Full transcript: on London Real
0:00 Brian Rose: This is London Real. I am Brian Rose. My guest today is Jeff Brown, the high-technology executive, investment analyst and angel investor who has spent 25 years working for some of the greatest technology companies in the world. You graduated with a degree in aeronautical and astronautical engineering from Purdue University before earning your master’s degree in management from the London Business School, right here. You also hold certificates from MIT, Stanford and Yale University’s School of Management. In 2015 you profiled Bitcoin when it was trading for less than $250, and last year you founded Brownstone Research, a boutique investment firm that delivers executive-level investment research to all who seek it. Jeff, welcome to London Real.
Jeff Brown: Thanks, Brian. It’s great to be here with you.
4:18 Brian Rose: Jeff, you’ve been massively successful, and I think it’s possibly because you have this marriage of technology and business and finance. It’s something I was lucky enough to have a similar path in. I graduated from MIT in ’93 with a mechanical engineering degree, but a lot of people don’t know I spent the last two years over at the Sloan School learning about options pricing and stock trading, and I went straight to Wall Street after that. I spent 10 years in the City of London here, and I must say I looked at everything through a different lens.
You spent time here in London at the London Business School, but you also came from that hardcore tech. And let me just say, folks, if you’re an aeronautical engineer, that’s real stuff. These people know the details: fluid dynamics. Having both of those tools in your arsenal, do you think that’s what’s given you the edge over the years?
Jeff Brown: Oh, absolutely. One of the smartest things for me to do was to do my undergraduate work at a school like Purdue in aeronautical and astronautical engineering. To your point: fluid dynamics, propulsion, some people like to call it rocket science, orbital mechanics, structural analysis. All of these tools have been immensely useful to me in my career in terms of understanding how technology works.
I started off as an engineer and then migrated over to the business side, which is what prompted me to decide to go to the London Business School. In particular I focused on corporate finance. I’ve been an investor since I was 16 years old, and I wanted to understand how assets were valued. I think this is one of the most critical aspects of being successful as an investor: understanding the value, not the share price, but the value of the underlying asset, and whether we’re investing at a reasonable, fair valuation or in a grossly overvalued asset.
The time that I spent in London working on that developed an amazing skill set in terms of what I do now, which is being an investment analyst, and that helps me and my subscribers make a lot of money.
6:43 Brian Rose: One thing I just noticed is you also got that international experience. I guess I do as well, and that must also change the game, just to be living in a different place, different markets, different ideas. You spent a couple of years here in London, I think from ’03 to ’04. What was that like?
Jeff Brown: It was the absolute best thing I could have ever done, to get outside of the United States. I first moved to Tokyo, Japan, in 1997, and most of my adult life, in fact, has been spent living and working overseas. I’ve done business in 65 different countries around the world. I’ve had global positions where I was leading an overall business unit in business development.
Probably the best thing we can do in terms of personal development is to spend several years living and working in a country that’s vastly different from our own. It just helps expand our world view and think differently. It certainly helped with my creative thinking, and to look at companies, technologies, people and cultures from entirely different perspectives.
Brian Rose: And what are your fondest memories of London?
Jeff Brown: Oh, pints of good beer at the local pub, definitely. No, I had an absolute blast at the London Business School, being right in central London, with absolutely the finest teachers I could dream of spending such quality time with in terms of corporate finance. I think they’re the best in the world. I love the parks. My wife and I tended to walk through the parks on the weekends, and we even enjoyed the ballet and opera, also within walking distance. It’s an extraordinary city. It really is.
Brian Rose: Yeah, I love it. I actually first moved over here for work in ’97, and it’s changed a lot since then and since you were here as well. I was actually fortunate enough that my mom got me over to Japan back in 1984 when I was a kid. I did a home exchange program, so I saw a really different culture at a younger age. It really shakes you up, but it really opens your eyes that the world is a bigger place than just America. When you’re in America sometimes it’s hard to see outside, because it’s a varied, massive place.
