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Season 3, Episode 25: Three Areas of Technology Investors Need to Watch

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With Simon Erickson, 7investing

Simon Erickson, founder and CEO of 7investing, joins the podcast to discuss three areas of technological innovation and disruption that stand to transform the world of business as we know it.

The guest identifies one stock from each area, with the understanding that it is not intended as investment advice.

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Transcript

Nathaniel E. Baker 0:35
Simon Erickson, founder and CEO of 7investing. Thank you so much for joining the podcast today, very excited to have you. We are here to talk about a couple of things. And I’m going to kick it off, because innovation, and this is gonna sound like cliche. But innovation is not just a luxury, it is necessary to survive. And that sounds like a little bit like a type of thing you would see in like a McKinsey study or one of these consulting things, but it’s true. I’m gonna give you some statistics here, that in the past 15 years, so since about 2005, s&p 500, companies half, exactly half of them have disappeared, gone under or perhaps been acquired in 1960. So 60 years ago, 61 years ago, the lifespan of an s&p 500 company was 61 years 61. In 2015, it was 17. And that was that’s probably already data, they don’t have the up to date statistics. But it’s probably much, much less now, as we record this in 2021, going into 2022. So with that in mind, you have some views here on a couple of different sectors that you where you see this innovation taking place. And the question, of course, for investors is how do they get ahead of this? And what could be right for for displacement and for disruption? through another business school term there? Yeah. And so I am curious, you gave me three. But yeah, maybe you can just talk about that. And we’ll take it from there.

Simon Erickson 2:12
Yeah, first of all, that I’m really excited to be on your program. I love contrarian mindsets. I love seeing what everyone else is not looking at. If you walk, if you look outside of the herd, that’s where the biggest opportunities, I think, are for investors. That’s exactly right. Yeah, it might spit my spin on that, from my perspective, my world that I’m in is looking at innovation. Like he said, technologies are changing, companies are changing. And sometimes they change very rapidly or very destructively, to the existing markets that they’re in. And so I think that that’s kind of the time with being contrarian is you know, if everyone else is focused on the way things are, we need to make bigger and bigger companies making more revenue, higher, higher margins, all of a sudden, there’s a disruptive innovator that comes in and says, Hey, we’re gonna rewrite, we’re gonna rewrite the rules of this game, we’re gonna find something completely different than what everybody’s gotten used to. And at first, no one’s paying attention to them. This is a contrarian idea. But then they can completely topple those existing income players, completely change markets, we’ve seen it time and time and time again, if you find those early on as an investor, those are the ones that can return 10 or 100 times your initial money. So that’s where I spend my time looking for them.

Nathaniel E. Baker 3:14
Interesting. So talk to me here about the sectors that we’ve that you’ve discovered three of them. Where do you think that this is particularly ripe for this type of innovation?

Simon Erickson 3:25
Sure, yeah. So I think that we chatted about three, you know, we kind of identified, one of the first ones it’s getting a lot of attention right now is being called Buy now pay later. That’s kind of the headline that you hear about, but really, it’s more of transparency and finance. And it’s disruptive to credit card companies. In America alone, no credit card companies are charging $125 billion in interest. And then on top of that, another 15 to $20 billion every year, and kind of unexpected late fees. And consumers hate this, right? You hate getting hit with fees, there’s no value add for that. It’s just an additional bill, you got to pay. And a lot of times those fees are rewarding the credit card companies for giving credit cards to people, and then doing bad behavior by buying things they shouldn’t be, and then they can’t pay it off. And then of course, there’s a lot of problems that happened downstream of that. And so the idea was, what’s not being called Buy now pay later of what if you just disclosed right up front, what all of the installments and the interest payments, for those are going to look like and then you pay it off over time. You make a mortgage for a consumer payment of any type of any amount, and make sure you’re finding the right consumers and the people that can responsibly pay it off. That’s the real trick. What’s going on out there?

Nathaniel E. Baker 4:36
Yeah, yeah. And have these have companies discovered this secret sauce of who will be able to do that? And how are they going about doing that?

