Catching big winners with Emmet Peppers (Dave Lee on Investing)

• youtube

Discussion about finding big winners before the broad market realizes it.

• Seeing how deep people are thinking (Elon Musk example).
• Understaning the CEO and their key insight(s).
  • e.g. Elon Musk:
    • Ruthless optimization: cut costs (or improve the product) in 1000 different ways and you're way ahead.
    • Product superiority: Don't release a product that's not best in class. Put all effort in it.
• Google OS for the cars -- what if they add self-driving to it?
• Avoid confirmation bias: initial reaction often leads to pre-judging all further research. Resist it.
• Pre-IPO videos give lots of information on the company but then they disappear.
• Dave Lee: Get in all the information and meditate on it for 30 minutes or an hour.
• There are some very good stories out there, but many of them are not true. Beware good story tellers and nice sounding narratives.
  • Check their track record of the story teller (not 100% reliable but it's something to consider).
  • Is the story repeated a lot?
• Multi-disciplinary understanding (psychology, tech, history) allows you to poke holes in narratives.
• The media is optimizing for clicks, not for accuracy, so there's a lot of sensationalist click-bait out there.
• Red flags:
  • Personally don't believe in the product.
  • How many buzzwords are they using?
  • Am I being swayed by something that is not great?
• Warren Buffet insights:
  • Investment is like batting in baseball but you can wait for the perfect pitch.
• In order to do crazy gains with a significant portion of your portfolio you need to have a degree of detachment from the money. Living below your means helps with this. There's a side effect that you don't spend more when you get big gains.
  • Having a non-perfect house gives you the financial freedom and that's a big deal.
  • Playing with a small account that you're ok to lose allows you to play the game better and try to win rather than worry about not losing.

Third video: early ideas:

• Dave: I look for 2x-3x-...-10x-... in how many years instead of 10% annualized and stuff like that. You need a different approach to figure out how to find those companies but this is a cool different game. My personal sweet spot is 5x over 5-10 years.
• Emmet: Buying options in anticipation of big moves. Selling covered calls is also interesting but you might lose your shares if there's a big move.
• What's the next big thing: young people might know better.
• Emmet: understand market caps and total addressable market. ARK invest is a pretty good beacon.
• Dave: CEO interviews are often available, but they are often shallow. Also for small-cap companies they are often not available.