Return to site

VITALIY KATSENELSON | CEO IMA Investments

· Podcast Episodes
PlaceTime discovers truth: Stoics, investing and Soul in the Game

How can listening to music make you a better investor? What if there’s something more to life than investing, stocks and money? In this episode I’m joined by Vitaliy Katsenelson to talk investing, Stoic philosophy and the importance of story-telling.

“When I analyze a business for the first time, and I know very little about it, it's almost like when you read a sci-fi novel for the first time, and you have to do what's called world building, right? Because the physics of this, of the earth, Earth may not work on the planet Gamma or whatever the, you know, and therefore, and they have different spaceships and they have, you know, all the different things. So there is some similarity when you analyze an industry which you know nothing about, you have to do a lot of world build building.”

Vitaliy Katsenelson was born in Murmansk, USSR, and immigrated to the United States with his family in 1991. After joining Denver-based value investment firm IMA in 1997, Vitaliy became Chief Investment Officer in 2007, and CEO in 2012. Vitaliy has written two books on investing and is an award-winning writer. Known for his uncommon common sense, Forbes Magazine called him “The New Benjamin Graham.”

He’s written for publications including Financial Times, Barron’s, Institutional Investor and Foreign Policy. His articles are also published on his website, ContrarianEdge, and in audio format on his Intellectual Investor Podcast. Vitaliy lives in Denver with his wife and three kids, where he loves to read, listen to classical music, play chess, and write about life, investing, and music. Soul in the Game is his third book, and first noninvesting book.

“So investing is a very interesting endeavor because it is a, it is an intellectual challenge if you do it right, you get to learn all the time about different companies in different industries and none of this knowledge is wasted because what it does is allow it to create mental models of how to look at something complex and simplify it and you can pour it from one industry to another. There is a very famous stoic philosopher Seneca, and he has this saying. Time discovers truth. And that is what investing is really for me, is just, I wanna discover truth before time does. That's, that's really kind of, this is how I look at my job.”

Soul in the Game - The Art of a Meaningful Life

Soul in the Game is a book of inspiring stories and hardwon lessons on how to live a meaningful life, crafted by investor and writer Vitaliy Katsenelson. Drawing from the lives of classical composers, ancient Stoics, and contemporary thinkers, Katsenelson weaves together a tapestry of practical wisdom that has helped him overcome his greatest challenges: in work, family, identity, health – and in dealing with success, failure, and more.

Part autobiography, part philosophy, part creativity manual, Soul in the Game is a unique and vulnerable exploration of what works, and what doesn’t, in the attempt to shape a fulfilling and happy life.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

Sharesight Award Winning Portfolio Tracker

Portfolio tracker Sharesight tracks your trades, shows your true performance, and saves you time and money at tax time. Get 4 months free at this link.

Disclosure: The links provided are affiliate links. I will be paid a commission if you use this link to make a purchase. You will also usually receive a discount by using these links/coupon codes. I only recommend products and services that I use and trust myself or where I have interviewed and/or met the founders and have assured myself that they’re offering something of value.

EPISODE TRANSCRIPT

Chloe (1s):
Stocks for Beginners.

Vitaliy (4s):
So number one, you have to have passion. Like, and I can't stress this point enough, there was a famous basketball coach who said, You can't teach height. Okay, well, in investing you can't teach passion. If you don't have it, just hire somebody else to do it. Don't do it yourself, because you'll become competing against people who do have it, and therefore they'll stick with the problems longer. Their capacity to suffer will be so much greater than yours. And by the way, there's plenty of suffering that comes with investing.

Phil (34s):
Hi, I'm welcome back to Stocks for Beginners. I'm Phil Muscatello. How can listening to music make you a better investor? What if there's something more to life than investing stocks and money? I know it's an interesting thought. Today I'm joined by Vitaliy Katsenlson. Hello, Vitaliy.

Vitaliy (51s):
Hello Phil. How are you?

Phil (53s):
Vitaliy Katsenelson is the Chief Investment officer of Denver based value investment firm. IMA, He's written for publications including Financial Times, Barron's, Institutional Investor and Foreign Policy. His articles are also published on his website, Contrarian Edge and in audio format on his Intellectual Investor podcast. Vitaliy lives in Denver with his wife and three kids where he loves to read, listen to classical music, play chess, and write about life, investing and music. Soul In the Game is his third and first non-investing book. So let's go back to the start by talking about growing up in Russia and is it pronounced Murmansk?

