No Way Out
Welcome to the No Way Out podcast where we examine the variety of domains and disciplines behind John R. Boyd’s OODA sketch and why, today, more than ever, it is an imperative to understand Boyd’s axiomatic sketch of how organisms, individuals, teams, corporations, and governments comprehend, shape, and adapt in our VUCA world.
No Way Out
Market VUCA: Reorienting in the New World Economy with Philippe Gijsels
Philippe Gijsels, Chief Strategy Officer, BNP Paribas Fortis joins Moose and Ponch on this episode of No Way Out.
The conversation explores the concept of volatility, uncertainty, complexity, and ambiguity (VUCA) and how it relates to investing and trend following. The analogy of surfing waves is used to describe the approach to navigating these challenges. The importance of having a disciplined approach and following objective rules is emphasized. The discussion also touches on the changing dynamics of the market, the need for adaptive strategies, and the influence of human behavior on trading decisions. The concept of reflexivity, where stock prices influence economic reality and vice versa, is explored.
Explore the psychological and philosophical elements that shape successful trading strategies. We'll share personal anecdotes and lessons learned from the trenches, emphasizing the importance of letting winning trades run and avoiding impulsive decisions. Plus, we explore advanced methods like Elliott Wave, GAN, and zero-day options expiration to navigate today's complex market dynamics.
Discover the interdisciplinary approach that drives innovation in finance. Through the lens of Jim Simons and his team, we'll discuss how blending knowledge from diverse fields like mathematics, economics, and history can lead to groundbreaking advancements. We also highlight the evolving role of blockchain technology in investment, the intricacies of currency markets, and the necessity of maintaining an adaptive mindset, referencing philosophical concepts like Karl Popper’s falsifiability and John Boyd’s OODA loop.
Philippe Gijsels on LinkedIn
Philippe Gijsels on X
The New World Economy in 5 Trends
AGLX Confidence in Complexity short commercial
Stay in the Loop. Don't have time to listen to the podcast? Want to make some snowmobiles? Subscribe to our weekly newsletter to receive deeper insights on current and past episodes.
Substack: The Whirl of ReOrientation
Want to develop your organization’s capacity for free and independent action (Organic Success)? Learn more and follow us at:
https://www.aglx.com/
https://www.youtube.com/@AGLXConsulting
https://www.linkedin.com/company/aglx-consulting-llc/
https://www.linkedin.com/in/briandrivera
https://www.linkedin.com/in/markjmcgrath1
https://www.linkedin.com/in/stevemccrone
Recent podcasts where you’ll also find Mark and Ponch:
What we'll do is just like I was saying. I wanted to get into just a conversation about how you see, as a strategist of a major firm, how do you see people orienting to volatility, uncertainty, complexity and ambiguity? We had discussed about surfing waves and that there's a lot of waves out there to surf and that there's a lot of waves out there to surf, and that's an analogy that we like to use a lot, because the ocean is a wonderful analogy, a wonderful metaphor of unpredictability, yet at the same time, it can provide such a tremendous energy that can be harnessed. So why don't we start at that level? Sort of what you see and what you think about when you approach these things. Sort of what you see and what you think about when you approach these things.
Philippe Gijsels:Well indeed, and that's a very good metaphor, a very good analogy, I think, of a wave, because that's actually what you want to do. And Kunde Leus, our chief economist, and myself we have co-authored the book the New World Economy in Five Trends, and that are exactly five big waves that we think is going to hit the markets and our world. Basically because even when you're not in financial markets, you will be impacted by higher inflation, by higher interest rates, which will be a consequence of everything that's demographics, everything that's debt, everything that's geopolitics, all of these other things, innovation and so on. So these big waves are hitting us and investing. And then, when you look at the big trend followers, and then if you look at what Michael Covell is writing about, or Tom Basso or Ed Sakota, it is always the same.
Philippe Gijsels:You try to pick a wave, you're there in the surf, you're waiting on the waveboard, a wave is developing, you try to take it and, of course, you never know whether it's going to be a very big wave or a small wave. It can break immediately or it can be a huge wave, but you try to surf it and then the idea is to get on it while it goes up and to get off it when it gets down and you don't know how big it's going to be. But I think that's a very, very good analogy for business, for trading, for investment and for life. Basically, I think you're on mute Mark.
Moose:Sorry, we agree and we would say that when we advise clients, you cannot eradicate volatility, uncertainty, complexity and ambiguity. You can't make it go away. You can. You can instead harness it and it's interesting that you mentioned Covell and Psychota and Basso of the discipline of trend following. That's an orientation where one can apply very simple rules that they have to follow. That allows them to deal with that. We call it VUCA, the analogy VUCA volatility, uncertainty, complexity, ambiguity. It allows them to deal with that in a way, from an orientation standpoint, that most others are not going to do. Most others are going to be subject to the whims that they hear in financial media. They're going to do what the crowds do. They're not necessarily going to take a disciplined approach. So do you see, when you're dealing with volatility, uncertainty, complexity and ambiguity, so you see clear value in having a very disciplined approach in that respect.
Philippe Gijsels:Absolutely, and that's something what I would like to do. And the money, the portfolios that we manage basically are a lot of people in the industry and we too are still very much a 60-40 portfolio. That worked extremely well since the beginning of the 80s basically, when the big bull market in commodities and equity started, from when the Dow Jones back then was 1,000, it went up to 40,000. And in the meantime you had some volatility going on. But all in all, it was a very good environment. And what you also saw? That bond markets and equity markets were negatively correlated. So if you were losing on equities, interest rates would come down and you would make some money back on bonds. So that that would be a very nice combination.
Philippe Gijsels:But unfortunately, I think the world we will move to will be a world and that's very difficult to see today because currently we're in a slowdown Inflation is coming down, economic growth is coming down, interest rates will come down. So it's maybe a little bit strange when you talk about a world where interest rates and inflation will be structurally higher, but that will be it. Also, in that long-term uptrend, you will see moments that it goes down, when the cycle turns down, and that's what we have today. But after this cyclical move, I think we'll be in a secular uptrend for interest rates and inflation, and that's a totally different environment. And then I think we will need to add to portfolios maybe also commodities which are now down, which also believe that we'll be in a structural uptrend, which are now down but also believe that will be in a structural uptrend, but also things like trend following.
Philippe Gijsels:That can indeed, I think, reduce very much the risk in the portfolio and then, in a way, they call it crisis alpha very often that you will make money on these things when a crisis hits. That's absolutely true. But I also believe that, like a lot of of people say, it's not only crisis alpha, because when you're in trend following and the stock market goes up and it goes up for an extended period of time and you're clearly in an uptrend, you will be long. So that will not take away from your uh, your performance. It will basically add to your performance. So I think for the next year, year and a half, we will remain in the logic that the 60-40 will work, because bonds and equities will move opposite ways. After that, I think we will have to have a very hard look at the world, the markets and the way we manage money, probably.
