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An Interview With Jason Zweig: Masters in Business (Audio) · Masters in Business

• 0:03
  Speaker 1: This is Masters in Business with Barry Ridholds on Bloomberg Radio.
• 0:08
  Speaker 1: So I'm I'm really excited about this week's guest. Jason's Wige.
• 0:12
  Speaker 1: He is a reporter, columnist, author. UM. You probably know
• 0:18
  Speaker 1: his work as the Weekend Investor column in the Wall
• 0:21
  Speaker 1: Street Journal. I'm a big fan of some of his books,
• 0:24
  Speaker 1: including Your Money and Your Brain, which is one of
• 0:27
  Speaker 1: the earliest looks at neuroeconomics and neurofinance. He has a
• 0:31
  Speaker 1: book coming up, uh it's an updated version of inspired
• 0:35
  Speaker 1: by Ambrose Bierce's Devil's Dictionary. It's called The Devil's Financial Dictionary.
• 0:40
  Speaker 1: And we we talked about that. We talk a little
• 0:42
  Speaker 1: bit about journalism and what it's gonna be like going forward,
• 0:45
  Speaker 1: or the impact of social media, Twitter, etcetera. I've read
• 0:50
  Speaker 1: him for so many years and know his work for
• 0:53
  Speaker 1: for just so long. It was really interesting sitting down
• 0:57
  Speaker 1: and talking with him about his assess and who his
• 1:00
  Speaker 1: mentors and influences were, and what sort of advice he
• 1:04
  Speaker 1: would give to somebody in the in the finance world.
• 1:07
  Speaker 1: And I just found it to be really quite fascinating.
• 1:12
  Speaker 1: We probably went about ninety minutes, so given how long
• 1:14
  Speaker 1: that is. UM rather than me, Babil, Let me just
• 1:18
  Speaker 1: say here is my conversation with Jason's Why this is
• 1:25
  Speaker 1: Masters in Business with Barry Ridholds on Bloomberg Radio This
• 1:30
  Speaker 1: week on Masters in Business, our special guest is journalist
• 1:33
  Speaker 1: and author Jason's Wage. He is a columnist for The
• 1:37
  Speaker 1: Wall Street Journal. He is also the author of the
• 1:40
  Speaker 1: upcoming The Devil's Financial Dictionary, loosely based on Ambrose Bierce's
• 1:45
  Speaker 1: famous Devil's Dictionary. I actually have read several of his
• 1:49
  Speaker 1: previous books and really enjoyed him, one of which Your
• 1:53
  Speaker 1: Money and Your Brain Might have been one of the
• 1:54
  Speaker 1: first books that looked at behavioral economics from the investor's perspective.
• 2:00
  Speaker 1: He also helped Danny Kahneman edit Thinking Fast and Slow,
• 2:05
  Speaker 1: as well as being the editor of the revised edition
• 2:09
  Speaker 1: of Benjamin Graham's classic The Intelligent Investor. Jason's Wide Welcome
• 2:14
  Speaker 1: to Bloomberg. Great to be here. Mary. So you have
• 2:16
  Speaker 1: a long and storied history and financial journalism, and we'll
• 2:19
  Speaker 1: we'll get into some of the more granular stuff, but
• 2:23
  Speaker 1: let's let's just go a little bit over your background. UM,
• 2:27
  Speaker 1: I would be remiss if I didn't mention in two
• 2:30
  Speaker 1: thousand and thirteen you won the Lobe Award for Personal
• 2:33
  Speaker 1: Finance Writing. You've also been a writer for Money magazine, Time, CNN,
• 2:39
  Speaker 1: you covered mutual funds for Forbes, and today you're the
• 2:43
  Speaker 1: personal finance writer at The Journal. How did you find
• 2:47
  Speaker 1: your way into financial journalism? Well, I think, like a
• 2:51
  Speaker 1: lot of your guests, Barry, I'm gonna talk about luck.
• 2:55
  Speaker 1: I think I'm anybody who has done read intably well
• 3:00
  Speaker 1: in just about any field who doesn't credit luck first
• 3:04
  Speaker 1: and foremost is kidding himself? Or isn't that fascinating? When
• 3:09
  Speaker 1: when I finally sit down and put together the Book
• 3:12
  Speaker 1: of Masters in Business, how many guests, and not just
• 3:16
  Speaker 1: guests who had like one lucky break, but guys who
• 3:19
  Speaker 1: were billionaires like Howard Marks and Leon Cooperman. He'd say, well,
• 3:24
  Speaker 1: you know, you got really lucky. That's an amazing statement,
• 3:28
  Speaker 1: isn't it. It's and I think it's totally true. And
• 3:31
  Speaker 1: we all like to pride ourselves on our abilities and
• 3:35
  Speaker 1: our skills, but without luck, I'm not sure any of
• 3:38
  Speaker 1: us would be where we are today. I mean, I
• 3:41
  Speaker 1: always wanted to be a writer. I was always fascinated
• 3:45
  Speaker 1: by business. I have no formal training in business or economics.
• 3:50
  Speaker 1: You went to Columbia, but you didn't go to Columbia
• 3:51
  Speaker 1: Business school. You went to Columbia College, And would you
• 3:54
  Speaker 1: study undergraduate art history? And so of course that makes
• 3:58
  Speaker 1: perfect sense. You go from that to prest fun right,
• 4:00
  Speaker 1: and and I think it's probably worth pointing out that, uh,
• 4:04
  Speaker 1: one of your former guests, Charlie Ellis, also also spent
• 4:08
  Speaker 1: some time studying art history. What a delightful gentleman. He's great,
• 4:13
  Speaker 1: one of the best. So so you you The real
• 4:16
  Speaker 1: question I always wanted to ask you, and I'll do
• 4:19
  Speaker 1: it now, is how did you manage to avoid a
• 4:21
  Speaker 1: career and asset management. Uh? Well, I think I I
• 4:26
  Speaker 1: learned early enough in my career as a financial journalist
• 4:32
  Speaker 1: that uh, luck is supremely important in investment management, and
• 4:40
  Speaker 1: very early on I had a hard time distinguishing luck
• 4:44
  Speaker 1: from skill. And I still do. You need a long
• 4:47
  Speaker 1: period and lots of data and the right decision making
• 4:52
  Speaker 1: environment to stand a chance of telling whether something is
• 4:55
  Speaker 1: luck or skill. But that's just a long way of
• 4:57
  Speaker 1: saying that I didn't want to go into investment management
• 5:01
  Speaker 1: because I felt I I sort of knew where the
• 5:05
  Speaker 1: fundamental body was buried. And the body that was buried
• 5:09
  Speaker 1: was that a lot of people who think they're skillful
• 5:12
  Speaker 1: are just lucky. And I didn't really want to go
• 5:15
  Speaker 1: through my professional career with that on my conscience. I
• 5:19
  Speaker 1: guess I have other things on my conscience than that.
