Full transcript
0:05hello hello and welcome to S hustle
0:08ideas I am Bill the company's expert
0:10thank you for joining me today um thank
0:13you to my YouTube channel members my
0:15patreons my super thanks donors and to
0:18all my participants thank you for being
0:20here you are awesome um the title of
0:24today's episode of side hustle ideas is
0:28how investors make decisions
0:30we're going to be talking about risk and
0:32return so if you are interested in
0:34investment you want to do it or if
0:36you're interested at it from the other
0:38side of the table if you are wanting to
0:41obtain investors and have them invest
0:44into something that you're doing some
0:45kind of project uh that you're doing
0:48this will hopefully help you uh that's
0:50what this is for um it's also called why
0:52we're not bold anymore this is something
0:54I wanted to talk about uh to lead us off
0:58uh but yes side hustle ideas this is the
1:0061st episode of this can you believe
1:02this we've been doing this for quite a
1:04while and if you are an entrepreneur or
1:06you are someone who has Ambitions to
1:09have your own business one day to break
1:12the rat race the cycle of employment
1:15where you work as an employee for
1:17someone else and you want to learn how
1:19to make money yourself directly without
1:21needing an intermediary like an employee
1:24sorry like an employer that's what we're
1:27here to do so thank you for joining me
1:28today um today's actually a holiday for
1:31me in uh in Canada where I'm
1:34broadcasting from um it's interesting I
1:38didn't realize it was a holiday at the
1:39time that I uh that I did this uh this
1:42is also the beginning of a new schedule
1:44I'm moving my live streams around so uh
1:47this live stream will occur at this time
1:49every week I'm moving it from the
1:51morning to the afternoon uh just to work
1:54around some stuff I've had uh but yeah
1:57so I see there's a few people here so
1:58thank you for joining me today and as
2:00always this is a Q&A so if you are
2:04wondering anything or you are struggling
2:06with something uh preferably to do with
2:09the topics that we are covering today uh
2:11let me know in the chat get in the chat
2:13let me know what you're wondering uh
2:16what you're struggling with and I'll do
2:17my best to help you
2:19out okay uh yeah so we're going to as I
2:25said we're going to talk about how
2:25investors make decisions we're going to
2:27talk about risk and return and these are
2:29some principles are the foundational
2:30principles of Finance so if you are
2:33looking to learn uh this stuff really in
2:37depth and you want to master this type
2:38of material and understand things like
2:40Risk and return and how investors think
2:43um you learn the stuff in business
2:45school and I have something that can
2:48help you right there if you really want
2:49to go in depth uh a course I have called
2:52the $100 MBA check it out Link in the
2:54description it's uh it was created for
2:57people like you people that are looking
2:59to learn the material uh but they don't
3:02necessarily have the time or inclination
3:04to go back to school and you know quit
3:06work and do a full-on educational
3:08program for a couple years uh this is
3:10for for those people this information
3:12has been freely available in the public
3:14domain for a very long time and uh
3:17that's what my course helps teach you
3:18okay right so first the first topic of
3:22the day I just wanted to cover this I
3:25really don't know how to express this
3:26very well or articulate it but um
3:30it's called why we're not bold anymore
3:33and uh just to sort of go on a little
3:36bit of a tangent and talk about myself
3:37for just just a couple of moments here
3:40um I've always been uh fascinated by the
3:45history of the 20th century in
3:47particular the uh the world wars and
3:49things like that like you know like a
3:51lot of guys just to play the cliche um
3:55but just the
3:56socioeconomic uh effects of things like
3:58World War II and what is interesting to
4:02me anyway is that during the world wars
4:05Innovation really
4:07spiked like they innovated more in just
4:10a couple of years than they had in
4:13several decades you know in that short
4:15amount of
4:16space in almost every facet of society
4:20uh in technology and in you know the
4:23social structure and and politics and
4:26how things are done organizational
4:27Theory uh we jumped
4:30we had a Great Leap Forward in a very
4:32small amount of time and I've always
4:35been fascinated by that um
4:38and you know we we've lost that you know
4:41I mean hey maybe it's just an effect of
4:44a World War and given the choice I don't
4:47think any of us would want a World War
4:49but one of the interesting and possibly
4:51good things to come out of it was the
4:53pace of innovation and the the things
4:55that they achieved during that very
4:57small space of time now um what am I
5:00talking about specifically I'm talking
5:02about you know the obvious things that
5:03people think of things like the devel
5:05development of the atomic bomb and then
5:07you know after the world after the world
5:09war led into the Cold War you had like
5:11the uh you know the space race and the
5:14Apollo program and stuff in the Cold War
5:16they landed people on the moon all this
5:18kind of stuff um you know and in the
