Journalytic Launch | The Acquirer's Multiple®

In their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discuss the Journalytic Launch. Here’s an excerpt from the episode:

Tobias: JT, you want to you want to take us away on the Journalytic journey?

Jake: Yes, please. So, yeah, today– [crosstalk]

Tobias: What is Journalytic?

Jake: Well, hold on, Toby.

Tobias: Sorry, dude. You’ve got a presentation. [crosstalk]

Jake: [laughs]

Tobias: Take it away.

Jake: Son of a bitch. So, today is a very special day for me. It’s literally years in the making to get to today. In some ways, it’s been more than 10 years to get to this very day. So, yes, as Toby was alluding to, this project that I’ve been working on is called Journalytic. It is open now for anyone who wants to go in there and log in and get journaling. We’ve been previously in a closed kind of beta, kind of invite only, but now it’s open to anybody. I thought maybe I would just like walk through what some of my motivations were for trying to build this thing.

If to rewind, go back, I’ve tried all kinds of different note taking apps over the years. Notion, and Roam, and Google Docs, and Slack channels with myself, all kinds of stuff. It always felt something was missing because all of those are such general-purpose tools. I was always wondering like, “Where’s that perfect investment journaling app that’s custom built for investment?” It’s a very specific use case, and I could never find it. So, I decided, yeah, maybe I’ll try to build something for myself internally running Farnam Street.

It turned out I felt what I was exploring and what I was wanting to get built, I’ve realized that might be able to help a lot of other people too. And so, the project got a little bit bigger than that, than just purely an internal tool to be built. I started building a team around me to help do it right. I’ve been incredibly blessed with the guys, with a super talented team that has come together to work on this project with me. The number of man years that are already invested in this is a little bit sickening in some ways, but [chuckles] it’s also exciting to finally get it out. For a fun and thrilling experience to offer the team, visit this website at https://www.escaperoomsbristol.co.uk/ to learn more.

I had three primary desires, these itches of my own that I was trying to scratch with building this. The first one is that I wanted to feel more organized. So, for years, I had research all over the place. I would take notes in these yellow legal pads. They start stacking up. Some of them had investment research. Some of them had book notes. Some of them had just general interest notes. They were stacked up everywhere. Some were at home. Some were at the office. I couldn’t find what I was looking for most of the time. It was just a mess.

The real problem is that I couldn’t really search across them and I couldn’t leave tags for myself to find later, like little breadcrumbs that help you connect dots. I knew I was having a lot less epiphanies than I should have been having, because you can only load so much RAM into the RAM of your brain at any one time. So, to be able to work with the information, the material, it helps to have it in this external brain. And so, that’s what I’ve been trying to build to stay organized.

And now, Journalytic is basically my external brain for the last 18 months that I’ve been using it. I can easily organize all my notes. It uses this $1 sign, like a cash tag like Twitter does, where you could put in $MKL, and then all of your notes would be Markel related to– It would then be organized by Markel. And you could then search and just look and see all your notes for Markel. Or a hash tag with a particular phrase on it or a note that helps you to keep things organized, and to then be able to search through your different hashtags.

One of the things that I do regularly is I’ll use #redflag or #greenflag. As I’m going through, let’s say, a 10k, I’ll just affix a little #redflag on something that I don’t like. Anything on its own is not that big of a deal, but because it’s actually colored red and colored green, I can go through my notes really quickly for an idea and I could see like, “Oh, shit. There’s a bunch of red flags that have been accumulating and I didn’t notice it as I was going through in real time. But now that I can see the whole sweep of it and see the color, it starts to stand out. Now, maybe I need to re-underwrite some of my thinking about it.”

I also use the hashtags for scoring. So, I’ll put #capitalallocation1 or #capitalallocatioin2 or #capitalallocatioin3. One will be like when I see good cap allocation or three will be bad, and so I can start to score different companies, different management. Maybe I could do culture as well as a scoring or returns on capital, different things. Then, I could click through and see like, “Oh, here are all my companies that I’ve seen #capallocation1. These guys are really good at it. Is there anything common between all of them that I can then look for in another pattern matching for another company?”

The ability to search multiple items at one time. I can put in, let’s say, #thesis and then $Fairfax, and then it’ll quickly just show me right away like, “Okay, here’s my thesis for owning Fairfax,” or, “Here’s a KPI at Markel,” and then I can see, “Okay, here are the KPIs I keep my eye on for Markel.”‘ And then of course, you can backlink between entries so that you can organize webs of information.

