S3E16 – Alexander Harmsen – Macro vs Micro investing

Key Timecodes

• (00:35) – Show intro and background history
• (02:58) – Deeper into his background and business path
• (04:04) – Understanding his business model
• (07:22) – His philosophy about the macro market perspective
• (09:09) – The differences between investing with a micro and macro-focused philosophy
• (14:30) – How he evaluates the market in his macro approach
• (20:42) – How he navigate safely in the bear markets
• (23:05) – Deeper into his numbers
• (27:43) – The importance of having a focused portfolio
• (28:42) – Deeper into his software and how it can help investors
• (33:03) – One key takeaway for the listeners
• (35:35) – Guest company website address
• (38:29) – The worst advice he ever received
• (39:58) – The best advice he ever received
• (43:24) – Farewells and ending of the show

Transcription

[00:00:01.900] – Intro

Hey, this is Sean Tepper, the host of Payback Time, an approachable and transparent podcast on business investing in finance. I like to bring our guests to hear authentic stories while giving you actionable takeaways you can use today. Let’s go. My next guest is an entrepreneur and investor who built a platform that helps investors monitor their own portfolios. In this episode, we talk about his investing strategy, why he believes it produces better results, and what actions investors can take today. Please welcome Alexander Harmsen. Alex, welcome to the show.

[00:00:37.700] – Alexander

Happy to be here, Sean.

[00:00:39.240] – Sean

Good to have you here. All right. So why don’t you kick us off and tell us about your background?

[00:00:43.050] – Alexander

My background, e as my education is engineering physics with a lot of economics. And so it seems like a lot, but what it really comes down to is a lot of mathematics, modeling. I’ve done a lot of simulation. And basically, over the last 10 to 15 years, I’ve worked in robotics and automation, worked on autonomous vehicle systems, built up a company called IRIS Automation. We did a significant amount of simulation, worked on autonomous vehicles. We were actually potentially the first commercial autonomous vehicle company to actually reach scale, sell thousands of systems. And we did it not with self driving cars, but actually with flying autonomous vehicles and in drones. And so I was always very excited about that. And then did a pretty hard shift into life sciences, but applied the same modeling simulations. There was a technique that we developed that became more and more useful called hybrid AI modeling. And so basically taking traditional mechanistic systems, combining them with more novel machine learning and AI approaches. And then a couple of years ago, started wondering, why has no one built some model of how the economy works? And in many ways, it felt similar to autonomous vehicles, building a digital twin of the human body.

[00:02:06.470] – Alexander

How difficult can it really be to model the economy? Everyone that I asked probably talked to something like 500 or 600 people. 99 % of them said, This is impossible. You can never be able to simulate what’s happening in the economy. And a few people that I talked to, actually, a few ex Bridgewater folks said, We’ve actually built this. We think about the world like a machine. And so it really made me think that potentially the big opportunity here is commercializing, democratizing access to Bridgewater type models, thinking about systematic macro, how the world works, how this economy works, applying the same hybrid AI modeling techniques that I used before. And that’s really the founding of global predictions. And so where we came up with this portfolio pilot product that we’re going to talk about today.

[00:02:57.830] – Sean

Yeah, S eps, I can’t wait to dive in. Before we do, I’m curious, with any of these other businesses you started in the past, did you go through an exit or you just shut them down? Or they side hustles? Where are they at?

[00:03:08.980] – Alexander

They’re still going. I’m still the chairman of IRIS Automation. We ended up in the reviation world. We ended up running into lots of regulatory hurdles and dealing with the FAA and decided to find someone who was really in that world to ex Boeing, hired a CEO to basically continue scaling up the company. Really excited about that. I spent a couple of hours a week on that at this point. And then with this life sciences company, it’s still going. I was always really just more of an AI technical advisor and helped build up the company from the very beginning. But that company, Varies in Life, continues to thrive. They’re pro series A now. They’ve raised tens of millions of dollars and they’re blowing up. Now global predictions is on its way. We’ve raised a pre seed round. We’re about to go through a seed round and that continues to scale up as well.

[00:04:04.430] – Sean

Let’s dive into all that. So sounds like global predictions. Com, that is the website, correct?

[00:04:10.100] – Alexander

That’s right. That’s where.

[00:04:11.400] – Sean

You spend the majority of your time, right?

