Ep303: Benjamin Quinlan – Investing in Cryptocurrency? Do Your Research First

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Guest profile

Benjamin Quinlan is the CEO and Managing Partner of Quinlan & Associates. He is also the Chairman of the FinTech Association of Hong Kong, an Adjunct Professor at the AIT School of Management, a Mentor for PingAn’s Cloud Accelerator, a Guest Contributor for eFinancialCareers and Regulation Asia, and a Senior Advisor to many leading startups in the region.

He was previously the Head of Strategy for Deutsche Bank’s equities business in the Asia Pacific and its Investment Bank in Greater China. He has also worked at UBS, Oliver Wyman, and PwC.

 

“You’ve got to be in the game and not on the sidelines; otherwise, you are never going to get involved to the degree you need to make things work for you.”

Benjamin Quinlan

 

Worst investment ever

Investing in cryptocurrency with all the hype

In 2017, there was all this hype going on around cryptocurrencies. Bitcoin was literally on the financial news headlines every day. As a strategic consultant, Benjamin likes to put a lot of data and thought behind how he looks at new opportunities and new developments, particularly in the financial services industry.

So Benjamin deployed his team and tasked them with cracking this new cryptocurrency. His focus was on learning what this ecosystem was all about and the real value of this very elusive Bitcoin that everyone kept referring to.

Finding a way to value Bitcoin

As Benjamin and his team tried to crack Bitcoin, they realized that nobody knew its worth. Analysts in the market said it was worth zero, while the people rushing to invest in Bitcoin were saying it was worth a million. But they were all in agreement about one thing; there were zero methodologies and approaches to valuing Bitcoin.

The team sat down and worked out how to value this new currency. The team came up with four different methodologies. Every single method pointed to the fact that this was a massive speculative bubble.

Sharing his report with the market

Benjamin and his team concluded that Bitcoin was just a speculative investment that would plummet in no time. At the time of Benjamin’s research, the price of Bitcoin was around $20,000.

In Benjamin’s report, he predicted that the price of Bitcoin at the end of 2018 would be $1,800. By the end of the year, it hit $3,100.

Claim to fame

Bloomberg cited Benjamin’s report as the most accurate crypto forecaster in the world. The report got so much coverage around the world and even made it into Quora and Reddit.

The advice he had but never took

One day, Benjamin was on international TV, CNBC, and the anchor asked him, “So Benjamin, given all of your research and analysis and thought process, are you shorting Bitcoin?” He said, “No, we do not. Because as an independent consulting firm, we do not get involved in the investment side.”

Benjamin watched as Bitcoin continued to plummet throughout the year and could not help but think about the amount of money he could have made from backing the advice he and his team were so confident of. But alas, he did not do it. It would have been great to put his money where his mouth is.

Lessons learned

The success of any investment lies in thorough research

When considering an investment, including cryptocurrencies such as Bitcoin, do thorough research first. Do not just look at technicals and theories. You need to look at what is going on in the broader market too.

Back your thought process with conviction

You will not always get everything you do right but no matter what happens, always back up your decisions with conviction. If you strongly believe that your decision is right, then stick by it.

Andrew’s takeaways

Take a small position and grow it over time

Just because your gut tells you to do something does not mean you have to go all in. Invest just a little bit into your investment of interest so that you are at least taking action. Start slowly and continue to build your portfolio.

Actionable advice

If your gut is fundamentally pushing you in a direction to make a decision, take a position. Whatever that position might be, follow your instinct, and follow your gut. Only over time can you work out if you got it right or wrong and, that is part of investing.

No. 1 goal for the next 12 months

Benjamin’s number one goal for the next 12 months is to continue to build and scale his business. Beyond that, he wants to get back on stage and do some more touring for comedy. He also wants to finish the book he’s been working on.

Parting words

 

“I wish everyone a very fruitful 2021.”