Phil (1m 33s):
Mermansk. Mesk.

Vitaliy (1m 34s):
I think Russians say Murmansk America, say Mermansk, whether it works.

Phil (1m 39s):
Okay.

Vitaliy (1m 39s):
I'm not sure how Australians say it or Yeah, but

Phil (1m 42s):
Yeah. Oh, we just copy whatever people say in the United States. Yeah, yeah. So tell us about growing up in, in, it was Soviet, it was still Soviet Russia at the time, wasn't it?

Vitaliy (1m 52s):
No, it's, it's, it is very important to understand that I was growing up, not just in Russia, but in Soviet Russia. My family left Russia in 1991. So let me describe you. The Russia In 1980s, every single business from barbershop to factory to movie theater was owned by the government. I don't think I know a single person who owned their own business, not, you know, at that time. So the concept of capitalism just did not exist. The concept of private property barely existed. So I knew nothing about capitalism growing up in Russia.

Vitaliy (2m 32s):
And let me tell you what it looks like. And the reason, actually, to me, this message is very important because today, young generation kind of romanticizes about socialism. And I tell you, it does not work when everybody owns everything. Nobody owns nothing. That's exactly what happened in Russia. The store shelves were empty most of the time. My mom struggled to buy meat and to feed us. We, we, we never went hungry, but it was always a big task to make sure we had food. The economy was centrally controlled. So the some bureaucrat in Moscow and St. Petersburg was deciding how much meat, you know, Murmansk should get.

Vitaliy (3m 12s):
It was a, well here, here's an interesting part. I look at this now and from my perspective today, it was, it looks like it would've been a very difficult life, but I was young, you know, so, so it was my childhood and I was happy. So it's a, despite all this, there was still a lot of happiness, you know, And so when we move moved to the United States in 1991, we see this incredible contrast. We go to the grocery store and there was this incredible abundance of food, abundance of everything. And this is what I knew, the capitalism really works.

Phil (3m 46s):
And it sounds like there was part of what was the happiness of your childhood and what contributed to the happiness of your childhood was your father's likeability and his likability in the community as well.

Vitaliy (3m 60s):
I, I was blessed by having terrific parents. Just this is, you know, this is, I turned out okay just because I had a wonderful, wonderful parents. And what made life a little bit more difficult than Russia at the time was that I'm Jewish and Jews were kind of put in a slightly lower cast than everybody else. Oh, the, this Russians or you know, then Russians. And so there's this kind of slight hint of antisemitism or discrimination, you know, kind of that I went through my life, but what made this all bearable, this incredible believe in love for my parents. You know, like I, my parents always made me feel that I can achieve anything I want.

Vitaliy (4m 43s):
And this is extremely important. Cause today I'm a parent, I have three kids, and this is something I always have to tell my kids that if they try, they can achieve anything and that they have it in them, that they can do it. So

Phil (4m 58s):
What was the view in Soviet Russia at the time of capitalism? What were you taught about capitalism in the capitalist west and what it was like?

Vitaliy (5m 6s):
So capitalism was equated to greed. So capitalist, greedy, like a few times a month, you know, my, my class would be taken to movie theater and we would see documentary, and I remember some of the documentaries showed Americans, this heartless people who eat hamburgers all the time. And were, there's a country where black people are constantly lynched. Of course, when I moved to United States, I learned that the part about hamburgers is, is true.

Phil (5m 35s):
Not forgetting hot dogs.

Vitaliy (5m 36s):
That's right. No, that's, that's right. Actually, I have a hot dog story. I have to tell you hot dog story. Okay, so just picture this, 1990, the relationship between United States, the west and Russia kind of becoming better and Americans start to send this care packages to Russia and we get one of those care packages. And what you have to understand is this Russian language does not have a word hot dog. There's links and there's sausage sausages, and we get this package and it says, hot dog. And I'm like, Oh my god, these guys are really screwed up. They eat dogs basically.

Phil (6m 15s):
And

Vitaliy (6m 15s):
So, and so that's, that's my kind of American hotdog story, but I feel, I forgot what the question was,

Phil (6m 25s):
Sorry. We're just talking about the view of capitalism in the West and that you were taught as a child.

