Danielle Town — How To Make Stock Investing "Not Scary"

This is an intro. Intro, intro, intro.

Hustle and Float. Shark with your boy.

My boy, Matt Wolf. Hey, yo, yo. We're back. We're back. I'm back. We're back, you're back. Both back. We're here. Joe Fear here.

Matt Wolf here.

There he is.

Are we just gonna start doing this on every episode?

It kind of seems like a trend.

It seems like something we should do.

All right, welcome to another amazing episode. Hustle and Flowchart.

Hustle and Flowchart.

And today we're talking to. This is an interesting one. It's like full circle now. So we had Phil Town on the podcast a few months back, handful months back, and it was amazing. One of our most popular episodes and one that we've both listened back to and taken notes. And now we have his daughter Danielle on here. Danielle Town, who does amazing things. We'll get into a lot of it, but essentially co authored a book, New York Times best selling book as well, is on this podcast with her father, Phil, where essentially, literally her journey from being not an investor to an investor. It's all documented through this podcast and it's absolutely fascinating.

Yes.

Yeah.

And this podcast actually really, really resonated with me because. And I think Joe too, because we're both aspiring investors, but we're very sort of passive investors. We kind of use a fund type thing and, and let other people kind of manage our investments for us. And Danielle sort of helps get through some of the mental barriers of figuring out how to manage yourself and getting comfortable looking at what businesses you should invest in and the things to look for. And she talks about Charlie Munger's four law or four rules for what to invest in. And when she broke that down, it just added so much more clarity in my head to what to look for in investing and sort of gave me the confidence to, you know what, maybe I will take some of my money out of my automated investments and start putting them into other companies because I really feel like they give a really good framework for that kind of stuff.

Yeah. Now this is an amazing episode to essentially, if you are feeling like you just don't have the confidence or you've been wanting to do this for a long time, investing that is for the future. You just don't feel like now's the right time. But, you know, I really want to please listen to this. Like, that is literally the backbone of this interview. And she makes it, she breaks it down where it should be actually very simple and she'll give some very good tips and tricks. And resources. All that fun stuff throughout this thing to further your journey.

All that fun stuff.

Dig it.

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All right, see you. Hey, Danielle, thanks for hopping on the show with us.

Hi, guys. Thanks so much.

Yeah. So we had your dad on, who was a fun episode. I'm seeing lightning.

He usually is. He tends to be fun.

He'd be a cool dad, huh? I think I even like.

It's a bit weird to have a cool dad. It's kind of like you don't want the cool dad. You know? I was super embarrassed of him when I was a kid because all my friends thought he was cool and I thought he was not cool at all. Of course. So, you know, everyone has their own special trauma as a child. Not mine.

I can kind of relate with that. Yeah, I felt a little like that with my dad, too. Like, why does he have all the friends with, you know, my friends, too? That's my friends.

Your dad had more friends at your high school than you did.

He definitely made a name for himself. Oh, man.

But, yeah, you know, it comes in handy when you're older and you realize, oh, my dad is kind of cool, and actually my mom is kind of cool and, like, my family is kind of awesome. And that's. There's sort of a point. There's like a turning point where you realize you actually like your own family.

And of course that's true.

That doesn't happen to everybody. I'm very grateful that that happened for me.

Thank God that happens.

Kind of sucks.

Just not really liking your family that much, too Much. Yeah. But, yeah, either way, he's taught you a lot. I know, and we'll dig into that. But let's get into your backstory. I know it all is very tied in with your dad, but you've done a lot of stuff other than the investing side of stuff, too.

Yeah. And you were telling us before this call that you were actually. When you were getting into investing, you were scared, and your dad was never really someone who really shied away from risk, and you actually had to convince your dad that you were scared to get involved in Vestig. So I'm really curious to hear that whole story arc there.

Yeah, no, I totally had to convince him. And we have a podcast together as well. And if you listen to the beginning episodes of the podcast, you can actually hear me over and over going, no, no, I'm really afraid of this. And he was just like, yeah, yeah, yeah, whatever. And two weeks later I'd be like, no, you don't understand. I have anxiety, like chest palpit about purchasing stocks. And he just, you know, it took him months, and then somehow there was like a switch and he just got it one day. But let me go back, because, yes, there was. There's been lots of other things that led me to this new investing journey, which has been a real change for me because I'm. I'm a corporate lawyer, actually, and I went to law school from studying religion, so I studied religion. I wanted to be a First Amendment lawyer, and I went to law school, and I got really interested in entrepreneurs and companies and decided to become a startup attorney. So I was a startup attorney in Boulder, Colorado, and loved it and never remotely wanted anything to do with business or investing. I mean, there's a reason I went to law school. It was not because I'm great with numbers or business, and I was working big law firm hours, and I started to get really, really burnt out and just exhausted. The next thing I knew, I was throwing up out of the blue at work. Everybody thought I was pregnant. I was not pregnant. And my hair started falling out in clumps. I started to not be able to digest food. I got fevers out of the blue, like, completely. Just like, boom. I was fine. And then I had 104 degree fever. Just like the weirdest physical ailments. And I went to the doctor, and she said, oh, I think you're stressed. And I said, no, no, no, I'm not stressed at all. And I really meant it. I really did not feel stressed at all. I had gotten so divorced from my body and what was going on with me that I actually thought that the way I felt was normal. Because everybody I know works like that. And it is normal for us. I mean, genuinely, my friends, I mean, yes, I worked a lot. Like, I worked through Christmases, I worked through all sorts of holidays. I canceled vacations all the time. Like, all the typical lawyer stuff. So, you know, it was a little crazy. But we all work so much, and we don't realize how stressed and how much of a toll it's taking on us and on our families. So my family noticed this, and my dad in particular said, you can't keep this up. Like, you're getting sick. This isn't going to work. And I don't want you to find out that you have cancer or something terrible for you to stop. And I just. I loved what I did. So I didn't. I couldn't figure out a way out. I had a mortgage, I had a life I loved, but I wasn't sure how I could continue that without my salary. And I couldn't think of anything else to do because I'm like a startup lawyer and I had my dream job. So my dad, of course, then was like, you got to learn investing. And I said, heck, no, I don't want to learn investing at all. Again, I'm terrified of numbers. I don't understand these businesses. They seem like this sort of dark fog of financial mysteriousness. And I mean, the way stock markets work just terrified me. I grew up, or I graduated from college during the recession in 2003, and then I graduated from law school in the second recession in 2010.