Moose:Yeah, that's what do you see. Like you know there's a lot, obviously, right now. What are the big trends that you see having a direct effect on investors? And I guess, how do you maybe, rather than that say this how do you advise when mental models have to be revised and updated and sort of shattered and reconstructed, what's the way that you approach that?
Philippe Gijsels:Well, we still go on fairly slowly because a lot of people still think that we're still in the world before COVID. A lot of people see COVID as something special and aberration. And then, once this is out of the system, inflation will go back to below zero, below two, excuse me forever, interest rates will go back to zero or one, and if you look at markets today, well, you could have that impression because indeed, inflation is coming down and interest rates are coming down. So I think it will be not a big bang. It will be more like a process. Of course, when a very serious crisis hits and people lose a lot of money, well, maybe the process will get faster now, but what we try to do is add these things gradually. It's also part of an education.
Philippe Gijsels:What surprised me or not really surprised me, but what was remarkable in the sell-off that we got and all the sell-offs that we have gotten already over the last year how fast it goes. Because if you look at this yen carry trade in Japan going on, everybody knew very much it was there, it was there for years, everybody participated, and then it started to unwind and then it goes really fast. So that will also be an issue for trend following models to capture this because the decline is so fast. The question is, how fast do these models turn? And you have shorter term, medium term, longer term and so on. So I think there's a lot to do now.
Philippe Gijsels:I think, for to sell a client the idea that you buy above a 200 day moving average and in the afternoon you sell below the 200 day moving average. In the morning after that you buy back above the the 200 day moving average. It's very difficult to sell that because then the clients that you have no idea what you're doing. So, therefore, adding some funds that are trend following, where you let the trend following be done by the people who know that, but you add that as a building block to your portfolio, I think that's something that could work. But I must admit we're in the very early stages and I've been a fan of Michael Covell and M Bezo and all these people for many, many years. I've read all these books Valen and Basel and all these people for many, many years read all these books. But I think we are still pretty far away to having this adopted in portfolios in the average portfolio.
Moose:Let's say, yeah, it's amazing how something that you know usually in most trend following. I think the rules are fairly simple but they require a lot of discipline. That might go against one's behavioral characteristics or their tendencies, their emotions, their psychology. You really have to do have control of your behavior.
Philippe Gijsels:Yeah, I don't know who said it exactly, is one of the trend followers who said it. Um, what are you in fact arbitraging is human behavior, because technology has changed. A lot of things have changed. The world goes faster you have, but in in way, we're still living uh uh in in the savannah, with, with the wild animals, and we still have a lot of these tendencies. When it was a very good idea when you saw a snake to run away, and when you saw the herd running away, it was probably a good idea to run with the herd, because the herd has way more eyes than an individual. So and that's in our DNA, because the animals that ran away, they basically survived and the other ones get killed off. So in this way, this has been engraved in our DNA, behaving like we're still somewhere in the jungle, but that does not work very much in financial markets. So what you can arbitrage is basically and that has not changed since Jesse Livermore's time or David Ricardo's time or all these famous trend followers or traders, basically from the past Human behavior is still very much there. You have still fear and greed and regret and all these biases that are there.
Philippe Gijsels:But indeed, if you have a system like a lot of these famous or good or strong trend following firms or individuals do.
Philippe Gijsels:I think you have a distinct advantage, and I've been doing this now for investment business for 35 or 40 years.
Philippe Gijsels:In the meantime, I can tell you this and you can tell this to me and we can both agree yeah, you should indeed cut your losses short and let your profits run until you have to do that yourself. And then you have a holiday and you have a very nice profit and your stock went up 100. It's so easy to take that because you feel well, you have a nice upper row, you have a nice barbecue and you feel good, until it goes up another 300, of course. And then the thing you're losing on, well, you would say, okay, I'll let that run because it will be okay, and we all know it will not be okay, but we can write about it and we've written about it in our book as well. We can preach about it, we can talk about it until you have to do it yourself. And therefore I think I agree with you need these rules and you need strict rules, because otherwise you will get into trouble fairly easy.
Moose:Yeah, yeah, I find that it seems, as I've read those books the Cavell books, of course you know the Trend Following and the Turtle Trader and Ed Psychota and others. You know you have to have objective rules, but I think that at the beginning, what has to precede that is the right behavioral frame of thinking. You have to have the right orientation that can shape how you're going to make observations, decisions, actions in the market. If you don't have that starting point, which really I think is encouraging, a perception that's trying to align to reality as best as it can, I think that that's really the edge of a good trend follower, certainly the ones that we were talking about.
Philippe Gijsels:Yeah, we are probably hardwired totally the wrong way.
Philippe Gijsels:So we overcome that in a way. So yeah, I agree with that in the mindset and the mindset that it's very difficult to predict anything. Entire book the Five Trends. While we predict trends, I believe that there will be a structural bull market in commodities and I believe that demographics will change and I will believe that basically that will be a problem. But I use believe a lot and believe does not buy you a lot of things. So, even though I think that copper prices will be way, way higher in the future, if I look at demand and supply and I look at the world and I look at that, you will be in deficit. So I have a lot of reason to believe that basically that will be the case.
Philippe Gijsels:But it's hard today to be long copper when you have a chart that looks horrible. So the trend is down. Then you have to choose. Do you choose between what you believe or what you see in the chart? And then the trend follower will say look, I do not believe anything, I just look at the figures. And if you look at the figures, you probably be neutral or or even even short in copper, even though you have a lot of arguments to say in the long run it should go up. So, yeah, that that's a matter of discipline, but I believe that we are really hardwired the wrong way and and that a good system, uh, like you talk about, which is probably like I understand it more, like a mental way of looking at it.
Moose:But that's a good start, a good place to start. Yeah, the US Army came up with that term in the early 90s about how do we explain the post-US-USSR paradigm, you know, after the Cold War, where things weren't so binary, wherein you had all sorts of anomalous events popping up in the former Yugoslavia or in Somalia and other places, and they were determined to be volatile, uncertain, complex and ambiguous. And my own background in asset management, having come from the military, was to teach investment advisors or even have discussions with portfolio managers about how what worked in the throes of warfighting and the chaos and the complexities of warfighting are actually those sort of ways of thinking and systems are actually perfect for markets. There's a very great corollary, a crossover.
Philippe Gijsels:There's a very great corollary or crossover, absolutely.
