Luke: 0:00

Welcome to the curiosity crisis, we challenge ourselves to explore the world of business tech, investing in science, get curious and be part of our journey, as we discuss, challenge and learn.

Khush: 0:10

Today we speak to Luke, the co host of the QRC crisis, Luke studied computer science and software engineering and loves all things tech. He has been investing for about six years and has a very unique and exciting view of the investing landscape. So I'm incredibly keen to pick his brain. Let's get into it. Looky Hi,

Luke: 0:27

mate. I'm very, very good. I'm excited to be here. It'll be a good chat today, I

Khush: 0:32

think. Absolutely. Let's get straight into it, mate. What asset classes are in your portfolio early? Yeah.

Luke: 0:39

So it's a little bit diversified. But I would say in terms of the classes, it's mostly crypto, but there are some other high risk stocks as well that I own. But yeah, primarily, I'd say you may as well just say it's crypto. Yeah.

Khush: 0:54

So generally, crypto and a few equities. Yes. Yeah. Okay, cool. And the relative weightings between them?

Luke: 1:00

Yeah, may may as well just say it's all crypto. It's not, it's not really. But in terms of value, it might as well be Yeah.

Khush: 1:06

So interesting. So obviously, you know, I've got a very different approach to that. So why is your portfolio you know, majority cryptocurrency? What's the investing philosophy? And what led to your current portfolio?

Luke: 1:18

Yeah, it's actually a big journey. And some very deep thinking, I think came about, I guess, I started to look at money more conceptually. And then I kind of had three major components, which was like, you know, it came from some questions of, you know, what am I actually trying to achieve? And investing? What is money? You know, how long do I want to be doing this for? What does the, you know, how does life look in terms of, you know, where I'm going to get income from and how long that's going to take, and then things like that. And so, I came up with three major things, which is like, Okay, what's my idea around risk tolerance? What are my you know, what's my first principles, thinking? If I strip everything back, you know, remove all jargon, what am I what am I doing? And then like, what am I investing axioms? Like, what am I going to follow to get to where I want to be? And it's very funny that yeah, I started off, you know, just reading books and learning slowly and getting more ideas. And eventually, yeah, there was a bit of a tipping point where I was like, What am I? What am I really doing? Because I'm just kind of following some things that other people have said, and that's not necessarily what I what I should be doing. Yeah.

Khush: 2:24

Yeah. Amazing. Down, very, very keen to unpack that. And there's a few things few things you mentioned there. Like I think we'll get into your your risk tolerance, especially, you know, as most people listening would consider, you know, crypto is very high risk or perceived high risk and young, kinder, can you thoughts on that? And a little bit about how you actually came to make this very conscious decision to have, you know, pretty much 100% Crypto portfolio? Yeah. Well, we'll start maybe just unpacking that by going to that question where you did a lot of thinking about why you do this, and what your sort of founding principles are with your philosophy sort of thing. So why do you invest in in what is the goal that you decided for yourself? Yeah, investing?

Luke: 3:06

Yeah, it's a great question. And I think it actually came off the back of at least 12 months of thinking and reading a lot of investing books, and then being challenged a lot by some more, kind of, I guess, just like, different different thinkers. And basically, what I do I the main conclusion that I came to is okay, like, let's look at the my lifespan. And then we say, Okay, what, what am I going to do over the next, you know, 4050 years something probably going to be working. Okay, I'm going to be working in At what point do I want to have the highest risk exposure, while probably younger, because as I get older, and I have people relying on me, I want to have less and less of that it's safer and safer. And so then I flip the inverse of that and go, Okay, well, then when should I add the riskier stuff? And that's what right now, okay, well, then what does the riskier stuff look like? And why am I doing that? Because I want to maximize the returns here. Why do I want to maximize returns? Well, yeah, okay, well, am I trying to create wealth or preserve it? Well, 25 how much wealth do I really have to preserve? Not much, okay, well, let's look at creating something. And that kind of has pushed things like, you know, I want to start businesses or I want to invest in higher risk assets. And, and eventually, you know, I don't see myself as some kind of cowboy gambler, I think, you know, in 20 years, I would not like to have a significant crypto exposure unnecessarily, depending on how the industry goes and, you know, all these other factors, but I definitely think that there is a much safer asset classes and I'm not going to say that that's not the case. Yeah.