Jeez, that's got to be great for your age.

I'm very familiar with stock market problems, and I think most of us who are younger feel this way about the market. So that was my starting point of like, no way.

That is like, that transition period must be the hardest part possible, because like you said, good salary, dream job, you have friends in that space, too. And it's just like this automatic mode.

Well, and I think what you're talking about, too, I mean, I kind of get the impression we're all very similar in age. So us all kind of having lived through that era and seeing that has made us all very sort of gun shy to get into investing. I know Joe and I, neither of us have. We've dabbled with investments, but at very sort of low levels because we have seen that in the past, and we are scared to death that it's going to happen again.

That's exactly right. Exactly And I think that's completely reasonable. I think we're correct. Like, of course we are afraid of getting into something that seems so random and filled with products that we don't understand, with a potential huge drop out of nowhere and then, you know, financial crisis and banks closing like that is terrifying. So we have very good reason to feel this way. I think the financial industry also encourages us to feel afraid, which, now that I see it, I see it everywhere. They encourage us. I see it as. There's two options. It's either they tell us to hoard our money and just stop buying anything fun. No more lattes, that whole thing, and you just keep it and you save it and you don't do anything with it, and that's like the fear response. Or they tell us to abdicate completely and, and hand our money over to some other person who then we pay fees to. We actually pay them money to invest for us. And usually we don't get much of a return in exchange for those fees. I mean, if you look at these charts, it's really extraordinary.

If you look on like Vanguard website, they have these fantastic charts that show how much you pay in typical fees to money managers and how much you would have gotten if you hadn't paid those fees. And it's exponential. It's terrifying.

I don't want to look at those.

Yeah, it's not fun.

And I didn't want to abdicate. I wanted to have some connection to my money. And so what I did was hoard. I just saved my money and didn't do anything with it because it was that fear response.

So when the government or financial situation, whoever is saying these, you know, hoard your money, stash your cash, you know there's a downturn coming, what would you, what would you say to do? And I might be totally jumping ahead, but.

No, you're not jumping ahead. Because I thought that I was a complete genius for deciding to just save my money under my mattress. Because this is. I grew up with an investor dad who follows Warren Buffett. And what Warren Buffett always says is, there's only two rules of investing. Rule number one is don't lose money. Rule number two is don't forget rule number one. My dad even named his first book rule number one.

Yep, I've got it on my bookshelf.

He believes this so much. And so I've had that in my head forever. So don't lose money. Don't lose money. You don't lose money. Well, how do you not lose money? You don't ever risk it, right? So I'm like an investing genius, right? And so I told my dad this, like, thinking he'd go, oh, yeah, you really understand already?

And he just. He just about blew his top. He was like, that is the dumbest thing I have ever heard. And I said, no, no, no, you don't understand. I'm not risking it, so I'm not going to lose it. And he said, what about inflation?

And I said, inflation? Yeah. And I was like. He goes, do you know what inflation is? And I was like, yeah, I think so.

Heard the term in school.

It's that thing where, like, things cost more and I can't tell you why. And he was like, you're an idiot, basically.

But look at that. So really quick, now that you understand inflation, what's your definition of inflation?

Yeah, Right. So here's what inflation is. Inflation is when the buying power of your money goes down. And it happens because of something I will not try to explain, but it's basically a cycle between the availability of jobs and the salaries that are paid for those jobs, and then what people can buy with those jobs and the demand and the supply, and then, voila, we have either inflation or deflation.

Got it?

And, yeah, there you go. Wasn't that helpful?

And so he said, what about inflation? And once I figured out that what it meant is that my buying power goes down, it occurred to me that my money, that is my safe money under the mattress, is losing its value day over day and year over year without me doing anything wrong. I'm doing everything right. I'm making the money, I'm saving the money, and somehow I'm getting slammed. How can that be? And how can nobody have taught me that in, like, third grade? If this is a real thing, Basic.

Education, we should all know.