Simon Erickson 4:44
I think so. I mean, one that we’ve kind of been paying a lot of attention to as a firm and you know, the kind of becoming the quintessential example of buy now pay later. Their founder, Max Levchin was a previous chief technology officer of PayPal. So he’s made To name for himself over decades of finding the needles in haystacks of the outliers, you know who what was the fraud that was plaguing pay tap Pay Pal back in the day. And now he’s kind of on a new quest to figure out who are the outliers that really aren’t going to be, or shouldn’t be getting out these kinds of loans. And so I think that, you know, this is one company that has really cracked this code. There are several others, but I really like the approach on it. Because not only is it bringing benefit to the people who want to purchase things, and giving them an option if they didn’t want to pay for everything right up front. But it’s also a lot of benefit for the merchants, too, because they’re reaching a new consumer pool that they might not have had access to before.

Nathaniel E. Baker 5:38
Affirm, right? The only experience I haven’t thought by now pay later is on, I bought, I bought a mattress, and her bed. And it was and that woman was checking out I was getting ready to get my credit credit card. And they were like, Hey, you can interest free. It’s the only reason why I did it. Here. Why don’t you just do six payments for the next six months? I was like, wait an interest free? There’s no catch? Sure. I’ll do it. So maybe did they offer everybody those deals? Probably not. But okay, so how to So okay, so they’re basically a lender, this whole Buy now pay later thing.

Simon Erickson 6:16
In many ways, it’s similar to that. But the whole thing is, they’re they’re meant they’re now an option that’s on the checkout page when you’re buying, right? So as opposed to is going in, if you go to the mattress store, net, and you pay for it in cash, they’re not collecting very much information on you, they say, Okay, here’s your mattress, go enjoy it, and we’ll take your cash for it. When you buy things online, you own that checkout page, you know, you kind of have the option to pay with credit card pay with PayPal, oh, but hey, now you can start buying things with Buy now pay later. And anyone that controls that experience, you know, if you sign up for a firm, they’re going to give you other deals too. Hey, we see that you’re like really nice mattresses? Do you want to also buy a nightstand or a you know, a new bedtime for insurance, that’s gonna start giving you other deals for other vendors and then giving you the option to pay in the same method that you did before? That’s kind of a whole lot of digital information going out there. And to your other point of, you know, how did they offered that deal for you that was actually chosen for you on the terms that you’ve got, because they said okay, you probably had to sign up. Yet, there’s only a couple of data points even have to give these providers anymore, it’s your last four years. So security number, your email address, your name, and your phone number, I think is what most of them can do. But they go and they scrape the internet, they find a whole bunch of stuff about you to say, Okay, this is a creditworthy borrower, we’re going to give them really favorable terms 0% interest rates, whatever it might be, if you had a figured out that you weren’t paying back your mortgage, and you’re delinquent on taxes and every other thing out there, they wouldn’t make those kinds of deals for you. So it’s customizing the experience for everybody and making sure that seemed the right people to sign up for this the minute once that there will be credit worthy to pay him back over time.

Nathaniel E. Baker 7:54
And what exactly does Affirm do? they do the technology that the software?

Simon Erickson 7:58
Yeah, so mattress merchant now is hands off, after you make the purchase the repayment of that preset, I think it was six months 0% Or whatever it was, if you sign up with a firm for that, they would be collecting the payments from your bank account for each of those installments, merchant walks away, says here affirm, take three to 6% off the top, for handling this form and taking the credit risk, and then they’re responsible for getting the payments back. And they’re also affirm is on the other side of that charging interest rates for most borrowers. Yeah, I use was 0% interest, but a lot of them, you know, you’re seeing kind of three, four, or 5%, sometimes as high as 20%, depending on the borrower. But again, if you don’t have the upfront cash, you really need to buy something and really want to buy something, it’s an option.

Nathaniel E. Baker 8:43
Maybe if you have to pay 20% Maybe you should buy it. But anyway.

Simon Erickson 8:46
Well, and you know, in a lot of things like flights travel, you know, it doesn’t have to be discretionary all the time. But if you want to take a flight, you don’t want all of a sudden pay $600 upfront for a flight, but you’re comfortable paying, you know, five 7% interest rate because the time value of money, that’s an option for you now.

Nathaniel E. Baker 9:02
Interesting. Wow. And so they so they basically have the and affirm. And again, it’s not the only company that does this, they go out and like you said you scrape the internet, they obviously have a bunch of big data processing that they can do to find out that the borrower is worthy of whatever, right? And that’s how they’re able to, I mean, I’m assuming the credit card companies have the same information right? Or have access to it.

