Howard Lindzon (03:16):
But the ones that I’ve gotten right on and the ones that I should have done all had this very simple product market fit idea and was at the right place at the right time with the right founder. That helps a lot. That impact right at the beginning when all those forces come together can create some kind of explosion that you can get a lot wrong and still build a huge company. The day-to-day grind of building it yourself, let somebody else do it. What a headache.

Trey Lockerbie (03:44):
I can relate to that. Yeah, so it sounds this sort of Venn diagram where all of these things merge right into the middle. Very interesting. I’m curious on that point. Have you ever felt that feeling and then it not work out? You’re so convinced, hey, this is a sure bet, and then it just didn’t pan out, either due to timing or something else?

Howard Lindzon (04:03):
Yeah. There’s a couple of TBDs. I’d say the one that… There’s a lot of deals in the last five, six years that have been screwed up, à la SoftBank. They got too much money. They went too fast. You had everything right except you didn’t take your time. The heart of start-ups is the pace, and there’s just been this period the last six, seven years that’s ended, I guess, over the last six months. But finally, for good and for bad, there was this pace of capital that was getting thrown at these ideas that seemed like they were working, but a lot of money thrown at a business that’s not quite fully tuned.

Howard Lindzon (04:45):
Have been the ones that I’m, like… You know. These guys… You know. It reminds you that too much money can destroy things. This company we invested in called Wag, which we were the seed investors out of LA. It was a dog walk… It’s kind of Uber for dog walking. It was no brainer. Everybody wants to walk dogs. Families have two working parents. Really good founders. Everything was lined up perfectly and it was working very well, and then SoftBank came in and put $600 million in in the third year of business, and like, what could go wrong? Well, some businesses just aren’t meant to be Uber.

Howard Lindzon (05:17):
I would say a lot of my disappointments, and they’re very limited… Because once an idea’s working, it’s really hard to screw it up, but we’re seeing here in 2022 that too much money can screw up a lot of businesses.

Trey Lockerbie (05:29):
Well, I know that one of your operating beliefs is that the stock market is rigged. I think a lot of market participants these days would agree with you, given all this attention around the Fed, for example. That said, you’ve had this belief since you were starting out in the markets. I’m curious how the markets were rigged back then, and how does it compare to today?

Howard Lindzon (05:49):
The idea of it being rigged is, in the ’90s when I started out, before Reddit and Twitter and StockTwits and the internet, for that matter, and YouTube and Tiktok, culture was delayed 20 minutes. Our first go around at Robinhood and Reddit, there was Yahoo Finance, and there was eTrade. Imagine seeing a quote on Yahoo, buying a stock, and it’s from 20 minutes delayed data. We were thrilled. We thought, “Woo! We are YOLO-ing to the moon.” That was what YOLO-ing to the moon meant in 1998, 1999. There was no mobile phones. There was no smart phones. We were just dumb idiots, but it just felt like we were close. That’s how far away… There were institutions, and there were newspapers, and then there were the retail idiots, like myself, on Yahoo Finance.

Howard Lindzon (06:39):
Come on, market was rigged. We didn’t have the data. Alan Greenstein used to come on. They used to have a whole day dedicated Alan Greenstein where they had pictures of his briefcase, and they were trying to figure out what was in his briefcase. It’s not even… Everybody knows everything in realtime. Everybody can trade for free, and now the Gen Z’ers think the market’s rigged against them. Well, let me just explain to people, the market is rigged, and if you invest with that in mind, knowing that you’re the last guy to know and that you’re paying the highest price, that’ll make your investing… You’ll start out with less of a aggravated mind.

Howard Lindzon (07:15):
Meaning, invest accordingly. Assume that Warren Buffet and Goldman Sachs know more than you. Assume that no matter how many great tools you have and how good your network is, there’s people more in the know, and invest accordingly. Because if you get upset about the whole thing, you’ll just go down a rabbit hole of… You’ll end up saying the earth is flat, and that’s not a good rabbit hole to go down to.

Howard Lindzon (07:39):
Much like any kind of sport, the sport of investing requires you to understand how the playing field is set. Bringing the fees down to zero, fantastic. Or close to zero. Bringing Twitter and Reddit and StockTwits realtime information social networks, fantastic. But the game is just as hard because everybody has the same tools, so invest according to that, and I think you’ll enjoy it more.

Trey Lockerbie (08:07):
I love this because you did mention Buffett there. He’s got that quote about, “If you can’t,” he’s sitting at a poker table, “If you can’t figure out who the Patsy is in the first five minutes in, then you’re the Patsy.” What you’re saying is, “Hey, we’re the Patsy. We know it.” Yeah, I know that you look at investing also like a game. I’m curious how you would exactly define investing as a game. Is it just simply betting on probabilities? Is there something else to it? How did you own the Patsy-ness of your investing strategy?

Howard Lindzon (08:35):
Well, you have to own the Patsy-ness. Right there, you got to be able to laugh. CNBC was always my… You’ve got to have an arch enemy, first of all. If you’re going to start a business, it helps to have an enemy, made up or real. My enemy was always Wall Street Journal and CNBC. They were easy enemies because they’re evil. They call it entertainment, but it’s not entertainment. It’s misdirection. This goes to my, “Everything’s rigged.” Why are they talking about why they are talking about? Someone produced the show. Someone whispered in someone’s ear that this is a good topic. Something bubbled up to the top, and then the machine gets going, as is media.