5:21wake of the first world war you had the
5:23Great Depression and all this kind of
5:25stuff just major social upheaval and uh
5:28things like electrification came in
5:30right you know all of a sudden we went
5:31from no electricity to electricity and
5:34uh things like this so what I thought
5:37was interesting was that uh we developed
5:39this attitude just humans in general of
5:41it can be done and think big and Think
5:44Bold and they took on some incredible
5:47challenges and uh went for it and solved
5:50them and I just contrast that to today
5:54when we look at things that we're
5:56struggling with now like uh a lot of the
5:58environmental stuff and a lot of the
6:00social stuff uh you know and it's the
6:02same problems that uh people were
6:06talking about when I was a kid we're
6:08still talking about today because they
6:09still haven't been
6:10solved and you contrast that to some of
6:13these periods back in the 20th century
6:15where they just completely solved things
6:17they went for it you know uh anyway so
6:21how does this relate to side hustles and
6:23Entrepreneurship well a big part of
6:25Entrepreneurship is innovative
6:27entrepreneurship there are different
6:28types of entrepreneur is hopefully
6:30everybody knows right you can go the
6:32sort of traditional uh type route and
6:35you could open a plumbing company for
6:37example and it's there's not a lot of
6:38innovation there um you know but you do
6:42build a business and uh you know it is
6:45your Creative Vision and all this you
6:47are in charge right so you can do that
6:49but there's the tech side of innovation
6:52um where you're innovating new
6:54technologies and things and uh you know
6:58that's been a huge part of Entre rship
7:00and for some people that's the direction
7:02they go they want to go down an
7:03Innovative path um and I think this is a
7:08tremendous resource and uh when you look
7:12at that kind of
7:13thinking uh and you look at what I just
7:16mentioned things like World War I World
7:18War II uh some of these new technologies
7:21it's like imagine that you had a startup
7:23idea uh and unlike in this sort of
7:26climate of opinion where it's quite
7:28challenging to get
7:30investment and to get backing for it uh
7:33during the world wars because you know
7:35they were in a life and death struggle
7:37anyone who potentially had the solution
7:39to a problem uh they were generally more
7:42receptive to and so they would back you
7:45the likelihood that they would back you
7:47went up and uh you know you still got
7:51like 95% of things failing but the 5% of
7:55things that were a
7:57success because they were backing so
7:59many more things uh you got some
8:02tremendous leaps forward that came out
8:04of it and uh it must have been a very
8:06exciting time to be alive from the
8:08perspective of being an entrepreneur and
8:11getting your ideas heard so I think
8:13that's that's
8:15fascinating so I put it to you why
8:18that's no longer the case why we no
8:20longer think like this um you
8:24know once again just to go on a personal
8:27note here for a second um you know where
8:30I live they have recycling you you you
8:33recycle your household trash right your
8:35garbage and you know certain materials
8:38are recyclable like cardboard and glass
8:40and all this kind of stuff but it still
8:42amazes me that you know they can't
8:43recycle things like wax paper like if
8:45you get a coffee cup they still don't
8:47know apparently how to how to recycle
8:49that has to go in the trash still and
8:51this is 20 years after you know
8:53recycling became common and you actually
8:56got it rolled out uh to a lot of major
8:59cities and things uh we still don't know
9:01how to do that you know and it just
9:03seems like it's so contrary to where we
9:07were in the past where problems like
9:09that would have been solved very very
9:11quickly almost overnight you know
9:13because the will was there and the uh
9:16the money was there and the backing was
9:17there and the infrastructure was there
9:19and the people that believed it could be
9:22done were there and it seems like we
9:25really have gone away from that
9:26unfortunately but this is why we need R
9:29preneurs because there are still tons of
9:32problems to solve and we don't seem to
9:35be solving them at a very rapid rate so
9:38anyone who's got some spark of Genius
9:41out there that thinks they have the
9:43solution to a problem and can
9:44demonstrate it and get other people to
9:46buy into it there's a lot of potential
9:49there even in the current economic
9:52climate and social climate there still
9:54is a ton of opportunity there for those
9:56of you who want to do Innovative
9:58startups so something I don't talk about
10:00very often on this uh on this channel
10:02but it's still very very very
10:05useful okay
10:08um you know I I'll say one more thing
10:11about this topic before I leave it and
10:12that is the uh current big innovation
10:17big uh Trend that's sweeping a lot of uh
10:20elements of society is AI right now and
10:25I think it's increasingly
10:27relevant uh considering that we're in
10:30this big aii wave that's coming
10:32through and a lot of people fear it I
10:35don't fear it yes it's causing
10:37disruption it's one of the truly
10:39disruptive things that has occurred in
10:41the last 30 years um people use the word
10:44disruptive all the time it becomes a
