amount where it's a needle moving in the end. It's just more of a mental trigger. Like even if it's just buying 100 shares, you know, of something when it was down 20% from two weeks ago, it's just, it just feels good. It at least feels like you're taking advantage of the situation. And that's what I mean by kind of safeguarding your emotions.

• 54:51Speaker 01

  Yeah, it's just a mental game. It's absolutely fascinating. You know, Ian, let me offer you a deal here. Let's say that I would guarantee that on your portfolio, you'll be getting 20% the rest of your life. But here's the problem, it's going to be 20% the rest of your life. We're not talking about inflation. We're not talking about all of a sudden there's hyperinflation, then 20%. No, no, no, you can get 20% the rest of your life. And of course, you would be obscenely rich if you took that offer. But on the other hand, you would never get the thrill of the chase, because it's not fun. You know, it's like, you already know, next year, you're going to get 20%. So would you take that deal?

• 55:30Speaker 02

  It's a fascinating question. It's quite a philosophical one, too. I appreciate that one. You know, I'm a competitive person. And so what people might want me to say is, you know, I wouldn't be satisfied with 20%. I can beat that, you know, I can beat 20%. But the truth and the reality, as you and I both know, is like, if you make 20% for the rest of your life, you're, you're up there with Buffett, you know, if you live long enough. So I think also, as you get older, time becomes your most important asset. And so if 20% was guaranteed for life, it's sort of like the challenge of spending my time differently. You know, I'd probably focus it more on impact and less on buy and sell decisions.

• 56:09Speaker 01

  Yeah, because in a way, it would be like telling Messi, like, you can win the rest of the World Cup, so the rest of your life, you don't even have to be on the pitch. You're just going to give it to you. It's like, that kind of sucks. But then, on the other hand, it's not the same at all. So that's amazing, too. Anyways, Ian, I want to go full circle back to the first question here. So we're back at this cocktail party here back in 2009. And someone said you weren't good enough to, to keep a job. And you also replied that, you know, he probably wasn't skilled enough to support himself with his own capital. And you also mentioned in your book that 99.9% of fund managers could never live off their own strategy. I love that statement. Who's here to make friends?

• 56:53Speaker 01

  Anyways, so Ian, you launched a fund back in 2019, and tell your Fanatics Capital Management, and by your own book, you climbed down from the pinnacle. So what did the 28-year-old not understand, or what did the 38-year-old give up?

• 57:09Speaker 02

  Well, you know, first, probably just having that conversation at that cocktail party probably pushed back my decision to become a fund manager for an extra five years, just because I didn't want to be like that guy, right? But I think, I think a few different reasons. I mean, at first, I would say, you know, I was a full-time private investor for 10 years. And after 10 years, I was in my late 30s, you know, so I was still relatively young. You know, I just co-authored a couple of books on Intelligent Fanatics. I'd just been saying no to outside capital for 15 years. And, you know, I think the big, one of the big things is just I was up for a new challenge, you know? And I think that kind of coincided around me realizing what type of investor would

• 57:52Speaker 02

  be right for my fund, which I realized it would be small business owners or those that own small businesses. And, you know, just because what I found with small businesses, and still do, most of the investors in my fund today are small business owners, or they owned one before. You know, they have an affinity to my type of investing, because I'm just a small business investor, and my small business have ticker symbols that you can buy on your Schwab account. And so they have an affinity to that. They understand that. They also know the volatility of small business, you know? And so, once I realized that, then I kind of just closed the loop and said, okay, maybe I can do this. And, you know, I think also, like, my, my strategy was evolving over time, too.

• 58:33Speaker 02

  And, you know, kind of your legacy starts to chase you as well. And I realized I can make a bigger impact, you know, if I just had more capital.

• 58:42Speaker 01

  So let me put you on the spot, because I can't help myself, Ian. Because I

• 58:47Speaker 02

  Go for it.

• 58:48Speaker 01

  I pulled up your public filings. And so you charge a 1% management fee, plus 20% of gains above a high watermark for qualified clients. And then you have the other class that's 2.5% for everyone else. Walk us through that fee philosophy.