Moose:Yeah, it's the same. It goes back to our original thing at the ocean analogy. You know you talked about even you said crisis. I actually see opportunity, right. I mean, isn't that the dream?
Philippe Gijsels:Yeah, absolutely. And then one of the original turtles, jerry Parker. He talks a lot about these things as well and he also has podcasts and has a book even about it, and indeed it's the outliers of course you want to catch. You're only going to catch them on both sides, but indeed you have a system. And then you have to overcome the idea.
Philippe Gijsels:When I look at my own investment career, I I made all the mistakes that you can possibly make, buying stuff I would buy, probably don't know. The company was european company, european typewriter company, computer company, after that olivetti, and they were at the lowest level. So you would look through newspapers, because there was no internet back then. So you had to look through newspapers to to find the highs and the lows. And you would look through newspapers because there was no internet back then. So you had to look through newspapers to to find the highs and the lows and you would start to buy things that were at the lows. Because the idea would be look, uh, you, you have to to buy things that are low because they will go back up.
Philippe Gijsels:And now, of course, after many years, you look at it totally differently because you say I want to buy things that go up, and and if you take that to an extreme, you could even say I'm only interested in things that make 52 week highs, because then they do something special, because if you want an apple that goes 100 fold, you cannot go 100 fold without doubling first.
Philippe Gijsels:So if you throw away everything that does not double, well you have, you have by definition. If you buy all of that and there is something that goes up times double, well you have, you have by definition. If you buy all of that and there is something that goes up times 50, well you have that in your portfolio. But everybody knows that that's mathematically absolutely correct, I think. But the point is you have to have the guts to do that, because it's way easier to buy something that's down and then to pay to pay up for something that that goes up. So I think and you need these outliers, if you want the cacao or the cocoa that went up threefold and stuff like that, well, basically, you have to buy these breakouts, which can be hard, and I think Jerry Parker calls this loose pants that you also have to let them run.
Moose:Tolerance yeah. Having tolerance yeah so that's that's.
Philippe Gijsels:That's very interesting and what helps me a lot, and that's also, with the books of michael covelle, trend following I think that's already the fifth or the sixth edition to do that on a regular basis, a bit of that each and every day.
Philippe Gijsels:We'll listen to their podcast and so on, to have this way of thinking about the world ingrained in your brain, because I think that our hard wire is totally wrong, so you have to rewire yourself.
Philippe Gijsels:And and then, of course, something that helps me as well, because in my job it's very easy to to make a quick decision because I'm I'm forced to look at fundamentals and and I talk about fundamentals all day, so logically I will be affected by that I see that the prices of all the assets all the time, so you're always in the temptation to open or to close the position.
Philippe Gijsels:So what I've learned is that it's very often a good idea also to only trade or make your decisions when the markets are closed or in the weekends, because then things are not moving and you do not get the huge temptation to to start trading on things that move, because if something goes in your way, then you get the temptation to to take the profit. If something turns against you, well then then basically, you, you, you want to add to that position, maybe even though you have to cut it. So working is something everybody has to find a way to deal with his own psyche, but taking the decisions the moment that the markets are closed is something that works fairly well for me.
Moose:And oftentimes their averages are pretty low. Their winning averages are extremely low. Over time they win a very low percentage of the time. They have a lot more losses than they do wins the point that you raise.
Philippe Gijsels:there was also I think Michael Covell had it on this podcast, but I've seen it also in other places there was an interview by Federer the tennis player, and he had a speech for students that graduated and he said I've only won in my entire career one of the most successful tennis players ever about 55% of the points. And then that you can do. You can win a tennis match by winning 55% of the points. And in trading, if you look at these averages and they're well documented of a lot of successful trend followers, they have about 40% hit rate, sometimes even not 40%, but if you can make sure, of course, that your winners are way bigger than your losers, well then, basically, you can make a lot of money. You can build a fortune on a hit ratio of 40. It's like it's more in your neck of the woods baseball. It's not so right, yeah but.
Philippe Gijsels:But you want to hit these home runs and then you get can be striked out a couple of times when you get a couple of home runs in, and that's, that's the same. When you have one nvidia, uh, you can have a lot of losers of a couple of percent against that if one thing goes up tenfold. So that's, you need them, but then of course you need to let them run as well, because I, like I was talking about all my investment mistakes at the beginning, like olivetti, but probably the biggest mistakes and the biggest regrets I had over the many years is that I probably had some very nice winners in my portfolio and you probably cut them too early.
Moose:Yeah, well, I mean, I'm glad you brought up the baseball analogy. We're glad to see someone in Belgium understands baseball. But to your point, babe Ruth had, I think, a 3.43 lifetime average, so 34.3% of the time he was hitting, the other almost 70% of the time he was out. So the similarities in trading are very similar. As you suggest when you dare to race baseball.
Philippe Gijsels:You always come with Babe Ruth. That's something that's illegal. Well, he's an easy one's something well he's an easy one.
Moose:Most know, if they know, even a basic bit about baseball, but not necessarily anymore. So, and Brian has joined us. Brian, this is Philippe.
Brian "Ponch" Rivera:I've been listening and, sorry, I've just done another call there. Nice to meet you, philippe. Hello, we were talking about Brian just to bring up the speed.
Moose:We've been listening. Sorry, I've just done another call there, nice, to meet you, philippe. Hello, we were talking about Brian, just to bring up the speed. We've been talking about the orientation of trend following, how it's a mental model, it's an approach that allows you to engage VUCA. Understand that you can't eradicate the waves, you can surf them instead, whereas most are going to tend to herd behavior and other things that are more conventional approaches and not get the same results as some of the big-time trend followers.
Brian "Ponch" Rivera:No cool. Yeah, I'm new to Elliot Wave and a few things like that and GAN a few other things I've been introduced to, along with Harmonix and Sacred, sacred geometry inside the market, so I am following quite a bit of that. I'm also familiar with like 50-day moving averages and 100-day and 200-day. To me those are linear approaches that I think a lot of algos are built on. But overall, the big shift in the market right now you talk about USS equities is the zero day options expiration where you got a group of folks running towards.
Brian "Ponch" Rivera:Just use the SPX as an example. Today it's at twenty fifty two, ninety three. We're probably chasing a bunch of fifty three hundred SPX or SPY calls trying to make a big buck on that. So that's, that's changing the dynamics of of the markets. Now to the daily trading and how things are done. Add in the manipulation from some of the bigger firms, misinformation, disinformation. The market is absolutely a VUCA environment and I heard you guys talking about that earlier. So just my two cents on where we are with the trend falling at the moment.
