Failure is a ladder. Mistakes are portals of opportunity. Try to go into something thinking that you're never going to fail is just crazy. It's absolutely insane. The thing that I just accomplished or I just done was actually the culmination of, you know, A, B, and C things that had fed into it. And so I was uniquely positioned to do it. The more somebody believes in luck, the lower agency they probably are. If you are successful long-term in the stock market, you have been punched in the face so many times by the market that you better be humble. Ambition can kill companies just as much as, you know, mistakes and errors. How many businesses that ended up being frauds were actually good businesses if they just hadn't tried to take that one extra 10% leap in.
Well, hello everyone. It's Jim O'Shaughnessy with yet another Infinite Loops. My guest today I've known for a long time. I met him when he very kindly extended me an invitation to his podcast of the time called Off the Chain. In 2018, my guest is Anthony Pompliano, who is the man, the myth, the legend. As I was saying to you, man, before we started to record, you — I don't know how you have packed so much into 35 years. You founder, CEO, professional capital management, you founded and invested in hundreds of companies, you've got one of the biggest financial media platforms of anyone I know. But again, I met you back in 2018. And you were kind enough to put an old guy like me on your podcast and try to get me to understand crypto. And as I recall, Anthony, I failed pretty miserably, didn't I? You taught me a very important lesson that day, which was you were one of the first three people on the podcast. And I think 50% of the questions I asked you, you responded with 'I don't know.' And I just remember saying to myself, well, if Jim O'Shaughnessy can publicly admit he doesn't know 50% of the time on a topic that I think you were interested in trying to figure out, but, you know, you were very clear, look, I'm not an expert on this. It's probably a lesson for the rest of us that it's okay to, you know, say, hey, I don't know and not I'm trying to figure it out alongside everybody else. So it was very helpful to me and I think people really enjoyed the other 50% of your answers, which were not 'I don't know' and were quite intelligent and helpful.
Yeah, I had a lot of fun doing that. And like, 'I don't know' is one of the most powerful things, in my opinion, you can tell to somebody. Because everybody always wants to have like the answer, right? There's a great book by Peter Drucker called Adventures of a Bystander. And he does little vignettes of people that he met throughout his life. And one of them is this guy who was a merchant banker in London. And he was like, this is in the 1930s, so like a hundred years ago. Anyway, this guy was this really eccentric, colorful character named Ernest Friedberg, if I'm remembering correctly. Anyway, there was a scheme that everyone in the city of London wanted to get in on. And he had these two young guys running his merchant bank, right? And so they brought the guy in. They were so psyched that they got this guy into their office because he was the hottest thing in London at the time. And so he gives the spiel. The old Friedberg sits and nods and nods, asks him a bunch of questions, and the guy leaves. And then Friedberg looks at his two young partners and he goes, 'That man is a fraud. We're not putting a dime in his scheme.' And of course, the young guys are like, 'What the — this is like — do you realize how lucky we even are to have him come?' And they went, 'Why? Why are you saying that?' And he said, 'He had an answer to every question I could think of. An honest person doesn't and will admit that he doesn't know.' And that really struck me when I was reading it. So I'd been in the habit of saying 'I don't know,' but I really leaned into it after that because it really is kind of true. Everybody then has like a pat answer to everything. My radar goes off and it's like, hmm, maybe I'll reconsider.
It reminds me, Jim, of young people want to boast about their wins to present that they're better than they are. And then successful older people want to downplay and only talk about their losses or the times where they messed up to try to humanize and, you know, pretend they're not as successful as they are. And so it kind of — you could tell where somebody is in their career based on the way that they present information as well. Because everyone is trying to be somebody that they're not to a degree. And so if you watch, you know, I love going on YouTube and watching many of the great investors and you listen to their interviews. And everyone knows that they're good investors. Like, look, your track record's out there for 30 years. And they'll start talking about, you know, 'well, you know, we're just trying to figure it out' and blah blah, and you're like, look, that is part of it though. Is the intellectual humility of saying just because the last 30 years were good doesn't mean the next five are going to be good. But I do find it funny that, you know, the younger people try to pretend to be the older people and the older people pretend to be the younger people.