Yeah. So my dad never taught it to me, or maybe he thought he did because it was so obvious to him. But I did not realize that my money is losing buying power. Essentially, I'm losing money every year by doing nothing. By doing nothing wrong. And so just to keep up with that, just to not lose money, I actually have to invest my money, which, like, is insane, but it's true. It's risky. It's what got me onto onto, like, okay, I don't want to lose my money. So, all right, I'll listen to you. I'll learn some of this investing stuff. And so that's how we started.

Wow.

So then with your dad, you mentioned that on the first couple episodes you did with him on the Podcast, you were really, really scared to get into investing. What advice or what sort of revelations did you have that helped you overcome that?

It was a process. It was a process. And now what I do is I talk to people about that process. And so I don't want to pretend like it's an overnight thing. And like I said before, I think it's really legit to be afraid of the stock market. So I think there's two different kinds of fear. One is the legitimate fear. The like, whoa, this thing is filled with all sorts of things I don't understand, so I need to really be careful and understand what I'm doing. And then there's the illegitimate fear, which is just like, I don't want to touch my money or deal with that or worry about it at all. And I had both kinds of fear, but I didn't know that they were different. And it took me. Gosh, a long time. I shouldn't say a long time. It took me probably six months before I started to really get into investing. And then I had to deal with. It felt like a long time. And then I had to deal with the emotional side of it. The part of me that was the. It was the irrational fear. The part that went, I just don't want to deal with my money at all. And I didn't even know that that was part of me, which is why I recommend this investing practice. So to me, investing. And I know you guys love process and how things work, which I do, too. So how I got into investing for myself was by thinking of it as a practice. By thinking of it as something where I didn't have to get really good at it really fast. And then there was some stopping point where then I was just check a box. Like, I'm an investor now.

Automatic mood.

Yes. Because I was very intimidated by that process because I didn't think I would be able to get there. So by thinking of it as a practice, like a yoga practice or a meditation practice or a legal practice or a medical practice or whatever kind of thing that you do regularly and don't have an end point. It's about the journey, it's about the learning, and it's especially about the experience of that journey and that learning and.

Probably having a very good guide as well, someone to show you some principles to just be messy and go practice, but don't expect great results right off the bat, like with yoga or meditation.

No. Right. You got to be practicing the right stuff. That's exactly right. So I was practicing the right Stuff and I figured out how to practice it better for me because my dad does things sometimes a little differently than I do. And, and as I started to get into that and really read the news, read about companies, start to understand the language that investors use, which is very different and very intimidating to those of us who are not in that world. Once I started to understand that and feel like, okay, I've got my footing a little bit, then this emotional stuff came up and it was extraordinary because I would have never encountered that. I would have never dealt with it, at least I don't think so, if I hadn't started this investing practice. So in a way it turned into amazing personal therapy out of the blue, which. Who knew that money stuff could do that?

Well, that could, because I think that's the baggage, and I'll call it baggage if it's holding you down. But money, just thoughts and subconscious feelings about money that a lot of people, like you said, suppress. I know I've done that for, for most of my life. And suppress. Just like I don't want to manage it. I'm not a money person or I'm not good enough to do that. Heather, my wife, you manage that, not me, or I'm going to hire someone else. Bookkeeper.

We all have that. All of us, no matter what our background is, whether you were rich or poor or somewhere in the middle, we all have those experiences with money. And, and when I talk to people about it, just like you just did, we all know exactly what those things are like immediately, but we don't think about it because it's painful. So of course we don't think about it. It's logical, but it's something that holds us back from this opportunity we have now. I mean, it's extraordinary, the Internet and has given us the ability to have our own side hustle as investors, where I can do this from my house for almost no fees, almost no money to even make a transaction. And I can get all of this information for free online through the SEC's website or a million other intermediary websites. I mean, even 20 years ago, it was not like that. And this money experience that we go through is holding us back from what is just to my mind, it's extraordinary the opportunities that we have access to right now.

Yeah, I love that you just said a side hustle for investing. I don't think I've never heard anybody say that. We've had a lot of side hustle type people and that's huge in this economy. And people see that as a way to get through life. They're an Uber driver, they're a TaskRabbit driver or whatever. But investing, you could do that too. It's probably way more powerful than just $in, $out for the hour spent or whatever it is.

Yeah. I'll tell you, long term investing is not as immediate as doing those kinds of side hustles, but it is way more lucrative in the long run. So that's, you know, that's another little hurdle that we kind of have to get over. The thing of like instant gratification and when am I going to see new money in my account? And there's another situation where looking at charts really helps because when you look at compounding charts of if you start, you know, 20 years before you want to stop, then you end up with X. If you start 21 years before you want to stop, your X is then, I mean, depending on how much you're making, but your X is often doubled. It's incredible. If you do 30 years from when you want to stop, it's a completely different life. Completely. And we put all these numbers in our book because my dad showed me and it just completely blew my mind and convinced me that.

Looking at this long term view was actually extremely worthwhile and something I wished I had started a number of years beforehand.

It's the eighth wonder of the world.

That's right. Compound interest.