9:16 I think that understanding has really helped you a lot in recognising these trends. Jeff, I’m a big fan of your work. You really have that deep knowledge and a lot of new ideas I haven’t heard from a lot of places. A lot of people don’t know much about the things you talk about, or they don’t know what they don’t know. When it comes to quantum computing, I think I’ve had one or two guests on in the last couple of years that have touched on it. People talk about AI, but when you talk about AGI it’s a different level. And with CRISPR, we’ve all heard that acronym and about gene sequencing, but we don’t know what it really means for tech or for the future. Could you talk about how these things get on your radar, and give us a taste of some of the ideas behind this stuff?
Jeff Brown: Absolutely. This is one of the hardest things that I do in terms of my work and my research, and truly one of my secrets is that I get involved very early on. On weekends, whenever I have free time, I literally read research reports. These aren’t company investor presentations. These are research reports coming out of bleeding-edge science, and I track technology from what I like to think of as inception, from the time these discoveries are being made.
The way it works is that when a big discovery has been made in research, the technology is licensed to corporations, and those are almost always private companies. Companies are often formed around these breakthroughs. So I follow where the intellectual property goes into these small private companies, and I’m a very active angel investor. I’ve invested in more than 150 different small, early-stage tech and biotech companies, which really gives me a lens into what’s happening at the very bleeding edge of technological development. These are the things that will become big deals in five years, sometimes 10 years, but I’ve got this inside view on how the technology is being commercialised.
I track these private companies for years, and I track the executives. I often speak with them and I look at the progress they’re making over time, so that when they’re getting ready to go public, I already understand the executives, the technology, the company and the series of fundraisings it’s been through. By the time it hits the public markets, I already know whether it’s a fantastic investment, whether it’s a poor investment, whether it’s grossly overvalued, or whether nobody knows about it and it’s one of the best deals I’ve ever seen.
This is part of what we can call my proprietary research and analysis system. I really do play the long game. I put a lot of effort in on the front end that often only materialises years later, but I’ve built up a tremendous pipeline of research, knowledge and analysis that comes out every week and every month when I publish investment research.
12:38 Brian Rose: Wow, now it makes sense, because when you speak about these technologies and companies, it does seem like it comes from a deep level of knowledge. It’s kind of black-belt level, and I think you might have a black belt in something. When you’re around someone seasoned like that, you know it’s not just a line they read on Bloomberg. It’s something they really know a lot about, and like you said, they know the players behind the scenes.
For people who don’t know, writing checks as an angel investor is a skill in itself. You’re talking to people who usually have just an idea, with not many other people investing in them. You’re giving them a check, and they could literally lose the whole thing, or they could be the next thing. That must make you privy to a lot of fascinating information, and even if only some of it becomes useful, it probably puts you way ahead of the curve of guys who are just out there analysing stocks and reading all the usual reports. Is that a fair assessment of where your skills lie?
Jeff Brown: Absolutely. I think that’s the mistake a lot of analysts make: thinking that combing through SEC filings or reading investor presentations will somehow provide the insights for good investments. There is so much more to it. I think of investing in early-stage companies as kind of the dark arts of investing. It’s not a clearly defined skill set. It’s something that really has to be learned through doing it. You have to develop a feel for which investments are more likely to be successful over time, and set up your own criteria, a kind of framework for analysing early-stage deals where you can’t possibly know all of the variables.
14:40 Another one of my secrets to success in terms of analysis is that as an executive, I’ve literally sold billions of dollars’ worth of technology into markets around the world for US and European companies. When you’re customer-facing, when you understand how a product has to be packaged, how it needs to be positioned, how it’s sold, and how technology buyers go through their own process of procurement, analysis and decision-making about which technology to choose, it provides some of the most valuable insights I could possibly have as an investment analyst.
Having been on the front line in sales, business development, leadership and strategy, these are invaluable skills that have had a defining impact on me as the founder and chief investment analyst of Brownstone Research. It’s really one of my secrets.