Philippe Gijsels:I think, indeed a number of interesting points. I think, first of all, if you look at GAN, when you look at Elliott waves and so on, you're in a way, predicting, like in trend following. You just say I follow the 200-day moving average and the simplest way is okay, when I'm above it, I'm in an uptrend, when I'm below, I'm in a downtrend. And of course, course, you can complicate it the way you you define the trend, because it does not have to be linear. Like, like you say, you can use exponential averages, but you can use um kalman filters, whatever. So the, the very professional trend followers, probably use another definition of trend. If you get in the world of jim simons and so on, well, yeah, they have more complicated systems than than that, but in a way, it's always defining trend. As for the environment, I totally agree.
Philippe Gijsels:There has been a lot of talk about, at the end, carry trade, indeed, and then everybody's borrowing yen and then they invest in in bitcoin and in technology and in japanese stocks and australian dollar and what have you. But, but, but you're totally correct. It's not only that, because they say, okay, that's three thousand billion, four thousand billion, it's a guesstimate, because nobody knows, because these things are on the books of of a number of of investment banks and a number of hedge funds, so you cannot know that, but indeed you have indeed the one-day options. That's clearly making the move bigger. You have a lot of people who have sold volatility and then, all of a sudden, volatility goes to the roof and then they have to sell equities. So it's not only the the yen story, it's basically an entire story of a market that's complicated and, like we said with market a couple of minutes ago, it complicates, and I would be happy to to talk or to hear a real trend follower talking about this, because what you want is also that these trends tend to shift.
Philippe Gijsels:First of all, you need want long trends. You do not want to be whipsawed all the time because that's painful, but, on the other hand, you also want these trends to bend more gently and that you have time, when you're long, to go neutral and short, or when you're short, to go neutral and long. But, of course, when you have moves like we saw last week on Monday, when the world falls down, well, it goes too fast, and then, of course, you have you need ways to capture that as well. But I think, indeed first learning about the VUCA, what you talk about, but the way I understand it, from what Mark was explaining and what you explain, and then the world that we have, this looks way more like a VUCA world than a couple of years ago. So this volatility will indeed be massive and will be way bigger when COCO can go up threefold in a couple of weeks and lose 50% after that, while you live in a world that's a little bit more difficult to navigate for investors, for traders, but also for companies, because very often these commodities are inputs for a company. These interest rates are important in the banking world or when you need a loan.
Philippe Gijsels:Inflation that all of a sudden goes to 12, 13, 14% Well, there are wages that go up. Inflation that all of a sudden goes to 12, 13, 14 percent Well, there are wages that go up. So I think the world that we have or that we're looking at today is way more complicated than the world we knew, and that's also one of the topics without predicting anything, because it's very hard to predict. But there's also the topics that we talk about in the book the New World Economy and we could even have dropped economy, we could have called it a new world or the new world. That's totally different.
Brian "Ponch" Rivera:So the traditional way of looking at the markets. You've got a 60-40 portfolio, as you have folks that are all about buying and holding for the long term. The challenges I have with that is the environment is such that products and company life cycles are shorter and shorter. So if you buy something, a company that you think is going to be 10x in the next three or four years, and they start moving in that direction and a new technology or something else innovates in their space, that company could be obsolete in five or seven years. So that idea is gone now and I'm throwing some ideas at you, philippe.
Brian "Ponch" Rivera:I'm in the belief that the market knows it's already reflected in the market. The market tells us what's going to happen. The problem is we don't know how to see that, and I want to hear your thoughts on that from your background. And is that true? We've had guests on that. Come on and talk about consciousness as reflected in the markets that you know. The global consciousness is seen there. Is it from your perspective? Is that true, or where do you fall in that line of thinking?
Philippe Gijsels:Well, there's a lot to unpack in that observation or that question. So, first of all, I totally agree that it goes way faster. That's absolutely correct. If you look and I don't know the exact figures but if you would go 50 years, 60 years back and you would look at the S&P or you would look at the Dow Jones, if a company would come in, it would stay there for 50 years and then you would have the things of course, the Xeroxes and the Eastman Codex and back then the IBMs and a lot of the railway companies. So if you became a huge company, you would be a huge company for a very long time. Now this rotates way more quickly, by the way. That's a massive advantage, because that's the creative destruction by Schumpeter in action. That's a massive advantage of what you see in the US at the moment. You have a lot of young companies. If you look at the S&P 500, they're still fairly young companies. Each and every year you have a number of IPOs. Okay, the last batch did not go so well, but okay, there will be new ones once again. If you look, for example, closer to where I am in London, which has also been a hub of innovation for ages, for centuries with universities, with spin-offs and so on. If you look at the FTSE 100, well, that are all fairly old companies, so the process of creative destruction is basically less in Europe than the US and that's no big surprise that the US markets have been outperforming massively since the crisis of 2008, 2009. It's mind-boggling that if you look at portfolios around the world not in the US, but portfolios around the world 60% on average is in US equity. So everybody wants to be in that field, that space. So that's absolutely clear.
Philippe Gijsels:If you look, indeed, at the S&P 500, and I saw an article about that some time ago and it was very insightful In a way, that's also a way of trend following, because you know that companies that come in, if a company does badly, it will be dropped. If a company comes in, it will enter the S&P 500. So things that double, triple, quadruple are, by definition, in the S&P 500. And NVIDIA, for example, a couple of weeks ago it was trading at 40-time revenues, not earnings, 40-time revenues. It's very hard to buy that. Say, hey, I'm going in my pocket, I buy some NVIDIA because you know it's massively expensive. But if you now buy the S&P, well, you buy a part of that. So, in a way, the S&P 500 is probably the best trend-following index you can buy, because you know that new companies will come in To your point.
Philippe Gijsels:That's very insightful, I think as well. The market knows, or somewhere it's embedded in the stock price already. I think that's what. And then I go back 30 years or 35 years to George Soros, the Elsinore Finance. He would call that reflexivity, and that means that the economic reality influences the stock price, but the stock price also influences economic reality, because if your stock price goes up, your options go up and everybody wants to work for you, and when you're a company where the stock price goes one way up, you can attract the best workers, and when you have a stock price that goes down all the time, you will lose all your good workers because they will move to this company where the stock price is going up. So, in a way, something that's strong influences the stock price, but also the stock price influences economic reality, and then, like that, you can have a virtuous or vicious cycle, depending on which way your stock price goes. So I think that's a very interesting way to look at things.
Moose:It's interesting you mentioned Soros' book. It's amazing how many people won't read that book because of his politics. Yeah that's another story. But the lessons in that book are again if you disagree with somebody politically, just because of that doesn't necessarily mean their ideas around investments and trading are bad, because it is a very useful book their ideas around investments and trading are bad, because it is a very useful book.