So this emotional stuff that I dealt with, it really got me actually amazingly closer to my dad because I realized as I was trying to figure out why I wasn't 100% into the investing thing. And I just did some soul searching and just realized, oh, there's this whole other level of fear that I haven't even dealt with. And I started to think, like, what is this fear? Like, what is this coming from? It doesn't seem to be related to anything. And this thought just kept coming of trust. And I thought, what do I not trust? And I realized I didn't trust my dad, which is weird because my dad is a good investor and I knew what he was teaching me was really good stuff, so why would I not trust him? And so I did some more soul searching. And I realized that it's because my parents got divorced when I was 11. And as with many divorces, it was very acrimonious. And my dad ended up, we had been very close, we lived in a big house. And my dad ended up leaving and essentially took the money with him. My sister and I and my mom moved into literally a trailer, a very Small trailer from our big, very nice house, which was a big culture shock for us. And our whole lives changed. And my dad, once he realized it, came back and made sure that we were taken care of. And my parents ended up.

They had these lawyers who were fighting massively, and they ended up ditching the lawyers and got a mediator and ended up working things out and now have a very good relationship. So it came around, but things were really tough there for a while.

I can relate to the idea.

As a kid, as an 11 year old, my experience was of pure trauma of my father, who I adored leaving us, and of this change from essentially being rich to essentially being poor. And I had never thought about the money part of that, ever. All I had ever remembered was the emotional part, like how painful it was, and then sort of getting our family back. So when I finally remembered that, I realized, like, oh, yeah, of course I don't trust him. That actually makes sense. And then we talked about it, which we would have never talked about if I hadn't gone through this experience of learning investing. And he said a bunch of stuff to me that as an adult, I can now appreciate his point of view and what he did and understand better and what my mom did and just understand them better.

And really, God, it brought us so much closer together. And that fear, which in the book, I describe it as just noticing it, just acknowledging it, first of all, was amazing to even know that I went through that. Secondly, to be grateful for it, to turn that experience around and say, okay, I mean, that's a pretty privileged experience and I'm doing fine and my family came back together and this, this thing that happened has been keeping me from stuff, but now I'm noticing it and I can move on. And I. And then, And I was able to transform it into something new for me. Something where I talked to my dad about how he felt about money, which, by the way, he had never really thought about. How did he come from parents who.

Were solidly middle class, I would say, at the time, but really never made much money in their lives. How did he come from that and go into the army and then go and become an investor and make all this money?

It was like a river rafter. I remember that.

How does it even occur to you to do that? And we had so many good conversations about it. And the transformation, I think it was what sent me.

Just soaring onto this journey of like, okay, this investing practice is not just about money. It's. It's about me and my life and being connected to My family and supporting my family. And now I'm married, so I want to support my husband, and I want to support every, like, everybody I love in my life. And. And how do I do that? Okay. I've got this incredible, as you said, side hustle. This is my skill. And. And it feels life supporting in a way that I never thought money could ever be.

Geez, that was powerful.

Well, go ahead, Matt. I'm just thinking, like, throughout your entire story, it sounds like you have these. And this is everyone, so I'm speaking for myself, too. But these layers of awareness, all the way back from when you're in the law practice, where you literally were just your body. You didn't even realize your body was shutting down and doing these things because you were so zoned in on that thing you were working on in your job. And I know we have experienced that.

In our own stuff. Yeah.

Well, it's so interesting, too, because I don't feel like most people analyze why they're scared to do something. And I think that is what's so powerful about the story you just told, was you actually took the time to analyze and think, okay, I'm really scared to get into this. Why am I so scared to get into this? And you dug deeper and dug deeper, and just by doing that digging, you kind of uncovered why the anxieties existed. And by uncovering those, it got you more comfortable going down the path you went down. And I just think so many people don't take that time for the sort of introspection to figure out why they are the way they are.

Exactly. And it's extraordinary how even. And I just loved how you just said that. To uncover layers of awareness. As you uncover these layers of awareness about yourself, it. What's the right word? It loses its power.

These things that have kept us for years or our entire lives from something that's actually useful to us. It's. I mean, I'm talking, like, in five minutes, it loses its power. Now, it's not that it goes away forever, and it's not that it's like it never happened. You know, like, these things stay with you, and that's okay. That's part of us, and that's what made us what we are. But to not be controlled by old crap is pretty great.

That's the freeing feeling and the fact that with all these struggles or potential struggles, they could just be. Not really. That they could just be all in your head, and then you just step out. You're like, oh, that wasn't that Bad. But look what that did for you and your dad, your entire family, completely because of investing and the trigger, that first layer of awareness in the job now, it brought you just so close to your dad, and you're just experiencing all new sorts of things and a better, hopefully healthier life now that you're investing. It's amazing.

Yeah, it's been wild. It's been wild.

And I know something for, I think Matt and I, you said it took about six months to get going and feel comfortable and kind of moving. I'm sure your dad helped a lot of that support through the podcast that you guys have. What's the name of that podcast, by the way?

It's called Invested. The book is called Invested, and the podcast is called Invested.

Awesome. Yeah, because it's such an interesting. I listened to the first two, I believe it was, but I know you have a lot more, and it's just really cool because that's literally your journey recorded.

Yeah, it is. And we've heard from a lot of people who have said they've gone back to the beginning and listened to the entire set of episodes, which were now at, I think around 190 episodes. So it's a lot. And then they've gone back to the beginning again and listened to them all a second time to make sure they didn't miss anything. I mean, it's amazing. And I'm just so glad that people are identifying with the process I went through, because.