Brian Rose: Yeah, that’s some serious deep knowledge.
16:19 Maybe you can give us a little taste of what some of these things are. Quantum computing: back when we got our degrees, I don’t remember hearing that phrase. I don’t think that was a thing at the time. But now it sounds like it could potentially change the game by being multiple orders of magnitude faster. How would you explain that to the layman, and what are the implications for the future?
Jeff Brown: Well, when you and I were at school, I’m sure you remember, most of the computing systems were driven off large mainframes. You had to get time in the computer lab to work with your code. It was extremely inconvenient and it took forever for relatively simple programs to run. I remember sleeping overnight in the computer lab just to get my results for the next day. It was truly awful.
Brian Rose: You’re giving me bad flashbacks to the computer lab. It’s a place where people sleep all night.
Jeff Brown: I’d love to say they were good memories, but not really. Since then we’ve seen this rapid progression of traditional von Neumann architecture computing systems that have basically been keeping pace with what’s referred to as Moore’s law: computing power basically doubles every 18 to 24 months. It’s held true because of advancements in semiconductor technology. What’s been happening in recent years is that Moore’s law has been slowing down. We’ve seen this incredible trajectory, and now it’s starting to flatten off. Things are still improving every couple of years by 15 or 20 percent, but we’re starting to reach a limit in terms of how tiny we can make these transistors. It’ll hold true for several more years, but eventually we’re going to reach the cap where it becomes very difficult to continue at that pace.
This is where quantum computing comes in. This is where we see not just an exponential leap, but a real massive jump in computer processing power, because suddenly we go from something that’s improving by 20 percent a year to something that’s improved a million times a year. That’s just for perspective on what a universal, fault-tolerant quantum computer could mean to the world.
So when we think about taking these incredibly powerful computers and focusing them on very complex problems, problems with so many variables that our traditional computers just can’t process them, those are the types of problems we’re going to give, and in fact have been giving, to quantum computers. When we think about designing new molecular structures, or understanding how proteins are folded and how our bodies interact with them, we talked about drug discovery and how that will change with the advent of quantum computing.
19:29 What most people are not seeing yet, and what’s incredible, is that the functionality of quantum computers is already increasing at an exponential rate. I remember just a few years ago a quantum computer that had a few quantum bits, we call them qubits, was a big deal. Then in 2019, when Google achieved quantum supremacy, we had 53 quantum bits. Going from a couple of quantum bits to 53 is beyond exponential growth in a very short period of time. What we’re going to see this year is quantum computers that have more than 100 quantum bits, and then in 2022 we’ll see several hundred quantum bits. I think you get what I’m getting at: quantum computers themselves are already growing at an exponential rate, and their computer processing power is far greater than the best supercomputers we have on the planet today.
20:32 Brian Rose: I bet it makes it difficult as a human to imagine what all that technology will lead to 20 years from now. Even for a guy as smart as you, Jeff, and as technologically studied as you are, it’s hard for me, as an organic being, to consume what that kind of computing structure could mean to biotech and all these things. Do you ever think about that?
Jeff Brown: Absolutely. In fact, one of the techniques I use with myself literally every day is to ask myself a simple question: are you thinking exponentially? Because we’re human, our DNA is literally programmed to think in a linear fashion. We think about going through our days in a very linear, scheduled sequence of events, and we think about the things we need to achieve every day in a very linear fashion. To us, on a day-to-day basis, life really doesn’t change that much. But that’s not true with technological advancement, and it changes much more quickly than even experts will realise.
It’s something I’ve noticed when I speak with PhDs around the world: they’re very focused on their one single area of expertise. I remember having discussions way back in 2016 with people with doctorates in genetics and genetic engineering, and their comments to me were that we really wouldn’t see any therapies based on genetic editing for at least 10 years. I remember telling them how wrong they were, and that in fact we were going to see the first successful therapeutic application of genetic editing on a human within 24 months. They were so focused that they didn’t see how fast the entire industry was developing. And what do you know, we actually did have a cure for beta thalassemia and sickle cell anaemia using CRISPR genetic editing technology within that 24-month time frame. It was extraordinary.