Brian "Ponch" Rivera:Yeah, we came across Soros studying underneath Karl Popper years ago and there's a nice connection to what we talked about quite a bit, and then one of the first things Soros wrote about was about consciousness and not the market. So again, I think he's onto something and I agree with Mark. Politics aside, you can learn a lot from people that really dive into the academics behind psychology and physics.
Philippe Gijsels:I think Popper will be very pleased with Foucault, because I remember back then I was 17, 18, when, I think, ultramarine Finance came out and then, because he was such a fan of Karl carol popper, I started to read open societies and his enemies and the cell of in his brain, and then you come with the philosophy of popper and then you get into falsification that you you do not know. You think that all swans are white until you see a black one. That's basically the year behind it, in very simple, simple terms. But that that, that's that, that that notion of, of trying to, to have an hypothesis and try to falsify it. But but if you buy a stock or you buy a commodity or whatever you, your belief is that the stock will go up. That's your hypothesis and it goes up until it's falsified, and that that's, in a way, it's a philosopher.
Moose:But you can apply that to trading and investing as well I'm gonna have to send you uh, I'll send you john boyd's uh white paper destruction and creation because we're hitting on a lot of the themes here. Um popper was a later influence on him and I can send you also to his epistemology of what I had sent you about the OODA loop sketch which he drafted in 96 right before he died. But it's essentially saying that we have to continuously break and revise and update our perceptions of what we think is actually going on in our environments think is actually going on in our environments. Because if we don't break those models whether we want them to or not are what's shaping how we see things and what's shaping how we decide, act and learn. And if we're not constantly challenging those assumptions, if we're not constantly revising those, we're left static. And you can't be static in a market where everything's in the state of ceaseless flux. We could probably say you can't be like that in a universe where everything is in the state of ceaseless flux.
Philippe Gijsels:It's a very interesting point, so I will be very happy to read about it, because I have the feeling that a lot of very interesting topics come together in what you say. And I also think and I've always been a big believer in that that the stock market is not only about PEs and it's not only about economic growth and about economic figures. It's about sociology, it's about philosophy, it's about all these things, psychology, a lot. So at the end of the day, and all of these and then you're back to trend following they come together in one point that's the price and then that's the volume at a certain moment in time. So all these beliefs, all these perceptions, all these different disciplines of science, they make that the need to buy or sell, and then somewhere you can observe that and you cannot know individually what everybody is thinking, but you can know what the total outcome is and that gives you a good idea of where things are moving.
Brian "Ponch" Rivera:Yeah, I wonder if you can help us understand our listeners too, and mainly me. I'm struggling with the idea of currencies. And so if we look at the global markets as a gigantic flow system and all flow systems and Mark and I talk about this quite a bit on the podcast, about using John Boyd to help people understand a flow system From a global macro perspective the money's moving all the time right. So we see the go back to what happened this past Monday with the unwind in Japan, the currency I think I can't remember if the yen went down against the dollar, I think it was on Monday but how does that flow of money affect um overall prices in a given day and can you use that for trend following?
Philippe Gijsels:yeah, I, I've um I I talk a lot about currencies, um because I I do basically a number of things, but the two big things.
Philippe Gijsels:I talk to investors and then you typically talk also about currencies, but mostly about equities and about commodities. Of course, when you talk to investors and then you typically talk also about currencies, but mostly about equities and about commodities. Of course, when you talk to companies that do business in currencies well, they need to hedge from time to time and then you have to have an idea. Now what I've learned, and then maybe some people in the trend following space will not really agree with me, but, but very often cycles waves in currency markets are shorter. So I think that when you do trend following on currencies, you probably need shorter term models, because I think it's not so common to have very big waves. Of course, when you look at the yen, that was weakening all the time. Now it became stronger, but was weakening all the time. Now it became stronger, but it was weakening all the time. That's a very nice wave. Turkish lira that goes down all the time, so that's a very nice wave as well. But if you look at euro, dollar and so on, that's very often mean reverting. So there are not a lot of trends or longer term trends to be picked up now, but I always tell to our clients and then also to to students from time to time is, and you're absolutely correct, it's. It's not a stock thing, it's a floating uh currencies. So and then if you look at the flows, there are basically three big sources of flows. Ones are transactional flows I would call that trade. The second one are investment flows and the third one, well, I call that central banks. Because if you're a big central bank, like the ecb of the bank of japan or the fed, you can clearly intervene and have an impact on on these markets because also, currency is a matter of of demand and supply. But if I always say, if you tell me what the trade flows are, if you tell me what the investment flows are and you know more or less what the central banks are doing, you can have a pretty good idea about the currency.
Philippe Gijsels:And let's look at the dollar, for example. The dollar has been strong and everybody is talking about the demise of the dollar and losing its reserve status and being less used in trade and so on. So it's true, basically the US has a trade deficit, that's clear. So that should drive the dollar down, making abstraction from the central bank for a second. If you look at the other big flow, investment flows, well that's still very much in favor of the dollar because of the entire world wants to buy american treasuries. And if the entire world wants to buy nvidia and so on, well it's still very much a dollar thing. So, yes, the united states has a clear trade deficit, but the investment flows are so strong that the dollar goes still up.
Philippe Gijsels:And I see all these countries that are not so happy with the United States, like Russia and Iran and other countries. They try to diversify away China, diversify away from the dollar and they try to sell treasuries. And that's one of the reasons why gold is going up, because a lot of central banks have been buying gold instead of dollars. But as long as you reserve currency, I think the dollar is going to be okay.
Philippe Gijsels:Because suppose that Saudi Arabia and Russia, they trade and suppose that the trade is an equilibrium. They sell and they buy more or less the same amount. They can do that in a ruble or whatever currency they dream up. But suppose that one of the two countries, let's say Saudi Arabia, has a trade surplus, then all of a sudden they have a massive amount of rubles. Then they can say what I'm going to do with these rubles. Am I going to buy real estate in st petersburg? Am I going to buy luke oil? They're not going to do that.
Philippe Gijsels:So if you take these rubles, you put them again in dollars and you buy real estate in the united states or you buy nvidia, you're back to square one. So you can trade in something else. But as long as you're not willing to hold the other currency and go back to dollars, the dollar is a reserve currency. So eventually, in a certain moment in time we know that there are shifts A certain moment in time the Chinese currency was strong, and then it were the Italian city-states, and then it was France, and then it was Holland for a very brief period in time, and then it was the pound for a very long time, and then it was the pound for a very long time, and now it's the dollar for a very long time. So in 250 years it can be Indian rupee or whatever, but for the time being it's still the dollar. That's a reserve currency. And when you're a reserve currency, well, I think you can get away with a lot.