10:47cliche you know they keep throwing this
10:49term around and I used to get annoyed
10:51because they kept throwing the term
10:52disruption around when things just
10:54weren't disruptive but now we have
10:56something that's genuinely disruptive
10:59that arrived and people are losing their
11:01minds over
11:03it because they they think that they're
11:05you know used to disruption they think
11:07they understand it they think they're
11:09used to it but they're not this is what
11:12true disruption
11:14is okay um let me know your thoughts on
11:18this if you have any thoughts get in the
11:19chat let me know I'd love to react to
11:21some comments and hear what you guys
11:23think that's kind of a weird topic I
11:26usually don't talk about stuff like this
11:27just this nebulous General thing with no
11:31precise uh lesson there but let me know
11:34what you think uh I'm going to move on
11:36to the main topic of today which is how
11:39investors make
11:40decisions okay now as I
11:43said this is uh some the fundamental
11:47building blocks of the study of Finance
11:50okay this is where we're drawing some of
11:52these principles from and for those of
11:54you that have never studied Finance
11:56which is a lot of
11:57people uh this may be new and I hope it
11:59is because uh this might shed some light
12:03on how this stuff actually works and it
12:06may help you understand more of what you
12:08see in the real world when you try and
12:11figure out why people do the things they
12:13do this may shed some
12:16clarity okay so if you want to be an
12:19investor or if you want to think like an
12:21investor or understand an investor you
12:23have to understand the concepts of risk
12:27and return Maybe youve heard of those
12:30right um for a lot of people those are
12:33kind of these
12:34General nebulous kind of uh Concepts
12:38right but they're actually very very
12:41precise and they're very
12:44mathematical and it may seem strange to
12:47try and apply something as precise as
12:49mathematics to something as intangible
12:52as say a business idea that you might
12:54have
12:55right you might have the idea of okay
12:58I'm going to start this kind of business
13:00and um I don't know precisely how much
13:03money it or time it will take to start
13:05it up and then I don't know precisely
13:07how much money it will
13:10generate I don't know how volatile that
13:14is
13:16um so with these nebulous ideas there
13:19was not a lot of data not a lot of
13:21precision on it's hard to think in terms
13:23of
13:26mathematics excuse me I am also sick by
13:30the
13:31way when I was younger I was able to uh
13:36take
13:37medication and get on with it that's
13:40what managers do you generally you know
13:43it's not not a job you can call in sick
13:45to a lot of the time depending on what
13:47you
13:48do and so I learned early on that what
13:51successful managers did was when they
13:53had a cold or something or they had the
13:54flu they would take medication they'd
13:57find out what works for them and then
13:59they would go to work anyway and then do
14:02their job uh and I was able to do that
14:04when I was younger and as I'm getting
14:06older I'm find it I'm able to do that
14:08less and less also the inclination isn't
14:10there it has nothing to do with the fact
14:12that I'm uh I may not be at my Peak
14:15physical condition I've ever been in my
14:17entire life but do not do not believe
14:19the unsubstantiated rumors that that's
14:21true okay let's get back to what I was
14:24talking about here um risk in
14:27return so so these are precise
14:30mathematical Concepts okay now if you
14:32want to think like an investor investors
14:35reduce everything to math okay um the
14:39study of Finance is basically the idea
14:45of where um where money is going to come
14:49from it's about money in the future
14:51accounting is the study of money in the
14:53past so if you're going to do an audit
14:55find out where the money went that's
14:57money in the past Finance is money in
14:59the future it's about what should we do
15:03if we do this what's the likelihood of
15:06making this much
15:08money uh if we do that alternatively
15:11what's the likelihood that that will
15:12make this much money you know these
15:13these kind of things it's a different
15:15type of thing to
15:17accounting okay accounting deals with
15:19Precision because it's already happened
15:23you just want to find out the facts
15:25Finance is the business of of prediction
15:29right now when you're talking about
15:32decisions of what you could do there's
15:35all kinds of uh variance shall we say um
15:40you don't know there's uncertainty of
15:42what could happen right so in the study
15:45of finance and this is how investors
15:48think you divide it into sort of two
15:51areas you have
15:54uncertainty which is when you don't know
15:56what's going to happen but there's no
15:57way to really find out
15:59okay that's
16:00uncertainty and then you have risk risk
16:03sounds like the same thing as
16:04uncertainty but it isn't risk
16:07is where you don't know what's going to
16:09happen but you can make a very educated
16:11prediction as to what's going to happen
16:15okay now how do you assess uncertainty
16:18well you can't okay if you're just doing
16:20something new there's just no way to
16:22find out so Finance doesn't really touch
