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Who We're Talking To

In this episode we speak with Stephen Clapham - former hedge fund analyst, bestselling author, and founder of 'Behind the Balance Sheet', a leading investment training consultancy. With decades of experience spanning the sell-side, buy-side, and now education, Stephen shares the unconventional path that led him into equity research, how he built a reputation for forensic accounting, and what it takes to truly understand a company’s financials.

In this candid conversation, Stephen reflects on his career transitions, the habits that drive his productivity, and the evolving role of technology in investing. Whether you’re a finance professional or just curious about how top analysts think and work, this episode offers a rare window into the mindset of someone who’s spent a lifetime learning how to ask better questions—and read between the lines.

 

Resources

Behind the Balance Sheet
Stephen on Substack
Stephen on LinkedIn
Stephen on X

 

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Transcript

Daniel: Hello, and welcome to another episode of The Way I Work. This is brought to you by Rigby. We're a staffing company here in Zurich and Switzerland. So we are generally interested in the way that different people approach and think about work. So how they structure their day, what tools they use, and how they manage their resources to get things done today, we'll be speaking with Stephen Clapham.

Stephen is a former hedge fund analyst and is the founder of 'Behind the Balance Sheet', which is a leading investment training consultancy. Since launching its first forensic accounting course in June 2018, the firm has trained over 500 investment professionals from top tier institutions.

In addition to training, Steve also produces research for institutional clients. His insights are regularly featured in prominent publications such as The Investors Chronicle, the Times, and the Financial Times. He's also made appearances on the Times Radio and on top investment podcasts like Bloomberg's Odd Lots, and the Grant Williams podcast.

Stephen began his career as an equity analyst spending two decades at several investment banks, and during this time, he was regularly ranked in the top 10 in his sector by both Extel and Reuters.

In 2005, he transitioned to the buy-side, becoming a partner and head of research at multi-billion dollar hedge funds where he specialised in deep dive research and special situation opportunities.

Trained as an accountant, Steve now lives in London. His book, 'The Smart Money Method' became a number one bestseller in the investing category on Amazon in the US, the UK and Australia.

He also writes a free weekly newsletter, and we'll be linking to that and all the other topics that we mentioned in the show notes.

Okay. So Stephen, thank you for joining us.

Stephen: No, thanks for having me.

Daniel: That's right. So we're subscribers and big fans of your work and yeah, it's a real honour to speak with you today.

Stephen: Oh I hope you're a paying subscriber.

Daniel: Yes! And can we start at the beginning? What first sparked your interest in equity research and investing?

Stephen: Oh, it was complete accident. I had accepted a job reporting to someone that reported to the CFO of the fifth largest company in the UK. And I was pretty young. It was a really high flying sort of role, and I accepted the job. They accepted me, everything was fine. Then he called me up and the guy that I was meant to be reporting to said, 'really sorry, Personnel pointed out we made a bit of a mistake because you're too young for this grade. And so don't worry, you'll be doing exactly the same thing, but you'll be one grade lower, and so you'll have a bit less money, a bit fewer benefits, and next year we'll promote you'.

I said, I'm not interested. I don't want to come work for a company that, my progress will be determined by my age. That's crazy. I can either do the job or I can't. 'Oh, you can do the job. You can do the job'. I said thanks, I really like you and I really like the CFO and I'm sure it would've been an interesting role, but I've just got no interest in having a constraint like that. I don't want my performance to be impaired by my age. So thanks very much, good luck and no thanks.

And I was telling somebody about this and they said, ‘why don't you go into the City’? And I said 'I don't know anybody in the City. I've got the wrong background, wouldn't be able to get in'. And he said 'you probably won't, but I think you'd quite enjoy equity research. I don't know very much about it, but my secretary, her boyfriend is a former analyst and he's now head of research. Why don't you go and have a chat with him and he'll tell you the type of job it is and how you would get in, and he might even be able to introduce you to some people'. And I said 'do you think he would'? And she said 'I don't know'. And he called up his secretary and she said, 'Oh yeah, of course, Bob will see you... hang on. Tell Steve to be in the office at eight o'clock on Tuesday', and I said, 'okay, fine. I'll be at the office at eight o'clock on Tuesday'. And I went in eight o'clock to the office on Tuesday, and the guy looks at my CV, and he said, oh, come and work for us.

Daniel: Isn't it amazing to think how moments like that can have such an impact on your life and your career?

Stephen: Well I didn't believe him. He said, 'yeah, all you need to do you need to come in and see a couple of other people, but it's fine. You'll be good'. And I started, I knew nothing about investing, my father never owned a stock, or a share, or a bond or any investment in his whole life. And it was a complete mystery to me. I didn't study finance at University. I'd never bought a share in my life.

I didn't know anything about it, but I could see that it was an opportunity and I could see it was a meritocracy, which at the time was very important to me, particularly having had this small setback. And I started, and of course I'd trained as an accountant, so I was already instantly ahead of most of the people there. Because most of them didn't have a clue what they were doing. No, I say that if you looked at it today, they would've struggled perhaps, but many of the analysts were much older than analysts today. They were very experienced, understood their industries very well.

They were less sophisticated about the stock market, about what makes stocks go up, about the accounting and so on. I could go straight in and add value to talking to a client. I could just say this company seems quite aggressive in the way it's doing its accounting. And nobody was doing that at that point. And I worked, I did twice as many hours as the average analyst in one of the old fashioned firms, the guy I sat next to used to complain, he said, 'Oh, it's terrible... our meeting's at 08:30 these days, it used to be at 09:30. It was much better in the old days, but, I used to come in at 09:30 and knock off for lunch at 12:30 and go and have a long lunch'. And then I was used to working. I'd been a management consultant, I was used to working 80 to 100 hours a week. I used to be at the office at 08:00 and the office was an hour's drive away. It was very simple for me to outwork them. And the investing part of it wasn't that difficult. Understanding the industries wasn't that difficult because I've been a management consultant, so I was accustomed to going into a new company and a new industry and trying to understand how it worked. So that part of it was straightforward. It was more the stock market side of it took me some time.

And, I can remember reading the Lex column and being completely flummoxed... what is it? What are they trying to say? Literally I would read it and I couldn't understand it, but after reading it every day for a month, two months, three months, gradually some of the terms start to sink in. It didn't seem it at the time, and looking back on it, it was very easy for me to excel and get to a position where I was regarded as one of the best analysts.

Yeah, you did make quite a few, so from being a management consultant to being an equity analyst, being on the buy-side to the sell-side and today being an entrepreneur and educator, it's quite a lot of adaptation, quite a lot of changing. Did that come naturally to you? You just adapt to your circumstances, don't you? Left to your own devices, you wouldn't seek a radical change, would you? Most people were comfortable with what they know. And I did want to move from management consulting because I was becoming ever more expert in a narrowed field. And it was interesting work, but I thought it's less interesting than it was 12 months ago. And it'll be even less interesting in another 12 months. And the last thing I want is a career doing this for the next 30 years. I could see that very clearly. So I wanted to move and that's why I'd applied for this other job.

And I could see that that working in the stock market was interesting, because you were mixing with very senior people at companies. I knew that I was interviewed by that CFO, but I knew that I would see him two or three times a year. I wasn't gonna be talking to him every day. Whereas in this job, that CFO was interested in what I had to say and would take my calls, and there very few jobs where you can do that, age 25 or whatever, that you can speak to the Chairman, the Chief Executive and the Finance Director, and they have to listen to you.

Daniel: Yep.

Stephen: And in some cases, they actually wanted to listen to you. So that was very unique. And, moving from the sell-side to the buy-side, I toyed with doing that earlier, and I almost went to work for Stuart Newton, but he couldn't decide what I was most suited to be, and he had a process where you went to a psychologist and the psychologist studied you and decided whether you'd be more suited to being an analyst or a PM (portfolio manager). And I didn't like the idea of being a portfolio manager. I thought it'd be quite fun to be a buy-side analyst, but I wasn't sure about being a PM. More through ignorance than anything else, and feeling confident. I was a good analyst, but I had no idea if I would be even competent as a PM. And I didn't pursue that opportunity because I just didn't want to end up in the wrong role and find six months later, I'd made a mistake. And I was scared of change I think, at that point. Which is slightly understandable. You're doing well where you are and you're highly regarded and you're making good money and you can see the future. Throwing that up in the air and doing something completely different, I didn't fancy it . But moving to the buy-side, that was a real opportunity because I was still using my analytical skills, but I was just using them in a broader context, a broader framework, and actually when I moved to the buy-side, I thought, oh, why didn't I do this earlier? Because looking at it from the other end of the table, I hadn't realised how much easier the job was in respects of understanding the company, because you've got somebody else doing a lot of the legwork for you. Obviously making the decisions and making sure that you buy the right things and sell the right things, that was more mission critical than it is in the sell-side. And it was more fraught and stressful, but the actual analytical job...

Daniel: With high stakes.

Stephen: Made it easier because you'd a lot more help, because you weren't sitting on your own with nobody helping you. The whole sell-side to tap into. And obviously I was doing a much broader canvas. So when I was in the sell-side, I was very unusual in my firm because I did not just UK stocks and European stocks. Most people did UK and European, but I also did some American companies. But now I was let loose in Asia and China, and I could look at wherever I was interested. And that opened up a whole new realm of possibilities and a whole new canvas, thinking about the global economy and what was doing well, where was the growth, where were there opportunities? So it was a much more interesting job, but I was a bit late to the party.

Daniel: And did you visit those places, Did you go to Asia?

Stephen: Oh yeah...

Daniel: Because you were only in your twenties.

Stephen: I was a gold cardholder very quickly I can tell you.

Daniel: What an adventure. It must have been great fun.

Stephen: Yeah, I used to go to Asia a couple of times a year. If I had some specific reason I might go an extra time.

I used to go to America once a quarter or thereabouts. I used to go to Europe once a month or thereabouts. I was on a plane every three weeks. Never kept track of how many flights I took, but, I took a lot of flights. And when things went wrong, we had a practice where, if something went wrong, the best thing to do is go and see the management. You bought the stock, it's gone down 20%... there's various reasons it could be, don't hang around, you've got a lot of money riding on this. Go and talk to them in person because you have a much better conversation. And their body language will give you comfort or make you feel uncomfortable. And that can be an important element in your decision, because you bought a stock, it's gone down 20%... you've gotta decide, do I buy more or do I get out and the status quo is not really a good option. And being forced to make a decision means you've gotta do more work and often having that confidence of running through your thesis again with the company can make you feel more confident that you haven't missed anything.

Daniel: Of course. Do you apply a discount when you are visiting management for the fact that they're probably very slick operators and good salesmen?

Stephen: Very few of them aren't. It's not that. You believe a hundred percent everything they tell you, obviously you've gotta take it with a pinch of salt. But they know their company and their industry better than you do, and better than any independent commentator does. And sometimes they're just little things that make you... it's not necessarily something you can put a finger on. You just feel uncomfortable. I think if I were to revisit that process again today, I would do it slightly differently because I think I understand more about what the physical body language, tells, that I'm better at asking the questions in the right way. I don't believe that I've got any particular skill in judging if somebody's lying to me or not. I wouldn't classify that interpersonal analysis as being one of my strong points. But I just think you get better intuition than you do over a Zoom call. We're having this conversation over Zoom, which is perfectly nice, and we can have a nice conversation, but it's not quite the same as if we were sitting in Zurich having this conversation, in the chairs behind you, it would be a different sort of conversation.

Daniel: That's interesting that Stuart Newton were using psychological profiling then when they were assessing candidates.

Stephen: I may have forgotten the details of it, but basically Stuart's view was that you were either a PM or an analyst in your makeup. I now forget, he explained to me at the time why he thought this way and what he did was he had a particular person, I don't know whether they were actually a qualified psychologist or whether they just were somebody that he used. But they asked you questions to try and figure out what your aptitudes were. And, his theory was that you could identify by asking somebody, talking to them, would you be better as an analyst or as a PM. And I didn't know how they did that. And looking back on it, I was quite stupid because obviously any tests like that, I would come out better as an analyst 'cause that's where my skill I think is. But with PMs you've got a slightly different emphasis. You've still gotta analyse the companies and the investment and opportunity, but it's more about harnessing your psychology and your emotions, and being in control of your emotions. So you could be a brilliant analyst, but be very emotional and get very upset when things go against you. If you're a PM, you've got to be able to ride those out because things go against you every day. As an analyst, things tend to go against you in waves. So you get some big macro thing wrong and everything goes wrong, and then you're miserable for a while, but then things turn around. And so you can be less calm as an analyst and still do well, but as a portfolio manager, if you're very at the mercy of your emotions, you won't be good at your job. You've gotta be quite rational and quite logical and quite accepting of getting things wrong because you get things wrong a lot. You get things more wrong as a PM as than as an analyst probably, I don't know if there's any statistical studies on this, but, if you're an analyst you're doing deeper work, so you should have a higher hit rate. As a portfolio manager, you're doing less detailed work, so you should, in theory, have a lower hit rate. And so I think, it was more of those psychological things that they were looking for. But it's a long time ago. I haven't worried too much about it and I've done both jobs.

Daniel: Yeah. Now, I know lots of organisations over here will often put people through kind of Myers-Briggs tests and things like that, but yeah.

Stephen, in this series we're focused really on how people work, and I know that you put out quite a lot of content on a schedule, so I wanted to ask you do you have a typical workday? And if so, could you walk us through what that looks like?

Stephen: Oh I've never really had a typical workday As an analyst at a hedge fund, you don't know, when you come in in the morning, what's happened overnight. President Trump could have introduced tariffs and the world has completely changed. Or you come in and nothing's happened and you can get on with your schedule. That pretty unusual because usually you come in and there's been something's happened somewhere and one of your stocks is badly down, and you've gotta find out why. And, my job now, obviously doesn't involve that sort of day-to-day interaction with the stock markets to the same extent. And so I'm better able to plan my schedule, but my schedule's very varied. I do more travel now because my main business is training and my clients have become more international over time as my forensic accounting course has got better known. I've delivered that course in person and over Zoom to, I don't know how many countries, 25, 35, something like that. But quite a large area. I've come to Zurich several times to give that course, for example. But if I look at a day like today, where are we're Thursday, I published my Substack, my weekly newsletter, which you can find and sign up for on https://behindthebalancesheet.com/, sign up button on the top-right. And it's free and it's quite good. I have to produce that every week, so I generally try and write that weekly. Sometimes, before the summer, I might rack up a few. Or I might do a series and do them altogether, but so we're on Thursday today as we're recording. I haven't completed my Substack, so my top priority is to make sure I've got something ready to go out on Sunday. So I've got the printed version here, and I'm just finishing off the edit I've written... I can't remember whether I wrote it on Monday or Tuesday or a bit of both this week. And this morning I got in, I started my Substack, I ended a call with a conference organiser who are interested in having me help them with a conference they're doing later in the year, and with some media they wanna advertise in my newsletter. I've just come back from a meeting with an old former colleague of mine who has semi-retired and he's launched an independent research boutique and he wants me to help. They want to publish on a couple of stocks that have difficult accounting. He wants me to help them do some of the accounting analysis and publish it, which I'm probably not gonna do. But I said I'd help them do it. Then, I got back to the office at three o'clock. I had a call with AlphaSense, who sponsor my podcast, who are great people and we're just talking about the next webinar I'm gonna do for them. And, we're just strategising and you know, what would be interesting for people. And I've got this call with you. And then at 18:30 I'm having dinner with a guy who coincidentally, we were meant to have dinner like two months ago, coincidentally was on the same plane as me. At Omaha we were getting off the British Airways flight and I looked, oh yeah, who's that guy? Reading 'Rich or Wise or Happier'? His face looks familiar... it's the same guy. And to be honest, I don't know why he wants to have dinner with me, but I think, he wants to do some sort of collaboration. So I spend, quite a bit of time talking to people about potential collaborations and partnerships. I spend quite a bit of time writing my Substack. I spend a bit this morning preparing for my next podcast interview, which I'm doing a week on Monday with a an American fund manager who's happens to be in London, and so we're gonna get together. So I just was reading some of his past letters thinking about what the conversation's gonna look like. And I spend quite a bit of time trying to promote my training product. My main business, I train professional investors. I have a forensic accounting course, which has been incredibly popular.

Daniel: Yeah.

Stephen: I did that course for a client on Monday and so I've just been following up with them today and I have an online school, so if you wanna become a serious investor, I have a course called Analyst Academy, which has been terribly popular and these things need constant promotion because people don't just wake up in the morning and say, 'Oh, you know what, I'd like to learn how to invest in the stock market and I'm gonna go and ask that Steve Clapham guy because they don't know that this course exists. You've gotta be there, waving the flag telling people about these things, so that sort of thing takes quite a bit of my time.

Daniel: It's a huge variety of different things that you're working on. Do you find it difficult to stay focused, and if so do you have some kind of ritual that helps you to stay focused with so many different things going on?

Stephen: Oh, I just focus on one thing at a time.

Daniel: Just do one thing at a time. Don't even attempt to multitask.

Stephen: I'm not capable of it. My children, I sometimes point out to them that it would be better if when they were learning their Latin vocabulary, if they weren't on TikTok.

I just think my children, my elder son has worked this out. My younger son thinks that it's better to listen to music while you're studying or, you can listen to music and watch TikTok and do his French homework all at the same time. Brilliant. Genius. We'll see. We'll see the GCSEs... He's had his Physics GCSE today so we'll see when the GCSE results come back how effective the multitasking has been.

Daniel: Was it French music at least that he was listening to while he was doing his French homework?

Stephen: There's no such thing.

Daniel: And do you have any kind of tools or apps or services that you rely on, maybe some underrated service that you use in your daily work?

Stephen: I've tried various things. I tried having the to-do list on the phone, tried various tools like that. I tried using Notion to build up a database of ideas for the Substack and social media, I've tried various databases and everything else. My to-do list is now on a piece of paper, I just write it.

Daniel: Notion's great.

Stephen: It might just be a product my age that I find it easier to do that. I'm writing up my Substack, which is about a conference I've been to, and, it's all written here. I was sitting in a presentation yesterday and somebody was on their iPad typing. I just find it easier to write, and I find that I remember if I've written and that suits me. It is almost certainly not the most efficient thing. Having loads of these sorts of notebooks, I've got a pile of them here and I keep meaning to bring my Dymo labeller into the office and label the dates so I can at least go back and find things more effectively. I'm just a product of my age. I do things in a way that I find effective. And so I don't really see that, an app is necessarily a cure. I do use a few different tools, but I also find, some of the apps you're all singing away very merely thinking this is the best thing since sliced bread, and then they go bust and you're completely screwed. So I was using one of the business card readers. I thought, oh, this is brilliant. And I then discovered that it was occupying a huge amount of space on my phone and I was thinking if I carry on using this, it's gonna be there. And the one thing that I found it didn't help me with was, it didn't help me with the connections as to where I'd met the people. You might think that this is not a very useful way of filing your business cards, but I group them by, so where'd you pick up business cards? You pick up business cards at conferences.

Daniel: Yes.

Stephen: So I group them by where I've met them.

Daniel: Makes sense.

Stephen: I then, I go to Bali. Oh yeah, what? Who was that guy? And I go to the next guy, I go, oh yeah, I remember that. I met them in New York three years ago. And I just find that works. I'm not averse to using new technologies, but I find generally that when I adopt new technology, 50% of the time, I would say I revert to my original.

Daniel: Yeah.

Stephen: And my original is usually, what is on the face of it less efficient, less effective, but I've.

Daniel: It works for you.

Stephen: I find it. And why worry about that?

Daniel: And you have your office there in London, in Paddington where I was born. Do you try to limit your work time to that space, or are you happy working anywhere... in an airport, lounge, or a coffee shop or kitchen table?

Stephen: Happy! Coming back from Omaha, the flight connections were not brilliant. I think the British Airways flights home were quite expensive and so I opted for the cheaper option. So I ended up in the lounge in Chicago for quite a few hours. And, I just sit, get my laptop out and I just... got a Substack to write and I just write it. I'm here nine till six usually and last night I was reading about this Tesla CFO's $139 million pay package and I thought, oh, I should really include that in my forensic accounting course. There was a particular angle about this, and I need a slide on this for my course. So last night I just went upstairs and produced that slide in my study at home.

Daniel: Yeah. So whenever the muse, whenever the spirit takes you.

Stephen: And equally, I'm not averse to, if there's something that I want to do, if I wanted to go off this afternoon and do something, it wouldn't bother me that I wasn't working.

Daniel: Sure. Okay. And you've said that investors often don't read the notes in the financial statements. Are there other bad habits like that you see repeatedly?

Stephen: It's my assertion that most investors are incompetent when it comes to analysing company financials, or not nearly as competent as they should be. So they don't do very much more than read the P&L and have a quick scan of the cash flow. They don't spend nearly enough time in the balance sheet. Quite funny that Mr. Buffet highlighted this year that it was far more important than income statement and he would look at eight or nine balance sheets before he even bothered to look at the income statement. And this is symptomatic of a... I was gonna say, of a low attention economy. I think it's partly a symptom of people just don't have the time, patience, and energy to really spend time on things. But that would be slightly unjust because I think there are lots of investors that do spend a lot of time studying companies, but you know the arcane stuff in the accounts is just too boring for most of them, and it's very rare that people really get in the weeds on the accounts. I'm not saying this is true of everyone, there are people that do a lot of really detailed and really impressive work on company accounts, but it's not nearly as widespread as it should be.

You would imagine that a hundred percent of professional investors, before they bought a share, would've read the accounts cover to cover. I can absolutely 100% guarantee you that it's nowhere near 100%. Just nowhere near. And that's quite understandable because the accounts are longer than they ever used to be, there's more information than there ever used to be. You come in the morning and you've got a deluge of stuff being thrown at you. Most of it crap, but you gotta wade through it, but work out where there's message, where there's signal and you gotta go through a lot of noise to find a little bit of signal. I don't blame people for not spending that time because they don't have a huge amount of time to spend. In a way, it's good for me, because I've got a bunch of clients that rely on me to help them sort the accounting stuff. So I, I do consulting for a number of institutions where they outsource the very detailed accounting research to me.

(AD BREAK)

Daniel: You know now more than ever with the rise of LLMs, there's lots of people speculating about the future of work. Do you have an opinion on that yet? How the world of work might look in two or three or five years from now?

Stephen: I'm not sure I'm the right person to ask. Daniel Susskind has written two very good books about the impact of AI and the future of work, and they're more general than specific. I could only really comment on the analytical role or investing more broadly and on a few sort of minor use cases. But I think, relative to my expectation when ChatGPT first came in our horizon. It's two and a half years ago, right? It is 30 months.

Daniel: Yeah.

Stephen: For all the talk about how fast things are improving, I'm pretty disappointed at where we are 30 months on because I expected to be able to come in and say to my computer, do this, do that, and, it would all be done for me. So I was looking at this Tesla finance director's pay. And I was asking various models to go through the Form 4 filings because I wanted to know how many shares he'd sold in the last X number of years. I would've assumed that within three months that you just asked that question and it would instantly come back to you. That was not a simple, straightforward thing to do. It didn't happen in 30 seconds. It took me maybe five minutes to do this morning. It would've taken me a lot longer without an LLM of course, because I had to go through a hundred Form 4s, obviously what I used to have to do. But I was disappointed, there's nothing difficult about that. If I said come back to me with the alternative arrangements to get to Omaha next year, and with costings, and tell me the difference between business class, first class and the layover times. And I want all these options... oh and give me all the towel options. And I'm not sure whether I wanna go out on the Wednesday or the Thursday or back on the Sunday or back on the Monday. That's a slightly more complicated thing, but even that isn't that complicated, and I doubt that you could do that today. Maybe there is an agent that, I have not found that to be possible to do. I'm not a real expert... and I'm trying to improve my skills. I've been able to use it for some quite useful things, but it's been a pretty laborious, pretty tedious process.

So one of the things I did was I've got about 4,000 people on my Substack who subscribe using their company domain. 80% of people subscribe using a Gmail or a Hotmail or an Outlook. But it was pretty easy for me to get the list of domain names. And so I used AI to go through and see how many asset managers do I have, how many hedge funds do I have, how many investment banks, how many brokers? That I would've thought 30 months on would just be upload the spreadsheet and it'll come back in 10 minutes and tell you the answer. And oh, by the way, we've looked up here's their specialty, here's the principal's name and email, here's their head office. That was not a five minute job, that was a several hour job. No, I was able to do other things at the same time, but it wasn't as easy as it could have been and should have been. I'm now trying to build some agents to help myself, but it's not as easy as I had anticipated it would be. It's definitely easier than it was without the AI, no question about that. But it's not painless, and making sure you've got accurate information is quite tricky and I've had numerous occasions with hallucinations, and of course if you're doing something important, you can use multiple models. So you can use the different models.

Daniel: Cross- check.

Stephen: I've just been trialling a system where you ask, it's like one interface, but you can choose which models you want to use, and so you can say ask three models the same question, and you get three different answers, and you compare three different answers. So you yeah.

Daniel: Triangulate. Yeah.

Stephen: Yeah. But that was quite expensive to buy and if you want to have three tabs open, and it just seems a bit more work.

Daniel: Yeah.

Stephen: The name artificial intelligence does imply that it's just like you say to your intern, go and do this, and it goes off and does it, and comes back with a beautiful, a hundred percent accurate, beautifully polished, beautifully presented thing. We're quite some way from doing that. But I've been experimenting quite a bit with AI to try and understand it and how I can improve myself, but I basically use it mainly for processing large volumes of data that are tedious to do myself. Or for helping me with things like, so I'm much better at Excel now because I've got my tutor.

Daniel: Right.

Stephen: I can do much more quickly in Excel because I say, oh, I wanna do this.

Daniel: And it'll give you the formula.

Stephen: Here's where the cells are, so pick this from that and pick that from that, and combine those two and then split that and put that there. Working out those formulae would've been quite difficult for me. I'd have been able to do it. I'm very good at forecasting company profits, but I'm not a very good Excel user... I'm not a power user by any means, so I've now become a power user because I've got the help. So there's no question that's been very helpful, but we're not where I imagined we would be. And my podcast guest this month, Gary Channon said that within two years, sell-side analysts would be replaced by AI. And he's very sophisticated, he's much better at using AI than I am. So he probably knows more about it than I do. But I was amazed that he said that because I wouldn't have thought we're anywhere near getting to that point.

Daniel: Wow.

Stephen: In two years, given the two and a half year journey we've been on because.

Daniel: Yeah.

Stephen: You imagine you do the easiest things first. And it's taken us two and a half years to get to here.

Daniel: That's interesting.

Stephen: I have to ask. But there's no question that it will improve over time and it'll make everybody's life much easier. But it will eliminate a lot of repetitive stuff. It will eliminate a lot of tedious stuff. And the only thing you can do to adapt to this, is to make sure. you're.

Daniel: Sure. You have to.

Stephen: A better user.

Daniel: It's interesting that Gary Channon would say that, so not empowered by or made more productive by, but replaced by.

Stephen: Yeah. That might not have been his exact words.

Daniel: Sure. I understand.

Stephen: The transcript's on the website, so you can check exactly, but.

Daniel: No it's interesting, you mentioned you have kids. So do I. I think as a parent it would always have been difficult to advise them about career choices, but what about now with all the changes that are going on now? What do you tell your kids about a sensible career path to choose?

Stephen: I don't think it's for me to push them down a particular path. My parents did that and I.

Daniel: Rebelled.

Stephen: Hated it. But all I've said to them is, look we don't know...

none of us knows what lies in store. We can make some sensible assumptions. And they're not really able to use AI very much to help them with their studying because it's really frowned upon at school.

Daniel: Yes.

Stephen: And they cannot use it to help them with their essays. They're even reluctant to put their finished essay into AI and say, clean this up, tidy up the grammar because they're worried that.

Daniel: Would be detected.

Stephen: They're then asked about it. They can't say, oh, we didn't, so as far as I know, they haven't interrogated them about it, but by and all, they don't really use AI for that sort of thing. Yeah, they might use it a little bit to help them with their research or something, but, when we're talking about careers I just said to them, look, you don't wanna make a decision too early and you don't want to make decisions that are gonna take you down a particular path until you have to. My attitude is that they should pursue knowledge and try and find things that interest them and learn about them and study what interests them. And so my eldest son is fascinated by politics and he's studying history and politics, or he is doing International Relations, and what is the career at the end of that? I don't know. And I'm pretty sure he doesn't know. And I hope it's not journalism. We chatted about journalism and he said it might be quite interesting to be a political journalist. So I took him, we went for lunch with Philip Stephens, who was the political editor of the FT, he's retired about 18 months ago. And Philip I've known for years with brand and not a close friend, I said to him, would you mind just explaining how you got to where you got to? And he went through, and of course, that's the sort of career that's fantastic if you get to the very top.

Daniel: Like he has done.

Stephen: If you don't get to the very top it's not very well paid, it's really difficult to make your mark, and it's not the easiest vocation to pursue. I said if that's what interests you, by all means do it. But, just understand what the constraints are and I don't know what my children will end up doing because the world might look a very different place in five years' time when you know those decisions are really being made in earnest and they may have very different interests then. I'm sure that if I'd asked them five years ago, what would you like to do? And ask them now, those answers would be very different. I ended up in equity analysis by complete accident and I found that was something that I really loved doing.

Daniel: That you were suited to.

Stephen: But, I didn't have a plan. I don't think you need a plan. You just need to work. When you find something you like, you just need to pursue it. I think it's a difficult thing to work out. It's a difficult thing to advise a friend's child or somebody that comes to you for advice. I think advising your own children probably you're on a hiding to nothing because they're not really gonna pay that much... they'll pay a little bit of attention, but I don't think.

Daniel: There's that as well.

Stephen: With the best will in the world, the person that you're least likely to listen to is your mum or dad.

Daniel: Yeah. It might be counterproductive.

Stephen: Yeah. It might be, yeah.

Daniel: Stephen, what's next for 'Behind the Balance Sheet'? Is there anything there that you're excited about in the pipeline?

Stephen: I enjoy doing what I'm doing. We'll probably do another cohort-based course. So my main course for institutional investors is a forensic accounting course, but I need four or five people to make it worth my while to go in to present the course in person. So if you're a smaller firm, family office or whatever, or serious private investors, it is not really possible for them to access that material. So what I've done is I've done a cohort-based course and we advertise that in the Substack, and we'll start that again probably in September. And that's good fun. We do it on a Monday night from 17:30 till 18:30 or 19:00 for eight weeks, and we go through a whole bunch of material and a lot of good Q and A. We'll do that. Going to launch a new initiative, which is top secret at the moment. I'm just trying to get my partner on side and signing up to finance it. We're due to sign it all up in Q2, but you know these things, it's.

Daniel: That's exciting,

Stephen: But hopefully that will become public in the next few weeks. Summer is always a quiet time for me because, training... nobody wants a training course in the summer. I spend summer with the family really. And write a few sub stacks but don't do the main training stuff. And we've got a couple of things... I'm trying to work out some new partnerships. I've got two books on the go, one I've written a chunk of, but the other one I've written a very detailed plan for. I haven't really decided which book to publish first. I've got a couple of projects like that and this other new project's been taking up a little bit of my time, but really just trying to improve the profile of the firm. We're not nearly as well known as we could be or should be. Six o'clock in the morning I was introduced in front of the Omaha CHI Center queuing up. I was introduced to one guy and then another guy. Two of them are professional financial influencers with YouTube channels. They've both got a million subscribers and they're very nice and they're very good at what they do. One of them has got an investing course and I was talking to him and I'm sure his investing course is fine, it'd be perfectly good content, but it couldn't possibly be a fraction of the content of my course. And of course, I've got five and a half thousand subscribers in my YouTube channel, so I've got another 994,500 to catch up with them. And I think over the next 18 months, that's one of the things I'm gonna focus on because I think I've been singularly bad at doing the marketing. So it's all very well having brilliant content and I genuinely believe, and all our customers tell us that the content's brilliant, but we've done a very bad job of marketing and I should spend more time thinking about the marketing and less time on the fun time. The content's all done now, that's gonna be the way forward.

Daniel: You're keeping busy then. And the cohort course is delivered online?

Stephen: Yeah, we're doing it over Zoom. So the combination we've got, so there's a webinar every Monday night which we record. And then we've got a portal, so you get access to the portal so you can watch the previous recordings and we've got some extra material and a community and so on, with additional stuff. I think the last one we did we had Pulak Prasad.

Daniel: Yeah... 'What I Learned About Investing From Darwin', it's fantastic.

Stephen: Before 'What I Learned About Investing From Darwin'. Brilliant book. Brilliant book.

Daniel: Excellent book. Yeah.

Stephen: So we did a private session with Pulak and he explained how to invest and how he thinks about quality and so it's more than just... of course you become a member of this community. An in the community, we try and do events. I did another event actually a couple of months ago, I interviewed Hugh Henry.

Daniel: Your compatriot!

Stephen: Yeah, we're both from Glasgow and Hugh has got his villas in St. Barts and.

Daniel: I read he was gonna sell one of those to buy Bitcoin.

Stephen: Funnily enough, last time I met him we agreed that Bitcoin was a buy at 19,000. And I've had my perception of Bitcoin coloured by Messrs Munger and Buffet.

Daniel: Poison squared.

Stephen: I feel slightly uncomfortable with Bitcoin because I just, I don't know what it's worth. And to me it's purely a speculative instrument. And so I feel very uncomfortable with the idea of putting my savings into it. Which in a way, is quite stupid, but I just have that hurdle of 'don't buy things you don't understand'. And I knew that I should break my own rule, but in the end I decided that the rules were not meant to be broken, so I didn't buy it. I dunno if Hugh did. That was 18 months ago and he nailed the entry price. He's very good at that.

Daniel: Yeah, I know. I think he did. And I think he's doubling down now.

Stephen, if someone would like to sign up for the cohort, or any of your other services, how can they do that?

Stephen: You can find me on https://behindthebalancesheet.com/.  Up there, on the top-right of the homepage, there's a sign-up button, which takes you to the Substack sign up page, and you can sign-up, it's free. And on there also there's a courses page. A range of online courses. For the cohort-based course you need to be in the Substack, I'm afraid, and we advertise it in the Substack. We open the window and you need to get through the window before it closes. It's a limited number of people that we can handle. I think the social media people have occasionally published it on LinkedIn or whatever, but best thing to do is just watch the Substack. But it'll be released at middle of August probably.

Daniel: That's great. Thanks very much for joining us today, Steve. It's been really interesting.

Stephen: No, you're welcome. Thanks for having me.

Daniel: All right. That was another episode of The Way I Work. Thank you for listening, and thanks again to Stephen for joining us.

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