[00:04:14.940] – Alexander

That’s right. This is 90 % of my time now.

[00:04:17.980] – Sean

Okay, good. All right, so let’s dive into the model. What problem does it solve?

[00:04:22.990] – Alexander

Yeah, definitely the big vision, the big picture is building this digital twin of the economy. We want to map out millions of relationships between different macro factors, how they relate to securities, what is actually important, what’s not important. One of the frustrating things for us very early on was that it felt like there was too much much focused on individual company analysis or basic trend following with technical analysis, or whether it’s the Wall Street Journal or Wall Street Bets, Jim Kramer, or Motley Fool, it felt like it was too micro focused. It felt like it was too focused on the things that are happening day to day, week to week. The news cycle amplifies everything. When in reality, something like 40 % of all stock market returns are driven by inflation and GDP changes. And so our general mentality and what we’re trying to solve with global predictions and the name of the product itself is Portfolio Pilot. And so what we’re trying to solve with Portfolio Pilot is basically taking people’s individual portfolios, their net worth, and then connecting that to the economy, connecting it to these economic models, helping people understand how impacted is my portfolio to inflation, how driven is my portfolio by credit conditions and markets, how exposed am I really?

[00:05:57.720] – Alexander

If I think about my portfolio in dollars space, maybe only 40 % of my portfolio is high growth tech stocks. But if I think about things in risk space, then maybe it’s 80 % of my portfolio that’s high growth tech stocks. And so I’m not actually properly diversified. I have way more downside risk than I actually think. And so we like to think about portfolio pilot as the most advanced portfolio tracker in the world. It does all the things that a normal portfolio tracker does. It connects to your account, automatically update. You can add things like real estate and crypto and cash and some private equity investments or angel investment, stock options, things like this. But then it takes into account whether you have tax accounts or not and it taches it to these large macro models that we have and then actually gives automatically a whole set of advice. So it analyzes your portfolio, it finds out holes and weaknesses, and then actually recommends buy this, sell this. You can optimize your portfolio by reweighting this part of your portfolio. This is a way that you could save on taxes. This is a more tax optimal strategy.

[00:07:11.340] – Alexander

And we wanted to make it both very powerful and very simple to use. And so that feels like a constant struggle to fit those two things into the same box.

[00:07:22.710] – Sean

Sure. So to back up a second, you were saying that macro is where a lot of people make money in the stock market. So they’re really following trends outside of businesses, right?

[00:07:35.260] – Alexander

Yeah. It feels like… And I don’t really know why this is. Maybe because the macro piece is so hard, or it’s so complex, or it’s so intertwined with everything that’s happening. But definitely, it feels like most people just say, I can’t control the macro piece. And so the thing that I can control or feel like I can wrap my head around is the company fundamentals, or the dividends, or the PE ratio, or some next launch, or is this company going to do well in the next couple of years? Or maybe I should just focus on a 15 year trend and think, Is this an industry that’s going to do really well over a certain period of time? But in reality, if you throw all of that away and just focus on over the next six months, over the next 12 months, are we going to be in a recession or not? What’s GDP going to do? How’s inflation changing? What are the current macro conditions? What’s the impact of credit or liquidity in markets? If you pay attention to changes in currency, if you think about the yield curve, bond rates, interest rates, and how all these things impact what you’re holding, that’s way more impactful and you will end up making way more money than any of the individual micro things that you focus on.

[00:09:00.030] – Alexander

That’s maybe like the crazy thing that we think we’re bringing to market, which feels very obvious to us, but it’s definitely contrarian.

[00:09:09.640] – Sean

It is because with Tykr and with who we follow, where people make the most of their money. It’s like a venture capitalist. You’re in that space, too. They’re not investing in an entire market. They’re investing in great businesses. That’s where you make your big returns. For example, I had a guy on a podcast who only invested in one insurance company for 15 years, and he turned that into multimillion dollars. Warren Buffett made his first million off five businesses in the beginning. Highly focused, great companies, not investing. Because we get investors that are like, I want to be a millionaire overnight, so I’m going to invest in S&P 500. What are we doing here? You’re not going to make a lot of money investing in the market. You have to be in businesses. So we are business micro focused, we’re not so macro focused. You’re actually the first to be in the podcast that’s macro focused.