Howard Lindzon (09:11):
So the game for me was… When I was a kid, we played a game called Risk. It was a flat board game, and it was about world domination. What was great about Risk is once you’ve played enough… There was some chance, obviously a roll of the dice, and the same thing goes in the markets. There’s probabilities, and you’ve got to stack the odds in your favor. But how you started the game and where you started the game and how you moved to take over the world was very much… You could see people’s different risk profiles and strategies based on how they played this board game pre-internet, pre-anything. Sit around for six hours, and they spoofed in Seinfeld for a while when Kramer and Newman had this hilarious board game where they had to have people watching the board.

Howard Lindzon (09:54):
But we would play these games, and depending on where you started, if you started in the middle of Europe, you were doomed because you had to protect all these borders. Everybody’s fighting for Europe. But if you started in eastern Indonesia, and that’s the same thing with start-ups, if you start doing one thing really, really well and kind of polish it and hone it and build up your armies, then you can move up into India through Siam, and then you can kind of spread out that way, and you’re protecting less borders.

Howard Lindzon (10:19):
The whole point of investing in business is… And this is where too much money came into everything. Everybody was starting with global domination three, four years ago because of all the money. Uber and Airbnb were the examples. They had a kernel of growth. You threw a lot of money on it, and it became, let’s go to China. Let’s go to Europe. Let’s just win, win, win. If we flash forward to 2022 and NFTs and crypto, it’s back to the art of building a business, which is how small can you be? How small can the team be? How fast can you polish it and then go out into the world with an idea? There’s some sort of art to that. So that’s how I feel like it’s a game.

Howard Lindzon (10:58):
There’s many ways to play the game, but with investing, you also have to stack the probabilities. You can’t just… Every trade can’t be the same size. Every trade can’t have the same risk-return profile. But if you’re disciplined, you can try and find trades or investments that line up in your favor, like a three to four to one upside. If you really are patient, which is hard to do, and disciplined, you can line up higher probability investment. That’s kind of the only way to get ahead. And then it’s constantly like stacking and filling.

Howard Lindzon (11:33):
If you build your own business, still the greatest way to wealth. But if you’re trying to become a billionaire just from the stock market, I don’t know what book you read or who’s lying to you, but that’s just not what it is. The stock market is for growing your wealth and preserving your wealth and compounding your wealth, but in terms of building your wealth?

Howard Lindzon (11:52):
Pre-internet, we were told that a hedge fund was how you did that, which is why I started a hedge fund. The reason a hedge fund theoretically could work is because you’re getting paid fees, whether you beat the market or not. It really was an interesting model, but a completely unfulfilling way to make a living. But if you’re just trying to make money in the market for yourself, very hard to do. A lot of people have come into this market recently thinking they can just get rich in the market, and we’re learning that that’s just not possible.

Trey Lockerbie (12:22):
You mentioned the hedge fund there. I’d like to go there next. You said it’s unfulfilling, and yet you did it for 18 years. I’m kind of curious about that experience and how it led to all these others that we’re going to talk about. I’m curious about taking that mindset of being the Patsy and then going into the hedge fund world. Was that in a way to, obviously, increase the odds in your favor? Were you using retail-esque strategies early on, and did it change over time? Maybe walk us through the strategy and the thesis for starting the hedge fund.

Howard Lindzon (12:52):
Yeah, well it was probably closer to eight years. The fund, it stills exists because I made a lot of investments in private markets that continue on today, so it’s still an entity. But I was smart enough after eight years to go, “I give up.” I threw up my hands, and I was like, “There’s no way to beat the market.”

Howard Lindzon (13:09):
So in ’96, ’97 as the internet was just starting… Pre-internet, pre-cloud, basically you opened the store. You could be an expert, or you could fake being an expert because there wasn’t that dissemination of information. Being an entrepreneur around the stock market was starting a hedge fund. You could be a stock broker and invest like that, or you could start a hedge fund, which was more of an entrepreneurial way, to convince a lot of your wealthy people around you to invest and take a fee.

Howard Lindzon (13:40):
What I learned very quickly was I didn’t know what I was doing. I wasn’t doing anything wrong, it was just that Vanguard came along. You could realize, no matter what you did, it was very hard to beat the market. And so in 2005 is when I started to make some private investments. The way it worked was I knew… And a lot of this goes to Warren Buffett too, you couldn’t beat the machine. Vanguard was this great, simply, disciplined momentum, market-beating strategy where it really was the market.

Howard Lindzon (14:13):
Once you started competing against that machine, by 2005 I was like, “What am I doing?” You may be able to beat it for a while, and the latest version is Cathie Wood, and when I was growing up it was Garrett Van Wagoner and Peter Lynch. There are a few people that do beat it. Just like there’s a few athletes, like Tom Brady, who defy all the odds. But it’s not a good strategy to bat your head against the wall and think you can beat everybody.

Howard Lindzon (14:39):
And the market, you’re competing against globally, 24/7, 365. There’s no season off. The market is grueling like no other kind of sport or game in that you’re competing against everybody in a multi-player game, 24/7, 365. And then they’re constantly throwing twists. Now it’s crypto, so now you got to make a whole another asset class that you’ve got to learn and all the correlations between them. Forget about it. I’ve long since said that if you want stock market returns, be in the market and manage your expectations to those market returns.