So yes, I remind myself every day, when I look at research, a company, a product or a service: are you looking at this from an exponential perspective? Are you missing the big picture here?
Brian Rose: Yeah, that’s so powerful. To try to recognise our own blind spots as humans, identify them and then do something about them is very difficult. I’m going to start asking myself if I’m thinking exponentially.
23:23 Talk to me about artificial intelligence, Jeff. If I google that right now, I’m going to get a bunch of videos, and I’ve had a lot of guests on my show talk about it. The general public is stuck on whether AI is going to take over the world or not. They don’t really seem to go to the next level. Even if I take a step back and think as a consumer about where I see AI in my life, I guess I see it with Alexa, but I don’t feel like it’s at the point where it actually changes my life. And yet you’re talking about AI and this thing called AGI. You’re thinking exponentially, and you’re saying, ‘No, Brian, this is going to be a reality that changes your day-to-day life in maybe a few years.’ Maybe you can explain that, and the companies that are going to benefit from it.
Jeff Brown: This is such an interesting topic, because it is genuinely hard for us to get our heads around. It’s not like a smartphone. We use a smartphone every day, and we know how incredible a technology it is and how it makes our life better, easier and more accessible. It’s tangible. We can literally see it and feel it, and we know the impact it has on our life. Artificial intelligence is one of those things that’s in the background. We are often using it and don’t even realise it.
The perfect example you gave was Alexa, the Amazon Echo. It’s Google Assistant, it’s Cortana from Microsoft. It doesn’t matter. There are all sorts of artificial-intelligence-enabled smart speakers, and they’re getting pretty good. We’ve had some breakthroughs in the last 12 months that haven’t quite filtered through to the general public. 2021 is going to be a big year. In fact, I believe by the end of this year we’re going to see digital assistants become quite pervasive. Think about having our own artificial intelligence that understands us deeply and can actually go out and do very valuable tasks on our behalf. My assistant can speak with your assistant and actually schedule our next meeting, without us ever having to do anything.
25:50 Artificial intelligence is actually pervasive in our lives today. Take a company like Amazon, which, believe it or not, is one of the largest artificial intelligence companies on the planet. It uses artificial intelligence for all of its logistics networks: sorting through millions upon millions of packages a day and figuring out how to optimise delivery. That’s all done with AI. Figuring out how to design a layout and manage all the robots that are automated to pick out packages in these warehouses is all artificial intelligence, and we use Amazon every single day. I get packages at my house every day. That’s just one example.
Whether it’s something we speak with, something that manages arduous daily tasks for us, or something like drug discovery, AI is in use. Artificial intelligence is used today for accelerating drug development and discovery, and of course as consumers we would never see this or know that it even existed. It’s across every industry. In fact, I would say that as of last year, companies that are not using artificial intelligence are at a severe disadvantage, whether it’s airlines that aren’t using AI to maximise their routes or the oil and gas industry using AI to find better discovery targets. It really doesn’t matter the industry. Telecommunications networks are using AI widely right now just to manage the flow of traffic over wireless networks, or even fibre-optic networks. It’s hard to express how widely artificial intelligence is being used.
27:37 One particular sector that’s very interesting to me, and that I’ve invested in heavily as an angel investor, is semiconductor companies making application-specific semiconductors. These are chips made specifically to optimise artificial intelligence and machine learning. As these companies release their new semiconductors, the AI software gets better. It becomes more efficient and more powerful, and companies around the world are empowered to use AI to deliver better, cheaper, faster services for all of us normal consumers.
28:29 Brian Rose: You talked about this concept of artificial general intelligence, and you made a comparison in the medical industry where, as opposed to going to my doctor, I might go to an AI doctor. Explain how that might work, because it’s not obvious to everybody, even though I think most of us realise how inefficient it is to go and get an appointment, cough, and have your doctor try to assess you. It’s definitely not the most efficient process, but it’s hard to believe a computer might do it better.
