[00:00:00] Jethro: Welcome everybody to My Bonus Money. I'm your host, Jethro Jones. You can find me on all the socials at Jethro Jones, and today we have a guest named Dan Ye. is a professor who's teaching a class about investing, and if people beat his, investment record at the end of the semester, he will give them $10,000 to invest.

[00:00:25] So Dan, there's the hook. Let's talk about what you're doing. So how does this class work, uh, for you when you're teaching students how to invest?

[00:00:35] dan: Uh, okay. So it came down to this concept that a dollar is a dollar, right? A dollar in your pocket is a dollar, and that dollar doesn't care how it got there. So I was teaching the class, and I was thinking

[00:00:55] Makes sense for them to manage some of my money, get greater returns, and at the end of the day, I'll have more money in my pocket. So when I was teaching the class, I teach a investment tournament. So I tell the students, "Everybody gets $100,000 in fake money in the beginning of the semester, and I'll be playing the game.

[00:01:17] And if you beat me by more than 20%, then, uh, I will give you, uh, $10,000 of my own money for you to invest. And if you can actually compound my money, um, you know, then I will give you a portion of that in scholarships." So I didn't actually think anybody would beat me, right? Because I've been investing for 20 years.

[00:01:47] A lot of my student have never invested in their life. So I thought, you know, like, nobody's winning my money. There's a show in the '90s called Win Ben Stein's Money. So the,

[00:02:01] Jethro: remember that

[00:02:02] dan: the class is actually colloquially known as Win Dan Yi's Money, and Dan Yi didn't think he would be giving any money out And, um, and you know, I did very well, right?

[00:02:15] Like, typically I can beat the S&P by quite a few points, like two to four points on average. So I was like, okay, you know, these are, you know, undergrads and grad students. I'll crush them. And, um, and interestingly, in a class, I typically always come in around number six or number seven. So last semester, both my classes are, um, are about fifty people.

[00:02:45] And, um, and I, I came in number six and number seven in both class. And in any population, you know, you have the median, which is not very interesting, but you always have a few outliers who, you know, who could beat me by a standard deviation. And those are the, the people that I'm really interested in, right?

[00:03:09] Like, how did you do it? Is this something that's repeatable? So after the first semester, uh, three students beat my return. And, uh, true to my word, I said, "All right. Well, you know, you beat me by, you know, twenty percent. I will give you the money. Um, you submit a report on what kind of stock you want to, to buy.

[00:03:34] I will buy those stocks. And if you actually beat me, you know, you get, you know, uh, w-we'll see what happens." And, you know, even up to that point, I didn't actually believe they can make money, right? I was like, all right, these are fake, um, paper money.

[00:03:51] Jethro: Yeah

[00:03:51] dan: see if they can make real money.

[00:03:54] Jethro: Well, yeah,

[00:03:54] dan: And

[00:03:54] Jethro: there's a difference between investing real money and investing money that is fake that you don't actually care about. But if you're gonna be investing someone's real money, you take that a little more seriously, and maybe you wouldn't make as bigger risks, uh, if you're using somebody's real money

[00:04:12] dan: So that's exactly what happened, and I think all three student become a little bit more risk-averse. I also built a bot, uh, to basically replicate the best trade of these students. And so to my surprise, they actually made a load of money with real money. Like, we had this fund, so it's a forty thousand dollar fund at the beginning of tw- twenty twenty-six.

[00:04:41] So our test fund is now, I think, fifteen points ahead of the S&P, which is, like, very high, right? Like, it's way statistically significant to be just probability. And I think the reason for this is because... So I look at who actually, um, win the competition, and I open my class to not just students, but to alums and other professors.

[00:05:13] So the guy and the girls who are actually making a good chunk of money. So I- I- I'll tell you the, the story. So the-- there's this one girl who actually, um, during the, the, the, the mock run, made a lot of money in these Chinese companies. And, you know, I, I've never heard of these companies. So I went to her, I was like, "You know, what's up?"

[00:05:42] Right? Like, "I am Chinese, and I have never heard of this company. How the heck did you make money out of them?" Right? So she said that she, she's a doctor. She runs her own clinic. And, um, she look at... They buy a lot of medical equipments, and she says, "I look at which medical equipment, uh, I like, that I would recommend to other doctors, and those are the company I invested."

[00:06:12] Right? And they just happen to be several Chinese companies that make these cheap but reliable medical equipments.

[00:06:19] Jethro: Mm-hmm.