Howard Lindzon (15:13):
Venture capital became exciting to me because there was no index, and it felt like you had an edge because you had some domain experience, and I liked the idea that I couldn’t see the price of my portfolio every day. We’re seeing that now with crypto. Seeing the price of your portfolio really messes with your mentality because it affects your mood, and it affects how much risk you want to take. It makes you do the wrong things at the wrong time.

Howard Lindzon (15:43):
For me, investing in start-ups 2005 and onward, it allowed me to be better investor because I wasn’t worried about the day-to-day and month-to-month fluctuation. Every company has these incredible gyrations, whether it’s from bad hires or missed launches. If you’re a public company and you’re marking yourself to market every day, you’re going to end up zigging when you should zag way too many times. The private markets kind of smooth out those type of mistakes. It’s not perfect, but I felt like it truly gave me an edge. That was when I started doing that full time.

Trey Lockerbie (16:20):
You mentioned Peter Lynch there. I want to start there. Basically, as I understand it, you made an Apple investment very early on that you’ve held on to, but you came about it in a very Peter Lynch kind of way. I’m wondering if all of your best investments came from that scuttlebutt approach, if you will, and is that your golf swing, if you will? I can’t think of a better analogy, but sort of your style that’s worked out best?

Howard Lindzon (16:44):
Yeah, Peter Lynch, there’s been a few books that have really… Even though they’re not necessarily stock market books. I’m not a big book reader. In the world of the internet, I never really had the concentration to read books. But Peter Lynch’s went up on Wall Street, and The Tipping Point, which was not a stock market book, but it was basically a book about tipping points based on what happened in SoHo. I was a big SoHo guy. I loved hanging out in SoHo and shopping the stores in the mid-2000s. I was building Wallstrip. So I really believe that you can immerse yourself in these trends.

Howard Lindzon (17:18):
First of all, I was lucky. At the time that Apple first started launching stores, that was considered a joke. There had been Gateway stores and Dell stores, and they had continually been flubs, like computer hardware at retail. It was written off before it started that Apple opening Apple stores would be a disaster. I wasn’t even thinking about it as an investment, but where I worked in Phoenix at Camelback and 24th street happened to be one of the first Apple stores. It was a high-end neighborhood, an office neighborhood, and for whatever reason, there was an… And I wasn’t even an Apple user.

Howard Lindzon (17:51):
This was 2002. At the time, in order to run a hedge fund business, you were using Windows. There was no internet software to run your trading programs, and all the banks were hooked up to proprietary software. You didn’t use the internet. You didn’t use Google Chrome. You didn’t use Safari. I was not an Apple user, obviously, and I went over to the Apple store, and the iPod was there. It was really well done in the way that you could take it, and it wasn’t… You didn’t have to put it behind a glass so that everybody was doing. I bought my first Apple product, which was an iPod, and I put the earbuds in, and I was like, “Everybody’s going to have this.” I just had one of those moments.

Howard Lindzon (18:31):
It just kept self-reinforcing the more you saw the white earbuds and the AirPods, the more bullish I became. The fact is, I was becoming an Apple user for the very first time, even though I was in my 40s. It just dawned on me that the market was massive and that the stores, if they could execute, obviously a lot of risk, was going to be a home run. I thought there could be thousands of stores. Here we are today, where they’ve executed beyond all those things. That was just stumbling, bumbling into Apple.

Howard Lindzon (19:00):
So yes, all my best investments have come from me Larry David-ing, Curb Your Enthusiasm, a modern version of Peter Lynch, which is a little bit more self-ware, a little bit more anything’s possible. And a little more, now that I’ve seen it happen in my life, I’m kind of looking for it, for those a-ha moments where my own experiences interact with trends. It gets harder as you get older because now I’m 56, and I have different interests than a 30 year old. Meaning Tiktok, I didn’t see it because I didn’t use it. Tesla, I didn’t see it because I wasn’t a Tesla customer. A lot of it is, it’s much easier if you’re the customer, and you’re in a demographic that is so big that it’s impossible to ignore. It’s very hard to do over and over again because you get older, and the context of which you see trends changes.

Trey Lockerbie (19:54):
Let’s talk about that demographic that’s so big you can’t ignore. You have this 8 and 80 rule. Originally, I thought this to mean invest in small caps that become large caps, like a tenbagger, as Lynch would say. But you’re actually speaking about products and markets. Walk us through this 8 and 80 rule and how you arrived at it.

Howard Lindzon (20:13):
Yeah, I’m not very good at marketing, but the concept 10 years ago was that if you’re going to buy growth companies, especially once the internet came along, you want to try and find these markets that eight year olds and 80 year olds use. At some point really it’s two year olds and 102 years old. If Google has something for the masses for anybody between two and 102. You see a two year old, four year old with an iPad. They’re scrolling on YouTube. You see an 80 year old, they’ve got an iPad, and they’re using Gmail, or they’re… So Apple and Google really kind of are those eight to 80 brands.

