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Kabir Sehgal

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22
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2015-11-02
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2015-11-02
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1
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  1. “Hey precedent steak, this is Zach Morton at a Black Diamond Washington Seahawks fan. I love your guys' show despite the loyalty to the Steelers. But I've been listening to your guys' show and going on your website and watching those videos for about a month now and learning about investing only for about a month. And it's been my primary source of education, I have to say. It's very helpful and it's well laid out and I love it. So please keep going and please keep doing it. And my question for you today is on Warren Buffett's fourth rule for investing, which would be about the company being undervalued. You know, how undervalued does it need to be? So for example, if you value the company at $40 per share, would you buy it at $39 or does it have to be at $32 or $30 or $25 or $20? Or what would you say? Good rule of thumb is, do you have any information on what Warren Buffett says about that or any other value investors, that'd be great? Thank you.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  2. “I think one book that gets overlooked is one called Second Nature. It's by Heim Ofak, and it's about the idea of exchange and how money is really an instrument of exchange. And he goes into thousands of years ago caveman days. He goes into how fire was manipulated to form early currencies. So it gets into the sort of biological aspects of money. And this book is sort of off syllabus for most investors. Most investors are reading about the markets and so forth, but this gives a very sort of deep understanding of the conceptual origin of money. But I think more recently, obviously thinking fast and slowman's book is a great one to look at the biological, cognitive biases that we deal with when it comes to money investing. So we have not read that book. I would definitely recommend Thinking Fast and Slow.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  3. “You don't owe anyone anything. It's just money sort of formalizes it and it's over. So money's an escape from the gift economy in a way.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  4. “And I think that gets back to the biology because that gets back to ancient times, caveman days, when you would go out and kill some game, you would come back and bring it, you would share it with your tribe. Because if you didn't, the time would come when you would be hungry and you wouldn't be invited to eat with everyone. And so when you invite someone to eat with you in ancient times, that was basically like a forged derivatives contract saying, I'm going to hedge my future because ultimately we need each other to survive. That's what gift giving really highlights. But money really introduces like an anonymous way to go about it. So for example, if you go to Starbucks and let's say Starbucks, you order a coffee and the Starbucks barista lets you have the coffee for free obligated to come see her in the future and there's kind of a relationship there. But if you just use money, then the relationship is over. So a lot of people are happy to use money because sort of paper is over.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  5. “And people who he owes. He's keeping a list of his gift economy. So we all do it. We all track who owes us. We all track who we owe in sort of this deep-seated psychology that if you want someone to do something for you, you have to give them a gift. You have to control them. So when you give a gift to someone, you're not just tying the present, the wrapping paper, you're tying the recipient to an obligation. And that obligation can be very, very powerful. So I learned the power of gifts is not just a benevolent thing, but as kind of a controlling and manipulative thing. And that gets back to the original currency, which is social debt.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  6. “Was really dead. So, just as you think about a mile as a measurement of distance, think about money as a measurement of debt. And so as I traveled all over the world with my job, everyone looks at money in this way. It's sort of like a way to measure debt. And everyone has their own kind of quirky ways of looking at gifts. I was in Japan and I gave a present to my friend and he said, I cannot accept this. I said, well, why not? He says, I'll never be able to repay you. The word in Japanese arigato means this difficult burden. There's another word in Japanese called sum, which means I'm so sorry I cannot accept it. They have all these kind of strange cultural quirks in dealing with debt, even though Wall Street, J.P. Morgan's CEO, Jamie Diamond, billionaire himself, he keeps a list in his suit pocket. And what's on that list is people who owe him something.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  7. “I think one of them is that talking about currency, what's the most powerful currency in the world? It's not Bitcoin. It's not the yen, it's not the dollar. I learned how powerful a gift can be. It was really debt that led to the invention of money. And actually, there's an anthropologist who went back and studied it and they said, oh, there's never been a society in the history of the world that's ever existed, which is saying something that's relied on bartering as sort of the principal means of exchange. And because bartering is what you do with someone you don't know. It's like, okay, if I don't see you again, I have to get a good amount of value for whatever I exchange. But if you know the person and they live sort of in your community, you're going to do an exchange. And so I looked at, you know, in 4,000 years ago, actually 4,000 BC rather, there was financial loan documents. They were loaning out money to each other in HM Mesopotamia. And it's not until the 7th century BC until coins are invented. So you have thousands of years where money...”