Simon Erickson 9:26
They do and you know, just kind of an example of as to Is there are there are installment plans, right? You can you can probably go anywhere, even where you buy a mattress from and they’ll say oh, you can pay this off over four installments and things like that. Even credit card companies are kind of setting up new installment plans. Amazon’s got an installment plan. But it’s not fixing the fundamental problem though. Now the disruptive part of this is we’re trying to wean ourselves off of interest payments. So if we’re doing installment plans, we can still use your credit card for it. That’s not fixing the fundamental problem that people shouldn’t be borrowing. That money in the first place needs to come directly debited from your bank account and Need to know that it’s a creditworthy borrower. That’s what we’re trying to fix it, the higher up the higher level, buy now pay later in my opinion is not a fad. I think this is something that’s definitely here to stay. And you see a lot more places five years from now,

Nathaniel E. Baker 10:12
how big is this industry and how many companies are there other than Affirm?

Simon Erickson 10:16
there’s quite a few. And there you’re starting to see acquisitions to right after pay was an Australian based Buy now pay later provider just got bought up by square, I think it’s $29 billion deal for the merger. Square is wanting to build a financial ecosystem, you can do all sorts of things, not just buy now pay later. But you can also trade NF T’s you can buy and sell Bitcoin now on square. I mean, they just want that to be one option in a much, much bigger ecosystem. And then there’s a whole bunch of other smaller ones too, especially here in the United States to the question is kind of what kind of interest rates do you want to charge? Do you want to hold the risk and the loans yourselves? And then what role of data are you collecting about people? We’re gonna see a lot of shakeout, some are gonna stay, and some are gonna get acquired.

Nathaniel E. Baker 10:56
Yeah, I was I was gonna say, I mean, what’s to keep somebody from, like, Visa, I mean, visa is fresh in my mind, because they just reported earnings yesterday and disappointed in the stock was dumped in a major way, partly because of their conservative outlook, and partly because some of these issues that they actually talked about worried worried about being disrupted a little bit. But why couldn’t they? Because I think they have plenty of cash, or even if they don’t, they can borrow it, like, can they acquire a new firm or somebody else? Yeah,

Simon Erickson 11:24
I mean, this has been a very accurate, acquisitive, you know, they’re actually very on top of what’s going on in the financial services. Even talking about cryptocurrencies and things, versus not fighting uphill against things that are meant to happen. Right. I think that’s more of a risk for kind of those, those banks that are have been a little bit out there a lot of these technologies. Yeah,

Nathaniel E. Baker 11:45
really interesting. Because, you know, banks are one of these things that that’s been talked about a lot. It’s kind of ready for disruption. And there’s been a couple of them around the edges. Like, you know, Lending Club is probably 10 years old already. And some other ones. But but it’s kind of something we haven’t really seen all that much of I mean, I know this isn’t banking, but it’s it’s lending is borrowing. And it’s consumer acquisition. So it’s, it’s easy. Is there anything that could that could screw it up? Like, I mean, is it a regulatory parliament? I mean, I know we talked about credit cards shouldn’t be charging, we’re basically usury rates, you know, compound interest of 20% or more, but if, if, by now pay later does it, it’s still the same kind of, you know, rip off, isn’t it?

Simon Erickson 12:28
It’s, well, they’ve still got to get the payments out, like, like you say that say that they make they make a wrong, they make the wrong offer to somebody who’s not going to pay it back, you still got to have the installments, and it’s directly debited from a bank account, you can still have overdrafts, you know, you can still have trouble if you make the wrong loans. And then those go delinquent, and you’re sitting on them on the balance sheet that can blow up. I think that’s the type of thing that’s why a firm is my favorite in the space. Just because you’ve got an experienced operator, Max has done this for decades. He’s not going to blow up the company by making bad loans. He’s going to continue to tweak those algorithms all the time. It’s a digital world out there that I mean, everybody’s using every zero and one out there to their advantage. Software is innovating a whole lot of industries. And like we said if service is a big one.

Nathaniel E. Baker 13:09
All right, and tell me this talk about a second one.

