My Worst Investment Ever Podcast

The Silicon Valley Bank crisis started when the US government shut down its economyThe Silicon Valley Bank crisis started when the US government shut down the economy from 2020 to 2021.Let’s take a step back to January 29th, 2020, when President Donald Trump announced a White House Coronavirus Response task force with the director of the National Institute of Allergy and Infectious Diseases, Anthony Fauci, and Deborah Brix as coordinator.The decision to shut down the economy originated from this body but was ultimately implemented by President Trump, members of congress, and eventually President Joe Biden. This decision was truly the worst decision I have ever seen a government make in my lifetime.Businesses and individuals saw their income collapseDuring that time, businesses and individuals saw their revenues collapse and could not pay the costs necessary to sustain their businesses and livelihood.The US government then came up with various programs to distribute money to these struggling businesses and individuals. Unfortunately, the government did not have this money to distribute.As we all learned in political science 101, the source of any government funds, of course, comes from its citizens, but in this case, citizens and businesses were reeling from the government’s shutdown of the economy and hence had no money.The US government had to borrow moneySo the only choice the government had was to borrow money. But the US Treasury department could not borrow from the population as citizens were in dire straits. Usually, the US government would be able to borrow from foreigners; however, as other countries were suffering and for various geopolitical reasons, foreigners didn’t buy much US government debt.In fact, in 2014, foreigners owned US$6.2trn of US Treasury Department bonds; five years later, in 2019, they only held slightly more at US$6.8trn. Throughout the crisis, the US Treasury Department could only get about one trillion dollars of foreign money to buy US Treasuries.The US government needed trillions of dollarsBut the US government needed a lot more money than that. In fact, between the end of 2019 and the end of 2021, the US government borrowed US$6.4trn, causing total US government debt to rise to US$29.6trn by the end of 2021, 122% of GDP.So, the US government needed US$6.4trn and couldn’t get it from taxpayers or businesses at that time, so where did they get it? As I mentioned earlier, they got about US$1trn of it from foreign investors, which left a US$5.4trn hold.In 2020/21, the Fed stepped in and lent money to the US TreasuryThe solution was for the Federal Reserve to step in and lend the money to the US Treasury. Now the Fed is not allowed to buy bonds directly from the US Treasury, so the largest banks bought these bonds and then offloaded most of them to the Fed. The total assets of the Fed grew from US$4.6trn at the end of 2019 to US$8.8trn by the end of 2021, a US$4.2trn increase.To put this into perspective, from 2020 to 2021, the US government spent US$12trn and took in taxes of US$5.1trn.This massive injection of money raised depositsThis massive injection of money resulted in deposits of individuals and companies at US banks increasing by US$4.7trn during 2020 and 2021. The banks put about half of that money, or about US$2.2trn, into cash. About a third of those deposits, or US$1.6trn, went into securities at a time when interest rates were close to zero. In 2020 US 10-year Treasury bonds yielded about 0.9%, and it was about 1.5% in 2021.Banks receive short-term deposits and lend long-termBanks generally receive short-term deposits and lend that to companies on a long-term basis. But in 2020 and 2021, there was enough concern about the economy that banks didn’t lend much. Instead, they put that money into cash and securities.In 2020 the Fed and the Treasury Department intervened and bought bondsIt’s worth noting that during March 2020, the price of bonds, especially high-risk ones, started crashing as investors started to doubt if companies could repay those bonds given the state of the economy.The Fed and the Treasury Department devised a scheme to save the bond market by announcing that they would hire Blackrock to help them buy bonds in the market to support bond prices. This was unprecedented and could have been seen as violating the letter of the law, which generally prevents the Fed from buying bonds in the open market.The prior main Fed intervention was after the 2008 crisis when the Fed bought US Treasuries and Mortgage-backed securities through its Quantitative Easing Program.Silicon Valley Bank faced a boom and bust cycle in TechSilicon Valley Bank (SVB) appeared to be overexposed to the Tech sector and the startup community. This was not a problem when things were riding high for them. In fact, SVB took in lots of deposits from the above-described government stimulus, the IPOs, and the profitable period of 2021.But when these types of companies started to experience a slowdown, they saw their market caps collapse and their profitability weaken. This meant that these companies started to have more of a need for the funds they had deposited at SVB.The Fed started increasing interest rates, and bond values fell by 10-30%Then the Fed started increasing interest rates on February 2022, and by one year later, they had moved rates up by 4.5% sending shock waves through the economy.This rise in interest rates meant that all the bonds the banks held became worth 10-30% less than what they paid for them. The government allows a bank to avoid showing those unrealized losses by classifying those bonds as “held-to-maturity,” which the banks were likely to do with them.Silicon Valley Bank started withdrawing depositsHowever, what happened with SVB was that its customers started withdrawing deposits, which forced the bank to sell those “held-to-maturity” bonds to raise the cash needed to repay the deposits. This forced the banks to make their unrealized losses real.Very quickly, this wiped out SVB’s capital, and the bank had to be taken control of by the Federal Deposit Insurance Corporation (FDIC), which resolves such types of cases.