[00:10:06.440] – Alexander

Yeah. I absolutely think there is money to be made on the micro piece. Don’t get me wrong, I just think it’s extremely difficult for retail investors to do that. I think something like 99 % of the possible Alpha that comes from the micro focus gets mopped up by the hedge funds out there. And I think it’s easy to convince ourselves as part time retail investors that we are taking advantage of some trend that the rest of the market is missing. So maybe to give one example, I was talking to someone recently about his investment portfolio, his strategy. Super fascinating. He had done tons of research into Ethereum, and he thinks we have electric vehicles that are taking off, this massive trend, and all of that requires battery technology and the batteries need the Lithium. Basically where Lithium is mined around the world, there’s all these conflict zones and the expectation that there’s going to be even more conflict. That’s like bipolar world becomes more and more defined. There’s going to be a lot more proxy conflicts in areas with rich minerals like this. It feels like China is obviously a big player in this and they’re going to start cutting off supply, and so there’s going to be more of a squeeze on Lithium.

[00:11:34.200] – Alexander

And so supply and demand leads us to think that litium prices are going to go through the roof over the next couple of years. And that feels like a great investment opportunity at the moment. The problem is that that’s not any different than what the Lithium traders that set prices in the market currently expect. As an individual retail investor, you probably don’t have your opinion on this or your current thesis about what’s going to happen with the prices probably isn’t all that different than what the biggest hedge funds that are trading commodities are thinking about the next couple of years. That means that a lot of that future expectation around price and supply and demand in the listing market is probably already priced in today’s pricing. You’re not actually going to get the returns that you think you are beyond just broad market exposure to commodities. Just like an inherent risk reward that you get for investing in individual commodity like Lithium. And there’s some very basic return, basically, that the market compensates you for taking on that risk. But there’s not an extra return you’re getting from some unique view on the Lithium market.

[00:12:49.850] – Alexander

That’s one example, but it relates to everything. The same thing with, I think Apple is an incredible company because of all these fundamentals. Unless you have some unique view or some insider knowledge, or you’re probably going to be thinking about that in a fairly similar way than it’s already priced into markets right now. And so fundamentally, if you’re going to make money beyond what everybody else is going to make, then you need to be investing in things that other people are ignoring or in markets that are so deep that the alpha doesn’t get eroded, which basically means you need some contrarian bets or you need to be doing this full time and really in it, or you need to be investing on the macro side. Because on the macro side, even Bridgewater with $150, $200 billion rarely moves markets because these macro markets are so deep and these opportunities are so deep that the opportunity doesn’t get eroded.

[00:13:46.280] – Sean

Let’s take a quick commercial break. Have you ever lost money in the stock market? Maybe you heard or saw a comment on YouTube, TikTok, Reddit, or another social platform. Or maybe you just received bad advice from a friend. Yeah, I think we’ve all been there. Most people lose money in the stock market because they make decisions based on emotions. What if you could remove emotions from investing? What if you could make consistent returns in the stock market based solely on logic? And what if there’s a software that could handle that logic for you? Introducing Tykr, a platform that helps you manage your investments with confidence. Get started today with a free trial. Visit Tykr. Com. That’s TYKR. Com. Again, Tykr. Com. All right, back to the show. I have to say this, it’s a lot of overengineered behavior in the macro space I see. And I’ve read principles, and I don’t exactly agree with D’Ali o’s principles, if you will. But interesting perspective. I do appreciate it. But we do find a lot of our investors, they are beating the market, not only by a little, by a lot. But what we use are the 4Ms.

[00:14:51.570] – Sean

I’ll keep it pretty simple. So you look at the fundamentals first. That’s the margin of safety M. That’s everything math related. But we teach people, always look past the numbers. I like your example there with the Lithium because that moves on to the second M, which is meaning what is the industry? What is the business model? How does it make money? What are the revenue streams? That is the multiple streams. Then the most competitive advantage is the third M. Then the management. Who’s the quarterback? What’s their experience? Have they won Super Bowls before? They come in right out of high school. That’s just a metaphor. But we look at all four M’s and if you can check all those boxes, then that’s where our investors are really crushing it. I’m curious, you’re investing in the market, how are you doing excluding 2022 because it’s a bear market. But what returns are you generating with this macro approach?

[00:15:34.910] – Alexander

Why would you exclude 2022?