[00:06:20] dan: So, you know, so these are the insights into the market that Wall Street doesn't have, right? Like, she's on the front line treating patients, and she has the insight of which machine works well.

[00:06:35] So by the time Wall Street got this information from quarterly statement, that's like Six months later, right?

[00:06:45] Jethro: Yep

[00:06:45] dan: So it is these insights that I think that really wins for them. That's why they were able to stack up such high returns because their sensitivity to information is, you know, quite a bit ahead of Wall Street.

[00:07:02] So, um, and that's just one example. There are... You know, the beauty of doing a decentralized model like this is because you get to see all sorts of ideas that's sort of bubbling to the surface because, um, the idea works, right? So all I have to do is really look at the return on investment. I look at which one my student have a consistent alpha, and then I, I talk to them and I say, you know, "How you, how you did it?"

[00:07:37] And, um, and I think that is a talent discovery pipeline that is superior to what, um, the current Wall Street model, um, it's, it's doing

[00:07:51] Jethro: Yeah. Well, and I, I recently listened to a podcast with a guy named Chris Camillo, I believe is his name, and he talks about doing basically the same thing that, that you're talking about, which is looking at the signals before Wall Street gets them and then makes that business decision. So paying attention to what's hot, what's not, what's, what's popular, what's interesting, and things like that, and then paying attention, and he calls it social arbitrage.

[00:08:21] Um, that's his phrase for it. And, and that is basically his way of saying this is how you can beat the market because you're paying attention to things that, that Wall Street's just not looking at yet. And they'll see it eventually, but they see it in the numbers where everything is in the past, and you're looking at it in the present, which gives you a little bit more in- insight into what could be successful.

[00:08:48] Now, the thing we didn't mention before is that you are at Johns Hopkins University, where you were teaching this class, and you're expanding it to other places and doing your own thing also, which we'll talk about in a minute. But the, the interesting thing is that you wouldn't really think that Johns Hopkins with a bunch of really bright, uh, medical-focused people would, one, even be interested in this course, and two, would, would then have a, a, a practicing doctor, uh, at our own clinic be one of the ones who's doing so much better than everybody else.

[00:09:23] So what's the, what's the deal with that? And, and what kind of people are being most successful in your classes?

[00:09:30] dan: So, you know, in America, I am the father of two kids, right? I noticed that pa-- there are two things parents get very uncomfortable talking to their kids about, and that's money and sex, right?

[00:09:46] Jethro: Yep,

[00:09:46] dan: And,

[00:09:46] Jethro: that's true

[00:09:47] dan: you know, as a result of our discomfort talking about money with our kids, we are raising a generation of kids who has no idea how to invest.

[00:09:57] And they have no idea how to invest partially because their parents have no idea how to invest. So I got, um, you know, I... the number of my student tripled between the fall twenty twenty-five and spring twenty twenty-six semester because there is actually a great hunger to learn how to invest and how to compound money, right?

[00:10:23] I got a few practicing doctors in my class. These are alums of the medical school, and one of them told me that she, she is fifty-eight years old, and for her whole life, she's been putting money into savings account. And we calculated that she probably lost close to ten million dollars from un-

[00:10:43] Jethro: Wow

[00:10:44] dan: money, right?

[00:10:45] And this is, you know, this is the education system of the United States. We don't teach our kids how to make money in the S&P. So, um, and it turned out that she did pretty well in the class, and she beat the S&P. And, um, I noticed that people who do well in the class tend to be someone with a STEM background, actually.

[00:11:11] So the student who actually study business, the MBA student, don't actually do as well as the engineering nerds. And I think, um, I don't exactly know why. Like, I will have more data, you know, going forward, but I do see a correlation between attending MBA program and doing badly. So, um, you know, I think maybe this is because the type of people that are attracted to MBA programs or it may be because what we're teaching in MBA, uh, needs a update.

[00:11:47] But, um, but there's definitely a lot of interest and enthusiasm for my class and, um, lots of people want to sign up.

[00:11:58] Jethro: Yeah, and, and I, I, I imagine that people, one, everybody likes making money. Even if we don't like talking about it, everybody likes making money. And the reason why this podcast exists is for me to be able to talk to people like you, who are doing, uh, people how to make money and helping them know how to do that.

[00:12:20] And, and I call it my bonus money because in my mind, money that you don't have to go to a job and trade your time for is bonus money. That's how I think about it, that your regular job is regular money, and then bonus money is anything that you can do that's passive or on the side or something that's not constantly trading money.