Jeff Brown: Today’s healthcare system is very symptom-based. To use your example, you’ve got a cough, you go to the doctor, and you ask to be treated for the cough. What is changing about healthcare is that it will become outcome-based, which means: what’s the outcome, not just today with your cold, but over your lifetime? What’s started to happen is that we’re using artificial intelligence to take a full genomic sequence of our DNA, figure out if there are any mutations and what those mutations might mean for our human condition, and then figure out which drugs, for example, would work well with our DNA and which ones may be dangerous for us and might actually kill us.
General practitioners, or even doctors who specialise in something, have a very limited world view. They develop a certain set of skills to deal with certain symptoms, but they don’t have the time to review all of the corresponding or secondary research that may factor into our condition of the day, or into an underlying condition that actually has to do with mutations in our own DNA.
So if we can imagine taking the finest doctors on the planet, all of them, and encapsulating that as an artificial general intelligence which has the world’s medical knowledge, which understands every single research paper that’s ever been written on every condition, understands our genetic makeup, and understands all of the drugs that have ever been produced and how they react with certain individuals, it doesn’t take a leap to understand that that would change our healthcare and the quality of our outcomes dramatically. And that’s the doctor, honestly, I want to see if something’s wrong.
Brian Rose: Yeah, that’s so exciting. Talk about a quantum leap in quality of life, health and maybe longevity, all because of the technologies you’re talking about, with quantum computing clicking in there and AGI. I’m wearing an Oura ring, and again I’m not plugging them, but it tracks all my data all the time, and it tells me when I’m about to have a bad day: my heart rate variability starts not being what it should be. It’s not always right, and sometimes I disagree, but it usually knows when I’m run down a bit and probably more susceptible to certain things. Imagine this at a quantum level, with the diagnosis in real time. It’s a game changer, and it’s probably available sooner than we expect, because of this exponential stuff.
32:13 The last thing I want to talk about is CRISPR technology. Funnily enough, I’d say most people know that acronym. My aunt would probably say, ‘Oh yeah, CRISPR, I’ve heard of it.’ A lot of people have heard of it, but Jeff, we don’t really know what it’s going to do, and I don’t think anyone sees the connection like you do between quantum computing, AGI and CRISPR. Honestly, you just described it to me and I’m still having a hard time seeing this incredible loop. Tell people: what does CRISPR mean, and what does it mean for their lives in the future?
Jeff Brown: It is one of the most exciting technological developments in our lifetime. Put very simply, we can think of it as a tool to correct mutations in our DNA. We think about our DNA almost as if it is software code. Software code sometimes has bugs; well, our DNA sometimes has mutations. Sometimes they’re complex mutations and sometimes they’re just one single mutation. For example, something called LCA10, which is a progressive form of blindness, is caused by one single mutation. The same goes for sickle cell anaemia and beta thalassemia.
By simply changing just a small part of our DNA, we empower our bodies to recover to the state they would normally be in if we didn’t have that particular mutation. So we think about CRISPR genetic editing technology as a method by which we can improve our outcomes by correcting unnatural mutations in our own DNA.
34:01 Brian Rose: And you add that to quantum computing and AGI. How does that start taking things to an exponential level?
Jeff Brown: We can think of quantum computing as raw horsepower. We give it very tough problems to solve and huge sets of DNA, for example, to analyse. Then we apply artificial intelligence running on these quantum computers to draw connections we would never have thought of between certain mutations and certain diseases. And then we use CRISPR as the tool to correct those mutations that we’ve identified with human conditions. That’s how it feeds on itself.
And I’m not exaggerating: every single day the medical community and the biotechnology industry get smarter. We start to break down and understand our DNA and the mutations for each disease. Every year, every month, we’re making major breakthroughs in better understanding how our DNA impacts our own health and condition. That’s why it’s so exciting. The smarter we get, the more it feeds on itself, and we keep building on that knowledge, empowering biotechnology companies to take on some of the most challenging diseases known to the human race.