• 5:21
  Speaker 1: The flip side of that is a lot of people
• 5:24
  Speaker 1: who think they're unlucky merely or unskillful. Correct. So you
• 5:29
  Speaker 1: mentioned you always were fascinated by business. We always interested
• 5:32
  Speaker 1: in stocks and investing or was that something you came
• 5:35
  Speaker 1: to later. Yeah, I bought my first stock when I
• 5:37
  Speaker 1: was sixteen, Barry, it was, and it was a fascinating experience,
• 5:42
  Speaker 1: especially in hindsight. I bought a stock based on an
• 5:46
  Speaker 1: absolutely god awful book that when I was sixteen thought
• 5:50
  Speaker 1: was pretty persuasive. It was called How I Made two
• 5:53
  Speaker 1: Million Dollars in the Stock Market by Nicholas Darvis. I
• 5:57
  Speaker 1: read that a long time. Yeah, and you remember that
• 6:00
  Speaker 1: thing he talks about where you know, increasing volume on
• 6:04
  Speaker 1: rising price proceeds price exactly and you wait for the
• 6:09
  Speaker 1: price to confirm the volume, and then you then you buy.
• 6:12
  Speaker 1: So you're a closet technician, Well I was, at least
• 6:16
  Speaker 1: I was. This is actually an interesting story because I
• 6:21
  Speaker 1: I did exactly what he suggested. I took graph paper
• 6:25
  Speaker 1: and I tracked ten stocks and um I had a
• 6:30
  Speaker 1: copy of the SNP Stock Guide. This was five or six.
• 6:35
  Speaker 1: It's not a great time to be an equity investor
• 6:37
  Speaker 1: in the first place. And I found a stock that
• 6:42
  Speaker 1: was called and I'm saying called mac a F. I
• 6:46
  Speaker 1: didn't know what it was. The SNP Stock Guide said
• 6:48
  Speaker 1: that it uh it produced liquorice and I think ball
• 6:52
  Speaker 1: bearings or something like that, and uh so and it
• 6:59
  Speaker 1: it turned out to be a perfect Darvis stock. And
• 7:01
  Speaker 1: I bought a hundred shares at nine and five eighths
• 7:04
  Speaker 1: with my you know, summer earnings, and it went up
• 7:08
  Speaker 1: to twelve and seven eighths in a matter of days.
• 7:11
  Speaker 1: And I didn't know a thing about the company other
• 7:14
  Speaker 1: than this ridiculous theory that appeared to be confirmed. It
• 7:19
  Speaker 1: turned out later to be mc andrews and Forbes Ron
• 7:22
  Speaker 1: Perlman's original takeover vehicle. And I think this was around
• 7:26
  Speaker 1: the time that he was first amassing shares. So I
• 7:29
  Speaker 1: bought it for the wrong reason. I made money in
• 7:31
  Speaker 1: it for the wrong reason, and I got stopped out
• 7:35
  Speaker 1: at twelve and seven eighths, but this was so I
• 7:39
  Speaker 1: didn't know I had been stopped out until the trade
• 7:41
  Speaker 1: confirm arrived in the mail about a week later, and
• 7:45
  Speaker 1: I went bonkers and I was like, I'm writing this
• 7:48
  Speaker 1: thing all the way to twenty and I called my
• 7:51
  Speaker 1: parents broker and I said, get me back in and
• 7:54
  Speaker 1: then he flat out refused, and my dad had to
• 7:57
  Speaker 1: buy it for me and went to fourteen and a
• 8:01
  Speaker 1: quarter or something, and my dad browbeat me into selling it.
• 8:06
  Speaker 1: And then where did it ultimately go? I it did
• 8:09
  Speaker 1: very well in the long run. I don't think it
• 8:12
  Speaker 1: did too well. Right after that, you're listening to Masters
• 8:15
  Speaker 1: in Business on Bloomberg Radio. My guest this week is
• 8:18
  Speaker 1: Jason's Wide, author of the upcoming The Devil's Financial Dictionary.
• 8:22
  Speaker 1: Before we get into the book, I want to talk
• 8:24
  Speaker 1: a little bit about social media. I see you tweeting
• 8:28
  Speaker 1: pretty regularly. One of the questions I had for you
• 8:32
  Speaker 1: as a professional journalist, what's the impact of Twitter, and
• 8:38
  Speaker 1: to a lesser degree, blobs on the changing nature of
• 8:42
  Speaker 1: financial journalism. Well, I think it's I think it's really big, Barry,
• 8:46
  Speaker 1: and it's it's good and bad, And maybe let me
• 8:49
  Speaker 1: talk about the bad first. You know, uh, up until
• 8:54
  Speaker 1: a few years ago, certainly until ten years ago, probably five,
• 8:59
  Speaker 1: um reading and investing public could rely on major media
• 9:04
  Speaker 1: outlets to be their filters of information. If you saw
• 9:07
  Speaker 1: something in the Wall Street Journal or the New York Times,
• 9:10
  Speaker 1: for that matter, you could be fairly sure it was reliable, vetted,
• 9:15
  Speaker 1: somebody had looked into what it wasn't just a random
• 9:17
  Speaker 1: It's just not somebody spouting or repeating information generated by
• 9:23
  Speaker 1: people with an axe to grind without checking at first.
• 9:26
  Speaker 1: And I think the danger that we're in in a
• 9:30
  Speaker 1: world dominated by social media and kind of insta pundits
• 9:34
  Speaker 1: through the blog of sphere that's literally a blog inst
• 9:37
  Speaker 1: the plan yeah I know, um, but I wasn't referring
• 9:40
  Speaker 1: to them in particular, is that it's it's much harder
• 9:44
  Speaker 1: today to make qualitative judgments as a consumer of news
• 9:49
  Speaker 1: about what's reliable and what's not, because you're just drinking
• 9:52
  Speaker 1: from a fire hose all day long. And I think
• 9:56
  Speaker 1: the value of Twitter is that by giving you those
• 9:59
  Speaker 1: mic o bursts of information and opinion from people, you
• 10:05
  Speaker 1: get to see that, you get to see what they
• 10:07
  Speaker 1: think in short spurts, and you can fairly quickly form
• 10:12
  Speaker 1: a judgment about how objective they are, how reliable their
• 10:16
  Speaker 1: information is, and I think ultimately it's going to help
• 10:20
  Speaker 1: people separate the good from the bad. You know, one
• 10:23
  Speaker 1: of my favorite aspects about Twitter is just how easy
• 10:27
  Speaker 1: it is to derive a conclusion from somebody's Twitter numbers.
• 10:31
  Speaker 1: So if someone's got eighty thousand tweets and a hundred
• 10:35
  Speaker 1: and forty seven followers, that's a pretty fair assessment that
• 10:39
  Speaker 1: this person is not pranking out quality tweets. On the
• 10:43
  Speaker 1: other hands, when and Warren Buffett is probably the extreme
• 10:47
  Speaker 1: opposite of that, He's got four tweets and six million followers.