It'S weird and it's confusing and. And I felt very alone in it, to be honest. Like, I had my dad who was teaching me, but it's different to have a teacher than it is to have, like, a guide, like, or, like a friend or somebody who's kind of been there for him. And he was lovely about it. But, you know, like I said, he didn't understand the fear, and he didn't really. Now he's very into my investing practice idea, but at the time he sort of thought it was a bit weird. And, you know, he's got his own methods. And I think this is. I really see this difference in people. It's like there's two kinds of people in the world. There's the people who totally get the whole financial world and are just like, boom, got it. I'm all about that. And, like, that's what he was. And that's what most investors are, of course, because they were drawn to it. They're good at it. So that's what they do. And then there's all the Rest of us who are just like, what is this financial industrial complex of mysteriousness? And I don't want to get into that. And, like, therefore, I'm just not going to get into that. And I'm going to pay other people to handle stuff. And we're the ones who get screwed. I don't want us to get screwed anymore. I want us to really, by not doing too much, be able to at least understand and have perspective on what the options are with our money. And with that, we can do so much. We can change this market. We can choose great companies to put our money into, and we can take our money out of crappy companies that are hurting their employees and poisoning our oceans and putting plastic out everywhere. We can make these choices with our morals and our values. And because we're not, we are allowing these people in terrible companies to do terrible things. And I think that sort of greater good part of it, combined with making money personally for ourselves and our families, it's like everybody wins if we actually did that.

So I think that's a good segue into kind of the. The how to kind of stuff. Now I'm sure there's people listening right now that are thinking to themselves, this all sounds great. I'd love to get into investing, but, you know, the money that I bring in each month is about equal to the money I put out each month in bills. And, you know, how do. How do. How does someone that's kind of just getting by.

Dip their toes in the water and start getting going with investing?

Well, first of all, I think, I mean, and I am not a personal finance expert, there are fantastic ones out there. So I would get some info from these fantastic personal finance experts out there. Stephanie o' Connell is great. Erin Lowry wrote a great book about millennials and the stuff that we deal with. Check out the real experts who can tell you how to handle your credit card bills, handle your student loans, what to do with mortgages, and just start thinking about it, start dealing with it. And that's probably. If you're somebody who, like me, avoided all that stuff, that's probably where some of this first, like, feeling of trepidation is going to come up. Like you said, like, you just ask your wife to handle it and avoid it. And even those of us who have our own businesses, it doesn't matter. We still can avoid it.

It's the same thing. It's just compounded now into another place.

Yeah, yeah, totally. So that's really the first place. And I think for people who start to Feel those, those feelings of like, I don't really want to do this, then that's the stuff that I'm working on now. So you can, I don't mean to plug too much, but you can go to danieletown.com and I'm putting out help for this kind of emotional, just baggage that's keeping us from handling our money and getting into investing. So I think once we've gotten through that, once we've started.

Putting those sort of structures, I guess would be the right way to say it in place for our personal finances, then putting away a little bit money, a little bit of money regularly so that we can start investing with it is all that you have to do. You don't have to have a lot of money to start doing your own investing. You don't actually have to even have any money to start doing your own investing because there's enough stuff to learn. Like, I mean, it took me almost a year. My dad actually told me I was not allowed to buy any companies, buy any stock for an entire year once we started. So a year of learning without actually purchasing anything.

So that's interesting right there is the learning. Because that's like, I would assume that's like a confidence comboed with like, hey, this is your practice. Like every day learn a little bit more, get a little better and question things differently and stuff like that.

I would imagine that's exactly right. And that experience matters as you move forward in learning about markets and learning about companies and learning about the management of the companies and those things. I actually love doing, it turns out, and then learning about the numbers and the financials, which are still not my favorite part, but we all have things we like and don't like. As you get into those things and really genuinely practice them, you'll find that you make a lot of mistakes. And I don't want us to be making mistakes with real money. And that's why my dad told me that he didn't want me to be making mistakes with real money. So I ended up buying a company towards the end of the year. So I asked for special permission and bought a company that I loved, which was Whole Foods. And I had just fallen in love with it, honestly. And I just really wanted to buy it and it was at a good price. And I made my case and I gave him the counter argument. Inverting the argument is how he describes it. So essentially for a lawyer, it's like the cross examination of the company case and made it through that. And so I went and Bought Whole Foods and ended up making like 40% on my money really quickly, which was amazing and is very unusual, by the way, in long term investing. But it just happened that Amazon swooped in and bought that.

Good timing.

But you did your research, I would imagine. So you were prepped for that decision, sounds like.

Well, I thought something would happen with them, but I didn't know that Amazon was going to be the one to buy them. I mean, that was a big surprise to a lot of people.

True, very true.

But a very cool one. I think we just did two episodes on Amazon and Whole Foods and kind of what happened with that now a year later? It's an interesting one.

It definitely shook up a lot of markets. Yeah, but also in a good way.

But it hasn't disrupted grocery as much as we all thought it would. Right. So the question is, are they holding stuff back or is the promise of Whole Foods and Amazon really not living up to what everybody thought it would? I'm not, I'm not 100% sure.