[00:15:36.220] – Sean

You want to? You want to include it? Because it was a down year, especially for me. It’s a bear market.

[00:15:42.080] – Alexander

I guess the way I look at it is not about total returns. It’s total returns, it’s relative returns. What you could have been doing with a different strategy or what the overall market is returning. And I actually think that taking this macro approach, I absolutely think that this strategy that you’re laying out makes a ton of sense. This is a great way to evaluate companies. To me, it just doesn’t seem very differentiated than what the top hedge funds are doing to evaluate the same companies. And so it’s very likely that the top hedge funds are the ones that are actually setting the price. And so if they see some displacement, then they’re going to adjust the price, they’re going to mop up that alpha, and then they’re going to do that much quicker. They’re going to have models to evaluate all these things. And so to us, it feels like the thing that is missing from the hedge fund piece is that, and most retail investors, all of us, is that we typically exclude these other market events. We say, Okay, it would have been a really good portfolio or would have been a really good year.

[00:16:48.780] – Alexander

This investing approach I’m taking would have been really good if it wasn’t for inflation, or if it wasn’t for the Fed changing interest rates, or if it wasn’t for this down market or a bear market. I actually think that you can’t just exclude that. You could exclude it if you’re specifically hedging out all of the macro risk. Hedge funds exclude this. They very specifically say our alpha is like in this, we are really good at picking managers, but we are basically going to isolate that risk and hedge against the market and hedge against any of the macro and hedge against any of the other fundamentals and changes and other sectors and just focus on the manager risk. I think it’s very difficult to do that as a retail investor, which don’t have access to a lot of those tools, like the low cost hedging strategies. And so, realistically, that means that you can’t just exclude 2022 and you need to think, okay, is my portfolio properly diversified? Am I really thinking through what’s going to happen in up markets and down markets? Is my strategy going to work, regardless of macro conditions? And maybe this word diversified has a negative connot because even what you say, right?

[00:18:07.430] – Alexander

Some of the greatest money makers in history specifically say diversification is bad. If you know what you’re doing, why would you diversify? If you know what you’re doing, then put all of your eggs in one basket and watch that basket really closely. This feels like the Warren Buffett example that you brought up before. So when I say diversification, I don’t mean get a nice portfolio of equities and bonds. And I think a lot of people think about diversification in this way. They think about, okay, in good times, I want to make sure that half my portfolio or 60 % of my portfolio is getting tons of exposure and going up. But then in bad times, I want to make sure that I cut my losses. And what that really feels like is a compliment. What it really means and what it ends up being is a compliment. And so we think about diversification in a very different way. We think about diversification in the sense that you should have all high performing securities in your portfolio. Every single item in your portfolio should be expected to go up. And so I don’t have any bonds in my portfolio, but my portfolio is extremely diversified.

[00:19:20.160] – Alexander

And what that really means is that I look at not diversification on a surface level, but I look at diversification when it comes to macro drivers. And so my general philosophy is that my portfolio, if I have 10 items in my portfolio, eight of those items in any macro condition should go up, and two in any macro condition should go down at any time. And so on the whole, I’m making a fair amount of money where 80 % is coming up, 20 % is going down. And what that really means is I got a bunch of commodities exposure. I have some leveraged inflation links bonds in my portfolio. I have some consumer staples companies in my portfolio. There’s other things like that that I think beyond the typical equities. There’s a fair amount of emerging markets exposure in my portfolio. So there’s things like this that allow you to look at diversification a couple of layers deeper and diversify on the core drivers to the portfolio, allowing you to pick what you think are high performing assets while still being diversified and making money in an upmarket or a downmarket. And just to be clear, I still lost money this last year.

[00:20:39.840] – Alexander

I just lost a lot less money than I think most other people.

[00:20:42.030] – Sean

Right. And it’s probably unrealized ou don’t sound like the type of guy that’s going to sell. We do get people who are on the fence and the markets going down, they’re like, Well, I better sell for a loss because I feel like I’m going to lose more.