• 10:51
  Speaker 1: But between those extremes there's a spectrum. And you know,
• 10:55
  Speaker 1: I have under a hundred thousand followers, My partner has
• 11:00
  Speaker 1: over a hundred thousand followers, and we have a lot
• 11:03
  Speaker 1: less tweets than we have followers. So somebody who's looking
• 11:06
  Speaker 1: at that can say, oh, there has to be something
• 11:08
  Speaker 1: worthwhile and substance if here not that followers or everything. Otherwise,
• 11:13
  Speaker 1: if that was the case, Justin Bieber would be philosopher king.
• 11:16
  Speaker 1: And we know that's not the case, but that's a
• 11:19
  Speaker 1: real good shorthand to say, hey, is this person putting
• 11:22
  Speaker 1: out anything of quality? Is there some way to double check, validate,
• 11:27
  Speaker 1: see if the crowd has any wisdom and they've endorsed
• 11:30
  Speaker 1: this person. Isn't it remarkable? Barry? How how hard that
• 11:35
  Speaker 1: simple algorithm you've just expressed is for so many people
• 11:38
  Speaker 1: to understand? I mean every day on Twitter you see
• 11:43
  Speaker 1: recommended lists of people who tweet, and then you look
• 11:46
  Speaker 1: at them and you see, oh, here's somebody they're recommending
• 11:50
  Speaker 1: because he has fifty thou followers without even noting that
• 11:56
  Speaker 1: he follows eighty thousand people and he's tweeted forty thousand times.
• 12:01
  Speaker 1: So you know, a lot of people are still using
• 12:04
  Speaker 1: followers alone. No, it can't be as the metric. You
• 12:07
  Speaker 1: have to it has to be a combination of quantitative
• 12:10
  Speaker 1: and qualities. You have to say, has the crowd vallet
• 12:14
  Speaker 1: you know, it's sort of like when when you go
• 12:15
  Speaker 1: to Metacritic, you basically say what were the reviews? Like
• 12:19
  Speaker 1: what did the audience say? When when you get a
• 12:21
  Speaker 1: movie like Jurassic Park or Mission Impossible and both the
• 12:26
  Speaker 1: reviewers like it and the crowd likes it. So that's
• 12:28
  Speaker 1: how I use the Twitter numbers, and we've now lost
• 12:32
  Speaker 1: half our audience let's let's let's turn to The Devil's
• 12:36
  Speaker 1: Financial Dictionary, which comes out in October. I've got a
• 12:40
  Speaker 1: preliminary copy of of the book, and that's one of
• 12:42
  Speaker 1: the reasons why I wanted to sit down and chat
• 12:45
  Speaker 1: with you. I found it. Let me let me rather
• 12:48
  Speaker 1: than me telling you what I think, let me go
• 12:50
  Speaker 1: some of the early reviews. Bob Schiller, Nobel winner and
• 12:55
  Speaker 1: Professor of Finance at Yale University. The most amusing presentation
• 12:59
  Speaker 1: of principle is the finance I've ever seen. John Bogel,
• 13:02
  Speaker 1: founder of the Vanguard Group. Laugh, cry, and learn as
• 13:06
  Speaker 1: you enjoy the sparkling Devil's Financial Dictionary. The List of
• 13:11
  Speaker 1: people who have given you blurbs Burton Malkiel, author author
• 13:15
  Speaker 1: of Random Walked Down Wall Street, delightfully humorous and stunningly irreverent.
• 13:21
  Speaker 1: James Grant opened this wonderful book to any page, try
• 13:25
  Speaker 1: not to laugh, I dare you. And then Bill Sharp
• 13:29
  Speaker 1: essentially created the Sharp ratio and another Nobel laureate at
• 13:33
  Speaker 1: Stanford The run of People You got to um. I
• 13:37
  Speaker 1: was like disappointed, No Buffett, and then I scrolled down
• 13:40
  Speaker 1: and there's Warren Buffett's blured it. It's Um, it's an
• 13:44
  Speaker 1: amazing run of people. Tell us a little bit about
• 13:47
  Speaker 1: the motivation and thought process behind the book. Well, I've
• 13:51
  Speaker 1: always loved Ambrose Beers's Devil's Dictionary. You know. Beers is
• 13:57
  Speaker 1: maybe the most unjustly elected author of the nineteenth century
• 14:04
  Speaker 1: in America. He was a contemporary of Mark Twain's. He
• 14:07
  Speaker 1: was at least as brilliant. He wrote some of the
• 14:10
  Speaker 1: most devastating epigrams ever written. And um, he was brutally
• 14:16
  Speaker 1: cynical about American society and institutions, and he took on
• 14:22
  Speaker 1: a few He he basically compiled The Devil's Dictionary as
• 14:27
  Speaker 1: a collection of satirical definitions of terms most people think
• 14:33
  Speaker 1: of in a very conventional way. And he just blew
• 14:36
  Speaker 1: up every sort of bit of conventional wisdom and turned
• 14:41
  Speaker 1: them all on their head. And it just occurred to
• 14:44
  Speaker 1: me about two years ago that this project that I
• 14:48
  Speaker 1: had had in mind for about fifteen years would be
• 14:52
  Speaker 1: easier to do than I realized. And I just started
• 14:54
  Speaker 1: doing it in my spare time. And my wife heard
• 14:57
  Speaker 1: me cackling in the kitchen at night, and I really,
• 15:00
  Speaker 1: if I was bothering her, I must be having fun.
• 15:04
  Speaker 1: And I just kept at it. And you know, my
• 15:07
  Speaker 1: goal was to try to do something like what Beers
• 15:10
  Speaker 1: did and bring it to the world of Wall Street.
• 15:14
  Speaker 1: And you know a couple of definitions from the original
• 15:17
  Speaker 1: Devil's Dictionary or worth keeping in mind. I mean these
• 15:20
  Speaker 1: are bear in mind. I'm going to read these. And
• 15:22
  Speaker 1: first comes the word, then comes to the part of speech,
• 15:25
  Speaker 1: then comes to the definition. So this is ambrose beers
• 15:28
  Speaker 1: ambidextrous adjective able to pick with equal skill a right
• 15:34
  Speaker 1: hand pocket or a left I gotta like that. In
• 15:38
  Speaker 1: the in the last thirty seconds we have of this segment, Um,
• 15:41
  Speaker 1: what are some of your favorite ones from the new
• 15:45
  Speaker 1: Financial Devil's Dictionary. I'll give you one of my favorite
• 15:49
  Speaker 1: day trader see idiot. Yeah, that's to get some hate
• 15:53
  Speaker 1: mail on that one. That might be my favorite too.