• 59:03Speaker 02

  Yeah, I mean, the fees are kind of a function of how we got started. So I started the fund as an SMA, Separately Managed Accounts. It wasn't a partnership. And so the tax treatment on performance fees is less desirable in a separately managed account structure. You know, for example, the performance fee in SMA is paid in cash, not as allocation. And then it's taxed at the income tax level, not capital gains level, whenever you would end up selling that allocation like it isn't a fund. So for those two reasons, I decided when we started with an SMA, just to charge a flat 2.5% management fee, no performance fee, until we would reach a scale to then be able to launch the partnership. And then, then I could layer on the 1 and 20.

• 59:45Speaker 02

  And so today, once I launched the fund, I brought in the SMA investors into the fund under that same fee class of flat 2.5. And so the fund today is kind of a mixture of flat 2.5 and 1 and 20. Now, we don't offer the 2.5 to anybody anymore, because we only take qualified clients. But that's the reason why there's kind of this, this mixture there. So the 1 and 20, you know, there's obviously a high watermark associated with that. And we don't have a hurdle rate or anything like that, like some fund managers have. I've always kind of believed that if somebody's that angry about paying me 20% in the first six, they shouldn't be the investor in the fund. They're not the right type. So I kind of let that be a self-select in based on that as well. But my overall view, kind of on fees in general, is I think you can charge whatever you want,

• 1:00:29Speaker 02

  as long as you outperform, over net of fees.

• 1:00:32Speaker 01

  How do you think about fees as you're scaling up? Some fund managers would say, then, you know, at this OM, these are the fees, and then at this AOM, the fees would look different, and then we sort of like grow together. Perhaps you're going to have different constraints, also because you're a microcap. So like, it's sort of tricky above a certain threshold, which is not the case for other managers who might be investing mega caps or whatnot. But how do you think about that?

• 1:00:56Speaker 02

  I don't know, Steve, I just like to keep things simple. You know, I like the 1 and 20 kind of bland, and I don't really see a need to ever to change that. It just probably provides more headaches.

• 1:01:09Speaker 01

  You know, the reason why you ask, and here comes all my biases. So I speak with quite a few fund managers, and I've heard quite a few say that they're going to lower the fees the higher their AOM, just because that's, that's the way the numbers work. And I can't help but think back on one of the things you talk about with Skip, and you know, being the old timers, and then like the newer touchy feeling, we all have to win together. And I don't necessarily know what the right or wrong way, but as an investor, this doesn't sound nice, but I don't really care about the other investors. You know, it's like, no, no, no, I want the other investors to win. And I can understand if you're a fund manager, you're like, you feel like everyone is your partner, and then you grow together, and then, you know, then you lower your fees.

• 1:01:54Speaker 01

  I understand that. But as a, as an LP myself, in this case, it's in private funds, like, I just want to pay the lowest fees for the best performance. Like, it's not a goal for me that now the AOM is this, or now the AOM. And I always kind of like, I kind of feel it's nice as an LP to see what the AOM is of the fund, just in terms of, you know, what size of company can invest in. But it's not like, I don't know, I think it's a badge of honor for a lot of fund managers what their AOM is, and they're sort of like want to show it to the world. It's almost like whenever you go to the bank, and then they're like showering you with champagne or whatever, and they have like the most marvelous, marbled, whatever, and you're like, I wonder who's paying for that?

• 1:02:37Speaker 01

  Oh, wait, oh, wait, that's me as a customer at this bank, I'm paying for that. So I'm actually not much of a big shot, as I thought I was. So anyways, I sort of like tried to put you on the spot there, but I, I found it to be interesting. And I don't say that to batch fund managers, because I can, I understand why it's very sympathetic, and why it's like, oh, you treat everyone as a partner. But like, as an LP, you're pretty, you're pretty isolated. And yes, you have all of these events, and you can meet up with the other LPs, and all that is good and well, but most LPs just want the lowest fees for the best performance. So anyways, I don't know if there was any question there, but I just want to throw it to you.

• 1:03:15Speaker 02

  I mean, I know a lot of fund managers that regret starting off so low. And then they end up raising it later, you know, because they they realize it's just hard to. And again, I think, I don't know, I think it's a mistake to lower them just because, you know, I don't know what the future holds for me, not regards to performance, but it's more so like I could see building somewhat of a team. And I need to have the wherewithal to be able to bring in the right team members, you know. So, you know, that's kind of what all the greats did, like they started as a solo shop. You know, then they expanded. I'm not talking about adding a hundred people, but you know, if you're managing a billion dollars, you probably have 10 other people with you at least, you know.

