“Why do you have to go so far?”
My mother asked me this when she realized that I was serious about moving to the Philippines. This was one more of some very unconventional decisions I have taken in my life, which may seem impulsive and “crazy” to most people but which were the result of a lot of thought, a lot of “what could go wrong”, “what is the benefit of that change” and “what is the probability of possible outcome occurring”.
I was born in 1989 in Barcelona, Spain, although it’s in Valencia that I lived until I was 23. I have always been quite introverted, someone that preferred to deal with words and numbers than with people. Even more so if said numbers have a currency sign next to them. Since I was a child I have been fascinated with money. Not with spending it, that’s something anyone can do, but with making and keeping it.
I remember my first business adventure, when I was 10, buying one box of Kit Kat and Lacasitos (a Spanish candy) to sell them by the piece at school. I enlisted two classmates in this retail project. The first day we were selling plenty, until our teacher found out and decided that our inventory and revenue would instead be distributed among all the classmates. There ended our dream to be the next Sam Walton and I learned that it’s not enough to have a good business idea, but that the “government” must be fine with it too.
When I was 11 my grandfather was often watching stock prices on teletext, when the internet was still something very exotic and primitive. I bought my first shares with some of the monumental savings that could be expected from a kid getting 1,500 pesetas a week (around $10).
Also in that year some classmates started playing a new game. It was a game played with cards, but, instead of sharing the same deck as in poker, each player had their own deck, and it could be customized, you could choose what to have in it. It didn’t take me long to join that craze. The game was called Magic: the Gathering.
I found out that cards had different prices, because of how rare and desirable (by players and/or collectors) they were. And not everybody was valuing their cards equally, so there were arbitrage opportunities. I started buying cards online to then trade them at the school. Then I regularly went to stores where more people played and traded. I also ordered cards from the US, which almost no one did those days. That trading cards hobby didn’t fade away and it’s something I even still do nowadays.
When I was 16, some of my Magic friends started getting interested in another card game. Unlike Magic, in that game you could actually make money playing. And lots of it. So I thought it was worth giving it a try. My first poker hands were played online in the Summer of 2005. I had no idea of what was going on (don’t worry, I was gambling with play money).
It seemed fun and I kept hearing stories of Magic players making ridiculous amounts of money playing poker, so I took it more seriously. I started reading everything I could about the game. I regularly talked with other players. I kept on improving and playing. I started making very small amounts of money, it seemed that there was some potential, and I was enjoying the game.
Meanwhile, I was still doing well in school and it seemed like my destiny was studying Economics. It was something I really liked and I consistently had good grades in High School. When I was 18 I enlisted in the Universitat de València to study that degree.
By then, however, it was evident that poker shouldn’t just be a hobby. My results were very good. I was consistently making quite more money than what I could expect to make after finishing my degree. I struggled with my decision, I tried combining both activities, but at the end, around 2 months after starting classes, I stopped attending them.
If somehow poker didn’t work out, I could just join the university again. However, poker was unlikely to stay as profitable as it was, I had to seize the opportunity. And, gladly, I did, although this is the first big decision that my parents couldn’t understand. They respected it as, by then, it seemed like I was able to prove to them that I was sensible enough. But they didn’t like it.
My parents, like all of their siblings, were civil servants (most of them teachers). They thought that the path to be followed consisted of getting a degree and then working for the government for life. Any other way was too risky. I was just 18 and I wanted to leave university to work on something very unconventional, with bad publicity and where instead of a specific “certain and safe” compensation I had to constantly deal with lots of variance that sometimes meant losing money instead of making it. You can imagine how reckless that looked for them and other relatives.
I played professionally for six years, mostly online. The last 16 of those months were spent in the United Kingdom, as the Spanish government regularized online gambling, which meant that, if you lived in Spain, you could only play against other people living there too. This is an activity where it’s very important to choose the games worth playing (“table selection”), and by closing the market the options were extremely limited, so I had no other choice than emigrating.
Those six years were very hard. I very rarely went out of home, maybe once a week on average (even less when living in the UK), I was quite a hermit. I spent most of my time either playing or studying my game and that of my opponents, when I wasn’t reading investing books or backtesting investing ideas.
I played on many tables at the same time (I think my record was 42). That forced me to have a strategy robust enough to be able to take swift decisions. It was very stressful. Each session was tremendously draining.
Also, in poker, short-term returns are mostly decided by luck, so you could be making good decisions and still lose money (or vice versa, which is very dangerous if you don’t realize you are making mistakes). Only by both making good decisions and playing a lot, the law of large numbers would bring you sure positive results. Even though that was often frustrating and cruel, it’s something I really loved about poker. In the end, you got exactly what you deserved based on the quality of your decisions and how many hours you worked. How well you did depended just on you, on your effort.