Howard Lindzon (20:51):
Eight to 80, theoretically, could be Exxon, don’t get me wrong. A five year old knows what Exxon is, and a 100 year old knows what Exxon is. You can pre-package, it’s not a perfect thing, but I try and find companies that have these massive demographics working in their favor, and that just helps. If you’re not trying to beat the market… Or if you want to be trying to beat the market, try and go with companies that have massive, massive markets, and they’re not subject to the same cyclicalities as other people. That’s just something, a little gimmick that I try and categorize companies that I’m looking at and want to own.

Howard Lindzon (21:28):
Then there’s obviously risk management around that. I had this other term called Fashology, where if you look at today in a world of technology, LVMH is one of the biggest companies in the world, and Nike… Are they technology companies, or are they fashion companies? I think as technology continues to permeate everything, fashion and technology meld, and some of the, if not the biggest companies in the world will be companies that do that well. Motorola is a great company, but you weren’t going to buy Motorola sunglasses. I mean, they tried. They had partnered with Oakley. You’re not going to buy Apple sunglasses, but you would buy Louis Vuitton sunglasses powered by Apple. So there’s all these different meldings that are going to happen now that technology permeate.

Trey Lockerbie (22:12):
We talked about how you held Apple for a very long time. There’s this quote that I love about, “How’d you get wealthy?” “Well, by selling too early.” That kind of brings to mind any positions where you’ve sold too early and watched something run on much farther than you thought?

Howard Lindzon (22:27):
Yeah, pretty much everything. I try not to get mad anymore because my mentors are the same way. Fred Wilson, Brad Feld. If you’re not running the company, and it becomes too much of your portfolio, and you’re not managing other people’s money, it becomes almost irresponsible for you to have one much in one position. That happens to me all the time, whether I invest a little bit in crypto and it becomes a huge part of my portfolio, or Robinhood, which then becomes a huge part of your portfolio, and it stresses you out, and you’re not going to call the CEO every minute because you can’t.

Howard Lindzon (22:57):
I generally am pretty disciplined about selling. Apple, obviously, if I had bought shares every time I sold a little bit to think that I was diversifying, I’d be a lot wealthier than today. The odds of staying… If I could have predicted the iPhone and services and the AirPods, then… I couldn’t. Along the way, risk management, unfortunately, has forced me to sell some of my winners down, and those have been mistakes. But that is investing.

Howard Lindzon (23:26):
The most important thing for investors to know, because I’m not competing anybody… When you watch an investing show or you’re online or you’re on FinTwit, everybody’s competing. “My portfolio is better than yours. I’m making more money that you.” I don’t even know what that means. You’re supposed to invest for the joy of investing and the art of trying to compound capital, and so everybody has different time horizons. Everybody has different risk profiles.

Howard Lindzon (23:51):
I think people need to get in the habit of managing to their own risk. That involves diversification, and you’re going to make mistakes. I just have a good ability to move on. Maybe that’s not a good ability. Maybe that’s why I’m not a billionaire, but I also have my sanity.

Trey Lockerbie (24:08):
And you can sleep well at night. I’m curious how you define risk. Say a position has gotten so big in your portfolio. You don’t really have a thesis that the company is going to do anything to not keep growing, but it’s just a position thing. Is it just the sheer volatility that’s coming into play or the potential of loss? Walk us through how you think through risk.

Howard Lindzon (24:28):
Yeah, there’s been a couple recently. An investor at a fund called Multicoin had a big position in Solana, and it worked in my favor because I couldn’t sell. For a couple years, I would have… I know if I had owned the position myself, I would have sold so much earlier for whatever reason. Maybe because I didn’t understand it. I wasn’t a user of the product. At some point last year, I couldn’t sleep. I was like, “What? This is silly. I’m excited. I’m too excited.” I sold enough that would let me feel not like an idiot if it went to zero. I will tell you that that’s never enough when it does go down 90%. Now I feel like I should have sold more. It just has to be a consistent being honest with yourself.

Howard Lindzon (25:11):
I found that writing every day and journaling helps me stay accountable to how I’m feeling about these things. If I’m too excited, it shows up in my writing, and that’s a good time to sell. If I’m too miserable in my writing, it’s a reminder maybe I should be buying something. That discipline of writing it down and journaling has really helped me trim. In the end, it’s not a perfect thing. You’re gardening, and sometimes you sell too much, and sometimes you won’t sell enough. But I think the art of consistently doing the right thing by gardening your portfolio is going to pay dividends.

Howard Lindzon (25:45):
Are you better off at the beginning of this bear market than you were at the beginning of the last bear market? And that’s the game. You stack your chips. You move forward. You know that you’re not going to perfectly time getting all your chips off the table, but what can you live with if the market were to change completely tomorrow?

Howard Lindzon (26:02):
I think if you asked a lot of people now, “Hey, in March 2021 when everybody was doing SPACs,” guilty as charged myself… If you look back and said, “Listen,” and I had these conversation with a lot, a lot of smart investors that were like, “I don’t want to sell. I’m going to owe 30% in taxes, and if I sell it at $200, it’s really like selling it at $140.” I would say, “Yeah, but you own it at $10.” But you can only try and talk to people, and now it’s a $50 or $40, that $90 spread of where they would have paid tax. When it gets so good that you’re not selling for taxes, that’s generally a good sign that you should be selling. There’s no perfect rule, but I think people have to be honest with themselves about how they would feel if the stock did this.