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  8. “The first part, yes. I think banks are like JP Morgan's investing Bank of America's, they're investing, they're actually creating patents to do just that, to look at how Bitcoin can be used as a transfer protocol to do money transfers. It's happening. I don't know if it's going to become a peg in that banks have, especially big banks, they have an agreement with the government, which is essentially the Fed says, go out and make some loans, and that's how money is really introduced throughout the world. And so I see it as sort of a private mechanism, Bitcoin, as a way to transfer money. But in terms of money itself being a peg, I don't know. Dollars are not going anywhere anytime soon. And I think the dollar is going to be remain the universal peg for a long time.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  9. “And you swipe your credit card. It's only about 2% that's going to the credit card companies and the merchant acquirers. But in the developing world, the huge cost savings. So that's why even in Kenya, they call it the Silicon Savannah. There's a lot of capital going into Bitcoin investments in the emerging world. I think that is the most powerful example of Bitcoin use in the coming future.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  10. “Glad you asked that because that's the most profound example of how Bitcoin could be immediately impactful. So I was in Saudi Arabia last year and there's a big Filipino population there. And I asked one of them, I said, do you send money home to the Philippines? He said, yes. I said, how much do you pay in terms of remittance fees? She said, 15%. I said, that's a lot. And so Bitcoin, using Bitcoin, she could save almost the entire thing. So how does that work? inside Arabia she can then use a bitcoin converter and she converts from the local currency into bitcoin and then someone in the philippines goes and picks it up and it converts from bitcoin into local pesos and the transaction cost is far less i mean anywhere there's like a huge friction to transfer money that's going to be taken out by bitcoin so like in america for example when you go to”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  11. “So, if I wanted to send you a PDF, if I wanted to transfer a PDF to you, like right now, if I emailed it to you. Bitcoin is an incredible way to transfer things. And so people often get hung up and Bitcoin is a currency. That's not the reason the venture capitalists are so excited about Bitcoin. That's not the reason Mark Andreessen, himself a billionaire, is so excited about Bitcoin. He's excited because of the technology implications that, wow, we can start transferring things using the Bitcoin technology. And so that's sort of a distinction that I think gets lost on people that Bitcoin is really about file transferring.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  12. “I don't see cryptocurrencies being the offset to the central banks in inflation, the potential inflation we may see. I think there's a misunderstanding with what Bitcoin really is. I mean, most people focus on Bitcoin as a currency. I don't think Bitcoin will flourish as a currency because of governments. Governments can essentially say what is or is not money. Like in the 1930s, Frank and Roosevelt said gold is no longer money. He took everyone's gold. He built Fort Knox. Government always has the capacity to say what is or is not money. Even now, the FBI owns like 10% or I think even 15% of all the Bitcoin because it sees so much Bitcoin. But look, I think Bitcoin is going to be very, very powerful as a technology. What do I mean by that? When you boil it down, Bitcoin is a decentralized way of authenticating transactions.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  13. “This is silent tax. It's an easy way to finance things instead of directly taxing your people. And it's a lesson that comes up even to today.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  14. “Kubla Khan said, You know, we have a problem. We have 60 million people. We don't have enough silver to back our money. So he cut that link between money and metal. And he said, you know what? I'm going to issue paper money. Marco Polo said the Great Khan issues money out of the barks of trees. He said essentially, if you did not accept my money, I will kill you. Or if you counterfeit my money, I will kill you. And so he ruled his entire vast kingdom that went from Burma all the way to Hungary with paper money. And what happened, he started to prince and print and print. They wanted to expand their kingdom or their empire. And then there was a monetary crisis, which led to an economic crisis. And eventually that part of the Mongol Empire came to an end. And so money is really a Faustian bargain. A paper money particularly is really a Faustian bargain. And there's always a sort of reclivity for governments to print print print because”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  15. “The current to appreciate there was massive inflation. And a lot of the folks who have studied the end of the Roman Empire, they attribute one of the problems is to the economic malaise, was to a monetary crisis in persistent inflation. And so the place that I found this most intriguing in order to really bring this home, and I didn't write about this in the book, but is I went to the middle of nowhere to study about this. I went to over 25 countries in researching this book, my job took me around the world, and I went to Mongolia. And why did I go to Mongolia to learn about money? And that's because Chinese in particular, the Mongols, came in later, they sort of invented paper money in the 9th century AD. And then what happens in the 13th century, the Mongols conquered the Chinese, and they added 60 million people to their empire. The Mongols had this currency and it was backed by silver and silk.