Benjamin Quinlan

 

Read full transcript

Andrew Stotz 00:03
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community we know that to win in investing, you must take risk but to win big, you've got to reduce it. This episode is sponsored by a Stotz Academy's online course. How to start building your wealth investing in the stock market. I wrote this course for those who want to go from feeling frustrated, intimidated or overwhelmed by the stock market to becoming confident and in control of their financial future go to my worst investment ever.com slash deals to claim your discount. Now. Fellow risk takers This is your worst podcast host Andrew Stotz and I'm here with featured guest, Benjamin Quinlan Benjamin, are you ready to rock,

00:50
I am ready to rock.

Andrew Stotz 00:52
Let's do it. Let me introduce you to the audience. Benjamin is the CEO and managing partner of Quinlan and Associates. He's also the chairman of the FinTech association of Hong Kong, an adjunct professor at the MIT School of Management, a mentor for ping ons cloud accelerator, a guest contributor for E financial careers and regulation, Asia, and a senior adviser to many leading startups in the region. He was previously the head of strategy for Deutsche Bank's equities business in Asia Pacific, and its investment bank in Greater China. He has also worked at UBS, Oliver, Wyman and PwC, then you can take a moment and filling further tidbits about your life.

Benjamin Quinlan 01:40
The one thing that I didn't include, but a lot of people know about my professional career is I'm a professional stand up comedian. So I do that as a second parallel evening weekend moonlighting job. Prior to COVID, it was actually a lot of fun, because I tour a lot around Asia, including in Thailand, where you are. So I missed doing it very much. But thankfully, there been a few shows in Hong Kong, but very much a part of me and who I am.

Andrew Stotz 02:09
You know, it's interesting about that, I often times, when I write courses, or when I write research, and try to come up with original ideas, the only way I can really test those ideas, is to put them in front of people. And the best way is put them in front of the smartest people I know and say, What do you think of this, you know, buy this sell that and that was really the job of an analyst. You know, in the research operations I've worked in, overall, my whole career was to come up with an idea that was original or semi original. And then, you know, put the research behind it to support it, anticipate the questions, you're going to get asked, and then get out in front of the fund managers and say, Hey, why don't you put $10 million behind this idea and get blasted. And then I found an interesting story was when I went to New York once many years ago, I had a presentation and I had a fun, a salesperson that was with me. And they attended my first presentation, I then went all the way across America to San Francisco, and then came back to New York. And I did another day of presentations. And that same salesperson attended my last presentation, they said there was nothing similar, like it was completely different. And what I realized is that, you know, the only way to really test an idea is to put it, you know, under fire. And then I iterated through all the weak points, the strong points. Is that the same thing with comedy and jokes?

Benjamin Quinlan 03:34
Yeah, of course, you constantly need to test your ideas. A lot of people ask me, do you stand in front of the mirror and tell jokes? And I say, of course not. It's quite odd to look at myself. I'm the worst audience reaction I can have to my own jokes. But you do need to test out ideas. And I often do it with friends, you need to select your friends very carefully. As you can hear from my accent, I'm Australian, right, I spent a lot of time then when I tell my jokes to my Australian friends, they tend to be a little bit more depraved and kind of their thinking. So I don't use that as the reference benchmark. Now, maybe good jokes within our little social circle, but different things work on stage.

Andrew Stotz 04:12
Yeah. And it's that feedback. That's so painful, or exhilarating, I guess that really getting on stage is all about. Correct. I often say

Benjamin Quinlan 04:24
comedy is the purest form of democracy, you get up there and you have to win as many votes as possible with a different audience in crowd in real time. So it's a lot of fun and you learn to think on your feet and whatever skills you learn from being on a comedy stage makes honestly the boardroom a piece of piss

Andrew Stotz 04:44
there. Well, and now on to a subject that may not be so funny. It's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be. Tell us a bit about the circumstances leading up to it then tell us your story.