[00:20:56.420] – Alexander

Right, exactly. I like to think that with this more diversified strategy, I feel like I don’t have to worry about the bear markets or the bull markets. I don’t have to worry about the macro conditions nearly as much unless I’m specifically trying to get some alpha from those macro conditions. And so we talked about this a little bit before we started, but we think a lot at Global Predictions about this concept of hybrid investing. And so when we think about hybrid investing, basically we think about this macro diversified base as the core of your portfolio. This idea of 80 % is going to go up, 20 % is going to go down. It’s net neutral to different macro conditions. And so it should be net neutral to inflation conditions. It should be net neutral to credit conditions, net neutral to changes in growth, internationally diversified. And then on top of that, the other part of the hybrid strategy is where you think you can get alpha. And so I actually don’t think this like, I don’t think what you’re saying is really at odds with what we’re saying, what we believe. We like to think that everybody, no matter who you are, should have this very diversified base that’s net neutral to macro, that’s guaranteed to make money in any macro condition.

[00:22:16.460] – Alexander

And then on top of that, you have whatever you think is your alpha strategy. And that could be the fore ends and the specific stock picking, or it could be we think it’s easier and more attainable to make money as a retail investor on the macro side and thinking about stock releases and the medium term where markets are going and act accordingly. And then depending on how much belief you have in the alpha that you have, you basically change the weighting of your portfolio. Personally, I feel like I have something like 50 % of my portfolio in this net, like this neutral, macro diversified base and 50 % where I think I have alpha and where I trade according to some of the incidents that come from our portfolio pilot platform.

[00:23:05.840] – Sean

Sure. So I have to ask circling back, how are you doing in the market? Let’s factor in 2022 over the average returns over the last five years, let’s.

[00:23:13.080] – Alexander

Say, per year. Yeah. I me, just to be clear, we’re two and a half years into the company at this point. So five years ago was very different than two years ago. But over the last year in particular, I’m down 5 % in total compared to I don’t know what it is with most other people, but definitely 15, 20 % is not crazy.

[00:23:34.320] – Sean

Sure.

[00:23:35.240] – Alexander

And I think a big part of that is because of how the leveraged inflation links bonds have done, how some of the emerging markets have done, and how the commodities have done. That’s the piece of the portfolio that I expect to do relatively well, but especially in high inflation environments, I expect to do really well.

[00:23:55.000] – Sean

Got you. And then prior to 2022, let’s take a snapshot of five years because I assume you’ve been investing in the stock market before you started your business, correct? Definitely. So what returns are you generating then?

[00:24:09.260] – Alexander

I honestly don’t know if I have a good number, but I think that the strategy that I was using on that point was basically risk on all equities and fair amount of ETFs and index funds and more broad exposure to what I consider high risk, high return. And so the returns there were pretty good, but mostly just because I was accidentally trading in an incredible bull market. I think it was two and a half years ago when I was asking people about why has no one built this macro model, model of the economy, I met my co founder, and this guy, Reid Hartman, he worked at Bridgewater for a long time. He left and was a hedge fund portfolio manager, managed over $150 million in assets. And I just learn from him every single day. He’s fascinating in the sense that he’s just been taught in the hedge fund world and has a completely different view of what’s possible, what’s not possible. A lot of companies that we come across, a lot of news articles, it’s like, there’s more crap or more of the same. This is interesting. Of course, this makes sense. But everybody that sets prices on the hedge fund world also thinks this makes sense.

[00:25:32.390] – Alexander

And so there’s not actually alpha there. It could be true and it could be a great opportunity, but the opportunity disappeared two weeks ago when the news originally came out. And three hours later, you had some big hedge fund moves that took advantage of it. And so being able to see inside what that world looks like and the data that people have access to, and even some of the people that have been introduced to learn what’s happening, we pull in tremendous amount of data, as you can imagine, into this global predictions technology stack. We probably take in something like two million data series every single week. And so we continuously talk to new data vendors. It’s wild what hedge funds have access to in terms of data streams. There’s an entire industry here. I was talking to someone who… The whole point of their company, basically, it’s like a consultant company that sets out data reports every single week. They interview people who were just fired from big tech companies and basically ask them to reveal secrets about that tech company. And the more the worse that firing was, the more they’re willing to reveal.

[00:26:46.440] – Alexander

Basically, this was like, this guy trying to sell me this data stream in these reports, basically saying, this is our strategy. This is how we get really… He said it’s not technically insider information because they don’t work there anymore. And they personally, their company doesn’t have the risk because they are not trading off of it and because they specifically tell these people don’t reveal anything important. But they push hard enough in the interviews that they end up revealing things that aren’t public knowledge. And they have a massive business and they fly under the radar and they approach us and they don’t have a website, but they definitely do millions of dollars in revenue every single year. And there’s just this whole world that we don’t have access to. We meaning us, plebs, us retail investors. And I’ve gotten a glimpse of that. And I think that’s part of what informs my opinion on very difficult to make money off the microstuff.