• 1:03:59Speaker 02

  So eventually you're going to have to build a team that will allow you to scale, evolve, you know, push out your circle of competence, you know, that's why Buffett wasn't just doing cigar, but investing now he's doing a bunch of other things, almost every type of investing there is. Like you have to allow yourself the capability to expand that circle of competence. And it's difficult, I think, if you're cramming down kind of that. And like I said, I mean, everybody wants to pay the lowest fees possible, but what they really want is the best performance possible. So I think there's there's two levers there. And for me, I'm concentrate on the latter.

• 1:04:30Speaker 01

  We once had a team member who said something along the lines of, it sucks selling to value investors, they're just so cheap. Like, I was like, well, that's, I don't know, that's probably true. But one thing I also wanted to mention, Ian, is that I really like how you benchmark yourself to the S and P 500. A lot of small cap managers are not doing that. And I don't fault them. I know how tough it is to run a small business. But usually, I'm just saying this to the listeners. Generally, you should be skeptical if someone is not benchmarking to the S and P 500. They're very often trying to find a benchmark they can beat. And of course they are, like, I'm not saying they're unethical people. If they if they send out their letter and then they're benchmarking to whatever kind of

• 1:05:14Speaker 01

  benchmark of small cap stocks, because you could say, hey, this is a small cap fund. So why wouldn't I? Well, perhaps the reason is everyone's going to compare it to the S and P 500. In any case, because it's a recognized index and you could pay low fees and everyone has access to it. So it's not crazy for you to be compared regardless if you only invest in Indian small caps or whatever, like it sort of makes sense still to be looking at the dollar performance of the S and P 500.

• 1:05:42Speaker 02

  Yeah, I talk about that in the book, as you know, it's just like my my competitor is the S and P 500. You know, and so many people want to compare themselves against something that more reflects the type of businesses they invest in, whether that's small cap, you know, comparing to the Russell or the funniest one I've seen, Stig, you love this. I saw a couple of managers actually having the, now they're Canadian investors, but they have the TSX Venture Exchange as a benchmark. Well, the TSX Venture Exchange is actually down like 15% over the last 20 years.

• 1:06:11Speaker 01

  Wow.

• 1:06:13Speaker 02

  You see this like, well, compared to the TSX Venture, you know, which is down 20% the last 10 years. I'm, you know, but for me, you know, I have a chip on my shoulder. I'm a competitor. It doesn't matter that I invest in micro caps. I don't invest in anything that looks like the S and P 500. I want to be compared against the most formidable competitor I have, which is the lowest cost, best performing asset or vehicle in the world. And that's the S and P 500, you know, and I compare it to, I want to go against the 1992, you know, dream team, the US team, which had Jordan, Bird, you know, all the great players, you know, and that's the same thing. But for stocks would be like Nvidia, Tesla, all these great stocks that are in that thing.

• 1:06:55Speaker 02

  I want my team of no name players to beat the dream team. You know, and that's my goal over the long term. And I think we're going to do it, you know, but that's what I want to compare myself against, not some lesser thing, you know, that that doesn't excite me.

• 1:07:11Speaker 01

  Yeah, I love that because speaking of the 92 team, I don't know, probably a lot of listeners are going to absolutely hate that I say this, but the team had zero strategy. Like they had zero tactics, but they were just so awesome that it didn't matter.

• 1:07:23Speaker 02

  Yeah.

• 1:07:23Speaker 01

  At least that's how I remember the team.

• 1:07:26Speaker 01

  So you could use that a metaphor for Ian if you want to.

• 1:07:29Speaker 02

  Yeah, there you go. That's a good one, too.

• 1:07:30Speaker 01

  No tactics, just being awesome.

• 1:07:35Speaker 02

  Good start to a fun letter.

• 1:07:38Speaker 01

  So what's the strategy? Dude, no strategy, but I'm awesome.

• 1:07:46Speaker 01

  So anyways, Ian, I don't know if you encounter as many young investors as I do. I'm sure you do and probably way more. I want to ask you about your start. You started with 25 investors. What would you tell aspiring fund managers who ask for your advice?