Howard Lindzon (26:49):
Generally, they can’t see that. They can’t see something dropping 70% for no reason. Well here we are, and it’s happened to 80% of the tech stocks. No one can explain why, and guess what they’re blaming? They’re blaming Biden, and they’re blaming the Fed. And I’m like, why are you blaming one guy for a 80% drop in your portfolio? That’s just crazy, but that’s what people do.

Trey Lockerbie (27:11):
Some people have these very rule-based approaches to selling. They’ll have a checklist. They’ll say, “Hey, the missed earnings, they’re doing X, Y, Z.” I’ve just never felt like that was the thing for me or the approach for me. What you just described is way more qualitative.

Howard Lindzon (27:25):
Well, or you could drive yourself insane. But if you think you’re a quan… Let me, I’ll introduce you to a few quans. You have a lot better chance being the Larry David of investing or of being a qualitative investor than you do of being a quantitative investor. Because all of the smartest people in the world have gone into quan because mathematically based modeling… And if you think you can be as iron-cold as a machine, I’m going to tell you, you’re not. In a world dominated by quans and AI, the edges are still qualitative.

Trey Lockerbie (27:56):
I’d like to talk about your experience with Amazon as well, only because I know you’ve held that for a long time. That was one of those bulls that was bucking non-stop the entire ride, it would seem, and you’ve held on for quite a while. What I’m curious about most with that is the optionality you saw early on. Meaning, they did what you said on the risk board. They were starting in a very specific part of the world. They weren’t boiling the ocean. They were selling books. At what point did you get in, and what were you seeing along the way, as far as the optionality there?

Howard Lindzon (28:24):
2006, when I started Wallstrip, I was doing one of my shows, and we were talking to a friend. I forget his name. He had started a music company, a database company. We were interviewing him, he was talking about AWS, and how it was started by Amazon, and they’re powering all these start-ups. I’m like, if you sell picks and shovels to start-ups, that’s a good business, especially as Web2 was going around. Then my daughter was using the Kindle.

Howard Lindzon (28:49):
So it really wasn’t about eCommerce when I invested. It was really about AWS. And hearing their name over and over as a start-up guy myself and an angel investor and starting StockTwits, and we were all hooking everything up to AWS. We didn’t have to buy computers, we were just outsourcing all that to the cloud. It was a no-brainer. Projecting my business to across millions of businesses, I felt like I had inside information. So it really wasn’t about eCommerce at all, and still isn’t. It’s still a bit about AWS.

Howard Lindzon (29:18):
Obviously now, it’s different because people have choices between Azure. They have DigitalOcean. They have Google Cloud. Amazon got a lot of competition. Now they’re a FAANG stock, and everybody loves them, and I still own a lot, but it’s not like I’m as excited about it as I was in 2008. 2008 felt like the Apple AirPods. It felt like I knew something that everybody was going to know, and I knew it because not that I had inside information, but I was talking to hundreds of start-ups that were all hooking up to AWS, and everybody was talking about Amazon as a book seller.

Trey Lockerbie (29:51):
Another company where I feel like you knew something other people didn’t, when investing in private companies like Robinhood way before people even know what it is and what it was, what were you seeing there that others weren’t?

Howard Lindzon (30:03):
For the aggravation of trading and all the headaches from the last cycle, no kids were building an E-Trade 2.0. It really wasn’t until 2013 that I got shown Robinhood. I was up in the valley, and they had pitched me. They had called me because I had StockTwits. Wouldn’t it be interesting if you could buy the shares, click a button on Twitter, and the link would go right to your brokerage account, and you could buy shares, and then re-share the trade? The social trade. That was a ’07, ’08 idea that I wrote about.

Howard Lindzon (30:34):
When I saw Robinhood, I was like, “Finally.” It was a no-brainer to me to do it. I didn’t know it’d be worth multi-billions. Obviously I was first investor. But I knew that if they build it, they will come. It wasn’t about thinking through the business plan or how they’re going to make money. It was a $8 million valuation. It was just yes or no. They delivered on that basic premise, and that’s why it was a no brainer. And I was right. I mean, in the end, I was right. People like to think they can beat the market, and Robinhood provided an on-ramp to tens of millions of people to do it.

Trey Lockerbie (31:08):
I’d like to talk about how are the entrepreneur and… I’m going to stick with this Larry David or Forest Gump-ian framework, but I know you’re way too smart for that, but we’re going to play along-

Howard Lindzon (31:19):
Well, Larry David’s really smart.

Trey Lockerbie (31:20):
That’s true. Larry David is very smart. Okay, so we’re going to stick to the Larry David metaphor here for a minute because it seems like you stumbled upon StockTwits to a degree. You’re on Twitter. You use the dollar sign next to a ticker. What happens next?

Howard Lindzon (31:37):
When Jack and Ev… Like I said, I was [inaudible 00:31:40]. When YouTube came out, and my mind was blown. I’m a hedge fund guy in 2006. Hate my life. I’m trading, I’m not going to win. I’m thinking about what I’m going to do next and yelling at the TV like everybody who watches CNBC does. They yell at the TV. But you’re in a room by yourself. You’re literally going insane. Then YouTube came out, and I was like, oh my god. This is the future. I’m going to create… Everybody could create their own CNBC. That was my vision.