Benjamin Quinlan 05:00
Okay, I think we all remember in 2017, all the hype going on around crypto currencies and Bitcoin was literally on the headlines of the financial news every day. By about midway through the year, you saw Bitcoin started to creep up in its price. And people are making millions overnight and every single scammy ad on Facebook that you could think of was popping up on your screen. And as a strategic consultancy, you know, I like to put a lot of data and thinking behind the way we look at new opportunities and new developments, particularly in the financial services industry. So I deployed My team and I said, we're going to crack this and we're going to work out, what is this ecosystem really telling us? And what is the real value of this, you know, very elusive Bitcoin that everyone keeps referring to. And what I was seeing what I was going through all of my research is analysts out there in the market was saying it was worth zero. Some people were saying it was worth a million. I think Jim McAfee made a very famous claim that if it didn't hit that dollar amount, he would do something to himself, which you can go and Google. But in any case, there was zero consensus and also zero methodology and approach to it. So we sat down as a team, and we were working out how do we value this thing, there must be ways to do it. And we came up with four different methodologies. And every single one pointed to the fact that this was a massive speculative bubble. Even one of the charts that we put in our report was just indexing the price of bitcoin to the number of Google searches for Bitcoin. And it was literally a shadow. So when you're talking about the concept of FOMO, if there was any graphic to really throw that in your face, that was it. And we read the report, that's when Bitcoin was topping out at around 20,000 US dollars at the end of 2017, beginning of 2018. And we released it to the market and we cold price a Bitcoin at the end of the year at 1800. US dollars. That's where we saw its true value. And by the end of the year, it hit three one, I think that was his low point. And Bloomberg cited us is the most accurate crypto forecaster in the world, right, which we were so very proud claim to fame that goes to your question, what was my worst investment? I was sitting on international TV, CNBC, and the anchor asked me so Benjamin, given all of your research and analysis and thought process, are you shorting Bitcoin? And I said, No, we don't. Because as an independent firm, we don't get really involved in the investment side, we're consulting firm, but I sat there and said, Well, why not. And as I watched it plummet throughout the year, I just thought, Oh, my gosh, the amount of money we could have made from backing our own advice that we're so confident about, would have been astronomical. But alas, we didn't do it. So I would say in the history of my investment track record, that really stands out to me as something that is not my proudest moment, because it got so much coverage around the world, we usually do a lot of financial press, but this made in Korra, it made it into Reddit, that will all the groups saying I'm gonna check this post in a year from now and go back and see how accurate these guys were and how I would have loved to have put my money where my mouth is.

Andrew Stotz 08:25
The missed opportunities, the of course, you're not also remembering the fact that you may have continued to short it, when it started to eventually move up to its next level,

Benjamin Quinlan 08:37
we can actually call a rebound straightaway in 2019. So I miss both ends. of the best worse, it gets worse, I would have made a fortune if I just followed all the things I said to do. But, you know, I'm happy to know from a consulting perspective, there's at least been client workflow that's come in. But from an investment perspective, that was definitely a really big missed opportunity for the past two and a half, three years.

Andrew Stotz 09:05
And as a result, you're not calling from a beachfront property?

Benjamin Quinlan 09:10
No, but I mean, in Hong Kong, if you sell this little coffin you most beachfronts around the world.

Andrew Stotz 09:18
Exactly. All right. So before I ask you the next question, I want to follow up on something. And that is, so given that work that you did then and where things are now, how would you use that there is four ways that you looked at valuing Bitcoin or crypto? How what would the average listener who doesn't know much at all about crypto, let's just say, how should they think about what's the value of this? Well,

Benjamin Quinlan 09:47
I fundamentally see it as a speculative asset, right? There's no if I had to draw the closest analogy, it's it's going to be more pushing towards digital gold, right. That's how people are conceiving it in their minds. I know there's been a lot of developments around Bitcoin, like PayPal announced they would actually start accepting it as a medium of exchange and payment, right? Who in their right mind with so much volatility around Bitcoin is going to be using that as a currency? One of the things that fundamentally makes it currency work is some stability in store value around the way you can transact with Bitcoin. I'm not going to pay you in Bitcoin, if I think the price is going to spike 50% in a week. So the reality is, yes, some exchanges may happen, but compared to fear compared to the development of stable coins, very, very difficult. When you ask how we valued it, we were looking at it as like an asset. So even as an asset, cost of production, like the cost of electricity, the mining equipment, all of these, a cost plus model we were looking at as an equivalent to a digital gold we were looking at as foreign currency reserves. And then the final I would say, most specific way, we were looking at it as a medium of exchange as a currency using quantity theory of money. And we were trying to understand and estimate its circulation in use within the global economy. And for us, it just didn't strike me as something that had that utility over and above Fiats. And I always laugh when people said that, you know, crypto is the future and fear, it's garbage, then I'm like, Well, why do you keep quoting the price of your Bitcoin and fear, right? The second you tell me your Bitcoin is worth X amount of aetherium, this amount of ripple and you completely ignore the US dollar anchor point, then I'll start to believe that fear is worth nothing.