Simon Erickson 13:12
Yeah, so speaking of zeros and ones, let’s talk about computing, right? We’re talking a lot about kind of the semiconductor shortage that’s out there, and all the innovation that’s happening with semiconductor chips, but something that’s really disruptive that’s on the horizon. It’s still a science project, for the most part right now. But it’s starting to get some attention in some publicly traded companies is quantum computing. And the reason I bring this one up is because this is not just a faster computer, a lot of people to hear Columbus, OH, YEAH. OKAY, just like a CPU. But you know, it’s 100 times faster than so it’s completely different set of rules, and a completely different way that processing is being done. It’s not just ones and zeros. It’s not just classical computing that we’ve gotten used to with CPUs running code in series. This is completely different, fundamental science that’s built upon quantum mechanics and quantum physics, it’s really hard to understand, I don’t understand even the experts in the field admit they don’t really understand what’s going on under the hood. But it’s a much, much faster way to actually do computing. The algorithms that are solving problems are happening at several orders of magnitude faster. And that’s going to unlock a whole lot of opportunities for companies that are trying to solve really, really hard problems out there.

Nathaniel E. Baker 14:23
Well, you know, Warren Buffett says, don’t invest in anything you don’t understand. So. But from a big picture top down, can you talk about what like, what is who’s behind this? And how, how does it work fundamentally, like the keytop talks about that?

Simon Erickson 14:38
there’s limitations on what we can do even with this fastest computers have gotten to even the highest performing computers that are out there. They’re solving really, really hard things like climate change or logistics, drug development, you know, how do you simulate molecules and what’s going on in the body when the drug gets delivered? I mean, things like that. We kind of do the best that we can. But there’s so many variables that you just can’t do. Really do better than then we’ve kind of been plateauing for years, we have faster processors that can crunch numbers faster and faster. But when you’re dealing with millions of variables on very, very complex things, it blows up, it would take way too long to do this. And quantum computers is really looking, it’s not, you’re not gonna have a quantum computer on our desktop that, you know, we’re using to use Microsoft Excel for. But if I’m trying to model out climate change, and what’s going to happen every single place in the world, and I’ve got data points from millions of sensors on every continent, and I want to see what all this is meaning that could be an application that would need something like this, again, the drug developer one, I think that’s an interesting one design for materials. I mean, right now we’re talking a lot about the batteries, they’re going into Tesla’s vehicles for electric vehicles, because range anxiety, people like I, I really am used to being able to pull over into a gas station because they need to fill up I don’t want to run out of range. Imagine if you could have an electric vehicle that could drive in circles all around Texas five times before it runs out, because you’ve got perfect storage and a battery. And you’ve designed that perfectly, because now you know how to, you know, you solve all the material challenges when you’re designing things like that. I mean, r&d could be completely disrupted. The way that we know it today, if you had something with an interface that can solve very, very complex problems.

Nathaniel E. Baker 16:19
So who’s behind this quantum computing? And you didn’t mention there are some public companies that can profit from it.

Simon Erickson 16:24
There’s a whole bunch of different approaches right now. The academic work is kind of focusing on how do you get a stable qubit, which is kind of the word you look for in in quantum computing’s. Google has worked on this for years. IBM has worked on this for years, Microsoft has worked on this for years. And now we’re starting to see some pure play companies like ion QIO in Q is a ticker on now and Justin are currently public, to the markets. And they believe that their ion trapping technology is completely disruptive. Anything else that’s going on out there. And again, now, these are companies that maybe will have $10 million in revenue this year, if everything goes well, and they’re selling at $2 billion market cap. So I mean, you’re talking about several hundreds, if not 1000s of times sales. That’s a head scratcher for anybody who’s a value investor saying, How can you possibly pay that much for a company like that, but I’ll tell you, when we look at the market caps of AMD, and Nvidia and Intel, and even the manufacturers of classical computers and CPUs out there. And these could easily if they crack the code. And this actually becomes a standard. You could have 100 200 $500 billion market caps and these companies,

Nathaniel E. Baker 17:36
yeah, this company has been public for a while. Not a lot, a very long time at all, like, since October 1, it looks like they had their IPO and it’s gone up, but it hasn’t gone up that much. Was this a spec deal? Because it’s right around 10 bucks now?

Simon Erickson 17:50
It sure was.

Nathaniel E. Baker 17:50
Oh it was okay.

Simon Erickson 17:52
Absolutely.

Nathaniel E. Baker 17:52
So it was 1228. Now, so okay, you know, 20%. But it’s a Yeah, $2.1 billion market cap. At its current valuation, it did go up 10%. Today, maybe they knew you’re going to be talking about it. But but you still think it’s worth obviously what this isn’t investment advice. But this you still think it’s worth acquiring for people who are very interested in?