Howard Lindzon (32:06):
At the time, no one will remember this, but in 2006 when YouTube came out, everything was cat videos. People would just put a camera on their cat and take a picture of their cat doing silly things for hours. That’s what people used YouTube for at the beginning. There were two things they used it for: women filming cats and people filming TV shows and putting them on the internet, or whatever they were going to do. The media companies do what the media companies do, and we were left with cat videos. That’s what led me to start Wallstrip. Anyway, sell Wallstrip, go to CBS.

Howard Lindzon (32:33):
Twitter comes out, and I’m like, that really is the future of trading. I dropped everything. I quit CBS, and I went to Jack and Ev at Twitter. I said, “Why don’t you guys do Twitter of finance? Twitter.finance.com.” They were like, “What? We have an open API. You should just build it.” I remember, back then we had BlackBerries. We didn’t even have iPhones. I remember Fred Wilson was a friend of mine, and I tweeted him on my BlackBerry. I was like, “Ooh, what do you think of this? I bought Apple. $AAPL.” Fred wrote back a message saying, “Genius.” If Fred writes you back a message saying, “Genius,” you’re on your way.

Howard Lindzon (33:16):
I really didn’t want to start a company. I was 44, but Twitter didn’t want to do it, and so I started Stocktwits, which was just Twitter for stocks. Here we are 12 years later. It’s got a million daily active users. It’s a profitable business. It’s a great little business, and it’s really just Twitter for stocks. It’s just for people who want to talk about stocks.

Howard Lindzon (33:38):
We came up with the dollar sign as a way to, at the beginning… If I’m searching for Apple and I go, “#apple,” it’s like, oh, I bought a green apple. Versus people in stocks talk about, and this is domain experience, for me I’d spoken tickers. I don’t know, I’m demented. That’s how I saw the world. GOOG. BlackBerry was RIMM. Citi Bank was C. The dollar sign was our way of making sure Twitter, we could separate who was talking about stocks versus something else. That’s really, it was just a hack idea that we did.

Trey Lockerbie (34:14):
That raises this question. Twitter’s been in the news a lot lately, and they can’t seem to make money. I’m curious if the business model with StockTwits is a bit different. Is there anything Twitter could learn from StockTwits about how to make a buck?

Howard Lindzon (34:27):
Well, they have a lot of cash flow. They also have about 4,000 too many employees. I’ve been giving out free advice to Twitter on Twitter for about 12 years. No one’s listening. Listen, they made a decision early on to raise bucket-loads of cash. When you raise bucket-loads of cash, you then have different pressures than you do if you do it yourself. Hundreds and millions and billions in the bank, and it came time to make revenue, and trading is a very small business. Even Robinhood has proved that. It’s very hard to make money.

Howard Lindzon (34:58):
But Twitter should be free for everybody. Not even ads. If they monetize trading embedding and data from realtime, from the people that want to pay for the data, they will pay the most. In a right world, Twitter is a pipe, and they should charge J.P. Morgan, Goldman Sachs, Reuters, hedge funds, Bloomberg billions of dollars a year and let every company sip from the fire hose and charge accordingly. Then they would have this great utility business.

Howard Lindzon (35:25):
But when you raise billions of dollars, it’s very hard to tell your VCs, “Hey, we’re not going to hire any employees, and here’s out business model.” So it was just early mistakes around raising money and expectations that set them on this path. It’s a disaster. I mean, one of the greatest products of all time, maybe the best. It’s not used by hundreds of million… Well, it’s used by a few hundred million people, but it’s not YouTube. If Twitter had done the same thing and just focused on Bloomberg, the company would be worth $150 billion without selling ads. They didn’t know that business, so they didn’t see that view.

Howard Lindzon (36:02):
I’ll tell you who’s breathing the biggest side of the leaf is Michael Bloomberg because Twitter could have destroyed him. Instead, he let Bloomberg sip from that fire hose inserted into the terminal, and now all those hedge fund guys get Twitter.

Trey Lockerbie (36:15):
Let’s talk about some of the pros and cons, the balcony and basement of VC because you kind of mentioned earlier, illiquidity can be somewhat of a blessing. It’s kind of like leverage though. It can cut both ways. I’m curious about… The name of the fund actually is called Social Leverage. What is the difference between social leverage and financial leverage? How would you define the two?

Howard Lindzon (36:37):
Social leverage is about using your network. Obviously, the risk of social leverage is time because you can get so many things done, you have too many projects. But that’s a lot less dangerous than financial leverage. You may have some more unfulfilled relationships from all the social leverage, and you may spread yourself too thin from all the social leverage, but you’re not taking down the whole economy. What takes down the economy and what takes down industries is financial leverage.

Trey Lockerbie (37:03):
Let’s talk about relationships. You just brought that up. Over the years, you’ve built this unbelievable network of brilliant investors and business people, entrepreneurs. Who are some of the people that stand out to you that have made the greatest impact on the way you think?

Howard Lindzon (37:18):
There’s Roger Ehrenberg, who’s a great investor. Brad Feld. They all kind of came up together. Some people that… These people understood tech. They had been through a crash. They had seen winners before. They had experienced defeat. That’s who you want to be mentored by. You don’t want to be mentored by someone who’s only seen victory. It was the right time with the right mentors on the right platform. You could’ve just shown up in 2007, 2008, 2009, and as long as you didn’t blow up, you’re going to get rich. That’s where we are. Now a lot of people just think they’re smart, but when you have that many platforms launching at the same time, forget about it.