16:24that but as it turns out almost
16:27everything you could do
16:29you can look at it as a risk and it is
16:32possible to talk about it as a risk that
16:34means something where you get precise
16:37information on what's likely to
16:40happen okay so let me give you an
16:42example let's say you wanted to start a
16:45business I don't know you want to start
16:47a uh recycling business there you
16:49go now um you've never done this before
16:55and you haven't started the business yet
16:56so you have no data on how it's going to
16:58go
16:59because you haven't even started you're
17:00right at time is time index zero
17:04okay so how do you talk about it in a
17:08meaningful way uh because you haven't
17:10done anything you don't know what the uh
17:12what could happen it seems like
17:14uncertainty right well wrong investors
17:17what they do is they start with what
17:19they know now what you know is that
17:21other people have started recycling
17:23businesses
17:24too and this has already occurred and
17:27this has happened in the past so you do
17:29have some data on how it went for them
17:34okay so what you can probably find is
17:36you can find other companies that have
17:39been started in the past that were
17:41similar to the thing that you want to
17:44do that um say this you happened 5 years
17:48ago 10 years ago so there will be data
17:51on how it
17:53went how much did it cost the start how
17:56much money did it make and say the first
17:59year the second year the third year all
18:02that data is out there okay so you can
18:05look at that data and you can look at
18:07that information for many many companies
18:10you can group them all together you can
18:12say I want to look at recycling
18:15companies in this
18:18region that were small they were started
18:20like you know as I don't know one or two
18:23person
18:25companies uh within the last 20 years
18:28and you can get that data and you can
18:30see okay on average they cost this much
18:34to
18:35start on average in their first year
18:38they made this much money on average in
18:41their second year they made this much
18:42money etc etc etc so you can get this
18:45data you can get these
18:46numbers and by looking at those numbers
18:49you can derive certain
18:50conclusions for example if you know that
18:53say a 100 companies were started like
18:56that they were in this region they were
18:58about this
19:00size um and it was in the last 20 years
19:02so relatively
19:03recently okay let's say there were 100
19:06companies that were
19:08started and of those 100 99 of them
19:12didn't make it past their first
19:16year okay just before we go any further
19:19just take that fact well that's giving
19:22you some idea of what the risk is
19:24involved if someone says I want to start
19:27a recycling company
19:29in this region it's going to be a small
19:31company
19:33right what you know historically is that
19:3699% of those companies have failed they
19:38didn't make it past the first 12
19:41months okay so even if you don't have
19:43any more precise data you don't know how
19:44much it cost to start you know how much
19:46money they made precisely or lost uh
19:49that alone can give you an idea of the
19:51risk involved you'd say okay well
19:54without knowing anything else I can tell
19:56you there's a 99% chance that you're
19:58going to fail within the first year
20:00because that's the situation that's
20:02happened to everyone else who's who's
20:03attempted to do
20:07this
20:09right now you can go deeper and you can
20:12maybe look at the individual and say
20:13well this individual who's starting this
20:16company this is maybe their first
20:18attempt at starting a company so you
20:20have no
20:21data so you could maybe assume they're
20:23like everyone else or you could say oh
20:25well this person that's starting a
20:27company say they have a track record of
20:29success they've started 40 companies
20:32previously and 39 of the 40 have gone on
20:35to make 10 times their original
20:37investment within 5 years something like
20:39that and you look at that person's track
20:41record and that's the result they tend
20:44to
20:45deliver so you maybe factor that in
20:48right but as you can gather you're
20:52getting information you're getting
20:53precise data on how you can
20:56quantify the likelihood
20:59of a certain outcome hopefully that
21:01makes
21:02sense okay so this is where we get into
21:05the idea of risk and return now we've
21:08talked about risk risk is a number it's
21:11a number it's where you can say okay
21:13this has a certain percentage chance of
21:16working
21:17out and return is the expected result
21:23okay so uh risk and return you would
21:26have an expected result you would say
21:28okay we expect to make this much moneyy
21:30in the first year and
21:33it's 85% likely that we will achieve
21:36that something like that okay so you
21:38have you assign a likelihood to an
21:42outcome that's what risk and return
21:46is okay uh hopefully everybody is with
21:50me so
21:51far um yeah and this is how you can
21:55quantify things so this is how investors
21:57think they think of like what's the
21:59likelihood of a certain outcome and the
22:03thing is you can get this you can
22:05calculate this with data so if you have
22:10a company that's up and operating the