Simon Erickson 18:15
I don’t. I don’t I’m not sure I am. So early on this on quantum computing that like right now, these are all dark bros short, there’s no way you can say company that’s that small that has $10 million of revenue. So what does that 200 times sales? Yeah, to be another valuation. I mean, that that is that is one of many dark throws, it’s going to be happening in quantum. But I’ll tell you, somebody is gonna crack this code, whether it’s on cue, whether it’s Microsoft, whoever it is, I mean, if it’s a small company that can show qubits stability, and the ability to have a commercially available quantum computer that starts doing sales and having a UI and a user interface that’s useful for it. Something like that is is going to knock it out of the park. And I think that the contrarian in me recognizes that that even if these valuations seems super expensive right now, maybe they really aren’t.

Nathaniel E. Baker 19:02
Yeah, I wonder if there’s a quantum computing ETF that kind of can take a bit of a larger, more macro approach.

Simon Erickson 19:09
There certainly is that further is, I have seen a couple of them come public now. Yep.

Nathaniel E. Baker 19:14
All right. Cool. I do want to take a quick break and come back just to give our sponsors a chance. And when we come back, I want to ask you some questions about your background and seven investing before we move on to the last final topic of discussion here. But let’s first take a break. If you are a premium subscriber, do not touch the dial. You will not get the break.

Nathaniel E. Baker 19:35
Welcome back. Everybody here with Simon Erickson. of 7investing. 7investing is a new firm, but this is the section relatively new year nowadays. It’s not really new. But this is the section of the show. We’d like to talk to our guests a little bit more about their personal background, how they got to this stage. In life, you are the CEO and founder of 7investing. So what were you doing before but go back technical specs for as far back as you like, all if you go back very far, then I will ask it for a Cliff’s Notes version. So we don’t have to get into like, major details around like your junior year, etc.

Simon Erickson 20:21
when I was born, let me tell you. Yeah, via the quick Cliff’s Notes version is I’m an engineer by training, you know, I came out as a chemical engineer and then went into technical sales. And so I spent most of my 20s going around that same Courtyard Marriott felt like my room every single week, going out. But you know, we were selling specialty chemicals, every single customer wanted to do something innovative and knew that they could sell at higher prices and better margins than their competitors. So got a taste for this love of innovation, went back, got an MBA, went to work for a large energy company, developing renewable energy projects for him. So building solar plants, and figuring out the economics of that, and how can you not mess up the economics of a big oil company if you’re going to be doing renewable projects. After doing that for a little while, strategy and kind of venture capital side of that, I worked for the Motley Fool for seven years, ran some services for them, and really looked at industries that were undergoing changes and the innovations that were taking place. So kind of a 180, if you will, from looking at things from the inside and developing them for a company and now looking as an outsider as an investor saying, okay, is this gonna work? What company do I actually want to invest in. And then like, like you mentioned, my favorite part of the, of the of my professional career, which was in March of 2020, when we started seven investing, brought in a fantastic team of stock pickers, and our lead advisors, we have seven of them now that every single month we’re going on, we’re each finding our very, very best idea on the stock market, pulling those together, at our top seven picks are available through a subscription product.

Nathaniel E. Baker 21:52
And so you did so it sounds like you do have a background in, you know, the, I guess the growth company, technology type of sector, especially if you’re you’re an engineer, you know, this stuff a little more closely than then others might. And so, so, so yeah, so it’s fitting that you would talk about these these segments of the of the economy, I guess, of business that are ripe for, I guess, yeah, dislodging the way that we do business. And we’ve seen this right, in the last 10 years, just how much things have changed and looks like they’re going to continue to change. So let’s talk about this third idea that you had.