[00:12:41] Investing is one of those things, and that's, that's why I do this, is to learn about what people are doing. And so tell us about the class that you are offering to anybody that doesn't... So they don't have to be, uh, at, enrolled at Johns Hopkins or, uh, Merced to be able to take your class

[00:13:00] dan: Okay, so for this semester, I am doing experimental Zoom class in which I will open it up to everyone. I'm doing this just like a public service so that more people can have access to, um, to financial education. So, uh, it's every Monday, uh, at 10:00 AM Eastern Time. Uh, so I

[00:13:23] Jethro: Okay

[00:13:23] dan: send you the details and sign up.

[00:13:25] Uh, there's a link to sign up. So if you want to come and, um, win Dan Yi's money, you know, you will have a chance

[00:13:33] Jethro: Yeah.

[00:13:33] dan: to, uh, to, to win some money out of me

[00:13:37] Jethro: Excellent. So the link to that will be in the show notes, so you can take it. Do you have a, a website that's easy to remember that people can go to?

[00:13:43] dan: Uh, professordan.com. Uh, there is

[00:13:48] Jethro: Okay

[00:13:48] dan: there. I will send it to you, uh, as well

[00:13:52] Jethro: Okay, perfect. Um, that's awesome. Now, uh, tell me what you do in the class, because if you invest and hold, then the rest of the class is not going to be, know, there's not gonna be a lot of action. But if you're trading every week, then having some insight on what you should trade and when you should trade it will be good. So tell me about what the class looks like week to week

[00:14:18] dan: So generally, I discourage day trading. So, and

[00:14:23] Jethro: Mm-hmm.

[00:14:23] dan: that is because we-- So the class is called Investing in the Age of Artificial Intelligence, right? And one of the thesis is that as we go forward, more and more of the arbitrage trading will be done by bots. And

[00:14:38] Jethro: Mm-hmm.

[00:14:39] dan: bots have infinitesimally more information and speed compared to human.

[00:14:44] So when you day trade, you actually, uh, you're trading with, uh, a arm tied behind your back. What we do, you know, the, the people who are making all the money in class are all long buyers. A lot of them will buy their stock in the beginning of the semester and not touch it for the entire semester. So what we do in class, we...

[00:15:07] I don't actually teach as much financial facts. That's actually a pretty inefficient use of my time because if you want to learn facts, I built a D&E bot. You can learn the financial facts from the bots. What we do in class each week is, are two things, right? Number one, we look at the previous week's, um, gains, and we look at which student made the most money.

[00:15:34] And those student will give analysis on why they think their stock will continue to make money, why they buy those stocks, and the philosophy behind it. So we can see, we can learn from the best. And I can tell you, I am definitely not the number one person in class every week. So I am learning just as much from my students as they are learning from me, right?

[00:15:58] The second part, which is the more interesting part, is that the class is basically sort of like a fortune... future-telling class, right? We look at the technology that's coming out of the labs right now. And I tell people I teach human nature, right? I'm an attorney by background, and I work with a lot of people in that, in that life.

[00:16:22] So we look at the emerging technologies, and we ask ourself when we- Put these technology into society, how will human being, uh, your average 50 percentile human being respond to this technology? And then how society will change accordingly. And most importantly, what are the picks and shovels that we can invest in today to take advantage of these coming changes, right?

[00:16:54] So let me give you an example. So one of the big topic of discussion last semester was bipedal humanoid robot. Now, one of the thesis was, um, fewer and fewer human will actually marry each other. And instead, we are going to go into an era in which human will marry these very pretty humanoid robots, and they will actually take over the function of what used to be our traditional family.

[00:17:28] If that were to happen,

[00:17:29] Jethro: That's bleak.

[00:17:30] dan: you know, the writing is already on the wall, right? Like you look at the humanoid robots coming out of China. These are robot you can buy for three thousand dollars. And if I were ten feet away, I couldn't even tell whether it's a human or not. And within five years, you will be walking on the street, and you will not be able to tell the person walking down the street is a human or a robot.

[00:17:56] So in... You know, just speaking as a guy, I personally don't think a lot of guys will care, right, whether their partner is a human or a robot. And you know, it's for stock investing, we must constantly adjust our parameter based on the facts on the ground, right? That's what distinguish a good investor from a bad investor.