Moose:I'm told that here in Manhattan, where I I live, that there are a lot of these uh mega skyscrapers that have gone up with huge residential uh properties that are sold for the hundreds of millions that they're actually savings accounts from uh rubles and other things. Yeah, that that no one even lives there. They they just buy the apartments up.
Philippe Gijsels:China as well. Maybe that is becoming a problem. I'm not so worried about the real estate market, because that's also one of the topics we discuss a lot in our book that in a world where interest rates and inflation will be materially higher, you want real assets, and equities basically are real assets because you buy part of a company. Real estate is a real asset but also pigeons, also old timers, also wine, also commodities, gold, silver, what have you. So I think and I'm yeah, I'm a very big conviction on that that the next many years 20, 30 years will be clearly a world where you want to own real assets and cash is going to be very unattractive because cash is going to be inflated away by central banks.
Moose:Do you envision when you say real assets? Do you ever envision currencies being re-pegged back to commodities like gold, silver, other things?
Philippe Gijsels:Well, as a gold bug, you can dream about it, because if you would try to repack all the massive money supply that has been created over the many years to the gold again, there is absolutely not enough gold. So if that were to happen, if you would say tomorrow we go to a gold standard, gold would be at 20 or 30,000, because there is absolutely way too much cash compared to gold.
Philippe Gijsels:You could add other stuff, you could add silver, you could add a lot of things. I think a gold standard like we had will not be liked too much by central banks, because then of course you take away their freedom, between brackets, to print money, because that's what they do. So they will not do that in a way. But I think that's what we tell clients. You should, of course, have some cash, you should have some savings. You would have some reserves.
Philippe Gijsels:If your roof comes down, you need money to repair it, stuff like that comes down, you need money to repair it, stuff like that. But but but if you hold cash now for the next, let's say, 10 years and inflation is only three percent, uh, you will lose about 50 percent accumulated uh, of yourself, your buying power. So so, even though real estate prices have gone up, and even though at some places commercial real estate has probably issues maybe in New York you will probably have a lot less people working there, so maybe some of the offices will be vacant, so locally there will be issues. But I would still, even at the current prices, at current interest rates, be way more happy to hold a nice piece of real estate, preferably with a loan against it, because exactly the loan will protect you from the inflation and the rising interest rates are going to come, than holding cash for the next 10 years, because, guess you're sure that you lose half your purchasing power in the next 50, 10 years.
Brian "Ponch" Rivera:It's a great perspective. In the context of bubbles. So some people call what we're experiencing now the mother of all bubbles. Some of our listeners are familiar with Tulip Mania and I'm sure you are, given where you are in the world In the context of bubbles. Let me ask you this and narrative economics and things like that crypto, um, is it a commodity, is it a currency? Is it a bubble?
Philippe Gijsels:well, uh, there's maybe another option. Um, okay, uh, in in the book I I talk about also about crypto, but I talk about um, also about blockchain, also about smart contracts, all these things. And I try to have an open mind on this because I very often talk for young people and I'm a gold bug for my entire life because I have the feeling that gold has held its value over the many centuries and eons, basically. So crypto is still fairly young. But if you say to young people, I don't believe in crypto, well you need very good arguments, otherwise they throw you out immediately, also with the kids. So I have an open mind to that and I know there are similarities between bitcoin and gold, because you're both mined. They both do not earn anything, so you're always in competition with something that's has rate has as yield, so there are similarities.
Philippe Gijsels:Now the point is that if you look at the chart, it's not money in the sense, because money you want to have a store of value. You would have a medium of exchange. You have a number of criteria. You need to have money. You're not buying a pizza with Bitcoin anymore. That was the basic idea, but you're not buying a pizza with it, so you try to hold it as a store of value. But the store of value you want to be stable. You do not want it to go up or triple in a couple of months and then half afterwards, so you want it to be stable. So if you would run the thought experiment and you would say, okay, take the Bitcoin chart and take the word Bitcoin of it and show it to someone and ask him or her what you think this is, I think most people will say it looks like a technology stock a bit. It has the volatility of a technology stock and if you look at it in a correlation sense, it moves with the Nasdaq. So it was not the safe haven when the, the carry trade came down. Uh, last week bitcoin was not the safe haven because it went down 20 as well, so it did what the nasdaq did, but but with the turbo and, and when the nasdaq goes up, bitcoin goes up, probably even more. So it looks like a technology stock to me. Um, and and yeah, it behaves like that. So, until further notice, I would call it maybe an investment, a speculative investment, and it's it's a bit in the technology space now the blockchain technology.
Philippe Gijsels:As a bank we do not invest in directly, but we look at the blockchain technology, because the blockchain technology will make a lot of things possible. And it's probably or maybe a painter, you do not know, but we had Vincent van Gogh. It's one of the guy who painted the sunflowers and so on. These are paintings that go for hundreds of millions, even billions at the moment. But the guy, he died in absolute poverty. He was supported by his brother and he took some of the paintings just to please him and he gave him paint and food and shelter and so on, but he was walking over the street with something that would be worth a couple of hundreds of millions of dollars a number of years later. So if you could go to Van Gogh and you would say look, my friend, I believe in you, here you have paint, here you have food, but I get 15% of your revenue streams for all the years to come, everybody would have been extremely happy. So blockchain will allow us to invest in an artist or to buy a part of an artwork, or to invest in in wine or or things that are not accessible today.
Philippe Gijsels:And then, when I'm thinking out loud, when you go back to the trend following world or trend following. You want as many different markets as possible, because if equity market is not trending, it's not interesting If currency markets. So these guys have 60 markets, 100 markets. They trade on eggs, they trade on pork belly, so whatever is a liquid market they will trade. So I think over the next many years there will be more markets, so that will be good and then you can say you will have a portfolio like you have today. I'm talking 20, 30 years time you will have a portfolio like today, but instead of only having NVIDIA and Walmart and IBM and so on, you will have 10% of the revenue stream of a guy you know. You will have 1,000 of a nice painting, you will have 20% of a wine cellar and so on, and these things will get quoted. So that's extremely excited because this, this blockchain technology, will open up markets we we have never thought about even and the internet never.
Moose:Well, say, blockchain never forgets, like kind of like the internet never forgets, right, you'd have the permanence of that. Ownership would be verifiable indefinitely, correct?
Philippe Gijsels:Yeah, that's what you want.
Moose:And you were just saying you know it was a very trend following comment. You know you trade everything. You don't have any bias towards any market, you trade everything. I'd love to get your opinion on this. I mean, we find that we study the theories of John Boyd and apply them to whether it's trading, whether it's to advising business leaders, whether it's to our own just personal life, sports and everything else that at some point you become, you know, you're more in tune, what's going on in reality and it has a different effect on your emotional and psychological judgment. That would maybe you would hurt off in a tribe or a group or something else.