You know, that's the — I do talk with a lot of young people in the various verticals that we have at OSB. And the thing that I try to impress them with is kind of two things. The first is failure is a ladder. So many of these people are really terrified of like failing publicly. And I'm like, that's the only way that you're going to make any progress, right? Because mistakes are portals of opportunity. And if you look at them that way, you're going to learn so much more. And to try to go into something thinking that you're never going to fail is just crazy. It's absolutely insane. And the second thing is, and you've got it in your book that we're going to talk about quite a bit today, it's nobody's — nobody's watching you with an eagle eye, right? And like, 'oh, he made a mistake' or 'she made a — oh, she's wrong, he's wrong.' No, that is not the way the world works. And yet the idea of youth doing that — I was that way. Like, you know, when I was young, I was like a proselytizer and 'this is the only way to invest and let me tell you why. I will tell you.' And then after —
The other thing that we look for when we're looking at founders and things is we need — we want people who've been kicked in the face a couple of times. Because if — and just to make it about the market, if you are successful long-term in the stock market, you have been punched in the face so many times by the market that you better be humble. Because like, that's the only way you're going to get ahead. And it just works so much better in my opinion.
I want to talk though about your new book, which I love. How to Live an Extraordinary Life, which you wrote for your kids. Now, your wife, who is glamorous and also successful, Paulina, did a piece about the letters that I wrote to my kids, completely different reason. And I kind of wish that I'd taken your course with like guidance and things like that. I hope it kind of emerges from the letters I ended up. But what I did was I wrote a bunch of letters for each of my children, and they all got, you know, the same letters. But on their 21st birthday — what was the motivation here? I know that you said that you kind of worried that you were going to die young and stay pretty. And you didn't even think you'd make it to the incredibly young age, to someone like me, of 35. You're younger than my two older kids. But was that the catalyst here?
Yeah, I think it was a combination, right? So I don't know why. I always just had in the back of my head that, you know, time is finite that you get here on Earth. And everyone always acts, even if they come to maybe the realization that time is finite, that you have 80, 90, 100 years, right? Like, if you look at the number of people who think they're going to live to 100 versus the number of people who actually do, there's a big gap. And it isn't in favor of the people who think they're going to live to 100, right? So it's just much shorter than people kind of expect. And especially if you look at things like, you know, health issues or whatever, even if you say, okay, the average life expectancy in America for a male is, you know, 72 years old or whatever. There are a lot of people who die at 55 or 60 or 65. And so, you know, it doesn't sound like that big of a difference between 65 and 72, but that's still seven years. And it's seven years where you're really starting to think about, hey, what did I do in my life and who do I want to spend time with and those things.
And so for me, you know, I opened the book with what I think kind of puts you in the perspective of when I started to write these letters, which was every single time someone would ask me, like, 'what do you want to do when you get older?' I would say, 'well, I got to do it before the age of 35.' And to be honest, it was kind of like half a joke, half like I did feel that way. And then when I went in the military, I think that's when it really hit home. So, I deployed when I was 20 years old to Iraq. And that's when I realized like, 'Hey, one, life is definitely finite and we're increasing the odds here that I don't make it to 100.' But also two was I had the fortunate opportunity to deploy with guys who are older than me. So at 20 years old I got deployed from college, literally during my junior year I get pulled out of college, I go, I'm worried about what party's on Friday night, you know, what's the football game or whatever. These guys have kids and mortgages and, you know, they're working two jobs and just like real life stuff. And so it opened my eyes to hey, there are real life consequences and stresses and things like that after here. So because I am young and I don't have those responsibilities, I may be able to do some things now that I won't be able to do later.
And so where it showed up, you know, in a negative way is I remember when I came back and I talk about in the book, you know, I was driving my motorcycle a little too fast. I was kind of like, you know, you feel like you're Superman, right? You know, if Al-Qaeda can't kill you, this 18-wheeler that happens to be going pretty fast down the highway as well probably doesn't stand a chance, right? So thankfully I made it through that period and matured a little bit. But then the good places where it shows up is, you know, when I went back to school to finish, which was really important to my parents, I took it much more seriously. Right? Like all of a sudden now you can like tie, okay, what I'm learning in school actually can help me later versus before maybe you were just doing it because somebody told you, you know, 'hey, get a good grade' or whatever. So I think that was like a huge piece.