[00:27:47.180] – Sean

I come from the teaching and I have to give Phil town. I don’t know if you know him, but I give him a ton of credit because he teaches us. And I found an article here, CNBC states that over 80 % of hedge funds actually do not beat the market. But as Phil teaches, we can, as retail investors, we can all beat the market because we’re not managing 50, 100, 500 different accounts. We’re just managing our own. And that makes it actually extremely easy to do. You probably run into people in this space, but I talk to people that run a fund and what is the stress threshold? Where does it become too hard to manage? And I found that number to be like, I’ve heard people say 40, 45 different accounts, and that’s why some people are like, I only work with families that have a net worth of five million or more. So I got right at 50 accounts at five million. Okay, now I can make some money based off the AUM. But it’s interesting where things get really stressful in that space. Now, your software, it sounds like it can help save a little time, make their lives a little easier.

[00:28:51.810] – Sean

Is that correct?

[00:28:52.780] – Alexander

For wealth managers? Yeah.

[00:28:53.890] – Sean

Because you got a B2B play and a B2C play, right?

[00:28:58.420] – Alexander

That’s right. I definitely think that we’re probably 90 % focused on the B2C side. We definitely see most of our business, most of where we think we can really make an impact on the consumer side. And then we definitely have a number of wealth managers that have come to us as well and said, Hey, this seems really impactful. I like to think on the wealth manager side, it’s mostly helping wealth managers look like geniuses. And we’re monitoring so much. It’s almost like it’s an automated version of a team of 1,000 analysts that’s looking at the world and analyzing data streams and calling out trends and deviations or returning to trend or trying to give context and insights into what’s normal, what’s not. The forecasts are extremely interesting, but when the forecasts change, it’s even more interesting. But something has changed the forecast and the expected outcome. So we call all of those outs as well into this Insights product that we have. And so some people just use that. It’s almost like an automated, unbiased version of what you might find in the Wall Street Journal or it’s data and charts and just automated things that the system spits out and automatically ranks in terms of how impactful and interesting they are.

[00:30:13.930] – Alexander

And so we find that the wealth managers seem to really like that part of the system. I think oftentimes with wealth managers, they have some fairly passive core strategy that they don’t change up all that often. I don’t think I’ve really encountered a wealth manager that is trying to individually manage and get alpha for each of their clients. Very typically, they say, Okay, onboard your money. And we have five different portfolios that we start centrally manage as a team, and we’re going to put you in one of those. And I think part of the reason why the consumer side of the business and portfolio pilot is so attractive is because there’s just a whole wave of millennials and Gen Z that wants to do it themselves and probably should be able to do it themselves. And self direct investing feels way more possible than ever before. The no fee trading, all the execution platforms that are out there, all of the opportunities. You absolutely should be able to do it yourself. And so I feel like the portfolio pilot piece is the most attractive because it’s there for the self direct investors. And then the wealth manager side is almost there to be this engine of insights and interesting things that keeps the wealth manager’s relevance and helps them stay ahead of what might come for their clients.

[00:31:43.720] – Alexander

But it’s specifically a very different user that goes to wealth manager. The investor that says, Okay, please manage my money for me. They have said, I don’t want to do this. I don’t want the additional responsibility. I want to trust someone else. And maybe some of them believe that will make more money doing it that way. But I think it feels like a pretty common understanding at this point that you’re not going to make more money putting your money with a wealth manager, especially after fees.

[00:32:20.950] – Sean

Correct. Let’s take a quick commercial break. Hey, this is Sean. I’d like to say thank you for taking the time to listen to this podcast. I know there’s a lot of other podcasts you could be listening to, so thanks for taking the time to listen to this one. I have a quick request. If you have a moment, could you please head over to Apple Podcasts and leave a five star review? The reason is the more ratings we get and the higher those ratings are, the more Apple will share us with the world. So thanks in advance for doing that. And then I have a quick comment. If there are any questions you want me to ask the guests, please head over to our Tykr Facebook group. You could drop a question right there. I’ll go ahead and make a note and I’ll do my best to ask that question on the podcast. All right, back to the show. We set expectations with our audience that there are very two different strategies. If you want to accelerate your wealth and actually make money, you need to be doing it on your own. And of course, we’re into stocks, equities, the micro play.