Khush: 4:39

Yeah. Okay. Really machined into quick line quick aside. So obviously, you know, this is the time that I kept thinking, you know, this is the time that you can have the highest risk tolerance with probably the least consequence for a big loss event, I suppose, like it would affect you You mainly then more than anyone else, you'd say, what gives you the confidence that you're This is also where your best ideas are going to come? Because you're doing the highest risk. You probably need, you know, the best amount of, of ideas paying off. Yeah, so obviously pretty young, but yeah, dollar thinking. So yeah,

Luke: 5:18

so I think there's a few things there. I think one thing is okay, what is the worst case scenario? Worst case scenario is I lose everything. Okay. So you lose everything. What happens then? Let's say you've wasted five years of investing and money. That sucks, right? But you say, Okay, well, if that's the complete worst case scenario, that I can fully pivot and say, Well, no, nothing more risky, I'm just gonna, I'm not even going to do any investing, I'm just going to save money because I'm not going to lose it. And I could just go, Okay, well, for the next 15 years, I'm going to save and I'm going to undo what i've what I've just wasted, right. So that's one way of looking at it. But that's, that's the worst case scenario. And so I think the thing is, as well, you have perceived risk, and then you have risk. And so for me, you need to make your own mind up about some things, just like someone might say that Tesla is a very risky stock, you might say, well, fundamentally, I don't think it is. And so the perceived risk is higher, which means you're going to have a lot more volatility in it. But that doesn't necessarily mean that it is actually riskier, it might be fundamentally quite strong. And so, you know, the way that I perceive some of the assets I own is not necessarily that they're extremely risky, but the rest of the market or other people think that it's high risk. And so it's not really, in my opinion, anyway, it's not looking apples and apples, that's kind of there's a lot more to unpack around risk, that doesn't translate necessarily to the value of something or the market cap of something.

Khush: 6:43

Yeah, kinda I get that. What it sounds like, it's not like you're going out of your way to sort of be a contrarian investor, you're not saying no, your ideas stupid, I'm going to do the opposite. Because, you know, you're wrong. It's like, you're just you're, you focus on the, you know, the project, or the equities or the things that really excite you. And it doesn't really necessarily faze you have other people are at the same opinion. Maybe it's just because they are less educated.

Luke: 7:12

Well, it's something that you actually said last week, which was if you're agreeing with the market, you're essentially doing something wrong, because you can never outperform the market if you just agree with it on everything. Yeah. And so one thing that I came to the conclusion was, you know, like, the classic investing example, is Warren Buffett. And I know for a fact that he didn't get rich investing in ETFs. For years. Yeah, he got rich in another way. And so I guess, I think, well, if I'm just going to invest in ETFs, for the next 3040 years, am I going to get rich off that? No, not really, when you account for inflation and such. So I needed a different way of approaching it. And that's kind of Yeah, where I'm at.

Khush: 7:52

Awesome. All right. Well, that sort of leads to my next question, you've answered a little bit your How does your philosophy and investing affect your risk tolerance, but then I went one step further and asked, you know, what, do you have a plan with your risk appetite? Can you walk us through maybe how your portfolio will change over time, as you know, you get 20 years older, and you might have dependents or whatever? And at the moment, so two separate questions. Sorry, what tools, if any, do you employ? You know, if the crypto market has a terrible day? Yeah. And it's it's dropping, you know, 60% a day, which, you know, sort of out of the out of the ballpark? Do you have any tools like stop losses or complete quit strategies? for that? Yeah. So