The second human need that I was really trying to go after was to hold myself accountable. I knew that there were places in my process where I was being sloppy. I would research a name for a little while, I’d get distracted, and then I’d end up not finishing my process. I’d move on to something else that was a shiny object. I had an investment checklist, but it was this really long document that I would just go through and kind of like, “Oh, yeah, this doesn’t really matter” or, “Yeah, I should look into this later.” It really was defeating the whole purpose of having a checklist, which is to have system to thinking trigger to use [unintelligible 00:25:25] terminology. You’re not just blowing through it. A lot of times, I wouldn’t write anything down as I was going through my checklist. So, I wouldn’t be able to see how things were changing as I would rerun the checklist, which is really important.

So now, I can hold myself accountable in Journalytic in whole bunch of different ways. You can look through this idea list so you can see where all your ideas are in process. I can see where I got the idea, so the source of the idea. So, I have an idea of who is giving me good ideas and who isn’t, which is pretty powerful. It’s really easy to run checklists in there. We have 45 different categories of checklists that we’ve prebuilt into here. There’s more than 300 individual checklist items to work through if you want to build your own checklists within there. I can set reminders to follow up on different events like let’s say that there’s a management says something and I want to go and keep an eye on like, “Okay, well, they said within six months, this was going to happen. I’ll set a reminder,” and it’ll pop up and tell me like, “Hey, you wanted to go look at this.” And now, I can go check and see did management execute on what they said they’re going to do.

There’s also this cool thing where you can set an inactivity alert for a particular idea. Let’s say it’s been 30 days or 90 days, and you haven’t journaled about that idea, it’ll give you an alert if you set it so that you can make sure you stay up on all your stuff that you own or things that you would like to own.

It’s really easy to record probabilistic predictions, so to get back to, is Cathie doing a probability prediction of bitcoin at a million. It’s really trying to behave super forecasters like Phil Tetlock would tell you what you should be doing. Then, you could create contracts with yourself. Last week, we were talking about kill criteria. That’s one of the things that I have in there is, I have kill criteria set for ideas. It’s really about putting my best intentions into this contract with myself so that it helps control my behavioral biases that might be creeping in sunk cost bias.

Then, the last thing was that I wanted to really understand myself better as an investor. I knew that there were all kinds of data about my investment process that were really going unrecorded. I couldn’t learn from any of that because I didn’t have the data. So, where are my blind spots and what feedback loops were currently stuck open that if I could close them, I could learn so much more? Right now, Journalytic makes it really easy and fast to record a decision. Buy and sell decisions, obviously, a lot of people do that, but also actually pass and hold decisions and what’s my reasoning for each one. Why am I buying? Why am I selling? Why am I passing? Why am I holding? And then, to go back and look at the reason code that I use for each one of those particular buckets of decisions and I could see what the returns were really easily for those decisions in real time, it allows me to go and look at systematic biases that I have in my reasoning.

Also, the ability to see which ideas am I spending the most time on. Does that match up with where I have my portfolio allocated? Am I spending a bunch of time on ideas I don’t even own and I’m basically chasing shiny objects? Do I get better returns from focusing on my existing portfolio and understanding those names better or looking for some new opportunity? How many ideas am I looking at per year? How many decisions am I making per year? What’s my swing rate on buying versus passing? How many rocks am I turning over? How many things am I buying or not? All those stuff, I think, is really cool to know.

Then, the ability to record feelings and then see them overlaid really easily on a price chart, we’ve built this. And so, I really want to see how price is driving my own sentiment as much because I fear that it is. I’ve already seen that it does somewhat, which is a little bit scary. So, it shows you what Kahneman said before about like, “Just because the biases, it doesn’t mean that you’re necessarily controlling for them unless you take very specific actions.” This whole thing is built to basically try to help you take more specific actions that will control your behavioral biases.

My ask of the audience is to go to journalytic.com, create an account, it’s free. This particular set of features that we built to start is going to most likely– I’m pretty sure it’s going to stay free for as long as we do it. We’ll build other things that eventually will turn this into a business. But for now, we just want to get people in there and get them working on stuff and becoming better investors. And then, I would ask that you just record one feeling about any investment that you’ve been making or that you’ve been thinking about lately. And then, navigate to that price chart for that. It’s inside of there. It’s very easy. And then, see your feeling that’s recorded on that price chart and then imagine yourself, if you continually record that type of thing to see what’s going to happen, how price is changing your sentiment, I think it’s super powerful to just get started.