• 1:08:03Speaker 02

  It's a good question. I mean, I think my investing career has been sort of backwards. When you look at fund management, you know, I became a full time private investor first. You know, I built my reputation first, then I decided to launch something, you know. So the advantage, the advantage for me was I already had a reputation. I already had somewhat of a waiting list for people that I knew would probably want to come in right away. And that was just due to the the previous 10 or 15 years of of being out there in the public sphere. And so that was definitely an advantage. The nice thing, like most investors or managers here in the United States, they start with an SMA structure because it's just a much cheaper, more inexpensive way to get started managing capital.

• 1:08:45Speaker 02

  I mean, it's, it's pretty much, there's really not that much associated with it, other than like 10,000 to get it set up and probably 5,000 attorney fees a year, a year. That's really about it. And so your break even point can be pretty low if you start out with an SMA. You know, you're not talking about tens of millions. You can probably make a go at it with a few million. But most of the emerging managers that I talk to, I mean, you still want to have that three, four, five year track record of beating the market. And yeah, it'd be great to have a 10 year track record, but you know, listen, I'm not, it's just like investing, there's no one way to to start a fund. You know, I did it my way. There's other ways to do it. And I'm certainly never going to tell someone that they they can't do something because they're too young or too experienced.

• 1:09:30Speaker 02

  I mean, people told me that a lot, a lot back in my twenties about full time private investing. I'm certainly not going to tell somebody young that wants to go for it, they can't do something. I'm probably just say, prove them wrong and go go after it. You know, I'd love to see investors crush it, especially young ones. And that's the beauty of being human is just your willingness to reach further than you should, you know, and expand out and do that. And a lot of people will fail and other people will crush it, you know. So it's just part of it.

• 1:10:00Speaker 01

  Let me, I continue to put you on the spot to go completely off script, Ian, because now I have the privilege to speak with you. So what AOM would you have to cross? And perhaps you already did that before you would shave 1% CAGR off your future track record. How do you think about that?

• 1:10:18Speaker 02

  Reframe that. Do you mean how?

• 1:10:21Speaker 01

  Yeah, like you mentioned 35 to 40 million is what you're at right now. You probably couldn't do the existing strategy with 10 billion. Like it just like it would be too illiquid to do that. And I guess where where I'm coming from is that I read so many shareholder letters and I, oh my God, I'm so grumpy today. But I read so many and they always say, we have our incentives aligned. And I'm like, no, not really. And I'm okay with that. I just need to know what the incentives are. Like, I understand why you would rather have $10 billion and do 17% than having $10 million and do 18%. Like, I understand that we have different incentives and that's okay. But I would like to know what the incentives are.

• 1:11:03Speaker 01

  Anyways, so what kind of like being a, let's say, a potential LP in your fund, I can easily understand if you want a significantly higher AOM, that's how you make money and doesn't take you 10 times as much time, you know, to minus 400 million as it would be to to minus 4 million. When would you pass that threshold where saying this amount of money means I cannot apply the existing strategy? And of course you can then say, well, then I have to learn new skills and then I can make the same kind of return just with a larger amount. Or, yeah, I guess that's sort of like where I'm coming from. How do you think about that?

• 1:11:38Speaker 02

  Yeah, no, it's a fair question. It's a good one. Especially when you're investing in a capacity constrained area like micro cap. There's only so much capital you can shovel down a handful of illiquid small companies. And I think if you're successful and your capital grows and you want to stay invested, especially in the small micro cap, so the sub 100 million, you know, my micro cap goes up to 500 million, but I'm saying like my bread and butter is the small stuff. You know, the sub 100 million. And obviously that puts it even more constraint on the amount of capital. And so what happens is every successful micro cap investor is forced with a decision as their capital grows. You either get more diversified or you increase your duration, your hold time,

• 1:12:23Speaker 02

  you know, and on these companies or both. And so as the amount of capitals progress for us. We've added a few more positions, you know, where when we started, we were probably in 10 and now it's 15, 16. But I've also evolved along the way, not forced because of the capital, but more of my investing strategy is I was used to taking 25% at cost positions when I was a full-time private investor, you know, and what I've realized is just looking at the data of my own trades and everything is I would have been better off probably having more positions. And I frame that as more chances to win in the portfolio rather than oversizing a single position. And so those, when we started in

• 1:13:07Speaker 02

  the fund, there's 10 or 15% at cost positions have now turned into three to five. And it's less of a position constraint than it is, I realize, adding three or four other positions that fit my framework, which I can find, will benefit the portfolio over the long term. And quite honestly, if I find something that's a winning stock, and as you know, in micro cap, so a winning stock isn't something that's going to go up 13% instead of 12, you're talking about something that could hopefully double, triple, quadruple over a few years. If you find those, it doesn't matter if you position size it quite that, quite honestly, it doesn't really matter if you whether you position size it 5% or 10. A winning stock's really just going to go. It is going to become the largest position in your portfolio. The other way that we've evolved is through that hybrid approach.