Vitaliy (6m 31s):
Yeah, no, it's a, I think the, the most interesting part that I was told that Americans are heartless and we arrived to Denver, my whole family and imagine, so six or seven of us, I forget how many, and we have this, bring all our belongings with us and we have, I don't know, 30 different bags or something. And we get picked up at the airport by this heartless Americans that take our bags, put 'em in their minivans and trucks, take us to fully furnished apartment with stuffed refrigerator. And you know, these people also take us to groceries store and tell us how to shop for groceries and then come to us and visit us every so often just to make sure via acclimated to this country.

Vitaliy (7m 17s):
So like, I wish everybody was as heartless as Americans that, you know, they greeted us. So, so yeah. So that, that's, that's what I was taught and that's, and that's the America experience, which was very different.

Phil (7m 30s):
Just before I forget about it, I just wanted to go back to something you mentioned when we first started talking about socialism and the urge for socialism that seems to be gripping the west at the moment, that there seems to be nothing seems to be good about capitalism and people want more and more government control, it seems. Sorry, there's no question there. I just made that, that's

Vitaliy (7m 52s):
No, no, no, but let me actually, so actually I have been thinking a lot about this. Yes. And let me run this framework on you. Okay, so let me give you two extremes. The socialism I experienced in Russia, the one I described, and the capitalism that existed in the United States maybe a hundred years ago, not now, a hundred years ago. And I'm talking about when you worked on the meat plant, extremely long hours and ungodly conditions

Phil (8m 19s):
For robber barrons,

Vitaliy (8m 20s):
Exactly where you can get hurt, et cetera. And you know, so that's like this. So you have two extremes. You have the capitalism on the right, socialism on the left, this capitalism behind years ago. Now if you look what happened to American or western capitalism, you know, it got diluted with socialism. Okay, so what two things happened. First of all, taxation went up and second of all, government involvement in regulation has changed. So unions in, in, in a, and we should think unions for that, at least in the beginning because they have led a tremendous change. So today, like, and I'm gonna use make up on numbers. So today about, actually I think it's about right, 33% of your income in America goes to the government, to the governments, to the local government and federal government, etcetera.

Vitaliy (9m 10s):
So let's use that 33% as the degree of socialism in the United States, okay? Where let's say, let's take Europe, and I'm, and I don't know this number, but I probably, if I said 50 to 55% of income went to the government, I probably would not be wrong. Okay? So, but here's the thing. When a third of your money goes to the government, you own a little bit less, I think government owns one 30 of your paycheck. When governments own 55% of your paycheck, you own only 45. You own less and less. So what happens over time, the more you go to the left, the more money government takes from you and re distributes to other people, the more service they provide, the less ownership you have of your time, of your earnings.

Vitaliy (9m 58s):
And so I don't know where that number is, I don't know at which point you stop caring at I I know at which point you say, what's the point if I work, if I work very hard or I don't work very hard, I'm, my income is not gonna change. This is more of a thought experiment that I, you know, that I'm trying to explain. And one thing we know is that the government is not very good at making things. And Provin government is good at running military, the go, but the government is not very good at running, you know, as running businesses, if you're not sure about this and you, you are an American, just go to the post office and try to send out a letter and you'll be stuck in line for a long time and think about post office versus ups, UPS did not receive any subsidies from the government, et cetera, and it's able to send things faster and cheaper than post office and you get a great service and you get guaranteed delivery, et cetera.

Vitaliy (11m 1s):
And I said, this is not a perfect example, but that's an example. I think the, just the capitalism is not a perfect system. Everybody knows this. The only problem is could not come up with a better one. And the reason that system works, because it is in line with out genetic programming of, of survival, of selfishness. Yeah. And, and when I say selfishness is that when I wake up in the morning, I think about my family, but not a family that is, you know, 10,000 miles away in some other, other, some other remote town in the United States. I think about my kids, my wife, myself, and that's what drives me to make the best decisions.

Vitaliy (11m 41s):
You know, you know, I, I can for my family, but the beauty of capitalism of course is that when everybody makes these selfish decisions, it ends up benefiting everybody else. And that's, you know, know that's kind of the bit of, you know, of capitalism and I know all the common pushbacks cetera. And it's, and I think success of any country, it's finding this right balance of, you know, I guess not to have a, I don't want, I don't want the United States to go to the capitalism of a hundred years ago. But at the same time, I would argue I would not want United States to go to the, where the Europe is today or especially some European countries.

