IFB154: Garbage In, Garbage Out
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Dave (00:36 ):
All right, folks, we’ll welcome to Investing for Beginners podcast. This is episode 150 people. Andrew and I are going to talk about garbage in garbage out. We’re going to talk a little bit about how you focus and what you take in. Can it impact how you think about things, Andrew and I were talking off-air about some of our ideas of, of some of these things, and we thought we would share some of those with you tonight. So, Andrew, I’m going to go ahead and turn it over to you, and why don’t you go ahead and get us started?
Andrew (01:06 ):
Yeah, definitely. So I think as investors, something you need to keep in mind is, and I hope I don’t come across this way when we talk about investing, but in my opinion, investing isn’t something you can just snap your finger and go and expect good results. Particularly if you’re going to be kind of poking around and trying to get involved with the businesses, understanding the businesses you own and understanding the principles of investing, you know, we’re doing this for the longterm, we’re diversifying where we’re making good habits and depositing money and investing money over time. These are all sorts of basic foundations of good financial sense. Good investing sense. And so when you talk about the mindset that goes behind it and the thoughts, what comes in your inputs and then how that translates to the type of businesses you’re investing in. I think it’s worth the conversation to, to maybe audit how you’re doing that and understand that it’s not going to be a snap of a finger.
Andrew (02:17 ):
There is going to be some effort involved. I think if you want to be good at anything, you’re going to have to put effort into it, and there are no shortcuts. And so if you can supercharge those efforts and make things as effortlessly as possible, that can do a lot for your end goals and maybe reaching financial freedom one day. And so there’s been a lot of chaos with media these days. I would say, personally, I feel media exhausted, and this hasn’t been necessarily that intentional for me lately. I kind of stumbled it, but in the past few weeks have been making it more intentional. That’s the idea that you need to. What I found for myself is I didn’t realize how, how, how many things I was letting to come into my valuable space, and my valuable time. And so I don’t know how much of this has to do with the way technology has changed the way things are, you know, back in the 1950s you had the daily newspaper get delivered to your door, right?
Andrew (03:37 ):
You could turn on three or four channels. I don’t know. I wasn’t alive back then. I’m just; I’m just guessing how it might have been. You had your colleagues, your neighbors, your colleagues, and small circles that you would talk to. And, and these days it’s like Pandora’s box has been opened and there are a million different websites. You can go to a million different people. You can talk to a million different communities. You can be a part of and a million different things that run on the autopilot without our realizing. Dave, you and I talked off the air about how you are considering deleting a couple of apps from your phone. For me, I deleted Facebook and read it. And so those are places where I was getting a lot of really bad ideas about the market, about stocks, about the economy. And so that stuff, whether consciously or subconsciously, it affects your decision making.
Andrew (04:44 ):
And so, you know, there’s, there’s some, there’s been a lot of talk around Facebook lately with Zuckerberg and a lot of things that we’re all learning about it. One thing I’ve I read the other day, it was saying that a person who commented a lot, like, I don’t know, it feels, I think they said a person who comments five times more than the average comment, or we’ll have a crazy majority amount of influence on the things that you might see on your feed or the things that appear on other people’s feeds rather than just the average user. And so if you think about, do I a, do I want to hear what somebody who’s spending all their time commenting has to say, and then be, am I going to let that guide how I’m spending the next five, 10, 15 minutes of my time? And then if you think about all those little things that add up over time and you replace it with something maybe with more constructive, that can actually, instead of maybe distract
Dave (05:58 ):
You or give you the wrong ideas or give you bad information about stocks, you know, whether if he had flipped it around and made it productive and found good investment ideas and formulate good thoughts that lead to good results in the stock market. I think those are things that are worth considering and something that I’ve been looking at more and more. Yeah, I agree. And as we were talking about this, and I was relating to Andrew, a story that I’d like to share with you guys when I was in college, I studied music and went to school to get a degree and a guitar. And I went to school to play baseball, but that didn’t work out. And so I started playing the guitar, and I was talking to one of my favorite teachers one day, and he asked me just casually, what kind of music do you listen to?