22:12most obvious thing to do would be to
22:14look at your past history how much money
22:16have you made every year since you
22:18started and with that you can drive
22:20certain conclusions if you don't have a
22:23track record they can look at the
22:24industry as a whole or the industry in
22:27your region
22:29or people in your situation you can
22:32refine it but one way or another you can
22:33get data and you can get these numbers
22:37now let's talk about what the numbers
22:38actually
22:41are okay hopefully everybody is still
22:44with me
22:45here my camera looks a bit weird it's
22:47very dark in here it's very cloudy where
22:49I am today so hopefully uh this shows up
22:54okay
22:56right okay so
23:00um you can calculate this now hope let's
23:02get into the nitty-gritty details here
23:05um there's two values that are important
23:08the expected return what the outcome
23:12is and the risk which is the likelihood
23:15that that will occur okay so these are
23:17the two numbers that we're interested in
23:20okay now let's make this easy let's
23:23pretend that you have a track record
23:25your company has been in business for
23:26say 10 years okay a perfect scenario
23:29you'd have this kind of data and you
23:31know how much money you made each
23:33year okay so uh let's say I don't know
23:37your profit was on average $10,000 a
23:41year just to pick some nice round
23:44numbers here okay so the average amount
23:48that you made every year over 10 years
23:50that would be your expected value so if
23:53one year you make 8,000 another year you
23:56make 12,000 the next year you make 9,000
23:59the year after that you make 11,000
24:01right they're averaging around 10,000 a
24:03year right so you could say well if
24:07someone says to you what do you expect
24:08this company to make at the end of this
24:11year the way you would figure that is
24:13you average out the previous 10 years or
24:15so all the data you have and you say
24:17okay well they seem to make $10,000 a
24:19year so My expected outcome is $10,000
24:22for this year Okay now what's the
24:26likelihood of that
24:28right that's where it gets a bit more
24:31complicated the expected value is very
24:33simple it's usually an average of all
24:36your previous values I think everyone
24:38understands that the risk or the
24:42likelihood that that is going to
24:44happen is calculated by something called
24:47the variance right uh and then if you
24:49take the square root of the variance
24:51it's called the standard deviation very
24:53very uh mathematical way of doing this
24:56so what that's doing is basically you're
24:58looking
25:00at uh ways to describe the data now the
25:03average value is obviously the first way
25:05of describing the data it makes around
25:0710,000 a year but think about it you
25:10could have a very stable company that
25:12makes like literally right around 10,000
25:15every year you know 10,000 one year
25:1899,900 the year after
25:2110,100 year after like very very close
25:24right so not a lot of variance there
25:28or you could have a much more volatile
25:31company that they average 10,000 a year
25:35but it swings wildly right one year they
25:38make
25:39110,000 the next year they lose
25:42990,000 right and then the year after
25:44that they make you know
25:46120,000 and then the year after that
25:48they lose 80,000 or something like that
25:51right so you see the difference both
25:55companies average out to 10,000 a year
25:57but one is much more vol volatile than
25:59the
26:00other well the way it turns out is how
26:04you measure risk is basically you look
26:06at how volatile the data has been the
26:11the historical data okay and you do this
26:14by calculating the
26:17variance so I don't know if people care
26:20about this level of detail but the
26:22variance is basically how far from the
26:24[Music]
26:26average the uh answer every year tends
26:30to be right so if the average is 10,000
26:33a year and you're
26:3510,100 you know you're very close to the
26:38average so there's not a lot of variance
26:40the the variance is
26:42100 right if the average is 10,000 a
26:45year but you made 110,000 this
26:48year your variance is 100,000 right uh
26:54it's huge right huge variance it's
26:58you're deviating from the average a
27:00significant amount right so that's what
27:04the variance is it's how far from the
27:07average the results tend to be okay so
27:11anyway it turns out that if you you can
27:13calculate the average for a stream of
27:16data a stream of numbers and you can
27:19calculate the variance for a stream of
27:20numbers so you got two values there
27:24right and then uh by taking the square
27:27root of the variance you get the
27:29standard deviation and then the standard
27:31deviation gives you a bell curve now
27:35let's see if I can open a window and
27:37show you guys this graphically because I
27:39know it's a bit dry just listening to me
27:43uh waffle on about this let's see if uh
27:46I can pull
27:47up a bell curve this is where I need uh
27:51absolute Mastery over my web browser
27:54here so here oh and I prefer to go to uh
28:00bing to do this to to do an image
28:04search because for some image searches
28:09um I find beinging a little bit more
28:11user friendly at the moment than uh than
28:16Google okay here we go so let me see if
28:19I can share my screen here okay so let's