• 15:56
  Speaker 1: And maybe we can, maybe we can get into some
• 15:57
  Speaker 1: of the longer ones. A bit later, you're listening a
• 16:00
  Speaker 1: Master's in Business on Bloomberg Radio. I'm speaking with jason's Wage,
• 16:04
  Speaker 1: personal finance writer and author of numerous books, his most
• 16:08
  Speaker 1: recent being The Devil's Financial Dictionary. Tell me, uh, some
• 16:13
  Speaker 1: of your favorite selections from this volume? Well, Barry, maybe
• 16:18
  Speaker 1: I can, maybe I can read one quickly, and you know,
• 16:21
  Speaker 1: I'll read the definition, the part of speech, and then
• 16:24
  Speaker 1: I have to warrnt everybody. There are what I call
• 16:27
  Speaker 1: flights of fancy in these, okay, which are these little
• 16:31
  Speaker 1: um imaginary passages featuring people who bear no resemblance to
• 16:37
  Speaker 1: anyone you and I might? Alright, So option nown the
• 16:42
  Speaker 1: right to buy or sell a financial asset at a
• 16:44
  Speaker 1: fixed price on or before a specific time from the
• 16:48
  Speaker 1: Latin opt o. I choose a boon for stockholders whose
• 16:53
  Speaker 1: clients don't understand how options work and generate a fortune
• 16:57
  Speaker 1: in commissions as they attempt to learn. And here comes
• 17:01
  Speaker 1: the flight of fancy stockholders of stockbrokers. Stockbrokers, explained you,
• 17:06
  Speaker 1: asking me, a client of the broker age firm born
• 17:10
  Speaker 1: rich and how I put two children through Harvard by
• 17:14
  Speaker 1: trading options. Unfortunately they were my broker's children. That's great,
• 17:20
  Speaker 1: so um obviously ambrosepers huge, huge influence. You mentioned you
• 17:26
  Speaker 1: were working on this at night. How long did it
• 17:29
  Speaker 1: take you to assemble this is a pretty thorough financial distinary.
• 17:33
  Speaker 1: How how long did this stake? It didn't take very long, actually, U.
• 17:38
  Speaker 1: You know a lot of these I'd had in my
• 17:40
  Speaker 1: head for a long time, so it's just a matter
• 17:42
  Speaker 1: of getting it out and on some page. Yeah. The
• 17:44
  Speaker 1: real what I'm trying to do with this book is
• 17:47
  Speaker 1: in each case when I define a term, I'm saying
• 17:49
  Speaker 1: to myself, you know, after more than a quarter century
• 17:54
  Speaker 1: of you know, researching and reporting on the financial markets,
• 17:57
  Speaker 1: can I take everything I've learned and boil it down
• 18:01
  Speaker 1: into a hundred fifty words or less? And then if
• 18:05
  Speaker 1: I can do that, how about fifty words? And in
• 18:08
  Speaker 1: some cases I got them down to a single word?
• 18:11
  Speaker 1: Give me us an example other than the day trader. Um. Uh, well,
• 18:16
  Speaker 1: there's one which is human adjective biased. We're gonna talk
• 18:22
  Speaker 1: a little more about the biases and cognitive issues of
• 18:27
  Speaker 1: humans coming up in a bit. Uh. Who is the
• 18:30
  Speaker 1: ideal audience for this? Is this scared for the professional?
• 18:33
  Speaker 1: Is this for a mom and pop investor? Who are
• 18:35
  Speaker 1: you thinking about when you were writing this? Well? Really everybody.
• 18:39
  Speaker 1: There's a lot of inside jokes in this book that
• 18:42
  Speaker 1: I think only a professional audience will get and will
• 18:45
  Speaker 1: certainly be annoyed by and I hope amused by. I
• 18:50
  Speaker 1: think one of the wonderful things about the Wall Street
• 18:52
  Speaker 1: community is that people do have an ability to laugh
• 18:57
  Speaker 1: at themselves. UM, at least the better people in the
• 19:00
  Speaker 1: in the field do. And there's a lot to laugh about,
• 19:04
  Speaker 1: so to say the least, I'm curious as to how
• 19:07
  Speaker 1: the research for this win. I know you said this
• 19:10
  Speaker 1: has been kicking around your head for fifteen years, but yeah,
• 19:13
  Speaker 1: I just picture you doing a pretty deep dive, if
• 19:17
  Speaker 1: not wearing the white gloves and the stacks of Yale,
• 19:21
  Speaker 1: certainly working your way through UM either Lexus or Google
• 19:26
  Speaker 1: to try and find some so early ideology of some
• 19:30
  Speaker 1: of these words. Yeah, a lot in a lot of cases,
• 19:33
  Speaker 1: because it is a true dictionary. So I was trying
• 19:37
  Speaker 1: to get at where a lot of these terms derived from.
• 19:41
  Speaker 1: And in many cases, people who use these terms all
• 19:44
  Speaker 1: day long don't really know what they mean, so they're
• 19:47
  Speaker 1: just using them as jargon, not as as true exactly.
• 19:50
  Speaker 1: And and so yes, there's I did a lot of
• 19:53
  Speaker 1: historical and archival research trying to figure out when a
• 19:57
  Speaker 1: certain term was first used, where came from. I spent
• 20:00
  Speaker 1: a lot of time with the Oxford English Dictionary and
• 20:04
  Speaker 1: UM all kinds of historical research as well. And you
• 20:08
  Speaker 1: have quite the background as an editor. One of the
• 20:11
  Speaker 1: questions I had to ask, So, the very famous classic
• 20:16
  Speaker 1: book by Benjamin Graham, The Intelligent Investor, you actually were
• 20:21
  Speaker 1: the editor of the revised edition. How on earth did
• 20:24
  Speaker 1: that invitation come along? Well, I don't think it hurt
• 20:29
  Speaker 1: that I was a Graham afficionado. I mean I I
• 20:34
  Speaker 1: first read The Intelligent Investor in March when I started
• 20:40
  Speaker 1: as a financial journalist at Forbes Magazine, and I probably
• 20:46
  Speaker 1: read it cover to cover at least six times. I'd
• 20:50
  Speaker 1: read almost all of Graham's shorter writings as well, and
• 20:54
  Speaker 1: all the biographies of him that existed at the time.
• 20:57
  Speaker 1: But ultimately it was it was uck like everything else
• 21:01
  Speaker 1: we've been talking about. Um. A friend of mine had
• 21:05
  Speaker 1: written a book for Harbercollins. Uh, one of the top
• 21:10
  Speaker 1: editors at the publishing house, was out to lunch with
• 21:13
  Speaker 1: her and said, uh, you know, we have this book.
• 21:16
  Speaker 1: Who do you think should do it? And she said, oh, well,
• 21:18
  Speaker 1: there was only one person who should do it, and
• 21:21
  Speaker 1: she told him to ask me. And why did she
• 21:24
  Speaker 1: do that? Because we had both been at a party
• 21:27
  Speaker 1: about a month beforehand. We hadn't seen each other in years.
• 21:31
  Speaker 1: I had seen her across the room and I said, oh,
• 21:34
  Speaker 1: I haven't seen her in years, and so I made
• 21:37
  Speaker 1: a special point going to say hi. And if I
• 21:39
  Speaker 1: hadn't said hi to her, she would have recommended somebody else.
• 21:42
  Speaker 1: You're listening to Master's in Business on Bloomberg Radio. We're
• 21:45
  Speaker 1: speaking with Jason's Wide, personal finance writer and author. Um.
• 21:49
  Speaker 1: One of the things I wanted to really go over
• 21:51
  Speaker 1: with you, uh, is your perspective as a personal finance columnist.
• 21:58
  Speaker 1: And I'm going to start by quoting you and then
• 22:01
  Speaker 1: and then we'll discuss it. You once wrote, my job
• 22:06
  Speaker 1: is to write the exact same thing between fifty and
• 22:10
  Speaker 1: one hundred times a year in such a way that
• 22:13
  Speaker 1: neither my editors nor my readers will ever think I'm
• 22:17
  Speaker 1: repeating myself. Explain. Um, Yeah, there's a simple reason for that, Barry.
• 22:23
  Speaker 1: I'm and I think you and I think alike on this.
• 22:26
  Speaker 1: There's there's really only a handful of things you can
• 22:29
  Speaker 1: tell investors about their portfolios that are true before you
• 22:36
  Speaker 1: get into things that are bad for them. And you know,
• 22:40
  Speaker 1: we could disagree about the number. There might be six
• 22:43
  Speaker 1: things they are good for people, there might be thirty,
• 22:48
  Speaker 1: but there aren't a hundred. And I'm and there's at
• 22:53
  Speaker 1: most a couple dozen. So We're not going to see
• 22:56
  Speaker 1: a daily television show for you where an hour day
• 23:00
  Speaker 1: you wax eloquence on the issues of the moment. Well,
• 23:04
  Speaker 1: probably not, because you know, as I, as I also
• 23:08
  Speaker 1: mentioned in the same piece you're quoting from, you know,
• 23:13
  Speaker 1: five per cent of the time, the right thing for
• 23:16
  Speaker 1: people to do is nothing. And uh, there's a financial
• 23:22
  Speaker 1: media that exists all day long, NonStop, having to provide
• 23:27
  Speaker 1: people with what appears to be information, well certainly content content.
• 23:32
  Speaker 1: And if you you can't do that, if you believe
• 23:35
  Speaker 1: that the right thing to tell people to do is nothing,
• 23:37
  Speaker 1: So that Jason's wide TV show would be have a
• 23:40
  Speaker 1: broadly diversified asset allocation model, rebalance regularly, watch your fees,
• 23:46
  Speaker 1: see you tomorrow. Yeah, diversify, buy and hold, minimize your
• 23:50
  Speaker 1: costs and your taxes. And I keep your hands in
• 23:56
  Speaker 1: your pockets, don't. Don't just do something? Sit there right
• 23:59
  Speaker 1: and keep other people's hands out of your pockets. That
• 24:02
  Speaker 1: makes sense. So let me let me re ask that
• 24:07
  Speaker 1: that question in a slightly different way, along the same
• 24:10
  Speaker 1: spirit of that that question, what does good financial advice
• 24:14
  Speaker 1: look like? Good financial advice on keeps people from being
• 24:20
  Speaker 1: their own worst enemies? You know. Benjamin Graham famously wrote
• 24:24
  Speaker 1: about that in the introduction to the Intelligent Investor, and
• 24:28
  Speaker 1: I think it all really boils down to one very
• 24:31
  Speaker 1: very simple thing, which is that markets regrets to the mean,
• 24:38
  Speaker 1: and the way you in the short run, the way
• 24:42
  Speaker 1: you attract attention to yourself if you're providing financial advice,
• 24:46
  Speaker 1: is by encouraging people to bet against regression to the mean.
• 24:51
  Speaker 1: So if an asset is rapidly going up in price,
• 24:55
  Speaker 1: you tell people buy more while you still can, and
• 24:58
  Speaker 1: if it's going down, you tell him to sell before
• 25:01
  Speaker 1: it's too late. But if you're trying to help people
• 25:05
  Speaker 1: get on the right side of regression to the mean,
• 25:08
  Speaker 1: then you give them countercyclical advice. When an asset is
• 25:12
  Speaker 1: going up and Brice, you tell them be cautious, and
• 25:15
  Speaker 1: when it's going down, you tell them to become more aggressive.
• 25:18
  Speaker 1: Quite interesting, So let me ask you the flip side
• 25:21
  Speaker 1: of that. Uh, why is it that so much bad
• 25:24
  Speaker 1: advice seems to hang around and not die? Why why?
• 25:29
  Speaker 1: Or or as slightly differently, why is there so much
• 25:32
  Speaker 1: zombie advice for investors? Well? I think it boils down
• 25:38
  Speaker 1: to something very simple. Barry. I think you know, humans
• 25:41
  Speaker 1: have a profound um, a profound desire to believe in magic.
• 25:48
  Speaker 1: People want to be lied to? And was it you
• 25:52
  Speaker 1: who recently wrote um the three ways to make money
• 25:56
  Speaker 1: as a as a writer lie to. If you, if
• 26:00
  Speaker 1: you tell people to truth, truth who don't want to
• 26:02
  Speaker 1: hear it, you're not gonna make any money. If you
• 26:04
  Speaker 1: tell people truth who want to hear the truth, they're
• 26:07
  Speaker 1: they're gonna make some money. But if you a lot
• 26:09
  Speaker 1: of the people who want to be lied to, you're
• 26:11
  Speaker 1: gonna make the most amount of Yeah, if you, if
• 26:14
  Speaker 1: you tell the truth to people who want to be
• 26:16
  Speaker 1: lied to, you'll starve. That's unbelievable. It's true. And so
• 26:21
  Speaker 1: what is it within our makeup that wants us to
• 26:25
  Speaker 1: be told the soft, easy, comfortable thing and not Hey, here,
• 26:31
  Speaker 1: here's you know, tough love, here's the cold, hard reality.
• 26:35
  Speaker 1: The sooner you learn that, the better off you are. Well,
• 26:37
  Speaker 1: people are people are machines, right, and their machines that
• 26:42
  Speaker 1: are designed to optimize a few things. Pattern recognition, self
• 26:47
  Speaker 1: enhancement m HM, and self delusion. I mean, human beings
• 26:53
  Speaker 1: are really good at those three things. We're we almost
• 26:57
  Speaker 1: certainly have evolved to maximize is those things and that's
• 27:02
  Speaker 1: why people are so susceptible to bad advice, because bad
• 27:07
  Speaker 1: advice praise on that stuff emotionally, praise to those emotional
• 27:12
  Speaker 1: hot buttons. Exactly. Interesting. So let's let's talk about some
• 27:16
  Speaker 1: more good advice. Who are the young writers that you
• 27:19
  Speaker 1: were reading today that you find to be giving the
• 27:24
  Speaker 1: sort of good advice or or good writing that is
• 27:28
  Speaker 1: beneficial to investors? And yeah, I think I I think
• 27:32
  Speaker 1: I I like some of the same people you do.