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  16. “Yeah, good question. I think monetary expansion is, it comes up almost in every society going back thousands of years. So in that example, in ancient Roman time, you know, the word money comes from the Romans, the Roman root of it means worn, to warn someone. That's where money comes from. In the Romans times, they would have currency called the denarius. It was basically a silver coin. And over the times when Nero came to power, when others came to power, A lot of times they had to sort of make more money in order to finance their costs. So the Romans had to, and they kept on expanding their empire. And one way to pay for this was to issue money. But there's only a fixed amount of silver in the world. And so they started to debase the currency. They literally punch a hole in the daenarius. So the quality of the coin would go down, but they would increase the number of coins circulating within the kingdom. And so over time,”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  17. “Yeah, and there's an emerging field called neuroeconomics. Basically, these are brain scientists that study financial decision making. They can scan your brain and they can show you what before you're aware, before you're consciously aware of what stock or bond you're going to choose, because they can see what's happening in your subconscious. And so these decisions are only manifest at the subconscious level, and then they get sort of kicked up to our conscious level. And there's so many things that influence our subconscious, you know, advertising and genetics and things you've learned in the past. When you think you're making a financial decision, you should really remember that money is really a biological output. It's really the evolutionary output of a biological mechanism called exchange. But one of the tools we created in order to survive better is called money.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  18. “Money in cash, and you had fewer credit lines and a higher credit score. And if you had the other gene, it was just the opposite. You're more riskiking. You put more money in stocks. And so this goes to show you that it was about, again, 97 points, which is about 20 points on your credit score, was influenced by your genetics. And so the good news is if you're not really good with your money, always blame your parents because it's their gene pool.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  19. “Yeah, so money is an instrument of exchange. Exchange is sort of a social interaction. There's all kinds of studies that show that people who are more social, they live longer. They feel more satisfied with their lives. And there's actually genes that we possess that regulate our social interactions. And this even gets to sort of financial behavior. So, for example, there was one study that showed that about 20% of someone's credit score can be influenced by their genetics. And so there's one gene that's called the COMT gene and is evenly dispersed within the population. There's two variants of it that are evenly dispersed within the population. So in the study, they swab some people's cheeks and they ask them a bunch of financial decisions like make a capital asset allocation decision, choose between stocks and bonds and cash. And they found that if you had one of the variants, you're much more likely to be risk-averse to put”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  20. “Having an exchange with a plant when you're breathing out carbon dioxide, the plant is secreting oxygen. So you're in a carbon loop. I think of exchange is everywhere. And so if you look at the first type of currency, what was it? It was salt. It was meat. Or even now money, it boiled down, gives us the calories we need to survive. So in the most concrete form, money is really energy. And so I went into that and I went into the genetic basis of money. That's why I went to the Galapagos to look at money and to come up with the biological link between money and energy.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  21. “If you look at most histories of money, they start perhaps in western Turkey where there was the invention of coinage, or maybe Africa, the Great Rift Valley, where you could dig up fossils that served as money. But I went to the Galapagos Islands because that's where Charles Darwin was inspired to come up with his theory of evolution by natural selection. And so I went there and I met with a couple of marine biologists and we went diving and we didn't find any gold, but we found something else, which was I found symbiosis at work. In one example, there was a sea turtle, and the sea turtle was being cleaned by different fish. And so what's happening there, the sea turtle is getting clean, but the fish are ingesting those parasites and getting nourishment. So that's an example of energy exchange. And so I went all throughout the Galapagos and I learned how exchange is really and energy is really the currency of nature all throughout the world.”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT

  22. “I started my journey really first at JP Morgan on Wall Street just months before the credit crisis began. And I found myself wondering what's happening, people are losing their jobs, people are losing their minds. And I asked a question that sort of governed the entire book, which was, what's happening in your brain? What's happening in your mind when we think about money, when we deal with money? That was largely a biological question. And so when I mentioned the word money to you right now and people listening, there's actually an electrical current going through your skin that you're having an increase in your skin conductancy. They've taken brain scans of people who are high on cocaine and people who are about to make money. And they look similar. So it shows that there's kind of a neural reaction. So I wanted to figure out, is there a biological basis to using money? And so”

    2015-11-02 · We Study Billionaires · TIP 058 : Coined - The Essence of Money and How It Works with Kabir Sehgal (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT