"Wints, this is appalling!"
"Panther… mate… stop."
It’s fair to say my Sydney finance and wealth industry mates were less than impressed with my hand-picked stock bundle. And rightfully so—at the time of writing, I’m down 74%, having learned the hard way about maximum drawdown, over-concentrating a portfolio, and share dilution.
To give context, this was a relatively small portfolio of $5K—funded by disposable income, long ago during a brief period of career boredom. And in other speculations, I've made that money back - shout out to NVIDIA and AMD !
But the numbers can't be ignored: this dumpster fire ASX bundle I've self picked will never see a positive return. And yet, it’s still some of the best money I’ve ever spent, because of how it's levelled up my critical thinking.
The Change Lesson: Hype vs Reality
Take BRAINCHIP (ASX:BRN). In theory, neuromorphic computing sounds revolutionary—low-power, AI-driven chips that mimic the human brain and can be deployed "at the edge", meaning on devices themselves (think Internet of Things).
But I knew my dollars were in trouble when Josh Clark from QVG Capital noted that YouTube videos hyping Brainchip’s stock were racking up 10,000+ views… while videos actually explaining the underlying technology struggled to hit 500 views.
Looking for proxies of actual customer behaviour is a signal all leaders should pay attention to; nearly three years on from that observation...and BRN has yet to land a significant customer.
The gap between investor enthusiasm and real-world product adoption is the same type of gap that kills effective change in organisations.
Clients I work with get sick of me saying: "I love what you're doing here...but change only happens when someone behaves differently!"
When the excitement around an idea outpaces the clarity of its actual use case, you’re not changing anything —you’re speculating. Redirect the energy towards building stakeholder context and understanding.
The Innovation Lesson: Innovator's Dilemma in the AI age
Appen (ASX:APX) was once the darling of AI-driven data labeling - an Australian success story which investor whitepapers painted as 'the future'. But what looked like a market leader became a case study in shifting macro trends (particularly Apple's stance on data privacy), competitive pressure, and overreliance on legacy revenue streams.
You didn't have to be the next budding Zuckerberg, to see that when Facebook (an ad-driven social media platform, which was Appen's primary customer) rebranded and ostensibly restrategised to Meta (an 'everything tech' company, as the name suggests), it was likely to use its clout to "own" it's full data ecosystem.
The brutal reality was Appen had a couple of major services related to data, which were too expensive (by unit) compared to its competitors. Moreover, the company had somehow failed to use its first mover advantage to innovate towards new data products, which would have made it a much more fundamentally sound business. (Note: Appen eventually came to the game with a data product tech stack in mid 2023)
Looking on from the outside, it seemed like Appen's leaders fell for the classic Innovators Dilemma, as articulated by Clayton Christensen where even a well-run company can ignore disruptive innovations...until it's too late.
The Leadership Lesson: your metrics and the market are two separate things
Lisa Wade (she/her) arrived at DigitalX Limited (ASX:DCC) in 2022 with much fanfare; widely respected and active within the industry, the pairing of her experience within Westpac (an established institution in the Australian economy) to a company at the forefront of digital asset innovation, seemed like a match made in heaven.
And yet… stock price movements don’t reflect the same enthusiasm; they are essentially unchanged. And evidently, there wasn't ongoing enthusiasm amongst the new pairing either, with Wade departing in September 2024.
I absolutely won't speculate whether Lisa did a "good" or "bad" job - because being external, I clearly have no idea what her metrics were and what it was like to work under her leadership.
I can make an informed assertion, that launching a Bitcoin ETF (ASX:BTXX) against the backdrop of the FTX crypto exchange collapse, was not an easy task! So for that to happen against the grain of a conservative regulatory environment and for it to remain a positive revenue source for the company, is clearly something for which she and her team ought to be congratulated.
What I will observe, is that clearly leadership alone can’t dictate investment outcomes. Timing, external market conditions, and investor sentiment all play a role. One of my more calculating investment / wealth industry friends has often categorised the "leadership stuff" I do as being "necessary, but not sufficient".
A bit reductionist for my taste, but it was good reminder for me to always consider the whole landscape behind a companies success. Or lack thereof...
And it raises a long-standing quandary at the highest levels of People and Culture; does it make sense to compensate top executives on stock price, when it is essentially out of their control and short term orientated?
Net Present Value from failed investments
Losing 74% is undoubtedly an investment failure - even if it was somewhat inconsequential to me. The best value is the education in risk assessment, rounding out my business thinking, and getting comfortable with the unpredictable nature of markets and macro-change.
The commonality between great investors, leaders and change agents is that they actively cultivate insights, to know when to pivot.
Speaking of pivots, I've now taken my own beahvioural economics advice and realised the Dunning-Kruger effect at work here; I no longer pick stocks, I pay professionals to do it for me and invest my efforts in my own 'circle of competence'.
But I'll be reading their analysis and probing their macro-theories to avoid the biggest risk of all: Failing to learn.