• 1:13:50Speaker 02

  We still have 20 million market cap companies in our fund, even our fund is a $40 million fund. And so when I'm making those into a smaller micro cap, a direct investment, which is completely illiquid, probably for 12 months, you know, it's position sized accordingly, but it gives me a foot in the door to be able to add in the open market later as that company, you know, performs over time. So, you know, just in the last seven years, you can see how just the increase in capital, which is less to do about new investors coming in, it's just as you perform as a fund, you're just going to get bigger, has kind of helped me evolve as an investor too. And I think where we're at, I can definitely see 40 million

• 1:14:32Speaker 02

  getting to 100. But I'm, I don't look past that. I don't think like, how's this going to become a billion dollar fund? I'm not concerned about that. I think as long as the fund grows naturally, I will grow naturally as a human being and as a stock picker along with it. It's when I force it by taking in $50 million into that fund, that's where I would make a mistake. But if I let it naturally blossom with the portfolio performance, my goal is to kegger myself and my abilities and my circle of competence, along with the progression of the portfolio. I don't know if that makes any sense, it might be too philosophical, but that's, you know, like, that's why I barely ever talk about the fund. Like, this is probably the most I ever talk about fund on any podcast, just because I

• 1:15:13Speaker 02

  don't lead with it. You know, I just let people naturally like kind of come into it and inquire about it. I'm not marketing it. I'm not looking for $10 million.

• 1:15:23Speaker 01

  Yeah. So do you think, I know this is an unreasonable question, but like, do you think you could say no to a $50 million check from an institutional investor and just be like, you're just not the right profile? Like, I, I don't think I would fault you by any means. And I should mention for the third time, I'm not, I'm not an investor in your fund, but like, I can easily understand if you're like, this is my strategy. But then someone comes in with a $50 million check and like, that's, that's a lot of money and you're having a lot of great ideas of what to invest in. And, but they also sort of like want you to do things in a sort of way and you're not really sure, but it's a lot of money. Like, are you just a better person than the rest of us? Or how do you, how do you think about this?

• 1:15:59Speaker 02

  Well, I think I would never say never, you know, but it would probably have to be in a different kind of structure, a different fund. I don't know what it would be, you know, just because I don't want to take on that much risk in the fund. Like, I'm the largest investor in my fund. It's going to stay that way. I don't want anybody putting more money than what I have already in there, just because I don't, might sound strange, but I just don't want some person to try to, you know, manipulate me in whatever way they, they can, or even if they do decide to pull their capital, really hurt everybody else in there as I try to liquidate that huge position. So I've always viewed the fun, again, the opposite of most fund managers where they're looking for a big check. I'd

• 1:16:42Speaker 02

  rather have a table with 40 legs on it, where if one gets pulled out, it's just a stable. I don't want one with four legs on it or three legs on it, where you pull one out and the whole thing topples over.

• 1:16:51Speaker 01

  Wonderful. Ian, the name of the book, Stock Picker. Where can people find you and perhaps talk a bit more about the book here at the very end?

• 1:17:01Speaker 02

  Sure. Yeah. I mean, you can, you can find the book on Amazon, Barnes and Noble, wherever books are sold. You can find me on X, which is just my name, Ian Castle. You can find me on microcapclub.com, which is a community I founded 15 years ago for wackos like me that invest in these companies. And then we also, you can also find me or attend one of our events at planetmicrocap.com to meet me in person.

• 1:17:24Speaker 01

  Fantastic. Well, Ian, thank you so much for joining. And I'm very happy that you sent me an early copy. I absolutely loved every page of this book. So thank you so much for your time, Ian.

• 1:17:36Speaker 02

  Thank you, Stig. Really appreciate it.

• 1:17:37Speaker 00

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