Because of the uncertainty of how much money you will make, poker teaches you to be very disciplined managing your money. You must be able to handle downswings, and therefore you must be risking only very small percentages of your bankroll when playing. Also, as you can’t know how good your decisions are and your opponents are constantly improving, complacency can make you a losing player. You must instead stay absolutely focused while playing, not letting emotions decide for you, and keep studying to get better.
I knew that someday poker would stop being profitable and I also didn’t like the job at all. So I worked hard and saved as much as I could. I became very frugal. That allowed me to go back to Spain and retire at 24. Not because I made millions, I wish, but because of the combination of getting used to not spending much and having enough to afford that kind of life.
Since around when I was 21 I have always been looking for investment strategies. I have spent countless hours backtesting all kinds of systems I could think about, and reading lots of books, articles, forums, etc. This is something that hasn’t stopped nor, I think, will, as I really enjoy it. Although I reached the conclusion that a value investing approach is likely to work out very well, I have also been trading derivatives for several years, which I think has higher expected returns.
Two years after I stopped playing poker I decided to move to Andorra, as I didn’t really like the idea of staying in Spain. Once there I started talking with Marc Roca more often, as he’s from Andorra. He also played poker before, so we already knew each other.
While in Andorra, an eight-year relationship with my then girlfriend ended. As I guess it’s usually the case, that made me reconsider many things. One of my conclusions was that the Philippines was very likely to be a good place to live in, even if it had never been on my radar before. Marc, who doesn’t need much convincing to join adventures and who had spent some time in the former Spanish colony in the past, agreed to come with me.
After visiting the country, it was obvious to me that I had to go back, to stay there. And my now fiancé was waiting for me. This was another of my very crazy ideas, from my parents’ extreme risk-averse point of view. A very crazy idea that I still think was a good one.
“What the fuck did you just buy?”
With that question started a project in which I never imagined I would be involved. I was 29 and I planned to enjoy a peaceful retired life in the Philippines, when Marc, who can’t ever stay idle, told me he had just agreed to buy a Fulfillment by Amazon (FBA) business and whether I wanted half of it.
Before making any investment I study it thoroughly. What he was proposing sounded quite promising at first sight and also as I kept thinking about it. He was buying a business that consisted of ordering items from some factory in China, sending them to Amazon warehouses and Amazon would take care of sending orders to their customers. It sounded like a quite easy to run business. And we knew it already worked well because it had been run by the previous owner for some time, we just had to keep doing the same.
It was sold for around 25 times its average monthly Seller’s Discretionary Earnings (SDE), which is basically gross profits before salaries. The selling price was around $64,000, plus $9,000 for inventory. Therefore, if we did it as well as the previous owner, a $73,000 investment would provide around $2,600 a month. That wasn’t just a jaw-dropping return, but it was expected to be quite stable and predictable, unlike what I was used to when trading derivatives and investing in the stock market.
Marc was willing to be the one managing the business for free (later than changed to $1,000 a month) and he expected to be able to increase profits, by simply making sure we always had all products in stock and by expanding to Europe, as the previous owner was only selling in the US. Not much later that hypothesis ended up being correct and monthly profits were around twice as big as when we acquired the business.
While this was happening I was thinking that this shouldn’t just be some side investment, it deserved more attention. If we were able to find and teach people to run FBAs efficiently, we could keep acquiring more of them. And we were located in the Philippines, the perfect place for that, as people speak English and salaries are lower than in most English speaking countries.
This would already be a great way to invest some of our savings, but what if we created a structure capable of also investing other people’s money? This would allow us to scale faster, and therefore achieve even higher returns, as we could benefit from economies of scale. If we pool money with other people and have more businesses, then we can decrease costs by, for example, combining shipping from several factories, or we could rent an external warehouse instead of always using Amazon’s (which have high storage costs).
Also, the bigger our company was, the more established and diversified, the higher multiple we would get if we ever sold it. What we were buying for 30 to 36 times SDE could end up being sold for quite more than that.
Those thoughts ended up materializing in what we have now, Alpha Rock Capital. We started this project in Singapore in early 2019, where we had our first four investors, two friends and Alex and David, who Marc met in the Philippines and have been helping us manage and making the company prosper since then.
Later we moved to the US, as we thought that would make raising capital and accessing favourable financing easier. More relatives and friends joined. The first “outside” investors trusted in our project too. As of now, Alpha Rock Capital owns 8 Amazon brands and is composed of 28 business partners located in several countries from three different continents. And here is where you can come into place too.