“Strengthening public confidence in our banking system”On March 12th, the Fed announced a Joint Statement with the Treasury and the FDIC to “Protect the US economy by strengthening public confidence in our banking system.” In it, they stated that depositors at SVB in California would have access to all of their money starting Monday, March 13th, and that the taxpayer would bear no losses associated with the resolution of Silicon Valley Bank.Enter Barney Frank (you can’t make this sh*t up)Fed, the Treasury, and FDIC announced the same for Signature Bank in New York, which was also going bust. The irony is that the guy at the center of passing the well-intentioned post-2008 bank legislation, Barney Frank, was a board member of Signature since 2015.Frank was a long-time congressman from Massachusetts and, to quote from the bank’s website, “was instrumental in crafting the short-term US$550 billion rescue plan in response to the nation’s 2008-2009 financial crisis. Later, he co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law in July 2010.”Dodd-Frank created the too-big-to-fail storylineThat act created the Financial Stability Oversight Council and the Office of Financial Research to identify threats to the financial stability of the United States and gave the Federal Reserve new powers to regulate systemically important institutions. This codified the too-big-to-fail storyline, which helped the largest banks gain protection from the US government. The irony, in this case, is rich.President Biden repeats that no taxpayer funds will be used (spoiler alert: it’s nonsense)The Fed, the Treasury, and FDIC statement clarified that shareholders and certain unsecured debtholders would not be protected, senior management was removed, and any losses to the Deposit Insurance Fund to support uninsured depositors would be recovered by a special assessment on banks, as required by law.The announcement from this trio that was repeated by President Biden claimed that no taxpayer funds will be used. Which we all know is nonsense because all government funds ultimately come from the taxpayers. They will claim that these funds come from other banks, but we know that any bank or business must pass on increased government-regulatory costs.The Bank Term Funding Program (BTFP) to guarantee banks don’t lose on bondsFinally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks can meet the needs of all their depositors.They called this the Bank Term Funding Program (BTFP), which will offer loans of up to one year to any US federally insured depository institution pledging US Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral as long as that collateral was owned as of March 12th, 2023.The key to this measure is that these assets will be valued at par, allowing these banks to avoid offloading those securities at a loss. They announced that using the Exchange Stabilization Fund, the Department of the Treasury would provide US$25 billion as credit protection to the Federal Reserve Banks in connection with the Program.The government is worried about bank runsThis hints that the government is worried that depositors at smaller banks will attempt to withdraw their deposits and that this Program will prevent that bank from experiencing the losses that Silicon Valley Bank experienced. Another way to think of this is that if this measure had been implemented one week prior, Silicon Valley Bank would not have gone bust.This is another well-intentioned intervention by the government into the banking system. It is meant to stabilize things, and it likely will. But it also raises moral hazard in the banking sector and prevents poorly managed banks from suffering from their bad policies, which brings me to bad policies.Silicon Valley Bank had bad policiesSVB had a simple solution to the dilemma they faced of having a massive amount of short-term deposits, which they invested into long-term government bonds. They could have implemented basic risk management measures such as interest rate swaps to protect the bank against rising interest rates. But, unlike well-run banks, they didn’t do this.Government intervention is not a part of capitalismIt’s important to remember that government intervention is not a part of capitalism. Instead, it is a policy that politicians and people feel is the right thing to do when things don’t turn out the way they were planned. The problem with government intervention is that it causes unintended consequences.The economist Milton Friedman famously said: “One of the great mistakes is to judge [government] policies and programs by their intentions rather than their results.” Let’s review the US government’s policies over the past few decades.The government pushed FANNIE MAE and FREDDIE MAC to achieve extremely affordable housing goals, which substantially reduced the quality of housing loans in America and brought millions more into the housing market, leading to the 2007 peak of the housing market and the subsequent bust.The Fed lowered interest rates to near zero in 2008/9 and kept them close to that for more than a decade.The Fed started Quantitative Easing in 2008, buying assets from the banks and injecting liquidity into the market.The government bailed out the US banks and failed to prosecute any major bankers for malfeasance.In 2020 and 2021, The US government shut down the US economy, cut interest rates, and the Fed and the US Treasury injected more money than ever imagined into the economy.In 2020 the Fed and the Treasury, for the first time, bought bonds in the bond market to prevent bond prices from crashing.In 2022 the Fed went on a 12-month rampage of rising rates, bringing rates from nearly zero to close to 5%. This was the fastest rate hike seen in my lifetime, and at the time, we have repeated what is likely to break something in the economy.And something did break at SVB and in the banking sector. And now, once again, the government has intervened in the bond market by announcing that it will buy bonds of banks facing losses on those bonds to prevent them from facing massive losses and going bust.Government programs always come with unintended consequencesAs I wrap up, I want to highlight that government programs always come with unintended consequences. Political leaders meddle in the economy and with capitalism with the best of intentions but slowly and steadily march toward more dangerous places.Silicon Valley Bank and Signature Bank, interestingly both from Democrat-controlled states, depositors will get their money back, and other regional banks will survive the rush to the withdrawal of deposits and move them to the larger banks. But at what cost?There is now more risk in the banking system because of more moral hazardAs we speak, a large amount of deposits is likely moving to the largest banks, strengthening their leadership position.It’s quite possible that this will not seriously damage the banking industry and bank funds or ETFs, as many of them are concentrated in the large banks that could be gaining from this.But in the end, government intervention in the banking sector just takes it further away from capitalism and brings new risks. Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Dave Collum is a professor of Organic Chemistry at Cornell University who developed an interest in markets, which, in turn, led to an interest in geopolitics.STORY: Dave talks about his 2022 Year in Review: All Roads Lead to Ukraine.LEARNING: Never trust politicians and bureaucrats. “The more the fact-checkers, the more likely the thing they’re checking is true.”Dave Collum Guest profileDave Collum is a professor of Organic Chemistry at Cornell University who developed an interest in markets, which, in turn, led to an interest in geopolitics. He enjoys the human folly of it all. He has a natural predilection for being contrarian, which makes him a “denier” on almost all hot topics.2022 Year in Review: All Roads Lead to UkraineGiven his interest in geopolitics, Dave has strong opinions about many things. For him, it’s a natural thing to go against everybody. Today, we’ll not talk about his worst investment ever but rather hear more about his 2022 Year in Review: All Roads Lead to Ukraine.Every year, Dave writes an annual survey of what is happening in the world. The reviews started as a handful of pages for friends and family on a simple website, and then it just got bigger. One year he decided to do a serious job. Now every year has gotten bigger and bolder. Dave has a friend who’s binding all the views so he can sell them all on Amazon.Every year, Dave writes about human folly. In his 2022 review, his primary focus was Ukraine. In his true controversial nature, he took the pro-Putin stance. Dave says he can easily make the case that NATO is bad.Dave argues that Putin is making incredibly rational moves and believes that NATO could have stopped the war but chose not to. He gets pretty troubled to watch people become self-righteous about Ukraine while the US is no victim. Going back in history, Dave says the US has bombed more countries than Russia over the last 20 years. The government has also killed more people with military weapons in the previous 20 years. People want to talk about the Ukraine war while ignoring that the US gave weapons to the Saudis to bomb the Yemenis into oblivion. Or the fact that last year, the US bombed Syria three times to send a message to Tehran. In Dave’s opinion, that should be a war crime.Dave predicts that the war in Ukraine will end soon. A Twitter poll he did shows that people are tired of the war and no longer support it. To end the war, the US must stop sending money and weapons to Ukraine.Go to Peak Prosperity to read Dave’s full honest review.Andrew’s takeawaysAndrew has three guiding principles:Never trust politicians.Never trust bureaucrats just like that. They’ve got to earn your trust.The majority of people follow politics blindly.Andrew believes that to really see a change in society, you’ve got to effect that change through the political system and apply that across all boards. [spp-transcript] Connect with Dave CollumLinkedInTwitterBlogAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Bill Blain is a well-known financier and commentator on financial markets, contributor, and editor of the Morning Porridge.STORY: Bill loves airships, and many of his investment mistakes involve airships.LEARNING: Ignore the worst and the best estimates and focus on the middle consensus. In a difficult market, a bid is a bid, and you’ve got to sell fast. “The market has one objective only; to inflict the maximum amount of pain on the maximum number of participants.”Bill Blain Guest profileBill Blain is a well-known financier and commentator on financial markets, contributor, and editor of the Morning Porridge. His day job combines his role as Strategist for Shard Capital, the leading investment management firm, and heading the firm’s Alternatives Group – financing Private debt and equity deals and direct lending transactions. His clients include sovereign wealth funds, hedge funds, insurance and pension managers, credit funds, and family offices.Worst investment everBill absolutely loves airships, and many of his investment mistakes—unsurprisingly—involve airships. When Bill was relatively young, he discussed with his grandfather about going to Dundee. He told him about reading about it and his interest in airships. Bill’s grandfather encouraged him to invest in that airship. Billy took his grandfather’s advice and put his pocket money into the airship company. He lost all his money when the company folded a year later.A few years later, as a young banker again, the airship industry came up, and Bill thought investing in it would work this time. So invested and lost a lot.About 10 years ago, there was yet another airship. Bill tried to invest in it, but somebody else beat him to the race since it was a private equity deal. The guy who beat him in the bid lost all their money.Over time, Bill has also made other poor investment decisions, like buying UK bank stocks just before Northern Rock went into meltdown. He also once did lots of serious analysis and market research and concluded that all the world’s growth would be in Southeast Asia. So he piled into Chinese stocks a couple of days before Ali Baba and Tencent were closed down.Another big mistake Bill made was with Tesla. He learned about Tesla very early on and thought it was interesting. He even invested in it. But his confidence in the stock evaporated because he let it get personal.Bill was distraught by the behavior of Elon Musk, particularly his attitude towards a British cave diver trying to rescue children stuck in a cave in Thailand. He felt the way Elon treated that diver, accusing him of being a pedophile, was unforgivable. So Bill decided to exit Tesla at that point. He decided for all the right moral reasons, and it cost him millions in the foregone upside that he would have made if he had held on to the stock.Lessons learnedMarkets are not clever themselves. They’re not artificial intelligence. All they are is a voting machine.The market has one objective; to inflict the maximum amount of pain on the maximum number of participants.Things are never as bad as you fear but seldom as good as you hope.Ignore the worst and the best estimates and focus on the middle consensus.In a difficult market, a bid is a bid, and you got to sell fast.Bill’s recommendationsAccording to Bill, a phone is the best resource for understanding what’s happening in markets and what you should do. Bill recommends calling people, speaking to them, and asking their opinions.No.1 goal for the next 12 monthsBill’s number one goal for the next 12 months is to go skiing and spend much of the summer sailing his boat with his wife and puppy. And if his kids also come along, it will be even better.Parting words “Eat the beans, cool the pie, and eat that porridge.”Bill Blain [spp-transcript] Connect with Bill BlainLinkedInTwitterWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Jeroen Blokland is a long-term multi-asset investor with a long-term track record in financial markets. Jeroen worked at Robeco, the largest independent asset manager in The Netherlands, for almost 20 years before launching his independent investment research company, True Insights.STORY: Jeroen’s first investment was in a Dutch company selling PCs. He barely did any research or due diligence. The company reported a loss of $27 million in the same year Jeroen invested. It later went bankrupt, leaving Jeroen with a massive loss.LEARNING: Know the actual outlook of a company before investing. Diversify your portfolio. “90% of the investing population doesn’t know the actual outlook of a company.”Jeroen Blokland Guest profileJeroen Blokland is a long-term multi-asset investor with a long-term track record in financial markets. Jeroen worked at Robeco, the largest independent asset manager in The Netherlands, for almost 20 years before launching his independent investment research company, True Insights.True Insights offers institutional and retail clients high-quality investment research to make better-informed investment decisions based on a proven investment framework covering Macro, Sentiment, and Valuation.True Insights is currently offering a discount on its Subscriptions. Get a 20% discount on your Monthly Premium Subscription (add ‘MONTH’ in the ‘Have a coupon?’ section.) You can also get a 25% discount on top of the regular discount on our Annual Subscription (add ‘YEAR’ in the ‘Have a coupon?’ section.’)Worst investment everWhen Jeroen decided to dive into the investment world, he knew nothing about investing and had no framework. He came across a Dutch company, Tulip Computers, the second biggest PC seller, next to IBM in the Netherlands.Jeroen didn’t know anything about the company besides what they did. He looked in the newspaper and ranked the company’s 12-month performance from high to low. He figured it was a good investment. His genuine belief was this is how you make the most money.The company reported a loss of $27 million in the same year Jeroen invested. In 1979 that was a very massive loss. Then the company went bankrupt, and Jeroen lost his entire investment.Lessons learned90% of investors don’t know the actual outlook of a company, even if they’re experienced in reading a balance sheet.Though difficult, invest in a couple of companies based on their fundamentals.Diversify your portfolio.Andrew’s takeawaysJust like investors, most companies also don’t know their actual outlook.Actionable adviceDiversify your portfolio and limit your risk by buying more companies or investing less.Jeroen’s recommendationsJeroen recommends using information and research that’s already been done by others. Then determine if you need to gather additional information by yourself. He recommends Twitter as a massive source of helpful information—as long as you follow the right people.No.1 goal for the next 12 monthsJeroen started a new business, and his number one goal for the next 12 months is to grow the knowledge part of the business so that more people have access to it.Parting words “Continue investing because, in the end, it will work. Thank you for having me; it was nice.”Jeroen Blokland [spp-transcript] Connect with Jeroen BloklandLinkedInTwitterYouTubeWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

In this episode of Investment Strategy Made Simple (ISMS), Andrew and Larry discuss a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this first series of many, they talk about mistake number one: Are you overconfident in your skills?LEARNING: Don’t be overconfident. Look for value-added information when researching an investment. “When you trade, understand that you’re competing against the market’s collective wisdom.”Larry Swedroe In today’s episode, Andrew chats with Larry Swedroe, head of financial and economic research at Buckingham Wealth Partners. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.Larry deeply understands the world of academic research and investing, especially risk. Today Andrew and Larry discuss a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this first series of many, they talk about mistake number one: Are you overconfident in your skills?The majority of people are naturally overconfidentThere’s a lot of research showing that human beings tend to be overconfident in their skills. If you ask people, are you liked by others more than the average person? Are you a better lover than the average person? Can you drive better than the average person? It doesn’t matter what the question is; the answer from a vast majority is that they think they’re better than the average person. According to Larry, this is actually a good healthy thing. Imagine getting up daily, looking in the mirror, seeing yourself, and thinking you’re dumb, ugly, stupid, and nobody likes you. You’d live a sad life. So it’s good to feel better about yourself as long as you don’t make mistakes.Overconfidence isn’t such a good trait when it comes to investingLarry says that the market is made up of all types of investors. If some investors are going to outperform, then some investors must underperform. The market must have victims to exploit. Most investors tend to be overconfident and think they’re a lot smarter than the average person, so they will be able to control them. But according to evidence, that’s dead wrong because people are not competing one-on-one.Female investors get better returns than men due to underconfidenceWomen are not better at stock picking than men. The stocks they buy perform just as poorly as those that men buy. And the stocks they sell go on to outperform in equal measure. However, men have overconfidence in skills they don’t have, while women simply know better. They don’t overestimate their skills as much as men do, so they trade less and have fewer turnover costs, resulting in better returns. Interestingly, married women do worse than single women because they get influenced by their husbands, while married men do better than single men because they have the influence of the sage counsel of their spouses.Does hard work, training, and knowledge play any role in outperformance?Generally, the more knowledge you have, the wiser you become. But the game of investing is very different than, say, the game of tennis, where you’re playing one-on-one. During a one-on-one match, whether tennis, chess, or any other similar game, minor differences in skill lead to considerable differences in outcome. As the competition gets more challenging, it becomes harder to win. And luck becomes more determined.According to Larry, when we’re playing a game of investing, we’re not competing one-on-one. We’re competing against the collective wisdom of the marketplace. That’s a much different competitor. That’s why Warren Buffett today has difficulty keeping up his winning streak of the 80s.The second related mistake is when researching a company, a famous person or a newscaster gives investors enticing information about a company he’s touting, and the investor decides they should buy that. They’re confusing information from this person with value-added information. They assume they’re the only ones who know this information. Yet thousands of other people could be watching this famous person or newscaster. The truth is the average person doesn’t have value-relevant information, and they’re competing against the market’s collective wisdom, which is a much tougher competitor than one-on-one. This is why only a few active managers can outperform persistently.Know who is on the other side of the trade before you executeWhenever you buy a stock, you should stop before you execute and ask yourself who’s on the other side of the trade. Ninety percent of the trades are done by sophisticated institutions that hire world-class mathematicians and scientists with PhDs in finance, invest in massive technology, and have more access to information than an individual investor. So are you seriously going to be overconfident and believe you know more than these institutions?Investing has become a lot harder than it was 20 years agoLarry says investing is much more complex today and will continue getting harder. There are several reasons why this is the case.1. Increased financial innovationsBefore the 1980s and around 1990, the only operating model we had for asset pricing was the capital asset