Dave (06:46 ):
And at the time, I was really into jazz, and I was really into the blues. And so I told him, I listened to all the big names, the John Coltrane’s and the Charlie parkers and BB King and muddy waters and all those kinds of guys. And he said, he said, that’s good. He said, you got to remember when you go to play in front of people, what you absorb and what you listen to is going to come out, and you’re playing because music is part of your soul, but it’s also part of your subconscious. And so what you listen to has a huge impact on what you come out of, out of your music. And it doesn’t need necessarily mean to you’re going to be a John Coltrane clone, but it doesn’t mean that his impact is his music on, you will absorb into your soul, and it will come out in your playing.
Dave (07:32 ):
And he was right. And he said you know, if you listen to other things that maybe aren’t as productive or art as the quality of music as the music that you want to play, then that’s going to reflect in your playing as well. So he said, you know, you may be playing on stage in front of people, and they want to hear John Coltrane. And all of a sudden, you’ve got Brittany Spears coming out of your guitar, not coming out of my guitar, but you know what I mean? And it’s not the same, but he was right in. And it was it became very evident to me over time that the more that I absorbed, the people that I liked and that were influences on me had a huge impact on my playing. I remember I was playing in a club in Mississippi, and we were playing, and at the end of the set, the owner of the club came over to me, and he said, you, you like Hendrix a lot, don’t you?
Dave (08:22 ):
Yeah, I do. How’d, you know, he said, I can hear it in your playing. And I said, wow, that’s awesome. I mean, we hadn’t played any Hendrix music in our show. It was all just kind of straight-ahead blues, but because I was a big Jimi Hendrix fan, that that part of me came out and in my music when I was playing, because he was such a huge influence on me. And he just kind of hearkened back what that teacher had told me about the garbage in and the garbage out. And as Andrew and I were talking about this before we came on the air, I thought that that was a great opportunity for us to talk a little bit about how we take in information and how that can impact what we think and how we react to things. And I agree with Andrew on the media burnout with, you know, all the unfortunate incidents that happened this weekend and then the Coronavirus.
Dave (09:14 ):
So we’ve had for the last few months. It just seems like I know me personally I’ve been watching the news far more than I have probably in the last ten years in the last three or four months, just because there’s seems like there are so many earth-shattering things going on. And I also noticed that my anxiety level has skyrocketed over the last two or three months, and that I’ve been more frustrated and that I’ve been more anxious and on edge than I normally am. And I think a lot of it has to do with the fact that I’m getting caught up in all the drama, so to speak that’s going on in the news. And we’ve talked about this before, and I have said this in the past that the news, the job of people in the news, whether it, it doesn’t matter what, you know, which way you’re leaning right or left with the center, their job is to get us cited and make us want to participate in what they have going on with all the hype of everything that’s been going on lately.
Dave (10:20 ):
It’s caused me to feel more anxious. And so over the last two or three days, I’ve tried to make a more concerted effort to distance myself from watching the news as much, just because it just, it, for me, it just makes me a little crazier, I guess, is the best way to put it. And Andrew and I were talking about this too. And when we’re talking about the apps, it’s impossible. I don’t care who you are. It’s possible or not to go on Facebook or Twitter and not be on there for half an hour. It’s just; it’s just almost impossible. And they’re like, Andrew was talking about, there are so many different things about those platforms that have things to entice you in. And it does, I think, take away from the ability for us to think about things clearly and logically.
Dave (11:17 ):
And I go on Twitter a fair amount, far more than I do on Facebook to follow some of the fin twit guys that I like. And I get, try to get information from them, investing ideas, thoughts on how they’re thinking about this, that of their thing, but it’s also easy to get drug into just mindlessly flipping it. And next thing you know, it’s 42 minutes have gone by, Oh, geez. I could have spent that time doing things like reading a 10 K reading, a book, listening to an audible watching a video of professor DAMA, Darren talking about something with valuation, any of those kinds of things that will make me a much better investor and a much more interesting person will be more helpful for me personally. And I just feel, I feel more productive when I do those kinds of things.
Dave (12:09 ):
So I read a book by Cal Newport called deep work. And I think I might’ve butchered the title of that book, but I know it’s Cal Newport. He’s also written a book recently called digital minimalism. And he’s a very big, big advocate of the kind of abstaining from technology. And he feels that technology tends to suck the intelligence away from us if you will. And not necessarily, but he, he, he feels that it, it, it does affect our productivity. He advocates things like deleting Twitter or Facebook, Snapchat, Instagram, all those kinds of social media devices from your phones just using your phones as a communication tool for your friends and your family, and for work even this to the extent of deleting email from your phone and that way you force yourself to concentrate on the things you want to concentrate.