Simon Erickson 22:35
Yeah, so the third one, you know, that really catches my eye as a fan of innovation and disruption is gene editing. This is another one that’s starting to get a lot of attention, you’re starting to see headlines about CRISPR, you’re starting to see kind of some publicly traded companies, but fundamentally, why why are we doing this? Why is this so important? Anyway, in the healthcare system that we have, traditionally is built around kind of sick care, when you get sick, you go to the hospital, and they give you something to treat that, or they give you a drug to treat that, you know, or if you have a chronic condition, they just kind of continue to chronically treat you for things like that. And that’s been the basis of drug development, and most pharmaceutical companies in the United States in Europe for decades. And this is the disruptive angle of that is what if you could actually go upstream of treating a condition that started manifesting showing symptoms and actually fix the fundamental problem itself. What if you could actually edit the genes that are telling you you’re telling your cells in your body to create harmful proteins that are causing you those issues that you have to have to have treated later on? So that’s the idea of gene editing. It’s very difficult right now, it’s very expensive. It’s very selective, it’s very personalized. But there’s a lot of breakthroughs kind of happening in this field that certainly has the attention of investors like myself. What are some one, it’s got my attention is Intel, the therapeutics ticker that is in te la. And so they are doing gene editing, it’s a CRISPR is the the approach that they’re taking. And they’re going primarily at least right now, this is still pre revenue. This is still just in clinical trials. But there’s a condition called translate written amyloidosis. It’s a mouthful, especially when you don’t have enough coffee yet, like I don’t, but I’m not gonna try to say that. It’s fatty builds up in the liver, right? You’ve got you’ve got these these fatty proteins that are building up in the liver, and it typically kills you within a couple of years. But again, it’s a genetic disorder. There’s something wrong in the genome, that it’s an anomaly that says do this. And your body’s doing that. And so the idea is, if you could actually go in and edit those, those cells and those genes directly within the liver that are causing those problems, you won’t have those fatty buildups anymore. You can have a reduction in the Transthyretin protein that’s causing the problems that go on to build these these buildups within the body. And so the idea is, you know, get upstream fix the source of the problem rather than trying to treat it downstream. And there’s a whole bunch of different things from hereditary blindness to sickle cell disease, you know, spinal muscular atrophy, TransSiberian May Allah doses made stuff like this, there’s a whole bunch of either very small or very complex diseases that could be treated at the genetic level.

Nathaniel E. Baker 25:07
Hmm. And how close are we to he said that these are in clinical trials? How close are we to potentially getting? The first I guess it would be the first right?

Simon Erickson 25:16
Still years out. It’s kind of interesting, though, because when you say the question is interesting, when you say how far are we? There’s obviously a whole lot of regulatory protections on this. You have to do your homework and show that it works in the first place, and it’s safe. And then on top of that, we’ve kind of got an ethical debate, United States of you know, do we want to be gene editing things? What about germline? What about stuff that’s going to manifest in your kids and in their kids? That’s a really hot topic right now, which in China, we’ve already, there’s already been genetically engineered babies that have been born by a scientist that just kind of ran forward with his experiment over there, and is now more or less under house arrest with the Chinese authorities, because you wouldn’t need to get this great breakthrough from scientific perspective, not as exciting if the government told you not to do something that you did anyway. And so gene editing as a whole, I mean, it’s kind of something like in vitro fertilization was really, really controversial. Decades ago, and now it’s generally accepted by most places as a way for people who otherwise couldn’t have kids to have kids. Will gene editing follow a similar approach, or something that’s very, very controversial today, gain societal acceptance, to really phased out a lot of diseases and a lot of conditions that are causing a lot of problems and suffering for people out there to be seen. I mean, it’s really hard to tell the answer of when that’s going to actually gain adoption.

Nathaniel E. Baker 26:41
What are the potential side effects of gene editing? You touched on? You know, actually screwing up the Yeah, I mean, they seem to be pretty fast.

Simon Erickson 26:50
Yeah, I mean, that’s the right, the right question to ask. Right. So the genetically engineered children in China, there are twins, two twin girls, they were trying to genetically engineer so they’d be HIV resistant to HIV Positive parents. And they succeeded in that the kids didn’t have that affecting them, because they genetically engineered them. But now they’re starting to wonder, okay, what was this gene that we knocked out? So that you could be resistant to this? What is going to be the long term effects from something like that? And we don’t know. You know, there are a lot of parts of the genome, we don’t know anything about just yet. And we don’t know how they’re interacting. We don’t know that. If genes that we thought were just correlated to one certain thing specifically, maybe have got correlations, other things that we don’t understand yet. And so there’s kind of this field of science, it’s kind of the, I guess you call it a polygenic risk score is, you know, how likely are you to developing a condition based on the genome that we can see and that we understand in your body? It’s kind of like if you ever took the ancestry.com screening, you know, the DNA screen? You I think you spit in the thing, and then they send on this okay, yes, Simon, your European Great. At the beginning that the circle was this big, it was all of Europe, because it didn’t know exactly where it wasn’t that it gets better over time says, Okay, actually, you’re mostly from United Kingdom in Germany, and it gets more and more specific. Same thing is happening with our understanding of diseases and genes, you might have a gene that they say, Okay, this is what we think about it right now. And it gets more and more specific, and the scientific understanding of it gets more and more pronounced. That’s what’s really excited about gene editing, and really just genomics as a whole, because it’s going to unlock a whole lot of new doors that we haven’t gone through before in science.