28:24try this one here
28:28okay so this is essentially a bell curve
28:31okay now what they found was that
28:36for for a lot of processes in nature
28:40when you look at how things are
28:41distributed they seem to follow the
28:43standard shape this bell curve okay it
28:45looks kind of like a bell right okay and
28:49uh they're using this little symbol here
28:51you probably can't see it or maybe you
28:52can I'm not sure I think that's Sigma I
28:55I can't remember I can't remember my
28:56Greek alphabet I used to know all the
28:59entire Greek alphabet like all the
29:01different what they what the letters are
29:02used for mathematically at one point
29:05anyway I think this is Sigma so uh
29:07lowercase Sigma so this represents a
29:09standard deviation so all it's saying is
29:13that if you've calculated the average of
29:16a string of numbers okay in our case it
29:18was $10,000 a year right that would be
29:22right here okay this would be right in
29:25the middle so you're expect Ed value for
29:29how much money you would make at the end
29:30of this year would be
29:33$10,000 but there's some there's some
29:36uncertainty there you know it's likely
29:38not going to be exactly
29:41$10,000 but you know it's going to be
29:43somewhere close to it okay that's where
29:47this bell curve comes in Okay so we've
29:50calculated the average which which is
29:52the expected value we've also calculated
29:54the variance which is on average how far
29:58are the numbers every year away from the
30:01average is it just varying by a little
30:03or does it vary by a lot okay so we
30:07calculate that number the variance the
30:09average deviation from the
30:12average okay and we get the variance we
30:16take the square root of that number and
30:17then we get the standard deviation and
30:19that standard deviation will be a number
30:22right so uh in our case our average is
30:25$10,000 and our standard deviation let's
30:27say it turned out to be
30:30$1,000 okay so that means we get this
30:34result this is the
30:36likelihood of how much money we're going
30:39to make this year the most likely amount
30:42is right in the middle
30:43$10,000 okay but over here at
30:49$1,000 right because it's $10,000 plus
30:53one standard deviation and in our case
30:55our standard deviation was a th000
31:00okay uh if if you figure um between say
31:06$110,000 and
31:08$1,000 there's a 34% likelihood that our
31:12actual result will fall in that
31:15range and same thing here between
31:18$10,000 and $99,000 there's another 34%
31:22chance that our actual number will fall
31:23in that
31:24range okay now over here at two standard
31:27deviations this would be
31:30$122,000 okay and if we're wondering
31:35what's the likelihood that our result
31:38will fall between say 8,000 and 12,000 a
31:42standard deviation of $2,000 that would
31:44be down here all the way to there okay
31:48it says here 95% of values are between
31:50those two those two values so the
31:53likelihood of our profit this year being
31:55between 8,000 and 12,000 will be
31:5895%
32:00okay so you can I mean you can read this
32:02graph for yourself you can see how it
32:04works but one standard deviation for us
32:07in our example was
32:09$11,000 and our average our expected
32:12value right here of X is 10,000 okay so
32:17you can fill in all these numbers
32:18yourself and this is the likelihood that
32:21you're going to get different
32:23values okay so this is how investors
32:26think this is what they do to try and
32:30predict the outcome of somebody running
32:33a business somebody uh investing in a
32:37project or an asset anything like that
32:41they're calculating this they're trying
32:44to find those two numbers what's the
32:46expected value and what's the risk which
32:50mathematically is the same thing as a
32:51standard deviation okay you get the idea
32:55they think in the terms of those numbers
32:57so everything can be reduced down to
33:00thinking in terms of these two
33:02numbers okay so uh hopefully everyone
33:07has a much easier time thinking of the
33:09expected value which is just the average
33:11of what has happened
33:13before okay you the most likely thing is
33:16that you're going to get the average of
33:18a string of data right and in order to
33:20get that string of data you look at a
33:23you look at historical data you look at
33:25the track record the track record of the
33:28company itself and if you don't have
33:30that the track record of the industry
33:33itself in that region you know refined
33:36by factors like your geographic location
33:38and your size and your age and all that
33:41kind of stuff or you could even look at
33:43the track record of the individual
33:46what's their uh historical data for the
33:50things they've
33:51attempted have have on average were they
33:53successful on average were they were
33:55they
33:56failures and if they were successful how
33:59successful and how volatile is that
34:02data and that informs you what your
34:06expected value is your your most likely
34:09outcome and the likelihood of that
34:14occurring and that's how you think like
34:16an investor at its fundamental level
34:18that's how you think like an investor
34:19you reduce everything down to these two
34:24numbers hopefully that makes sense NC
34:26workers here says good afternoon
34:28everyone good afternoon NC worker thank