Moose:So you know, for speaking for myself, I tend to be fairly apolitical. You know, like we're talking about Soros's book, I mean it's okay to just pick it up and read it because I'm looking at the concepts, I'm not looking to make a judgment on the person. I've always found that in trend. Following that, if I follow that discipline, if I'm oriented that way that I become agnostic about where I invest or what I invest in and say commodities or tech or whatever, I'm following a discipline and I'm looking at a amount of price and then I find that that sort of agnosticism prevents me from falling into emotional or psychological traps that would otherwise otherwise lead me to ruin. What do you? What are your thoughts on that?
Philippe Gijsels:yeah, no, that's absolutely correct, and it's always more safe, or it feels more safe and it feels more comfortable, to be with the herd. To go it alone is very often. It's sometimes easier to lose all together than to be the only one who's not winning and all the rest is winning and they're parting. So belonging to a tribe, to a group, to a herd, is something very human, I think. So going alone, some people have the capacity to do that, but it's not easy.
Philippe Gijsels:I think, therefore, it's also important to have maybe some sort of community of trend followers that you do not necessarily need to have the same positions, but, by definition, you probably will, because you will belong to something that's an uptrend. Everybody will define it a little bit differently, so there can be changes. There can be changes in time frame. Somebody is short-term, long-term, but developing some. That's what I said. Therefore, reading these books and reading from time to time Tom Bezo and others, gives you comfort because you in a way feel that you also belong to sort of a tribe, even though you not know the people personally or not very well. So that's something that helps, but I indeed agree that that's the way to go.
Moose:We all know that's the Michael Covell calls it to go off the grid. That that's the way to go.
Philippe Gijsels:We all know that. Michael Covell calls it to go off the grid. That means I live on a beach somewhere, I have a very nice home, I live very well, but I do not care too much about the world, and I agree with him being off the grid. But you want to be off the grid and sometimes it's not easy to do that because you feel probably nicer with your tribe and and and. Yeah, when everybody's buying nvidia, it's way easier to buy nvidia. Now, when nvidia is going up, you're probably an uptrend and you would be there as a trend follower as well, probably. But but but being alone, being agnostic, being sto I guess some people can do that, but I also appreciate the idea that that may not be easy. So have some like-minded people around you that are in that mindset and that you can talk to from time to time and when they're not available, read a book from these people. Then that can help you, I think, maybe make the right decisions.
Moose:And challenge each other's assumptions to avoid groupthink and herdthink. So, john Boyd, in the white paper I'll send you, he wrote Destruction and Creation. He says that one cannot determine the nature or character of a system within itself. In other words, I can't come up with a trading formula to prove a trading formula, and the more that I would try to do that confusion and disorder would increase. So an outside view, an outside perspective or, I'm sorry, sticking in that idea of I can't determine the nature of a character.
Moose:It goes back to what you said earlier. I have to be able to let go of a thesis if it's failing or if it doesn't work. I have to let go fast because my experience in asset management, I would see a portfolio manager, an analyst. They would write something all the way down to the bottom because it was their idea, because it was their thought and they didn't let go. And that ability to let go, knowing that you can't determine the nature of something within itself, that seems to be one of the harder uh, one of the hardest puzzles to crack in in investing the ability to let go because of the emotion, the psychology and the herd think and other things but in that logic and I asked the question to you because you know this theory is better than I do but then it would be able to look at markets which are in a way mathematical, are in a way model-like.
Philippe Gijsels:You could look at them from a psychological point of view, because that would be something outside the traditional model and that would enable you to have another way of looking at it in a way.
Moose:So I learned this long ago, in the year 2000, when a taxi driver in New York City recommended the book by Humphrey B Neal, the Art of Contrary Thinking, and he told me that when I got out of the Marine Corps that I should go work on Wall Street. I thought he was crazy because I said I'm not good at math and I didn't major in accounting. And he said you have it all wrong. He says that you know that Wall Street is run by liberal arts majors. So psychology, economics, history, english, spanish and my own experience I was on, I was in asset management for about 17 years. It was amazing to me that some of the best portfolio managers they had bachelors of arts, masters of arts. They did not have, they did not have financial degrees at all, that they were very interdisciplinary, that they had very broad interests beyond finance. That helps influence their thinking and their decision-making capabilities.
Philippe Gijsels:Totally correct. My team. I have economists and commercial engineers, but I also have biologists, I have historians. I always try to get people from other disciplines just to have other points of view.
Moose:Talk about how important that is In this day and age. How important is it to have an interdisciplinary background when you're approaching the volatility, uncertainty, complexity and ambiguity of markets?
Philippe Gijsels:Absolutely. That's something I strongly believe in as well. It's also when you look at innovation, basically Innovation is in a way and Stephen Johnson wrote about it where good ideas come from. It's a fantastic book about innovation and he says, okay, what's innovation? Well, it's a round table innovation. And he says, okay, what's innovation? Well, it's a round table. Around the table you have smart people and on the table you have parts. You have semiconductors, you have computers, you have chemical materials, you have ideas, you have papers and you let, basically, smart people play with ideas and components and you invent something.
Philippe Gijsels:And and the idea that we added also in our book is that and that's the way of diversity it's not only that you have smart people around the table and the components on the table, but also make sure that the people around the table are as diverse as possible, because they will come up with other ways of looking at the thing, taking two components and put them together in a totally different way than somebody else would do, maybe in a crazy way, but that's the way you may be going to find new things. So I think that this is a world of generalists more than specialists, and when specialists have a lot of them and have a lot of them from very different. I heard a very interesting YouTube video by Simons and then the man who solved the market about Simons and then his people. They're very, very intelligent people from very, very different disciplines a lot of mathematicians, but, but a lot of other stuff as well. And what he said, what, what my model was, what my algorithm was.
Philippe Gijsels:I tried to find as many interesting, intelligent people and I find a way to let them work together and let them work together was, of course, financially in a way, because they would be heavily involved in the fund, so when they would do well, they would all make a lot of money. So that was maybe the way to bring them together. But that's what he said. What I'm good at is finding smart people and let them, in a way, work together, and that's maybe a way. That's what I'm, on a a very small level, trying to do as well.
Moose:Well, your comment on generalists is well taken, and I know on your LinkedIn page you have the quote we cannot control the winds, but we can adjust the sails. And that reminds me of Buckminster Fuller, who was a contemporary of John Boyd. I had a lot of the similar ideas, but he would say that you call me trim tab. In fact, it's on his gravestone to make little adjustments that are going to have big effects in the long term.