• 27:35
  Speaker 1: Barry Well, it's not a coincidence. You being here is
• 27:40
  Speaker 1: just my confirmation bias that works, Yes, exactly, and mine too. Um.
• 27:44
  Speaker 1: You know the first person I would name would be Morgan.
• 27:47
  Speaker 1: How is only the Moley fool? I think? Um? I
• 27:50
  Speaker 1: think he does just incredibly sharp, really insightful stuff. Love
• 27:54
  Speaker 1: his work. Ben Carlson a wealth of common sense, really
• 27:59
  Speaker 1: that's his does great stuff. James Osborne at Basin Asset
• 28:05
  Speaker 1: Management does also really cool stuff. There's a bunch of
• 28:08
  Speaker 1: other people as well, I'm who are terrific. It's amazing
• 28:13
  Speaker 1: how the meritocracy of financial writing, how these names have
• 28:18
  Speaker 1: risen up to the top fairly quickly. Ben Carlson as
• 28:21
  Speaker 1: an example, I mean he started blogging. I don't know,
• 28:26
  Speaker 1: a year ago, maybe less really relative, maybe it's two
• 28:30
  Speaker 1: years ago relatively short time, quickly found an institutional audience
• 28:35
  Speaker 1: and puts out really really good stuff on a regular Yeah.
• 28:38
  Speaker 1: And I think this is a very hopeful sign for
• 28:40
  Speaker 1: the future. You know, there are a lot of people
• 28:42
  Speaker 1: and Charlie Munger is one worrying what does he blog away?
• 28:50
  Speaker 1: I know I recognized that he. Uh, he's very worried
• 28:54
  Speaker 1: about the institutional impact of the decline of the traditional
• 28:58
  Speaker 1: great newspaper. And we don't know yet what's going to
• 29:01
  Speaker 1: replace it. But the fact that that really talented, bright
• 29:05
  Speaker 1: young people have been able to sort of rise to
• 29:09
  Speaker 1: the top, I think is is a hopeful sign for
• 29:12
  Speaker 1: the future. I can't say I I disagree. Um, what
• 29:16
  Speaker 1: are the writers do you read? Who else have you
• 29:19
  Speaker 1: read over the years that really stood out as as
• 29:22
  Speaker 1: a powerful and influential voice to you? Well, a lot
• 29:27
  Speaker 1: of them are are now of another generation. Um, Charlie
• 29:32
  Speaker 1: Ellis was a very big influence on me. I'm Ben Graham,
• 29:38
  Speaker 1: of course. Uh. Probably the single biggest influences on the
• 29:44
  Speaker 1: on the way I try to think, uh would be
• 29:49
  Speaker 1: Richard Feineman, the physicist m yes um uh. Who's wonderful
• 29:58
  Speaker 1: books these oral streets, And there's a series of them.
• 30:01
  Speaker 1: There's four or five of them I think are among
• 30:04
  Speaker 1: the most engaging books on how to think. I believe
• 30:08
  Speaker 1: you could find anywhere. And of course Danny Kahneman the
• 30:13
  Speaker 1: Thinking Fast Uh and Slow Ye was a huge influence
• 30:17
  Speaker 1: on me as well, and I was very fortunate to
• 30:20
  Speaker 1: be able to work with him and help him on
• 30:22
  Speaker 1: the book that that was a fascinating book, which leads
• 30:25
  Speaker 1: to a question. So you and I both found behavioral
• 30:29
  Speaker 1: economics fairly early in our career. How did you stumble
• 30:32
  Speaker 1: into that space? Uh? Well, I realized around that I
• 30:42
  Speaker 1: was running out of interesting questions. I didn't think. I
• 30:46
  Speaker 1: I didn't think by any means I had all the answers.
• 30:49
  Speaker 1: But as someone who didn't have professional training in finance
• 30:54
  Speaker 1: or economics, but who sort of sat at the feet
• 30:57
  Speaker 1: of the smartest people, I could find a lot of
• 31:00
  Speaker 1: the questions were starting to feel repetitive to me, my
• 31:04
  Speaker 1: questions and other people's questions. And there was still this
• 31:09
  Speaker 1: this fundamental mystery that nobody seemed to have an answer to,
• 31:12
  Speaker 1: which is why do smart people do such stupid things?
• 31:16
  Speaker 1: When it comes to money. It's amazing. History is replete
• 31:20
  Speaker 1: with examples, whether it's Isaac Newton, Mark Twain, go down
• 31:24
  Speaker 1: the list of various brilliant, insightful people who will manage
• 31:29
  Speaker 1: to just blow up in the stock mark. Ye. And
• 31:32
  Speaker 1: and that's really the central question that has obsessed me
• 31:36
  Speaker 1: for the past twenty years is why do smart people
• 31:39
  Speaker 1: become stupid when money comes into the room. Well, we've
• 31:44
  Speaker 1: run out of time for this segment. If you enjoy
• 31:47
  Speaker 1: this conversation, be sure and check out our podcast extras
• 31:50
  Speaker 1: with a tape keeps rolling and we continue our conversation. Uh.
• 31:54
  Speaker 1: If you want to catch more of Jason's wives work,
• 31:57
  Speaker 1: you can follow him on Twitter. Your Twitter handle is
• 32:00
  Speaker 1: Jason's wag w s J. I'm Barry RIH Halts. Be
• 32:03
  Speaker 1: sure and check out my daily column on Bloomberg View
• 32:06
  Speaker 1: dot com. Follow me on Twitter at rid Halts. You've
• 32:10
  Speaker 1: been listening to Masters in Business on Bloomberg Radio. Welcome
• 32:14
  Speaker 1: to the podcast Extras. My guest this week is Jason's
• 32:18
  Speaker 1: Wage and there's so much stuff I want to ask
• 32:20
  Speaker 1: you about. You know, it's funny those segments that are
• 32:24
  Speaker 1: seven minutes, eight minutes, six minutes, eleven minutes, I lose
• 32:28
  Speaker 1: a little bit of rhythm because I'm always aware of
• 32:30
  Speaker 1: the time. And then we get to this segment and
• 32:33
  Speaker 1: we could kind of take our shoes off and kick
• 32:36
  Speaker 1: back and relax. So let me go over some of
• 32:38
  Speaker 1: the questions that I skipped that I wanted to to
• 32:42
  Speaker 1: ask you. And these are really print real questions printed out.