And then the second part is Paulina really — I think she pushed me when our first child was born like 'write your child a letter.' And so the first one I wrote isn't in the book and it was more of just like 'you're here. Great to meet you. You know, this is awesome. I'm a dad.' Like almost like I literally was writing to like, you know, a newborn. Like not very publishable. But what it got me thinking about was like, okay, God forbid something does happen to me. Like what would I want to put down? And so for years I'd kept a note. First it was on paper and then eventually I started to do it on my iPhone of just like anytime I would learn something that was kind of like a pithy, you know, one sentence, you know, kind of takeaway, I would write it down.
And so when I decided to write the letters, I said to myself like let's just start with like whatever I think I should know, you know, let's just turn one into a letter. And so the very first one I wrote I believe is the first letter in the book, which is 'how you do one thing is how you do everything,' right? And I frankly — it was like therapeutic. It was almost like I was writing the letter and yeah, I was writing it to them, but I was writing it and it was reminding me. Like this is who you aspire to be as well, right? And so, you know, one turned into two pretty quick. I think Paulina was surprised that I wrote a second one. She was like, you know, usually again like, you know, I got to like pull teeth to get you to do something. And by the time I got to I don't know, somewhere between five and 10, I was like, oh, this is like a good thing that I want my kids to have. It's actually helpful to me and if I put a goal out there, then I will actually go and finish this. It may take a while, but I will finish it.
And so that's when I said, you know, what if I just turned this into a book. And so the dirty secret is I had signed the book deal already, but it was for a different book, which maybe one day I will write, but I had momentum here and I was enjoying it and so it was like, let's not, you know, try to force something that doesn't feel natural. Let's just go write the book that, you know, I want to write right now and so that's the book that you got in your hand.
So personally, as you know, I think the power of writing both for yourself and for others, your kids, is such an amazing tool. And I am so delighted to see your book doing so well because if you can get just like let's say you sell a million copies and if you get even just 10,000 people writing letters to their kids or loved ones or whatever, man, I think that's going to be just a huge addition to people's toolkits because it's something I've done since I was a teenager. We're creating Sim Jim on Bram AI and like going through all of my old journals like it's really cool to see what I thought about the world when I was 20, right? And so and I also as I mentioned did letters for my kids that we gave on their 21st birthday. But I want to focus on some of the lessons because I think so many of them I just resonate so much with.
And the first or the second one — you already mentioned the first is 'today is practice for tomorrow.' And I love the way you phrase it because that's right. It is practice. And guess what? When you're practicing something, are you always going to do it right? No. You're going to screw it up a lot of times. I always use — I have a lot of grandkids. I'm very very lucky. And watching a child learn how to walk is such a great metaphor. Can you imagine if we took the mentality of 'no, you can't do that. It's too dangerous. It's too, you know, you might hurt yourself,' etc., and applied it to a child learning how to walk? No one would ever walk. Yes. I mean it would never happen. And so when people read that, are they taking that from the chapter in the letter?
Yeah, you know what's interesting is I didn't know this until I had the benefit of hindsight, which was every time I was doing something, 'this is the most important thing in the world I'm going to do for the rest of my life. It's, you know, like this is it,' whatever. And then I one day just kind of popped my head up and I said, you know, the thing that I just accomplished or just done was actually the culmination of, you know, A, B, and C things that had fed into it. And so I was uniquely positioned to do it. And so, you know, a great example is a lot of people externally will look and say like, 'How did he build all of these media properties?' What they don't know is I had tried multiple times in different variations. There's a Medium blog that's out there somewhere. There was an interview show in Raleigh, North Carolina. Like, you know, all these different things that had kind of been almost practice for what ended up, you know, really working and kind of taking off.