My hope is that these tools are going to turn all of us into way better investors than we would have been. I love the idea that our group of people who are using it are ironing out a bunch of the inefficiencies in the market and becoming the best version that they can become of investors. So, longtime in coming, lot of thought and effort and human– just thinking about this over and over and over again and working it out to figure out what’s the best way to structure this so it’s not overly complicated, but it’s still very easy to use. I’ve been using it now for about 18 months like a rudimentary version. I’ve got now more than, think 1,900 entries over that time period. I can search through any of them and I could see all kinds of stuff about myself. The more that I put in there, the more that I’m learning about myself. It’s starting to become an exponential curve to that. If you’re into self-improvement, I don’t think there’s a better tool out there for that. So, that’s the [crosstalk]

Tobias: Congrats, JT. Congrats there.

Jake: Thanks, man.

Tobias: Longtime coming.

Jake: Yeah, longtime coming. How long have we been talking about this behind the scenes? [laughs] Forever.

Tobias: At least 18 months. Two years, maybe more than that.

Jake: Oh, Jesus.

Bill: So, you are giving it away free to everyone?

Jake: Yes.

Bill: Free?

Jake: [laughs] Free for– [crosstalk]

Bill: So, there is no reason that anyone shouldn’t at least check this out.

Tobias: Just $19.95 and postage– [laughs]

Jake: Yeah. [laughs]

Bill: I’m a little upset because I thought I was special but we’ll take that offline.

Jake: Yeah. [laughs] Well, listen, you got into the beta before it was open. So, that’s [crosstalk] entire special.

Bill: That’s right. I missed one of our scheduling sessions, which I’m sure would drove you a little nuts as it should have. But it’s a great product. I think Jake’s the right guy to bring something like this to market.

Jake: Thank you.

Bill: I don’t know if that helps you, by the way. The audience that loves you may not like me, but [Jake laughs] we are together on this one. Sympatico.

Tobias: You sent me some insights that you’d had and we’ll try to work out to what extent is that the market and to what extent is that you. But do you feel comfortable? Can you share some of those ideas that– I can probably pull it up. [crosstalk]

Jake: Are you talking about my decision analysis?

Tobias: Yeah. It doesn’t have to be the actual detail of it, just to give a flavor of what you do. Because I thought that was interesting. I thought it was useful.

Jake: Yeah. Maybe it would be good if you pulled up because you probably have that.

Tobias: Let me see. Not far back we have to go.

Jake: Well, here you go. I’m searching my process hashtag, which will take me right to that.

Tobias: Oh, yeah, I do have it here. I won’t read it. I’ll just lead you into it.

Jake: Yeah. All right, for buying things by reason codes, some interesting things that stood out from that, it’s a little bit annoying in some ways to look at this stuff. But when I had “increasing certainty” about an idea, yeah, that performed quite poorly. When I had loved the business, that didn’t do very well either. [chuckles] When I had asymmetric outcomes, which I thought was a dondo idea of heads I win, tails I don’t lose much, it turns out I lost more than I thought I was going to.

Tobias: [laughs]

Jake: [laughs] But my core strategies of things that I work on like finding good cap allocators and reversion to the mean, I would call it which is basically traditional quant value bets, both of those did quite well and those tend to be the majority of how my assets are positioned. In general, it wasn’t as bad as it looked on a dollar-weighted basis, but there were definitely some surprises in there of things like increasing certainty and asymmetric outcomes both shoved it on me. [chuckles]

Tobias: It’s not a probably a long enough period of time to separate it out from what’s happened in the market. It’s probably been a market that’s shifted from better businesses to more quant type value, just deep value.

Jake: Yeah.

Tobias: But it’d be interesting to see that over time as the cycles change, see which ones– whether you do it like being a better business is more important over– So, maybe 18 months.

Jake: Right.

Tobias: Absolutely, cheapness is the right way to be, but five years– [crosstalk]

Jake: Or, maybe I’m not as good at identifying good business– [crosstalk]

Tobias: But that’s good to know too. That’s what you want to get told. That’s what you want to learn.

Jake: Yeah.

Tobias: That’s the idea.

Jake: That’s really what it’s all about. It’s just trying to close these feedback loops and learn about yourself. We’ve got a bunch of cool reports that we built that I haven’t seen anywhere else. It’s just all the stuff I want to know about my own process. Yeah, here’s some other funny stuff. On hold decisions, so things I didn’t sell, but I was thinking about it, these are my impulses that I said like, “Okay, well, I’m not going to do it, but I’m thinking about it.” Turns out that a good business result, which I thought like, “Okay, update on a 10Q seems good. You didn’t really do much.” Things I thought were of good value actually did pretty well. Businesses that I put on watch actually did very poorly. So, I maybe should have been listening to that a little bit more. It was red flags are showing up, but I’m going to give this a little bit more time. That didn’t work out very well.