pricing model (CAPM). This model could only explain about two-thirds of the differences in returns of diversified portfolios. This meant there were tremendous opportunities to generate alpha.Along came a bunch of researchers who found two characteristics that added explanatory power. One of them was that small stocks outperform large stocks. The other was that cheap stocks outperformed expensive stocks. So now, on top of CAPM, there were two other factors: size and value. Now investors could no longer claim to outperform just by buying small companies.Research by Jegadeesh and Titman found a momentum factor. This was that stocks that had outperformed in the past six months to a year roughly had a tendency—a bit more than half the time—to continue outperforming over the next short period, on average, five-six months. So now active managers couldn’t claim alpha by buying positive momentum stocks, avoiding negative ones, or shorting them.Then in 2013, Robert Novy-Marx wrote a paper on profitability. He found that you could outperform your position by buying more profitable companies—Just as Warren Buffett did.Most recent research by Cliff Asness and the team at AQR combined profitability with other factors related to what Buffett had been saying; you shouldn’t just buy cheap, profitable companies. You want to buy them when their earnings are more stable. Such companies don’t have a lot of financial leverage, making them quality companies. So now we have a factor called QNJ: quality minus junk. So you buy the quality stocks and short the junk ones.With all these financial innovations in place, investing as an individual gets harder because stock selection strategies are not a privilege to a select few. Anybody can invest in small-cap stocks en masse. Therefore anybody can capture that alpha or cause it to disappear.2. Increased financial knowledge and competitionThere was no financial theory until the late 60s and early 70s. People managing money were not finance majors and didn’t know finance theory. Today, everyone managing money has easy access to financial knowledge. With increased knowledge comes tougher competition and the paradox of skill. When competition is tougher, it becomes harder to differentiate yourself.It’s the smarter, more informed people playing the game now making it harder for others to outperform by a wide margin.3. Retail investors have been channeled into hedge fundsFor there to be winners in the market, there must be victims to outperform. In 1945, after World War 2, 90% of all stocks were held by individual investors in their brokerage accounts. So they were doing most of the trading. There were only 100 mutual funds in the US in the 1950s. Today those numbers are entirely reversed. Most of the trading is done by institutions. This means when you’re trading, you’re likely trading against giants like Renaissance Technologies, Citadel, or Morgan Stanley. Whereas in the 40s and 50s, you were trading against another naive investor. Today, retail investors have been channeled into funds managed by the most innovative people.4. Dollars are growing while sources of alpha are shrinkingThe sources of alpha are continuously shrinking while the supply of dollars chasing them has grown dramatically. In the late 90s, there was $300 billion in hedge funds. Today, there’s over $5 trillion. On the other hand, the sources of alpha are shrinking because the academics have converted into beta—which is just a systematic characteristic that’s replicable. It’s no wonder it’s becoming harder and harder to trade.Will the largest hedge funds remain the top players, or will another group rise in the next 10 years?Larry predicts that the largest hedge funds, such as Renaissance and Citadel, will grow as more people go into systematic passive strategies. A few active managers who are becoming successful will likely continue to gain market share. This is likely to create a problem for the managers. This is because the only way they can continue generating alpha is to stop taking assets. Otherwise, they’ll get too big and have to diversify or increase their market impact costs. Very few managers will turn down the chance to earn higher AUM fees.Final thoughts from LarryDon’t be overconfident. When you’re overconfident, you’ll think you can outperform when the odds say you’re not likely to be able to do so. Also, don’t confuse information—something everybody knows—with value-added information—something nobody else knows or you can interpret better.About Larry SwedroeLarry Swedroe is head of financial and economic research at Buckingham Wealth Partners. Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match.Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has authored or co-authored 18 books.Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets.Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect, Advisor Perspectives, and Wealth Management. [spp-transcript] Connect with Larry SwedroeLinkedInTwitterWebsiteBooksAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Brian Feroldi is a financial educator, YouTuber, and author. His career mission statement is “to demystify finance.”STORY: Brian invested in an oil pipeline company with take-or-pay contracts. This meant that the company would get paid either way if the price of oil or natural gas went up or down. Prices went down and despite the contract, the pipeline’s stock went down because its customers couldn’t afford to pay. Brian lost 70% of his entire portfolio.LEARNING: Don’t use options as an investment strategy. Never let one company become your largest position. Be careful about trying to leverage beyond your capability. “When my research makes me unbelievably bullish about something, that probably means I’m blind to some risk.”Brian Feroldi Guest profileBrian Feroldi is a financial educator, YouTuber, and author. His career mission statement is “to demystify finance.” He loves to help other people do better with their money, especially their investments. He has written more than 3,000 articles on stocks, investing, and personal finance for the Motley Fool.Worst investment everBrian invested in a company in 2013, about nine years into his investing journey. Though not an expert, he completely understood business fundamentals. He had a framework for what kind of companies he was going after. The company Brian invested in was Kinder Morgan, an oil pipeline company. That means they don’t go out and find the oil but own and operate pipelines that move oil and natural gas from the extraction point to a processing plant. The company then takes a fee for moving the oil.What really attracted Brian to that business model was that it had take-or-pay contracts in place. Meaning that if the price of oil or natural gas went up or down, Kinder Morgan would get paid either way.In theory, this company had locked in guaranteed recurring revenue. In addition, it was run by its founder, Richard Kinder, who owned tons of stock and continually bought more. The company had a 4% dividend yield at the time, plus a realistic growth plan for them to expand that dividend by about 10% per year. So from the outside, it looked