• 32:47
  Speaker 1: You know you can you can get the home copies
• 32:49
  Speaker 1: if you want. Um. We talked briefly about Twitter and
• 32:53
  Speaker 1: blogs and social media. Um. What I wanted to ask
• 32:57
  Speaker 1: was not so much about commentary in and now lissis,
• 33:01
  Speaker 1: which is always its own separate page in a newspaper,
• 33:05
  Speaker 1: but what about just straight up reporting. We keep seeing
• 33:08
  Speaker 1: various media outlets just ending various local reporting, city hall
• 33:15
  Speaker 1: that the other thing, what does this mean for the
• 33:18
  Speaker 1: future of of actual not what you and I do,
• 33:22
  Speaker 1: but actual reporting with people go out and try and
• 33:25
  Speaker 1: find the facts in current events and tell the rest
• 33:29
  Speaker 1: of the world about it. Yeah, I think that I
• 33:31
  Speaker 1: think you know, all of this is like is sort
• 33:36
  Speaker 1: of like a Newton's law of thermodynamics, right, Barry. I mean,
• 33:40
  Speaker 1: for everything created, something is destroyed. And you know, the
• 33:46
  Speaker 1: the Internet and the advent of social media have democratized
• 33:51
  Speaker 1: the spread and for that matter, in the generation of
• 33:55
  Speaker 1: news and information, so that anyone with a cell phone
• 34:00
  Speaker 1: hand become a broadcaster or a reporter. The problem is
• 34:05
  Speaker 1: that anybody who has done shoe leather investigative reporting in
• 34:12
  Speaker 1: one of the great newsrooms of America like the Wall
• 34:14
  Speaker 1: Street Journal or or the New York Times or the
• 34:18
  Speaker 1: Washington Post or the l A Times, any of the
• 34:21
  Speaker 1: great or or once great newspapers in this country or
• 34:26
  Speaker 1: magazines for that manner, can tell you that reporting is
• 34:30
  Speaker 1: brutally hard work to get it right. It's really hard
• 34:34
  Speaker 1: work to do. It's really hard work to prevent yourself
• 34:38
  Speaker 1: from injecting your own viewpoint, bias, personality. It's and it's
• 34:44
  Speaker 1: absolutely essential to a functioning democrat. It's I mean, it's not.
• 34:48
  Speaker 1: The press is not called the fourth Estate for nothing.
• 34:51
  Speaker 1: And Charlie Munger's fear, and this is the fear that
• 34:55
  Speaker 1: I share, is that when reporting gets atomized the way
• 35:01
  Speaker 1: we see it unfolding on the Internet and in social media,
• 35:07
  Speaker 1: you don't have that institutional memory and historical tradition, and
• 35:12
  Speaker 1: most importantly, that professional training in newsrooms the way you
• 35:18
  Speaker 1: once did. You don't have reporters doing two three five
• 35:23
  Speaker 1: years of understudy with unmasters, and and so the attention
• 35:29
  Speaker 1: to fairness and detail and proper methodology falls by the wayside.
• 35:37
  Speaker 1: And if you think about House of Cards, for example,
• 35:40
  Speaker 1: the you know, the TV I'm going to call it
• 35:42
  Speaker 1: a melodrama with that's very compelling, with Kevin Spacey and
• 35:46
  Speaker 1: Robin Wright, House of Cards, House of Games, House of Cards, um,
• 35:52
  Speaker 1: you know, in that show, over and over again, you
• 35:54
  Speaker 1: see these journalists at a newspaper clearly modeled after the
• 35:58
  Speaker 1: Washington Post doing things that are so unscrupulous that if
• 36:03
  Speaker 1: you did them once at the Wall Street Journal, you
• 36:06
  Speaker 1: would be summarily fired. And it's it now just goes
• 36:12
  Speaker 1: without passing, without mention. I think the American public sort
• 36:16
  Speaker 1: of takes it for granted that journalists are sloppy creeps who,
• 36:21
  Speaker 1: you know, invade people's privacy and lie to their sources regularly,
• 36:25
  Speaker 1: and in fact, believe it or not, journalists in a
• 36:30
  Speaker 1: traditional newsroom environment are phenomenally ethical people who who would
• 36:36
  Speaker 1: you could put most journalists thumb in a screw and
• 36:40
  Speaker 1: tighten it before you would get them to tell a lie.
• 36:43
  Speaker 1: That I don't disagree with that it's always the bed
• 36:47
  Speaker 1: eggs that that spoil everybody's perception. But I want to
• 36:51
  Speaker 1: mention something you just said earlier, that anybody with a
• 36:55
  Speaker 1: cell phone can can broadcast and and literally, I'm gonna
• 37:00
  Speaker 1: do this. I'm gonna do this right now. I'm gonna
• 37:03
  Speaker 1: use periscope and broadcast a few seconds of our interview
• 37:08
  Speaker 1: off of a phone. That this is fascinating technology that
• 37:13
  Speaker 1: did not exist forget twenty five years ago, this didn't
• 37:16
  Speaker 1: exist eight months ago. Exactly. It's amazing that the technology
• 37:21
  Speaker 1: for this exists today. And so how do you compete
• 37:25
  Speaker 1: with that? How do you build a television station and
• 37:29
  Speaker 1: go through the training of reporters and journalists when everyone
• 37:33
  Speaker 1: and anyone can be a citizen journalist. What happens to
• 37:36
  Speaker 1: that business model that digital technology is challenging. It's amazing. Well,
• 37:42
  Speaker 1: first of all, Barry, thank you for not pointing the
• 37:44
  Speaker 1: camera at your feet. Um. And secondly, I said, can't
• 37:47
  Speaker 1: off of shoes and get comfortable, and uh, literally, that's
• 37:51
  Speaker 1: what we did. And secondly, I'm you know, look, you're
• 37:54
  Speaker 1: raising an incredibly troubling question and we don't yet know
• 37:58
  Speaker 1: the answer because we don't how this is going to
• 38:00
  Speaker 1: play out. I think ultimately the better emerging news organizations.
• 38:07
  Speaker 1: And you know, we could all think of you know,
• 38:09
  Speaker 1: some of the candidates right like, you know, maybe Vice
• 38:12
  Speaker 1: or some some outfit like that. Um, we'll get the
• 38:16
  Speaker 1: capital and the experience and the professionalism that they need
• 38:21
  Speaker 1: to build something that competes with the traditional newsroom like
• 38:25
  Speaker 1: the Wall Street Journal or Bloomberg, and um, that could
• 38:29
  Speaker 1: take a long time now, and ultimately those organizations are
• 38:33
  Speaker 1: going to have to cannibalize the existing great news organizations
• 38:40
  Speaker 1: to staff themselves up with people who have the experience
• 38:45
  Speaker 1: and the ethical background to run uh, proper news organization.
• 38:52
  Speaker 1: I'm running, I'm running out of battery here, so I'm
• 38:54
  Speaker 1: gonna kill periscope and I think that that's done. But um,
• 38:58
  Speaker 1: that was just thirty of that. UM, I think you're
• 39:02
  Speaker 1: onto something with that, which which leads me to a
• 39:05
  Speaker 1: question I wanted to get to earlier, um, and didn't.