35:22 Brian Rose: It’s an exciting time. Jeff, are we going to live long enough to see it all happen?
Jeff Brown: Well, my baseline goal is 120, and I think I can get there. A lot of people think about not just living until that age, but actually being healthy, being able to enjoy life and being active at 100 years old. The concept of longevity isn’t new, but it’s very powerful right now. The advice I give people is: if you can take really good care of yourself for just the next five or 10 years, you really do have a shot at living well past 100, because these advancements are going to empower us to do exactly that.
In fact, I just returned a few days ago from the world’s leading centre of preventative and predictive medicine. It’s a place in La Jolla, just outside San Diego, called the Health Nucleus. I just got back from a six-month visit. They use artificial intelligence in their analysis of our DNA and of therapeutic approaches to medicine, and they have a program called 100 Plus. Their whole premise is really the future of healthcare: it’s outcome-based, and their whole goal is to help us live beyond 100 years. It’s something I take very seriously and practise in my daily life in terms of health, nutrition and exercise. I really want to be a great-grandfather someday, and that’s not something that just happens. You have to work at it.
37:09 Brian Rose: I want to ask you about some of your daily routines when we finish up here, but it’s a great point you make. I actually remember my great-grandmother. When I was a kid we used to go visit her. I was obviously really young and I remember her being really old, but it was an anomaly; she was the only one I remember who was still alive. I’m turning 50 this year, and I was talking to my daughter recently, she’s 16, and I made a comment like, ‘I don’t have that much time left,’ which is why I’m going all in on everything I do these days. It was interesting to hear myself say that, because potentially I’m on the other side, or am I? That’s the question.
I had a guest here one time who said, ‘Brian, what if you treated your body like your very first car?’ What we usually do is discard cars after five or 10 years. I used to have a ’68 Mustang when I was in high school. At the time that car was older than me; I was born in ’71. Right now that car would be over 50 years old. Imagine what that thing would be like unless I really went out of my way to proactively take care of it. I think that’s the way we have to visualise our bodies, and yet most of us take them for granted. I guess you could probably observe it as well: sometimes our health is getting worse even though the technology is getting better.
Jeff Brown: Absolutely. The way I look at it is that we have to think about optimising our own human condition, and it’s a very difficult thing to do because it’s hard work. It’s hard work to closely monitor our intake, it’s hard work to exercise on a regular basis and stay fit, and it’s hard work to monitor, for example, our visceral fat. You really need good guidance and a good partnership with practitioners to do that accurately. But we really do need to track our overall health and well-being. If we want to live well beyond 100 years old, we have to understand our condition today and monitor it proactively on a regular basis.
40:22 Brian Rose: Tell me about you. You look pretty good, Jeff. What are your daily routines? I know you’ve got a black belt in martial arts; maybe you can talk about that a little bit. My daily habits have improved probably exponentially in the past six years since I’ve been doing the show, because I’ve had some pretty cool minds on here, and when I sit down with them I take a little bit of IP here and a little bit there. I’m healthier and stronger now than I was 10 years ago, and I know because I do the same workout, which includes around 130 burpees and a shadow-boxing routine, and I can actually do more than I could when I was 40. But I’ve made a lot of changes to my lifestyle as well. How do you view that whole equation?
Jeff Brown: Well, first of all, that’s amazing. You clearly have that mindset that even as you age you can actually do more, and it’s absolutely true. I earned my third-degree black belt in Shotokan karate back in 2016, while I was still living and working in Tokyo and training under one of the world’s greatest masters, which was truly a privilege. The hardest part about leaving Japan was having to move away from my dojo. It’s an amazing art that’s incredible not just for your physical well-being but also your mental well-being. It’s a very peaceful place to be, and I have found it immensely meaningful in my life.