Nathaniel E. Baker 28:28
Yeah, in fact, the the ancestry.com tests, maybe it wasn’t that one, but another one, they came back to me with a bunch of, you know, diseases that I would might be more susceptible to, and other ones that I’m more, you know, so that was pretty interesting, based on I guess, based on just on my genetic makeup. So yeah, so gosh, what? Alright, so you’ve talked to us here about some really interesting concepts, and a couple of ways that these could manifest itself for investors. And how do you guys pick your entry points? Like it’s, it’s, you know, it’s easy to, it’s one thing to pick the theme. And then it’s a little harder to pick the companies that are going to be able to profit from the theme. And then thirdly, you have to find your entry point to where you’re comfortable with allocating the funds to get access. So how do you go about that? That final step?

Simon Erickson 29:20
Yeah, at first, I should say not that seven investing even though we’re talking about some really cool, futuristic cutting edge stuff, we actually tried to set the full buffet of options for investors. So you know, in addition to talking about cool stuff in gene editing, and quantum computing, we also make dividend pay retail companies as our recommendations. You know, we’re telecom companies and things that are much larger, that aren’t quite as risky. We want to have low risk and high risk, super high reward and you know, more and more in tune with the s&p rewards, because we think investing is a very personal thing. answer your question about how do you how do you think about valuation? For a company that’s disruptive? It starts at the market. You have to start the market because you got to figure out what is the market going to change? Who’s going to embrace this? You know, if this catches on what is the actual market potential in terms of billions of dollars, hopefully, that your disruptive solution could achieve? And if you say, okay, the markets this large, what percentage of that market share Do you think this could grab? And then you kind of work backwards and say, Okay, well, if revenue is going to look like this five years out, what’s the percentage chance of succeeding? Okay, maybe it’s 30% chance. And if you kind of walk backwards and say, what’s the valuation, I want to pay for that today, you might say, Wow, this is an incredible bargain. Because nobody is thinking this is going to succeed, or the markets not big enough, or their share the markets not big enough, or it’s just, it’s just not understood at all, it’s going to be completely different market. So I tend to think of it in terms of I look for things that I really like, I do a lot of conferences in the last 10 years, and just seeing what PhDs are really excited about. And that tends to go into the commercial markets and find its way into businesses over time. And so that it’s not an exact science, but you can certainly see if the bar is here, but the price for the company is here, you can kind of figure out what’s a bargain, and what is really got too much hype already baked into it.

Nathaniel E. Baker 31:06
You know, one thing that you didn’t mention here was crypto. And I’m curious, because that is oftentimes the first thing that people mentioned when they think of disruptive technologies and blockchain against more specifically, do you have any views on that?

Simon Erickson 31:20
Tons? How much time do we have? And how much crypto is something that is followed by a disruptive curve? You’ve got early adopters, you know, who are in their basement buying Bitcoin before anyone else has even heard of it? For a couple pennies for Bitcoin? And that is the first step that’s necessary. Then all of a sudden, you have kind of the early the early majority, where you start seeing companies like like Elon Musk, with Tesla, with a handful of other companies buying crypto buying Bitcoin, put it on their balance sheet or accepting it as transactions. But still, I’m not buying anything with Bitcoin today, most people still aren’t doing that. Maybe in five years, we will be though maybe this is going to just be something that I say, Oh, wow. If I hold Bitcoin, in a cryptocurrency account, like Coinbase, and I’m getting paid 12% a year just for holding it there. And I can buy things when the price of it goes up, and I wouldn’t have been able to afford earlier. Maybe I’ll start making transaction with that. And then maybe five 510 years after that. We just see the majority where everyone’s grandma is like, Yeah, send me some bitcoin, you know, this digital app that I’ve got on my smartphone. I mean, stuff like this takes time, but you start seeing it catch on, as more and more people recognize how it could be useful for them.

Nathaniel E. Baker 32:29
What about blockchain technology more specifically?