like a very low-risk company that could earn Brian a high dividend yield.The more Brian studied the company, the more bullish he became on its potential. So over time, he would add to the stock because he thought it was attractive. Within no time, Kinder Morgan became Brian’s number one position.At the time, Brian was learning about options and how they work. He set up a synthetic long on Kinder Morgan. Synthetic long is when you sell a long-dated put, which brings in cash today, and you use that cash to buy a long-dated call option. Essentially, you get to benefit from the upside. So if that stock goes up, you get paid for that stock to go up ahead of time. So the returns to the investor are enormous on a percentage basis. The downside to a synthetic long is if the stock price falls, you’re on the hook for pure leverage because you don’t own the shares. Brian’s confidence level in this thing was sky-high because it looked so bulletproof. After he set up this position, the oil and natural gas prices suddenly tanked by more than 50%. There was simply an oversupply on the market.What confused Brian at the time was that Kinder Morgan’s stock was going down a lot during this downturn. The company had take-or-pay contracts in place, and it got paid no matter the energy price, so why was this stock going down?Even though Brian’s position was in the red, he added to it because he believed it would recover and go up. Kinder Morgan’s stock ended up falling 70%. This was because the take or pay contracts only matter if the person on the other side of the transaction can afford to meet their end of the agreement. So while the company had a guaranteed locked-in revenue in place, those customers were dependent on the price of oil and natural gas and were hurting. The customers literally couldn’t pay. Once Brian eventually learned that, he capitulated and took up the largest loss he’s ever taken.Lessons learnedDon’t use options as an investment strategy.Never let one company become your largest position. Instead, put a little capital into different companies and watch them grow and flourish.Be careful when investing in an industry that depends on market price luck for the investment to work out.When your research makes you unbelievably bullish about something, you’re likely blind to some risk.Have some rules for the maximum amount you want to put into an idea because you can still be wrong no matter how confident you are.Andrew’s takeawaysDon’t be seduced by your research about a company that fits in the supply chain.Contracts can be renegotiated. So if you find yourself in a bad situation, talk to the people you signed a contract with and renegotiate the terms.Be careful about trying to leverage beyond your capability.Actionable adviceWrite down a list of the possible business risks you want to avoid. Then whenever you’re researching an investment, run it through that checklist. This will help you avoid making the same mistake again.Brian’s recommendationsBrian recommends reading books and watching YouTube videos to get all the information you need to make good decisions. Brian also recommends checking out his free investing checklist—the exact investing checklist he uses. The checklist contains both the positive attributes that Brian looks for in a business and the risks he wants to avoid.No.1 goal for the next 12 monthsBrian’s number one goal for the next 12 months is to keep the flywheel that he has going and continue to grow his business.Parting words“Learn to love the process of becoming a better investor. If you can actually find joy in the process of becoming a better investor, you’ll actually become one.”Brian Feroldi [spp-transcript] Connect with Brian FeroldiLinkedInTwitterYouTubeBlogBookAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedAtul Gawande (December 2009), The Checklist Manifesto: How to Get Things Right.

BIO: Matt LeBris is a born and raised NY’er who inevitably caught the hustler’s spirit that fills his hometown streets.STORY: Matt got an opportunity to be part of a successful business venture in his early 20s. He was making good money and living a good life. Unfortunately, the business went down, and he took an unpaid internship with Daymond John of Shark Tank. Matt’s biggest mistake was to continue living large even though he no longer had money coming up. He blew over $80,000 of his savings by living way above his means.LEARNING: Understand how you’re subconsciously programmed about money. Live below your means. “Understand how money works. If money’s not coming in, be very cautious of how it’s going out.”Matt LeBris Guest profileMatt LeBris is a born and raised NY’er who inevitably caught the hustler’s spirit that fills his hometown streets. A Forbes 30 Under 30 nominee, Matt has worked with Daymond John of Shark Tank as well as hosted a top 1% globally ranked podcast, Decoding Success. His life mission: impact one person a day, and that’s what he’s here to do today.Worst investment everWhen Matt was in college, he was very fortunate to have had an opportunity to surround himself with individuals a little older than him in a particular business venture. It was a New York City hospitality throwing various events. Matt was in his early 20s and raking it in. He was doing good for himself and felt proud to make a lot of money, drive a nice car, travel, and eat out without making a dent in his bank account.At a certain point, the business started to change. Matt also began to change as a person. This led him to intern with Daymond John of Shark Tank. It was a leap of faith for Matt because it was an unpaid internship. What Matt didn’t do was change his lifestyle. He wanted people to still think he was the rich young man he was before. Even though Matt now had no money coming in, he continued to live above his means just to maintain an image. He ended up blowing $80,000, taking Ubers instead of taking the train and eating at the most lavish restaurants instead of eating at home. Matt’s need to appease his ego was his worst investment ever. He is still trying to forgive himself for that.Lessons learnedUnderstand how you’re subconsciously programmed about money.Live below your means.Turn your worth inward.Andrew’s takeawaysYour life is going to be full of ups and downs. You’ve got to manage during your uptimes to have the cushion you need to survive the downtime.Spend as little as you can and take pride in that. This will keep you happy even during your worst times.Actionable adviceUnderstand how money works. If money’s not coming in, be very cautious of how it’s going out. Put your ego aside and find any possible ways to make money.Matt’s recommendationsMatt recommends talking to somebody like a therapist if you’re feeling down or struggling to regularly work through these issues.No.1 goal for the next 12 monthsMatt’s number one goal for the next 12 months is to adopt the mindset of John Gordon’s simple equation: E+P=O (events plus perspective equals the outcome.)Parting words “I’m giving you your kudos, Andrew. Thank you so much for the opportunity to join you here on this platform. Shout out to everyone that’s listening.”Matt LeBris [spp-transcript] Connect with Matt LeBrisLinkedInTwitterFacebookInstagramYouTubeBlogPodcastAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedT. Harv Eker (October 2009), Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth

BIO: Pim van Vliet is Head of Conservative Equities and Chief Quant Strategist at Robeco. He is responsible for a wide range of global, regional, and sustainable low-volatility strategies.STORY: Pim wanted to make more money investing, so he decided to go all in on a cheap stock. He believed the price would eventually go up as it had done a few years back. Unfortunately, the company went bankrupt, and Pim lost 75% of his investment.LEARNING: Don’t be overconfident and over-optimistic when investing. Just because it’s cheap doesn’t mean you have to buy it. “I thought taking risks gives you a return. That’s not always the case. Taking more risk could give you a lower return.”Pim van Vliet Guest profilePim van Vliet is Head of Conservative Equities and Chief Quant Strategist at Robeco. He is responsible for a wide range of global, regional, and sustainable low-volatility strategies. He specializes in low-volatility investing, asset pricing, and quantitative finance.He is the author of numerous academic research papers and various books.Worst investment everPim has been fascinated with money-saving ever since he was a small kid. His father was an entrepreneur who had a family business. Growing up, Pim would sometimes work at the family business and save the money he made in a savings account. He would get good interest. He learned about the compounding of interest in the process. As Pim learned more about saving, he decided to go into a mutual bond fund to earn more return on his money. Now he would make an 8% yield, up from 6%.This was during the 90s when the stock market became increasingly popular. The newspapers started to write more about it. Pim was getting a bit bored by mutual bond funds because he wanted to make more money. Bonds were just very low, volatile, and boring. Being an eager kid, Pim started to follow the news and learned about a Dutch aircraft manufacturer trading for $13. He researched and discovered that the stock price had once been $40, so it was cheap he thought.Pim believed the stock price would return to $40, so he invested in it. His advisor at the bank cautioned him against investing in just one stock. But of course, Pim was overconfident that the stock price would only go up. So he put a sizeable amount of his wealth into this one stock. Then things went sour. The stock price went down and down. The company eventually went bankrupt. Luckily, Pim could get out at $3 but lost 75% of his investment.Lessons learnedDon’t be overconfident and over-optimistic when investing.It’s more important to protect your downside than to keep your upside.Andrew’s takeawaysJust because it’s cheap doesn’t mean you have to buy it.Don’t go all in on one stock.As an individual investor, having more than 10 stocks would be overwhelming. And to have less than five would leave you with too much risk if any of them went bad. So invest in 10 stocks and put stop losses on them.Actionable adviceIf you’re young, take some risks. Risks allow you to learn even if you don’t get a reward for it in investing. So take some controlled risks with the objective of learning instead of becoming rich.Pim’s recommendationsPim recommends reading good investment books that are time-tested such as Benjamin Graham’s books and Warren Buffet’s philosophy.No.1 goal for the next 12 monthsPim van Vliet’s number one goal for the next 12 months is to continue living his dream with his family and colleagues.Parting words “I really enjoyed it. Thanks for having me, Andrew.”Pim van Vliet Connect with Pim van VlietLinkedInTwitterWebsiteBookAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

In this presentation, I will introduce you to our MSCI Sectors and their attractivenessClick here to get the PDF with all charts and graphsWhat do you think: Which of the global sectors is most attractive?We use GICS sector classificationGICS The Global Industry Classification Standard (GICS®) is an industry classification system developed by Standard & Poor’s Financial Services LLC (S&P) and MSCI in 1999GICS works well for the global financial communityMSCI separates stocks into 11 different sectorsEnergy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Communication Services, Utilities, and Real EstateThen 25 Industry groupsSome sectors such as Industrials have three Industry groups as follows:Capital GoodsCommercial & Professional ServicesTransportationThere are 74 industriesWithin Transportation Industry Group there are five main Industries1) Air Freight & Logistics, 2) Passenger Airlines, 3) Marine Transportation, 4) Ground Transportation, and 5) Transportation InfrastructureThere are 163 Sub-IndustriesFinally, within the Industrials Sector, the Transportation Industry group, the Transportation Infrastructure Industry, are 3 Sub-Industries1) Airport Services, 2) Highways & Railtracks, and 3) Marine Ports & ServicesGICS sectors include 1,508 Developed Market companies, total market cap is about US$53trnThe largest sector is Info. Tech. at US$11trn market cap and consists of 183 companiesThe smallest is Real Estate with a market cap of US$1.5trn and 96 companiesWhat is your investment framework?Our investment strategies for ETFs and stocks come from our FVMR frameworkWe backtest and optimize the strategy for the factors that have worked best in each marketWe do all our research in-houseWe don’t rely on other people’s researchWe might of course get ideas from others, but we then test those ideas in our FVMR frameworkThe benefit of an investment framework is that it forces discipline when emotions run highEmotions from wild market events can cause you to make rash and costly decisionsTo avoid this, stick to a frameworkOur framework relies on data & structure, not just a feeling or opinionManagementIs responsible for producing earningsInvestorsSet the price the company trades atThere are 4 Elements to our FVMR frameworkFundamentals: Strong profitability shows a company is managed well.We prefer high or rising profitability.Valuation: Shows how the market perceives the stock.We prefer good fundamentals at relatively cheap valuations.Momentum: We try to avoid “value traps” by looking for positive price and earnings momentum.At times, low momentum signals an out-of-favor opportunity.Risk: We prefer low business and price risk.Not every stock is going to fly; some just provide stable returns and strong dividends.FundamentalsInfo. Tech has a 23% ROE; Health Care, Cons. Staples, and Energy are each earning 20% ROE15% average is higher than the long-term average of 12%Info. Tech. has a strong 16% net marginThe current market average net margin of 10% is still much higher than the long-term average of about 6%5 sectors have 7-8% net marginWhat you have learnedEven after difficult times, Info. Tech. still has a high 23% ROE and a strong 16% net marginHealth Care, Cons. Staples, and Energy are each earning strong 20% ROEAverage ROE is 15%, higher than 12% LT averageThe current average