Philippe Gijsels:But one of the things that he also said too was that in the who can talk to two or three different specialists from different disciplines and, in a way, bring ideas together, because innovation, creativity, inventions, that's all about very often about taking one idea from one field and applying it to another field, and then the further you go, the further you specialize, the less likely it becomes that you still have the overview.
Philippe Gijsels:So you need people who can from time to time stand between the specialist and look hey, this is interesting thing in biotech or in artificial intelligence or in quantum or whatever, and let's take that idea and bring it to another field, and that in itself can be the way you make a new company or the way you make a fortune or you invent the new battery or something like that. So I think that that's usually important and also the way we educate people, because we try to, and I think in Belgium that's not too bad. I think we have a very good basic education which is general in nature, and then, of course, you specialize afterwards. But I think it's still very important that throughout your life. You see, you cannot see behind me, but I have books from all fields and I have, of course, basically all the books on stock markets and the Covells and the Bezos and all the Warren Buffetts and everything. There are a couple of hundreds of them easily, or even more.
Moose:How about Mises and Hayek?
Philippe Gijsels:Yeah, absolutely. That's economics. That's Austrian school, schumpeter and so on. So that's economics. But you also need stuff from history, from law, from. Of course you cannot read everything you have only 24 hours in a day but the more different disciplines you in a way you cannot master it, but you know about the bigger chances you get to come up with something that's useful in your field.
Brian "Ponch" Rivera:Basically, yeah, I think that's what we're trying to do with John Boyd's work is show folks that you can use it in different disciplines, and one is in the markets, the other one is in AI and other places. You brought up Jim Simons. One of the books I read recently is the man who Solved the Market. I was just trend following in there. What exactly? Do you have any insights as to what he was doing better than what's in the book?
Philippe Gijsels:Well, I think it's it's trend following in a way, because also in another interview I heard him talk. He talked about momentum, so he talked about momentum being in the market to a certain extent. So if you talk about momentum, you talk about trend and you talk a bit about trend following. So so he said there is there is not a lot of momentum in the market, but but at least enough momentum to to make some money, so that that that would be a bottoms up or a thumbs up for trend following in a way. But he added, okay, but he adds other elements to that. And then you maybe come in the world of AI. Even before AI was really the topic of the day like we have today.
Philippe Gijsels:The day like we have today, you would look to big data and you would come up to to to a bit strange little things, anomalies. And because they always look for anomalies in the market, trend is an anomaly, because in efficient market theory you should not have trends or they should be random. So if you believe there are trends, trends are an anomaly in efficient markets, but there are other ones, and you would say, uh and no, I'm joking, but on a tuesday afternoon when it rains, typically the market goes up. That that's, of course, a joke, but that's something that you would come up with. And then you would combine that with trend, and if you would combine that with trend, you would find other things. So you would look with mathematical models to find anomalies and they could be very strange. And then I say Tuesday afternoon when it rains, because that's still something that we can imagine. But you can also combine two or three things where we do not have a word anymore for, so that you have a number of parameters, as in factor analysis, oil prices together with dollars, together with the bad weather, that would be a factor. But how do you call these three together? We do not have a word for that.
Philippe Gijsels:So, but that's the thing you would look at, to add to trend models, to momentum models, and then the system would run. But like I see it and I was never there, of course I've I've his interviews, I've talked a lot about it, I've read the book as well, but that's the way I see it you you scan the market for, for anomalies, and that's something that ai could maybe do better today than you could do it 20 years ago. But he was a pioneer at Sakota as well. At Sakota was a pioneer in electronic trading. These guys started to work with computers and stuff like that long before all the others, so theoretically you could have models and stuff like that that do this even better than Jim Simons did it, even though he was wildly successful, of course.
Moose:Yeah, you're looking for mismatches. You're scanning the market and you're looking for mismatches that you want to have an understanding of before your competitors do.
Philippe Gijsels:Yeah, and sometimes indeed, that's a very good point and a very fair point if everybody sees the anomaly is gone, because everybody will start to trade on that. So it's also the idea to find new angles to look at it. But but ai novelty yeah, absolutely john.
Moose:John boyd had a famous example that he would use in his brief called yeah, absolutely, and a tank. And he said think of those component parts and then analyze them. So he would define analysis as deduction. So I would take in the skier on the slopes I'd have skis and snow. In the motorboat I'd have engine and gas. In the bicycle I'd have handlebars and seat, and in the tank I'd have treads and maybe a turret.
Moose:And then when he said, now that we can analyze those things, and that's great, great and most people stop there. And now what we need to do is use induction and we use synthesis, so we take those domains away. Those component parts that we've analyzed are no longer defined by bicycle, skier, boat, etc. And we're left with these pieces. And then we create a snowmobile out of what was left. And his definition of a winner was someone that could create snowmobiles and a loser was someone that could not create snowmobiles. Essentially, what he was saying was that a winner could deduce things and then synthesize something that didn't previously exist via novelty, because I think that's another thing that you're talking about is something new, novelty. And that's going to take my differentiated orientation that's constantly looking for mismatches to shape how I see things, to create that kind of novelty, to give me my edge, whether it's in trading or business or anything else well, it's very, it's a very deep one, but it's very interesting.
Philippe Gijsels:It's the way what you do also when you sell a structured product. If you you sell a tank, you will not get a lot of money for that. If you sell a bike, you will not get a lot of money, but if, of course, you take a bicycle that can shoot or something like that and has some added components, then you can add a premium for that. That has some added components, then you can add the premium for that, because then, at the end of the day, nobody will know the price of that, because everybody will know the price of the tank, everybody will know the price of the bike, but nobody will know the price of a bike that can shoot. So there you can add value and then you can have pricing power, probably as well.
Moose:Yeah, I mean, generally speaking, the value comes from the subjective feeling that we have around things that are novel or new or help us do things better, that kind of thing. I mean you mentioned the Austrian school, kind of goes back to that.
Philippe Gijsels:Yeah, absolutely.
Moose:Yeah Well, Philippe, we really enjoy you taking the time to speak with us and we hope to do this again and stay in touch on this path. You bring a tremendous insight that we think is going to be really valuable to people. That again, can see how the ideas that we talk about are interdisciplinary, and you bring it to us from the world of investing in finances really helps illustrate a lot of that.
Philippe Gijsels:I enjoyed the conversation very much because we elaborated on a lot of things and we did not know where we were going to go, but it was the conversation I like to have for the glass of wine with some friends at the barbecue, so it's always the best podcast, I think. So I enjoyed it very much. So thank you for the opportunity.
Brian "Ponch" Rivera:Thank you.