And so I started to get pretty fascinated with this and it's timely that we're talking today because over the weekend I read a book called The Art of Learning. And it is Josh Waitzkin, I think is how you pronounce his name. Great book. You know, kind of he was like the next Bobby Fischer as he was growing up and he was this great chess player. And in it he talks about kind of two types of learning. He describes one which is like an entity-based intelligence and another which is an iterative-based intelligence. And so the best way to describe it is entity-based intelligence is somebody who is, let's say, playing chess and they keep winning. They keep getting told it's because you're smart. You're a winner because you win. You're winning because you're smart. And so when they lose, well, the only thing they know is that's the opposite of winning and so now I'm not smart, right? And I'm a loser. And so that's obviously destructive to a child because, you know, they are going to lose at some point.
Instead, the idea of iterative-based kind of intelligence is you're winning because you're working hard. You're winning because you've put the time and effort in. You're winning and it's the kind of process, right? Is really what is driving it. And so when that child loses, the natural reaction is not 'I'm stupid' or 'I'm a loser,' the reaction is 'I need to work hard,' right? I need to go back and keep, you know, kind of iterating to get this figured out. And so I do think that, you know, that's like a very unique way of looking at the world as we want more iterative kind of intelligent people. And so the idea that 'today is practice for tomorrow' fits right into that because every single thing you're doing today, whether it works or it doesn't, it's a lesson. You know, and I always like the old kind of there's no winning and losing, right? Or like right and wrong, it's just like either I won or I learned. Very similar I think in life.
But if you were to go and you were to ask, you know, go back to investing, the best investors, I think they learn more from their losses than their wins. And so you need that, right? It's kind of like as an input, if you don't have the losses — I love, I think Jerry Giffins got this great framework where he talks about before and after the fall. And he's like when you meet somebody, you know, the army equivalent is if you've ever watched the movie 12 Strong, they have General Dostum who, you know, is overseeing one of the Afghan kind of military units and the US forces go and they meet up with him and he refuses to talk to the US leader. And instead he scans the room and he finds somebody who's standing in the back and he says, 'That's the guy I want to talk to.' And the US leader, you know, young guy right out of kind of training is super pissed. He's like, you know, 'I'm the leader.' And he says, 'You don't have killer eyes. That guy has killer eyes.' Right? He's got the thousand-yard stare. He's seen some you haven't.
And so before and after the fall very similar of, you know, once I heard that and I started to see it in the world, I said, 'Oh, there's a humility that comes with, you know, post-fall, but also there's a difference in the risk mitigation or the risk analysis. There's a difference in kind of how you allocate capital and all these things that just goes back to, you know, the T-ball player in Little League baseball should not be as prepared for the game as the high schooler, who should not be as prepared as the Major League Baseball player. And so, you need practice to be able to do this stuff, and I think that, you know, just reminding yourself of that's important.'
Yeah, and again, I agree with you completely. And the — I like the way you put it. The notion that you're going to have everything figured out when wherever you are in your life, right? The people I'm attracted to are people who basically admit, 'Wow, I have so many wrong ideas, and I got to try to root them out. I've got to try to replace them. I've got to try to upgrade my skill set, etc.' That ties into the person after the fall, right? Like I had the great misfortune when I wanted to be in the stock market, right? I was a kid, and so I had some money, and I had developed this very technical options trading program, and, you know, I was programming the computer. I had a Texas Instruments, and I got that one because it had 16K of RAM. So, I'm really dating myself. Anyway, on my first trade, I doubled my money.
And of course, I was 20-whatever, and I thought, 'Oh my god, I'm the king. I am the smartest man in the world.' And then of course, the world disabused me of that notion for the next several years. But as you say, it was the next several years where I learned everything, right? And so, being open to that, I just think makes you a much more anti-fragile person because it shows you you got to pivot, you've got to iterate, you've got to just keep doing until you get to that groove. And then you got to figure that part out, too, right? In my opinion, life is growth, right? Death is stasis. And the ability to have like high agency is super important. But you have another thing in the book that I also agree with, which is, 'Hey, carve your ethics in stone, but your opinions in sand.' I love that wordsmithing. But talk a bit about that.