Vitaliy (12m 21s):
And I understand this is not a perfect example again, because United States has many advantages, geographic advantages, et cetera. But if you look the amount of innovation coming from the United States versus about of innovation coming out of Europe or of number of new businesses starting up, you would see that the reason, I think the reason we are, you know, more successful because, and we are more entrepreneurial because the system is still encourages risk taking. The more, the most socialism you have, the less, less risk taking you wanna do. I'm not, by the way, I'm not writing, I'm not running for the office. I'm just, you ask, I answer. So,

Phil (13m 4s):
So coming to the United States and you pretty quickly became involved in finance and investment, didn't you? What happened there?

Vitaliy (13m 13s):
So I arrived in the United States, so when, when I was about 18 and 18 and a half and I went to university and I, while I was University of Colorado, I tried, dated like five or seven different majors and I really, you know, it took me a while to find myself. And then I got a job at an investment firm and an investment firm and they hired me not because of my investment skills, because I had none. They hired me because of my computer skills. At the same time I was taking finance classes at University of Colorado and it just was a finance and investment clicked with me. And I was fairly lucky because I think at the time I was 21 and 22, I knew exactly what I wanted to do. And when you know this, you have focus and focus is like a magnifying glass, you know, I just focus all my energy on starting finance.

Vitaliy (14m 2s):
I got my under undergraduate degree in finance, graduate degree in finance, I got my cfa and I haven't worked a day in my life since.

Phil (14m 11s):
Well that's, I was just gonna quote back at you cuz you call your work hobby not a job.

Vitaliy (14m 16s):
Yeah, because I love it so much. It's not a, like I would do this if you got my pay by half by, you know, by two thirds, it wouldn't make a difference. I love what I do and money is a second consideration. It's just, I can't wait to learn about new company, to study a new industry. I just love what I do. So yes, when, when you love what you do, it stops, you know, the work stops being work. And by the way, this is what I exactly tell my kids. You wanna find something you're really passionate about and that should become your career.

Phil (14m 48s):
And, and you talk about it as being like an intellectual game, isn't it? It that for you it's like playing chess or Yeah, learning an instrument for example, that it becomes a game.

Vitaliy (14m 57s):
So investing is a very interesting endeavor because it is a, it is an intellectual challenge if you do it right, you get to learn all the time about different companies in different industries and none of this knowledge is wasted because what it does is allow it to create mental models of how to look at something complex and simplify it and you can pour it from one industry to another. There is a very famous stoic philosopher Seneca, and he has this saying. Time discovers truth. And that is what investing is really for me, is just, I wanna discover truth before time does. That's, that's really kind of, this is how I look at my job.

Vitaliy (15m 37s):
Just, you know, just looking for truth.

Phil (15m 39s):
What is your definition of value investing?

Vitaliy (15m 43s):
So value investing is often misunderstood. It's a lot of times people look at value investing as basically buying statistically cheap stocks. I would argue that's a very primitive way to look at value invested. Value investing is really philosophy. It's, it's a, it's a philosophy of how you, how you approach invested in and you know, as any philosophy it has tenants. So I call 'em commandments and I have the six commandments of value invested, and I'll give you a few in your listeners can get the other ones on like six commandments.com, they're absolutely free. It's just, I wrote this essay called The Six Commandments of Value Investing. And it's just, I think it's a great primer in general on value investing.

Vitaliy (16m 25s):
So if you just, they go to six commandments.com, they can find it there. But basically, let me give you few. So number one, a value investor approaches just stock as a business, not not a piece of paper. And so when we realize a company, we ask some question, would we want to own the whole business? If, if you could buy the whole company. So when you do this, it changes your mindset tremendously. Suddenly you start looking at the management and well, they're run the business, how well they allocate capital, start looking at cash flows, return capital, this kind of things. Another one, another commitment would be margins of safety. You wanna buy a company at a discount what it's worth, and you wanna do it for a couple reasons.

Vitaliy (17m 5s):
Number one, when the discount closes, you make money. But number two, and as important is that it prevents you from losing money. Because when the future plays out different from than you from you expected, if you bought a significant margin of safety, you may not make money, but you won't lose money. Which brings me to the third point to value investors risk is not really, volatility is not going up and down in price, but the stock price declining and never coming back. So this is why the margin of safety is so important because I'm not worried about what the stock I declined, if it's fair value hasn't changed, it's just really just a market's opinion of what the company on the, on the stock price today, which may change tomorrow.

Vitaliy (17m 50s):
So let's, so, so those are kind of the three commandments, but there's three more on the six amendment.com.

Phil (17m 56s):
I kind of like the way that you talk about businesses and I'll just quote another guess that I had on the podcast who you should not refer to a company by its ticket code. You should always use its full name because that reinforces in your mind that you are actually talking about an actual living, breathing business.