Dave (13:06 ):
Now, I don’t know if I want to go all-in on some of his ideas. Still, I think that the idea of eliminating Twitter and Facebook from my app from my phone would be beneficial for me personally because it would help me focus more on the things that I want to do. Andy, when he was on our podcast a few weeks ago, he was talking about how he never buys stock from his phone. And I thought that was brilliant. And I adopted that idea. I deleted my Schwab app from my phone so that if I want to look at my accounts, I have to go on my computer to do it. And I thought that that was a great speed bump. And so I think a lot of the things that Andrew and I are going to are talking about tonight, I think are ideas that you, that we can adapt to help us think more clearly.
Dave (13:55 ):
And I think to be more rational and also try to be a little more productive. And when you’re talking about investing, it isn’t something that you can just do casually. If you want to be successful at it, it is an effort you have to put into it. And whether that’s warning something from things Andrew and I are trying to teach, or whether it’s from precedent, stake on the investor’s podcast or Brayden, or any of the millions of resources out there spending the time using those resources will benefit you far greater than they will spend hours and hours and hours watching the news and getting wrapped up in all the things that are going on. Warren Buffet talks all the time about how he reads, reads, reads, and reads. And I know I’m going to embarrass Andrew here a little bit, but this is something that Andrew has started embracing.
Dave (14:51 ):
He’s, he’s reading a lot more, and he’s reading a lot of various books, and I’m going to have him talk about some of the stuff. And it’s really interesting. And it’s interesting to me because he’s, he’s rounding out all the ideas that he’s been trying to put together. And I think the more information you gather from different sources helps make you a more rounded person, but it also makes you more around an investor because you have, you can pull ideas from different disciplines, and it can help you. It’s I guess a man that’s, he’s building a latticework of mental models is really what he’s doing. Just thought of that. But Andrew, I’d like you to expound a little bit about some of the things that you kind of discovered the last couple of weeks,
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Andrew (15:47 ):
I’ll give you the one. And I think building a latticework of mental models is a lot more elegant than what’s going on, but I’ll take that. That’s nice. I liked what you said about the difference between, you know, wasting 40 minutes on Twitter and maybe picking up a 10 K and, and finding, having some sort of productivity that could lead to a great stock idea or something like that. So
Andrew (16:16 ):
For me, I used to go a lot on Reddit. You know, I talked about that was the other app that I deleted from my phone. If you’ve listened to the podcast, you know, I had my, my day trading I was doing for fun. And I didn’t realize how much that was sinking my time away, just five minutes here, five minutes there you don’t realize how much that adds up and really for, for no great purpose. And so I would get on Reddit, and there is this community of people who, who is doing similar things. And then, you know, you read these success stories and then it’s like this grade switch switches on and looking for different stocks and different things that it just wasn’t leading to anything from an investment, good investment idea standpoint, a contrast that to what happened this month, where if I have some downtime, maybe I’ll, I’ll read an article in the wall street journal. And then from there, you hear something about it.
Andrew (17:25 ):
You know, like intelligent, good analysis, on what’s going on in the world. You know, you don’t want to put your head in the sand, but at the same time, finding out what are some logical breakdowns of what’s going on with the Coronavirus and everything. So maybe reading that leads to looking at the latest job report that you didn’t realize came out a couple of days ago from there digging into the data and seeing some things that pop out at you. And then, that could birth the next stock idea that you have and your next investment thesis. And so that’s what happened for me. Something that kind of seems small, but something I think it was buffet said, you know, we, we talk about compound interest a lot, and it’s a great thing for your money. They said when you’re learning things; knowledge also grows like compound interest.