34:30you for joining me today I have uh 19
34:32people here
34:35today okay so just a very quick recap if
34:38you're just joining me now uh we talked
34:40about how investors make decisions we
34:42talked about the concept of risk and
34:44return and these are actually two
34:46numbers that you can calculate and
34:49investors do calculate them and in order
34:52to calculate these numbers you need
34:54historical data now if someone is
34:57opposing to start something up they
34:59haven't started it yet you won't have a
35:02track record of how that particular
35:04thing has gone because they haven't
35:05started it yet but you do have
35:08historical data in some form you have
35:11that person's previous track record you
35:14have the thing that they're
35:16starting uh that type of company or that
35:20type of
35:22Adventure uh you have historical data on
35:26that so usually looks that looks at an
35:29industry of all the you know the
35:32companies that are started or all the
35:33Investments that are made in that
35:35industry usually by location in that
35:39region how do they go and you can get
35:42that
35:43data uh some companies they will sell
35:46you that data but
35:49um that data does
35:52exist in its absolute basic form usually
35:56the government has that data they
35:57collect it through taxes when you fill
35:59out your tax return uh if you have a
36:01business that's
36:03Incorporated it fills out its own tax
36:05return where it has to declare
36:07essentially its finances you know how
36:09much money came in how much money did
36:11you
36:12make because you need that information
36:14to know how much money to pay the
36:15government in taxes right so they they
36:19distribute this all to the government
36:20and the government does make this
36:22available it doesn't do it in a way that
36:25you can identify the precise company
36:27because that would breach privacy laws
36:30but you can go to uh government websites
36:32that will provide statistics on economic
36:34data and this is freely available to the
36:37public and they can tell you like in a
36:39certain region you know they'll they'll
36:43either tell you this this information
36:46averaged across the entire country or
36:48they can maybe even break it down into
36:49certain regions but they'll say for this
36:51type of
36:53business let's say of this size on
36:56average it contains this many employees
37:00and it uh makes this much money every
37:02year and here's the average like the
37:05expected value and here's the
37:08variance right so you can get this and
37:12you can refine your
37:13query uh you know by different
37:16factors so if you want to know how risky
37:19certain businesses are you can get that
37:21information from the government now
37:23depending what country you're in it's
37:24going to look it's going to take
37:25different forms but uh uh you know I'm
37:28I'm in Canada there's a website called
37:30statistics Canada so you can go there
37:32and get all this this information free
37:35uh you can contact them if you want more
37:37precise queries and sometimes they can
37:40help you drill down into a more uh a
37:42more precise region like like a city or
37:46you know something like that uh in the
37:49United States they have something very
37:50very similar I don't remember the name
37:51of the website but it's the US
37:53Government website uh where they make
37:55this available federally like for the
37:57entire country and I believe you can get
37:59it broken down by state I think so I'm
38:01not
38:03sure
38:04um so there you go now that gives you
38:07sort of a base to operate from right it
38:10also allows you to do research into
38:11different types of businesses to see you
38:13know on average doesn't make sense to do
38:15that business are they making a lot of
38:17money or they not uh basically it gives
38:20you all the ratios on their financial
38:23statements so you know their profit
38:25margin and uh you know cost of goods
38:28sold and you know net income and like
38:30like all that kind of stuff you can look
38:32at that averaged across many many
38:35companies in that industry in that
38:40situation so that's how that stuff
38:43works um hopefully that makes sense to
38:45everyone now this is kind of the tip of
38:48the iceberg I'm sort of trying to
38:49explain this uh without drawing it out
38:52without showing you any equations or
38:53anything like that uh I'm just trying to
38:56do this all verbally so there's a limit
38:57to what you can do verbally um unless I
39:00want to try and teach a lecture on it
39:01but um but that's the basics you can go
39:04a lot deeper than this you can go into
39:07um you know diversification and you know
39:09Market risk and uh all this kind of
39:12stuff let me know if you want me to go
39:14in that direction uh I could go there if
39:16people want me to but I think this is
39:18the basics and this is what everyone
39:20needs to know if you do want to go
39:22further uh consider getting a book on
39:26finance and once again if you do want to
39:28go deeper I've created this resource for
39:30people uh check that out that's the best
39:33bang for the buck you're going to find
39:35anywhere uh where it's it's called a
39:38course because it's technically a course
39:40but it's actually taking you through
39:42everything and in an entire Business
39:45program that's many courses okay there's