Andrew Stotz 11:36
Right? Fantastic. There's so much to learn in that space. So. So tell us what lessons did you learn from this experience?

Benjamin Quinlan 11:46
Well, I mean, when it comes to any good thought process around an investment, it is research, right? homework, homework, homework, and making sure that you do your research in a way that's very thorough, and you don't just look at technicals, you don't just look at theories, you look at what's going on in the broader market, I think it's very important to understand sentiment more generally, and how people are looking at a particular space, particularly the new technology space, like cryptocurrency was at the time. And when you see herd mentality, you know, gravitate towards something, I often find that when anything spikes to that degree, it doesn't really Bode or end well, for that investment at the end of the day. So homework and research is one thing. The other part is I would say conviction, right? A lot of investors out there are very scared to back their thought process. And we all know the amount of times we've sat there with our friends, and they've said, Oh, I was going to do this, or, or had I done that or someone. The reality is, you often need to just put your money where your mouth is, and you're not going to get everything right. And there's no need to get everything right in the world of investing. I think it's just getting some of your key convictions, right? If you really believe they are the correct thing will pay off in multiples. So like, yeah, so as well,

Andrew Stotz 13:12
got it. And I guess what I would just add to what I took away from your story is, I would just add one thing to you know, your convictions and and i would say, to follow your convictions, take a small position. You know, you don't just because you have a big strong conviction doesn't mean you have to put all your money behind it. But if you if that conviction is something that's investable with the small amount of money, do it right away, just put a little bit in it. And it changes the dynamics of the way you're thinking also, to now own it, and, you know, be in it. And so, and of course, with most of these convictions and ideas, start slowly, you know, be careful of how much it builds up to be in your portfolio. But take action. I think it's really a lesson that I take away anything you'd add. No,

Benjamin Quinlan 14:01
I completely agree on taking action, because a lot of people when they look in retrospect, they say, What if I allocated my entire bank account to that, then it would have multiplied x fold and I would be a multimillionaire, you can't think along those dimensions. You need to think of your wealth in a broader context. And I think even starting with a small allocation, you are right, it does help change the mindset to bring people into the game, right? If you want to play in the game, you've got to be in the game. But if you're sitting on the sidelines, you're never going to really get involved to the, to the degree you need to make things work for you.

Andrew Stotz 14:38
And then when the media asks you, what did you put some money behind this investment idea? And you go Oh, yeah, they don't know. It was only $100. But you know,

14:45
nothing. Yeah,

Andrew Stotz 14:46
I've tripled my money on it. All right. So based on what you learned from this story, and what you continue to learn what one action would you recommend our listeners take? To avoid suffering the same fate,

Benjamin Quinlan 15:04
I honestly think that people need to at the end of the day, in addition to doing your research is just go with your gut, right? A lot of the time, provided that your home, like don't go with random gut feeling, right. But if your gut is telling you to do something, and you've done your homework to support it, it's oftentimes when people don't listen to their gut that they have the biggest regret. So if you'll get us fundamentally pushing you in a direction to make a decision, take a position. You know, go long on something, go short on something, whatever it might be, follow your instinct and follow your gut. And only over time, can you work out if you got as right or wrong. That's part of it. People are, you know, trying to evaluate their imaginary gun, right, they got that shoulda, woulda coulda. What you need to do is the guy that actually took a position, and then you can start to have a lot more confidence around yourself, your capabilities. And again, you're not going to get everything right, but going with your gut and learning to, I guess, explore the way you think and react to things is a very important part of becoming an investor. And, you know, I think everyone needs to experience that, including the highs and lows, because it teaches you things along the way. So I think being in the game, and going with your gut is absolutely critical.