Yeah.

So, yeah, so I think. And people always say to me, like, oh, there's so many expensive companies right now, like there's just nothing to buy because we want to buy things on sale. And there's not a lot of companies on sale right now. So I just always say this is the perfect time to be learning, practicing. There's no pressure to be buying anything right now. If we were in a massive crash right now, which could happen at any day by the way, then there would be a lot of pressure to buy because a lot of companies would be on sale. So I'm actually hoping that this bull market continues a little bit longer while I'm.

Figuring out my stuff and practicing.

So what does a stock look like when it's on sale? I mean, I know we can obviously see when the market as a whole is in a downtrend, but.

What kind of things are you looking for where you kind of decide, okay, this stock is a good one to buy right now?

Okay, so there are four principles of investing that Charlie Munger presented in a BBC interview in 2012. And from these four principles, which he just sort of rattled off and nobody paid attention to, we have. My dad and I have turned it into the basis of my investing education and our entire book about investing because they are so simple, but they're not easy. So the first one is we want to have a company that we understand that we are capable of understanding, which sounds really simple, but it's not always easy to understand. A big public company can be really hard. And Warren Buffett himself actually has literally a literal box on his desk. There's a photograph of it, and on the box it says, too hard. It's his too hard box. And he keeps it there to remind himself that when he's reading, because he's old school, so he reads stuff on paper. Paper. So when he's reading an annual report on paper and it's too hard, he puts it in the too hard box and it goes away. If Mr. Buffett himself has stuff that's too hard, I can guarantee you 95% of the companies out there are too hard for me. So I love it because it gives me such an excuse to just be like, oh, this one? Yeah, oil companies. I totally don't get opec. No. Too hard. That's cool. I mean, even Amazon, Like, I love Amazon, but I struggle with them because it's a very complicated company.

Yeah.

So it's not. It's not in the too hard box for me, but it's definitely, like toys with it. And. And then for me also, by the way, too boring is a very important box. If a company is boring me, just. Just stop. This is supposed to be fun and interesting, and I think that we. I always think, like, oh, I have to, like, be a serious investor and that means pain. And no, I don't. I'm not gonna keep this up if it's painful. So if something's too boring, I just stop. And life should be fun.

Even investing and making money, too. Yeah, yeah.

But I. But I mean, it's got to be, because we will stop. Life is too busy and stressful and there are too many other demands on our time to continue with something that you don't like. So it's gotta be fun. And the only way to make it fun is to be interested in researching stuff that is part of our lives and cool and whatever. Like, I'm personally really interested in blockchain right now. Like, whatever it is for you, that's what makes this fun, is learning about new things. So that's the first one capable of understanding the company. The second one is to make sure that the company has an intrinsic and durable competitive advantage, which in investing talk is called a moat. Like a moat around a castle. So we want to make sure that the company. And there are ways to do this by different kinds of moats and discovering how they protect themselves from competition. We've got to make sure that this company is well protected and that if some upstart disruptor shows up, that this company we've invested in isn't just going to immediately disappear.

Well, for that second one, do you have any. Do you have any sort of examples of a company that has, like a pretty clear moat? Just out of curiosity, just so I have like a visual for the audience or like an existing company that we could kind of reference?

Yeah. So a very common one in companies I look at are brand moats. They have a fantastic brand that is so strong that it would be really hard for another company to come in and replicate that kind of market share with that kind of brand. So, like Coca Cola is a classic example. They have such an incredibly bulletproof worldwide brand of you know exactly what you're going to get in that bottle no matter where you are in the entire world. Plus, they have so much market share on grocery shelves that they would be very, very difficult to displace. Now, that said, a lot of people don't like Coke because they sell sugary water. That's bad for us. So it's not to say it can never go away. Any company is vulnerable. But Coke has an incredibly strong brand moat, and stronger than Pepsi, by the way, for various reasons. If you look at the two different companies, Apple is another one. Apple has a really strong brand moat. Again, not invulnerable like Google's coming up, but when it comes to phones and beautiful computers, Apple has cornered the market on that. And then there's a number of other kinds of moats that are in our book, perfect.

No, that's plenty. That definitely clarifies it in my head. So thank you.

Okay, sure. So the third Charlie principle, which is my favorite, is that he says, so the other two are requirements. The third one is optional. He says, we would like to have management with integrity and talent. And I love that he says. When I first heard that, I was like, we would like to have. Don't we have to have. Isn't that the most important one? Who's running this damn company? And I realized that the thing is, we can't really know who's running this company. We. We can't guarantee. Humans are humans. Humans make mistakes. Humans have all kinds of personal problems. Humans steal from each other. Like, humans just try to do the right thing and fail. Like, we are unpredictable. And so what Charlie's saying when he says we would like to have management with integrity and talent is that you try to go for that, and sometimes you don't get it. Sometimes you're wrong. And so you've got to have the first two to protect a company from even A bad CEO or a bad executive or a bad board of directors. Because these things happen. They do. And one of them, Buffett or Munger, I can't remember. Buffett and Munger, by the way, are investing partners. And Buffett is the more famous one because he's the guy who likes to talk about it a lot. And Munger's very quiet, but they throw ideas back and forth and are total partners in investing.