net margin of 10% is much higher than the LT average of about 6%Info. Tech and Health Care are most profitableValuation24x PE for Info Tech. is highest; Financials at 11x and Energy at 8x are the cheapestFinancials look interesting at this levelGenerally, you buy cyclical energy and materials sectors when PE is high which is when earnings are at the bottom of the cycleInfo. Tech. is crazy expensive at 5.4x PB, Cons. Staples and Health Care are also expensiveFinancials look attractiveEven after adjusting for cash, Info. Tech companies are fixed asset lightExpensive Info. Tech., Health Care, and Cons. Staples; cheap Comm. Services and FinancialsFive sectors are yielding more than 3%, signaling they are potentially cheapFinancials look interestingFinancials are most attractive, Info. Tech. and Real Estate leastWhat you have learned24x PE for Info Tech. is highest; Financials at 11x and Energy at 8x are the cheapestFinancials look interesting at this levelBuy cyclical energy and materials when PE is highInfo. Tech. is crazy expensive at 5.4x PB, Cons. Staples and Health Care are also expensiveFive sectors are yielding more than 3%, signaling some are potentially cheapMomentum2023 revenue growth expectations are a low 2%, highest is Cons. Disc., lowest is Energy2023 consensus earnings growth flat, up at Financials, Cons. Disc., and UtilitiesBest 6-mth price momentum at defensive sectors: Health Care, Cons. Staples, and UtilitiesReal Estate has been hit hard from Fed rate hikesInfo. Tech., Energy, and Materials are best 3-year performers, Real Estate worstWhat you have learnedLow 2023 revenue growth expected highest growth at Cons. Disc., is Energy2023 consensus earnings growth flat, up at Financials, Cons. Disc., and UtilitiesBest 6-mth price momentum at defensive sectors: Health Care, Cons. Staples, and UtilitiesInfo. Tech., Energy, and Materials are best 3-year performers, Real Estate worstFinancials, Cons. Disc., and Utilities look interestingFinancials - Cheap and good momentumCons. Disc. - Strong earnings momentumUtilities - Weak fundamentals, but cheap and good earnings and price momoInfo. Tech, Health Care, and Cons. Stapes strong, but expensiveInfo. Tech. - Strong fundamentals but expensiveHealth Care - Strong fundamentals and price momo, but expensiveCons. Staples - Strong fundamentals and price momo, but expensiveEnergy and Materials appear cheap…butFor cyclicals we usually buy when expensiveKey points and the bottom lineFinancials, Cons. Disc., and Utilities look interestingInfo. Tech, Health Care, and Cons. Stapes strong, but expensiveEnergy and Materials appear cheap we usually buy them when expensiveClick here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Logan Nathan is the founder and CEO at i4T Global. He’s a digital transformation specialist, a serial startup entrepreneur, a board director and advisor, and an angel investor.STORY: Logan offers time-tested advice on how to launch a successful software product.LEARNING: Focus on customer experience and satisfaction to win confidence. “The culture within you as a supplier is vital in building trust with your client.”Logan Nathan Guest profileLogan Nathan is the founder and CEO at i4T Global. He’s a digital transformation specialist, a serial startup entrepreneur, a board director and advisor, and an angel investor.We won’t discuss Logan’s worst investment story in today’s episode because he shared that in Ep374: Your Solutions Are with Your Advocates Talk to Them. Today we’ll discuss what’s been happening with his business over the last few years. He’ll also offer time-tested advice on how to launch a successful software product.Logan’s business—i4T Global—provides a Field Services Management platform for people or companies that manage property assets on behalf of their clients. The platform automates most of the work creating efficiency, compliance, and safety easier. In doing so, it brings more tenants.How to hire and work with the right developersIf you’re looking to hire a developer/s for your new software, Logan’s advice is to go to credible supplier platforms, such as LinkedIn. Here, you can independently verify client testimonials of various developers. This will help you ascertain whether they can do what they claim to do.Secondly, before you hire a developer, ensure you make them understand your business requirements, not just your technical needs. Agree on what happens if you don’t get what you want, how changes will be made, and the penalty for not delivering on the agreed deliverables.A frank conversation with the supplier about current and future business requirements is crucial. Agree on what should happen as your business grows and requirements change. Will the supplier grow with you? Do they have the agility to deliver what your business needs promptly?Focus on the customer experience and satisfactionLogan believes delivering top-notch customer experience is the key to running a successful software business. His advice is to have a process that allows you to fully understand the customer’s requirements and deliver them as requested. To achieve this, you need a communication channel that collects customer feedback regularly.To continuously offer services that fulfill your customers’ requirements, you need to understand the changes in your industry. Then reiterate to provide more benefits, even if your customer hasn’t requested them.How to win the confidence of your customersBuilding a relationship with your client will guarantee you a return customer. The best way to build a relationship is to win their confidence by delivering your value proposition. When a customer requests for a piece of change—which will happen often—document the request, understand the business requirement and then deliver it on time, every time. Doing this will show the client you’re reliable and want to stay with you long-term.Andrew’s takeawaysCreate a minimum viable product (your SaaS product), have a feedback mechanism from the customer, and then ensure all feedback is dealt with promptly so your customer can have a smooth experience with your product.When looking for suppliers, first try to independently verify their processes. When you find a supplier you’d like to work with, ensure they understand your business requirements and deliverables.Actionable adviceMake sure your supplier understands your business service level requirements.Ensure any business you’re dealing with has a culture of fully understanding business deliverables before developing the code.No.1 goal for the next 12 monthsLogan’s number one goal for the next 12 months is to focus on global growth. This means the organization needs to understand different cultures, how to deliver to different time zones, and stay efficient to minimize costs while providing clients with maximum value around the clock.Parting words “Your supplier is your heartbeat in terms of delivering your products to your clients. So keep them as an extension of your business, not as an outsider that’s there to just deliver a piece of work.”Logan Nathan [spp-transcript] Connect with Logan NathanLinkedInTwitterWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast