Are Microcap Stocks Just Gambling in Disguise?

**SPEAKER_2** (0:09)
Speaking on Resource Talks, I'm in Las Vegas, learning the lesson that the house always wins.
Even here at a blackjack table, where you're traditionally gonna get the best odds in a casino, you sit there all evening, you don't split your 10s, you follow a basic strategy, 20 or 22 rules, whatever it is, you're decent at counting, plus one, minus one, you don't drink, so you're paying attention to what's going on, you try to keep your emotions at check. At the end of the evening, though, you look at the chips and you're like, oh, the house still has that edge, what's really going on? Well, emotion gets mixed in, right? And not only that, just looking at how people behave when they win or lose at these tables, and luckily, there's nobody right now because it's in the morning, but in the evening, this place is full and you can really see how people react to these things. It made me think that this is a lot like microcapping investing. The whole place is, but it's definitely a lot like junior mining. And maybe Blackjack was not the best example because you could argue that if you follow full strategy, not just basic strategy, you only play at tables that are gonna pay you three to two for natural Blackjack, you could end up beating the dealer over time. But that's not the reality in junior mining. Those odds are not available to us. Maybe the slots, for a better example, where the majority of people loses money, but that's not everyone, everyone, right? I mean, there seem to be a few, and few really is a keyword here, but there seem to be a few people out there who know what they're doing. Luckily, while I'm here and not at all planned for months, there's a conference going on. It's called Planet Microcap, organized by Ian Castle and Microcap Club. And apparently, it's kind of like the Berkshire Hathaway annual meeting, but for Microcap stocks, but kind of different. Point is, there's a lot of fund managers at this conference, you know, the guys who seem to know what they're doing, but I'm sure that wasn't always the case for them. I'm sure that maybe even for some of them, or even a lot of them, it started off as gambling, and then after at least a little bit of suffering, it turned into disciplined decision making. So, unfortunately, it's time for me to shut up and go and ask them how they did that. But more importantly, is micro cap investing just gambling?

**SPEAKER_3** (2:05)
It can be if you don't know what you're doing and what to look for in a winning stock. And I think for a lot of people, when they get into the micro cap space, it is gambling because they don't know that much on how to invest in the space. And it can feel like that. And why probably the best advice I can give somebody that's due to the space is you're going to learn probably by losing some money here and there, and by getting those reps in early and then obviously-

**SPEAKER_2** (2:26)
Tuition fee.

**SPEAKER_3** (2:26)
Exactly, yeah, and it could be a painful tuition and an expensive one, but that's how you learn not to make those mistakes over and over again.

**SPEAKER_2** (2:33)
So what do you draw that line between gambling and non-gambling, and maybe you can give me a personal story or something where maybe your first investment in microcaps was just a gamble, or was it?

**SPEAKER_3** (2:43)
Yeah, with my personal story is the first, I would say two or three of the companies that I bought were kind of just luck. The first ones were during the.com bubble, and there was a basket of small cap technology companies that I purchased, and I just rode that way from 1997 to 2001, all those companies 5X because that was that time period in the bull market where anybody could throw a dart at a newspaper and pick a few winning stocks as long as they had technology in their name, and I rode that. And then when the technology bubble burst, all those companies went down 90, 95%, the 100,000 I had turned into 8, and then I got kind of angry and started to figure out, like, how can I make my money back? Ended up investing in another one, ended up doing very well. I would say that was probably 50% luck.
And then from that point forward, the luck to skill ratio hopefully develops over time as you kind of learn from your winners and you learn from your losers.

**SPEAKER_2** (3:34)
What's the highest it could get to? Like, is it 80, 20?