So one of them said.

You'Ve got to choose a company that a monkey could run because one day a monkey will.

I love that.

I know. And what they're saying is the same thing. At some point some idiot's gonna show up here, and you gotta have a company that can withstand the idiot for a couple of years and then before.

We kick them out and that they.

Can recover from it.

Exactly.

The fourth one, which is the one you touched on, is you buy a company that is on sale with a margin of safety on the price. And the reason for that is that you can be wrong about a lot of this stuff. And I certainly expect, frankly, to be wrong about some of this stuff. And so if you can figure out the intrinsic value of the company, which is a very debatable thing I've learned in investing and in business. But Buffett and Munger have a very clear way of doing this. And my dad has taught me a couple of ways, which I was glad to have a couple of ways, because I'm really bad with numbers. So I can kind of triangulate my way into figuring out the intrinsic value of a company. Once you have that, then you can. So what my dad says is to do 50% of that for the price, so you buy at a 50% discount, because then you have such a huge margin of safety in case you got that value wrong for some reason that you're still going to. And here's rule number one. Not lose money.

Got it.

So when you say the intrinsic value of the company so that you're kind of looking at the numbers, right? Kind of like the assets less the liabilities. And that's kind of the intrinsic value extrinsic value being like the brand equity and that sort of thing.

Yep, precisely. Yeah. Unfortunately, there is no way around reading a financial statement if you. Your own personal money into a company. And, and, And I'm the worst. Like, if anybody can. If I can do it, anybody can do it. And if anybody doesn't want to do it, that's me. But I've actually, it's so funny. I. I've Just turned into such a, like, weirdo. Different person since the whole investment thing. Like, sometimes I'm just like, who am I? So literally last night I was watching CNN and is it okay if I say like dates of things or do.

You say whatever you want?

So last night SoftBank IPO'd their mobile division and it was on TV because the IPO went down 15% the first day, which is extremely unusual for an IPO. And I just was sitting there and I thought, God, I got to look that up. So I spent an hour reading SoftBank's financial statements and putting them into my own spreadsheet and getting the numbers and figuring out what was going on with SoftBank. Because I thought, well, if I'm going to, if this is like a buying opportunity and I need to figure this out, then I better do it right now. And my husband at some point turned to me and was like, oh, are you reading celebrity gossip? I do read a lot of celebrity gossip. And I said, I said, no, I'm filling in my spreadsheet. And he was like, whoa.

Business time. Yeah, exactly. And I actually really enjoyed it. That's the crazy part. I was sitting there going, what? I'm like loving this. I'm like, oh, they have a lot of debt, huh? And I have some sense of what that means. So there again, it's just like once you sort of get the perspective and you start to understand the language, it gets easier really quickly and it gets fun.

I could see that. And me being not a numbers forward guy gives me a lot of hope. So thank you for that. Daniel.

I love those four principles. Is there any sort of. And this would be the last kind of question I have on this vein, but is there any sort of like filter to kind of find those? Because obviously there's like millions of companies.

How do you spot those kinds of companies, especially if the whole market is kind of on sale.

It's a great question. It's something I've been thinking about a lot actually, and I've been writing about it for my newsletter.

So there's kind of two answers. One is my dad's website has a really good filter. It's rule one investing dot com. Check it out. You have to pay to get all the bells and whistles of figuring out the investing numbers on the website. So that's a really good way. There are also a number of other websites out there that will give you, if you just Google it, it'll give you top 10 companies that value investors bought last year. And that kind of Stuff. So that's a good way to just start. And then I also just. I just start with stuff that I use in my daily life. Now, that might not lead you to, like, whatever, like a great company that's undervalued right now would be. But we don't care about that when we're starting. What we care about is practicing. So. And again, you're not going to do it unless it's interesting. So I started reading about Whole Foods because I shopped a lot at Whole Foods. I looked at my bank account, I realized how much money I was spending there, and I was like, God, I better figure out if this is actually a good company. And it turned out it was. I spend a lot of money at Lululemon. I spend a lot of money at Amazon. I used to have a Nissan, so I looked up Nissan. It doesn't have to be hard and complicated. It can just be, oh, my computer is an Apple. I'm going to go read about Apple Computer. I use Google, so I'm going to go read about Google. I was talking to somebody the other day who has started learning investing the same as me, and he said, God, I was walking down the street the other day and I realized that there are manhole covers everywhere. And all the manhole covers have the name of a company stamped on them. And I've never looked at it before. And I was like, oh, my God, you're right. We've got to look up the manhole cover company because I bet they're awesome. They probably cornered the market and it's really this amazing kind of 3D view of the world that you get, which I really enjoy. Where I'm seeing stuff now that I didn't used to see. Where before it was just kind of stuff and services and whatever. And it felt very impersonal. Now I look at stuff like manhole covers, and I'm like, somebody made that. Somebody thought about that and made it and probably competed with somebody else to get that manhole cover right there on the street. That's so fascinating. And it's such a human story. So I love that. And then part two of the answer is it's kind of hard. And you just have to sort of keep your eye on the ear to the ground. Listen to the scuttlebutt. You can look at, oh, here's a good one. You can look at what other investors are buying that have very big funds because they actually have to file with the SEC quarterly about what they've purchased, so it's fully public. Lots of caveats about this. It's only long positions. There's no shorting on there. So if they're shorting something, we won't know about that. But anything they're buying long, they have to put out publicly. Again, caveat. It's old information because they'll often buy something and then the disclosure is three months later. Still, it's a way to find out what interesting investors are looking at. And so there's a lot of that info in our book Invested as well.

Love it.

Super cool. Okay, I want to be careful on time because I know we're almost at an hour, but there's so much that I want to talk about. This is fun. This is cool. You're like making it just. And this is what your dad did too, Phil. He just made it feel a fun but simple. Like it's just. Don't over complicate this thing, this beast of investing. It doesn't have to be like that.

I know, but genuinely, I think that the financial industry does that to us on purpose because that's how they get paid and that's how they get us to fall in line for their products and everything that they offer us, because if we weren't scared, we wouldn't do that as much. So, yeah, I'm not into the whole. The whole it's terrible and terrifying vibe anymore.

Yeah, no, that's cool. It's a fresh perspective. And your book is a must get invested. And that was done with your dad, right? Written kind of. Co author.

Yeah, we wrote it together. Which was an experience unto itself.

I can only imagine. Maybe we'll do a round two and just dig into that. Just like the psychological thing.

I will tell you about it and.

The podcast, of course, Invested as well. Just wrapping up. What's a good. It could be financial, it could be fiction or whatever. What's a good book that you find yourself reading often or referring to others?

Hmm. The book that I think of a lot is actually a book that I read first when I must. I must have been like 9 or 10 when I read this book, which was probably not appropriate for me at the time, but it's an old book. It's called Investment Biker and it's written by this investor called Jim Rogers. It was just in our house, and so my dad must have gotten it and I read it. And it's about his trip around the world on a motorcycle, going from small country to small country stock market to stock market and looking for basically for interesting, undervalued countries to invest. In wow. And I didn't understand most of that when I read it the first time. I just thought it was a really cool adventure story about riding a motorcycle around the world. And so I have literally the same book I've kept with me my entire life. It's gone with me to college. I live in Switzerland now it's here with me in Switzerland on my bookshelf. And I open it up every now and then, and I just think back to how somehow, back then, before I ever wanted to do anything with investing at all, I was inspired by this guy. And Jim Rogers, by the way, is a incredibly wealthy, very famous, very good investor still. And so, you know, he's really worth reading. So I highly recommend that one. And then the other one, I would say is actually one my dad mentioned, but. But I introduced him to it, so I take Credit. It's by L.J. rittenhouse, and it's called Investing between the Lines. And this book that she wrote is about analyzing CEO letters to shareholders and using those letters to determine if the management team is trustworthy and if they're telling the truth about the company. One of the biggest questions I get is, how do you figure out if management has integrity and talent? And she wrote the book on it. It's absolutely amazing. It changed the way I thought about investing, where I had been learning from my dad, where it was this whole numbers and Munger and Buffett and da, da, da, da. And then I read L.J. rittenhouse's book, and I realized I felt like I was seen. It was my people, because I'm a words person. I'm not a numbers person. And so is she. And so the way she describes how to tell if a company is not only trustworthy, but how they're going to do in the future based on their words. It's worth a read.

Cool. Yeah. And that sounds like it's like the fourth or the third principle from Munger. There is the values and all that. And by the way, I had no clue you were in Switzerland, so I appreciate you staying up late for this one. I had no clue the time.

Oh, it's no problem. I'm used to working at night now.

Okay, good.

And so. And your book is Invested. And then also there's rule number one, investing, which was. Is your dad's book. Are there any other books that you or your dad have out? I think. Isn't there one more?

My dad has written two books. His first was Rule Number One, and his second one is Payback Time.

Okay. And then the one that you co.

Wrote is Invested is the book that we wrote together.

Got it.

Awesome.

Which is much more of like an investing memoir than a how to book.

Yeah, I think that would be. Would you recommend that as a first go to for the listeners here?

Yeah, I think. I think that's. It kind of went backwards chronologically. But Invested is for people like me. I wrote it so that people like me who have no clue and frankly, like, not a lot of interest, would try to see how investing can be part of your life, can be a really good part of your life and the details of what to do as you go through the book. So by the end of the book, you will know how to invest on your own, like Warren Buffett. But hopefully along the way you enjoyed the book and saw and see the journey that I went through and that my dad went through teaching me.

That's super unique. Yeah, I highly recommend it. Go get that. Listen to the podcast as well, called Invested and go check out danieltowne.com like you were saying, you have some other resources and things that you write on there, so great stuff. Thank you.

Is there anywhere else you'd want people to check out or are there any social medias that you like to hang out on or anywhere else you'd want to send people after listening to this, this to further connect and learn from you?

My Instagram is Danielle Towne.

And I mean, I'm on all the other ones, but that one's my favorite.

And then danieltown.com is the place to go for info about my newsletter as well.

Love it.

Right on. Thank you very much for your time. This has been fascinating, and maybe we'll get you and your dad on together. That would be interesting in the future.

That would be fun.

We'll make it happen. All right, well, have a great night over there.

Thanks, you guys. It's really fun to chat with you.

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