Tuesday, September 29, 2020

Trump vs Biden Debate and Lessons for Us

Healthy debate is crucial in investing. This is because we all have blind spots and we need to bang our heads together to check what is wrong with our investment thesis. Did we miss anything? Did we have enough margin of safety? Did we overlook a big risk? I looked at my worst performing names over the years. They were usually stocks that I didn't debate with anyone. I just analyzed on my own and bought it, thinking it was cheap, had a good story and I knew all the risks. I have learnt my lesson. To invest well, engage in healthy debates.

But importantly, the debate has to be healthy. 

Unhealthy debate, which we just saw with Trump and Biden, open a new can of worms or just opened worms that can debate unhealthily amongst themselves. I don't even know which is worse. Maybe watching Trump is worse than a can of worms. If I had to debate with someone like that on stock ideas, maybe I would have lost all my money and my pants hahaha.

Well, back to debate and lessons learnt.

Debate has always intrigued me. We grew up watching debate matches and politicians on TV and it's not about seeking the truth. It is about who can talk well, who can stage a good rebuttal, which may or may not be logical. Sometimes it sounds logical, but if we think deeper, it's just rubbish. Yes, sometimes, it's just outright lies, not just with Trump. There are usually no solutions and no insights. Just a lot of cheap talk. Trump vs Biden was worse. We didn't learn any truths, we didn't even have cheap talk. It was just pasa malam (wet market) rattling and Trump cutting other people off.

So here's the lesson: don't debate with rubbish people. Walk away. 

Joe Biden would have walk away if he could. But he has to fight on. At 78, he certainly still has the grit to keep putting up with shit. If that is what it takes to do the job. Kudos to that. Debating on stocks is also about grit. The desire to seek the truth, to understand the reality, to find out the true range of intrinsic values and then buy at a margin of safety and make money. It's hard work and grit.

Good debating about stocks has to be built on trust. We want to tear down each other's arguments to seek truths. It is not about ego and it is not about arguing who is right or wrong. It is about really seeing what are the scenarios, how they will play out and how to bet such that we can make money. When ego gets in the way, all is lost. 

Questions will be pointing and some with big egos may not take them well, here's a few examples below:

1. You are telling me what the markets know, what everyone knows. Is there a differentiated angle here? What makes you think the market has not thought about this?

2.  What if the stock falls through your worst case scenario? Have you modelled a second and third wave and its negative impact? What will be the risk vs reward then? Can you still say the rewards outweigh the risks?

3. If this is the case, why hasn't the company done what you have just described? Surely the company has thought about it. They live and breathe their business. You just do desktop analysis. What are the chances that you are wrong and the company is right?

4. There are reasons why the stock is cheap and has not rerated. What is different today vs one year ago or two years ago? The market is not stupid. What have you overlooked?

5. You are saying growth will be much higher and hence current valuation is justified. What makes you think you are smarter than all the analysts out there projecting growth numbers? 

The lesson here is to be like Biden. Take it in strides. It is not about me and never mind the tone of the questions. Never mind getting cut off. The quest is to win and make constructive changes to benefit the country. That's Biden. For investing, the quest is to get to the truth. If it means making money, then it's worth it. The struggle makes the analysis better and makes us sharper, better investors. 

Happy Children's Day, Huat Ah!    

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