Luke: 8:36

so there's a few things there in terms of the appetite for risk and where kind of that's where that's see, it's, I guess you want to you want to be very confident in the in the fundamentals. And something that you actually said last week, as well, is that you want to do your own research and you want to understand what's going on, you don't invest in in things that you don't understand. And then from there, that's going to also affect when you have a big swing, you say, workout, has the fundamentals changed? If it has, then I want to exit? And if it hasn't, then I don't want it because it's the same. And then, yeah, in terms of, like, what do I do, like, what what tools do I employ, I actually don't do stop losses or anything. And that's because of that idea of, I'm going to have the fundamental things I'm going to I'm going to know those really well. I'm going to invest in those things. And unless those change, then I don't have any reason to exit. And I'll be honest, the first few times you get a big swing your stomach churns a little bit. But eventually, especially when you see something dip and you get worried, and then it pops back up, and then it dips the second time and you go, Well, it did pop back up last time and it goes back. And then yeah, I mean, you can look at historical performance and you can say, Oh, well the market eventually trends up or you can say whatever you want, but I think experience ends up helping and so like, especially Leave, you know, five years ago when I when I first bought something and it went down? Yeah, you know, that doesn't you don't feel great about that. But then five years later when you buy something and it goes down, you might buy more. So it's true in all in all changes gradually, I think.

Khush: 10:15

Yeah. All right. Well, quick on then. What? Like so say someone you and I have been investing for a few years, absolutely still green compared to like the people that are investing for decades. But what advice would you give somebody that's, you know, in, in the market, you know, has been in for less than a year or is pretty green to it. And, you know, has high conviction has done research in whatever project or stock or holding it there, they've got, but, you know, say something like, the COVID crash happens again. Yeah. What advice do you have to stomaching? That, you know, how do you how did you learn to start with the big swings in crypto? Yeah.

Luke: 10:56

So I think in terms of like that, nothing can substitute for experience, you can't read any book, you can't listen to any podcast, you can't read any thesis and and feel like you're prepared. It's not how it works. It's not how anything works in the world, you have to have experience, and that's fine. So you might as well start and start with something that's not insane. To start, start small and grow later. Because you need it, you need to get that experience first. And it happens with everything. You got to dip your toes in before Yeah, you don't want to you don't want to dive in headfirst and lose everything. Yeah. I don't agree with some of the things that people glorify on Wall Street bets, even though it isn't very amazing. Yeah, it's not, you know, it's not a good idea. Like it's just not. And so when you talk about, okay, well, what do you do with, like the COVID, crash, for example, strip away all the media strip away what everyone else is saying and say, Okay, what are the fundamentals? A great example was, when we had the COVID crashes, a large amount of Australia's GDP is made up by banks, and the banks went down a lot, you know, 3040 50%, and I was saying, this is fantastic. This is a great buying opportunity, if you can, if you can hold this for 12 to 24 months, these are going to recover, because of an Australian bank falls, the country falls. Yeah. And so that's a really like, key example where you can say, Everyone's panicking. But I know for a fact that there's a lot more at stake if this if something goes wrong here, and therefore I'm going to buy this. And so you buy the banks, you get a comfortable return, and you're confident in it, because you're confident in the thesis of the bank. They're not going anywhere. And you're comfortable in that first principles thinking.

Khush: 12:40

Yeah, okay. Love that. Love that. And I picked up on a little theme. If your answers here that, firstly, firstly, and it's very important, I suppose to everybody, including ourselves is that personal finance thinking. So, you know, when you are going into investing, make sure you're not if you lose your shirt with your investments, you're not going to, you know, lose your bank balance and be able to sustain yourself. And so it start small and build up through it. And then, yeah, this high conviction thinking and understanding, you know, what really is happening, what the fundamentals are. Just a quick, quick story. I remember I literally watched our I think it was like much 20 or something of the COVID crash, I watched Macquarie Bank, which ended up being ridiculously well, yeah, after COVID Go down, like a ridiculous amount, maybe 60. Or went down. Yeah. And then, you know, it really profited off that. So anyway. Okay, so we've talked a little bit about, you know, your holdings and having a belief in in what they're doing and the fundamentals not changing. So. But for somebody that's not really into crypto, or wants to get into it a little bit more, how do you sift the crypto universe for holdings like that? There's so many coins. And I know how I do it for equities, like your circle of competence, your style of investing what you want to do with it, but crypto is foreign to many. So when you start?