From start to finish, I’m an early riser. It’s not unusual for me to start my day working and researching at 4 a.m., and absolutely by 5 a.m. every day, so by the time one o’clock rolls around I’ve typically put in eight, sometimes nine hours of work. I eat very healthy breakfasts. My diet is gluten-free, entirely dairy-free, and I consume no animal proteins, which is hard; I only eat fresh wild seafood. My breakfasts are vegetables, a little bit of smoked salmon, two eggs and some coconut yoghurt. I take supplements morning and night, a lot of the usual suspects. I try to sleep well, obviously, but six or seven hours a night is more than enough for me.
I also have a very regular exercise routine. I do cardiovascular exercise, and my favourite is rowing, because it uses about 86 percent of the muscles in your body. I’ll do that three days a week, and then I use kettlebells on off days, which I’ve found to be great functional strength training. They definitely get your heart rate up and down with good variability, and keep your muscles strong. I’ve got a few years on you, Brian, and one of the biggest mistakes we make as we age is letting our muscle mass decrease, which is very dangerous. It’s a spiral that just gets worse in time. That’s why cardiovascular exercise alone is not enough. We have to engage in strength training every week to make sure our muscle mass at least stays the same, and hopefully gets a little bit stronger and denser. It definitely improves our overall quality of life.
44:16 Brian Rose: That’s not surprising when I hear your routine. If some people watching and listening right now don’t do these kinds of practices, it might sound like Jeff and I are weird and crazy, but I’m telling you, if you look at a high-performance person, 90-some percent of the time you can track it back to their daily practices: their mindset, their physical practice, their diet, a lot of times their gratitude practice, their affirmations, their media diet. I teach a course in my academy where I break all this down for my students, and these little things are such a game changer.
Martial arts has been a massive part of my life. About 20 years ago I had my first Brazilian jiu-jitsu class, before it became super big; I think it was around UFC 38, so it was really early days. I’ve trained all over the world, in Rio de Janeiro, Los Angeles, New York City and Asia, and the spirit of those dojos is something very special. I took my son to his first jiu-jitsu lesson a few weeks ago, and it was special. He’s four years old, and he was a little bit timid to step on the dojo floor, wearing a gi for the first time with all these people, but he got out there. It’s a journey I want my boys to be part of, because it gave me so much mentally, spiritually and physically. I’ve never had to use my jiu-jitsu, but I could, and I choose not to. I use it as a way of life.
It’s interesting what you say about the plant-based diet. I got challenged to run an Ironman 70.3 about three years ago on a plant-based diet, so I went plant-based for a year and made a whole movie about it. It was a gruelling but fascinating experience. It drove my wife crazy, but she started making amazing things with those limitations, and I’ve come to find somewhere between those two diets that works for me. It’s no surprise that you’ve got a lot of that IP, Jeff, and it seems to be working well for you.
46:43 Question for you: what are you doing in 10 years? What does your world look like?
Jeff Brown: Oh, I’m so conflicted, especially being a father. As a father I want every day to go slowly so I maximise the time with my two young boys.
Brian Rose: How old are they?
Jeff Brown: They’re eight and 10. I want as much of them as I can get before they move on and become teenagers, or adults for that matter. But then I cannot wait to wake up every day to see what’s happening in the world of technology, biotechnology and, of course, investing. I can’t wait to get to 2028, which is the year I predict we’ll have artificial general intelligence, and that’s really only seven years away. It’s not far. Later this year we’re going to see regular space flights for normal citizens, for normal consumers. This is the birth of space travel and space tourism, and it’s happening this year.
I think our travel will be entirely different. There will be hypersonic travel to get from London to Tokyo in a fraction of the time. And of course the medical advances will be unheard of. We have a real shot, especially with genetic editing technology, at curing thousands of diseases that have never had a cure. There’s so much to look forward to because of all these technological developments.
