Snapchat vs. Lululemon vs. S&P 500: The $1,000 Challenge

Snap Bragging And A Challenge

SPEAKER_00 0:00

I get way more girls on Snapchat than you do. That's not an opinion, that's a stat. It's a science.

SPEAKER_01 0:06

Your top snap score is from the raccoon filter and your cousin.

SPEAKER_02 0:10

Can we focus? Grandma just sent us all checks.

SPEAKER_00 0:14

Wait, checks? Like money checks?

SPEAKER_02 0:17

Happy birthday. Invest it. Don't blow it. And Austin, no parlays. That's underlined three times. And she sent a frowny face.

SPEAKER_01 0:28

That was one time. And it was almost a great story.

SPEAKER_00 0:33

Whoever grows their money the most is obviously grandma's favorite now.

SPEAKER_02 0:37

Nobody said that, but also, you're on.

Grandma’s $1,000 Investing Rule

SPEAKER_02 0:41

Okay, so here's the situation. We each got a thousand dollars with one rule. Invest it. Don't blow it.

SPEAKER_00 0:50

Easy. I already know exactly what I'm doing.

SPEAKER_02 0:53

That sentence is exactly the problem I want to talk about.

Why Teens Invest On Vibes

SPEAKER_02 0:58

If you're 17 and nobody's actually taught you how to pick a stock, here's what your brain does instead. You look at your phone and you see what app you used the most, and you say, well, this must be a good investment. I use it every day.

SPEAKER_01 1:12

That's not wrong though.

SPEAKER_02 1:14

That's not exactly right. Using something a lot tells you it's popular. It doesn't tell you that the company is making money.

SPEAKER_00 1:22

Okay, but what if I use it and it's a good company?

SPEAKER_02 1:26

Then congratulations, you got lucky. Let's test it. You're each putting your $1,000 into whatever your brain tells you is the best investment. No research, just vibes.

The Lululemon Popularity Thesis

SPEAKER_00 1:38

I'll put my $1,000 into Snapchat.

SPEAKER_02 1:41

Why?

SPEAKER_00 1:42

Because I'm on it right now, every day. My whole friend group is on it right now. If a billion people are using something, that basically means a billion people think it's good. That's called democracy.

SPEAKER_02 1:54

That is not democracy.

SPEAKER_00 1:56

Well, it's adjacent to democracy. I use it every day, check. My whole friend group uses it every day, check. Has a cool ghost logo, check. Everybody can see what I'm up to all day, check. And girls respond to my streaks. Unconfirmed, but that's basically a check. And that's five reasons. And that's a lot of reasons because I don't even think scientists get that amount of reasons.

SPEAKER_01 2:20

None of those are business reasons.

SPEAKER_00 2:22

It meant something when I said it.

SPEAKER_02 2:24

That's just sad. Not even the Snapchat ghosts could raise that stock from the dead.

SPEAKER_01 2:29

I'm going with Lululemon.

SPEAKER_02 2:31

Why Lululemon?

SPEAKER_01 2:32

Because everyone at my gym wears it. It's not just girls, it's guys too. That's a growing customer base right there. That's business 101. Since when do you know business 101? Since right now, I feel it entering my brain right now as we speak. Every girl at the gym wears it. Check. Guys are wearing it now too. Check. Leggings are a top five invention. Check. I have never seen someone unhappy wearing Lululemon. Check. This is the safest bet in the building. Maybe even in the state.

SPEAKER_02 3:06

That is not the safest bet in the building. There is a candle lit under the curtains right now. That's safer than this.

SPEAKER_01 3:14

It's popular and practical. That's a dream combo. It's the Deborah of stocks.

SPEAKER_02 3:20

We'll see. I guess maybe you shouldn't have put all your money on leggings.

SPEAKER_00 3:26

Okay, what's the genius picking then?

The Boring Index Fund Pitch

SPEAKER_02 3:29

An SP 500 index fund.

SPEAKER_00 3:31

That's not even a company. That's not even a noun.

SPEAKER_02 3:35

Yeah, correct. It's 500 of them. All bundled together into one fund so no single one can embarrass you.

SPEAKER_01 3:43

It's so boring though.

SPEAKER_02 3:45

Boring is the whole point. I'm not betting on one company being cool forever. I'm betting on American business overall continuing to make money. Historically, that bet has paid off about 7% overall on average.

SPEAKER_00 4:01

7% doesn't really sound like a lot.

SPEAKER_02 4:04

It's not supposed to sound exciting. It's supposed to be here in 10 years, unlike some of the pics in this room.

SPEAKER_00 4:11

That's so anticlimactic. Where's the drama? Where's the rush?

SPEAKER_02 4:17

Good investing usually doesn't have a rush. That's the whole point.

One Year Later: Winners And Losers

SPEAKER_02 4:22

Okay, checking in. Same $1,000 a year later. Let's see where everybody landed.

SPEAKER_00 4:30

Aw shoot. It looks like Snapchat's down 30%. How is this possible?

SPEAKER_01 4:34

Lululemon is down 53%.

SPEAKER_02 4:37

Oh wow, I'm actually up 11%.

SPEAKER_00 4:40

Wait, being on an app every single day doesn't even count for anything?

SPEAKER_02 4:44

The company still has to turn all of the attention into actual profit. Snap has more users than most countries have people, and it still struggles to turn a consistent profit.

SPEAKER_00 4:56

So my loyalty means nothing to them?

SPEAKER_02 4:58

Means nothing.

SPEAKER_00 4:59

And mine?

SPEAKER_02 5:01

Lulemon had a rough year. Some of it was outside noise, some of it was internal decisions, new competition, new controversies, some strategy calls that just didn't land. The point is, everyone at the gym wears it.

SPEAKER_01 5:20

So popular and practical, it just doesn't matter.

SPEAKER_02 5:24

It's not that it doesn't matter, it's just not the whole story.

SPEAKER_00 5:28

Looks like the boring 1-1.

SPEAKER_02 5:30

Yep.

SPEAKER_00 5:31

I just hate that so much.

SPEAKER_02 5:33

And

Famous Companies That Still Failed

SPEAKER_02 5:34

this isn't new, by the way. This happens over and over. Blockbuster never adapted to streaming. So they're dead. Kodak invented the digital camera and buried it to protect film sales. They got run over by the thing they invented and hid in a drawer. GoPro? Great product, but worth nothing. It's pennies on the dollar that it used to be worth.

SPEAKER_00 6:00

Wait, GoPro's out of style now? I have two.

SPEAKER_02 6:04

Being well known was never the same thing as being a good investment. Here's the thing: popularity isn't a red flag exactly. It's just not a green light. You have to look deeper into it.

The One Question Before You Buy

SPEAKER_02 6:17

Before you invest a single dollar into a company just because you love the app or you love the product, ask yourself this one question. Is that company actually turning your love into profit? Or is it just really good at getting people to go on the app?

SPEAKER_01 6:33

So basically, do the boring homework?

SPEAKER_02 6:37

Basically.

SPEAKER_00 6:38

I really thought my streaks would carry me to victory.

SPEAKER_02 6:41

We're troubled to money, and just liking something isn't an investment strategy.

SPEAKER_01 6:46

Well, liking and subscribing to the channel, that's a very good investment.