[00:33:17.970] – Sean

If you go with an advisor, and I’ve got a lot of friends in this space, they set expectations right away. We’re not here to make you money. We’re here to protect your wealth.

[00:33:26.780] – Alexander

Yeah, a lot about not losing money. It’s a lot about growing slowly over time. No, absolutely.

[00:33:34.960] – Sean

Yeah. I know we talked more about investment strategy than your business on this, which I thought was a lot of fun. But I’m going to ask you a question here. What is a key take away, one key action people can take today when investing on their own?

[00:33:51.060] – Alexander

I’m extremely biased in this, of course, but I really think that most people don’t set up this diversified base. And even if you think you have lots and lots of alpha and have this force trading strategy, at a minimum, you should decide what that split is and put a certain amount of money into this macro neutral base as part of this hybrid investing strategy. And obviously I’m biased, but I think people should sign up for a portfolio pilot. It’s free. Connect your portfolio and not just think about your one Robin hood trading account, but think about your retirement accounts, cash, your crypto, your real estate, basically pull everything in together and look to see, does the risk overall match the risk that you’re really willing to take? What is your overall risk adjusted returns across your entire net worth and the expectation for the next year? And what is your downside protection? And when we think about downside protection, we really think about what is your exposure to potential tail risk in the economy? And this is where the net neutral macro exposure comes in. How exposed are you really to changes in inflation or surprises in GDP and growth conditions?

[00:35:13.360] – Alexander

And I think even if you don’t change anything about your portfolio and decide to take on the risk from the current strategy that you’re employing, I think it’s very useful to consider that, to measure that, and just be explicit about the risk you are taking and the downside that you actually do have.

[00:35:31.590] – Sean

Right.

[00:35:32.100] – Alexander

On. The downside exposure you do have.

[00:35:36.240] – Sean

Well, I do encourage anybody, if you want to check out a portfolio tracker, they should definitely go to your site. We’ve got portfoliopilot.

[00:35:45.390] – Alexander

Com, right? That’s right. Yeah, well, predictions. Com is the whole company. There’s interesting stuff about the technology and blogs and breakdowns there. Then Portfolio Pilot. Com is the product itself. And this is solely focused on Zoom.

[00:36:00.840] – Sean

Got it. Well, let’s dive into a fun little round here I call the rapid fire round. This is part of the episode where we get to find out who Alex really is. If you can try to answer each question in 15 seconds or less. You ready?

[00:36:12.920] – Alexander

Okay. Ready.

[00:36:14.500] – Sean

What is your favorite podcast?

[00:36:17.380] – Alexander

Favorite podcast that recently I’ve really been listening to this podcast called Founders. Basically this guy who talks within a unique audience or to himself and thinks like we’re all on this journey together. He basically just goes through different biographies of interesting founders throughout history, breaks it down, really tries to get into their mental space, philosophy, how they’re thinking. And it feels so intimate. I love that.

[00:36:48.780] – Sean

That’s cool. Very cool. What is a recent book you read and would recommend?

[00:36:52.980] – Alexander

There’s a book that I think completely changed my way I think about product management called jobs to be done. And basically says that you shouldn’t just interview people and ask them what they want, but you should really drill down to what is the job to be done? Why would they hire your product? What is the problem that they’re actually looking to be solved and fixed, rather than something they may just be interested in?

[00:37:28.860] – Sean

Asking those key questions, product development, so many people overlook the skills required to do it correctly, especially in the early stages of a startup. Good for you for leaning into that. All right, we got a fun one here. What is your favorite movie?

[00:37:42.940] – Alexander

My favorite movie has got to be a beautiful mind. I’ve seen this so many times at this point, but I think there’s something about just being so maniacally focused on making an impact in the world and causing some change. And there’s something so scary about the mind deteriorating and what that could possibly look like. Honestly, it’s partly my favorite movie because it’s extremely inspiring. And it’s worse than some horror movies in terms of the fact that that could happen to us at some point. Beautiful Minds.

[00:38:25.160] – Sean

Great perspective. I haven’t seen it in years, but that’s a great call. Few business questions here. What is the worst business advice you ever received? Worst business advice?