[00:18:22] And for these technology that are coming now, putting moral judgment aside, whether it's a good thing or a bad thing. But whether you think it's a good thing or bad thing, it's gonna come whether you like it or not. We might as well just make some money out of it, right? So then we ask ourselves, what are the companies and what are the picks and shovel play that we will invest in to take advantage this fundamental change in our society, right?

[00:18:52] There's quite a few fundamental changes that will happen. What are the industries that will be going down? What are the industries that will be going up? And you know, how do we make a pretty penny out of it?

[00:19:05] Jethro: Yeah. Well, I, I like that approach, uh, of looking at the future and what kinds of things are going to be happening and what kinds of things aren't, and where, where can we invest now to, as you said, invest in the picks and shovels. Um, for people who don't know the story of that during the Gold Rush, can you tell a little bit about why the picks and the shovels are an important thing?

[00:19:28] dan: Uh, so in the California Gold Rush, um, tons of people fled to California trying to find gold. But if you actually look at who are the people that made money at the end of the day, the most reliable way to make money is by selling the picks and shovels to the gold miners, because that is a reliable demand.

[00:19:51] So, you know, in this artificial intelligence boom, we're having an AI data center boom. It is the ones who are making the chips. It is the one that generating the energy that is actually doing very, very well, right? Because no matter which AI company wins, they will always need, you know, chips. They will always need energy.

[00:20:11] So these are the picks and shovel play. Now, for a lot of emerging technologies that's coming up, I cannot tell you which company will win this bipedal robot race, right? But we could take it apart and see what kind of chips these robots are using. You know, what kind of material we'll be using. The solar, uh, industry is another example, right?

[00:20:37] Like solar energy is now much cheaper than coal or natural gas, and the Chinese are exporting solar panels all across the world. In making that many solar panels, what are the, the picks and shovel play, right? Silver is one of the picks and shovel play because silver is one of the best conductor of electricity.

[00:20:58] Uh, every solar panel has a little bit of silver in it, and in order to replace those silver, it gets exceedingly expensive because those panels are used for thirty to forty years. And if you decrease the electric conductivity by just half a percent, that is, you know, thousands of dollars of energy. So silver is probably g-gonna be here to stay.

[00:21:24] And so that's one of the picks and shovel play equivalent of the California Gold Rush. I'm just giving you an example here. There are tons of this example and truth come out with group discussion, right? Truth come out

[00:21:39] Jethro: Yeah

[00:21:39] dan: by looking at whose portfolio is doing the best and asking, "How did you do it?" Share it with everyone.

[00:21:46] Jethro: Yeah

[00:21:46] dan: if you can actually consistently maintain an alpha throughout the entire semester, then maybe there's something there.

[00:21:56] Jethro: Yeah. Yep. Yeah, that's great. So I encourage everybody to go check out professordanYee.com. Sign up for the class. There's a little chat bot there, and you can, you can enter your information to sign up for the class. I'm gonna be in the class this fall if Dan accepts me, so, uh, hopefully he does.

[00:22:13] dan: I--

[00:22:14] Jethro: So,

[00:22:15] dan: Come and, come and take a play and

[00:22:17] Jethro: Yeah

[00:22:18] dan: I, I'd be more than happy to give you my money because then you'll be making money for me, right? So

[00:22:24] Jethro: Yeah, that's right. So if somebody's making money for you, what's in it for them as well? Especially in this new class where it's not how you did it before

[00:22:34] dan: So, you know, uh, I give 20% out in the form of scholarships. So, um, if you're not a student, then you can just take the cash. So,

[00:22:47] um, in order for me to pick you, you have to at least outperform me by, you know, 20%, right? For

[00:22:53] Jethro: Mm-hmm.

[00:22:54] dan: sense. And I, I think I'm pretty good, so it's pretty hard to win my money. But if you... And you know, also, when you come to class, when you have a portfolio, I will mandate that you have to have at least ten different stock positions with no one stock position over 20%.

[00:23:12] So I want to eliminate as much element of chance as possible. So I mean, if you, you can just come in, and if the timing's right, you gamble on GameStop, you know, you made tons of money. But that's not something that's repeatable. But if you can invest in ten different stock and you still beat me, then, you know, good for you.

[00:23:35] I want to learn how you did it

[00:23:38] Jethro: Yeah, very good. Well, this i- this is great. I'm glad you're doing this, and again, encourage everybody to go check that out, professordanngi.com. And thanks for coming on My Bonus Money. It was great chatting with you again, Dan

[00:23:49] dan: All right. Thank you so much for having me

[00:23:54] Jethro: All right