Trey Lockerbie (37:55):
Are you finding people that really change your way of thinking, or do you look at and say, “I respect that, but I view it differently?”

Howard Lindzon (38:01):
I really look to comedians, and the comedian community is coming back together and getting a manhandle on the woke community and the right, and they’re getting a handle on how to manage phones as you come into a club. They’re starting to push back against the cancel culture. When they start pushing back, when you have people that are that smart and that creative finally just pushing back, we need more George Carlins. We need more Ricky Gervais’. They may be rich, and they may be affected, but they really have a way with their words of defining moments of time. I think that whole area is very important to me because it’s a very strong community.

Trey Lockerbie (38:39):
You mentioned joy earlier, and I know you’ve sown this into some of your projects, investing for profit and joy. The joy really popped out at me. It seems obvious when you just gloss over it or read it. You say, “Yeah, you want to make money and be happy,” but that word in particular is such a choice word. It’s interesting. It’s not happiness, it’s joy. I’m curious, over your career, which part of investing has brought you the most joy? For example, Warren Buffett says he tap dances to work. He doesn’t need any more money, so it’s not really that. Is there something in the process, or is it the idea that has come to fruition? What gives you the most joy when you’re investing?

Howard Lindzon (39:16):
When I was young in the ’80s… If you were like… And I grew up Jewish, Jewish community, you had to be a lawyer, doctor, accountant. That was a lot of pressure. That means you got to do school. You got to go to graduate school. You got to go bill by the hour. That just was not appealing to me. Today, that’s truly what AI is disrupting. Everybody says, “Tech’s coming for my jobs.” Tech’s coming for lawyers, doctors, and accountants. There’s three paragraphs you need in a contract. Smart contracts will start taking care of that.

Howard Lindzon (39:45):
Doctors, let’s be honest, no one trusts their doctor. We didn’t trust Dr. Fauci. I’m not saying good doctors aren’t good, but we’re open to new ideas. Then accounts, everything’s cash-based accounting. We’ve already blown up the idea of what accounting is because everybody can work for themselves and figure out how to be cash flow positive. In a world like that, people can actually pursue their passion.

Howard Lindzon (40:07):
In a world of Tiktok and YouTube and Twitter… For example, my kids are not a lawyer, doctor, accountant. My daughter is living in New York as an entrepreneur, and my son’s living a golf life. 30 years ago, that wasn’t a choice for any kid. That’s joy. Kids, they have other kinds of stress, and they have other kinds of, I wouldn’t say depression, but anxiety that the phone brings and all these things. That comes with the territory. But with the smartphone and with the cloud and with the internet comes these unbelievable ways for people at a much younger age to find their calling and to do stuff they love.

Howard Lindzon (40:44):
They’ll still screw it up, and they’ll still make mistakes, but the fact that it took me until my 40s to figure out my calling… If we can help people speed that up and do it in their late 20s, that would do an incredible amount for both behavioral good of the world and just wealth. Because that extra 15 years of the grind, if we can get that out of people, is an important message of what I’m trying to do. I’m trying to lead by example.

Howard Lindzon (41:11):
A lot of people that read me just go, “Oh, I want to live your life.” And I’m like, “Well, if you’re going to live it, try and do it in your early 30s. Don’t wait until you’re 50, like me.” Because I think it’s possible. Happiness is a weird word. The only joy we’re going to get is that when we’re not doing those three things, which is our work life. If we hate our work life, we’re screwed. So being able to find what you like doing has been a gift, and showing other people the way is really fun.

Trey Lockerbie (41:40):
Okay. I have a bonus question for you as well here. You mentioned NFTs, and you’re leaning into that world of Web3 moving forward. I am in my early 30s, and I feel like I’m one of those people that was excited about it to a degree, and then I kept looking into it, following it, and I was like, “I just can’t find a use case for this.” There’s this clip going around with Andres and fumbling his way through a elevator pitch on Web3. I guess I’ve just been around a long time, and I’m struggling here. I’m struggling for the use case. Can you walk me through or give me a proper one?

Howard Lindzon (42:15):
Yeah, it’s not going to make people happy, but I feel like finally have an idea of what it is. That’s the problem. If I can’t explain it, and I’m supposed to be an expert, and I admit that I don’t know it, how can you invest in it? This goes to all the money that was going around. Everybody’s looking for a new platform. When Google Glass came out in 2012, they bury those magazines and mark entries and et cetera. These are very smart people. I know these people. They invest with me. The top of the food chain in terms of what they read and how they think, but they’re wrong, just like everybody else. When they’re wrong, they’re really wrong.

Howard Lindzon (42:51):
If you remember, there was Google Glass. Everybody was going to wear glasses. That was going to be your search engine and blah blah blah, and nirvana. If you had started, and Andres did, if you had started a Google Glass fund in 2012, I’m going to tell you, there’s a lot of donuts in that fund. Web3 feels like Google Glass in that it’s just the web. People have built it into being… Who’s going to benefit from Web3? Google. Apple. Why does Warren Buffett buy Apple? Why does he think Bitcoin is silly? I mean, he’s sound biting, but if he really believed it was stupid, he wouldn’t have 42% of his money in Apple. Basically what Warren Buffet’s saying is if Web3 is something, Apple will be part of it. It’s smart because he’s hedged.