Luke: 14:03

Yeah, I think so. There's two other things I want to briefly say. And that is that this isn't for everyone in the sense that you need to understand what you are capable of doing and what you're not. And by capability. I mean, you don't want to be out on the street if things go wrong. And so you really need to preface this kind of line of thinking with what's my worst case scenario. That's my lower bounds now, what's what's the higher bound that I'm trying to achieve? And you need to make sure that you're still comfortable regardless of the result. And so that I think is really important. And everyone's circumstances are going to be different because it's based on Well, maybe you have an inheritance, or maybe you don't have anyone you can rely on in which case is going to be extremely different in what in what you do. The second thing is that I don't just invest in crypto I've previously have invested in all kinds of things. And I don't just think that this is the only asset classes that that's interesting or something, not the case at all. It's just something that I've become extremely interested in more recently, as a result of doing some cryptography at university. And yeah, I think that the same principles can apply to a lot of different areas, you might even look at, let's say up and coming biomed companies, for example, they're a classic example where if they pass their trial phase, the the amount of money that will flow into that company is enormous. So you might have the market cap of a biomed, company 1,000x, overnight, as soon as they pass a trial phase. And so if you understand what they're doing, you might be really interested in that, and therefore, you're in a competitive advantage compared to the market. So anyway, I think that yeah, there's, there's those things to consider, in terms of dipping your toes in, I think the first thing to do is understand what the hell's going on, you need to understand what is the data structure of a blockchain? Why does it add any value at all? And if it does add value, what does it do? And then if it does something useful, what does it do compared to everything else, right. And so in my opinion, the best way to start that is actually to look at the research coming out of universities, because a lot of these Kryptos a lot of the successful ones anyway, have actually come off the back of university research, or a being spearheaded by a university lecturer. So there's some from MIT, some of them have, like correspondence with UC Berkeley, some of them have teamed up with Cambridge. So there's, there's a lot that comes off the back of research, because a lot of it is it's computer science as mathematics, it's things that are being used to improve stuff. And that's, that's their competitive advantage. And that's, you need to understand what's going on, at least to an extent, before you really want to get too into it. Yeah.

Khush: 16:52

Okay, cool. So there's still that little bit of circle of competence. And some people might be hearing that, like, even even I am, I would probably have a bit more of a high barrier barrier to entry to, you know, start thinking about and understanding and digesting papers, but there's plenty out there, obviously, to start looking into. If we could ask for like an example. Like, you know, obviously, you've done a bit of research on cryptography, and look for a few projects. What is it that you're looking for? What tells you or get you excited? Do you have a type? Yeah, yeah,

Luke: 17:31

yeah, I definitely do. So. I guess, if you're looking to start start with understanding Bitcoin, because it's, it was the first and it's the simplest, you know, it's that idea of a distributed system, there's a white paper that's been out for well over 10 years. And a lot has come off the back of that. And so, like all technology, I think it can be improved. And so for me, what I'm looking at is okay, this is a fantastic idea. And that's why I blew up in the first place. Someone came up with an idea of this distributed system, where there's no, you know, there's no third party that's that's relied upon? Well, okay, that's a great idea. But what are you going to do about that? What are you going to improve? And Bitcoin hasn't really had the same path to improvement as a lot of the new ideas that have popped up and have poured a lot of time and money and research into it? And I'll say something similar, where I like to look at the research, the you know, what are the partnerships? What are the end, because there's a lot to consider about these things. You know, there's the, there's the economic side of it, the technology side of it, the community side of it, all of that all of these pieces need to come together for it to be successful. And so what you can do is work backwards. So if you have no idea what's going on, you say, Okay, well, what isn't going to change tomorrow? Is Bitcoin or Aetherium going to disappear tomorrow? Likely not. Because if there become a legal in the country, that's fine, because they're distributed and decentralized, that that solves that problem. Okay, well, are they still going to be relevant? Well, do they still fix the fundamental problem? Yes or no? And so you can you can work backwards and then say, Okay, well, what's the best that these is a theory and fast enough, maybe there's a faster solution that will make payments or other things? So I guess my my type is, is again, it's stemming from, yeah, that idea of just stripping back everything and like, what is the problem that it's solving? And why is it better than other things? And yeah, again, I'm not I'm not opposed to diversification in this either. I actually own multiple, multiple assets, which also alleviates a bit of the risk.

Khush: 19:32

Okay, well, quick one. And so obviously, you do a lot of research, you understand how it works, what problem you're trying to solve, and to simply the university like, what do you do about the main, like the main coins that have coins? Like she knew? Yes, I don't know. Whatever. It's a bit scary. Yeah. Don't tweet about it.