Andrew Stotz 16:25
Boom. All right. Last question, what's your number one goal for the next 12 months?

Benjamin Quinlan 16:30
For me, I'd love to continue to build and scale my business. You know, I run my own consulting firm. And it's we've had a very good 2020 thankfully. And I want to ensure that that momentum continues into what is going to be, I guess, a bit of a precarious 2021. A lot of people don't know what is going to happen. But I think beyond that, there are some other things, I really want to get back on stage and do some more touring for comedy. I really, really, really miss it. I did a show last week, and I had been off stage for months. And then I came back and you had the pre show jitters and nerves. Because it had been so long been the second I grabbed the microphone and I looked at that packed room and the spotlights were on, there was just this muscle memory that clicked back in. And as I started to deliver in the crowd was reacting, I thought, gosh, this is really a part of me, and I cannot let this go, I cannot forget about it. So that's definitely something I want to focus on. The final thing is, I'm writing a book, and I've spoken about this before, but I have to finish the damn book. So I really need to get to the point where I focus the time, energy and effort to allocate a bit of time every week to get that done, and get it out to market because I think it'll be a great and very fun read.

Andrew Stotz 17:48
Well, ladies and gentlemen, look for Benjamin on this stage or in Amazon, or at his company. And just so that the listener, the listener said that they were considering you know, they're looking for help or support from a company like yours, what would be the number one thing that you do or can help with for a company out there that's struggling in one way or another?

Benjamin Quinlan 18:10
Okay, so for us, it's hard to summarize in one sentence, but we are a strategic consultancy. So for those people who think McKinsey Boston Consulting Group, all of that, that way too expensive. They, you know, I've heard many stories commensurate with their fee, they don't add the value that we were seeking. We're the alternative. we bumped heads directly with these firms. So if you're looking for genuine advice, particularly in financial services, and FinTech, very honest straightforward views, huge amounts of data driven insights, research and conviction, again, on the consulting side to stand behind what we recommend to our clients, then give us a call, drop us an email, and we you know, I think you'll be pleasantly surprised track record for the time we've been around has been something I've been extremely thankful for and grateful for and proud of. And it's nice to see that clients are taking a shining to us.

Andrew Stotz 19:06
Great, and we'll have all that on the show notes. So if anybody's interested, just go to the shownotes. And I'll have everything there. And unlike those stuffy management consultants, at least you'll laugh and have fun as you work with Benjamin and his team.

Benjamin Quinlan 19:23
But just remember that the joke isn't the final presentation that we do. At the end of the project. The laugh that

Andrew Stotz 19:30
you're gonna have is beating your competitors implementing the great strategies. Alright listeners, there you have it another story of loss to keep you winning. Remember to go to my worst investment ever.com slash deals to claim your discount on my how to start building your wealth investing in the stock market course. As we conclude, Benjamin, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst enemy Investment ever into your best teaching moment? Do you have any parting words for the audience?

Benjamin Quinlan 20:05
I wish everyone a very fruitful 2021. I know 2020 has been rather odd for many of us. But it's an interesting year. I think the world is scratching his head regarding Where do I put my money yields at all time lows fixed incomes returning you nothing cash. There's questions around the value in the long term of the US dollar and feared but equities are through the roof, Sir, how much can you sustain evaluations? At the end of the day, it's making some people very crazy. So I wish you all the best along with myself to make sure that we don't get bled dry in 2021 as the market starts to,

Andrew Stotz 20:42
I guess, find their real value. Amen. And that's a wrap on another great story to help us create, grow, and most importantly, protect our well. Fellow risk takers. This is your worst podcast host Andrew Stotz saying. I'll see you on the upside.

 

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Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company that provides institutional and high net worth investors with ready-to-invest stock portfolios that aim to beat the benchmark through superior stock selection.

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