Andrew (18:21 ):
So if you’re talking about little five minutes here, 10 minutes there, and kind of like, you know, this idea of building a latticework, I don’t know if that’s, I’m going to assume it’s something like a spider’s web, but maybe if you’re taking little pieces. You’re starting to learn little, little parts of different industries. You’re doing like five minutes here, five minutes there, and you’re learning from good sources, you’re not learning from the person who’s sitting in their basement commenting 20 times a day, not even thinking about what he’s typing about, and then thinking about as fact, but maybe you’re kind of intelligently and with purpose, trying to filter what, what thoughts you’re putting in and how that’s going out into the analysis is that you’re doing, I think that’s key seeking alphas, another great resource that we’ve talked about a lot.
Andrew (19:24 ):
I’ve used it. It’s still one of my favorites, but every once in awhile, I just get dragged in the comments. I need to figure out how to stop doing that. And it’s just; it does nothing productive. And all it does is make me angry because I see what I feel like are the most idiotic comments that you could say, and they, there’s no point in ranting about it, but, you know, there’s just, there’s a lot of nonsense that people will say. And it’s clear to me because I’m well versed on the topic. Let’s say it’s clear to me that they have no idea what they’re talking about. And it’s, it’s hilarious to see how much of the same stuff has regurgitated mindlessly from person to person, to person on things that sound authoritative about the economy, about a stock, about business valuations, any of those sorts of things.
Andrew (20:18 ):
And they have no sense behind them and to think in the way that they’re all parroting to think would be bad for your investment results. And so there’s a lot of wisdom. And I think a lot of freedom that comes with the kind of taking control of what you’re, what you’re allowing to come in from a technology standpoint maybe really taking an on this audit of where time is going, at least, you know, not to say you need to be a revolutionary and turn in your cell phone and become a monk over across the way. Maybe you just realize that like for me now, at least I know, alright, I just wasted. I just got into the comments again. And then I slapped myself on the wrist and then just try not to do it again next time, you know, but at least I’m aware that this is going on rather than, rather than wasting all of this time.
Andrew (21:17 ):
And essentially having all these ideas in my head that don’t lead to anything, or maybe even hurt your results over time and not knowing where they come from. And so whether it’s apps that are, that comes for free on our phone, you know, or if it’s I use Yahoo mail for my email, and I notice that they’re popping up news headlines all the time. And I know this is how easy it is to get drugged down their little TMZ rabbit hole. And so I like when it comes to this, I think you need to be intentional. I think you get what you pay for. I saw I can’t remember what the topic was, but there was, it was some financial topic and the sort of analysis, and it was on Yahoo. And then somebody in the comments said, this is the worst.
Andrew (22:15 ):
And it was really bad. It was like a very surface level. Like, like it was as if a robot had written, had written it, and they just put some numbers out, and they call it financial analysis. They’re like; this is the worst thing that I’ve ever read. And like, I can’t believe the state of journalism today has just gone down to this. That’s like, dude, come on. Like you get what you pay for. There’s plenty of good resources out there that intentionally cost money. And so they, they just run their businesses differently. I’ll give two examples. You have a wall street journal, and you have Bloomberg. I subscribe to both of them right now. And I think it gives me a good balance of good financial analysis. You have Bloomberg leans a little bit left wall street, journal lanes a little bit, right?
Andrew (23:02 ):
And so they’re not like super cheap, like a Pandora subscription, but they let you know what’s going on. I like how, at least with the wall street journal, they’re explaining things to you as you go along. So if you’re not familiar with politics abroad or any of that, they’re there, they’re giving background information, and they’re kind of leading you through so you can understand it. And it’s very intentional. There’s a lot of detail to it. And just a lot of intelligence for lack of a better word and there, the way that they structure their websites is not the same way that you’ll find on a clickbait Buzzfeed, their business model is based on having good quality, having a good reputation and having quality journalism. And you contrast that to something else where they’re trying to draw you in, you know, whether that’s a social media website, whether that’s some news thing where that defaults on your browser, they’re going to have different standards. And, and so I think if you’re intentional with that, and you’re not afraid to invest in yourself, I think that can go a long way towards making yourself a better investor. Maybe not tomorrow, but over time. Yeah. That’s,
Dave (24:21 ):
That’s a beautiful idea. I love the idea of the, everything compounding on what you’re, what you’re learning. And I agree with that. And I think the more that you spend time thinking about how to get better at something, the more you’re going to learn, how to get better at it. I read a great book just recently called ultra learning. And the basic premise of the book is that you can learn anything you want. You just need to spend some time figuring out, Hey, how to do it and be spending the time focusing on doing it. It doesn’t mean that you have to quit your job, and you have to travel the world to learn a language, but it does mean that when you are working on it, you have to be focused and spend the time to do it. And that once you do that, that you will improve on those things.
Dave (25:14 ):
And so if investing is important to you, and it’s something that you want to get better at then, like Andrew was saying surrounding yourself with good sources and using your time wisely and spending the time, looking at the things that you want to learn, you’re going to get better at it. It’s just; it’s just a natural evolution of, of spending time with things you’re going to get better at it. Do you think about what it is you do for a living and you think about your first day to 10 years from that day and think about how much better and more knowledge you have about what it is you do? And you’ll just, you look back on that, and you think, wow, I didn’t know anything. And now, wow. I know some things. And it’s, it’s the same thing with investing. It’s just a matter of spending the time.
Dave (26:02 ):
And I, I think some of the things that Andrew and I are talking about, I think one of the things that you always have to remember is that the, no matter how rich you are or how long you’ve been on the earth, the only thing that we all have a limited amount of is time. And it’s the only thing we can never get back. And it’s the only thing that we all have the same amount of and being, I guess, jealous of your time and guarding it, very stringently is going to be something that will help you down the road and thinking about what it is that you take into your, into your life, that allows you to become better is going to be that much more impactful as time goes on. And I think reading sites like seeking alpha is awesome. The articles are generally very well written.
Dave (27:00 ):
They’re very well thought out. There’s lots of information there. And the great thing is, is that if you’re trying to maybe expand on your circle of competence and trying to get outside of your comfort zone a little bit, and you want to learn about something that maybe is you feel like maybe interesting, but you don’t know that much about it. That’s a great place to go and read some articles about companies that might interest you, and it might excite you, but you don’t know stuff about it. It’s a great place to kind of start delving into it instead of just necessarily going right directly to the 10 K because I know for me, if I went to the 10 K of saving some tech super tech company like Qualcomm or something like that, I’d be overwhelmed. Just all the technology they’d be going at, coming at me.
Dave (27:48 ):
I’d been, it’d be, it’d be above me. It just would. And for me to go and read an article, maybe on seeking alpha would give me a nice kind of introduction to it and not overwhelming with all the technology. And it would talk to me more about the business as opposed to necessarily all the technical parts of it. And it would help me learn more about it. And so, again, that’s kind of that idea of, of the garbage in garbage out. So instead of spending 20 minutes on Facebook, reading through all the comments about a certain topic, you could spend 10 minutes reading an article on seeking alpha, and it would be that farther, much farther along on your investing journey. Like Andrew was saying that the news do you, you impact that you take into your life is going to have an impact on your thinking, and it’s going to have an impact on your emotional state and how you feel about things.
Dave (28:45 ):
And so trying to disassociate yourself from some of those things, I think, will benefit you in the long run. And one of the things that, again, to go back to that book by Cal Newport, he, he talks a lot about thinking and spending time with your thoughts. And in this day and age of technology, I think that’s one of the things that’s gotten lost is how many of us, myself included, I can’t sit and not pick up our phones for 10 or 15 minutes and just think about something. And I’m going to talking about meditating. I’m just talking about just sitting down and just thinking about something it’s very difficult to do. I’ve tried to do it more so recently, and it can be challenged. I’m not going to lie, but it helps it, it helps clear my head. It helps me think a little bit better.
Dave (29:33 ):
It helps my emotional state. And I just think that there’s a lot of benefits to going for a walk for 20 minutes, for half an hour and not taking your phone with you. And it kind of disconnecting from all the chaos that can then go, even though we’re more connected now than we ever have been. I think sometimes it can get a little cluttering. And I think that sometimes stepping away from some of those things can help you think a little more clearly and process any ideas, any information you’re trying to assimilate. All right, folks, we’ll that is going to wrap up our discussion for this evening. I hope you enjoyed Andrew, nice conversation about the garbage in garbage out. And I encourage you to take to heart some of the ideas that we shared with you guys tonight. So hope everybody’s safe, be safe out there. Invest with a margin of safety emphasis on the safety. Have a great week, and we’ll talk to you all next week.
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