Luke: 19:50

Yeah, yeah. The Doge coins. Never underestimate the power of community. Alright, so I don't think that they're necessarily they're not bad by any means. I don't think that's the case. But from my perspective, I'll never buy them and there isn't an honor to buy them is the price is going up because people are buying it, not because there's value there. That doesn't mean the value can't come later. But I'm not willing to risk that. And so that's kind of where I see I go, Okay, well, what bank is partnering with Shiva? None. Okay. Well, probably not something for me there. Yeah. And so that's where I'm not saying don't invest. I definitely think you can make money off it if something's popping. And, and you're hearing this and saying, I've been told not to do it? Well, that's not true. You could you could buy it and make a lot. And I actually know someone who made six figures on Dogecoin. But that doesn't mean that it's a good idea. Yeah. I think that's the Yeah, that's the difference. So

Khush: 20:46

you're a fundamental believer, but obviously there is, you know, there is momentum investing. There's all that sort of stuff as volatility purely for that stuff. So there you go. All right. Cool. So can you give us a an example of you know, your type and what we've gone through your process, but can you just give us an example of maybe what you looked at and and and why you thought it was exciting, why the problem that we're solving was was important?

Luke: 21:11

Yeah. Well, I mean, the classic one is Aetherium. I think that Aetherium has one main advantage over every other blockchain and that that's its adoption. It has well over 60% market share in terms of decentralized finance. And I think one of the bigger things is that the programming language to do smart contracts on it is in solidity, and solidity is not going anywhere at the moment. And so even if you have these up and coming chains, which use a faster programming language, or they do something better, it's got market dominance. It's not it's not disappearing, and it's still the same as other things is incrementally improving. And so unless something else can outpace it in another way, I'm not saying it's the best solution, I don't actually think it is. But I don't think it's going anywhere, at least for the foreseeable future. So I think that to me, it's quite a safe investment. And yeah, I think that's probably a good example.

Khush: 22:09

Yeah, I love that. And I'm just thinking is my son sitting here thinking of jail, we've got a classical brain when it comes to investing. But everything you said there, you know, looking at network effects, looking at the scale and its adoption, looking at its ease of use, you know, that's all subjects. That creates moats for companies use on s&p 500, NASDAQ, whatever. Similar. That's cool. All that there is a lot of trends, like some people think of and you said, you know, what a cowboy. Some people think of crypto and it's like the Wild West. Yeah. But there is a lot that you know, translates across. And I know, yeah, a lot of like, industry sort of can look to, you know, adopt smart contracts and in theory network, and they have been making money off of those projects. So yeah, yeah, that's awesome.

Luke: 22:56

I think I think the assumption should be, everything is not worth your time until it's proved that it is. So because most of the crypto sphere, there's, there's so much useless stuff in there, whether it's a scam or a pump and dump or just, you know, they're just trying to get funding and then achieving anything or they're just worse than something else. I think most of it is not very good. And so what you should do is say, Okay, well, what is worth my time and and start with the big stuff and work your way down the smaller cup stuff if you're if you're really interested. But yeah, assume that it's it's I'm here. I think the assumption that the the whole thing is scam. It's not accurate, but it doesn't mean that it's necessarily bad mindset to start off with.

Khush: 23:43

Yeah, it will. Skeptic skepticism is healthy, right? Yeah.

Luke: 23:46

I think it's very healthy, especially in in this kind of, yeah, and we're just wasting money anywhere. 100% like, Yeah,

Khush: 23:52

isn't that one guaranteed fraud in the one guaranteed fraud investing is if something's guaranteed. Yeah, sure thing, then you know that yes. 100% there's always risk. Awesome, mate. That was so good. And you know what, we're definitely going to do some more a bit bit more about maybe the blockchain a bit more about. It could be used uses use case and stuff like that. So episodes to come get very keen. We're looking forward. What does Lukey map the investor think is the next year for growth? What has caught your eye where What are you excited about?