Tobias: So, you intuitively knew something was wrong, but you should have acted earlier.

Jake: I didn’t. Right. So, there’s a feeling there that I ignored. When I thought the business was almost fully valued, but I didn’t sell it also ended up not doing very well, maybe that’s that debate– Having actual data to support the idea of never sell or not might be a good idea.

Tobias: I’ve got a question from Matt Hansen. “Is this interlinked with other people’s thoughts/journals? Will I see others’ thoughts?”

Jake: Not yet, but we are working on building a shared journaling experience where you could work with other people and have a dedicated shared journal. But for now, it’s just– [crosstalk]

Tobias: Your ideas are private.

Jake: Yeah.

Tobias: Yeah, no one– [crosstalk]

Jake: Everything’s private. Actually, security is very important to us. And so, we can’t see anything that your data actually. It’s all encrypted at rest, and then transmitted to the servers. We can’t see anything. Actually, we have this cool program that lets you see how people are moving around and clicking around, but then it blurs out all of what they’re actually typing and what it says. So, we can see the journey, but we can’t see what’s actually written in there. We can see like, “Oh, people are getting stuck on this particular thing. Let’s like fix that.” But we can’t see what they’re actually writing.

Tobias: I guess this is a question that you probably got to sign up to understand. “But we’d like to see what format this is, how the info is displayed, how the search works. I use Evernote all the time. It’s not ideal the bigger the note–”

Bill: It’s free. Sign up.

Jake: What was that last part?

Tobias: “I use Evernote all the time and it’s not ideal the bigger than note inventory. It needs better search, I think for big note inventories.”

Bill: Yeah, Jake, obviously this is your thing, but I don’t know that I would use it in the same way that I would use Evernote. You definitely could. But I think it’s more specific. If you’re like me, I use Roam for all my thoughts. Yesterday, somebody told me to look at Performance Financial Corp or something. I viscerally didn’t like it, but my notes, it’d say. “Got it from a Twitter DM. Collection of businesses that have little competitive advantage. Check trailing financials. Yada, yada, yada. Decision to pass.” And then I have pass decision, the date, and the reason why. By the way, if anything I said is stupid, please let me know. But it’s a little more security specific and it’s closer to my work process than what I would use Evernote or Roam for it. Do you think that’s fair?

Jake: It’s funny, because this is something we’ve internally debated, because people have it in their head that it’s journaling only and recording decisions. That’s one of the major use cases. Everybody’s using it to record decisions. That’s one of the driving factors. But I personally use it to take all my notes in, because I want to be able to search across ideas and notes to see how there’s interaction and tagging. But honestly, we wondered internally like if the size of the box for input actually drives people to how much do they feel they should be typing in there, there’s these weird psychology things that happen with software that I’ve learned that– It’s not as cut and dried as you would think. It’s not an engineering problem a lot of the time. A lot of times, it’s a psychology problem.

Tobias: And JT, journalytic.com is where people need to go.

Jake: Yes, please. Yeah, journalytic.com.

Tobias: “If you want to migrate your information away from there, is there a process?”

Jake: Yeah, we have the ability to download out into a text file. We might work on something to make it even more user friendly to leave, because I know that’s a big sticking point for people. They don’t want to feel like they’re trapped on a platform. I feel the same way. If I wasn’t personally, my fingerprint’s all over it so much. I would also not want all my stuff to get trapped.

Yeah, I think the other thing I should probably mention is that I think it would be awesome to get a nice group of good investors who are all working on it and then tell me what you want to build. What else do you what else do you want it to do? Because we’re in the stage of still building it out. We’re really just at the minimum viable product today, I would say. And so, what do you think would be cool, how would you want to work with other people, all that stuff, I want to know about it, because that’s what we’re working towards. We want to make it kick ass for people like us.

Tobias: Awesome.

Jake: Yeah, and thank you for letting me have a few moments here to do a little pitch. But it is something that’s near and dear to my heart. I’ve been pouring my heart into it for a couple years now. So, it feels good to finally get it over to this particular finish line, which is finally public.

Tobias: Congrats on making to the start line.

Jake: Yeah, exactly. Yeah.

Tobias: Congrats on starting the race.

Jake: Congrats on starting the marathon.

Tobias: It’s a little bit like having your first kid, like the nine months goes by and then the baby’s born and you are like, “Oh, hang on, that’s just the start.”

Jake: Yeah, we haven’t even done anything yet. [laughs]

Tobias: How do we pivot away? How do we transition out?

Jake: Yeah, let’s just hit us Q&A or we got any other topics?

Tobias: This wasn’t Q&A. I got to– [crosstalk]

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