As I mentioned earlier, I’ve been an investor since I was 16 years old, and I’ve never been more excited about being an investor than I am right now. I often refer to this decade as the decade of biotech. It’s when biotech transforms from a laboratory of wet works and pipettes into a quantum-computing, supercomputer-fuelled, artificial-intelligence-empowered industry that is moving at a pace beyond Moore’s law. It’s happening that quickly, and we’ve never seen this before. This will be the decade of biotechnology, when biotechnology is really more like high-tech and growing at the same speed. There are so many incredible opportunities right now. Every day brings new developments, and it’s just a lot of fun right now.
Brian Rose: Yeah, I can feel it, man. I can feel how excited you are, and it makes me excited as well.
49:54 There’s one last question I wanted to ask you, Jeff. For people who are new to investing, or who have invested before but don’t have much experience, what advice do you give, even from a psychological perspective? Maybe some of your martial arts training will help here, because when a lot of people get into a fight, everything goes out the window. The preparation goes, they get emotional, they’re in the moment, and I feel like stock trading is sometimes the same. I remember my first couple of weeks on Wall Street; I made all the wrong decisions. You’re supposed to buy low and sell high, and yet human nature makes us do the opposite. We try to save our losers and we cut our winners too early. Any thoughts on a philosophy for someone new to investing? How do you teach your sons about something like this?
Jeff Brown: This is such an interesting topic, and your analogy of martial arts to investing is actually very apt. As I mentioned earlier, for me the dojo is a very peaceful place, even when you’re sparring or competing and it’s very dangerous. I find it’s when my brain is in a perfect state of calm, completely present and focused on just one simple task. I’m always at my best when my mind is clear and not thinking about anything else. That’s very hard to do in investing. Why? Because it’s your money and you’re worried about it. You want your wealth to increase, but you’re worried that it might decrease, and that causes us to do very irrational things, to your point.
One of the things I always caution about is position sizing, and understanding the importance of developing a portfolio of great companies with fantastic growth prospects. One of the first mistakes so many people make is that they fall in love with an individual stock, think that’s the one, and go overboard on it. Inevitably, that might be the stock that crashes, and it has a devastating financial impact, which is short-term, but it can also cloud their judgement for the rest of their life. It can literally hold them back from creating wealth for themselves and their families, and I really hate to see that happen.
A big part of my role at Brownstone Research is to help educate investors on how to be smart about their approach to investing. Never go all in on one stock; develop a healthy, balanced portfolio of fabulous companies. What my team and I do is monitor those positions every day, and if you use that kind of investment research in the right way, it takes the emotion out of when to buy and when to sell.
52:59 The other aspect we touched on is valuation. We should never buy a stock just because we like the product, we like how the food tastes, we think it’s cool, or we think the network is functioning really well. That’s completely irrelevant; it’s arbitrary. What’s the overall value of the company? Is it trading at 100 times earnings? I can guarantee you that if it’s trading at 100 times earnings or 100 times sales, which is what we’re seeing right now in some companies, you’re going to lose almost all your money. I can guarantee it. Those levels will never be sustained.
But if you find a fabulous company that’s very high growth and only trading at four or five times sales, that’s an undervalued company, and it has amazing potential to double, triple or quadruple your money over time. So I really try to help investors understand how important valuation is, and that we should understand the value we’re investing at, not just the nominal share price of the stock. There’s a big difference.
54:08 Brian Rose: Very well said. You clearly studied corporate finance at the London Business School, and it comes out. What did Steve Jobs say? You can only connect the dots in reverse, and I think I’m seeing all the little bits that got you to where you are today. For me, I focus on what I’m good at, which is doing what I do here, and I get experts like you to advise me. I appreciate the time today.
Gordon Gekko said it: never get emotional about a stock, it clouds your judgement. And then Bud Fox said it back to Gordon when he was getting emotional about a stock. It’s the wrong way to do it. You want to pick, like you said, companies that have those ratios, and have a portfolio of them, and over time you’ll see that value. I agree this is an exciting decade; it makes me want to move back to California at this rate. Really appreciate you, Jeff, and your expertise. Thanks so much for the time today, and let’s do this again sometime.
Jeff Brown: Thanks, Brian. Great fun.
Brian Rose: All right. Take care. Bye.