Luke: 24:24

Yeah, that's a that's a great question. So I feel like I understand this fear now. And I want to move on to something else as well. I'll move on but but expand my my knowledge. Yeah, I think, you know, touching on my investing axioms, you know, I want tapering off risk. I don't think that diversification equals wealth, but it's a risk kind of mitigation tool. You know, it's it's something that I want to make sure I use wisely. And I like to choose industry picks over individuals. And so at the moment, the industry that I've been looking at has been crypto and then the new thing that I'm kind of want to branch into a bit more is semiconductors and chip manufacturing and the future of computational, I guess, hardware, I think that's something that will grow a lot in the future. It's not going anywhere as well, you know, the fundamental idea of what's going to be the big thing tomorrow, I don't know, but what's going to not go anywhere tomorrow? I do know, I think, you know, chip manufacturing is going to continue to grow. So looking at foundries I could invest in looking at I mean, the classic one recently, it's not actually a manufacturer, but Nvidia has gone up an enormous amount due to the AI hype. But I think that there's some there's some lower level. Yeah, computational chip manufacturing, businesses that are quite interesting. And I want to understand that a bit more and where they're going and where they're trying to get to, which could reap some some good reward in the future, I

Khush: 25:54

think. Right. And, yeah, I've done as well, because I suppose there's so many, like downstream industries that use for example, chips. And they're in markets that are developing as we go into decarbonisation trends. So like you said, not going anywhere, but plenty of plenty of room for growth and expansion. So awesome. Well, what do you know, sort of close it out? What advice would you give any investors looking to get into any specific advice or just investing in general?

Luke: 26:27

Yeah, I think, um, just just really question what you're doing. And question when people are saying, if you're reading a book, with, you know, the guide to invest in one on one or something, just because something says that in the book doesn't mean it's correct, it doesn't mean it's correct for you, or the time you live in. It doesn't mean that that person got rich off what they're saying it there could be getting rich of you buying their book. So I think that it's it's important to understand everyone's angle on things. Understand what everyone's motives are, and understand. Yeah, just just really question what you're doing and why you're doing it. And I think you'll end up with a much a much better portfolio a much better understanding of what you're doing and why at the end. And for some people that might be, I don't have enough time to invest, I'm not going to invest, I'm going to let someone else manage it. That's totally fine. That's not a problem. But yeah, I think that the five why's is something that some people have found success with, which is ask yourself why you're doing something five times and and see what you get down to as the as the base level. And I think you'll, you'll find some pretty interesting things. If you do. Dig

Khush: 27:35

deep. I love that. I love that you not just find your why. But you find otherwise to the method and following processes. Yeah. Awesome. And then, all right, well, closing it out. We always close out with one question for days. And it sounds the same as different. What advice would you give to your younger investor self? loop back in the day five, six years ago, getting into investing? Obviously, your method has changed over the time? Yeah. What advice would you give that might have lost a bit of money here and there and all that sort of stuff?

Luke: 28:08

Yeah, I think there's yeah, there's a there's a couple of things there. I think one thing I would would have said is, if it sounds too good to be true, it probably is. But at the same time, that doesn't mean that significant upside is impossible. Yeah, there are a few things that I invested on in early on that I shouldn't have, just because of I think, a number of reasons. But I think that I've also had significant success. And I guess you don't want to be discouraged. You just want to be eager to learn more, you know. And I guess if there was one other thing, yeah. Coming getting over that hurdle of, you know, diversification doesn't equal wealth. If you invest in ETFs, forever, you're not really going to outperform the market that well and that was something that once I once I understood that a bit better I think, I think it really helped me with what I was looking at why I was looking at it, and just that that that one fundamental idea changed a lot of where the direction that I wanted to go with where I put my money for everything. Yeah, yeah. And I suppose your thought processes Yeah, and the thought processes and who you listen to and why listen to them and other things like that.

Khush: 29:21

Wow, that's That's epic, profound. Love. It may have thoroughly enjoyed this. We'll do some follow up episodes for sure. Yeah. Because I'm presage Kingdom back to myself. And I'm sure listeners will to the Thank you. That was that was really good logic pick you pick your brain. That's all we have for today. Thanks for listening. Find us at curiosity crisis.com and curiosity crisis on Instagram, where are all major streaming services so you can listen how you like thank you and catch you next episode

Luke: 29:48

catch in the next episode. Thank you.

Khush: 29:51

Quick reminder, this is purely for your entertainment and education. This is not financial advice. It's just our opinions, but I hope you get something out of it. Enjoy The