[00:38:36.960] – Alexander

I think, honestly, this may be super contrarian, but I actually think that a lot of people say you should just continuously be fundraising, talking to investors, maintaining relationships. And I don’t know. My general mindset and what’s worked really well across probably, at this point, 10 different fundraisers and something like 50 or 60 million dollars raised is cut out investors, don’t talk to them unless I’m 100 % in investing mode, in which case I basically put the rest, give the company to my co founder to run and just go seven meetings a day investors for three to four months. And then once the round is closed, the money is in the bank, get back to company building, focus on the customer, focus on the product. And it blows my mind that this is common advice.

[00:39:35.220] – Sean

Yeah. We actually were completely bootstrapped and we decided not to raise funds partially because of that exact region. It’s a distracting process. It gets you further away from your customers and your product. It’s like, Nope, we are highly focused on our customer building a great product, and that is that.

[00:39:54.880] – Alexander

I love that. Absolutely the right approach.

[00:39:59.480] – Sean

All right, let’s flip the question. What is the best advice you ever received?

[00:40:04.200] – Alexander

Fire fast, hire slow. I think this continues to be something that I just need to iterate again and again and again. And we like to think that we set a very high bar and there’s tons of pressure. We need this senior software engineer right now and we need to fix this thing. But if you end up firing that person three months later, it’s so distracting to the company. It affects the company culture. I really like this mentality of A players hire other A players and B players hire C players. That’s come up and I’ve seen that in practice. You just need to maintain the bar. I think it’s so important that every new hire raises the bar for the company, add something, otherwise it becomes a compromise and a slippery slope.

[00:40:54.930] – Sean

Yes, that is wise. I love it. All right, last question. last question here. This is a time machine question. If you could go back in time to give your younger self advice, what age would you visit and what would you say?

[00:41:08.740] – Alexander

That’s a great question. I love this. I think back to running IRIS automation in the early days, like my first company. We had technical risk building autonomous vehicle systems. We had regulatory risk dealing with early autonomous vehicles, drones, FAA. We had business risk because we were building a critical component within a growing industry. And there was execution risk because we were first time founders. It’s crazy that we managed to pull it off. And we’re now international and you’re basically unconscious leader in the space. And I would have told myself in the early days that you need to focus, talk to customers more, focus, I know we spent so much time on random admin stuff, and I don’t know where the days went and why we focused on these things, but it felt really important that we had all of our finances correct and we had all these admin issues. And we spent a lot of time making sure that we had the right office space. And now it’s just like, we’re all remote and I just have one bookkeeper and just push everything to her. And the taxes, I don’t think about it all year. And all the IRS notices and everything, put them in a big pile and just hand them to our accountant once a year.

[00:42:36.580] – Alexander

And that stuff will sort itself out post Series A. Once we get to a large enough point, we’ll hire a VP of Finance and we’ll clean up any of the random other loose ends that we didn’t deal with in the early days. But the early days should really just be focused on product market fit, talking to as many customers as possible, building something people want, outsourcing as much as you possibly can. That’s not the critical thing that you are actually focused on. Eight years ago at this point, that guy needed a slap or a hit to the head and just focus. You think you’re focused, but you’re not focused. You are going to learn over the next eight years what focus really means. And just cut 90 % of what you’re doing out, it doesn’t matter.

[00:43:24.650] – Sean

Thanks for sharing that. I know our audience loves lessons learned. I got to jump off here in a second, but we’ll make sure we promote your website link when you get out to social media and all the hot spots. But Alex, thank you so much for sharing your story here and dive in and investing a little bit. We had a good discussion there.

[00:43:42.420] – Alexander

Shawn, I love it. Thanks for having me.

[00:43:44.490] – Sean

All right, we’ll see you. Hey, I’d like to say thank you for checking out this podcast. I know there’s a lot of other podcasts you could be listening to, so thanks for spending some time with me. Also, if you have a moment, could you please head over to Apple podcast and leave a review? The more reviews we get, the more Apple will share this podcast with the world. So thanks for doing that. And last thing, if you do hear any stocks mentioned on this podcast, please keep in mind this podcast is for entertainment purposes only. Please do not make a buyer sell decision based solely on what you hear. All right, thanks for your time. Talk to you later. See you.