Vitaliy (18m 16s):
I love it. Yeah, I think that's, I think that's, I think that's a great idea and I, and no, I think that is a great idea. So let me, let me take a step further. When I buy a company, when I buy a stock for clients, so I run an investment firm in Denver, right? So I have clients who come to us and say Vitaliy, here's my life savings, please don't screw it up. Okay? So you build a portfolio of stocks for them and, but here's the problem. We spent sometimes hundreds of hours analysing each company, but for them is just a collection of tickers and names. You know, CHTR, what does it mean? You know, like that's what it is for them. So it's my job to write letters to them to actually explain, like we say we bought Charter Communication like so and SQL cdr.

Vitaliy (19m 6s):
So my job is to write 'em a letter to explain 'em that we bought one of the best cable companies in the United States and here's the, what are the risks of the business, Here's why we think the risks are overstated. Here is the what balance sheet looks like. Here's what cash flows look like. Here's why we think if it's undervalued and I, this is what I go through, discuss, you know, so every letter I go through this kind of discussions for every buy decision we make, for every sell decisions we make, we talk about all, all the other companies we own in the portfolio. And here's the thing, over time, if my clients do the homework, which is a prerequisite for them to be client of my firm, then they, the tickers will stop in tickers and they become companies and they'll stop being Vitaliy's companies and become their companies.

Vitaliy (19m 51s):
That is the goal. Like that's why write this long, long letters a few times a year.

Phil (19m 56s):
If someone's listening to the, this podcast is becoming interested in researching and to become a value investor themselves, it's going to take a long period of time. I know, but what are a couple of the first steps that they could possibly be looking at to begin this journey in learning how to value companies?

Vitaliy (20m 16s):
Okay, so number one, you have to have passion. Like, and I can't stress this point enough. There's a, there was a basketball coach who said you can't teach height in basketball. That's

Phil (20m 33s):
Beautiful.

Vitaliy (20m 34s):
Okay, well, in investing you can't teach passion. If you don't have it, just hire somebody else to do it. You know, don't do it yourself because you become competing against people who do have it and therefore they'll stick with the problems longer. They will, you know, their capac to suffer will be so much greater than yours. And by the way, there's plenty of suffering that comes with investing. So how I would do this, number one, I would take as much money as you could afford to lose, okay? Look at this as tuition money, okay? But again, it has to be, you know, just enough money that you can afford to lose.

Vitaliy (21m 14s):
And then ask yourself, what industries do I understand? Well, so I had two story, I had a college student come to me, he was a graduate student, and he asked me like what industry I should focus on. I said, Well, what do you do? He said, Well, I work for a aerospace company and I've been working in this business for 10 years. I said, Well, you probably should not be analyzing restaurants, but you probably know a lot more about aerospace industry than I ever will. It's very important when you, when I analyze the business for the first time, and I know very little about it, it's almost like when you read a sci-fi novel for the, you know, sci-fi novel for the first time, and you have to do what's called world building, right? Because the physics of this, of the earth, Earth may not work on the planet Gama or whatever the, you know, and therefore, and they have different spaceships and they have, you know, all the different things.

Vitaliy (22m 4s):
So there is some similarity when you analyze an industry which you know nothing about, you have to do a lot of world build building. Well, if you are working in aerospace industry, you already know this world. So you can skip a very important step of you when you know, you know, what the physiological of an airplane is, which or whatever. Okay, point number three. You don't wanna have a diversified portfolio. And this is important point, this is somewhat counterintuitive. Today, when I manage IMA, we have a very diversified portfolio of stocks, but I have a team of analysts and I've been doing it for a long time, even without analysts. Yeah, I would be able to do just fine because I've been doing it for a long time at this point, you just trying to learn, and therefore I would focus maybe one, two or three companies, just enough stocks and companies that you can understand extremely well .Bec it's very difficult for somebody who hasn't done this to cover 25, 30 stocks.

Vitaliy (23m 4s):
Okay? So I would just stick to a few companies and then try to find people, like-minded people who look at, invest in the same way and try to learn from them. I mean, those, I think probably the steps I would, you know, you know, those were the steps I would, I would take,

Phil (23m 19s):
I really like the way that you talk about the story and how you've gotta understand the story and constructing your particular mental model around a company and around businesses, but that's a double edged sword. I mean, you can construct it, but you can also delude yourself with that story. And you can be also confirming your own biases. I mean, I was just talking to a friend last night who he's just very passionate about changing the world for to become a carbon free future. And he's found this little battery company here in Australia, and he wants to invest in it. And I keep on saying to him, well, you know, what's their cash flow?

Phil (23m 59s):
How much is being invested? Do they have good management? But he gets so caught up in the story that supports his own beliefs as well.

Vitaliy (24m 9s):
Well, I, I mean, I think think a storytelling is one of the best ways to communicate in general, however, you're absolutely right. It is very, it could be extremely dangerous in ancient Greece and Rome, there was this people, they were called sophist and what sophisticated has the same rule

Phil (24m 29s):
And soft sophistry as well as another

Vitaliy (24m 31s):
One that comes from

Phil (24m 32s):
Lying.

Vitaliy (24m 33s):
Yeah, well those people were, they were not necessarily liars, but they basically Oh,

Phil (24m 38s):
That's right. There were storytellers, weren't

Vitaliy (24m 40s):
They? Yeah, yeah, there was, Yeah. So the, like, I, as I understand basically like if you, if you look at ancient Roman Greece, there was just a lot of competing schools. So is basically they would teach kids or young adults of how to make a, a very compassionate, emotional argument. And they wanted them to be able to make argument for and against, okay? So stoic looked at sous with a lot of caution because they felt it's a sphere that could be used for good or for bad. So without the moral compass. So, and therefore they, in fact, stoic had had an opposite approach.

Vitaliy (25m 23s):
They basically would say that they wanna break down an argument to complete bare bones. Okay? So, and this is a, I think I'm quoted Marcus Aurelius, who was an emperor of Rome, who was one of the most famous to, he said, instead of thinking about, you know, when you go to very fancy French restaurant and he, they bring the salmon and, and the, the explanation of the salmon, but the waiter is gonna take about five minutes. It gonna be a lot of words you won't understand and you know, with honey and herbs and how much of other things, Well, Marcus Aurelius would look at this, you know, salmon and say, this is a fish with herbs and honey on it.

Vitaliy (26m 2s):
Okay? So you, he just cut it down to basics. And I think it's very important for us to, like, especially as an analyst, and this is very important when analyst companies, I spend a lot of time listening to conference calls where you, you hear management speak or you listen to the presentations. And to become a manager at a company is, you know, an executive of the company, you need to have a certain basic set of skills. And being a great speaker is one of them. Now sometimes you have this, you know, this this managers who are incredible speakers. And when I recognize that, that this person is incredible speaker, I become very cautious.

Vitaliy (26m 46s):
Now, when I listen to them, I try to break down the message to the bare bones because I understand that I'm as go as gullible as everybody else when, you know, because I get influenced by how they speak, Okay? And therefore, I, it doesn't, by the way, it doesn't mean they're lying. I don't wanna imply that I just know that my analytical ability will be a little bit less good because of, of them being so per persuasive. So it means I have to work a little bit harder to make sure that I'm objective. So you have to be aware that storytelling on the one side, that's the most effective way to communicate. You mentioned my book, I think my book is just a whole bunch of storytelling, and this is why I think it's easy to get through the book because it just, you know, story after story after story.

Vitaliy (27m 34s):
And that is a, and I'm not doing because I'm trying to be a, Sophist maybe I'm just genetically Sophist, but it's just, that's the only way I know how to communicate. And just think about it, this conversation right now, it's just a lot of storytelling. So, so I have to be aware of myself that I think that Dostoyevsky said the most important thing, you don't wanna lie to yourself because you are the, you are the easiest person to deceive. So, so we have to be careful with ourselves as well.

Phil (28m 1s):
So as an investor, and when a CEO or management is explaining the salmon that they're putting on the table in front of you, using stoic philosophy and using those stoic principles, how do you break that meal down into its bare bones?

Vitaliy (28m 16s):
Well, I think, so the, for us, it makes it somewhat easier because for every single company we build a financial model. We don't buy it on wards, right? So for every company we build a financial model, which should be grounded in reality. And based on this model, we try different assumptions. We try pricing in high growth, medium growth, low growth, try different scenarios, and then see what the company's worth is the stock as the company's worth. And then based on that, we decide you wanna own the business. Is it cheap enough or not? We have a very well defined analytical process, and going through this process kind of clears out a lot of sory.

Phil (28m 58s):
So what inspired you to write the book? Soul in the Game, which was decidedly a non investing book,

Vitaliy (29m 4s):
So I've written two other books before. I've written the book, two books on investing, kind of been there, done that, was fun. And I think, you know, and, and I think in fact my, my second book, The Little Book of Sideways Markets is probably more relevant today than ever, even more relevant than when I wrote it in 2010. Over time, I've been writing, I've been writing since 2004, and I started writing investing articles and over time, little by little I started to bring stories about my kids, about classical music into investing as a character. A lot of times distill investment story. But over time they went from kind of being supporting actors to being main actors.

Vitaliy (29m 46s):
And Phil, the most amazing thing happened. And I, I, this happens to me all the time. People wrote to me, Vitality, I come to you, I came to you for investment articles, but I'm really staying because of your insights about life. And I tell you, that gave me so much more, like writing about investing was easy because I have the pedigree, that's what I do. Writing about life, that required a lot more confidence. And that feedback from readers gave me the confidence to keep writing about life. And so this book is basically the reason I wrote this book because I wanted to, it's a completely altruistic endeaeeur because it's not even about investing.

Vitaliy (30m 31s):
I just wanted to make a difference in people's lives. Okay? My greatest hope is that somebody reads or listens to the book on the audible and few, you know, chapters touch 'em in a way that makes them do something different and improves their life. And the book came out about three months ago, and I keep getting emails daily from people who are saying that I've done that. So,

Phil (30m 56s):
And what is it that you were saying about life in the United States at the moment that need some work?

Vitaliy (31m 2s):
Oh, life United States, oh my God, we are the most divided society we've ever been, ever. We are, you know, we have this luxury beliefs of, of, you know, things that you would like to be true, but not actually our beliefs and that ground in reality, we would we pursue those things as if they were true. And then when they meet reality, we get surprised. I'll give you a few example. And this is esg. I mean, I love the idea of doing things that would, you know, combat climate change, but that's not where, what ESG is. Let me tell you a true story, which basically sums up, you know, what's happening in this environment. Our environmental virtue signaling, my son Jonah, 21 years old, he has a plastic coffee mug from Starbucks.

Vitaliy (31m 50s):
He take, he goes to Starbucks and thinks, you know what, I'll do good for the environment, I'm gonna use reusable cup. He gives the cup to the clerk, the clerk makes coffee in the paper cup, pulls it in the plastic cup, throws the paper cup away, gives plastic cup back to my son and says, Thank you so much for saving the environment. I would like for us to have zero emissions, but we focus on cars. And when you think about, you know, like the most on evil oil companies, well, I'll give you a very interesting statistic. Bill Gates wrote a book about environment and there was a chart in that book which basically showed that about 14% of CO2 comes from cars, trucks and planes.

Phil (32m 33s):
14% it's 14, 14 or

Vitaliy (32m 35s):
Four one. Yeah, as much CO2 comes from farming and cows as much CO2 comes from construction. You don't see anybody talking about evil construction companies. You don't see anybody talking about evil cows, right? I'm not making an argument that we should completely ignore of CO2 coming from cars, but if you go is to change the environment, you know, you should probably focus not just on 14%, but also now forget about 86% of what's, you know, causing co2. And we are so preoccupied with the 14% that we ignore 86. There are a lot of things that are wrong with the United States today.

Vitaliy (33m 16s):
And despite all that, this is still the only country I wanna live in, you know, so, so it's, it's, it's a, you know, and it's, you know, and we are a lot more divided now than I before, et cetera, but it's still, I would choose to live here than anywhere else.

Phil (33m 33s):
Okay. I just wanted to, this is not a question about investing, but I've got in my notes here, and I can't remember where I found this. Is that you believe that AC/DC/ can make you a better writer?

Vitaliy (33m 41s):
Oh, absolutely.

Phil (33m 44s):
I'll just preface this by saying that ACDC played at one of my school dances. That's how long I've been around for.

Vitaliy (33m 51s):
Oh, I see. So I, so I, I gotta tell the story. So I gotta tell this story. See another, you know, another story. So my son Jonah was born in 2001. This is an early innings of internet. And my wife and I read, I forget it, I read a headline or whatever the headline said, If your child listens to Mozart, he's gonna be well more developed in, you know, in a, they even play, He'll become a genius. So I read this article when my wife, I think was like five or six months pregnant, and this was a time where she had a CD player. So I bought a belt that had a speaker on this, and we connected CD player and she walked around the house listening to Mozart's music.