39:48a link in the description if you want to
39:49check it out there's a lot there and
39:52even if you just are interested in the
39:54finance component of it you don't care
39:56about marketing or HR or anything like
39:58that uh check that out still that's
40:00definitely worth uh you know the bang
40:03for the buck what you're getting for
40:05what you're paying and you're getting uh
40:08the definitive information on how this
40:10stuff works from beginning to end and
40:11you can go as deep as you want so that's
40:13what I'd
40:15recommend okay I'm going to open this up
40:17to questions so if anyone has any
40:18questions about this or anything to do
40:20with entrepreneurship or business speak
40:23now uh or forever hold your peace get in
40:25the chat let me know uh what you're
40:30wondering about and what you're
40:32struggling what you're trying to do and
40:35maybe what you feel is stopping you or
40:38or puzzling you at the
40:41moment and I will do my best to help you
40:47out
40:49yes in the meantime uh later this
40:53afternoon I am doing a collaborative
40:56live stream
40:58with uh I believe it's Abby from the
41:01YouTube channel life work balance Abby
41:04is a recruiter and we're going to be
41:06talking about uh you know how to get a
41:08job and how to pass a job interview and
41:10that kind of stuff so if you're
41:11interested in that stick
41:13around um I'm going to be doing these
41:17more on this channel I'd like to do one
41:19weekly where I talk to other
41:22YouTubers uh that are in the similar
41:24space to me talking about employment and
41:26hiring and all this kind of stuff I'd
41:28like to do one with business people
41:30too uh just be able to put questions to
41:33them and you can get uh different
41:34perspectives on things and you can maybe
41:36see where everybody's coming from and
41:39that helps inform people
41:45further okay not a lot of questions as I
41:47said today is a holiday so uh I I didn't
41:51realize that when I uh had scheduled
41:53this a few weeks in advance so uh so
41:58yeah but
42:02um yeah if I don't get a question in the
42:04next uh 30 seconds or so I'll probably
42:06be wrapping it
42:07up but yeah you can learn more about
42:09this um once you understand how
42:11investors think that helps you to
42:15understand what is a good investment and
42:17what is a good investment translates to
42:20whether it's likely to succeed or not
42:23and understanding that is very important
42:25to make the right decisions at as to
42:27what business to start up and how to do
42:29it and increase your chances of
42:32success okay a lot of entrepreneurs they
42:35don't really understand
42:38investors and in my experience neither
42:41really has a complete picture of how
42:43things go and and what's really going on
42:46but the more you understand about you
42:48know how you can look at what you're
42:49doing the prospect of starting a
42:51business whether it's a side hustle or
42:53it's a full-blown business that replaces
42:56your your day job or equivalent um you
43:00want to give yourself the most the best
43:03likelihood of succeeding and so it's
43:06good to look at it from many different
43:09perspectives
43:10and avoid pitfalls and spot
43:14trouble uh and realize why things are
43:19considered uh higher risk or
43:22not right that only serves to make you
43:26more successful in the long long
43:29run okay so uh it looks like we're going
43:32to wrap this up early today um thank you
43:35for joining me you guys are awesome I'm
43:37I do this stream every week so uh so let
43:42me know if you have any questions about
43:43this kind of thing uh check out my
43:45course for the $100
43:48MBA and uh take that course if you are
43:52if you are looking to start a business
43:53you're looking to do a side hustle for
43:55$100
43:58this will give you so much value you'll
44:00be able to avoid very costly mistakes
44:03you'll be able to achieve success years
44:05ahead of the time you would have if you
44:08didn't know business uh absolutely
44:11incredible and uh I created this course
44:14for anybody who's looking to learn
44:17business and you get not only the
44:19business Theory I you'll also get many
44:21videos from me that uh explain give you
44:24my perspective having been an
44:26entrepreneur having been uh CEO of a
44:28smaller company you get my take on a lot
44:31of the material how it relates how you
44:33can use
44:35it um check that out okay uh hello
44:41to quanell is that how you say that uh
44:44thank you for being here quel so sorry
44:47for arriving late I will rewatch The
44:49live yes well thank you for being here
44:51uh quell and when you rewatch The live
44:55uh what I like to do with a lot of live
44:57streams and stuff that I've that I've
44:58seen from other people is uh watch it at
45:01like 1.5 times the speed and it flows a
45:04lot better and it's a little bit uh more
45:07interesting okay so thank you very much
45:09I will be back a week from today the
45:12same time with another episode of side
45:14hustle ideas I will also be back in an
45:17hour and 15 minutes for a collaborative
45:19live stream right here on this channel
45:21with another YouTuber talking about
45:23virtual job interviews so join me for
45:25that if you are interested until then
45:28take care you guys are awesome I wish
45:29you nothing but success