This came to mind because I was watching politicians flip-flop all the time. And what was so funny about it was they get attacked for it. 'Oh, you're a flip-flopper. Oh, you're, you know, whatever.' In business, you actually are rewarded and encouraged to change your mind when you get new information. It's a sign of intelligence. And so, I started thinking about how do you teach your kids when do you change your mind? When is it appropriate versus when is it not? And so, really what I said to myself was, 'Ethical decisions are kind of the red line, right? It's look, in ethical decisions, you should make the same decision every single time in your life regardless of how you are presented with different options. Everything else, really just your opinion on things, right? Can be changed based on what information you receive.'
And so, trying to think through, you know, am I facing an ethical kind of dilemma, or am I facing an opinion or kind of business decision or whatever? And if you can always just make sure, okay, if it's an ethical thing, I know exactly what to do is do the right thing. Everything else is open for interpretation based on whatever the latest information I have is. And so, you know, if you start to kind of look for this in the world, you will find that actually when people change their mind on an ethical situation, that usually leads to really poor outcomes. And one of my favorite books is Clayton Christensen a couple years ago wrote a book called How Will You Measure Your Life? And he had been diagnosed with a terminal illness or an illness and he I think knew, 'Hey, you know, I don't have as long as maybe I want to have with my life.' And so, he started thinking about some of these topics.
And in the book, he talks about ethics, and he says, 'Look, I went to business school at Harvard Business School, and all these great people and stuff.' And he goes, 'And some of my classmates went to jail later on in their careers.' And he says, you know, 'Was it worth it?' And he talks about 'I don't think these were bad people. I knew them. But through a series of iterations and developments in their career, they made little tiny decisions that compounded, and then next thing you know.' And I think he actually went to — I think he was in business school with one of the Enron executives. Right? And he says to himself, he's like, 'Look, nobody sets out to create Enron in the form that it ended up, but let's change the, you know, accounting for one quarter or one week or, you know, and then next thing you know, you end up with this massive issue.' And so, I do think that by having kind of the again, ethics in stone, you just always know I'm always going to make the same decision there. Gives you the confidence then to change your mind on, you know, non-ethical things, which are, you know, kind of opinion-based decisions you may face.
Yeah, the road to hell being paved with good intentions is a great proverb, right? And I've seen it so many times in my career. And like you advise your kids and others in the book, when there — I have a real bright line around ethics versus, you know, situational things, opinion things. So, one of the things that I decided really early in my life was I will always honor my word. It doesn't have to be in writing. If it's a handshake, it's the same as if I've got a contract. And I got to tell you, man, there have been times when that really backfired on me. Shocker. But the way you build a reputation is block by block, and it takes time. And what does Buffett say? You know, it takes a lifetime to create a reputation, and it can be destroyed in like a day or a few minutes or one bad decision. And the Enron example is a great example. A lot of those guys — I knew some of those guys, too. A lot of those guys did not go in with their master plan to con everyone in the world, right? Yes. They went in with good intentions.
And then it also illustrates the power of negative compounding. Like everybody understands or most people understand positive compounding. Things can compound negatively, too. And the minute you make that tiny little concession, right? You know what? Nobody's going to notice. Let's just accelerate this earnings. And then it becomes, 'Oh, we signed a 30-year contract. Let's take all of the profits we're anticipating over that 30 year, and book them this quarter.' Like that leads to bad things.
Shane Parrish did a podcast episode a while ago on a podcast called Stray Reflections. And I don't know how popular that podcast is, but somehow I found it, and I found this episode, and I was listening to it recently. And he talks about the importance of positioning. Everyone looks at the decision, but so many people don't realize that it's the positioning that either empowers or kind of creates good or bad decision-making. And so, the example that he uses is he's got a kid who's got a test, and they don't do well on the test. And so, he says, 'Well, did you get a good night's sleep the night before?' No, because you were cramming. 'Did you study?' No, that's why you had to cram. 'Did you eat a good breakfast that morning?' No, that's because, you know, and because you slept in, right? And you like kind of do all — So, like you went into the test in bad positioning, which obviously was going to decrease your performance.
If you take it to the Enron situation, there's a whole idea of like if you keep creating bigger and bigger expectations, and you can't fulfill them, then you start to get desperate. But how many businesses that ended up being frauds over, you know, generations now were actually good businesses if they just hadn't tried to take that one extra 10% leap in, you know, whether it's a public market, you know, earnings report or whatever. And so, you can definitely — I tell founders this sometimes, and they always are like, 'Wait, why are you telling me this?' I say, you know, 'Ambition can kill companies just as much as, you know, mistakes and errors and everything else.' And so, you got to know when is the time to be ambitious, and when is the time to, you know, mitigate ambition suffocating your business because you're so focused on, you know, how much revenue, how many employees, or whatever. Well, maybe right now actually is time for you to kind of gather everyone around and become resilient. And then kind of create that new foundation, so then you can go be ambitious again. Again, it's an art, not a science, but I do think that positioning is a really interesting way to kind of think about, you know, why do people make some of these bad decisions?
Yeah, I agree. My friend Annie Duke calls looking at just the result 'resulting,' right? Like, 'Oh, bad test, you're a bad student.' Right? That's resulting. If you don't do that and look at the other things that contributed to why on that one snapshot of a test you didn't do well, you're going to get a much better understanding of base rates, for example, right? Like people ignore base rates for the most part, and yet they, in my opinion, are like the most valuable information you can have access to. Because like I always use the example when I try to take it out of like investing and that realm. Because for whatever reason, people's brains seem to shut off when you're trying to talk to them in that way about investing. But then I say, 'Okay, hey pop, would you go to a doctor if you had something wrong with you who looked at you, didn't do an exam, and looked and said, "Yeah, you know what? These little yellow pills, a farm rep just gave them to me. I think that they're going to fix your problem," and tosses them over to you?'
I'm going to run like hell out the door from that doctor if he doesn't show me or she doesn't show me long-term double-blind tests, understand what my condition is, all of those things. Insurance is another great example. Can you imagine if the life insurance industry operated from just a gut level, right? Like, 'Hey, even though all of your tests — all of your male forebears died at age below 50 of a heart attack, you have your obese, you have diabetes, you have all of these problems, but we like you so much, we're going to give you a $50 million life insurance policy.' They're going out of business, right? The actuarial table, the base rate, all of that is vital information in so many areas of life, and people just totally ignore it. And that has always perplexed me. And especially on this theme of people like that one time. Like that becomes — and I love the bright line you put here. That's an ethical issue, right? And if you mess that one up, it doesn't really matter. It doesn't really matter how great that business could have been, how great that project could have been. Like you're on the wrong slope in my opinion.
Well, it's also which one can you afford to be wrong on? Right? It's like another way to think about this. And so, you can afford to be wrong in your decision-making a lot when it's non-ethical things. But what I have seen in kind of, you know, various news stories, current events, people who end up, you know, kind of doing bad things, once they begin to make an error on an ethical decision, it snowballs. Right? It's like some weird thing where they've like breached a — I don't know, an activity that they previously wouldn't have done. Now it's like, 'Well, I've already done that before. Like, just do it again.' Right? And then next thing you know, you're just like, 'Okay, well, like that took it to the extreme.'
So, I don't know. I try not to pretend like I have all the answers or preach to people about that. You know, that's one of the challenges of writing a book like this is first, you have to make it very clear to people that like every single person's extraordinary life is different. You know, mine may be sitting inside reading on a weekend. Yours may be like, you know, I don't know, being in Monaco partying or Ibiza or whatever. And like both of those can be extraordinary lives for the different people. But also I call out in the beginning some of the letters compliment each other. Some of them contradict each other. Right? And it's because there's different points in your life. And so, sometimes things apply, but other times they don't. And, you know, part of my hope in people reading this book is you got to be smart enough to know what to apply when. Right? Nobody else can do that for you. You just want to have like a toolkit that you can kind of reach into and grab what you need when you need it. But really, you're the person grabbing the tools, right? So, if you are working on a car and you need a screwdriver, but you grab a hammer, good luck.