Vitaliy (34m 37s):
So the most music was playing to my wife's belly. And my son was listening to it even before he was born. But then I actually read the study a few years ago, and the study, actually, that's not what the study said actually, the study, basically. So this study was conducted by guy who liked Mozart. And so he conducted the study using Mozart'sckmusic, but he, it's, he admitted that it could have been acdc, it didn't matter what it was, it just had to be music. And what happens to you when you listen to music, your left brain and right brain, the connection between them gets stronger. And while you're listening to music and you're doing something creative, it enhances your creativity.

Vitaliy (35m 22s):
Okay? However, that only lasts maybe 10 minutes longer than you listen to music. So if they stop listening that that benefit goes away, it gets a little bit more complicated. So, because you have to be very careful which music you listen to, and it doesn't have, it has nothing to do with ACDC or Mozart, but I'll give you a few examples. If you listen to music with words that actually it activates part of your brain where it starts to interpret the words actually becomes reduce, may actually tax your brain more. Some music, for instance, when I write, I listen to classical music, but I can't listen to violin concerts, just for some reason it doesn't, I love violin concerts.

Vitaliy (36m 5s):
Okay? Nothing against them, but it just, for some reason it just interrupts my, you know, my thinking. At the same time, when I write and I get stuck, I listen to opera. And the good thing is most operas are, you know, they're either in Italian or French or German, so I don't speak the language, so they might as well be in a Martian to me. And so when I listen to opera, so the language doesn't bother me, but it just, it actually induces my creativity so much. It a lot of times helps me to get through the writing blog. So you just have to figure out what music works for you and what doesn't. And if a cdc, you know, if a CDC works for you. Great.

Phil (36m 44s):
So tell listeners where they can find out more information about you and of course, the book Soul in the Game. Yeah,

Vitaliy (36m 50s):
So I think the easiest way to do it is that if the go to soulinthegame.net there, they can subscribe to my articles, they can read about the book Now since the book came out, I wrote about four or five new chapters. And if they buy the book, there are instructions there how they can get those new chapters absolutely free. And here's the best part, I keep writing, so, you know, you get new chapters over time as I write item. So, So in a game that Net is probably the best place you can get the book on Audible format. So I figure if you listen to this podcast, you probably like to listen more than you like to read. Not necessarily, but a lot of people do. And finally, I have a, we have a podcast, which is kind of a lazy man's podcast.

Vitaliy (37m 32s):
It's Imagine my articles are basically read to you. And so if you just look for Intellectual Investor podcast, wherever you listen to podcasts. Yeah. So you can listen, you can subscribe to a podcast.

Phil (37m 44s):
And of course you're on Twitter as well. Is that your main social channel?

Vitaliy (37m 49s):
Yeah, I'm, yeah, I'm on, Yeah, you can find me on Twitter. It's a, my first name, Vital Iy at the end. K letter K, Vitality K. You can find me on Twitter. And I'm actually, I'm, I'm, I really enjoy Twitter actually. It's a,

Phil (38m 2s):
I do too. It's my favorite.

Vitaliy (38m 4s):
It's a place for me to go and just look when I have a new thought just to share with the world and see what the world thinks. And yeah, so I, I'm on Twitter all the time though. I have to, you know, I try to manage my time wise

Phil (38m 17s):
There. We do, we always do. Vitaliy Katsenelson, thank you so much for joining me. It's been a real pleasure speaking with

Vitaliy (38m 24s):
You, Phil. Thank you so much. I really enjoyed it. Thank you.

Phil (38m 27s):
If you found this podcast helpful, please tell a friend, especially if it's someone who needs to start thinking about investing for their future, you'll be helping them and helping me to keep this show on the road.

Chloe (38m 37s):
Stocks for Beginners is for information and educational purposes only. It isn't financial advice and you shouldn't buy or sell any investments based on what you've heard here, any opinion or commentary, The view of the Speaker, Only Not Stocks for beginners. This podcast doesn't replace professional advice regarding your personal financial needs, circumstances, or current situation.

Phil (38m 55s):
And thank you for listening to my podcast.

Stocks for Beginners is for information and educational purposes only. It isn’t financial advice, and you shouldn’t buy or sell any investments based on what you’ve heard here. Any opinion or commentary is the view of the speaker only not Stocks for Beginners. This podcast doesn’t replace professional advice regarding your personal financial needs, circumstances or current situation.

 

 

 

 

All Posts
×

Almost done…

We just sent you an email. Please click the link in the email to confirm your subscription!

OK