Simon Erickson 32:31
I mean, the enterprise is figuring that one out right now, right? Crypto first came direct to consumers, you could go set up an account and Buy Bitcoin and sit on them as a store of value or was something that you were using as an investment, probably for the short term pops that we’ve seen, or at least the volatility of it, the fundamental blockchain technology itself, the distributed ledger, which is really, really interesting, does not require financial middlemen, because everybody is looking at the same distributed ledger that’s very, very hard to crack or have any chargebacks or any fraud associated with it. And so companies that have really, really sophisticated global supply chains, with lots of middlemen, Starbucks Walmart, are adopting blockchain within their own operations in their own infrastructure. So absolutely, it’s gonna be a huge, huge deal. And a lot of it I think, now there’s gonna be a theorem because Aetherium also is connected to smart contracts, which means you don’t have to get the legal aspect involved for a lot of the transactions. Yeah, the paperwork. Oh, the ship showed up. You know, the port here. Let’s verify that this guy, your stuff like that, if you can just settle all of that instantaneously. Huge time savings. Huge efficiency win.

Nathaniel E. Baker 33:30
Very cool. All right. Interesting. All right. Simon Erickson, in concluding here, maybe tell us about seven investing.com. Where else people can find you. I know you’re our active on the Twitter, as mine is how we connected. So yeah. Where can people find out more about you?

Simon Erickson 33:46
Yeah, sure. Thanks. On Twitter, we’re at seven investing. That’s the number seven investing. I’m at seven, innovator. And our website is seven investing.com. We put our our new pics on the first of the month, I know that you said that you’re going to drop this podcast for your subscribers today, our first picks will be coming out on November 1, cool a couple of days from now. And that’s where our new seven recommendations will be coming out for the next month.

Nathaniel E. Baker 34:07
And so this is something that the seven of you, are you one of the seven or you just oversee the thing?

Simon Erickson 34:12
I am Yes, I’m putting myself in the middle of the of the pool as well. That’s right.

Nathaniel E. Baker 34:15
so you’re one of seven. There’s seven of you and you guys all do your research during the month and then you on this first meeting of the month you put out this your best idea? How does that work? Is everybody focused on a different segment of the market are

Simon Erickson 34:29
we do we have different sectors that we that we focus on, you know, we’ve got some people that are really really in tune with biotechnology, others really like artificial intelligence, some like financial services, and then even retail and entertainment, more established things. And we transparently track every single one of our picks to revisit if we’re gonna if we’re going to go out and call ourselves stock pickers. We need to be holding ourselves accountable. And we’re transparently reporting the real time return of every single pic we’ve ever made on a recommendation stage.

Nathaniel E. Baker 34:54
Very cool, very cool. And so it comes out when when is this release generally and how like, isn’t it isn’t a podcast is just a paper that you put out? How does it work?

Simon Erickson 35:03
We’ll, we’ll put the reports together. So we will publish on the first of the month reports for each of our recommendations. So if Simon is going to go out and recommend, I can’t tell the company right now, but XYZ on the first of November that my report will come out, you can ask questions directly to me either in an email on Twitter, DMS, or even have a community forum now. We kind of think that investing is this long term journey that’s very personal for people. We don’t just want to issue a report and disappear. We want to kind of continue that conversation. And also follow this companies. You know, they change over time to they do new things. Facebook today is now going to be the metaverse company medical No, no, I think it’s just meta. Meta. Meta. That’s right. That’s in VRS. Mr. vs.

Nathaniel E. Baker 35:43
Meta wasn’t available, and eta wasn’t available.

Simon Erickson 35:45
So that website already had it. Did you have a better? I wish Yeah, nobody made a lot of money off right now. Right? Yeah. But I mean, the company changed to it. So we want to keep up what they’re doing as well, overtime.

Nathaniel E. Baker 35:55
Cool. And are these so these are released to your subscribers? Then the first of the month? Are they released the general public later on? Or not? You just keep them great. And so how does one get in there? Obviously seven investing calm has more information. What are the general costs associated with this?

Simon Erickson 36:09
7investing.com/subscribe. If you’d like to get started, our subscription is $49 A month or $400 a year with a special caveat that if you’re a student in a university, I know that you don’t have any money because I’ve been there done that myself. So we’re offering a special rate of $84 a year, but the rest of it towards your tuition, if not your money.

Nathaniel E. Baker 36:29
Oh, somebody tells me I know where that’s gonna go if my experience as a student was any guide in this. Very, very cool. Alright Simon, thank you so much for joining the podcast. I thank you all for listening. And with that, we look forward to speaking to you again next time.

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