Howard Lindzon (43:36):
If, five years from now, saying… He’s not going to miss the crypto train because Apple’s going to have a wallet. Because this whole thing won’t work. You and I don’t get it because it needs to work with Apple wallet. And by the way, we need to be able to pay for an NFT with Apple Pay. I shouldn’t have to go and do Ethereum. Technology and all its wisdom has complicated this whole thing, which is a feature. Which is a beautiful feature. The whole point of Web3 is for it to be complicated so that people… It’s not for everybody. But then the VCs came in there and said, “We’re going to make this for everybody.” Look, 10 years later, it’s for nobody except crazy people.

Howard Lindzon (44:13):
The way I think Web3 is is it just augments Web2. If you have a Shopify page, and you have a great little store, there should be an easier way to build community around your product. That’s where NFTs come in. But an NFT is not really going to work if your six year old cousin’s got to download a MetaMask and then transfer $60 into Ethereum and pay $100 for that transaction. No offense to the crypto people, but that’s just mathematically dumb and eight steps too many when they have an iPhone in their hand. So I think we’re going backwards, and I think the way to think about NFTs is the opposite of Web 2.0.

Howard Lindzon (44:54):
Web 2.0, the two hottest companies were Groupon and a ClassPass. The whole idea of Groupon was take the whole internet and turn it onto your sandwich store, and Frank the sandwich guy could go, “Hey Groupon,” and have a million people show up on the door at the same time. Let me tell you what happened. It happened, and then Frank went out of business because he got all the dregs of society coming for their cheap one-time sandwich. That was the Web 2.0 version of NFTs, Groupon and ClassPass and flash sales. It was magnificent from an entrepreneur’s perspective. I can channel everybody on the internet and make them go to one place at the same time. Unbelievable.

Howard Lindzon (45:34):
Web3 is the opposite. If I could send you the best people at the right time with the right way to enter the club with my NFT, and there were rewards built into that so that the right people are using your product, and they can form community around that, that’s Web3. What everybody’s got wrong is they think it’s the same as Web2. Web2 was about traffic. Web3 is much more about the right traffic. So I think it’s more of a extra feature of the web.

Howard Lindzon (46:04):
That’s why we’re having… No one’s having that real discussion, but Groupon was a very Web 2.0 thing, and that didn’t work. I mean, it worked for the founders of Groupon. But it needs to work for the Frank sandwich shop, and I think Frank’s sandwich shop needs this to work with Apple Pay. It needs to be able to give out a card that nobody loses for loyalty that’s just an NFT, and that NFT can do many more things for that customer. The more information you plug into your NFT, the more information that you could help your customer when they come in the door.

Howard Lindzon (46:38):
I don’t think it’s as big as what everybody says. But at the same time, the companies that are going to now build using NFTs are going to be better, and I think Apple and Google are probably the biggest beneficiaries of it.

Trey Lockerbie (46:49):
Well, what I think you’re saying there is that Web3 will alter Web2, not necessarily change it. Howard, this has been so much fun. Thank you so much for taking the time. I’ve really enjoyed it. Like I said at the top, I’m so impressed with everything you’ve done. It takes a certain, I don’t know, a flexibility, elasticity, something that to keep your mind as open as you have, to play all these different roles and to fit into all these different scenarios and/or opportunities. A lot to learn from. Thank you for putting out a lot of content on it. It’s why I highly recommend people check it out. Before I let you go, please hand off to the audience where they can learn more about you, find your podcast, find your research, anything else you want to share.

Howard Lindzon (47:26):
Yeah, three things, thank you. Howardlindzon.com. My name, just search it. I write pretty much every day. It’s about the markets, the trends, my prostate, my family. Then Twitter is generally the silly, dissident Howard, which is, can I get kicked off the internet? It’s a fine line between getting kicked off and not, so it’s definitely a more edgy part of my.

Howard Lindzon (47:51):
Then my podcast is just leaned back with my buddy Knut. We’ve done, I don’t know, 300 episodes, called Panic with Friends. You can search it on Spotify or Apple. I sit down with my favorite entrepreneurs, the people I look up to. I don’t ask them… You’ve run a professional interview. I literally do not run a professional interview. It’s a mix between how Conan O’Brien, he talks about himself all the time. I kind of do that. It’s hard to get me to shut up. But it’s really just a wacky look into how I think about things and trends, and that’s one a week called Panic with Friends.

Trey Lockerbie (48:26):
Fantastic. Howard, thank you so much again. Let’s do it again.

Howard Lindzon (48:30):
Thank you. Great to meet you.

Trey Lockerbie (48:32):
All right, everybody. That’s all we had for you this week. If you’re loving the show, don’t forget to follow us on your favorite podcast app and maybe even leave us a review, if you’d be so kind. You can always reach out with feedback or questions. I’m on Twitter @treylockerbie, and if you’re looking to up your investment game, be sure to check out theinvestorspodcast.com or simply Google TIP Finance to find all the resources we’ve provided for you there. With that, we’ll see you again next time.

Outro (48:54):
Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by The Investor’s Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or re-broadcasting.