• 39:09
  Speaker 1: It's actually two related questions. The first is this comes
• 39:13
  Speaker 1: right from you, from your money and your brain. People
• 39:16
  Speaker 1: who received frequent news updates on their investments earn lower
• 39:20
  Speaker 1: returns than those who get no news whatsoever. Discuss Yeah,
• 39:25
  Speaker 1: this is based on a series of fascinating experiments done
• 39:29
  Speaker 1: by a psychologist named Paul Andreas and in the nineteen
• 39:33
  Speaker 1: eighties he was at Columbia for a while and Harvard,
• 39:37
  Speaker 1: and he took UH. He took experimental subjects and divided
• 39:42
  Speaker 1: them into two groups. Some got essentially no no updated
• 39:46
  Speaker 1: information on their chosen investment portfolios, and others got frequent,
• 39:53
  Speaker 1: in fact, almost constant news updates. And then he tracked
• 39:57
  Speaker 1: their investment performance. And he found that the more often
• 40:01
  Speaker 1: people got news, the more often they traded. And we
• 40:04
  Speaker 1: know what the net outcome of that is for the
• 40:06
  Speaker 1: average invest The more you trade, the less you learn.
• 40:09
  Speaker 1: And it's a direct relationship. It's just if A then B.
• 40:14
  Speaker 1: If you get more news information, more updates, you will
• 40:19
  Speaker 1: act on it because it will feel informative to you,
• 40:24
  Speaker 1: even if it's just even if the news is just noise,
• 40:27
  Speaker 1: you will feel you have to act on it because
• 40:29
  Speaker 1: it seems like news and it seems significant. I call
• 40:33
  Speaker 1: a lot of what gets reported falls into the recency effects. Look,
• 40:39
  Speaker 1: we get a non farm payroll every month. It doesn't
• 40:42
  Speaker 1: mean that it changes the value of what your investment is.
• 40:45
  Speaker 1: And half of the time when it's an aberration to
• 40:48
  Speaker 1: the upisode of the downside, it's still within the statistical
• 40:52
  Speaker 1: range of probabilities that reflect nothing other than oh, something
• 40:57
  Speaker 1: is slightly often this reporting, and so it's a little
• 40:59
  Speaker 1: more were a little less than people were expecting, and
• 41:02
  Speaker 1: yet everybody reacts and overreacts to it. Yeah, I mean
• 41:06
  Speaker 1: we're you know, everyone sort of comes with a default
• 41:10
  Speaker 1: hair trigger mechanism. I mean, this example has been used
• 41:14
  Speaker 1: so many times it's it's almost dull at this point.
• 41:17
  Speaker 1: But you know, in evolutionary time, when our ancestors were
• 41:22
  Speaker 1: evolving on the you know, the planes of the African savannah,
• 41:26
  Speaker 1: you know, if you thought you might see a lion
• 41:29
  Speaker 1: and you overreacted to what you thought was the lion,
• 41:33
  Speaker 1: well you lived to you know, pass on, and if
• 41:38
  Speaker 1: person was blase about that, not a whole lot of progeny. Right.
• 41:42
  Speaker 1: The thing is, most of the time it wasn't a lion.
• 41:46
  Speaker 1: Most of the time it was just the wind, you know,
• 41:48
  Speaker 1: waving a patch of grass. But that one time it
• 41:51
  Speaker 1: was a lion. If you overreacted, you survived and you
• 41:55
  Speaker 1: passed your jeans on. And if you underreacted, you were
• 41:58
  Speaker 1: lion food. That that makes perfect sense. So I've used
• 42:03
  Speaker 1: the phrase behavioral economics repeatedly your behavioral finance. But the
• 42:09
  Speaker 1: book Your Your Money, or Your Brain, which you talked
• 42:13
  Speaker 1: about the New Science of Neuroeconomics, describe the difference between
• 42:18
  Speaker 1: behavioral economics and neurofinance. How do you how do you
• 42:22
  Speaker 1: define that? Yeah, it's really I think it's a I
• 42:24
  Speaker 1: think it's a very simple distinction. In neuroeconomics or or
• 42:29
  Speaker 1: neurofinance simply uses the tools and techniques of neuroscience. Two
• 42:38
  Speaker 1: extend existing research and findings in psychology and economics, and
• 42:45
  Speaker 1: by those tools and techniques, it's primarily methods of measuring
• 42:50
  Speaker 1: brain activity m R. Yeah, like a functional MRI I,
• 42:55
  Speaker 1: a pet scan, a cat scan, um. It could also
• 42:59
  Speaker 1: be uh various um um uh tools for monitoring brain
• 43:06
  Speaker 1: waves or electromagnetic activity in the brain. So so the
• 43:10
  Speaker 1: way I like to define that behavioral economics is you
• 43:12
  Speaker 1: can see the results of this issue in someone's actual behavior.
• 43:18
  Speaker 1: They did this, they bought that, they sold that, whereas
• 43:21
  Speaker 1: neuro you're actually looking inside their brain in some way
• 43:25
  Speaker 1: and seeing what's going on organically as opposed to behaviorally. Yeah,
• 43:30
  Speaker 1: And if you think about it, uh, there's there's not
• 43:34
  Speaker 1: much difference between the two in a way behavioral economics
• 43:39
  Speaker 1: is telling you what minds do, and neuroeconomics is telling
• 43:43
  Speaker 1: you what brains do. It's we already a great distinction.
• 43:48
  Speaker 1: We can already observe the behavior. Because somebody buys high
• 43:51
  Speaker 1: and sells low. They made a decision in their mind
• 43:54
  Speaker 1: to do this. We see, we see their action, we
• 43:56
  Speaker 1: see what they did, so we know what happened. What
• 44:00
  Speaker 1: neuroeconomics does is it says, these are the specific circuits
• 44:04
  Speaker 1: in the brain that generated the behavior you've observed in
• 44:09
  Speaker 1: in your psychological experiments. Let me shift gears on you,
• 44:12
  Speaker 1: and and let's talk a little bit about the problem
• 44:15
  Speaker 1: with predictions. What's the problem? So we all make forecasts. Everybody,
• 44:20
  Speaker 1: everybody in will state has a Here's where the d
• 44:22
  Speaker 1: will be in a year. Here's what I think these
• 44:25
  Speaker 1: earnings are gonna be. What's the problem with predictions. Well,
• 44:29
  Speaker 1: I think that there's a there's many problems with them, Barry.
• 44:32
  Speaker 1: I think the first problem is that people are people
• 44:35
  Speaker 1: are very poor at learning from their predictive errors, particularly
• 44:42
  Speaker 1: when the consequences aren't high or the feedback is noisy.
• 44:45
  Speaker 1: To define that, what do you mean by that? Well,
• 44:49
  Speaker 1: think about it this way. I'm you know. Uh, think
• 44:54
  Speaker 1: of the quarterfinal match in the US Open between the
• 44:57
  Speaker 1: Williams sisters. You know, Venus and Serena are playing. Every
• 45:01
  Speaker 1: stroke has three characteristics. The feedback their feedback of every stroke.
• 45:08
  Speaker 1: So if Venus hits the ball, it's in or it's out,
• 45:14
  Speaker 1: and she knows that immediately. So the feedback is prompt
• 45:17
  Speaker 1: and it's unambiguous. Secondly, every stroke matters. It's consequential if
• 45:24
  Speaker 1: if you miss too many shots, you lose, and you
• 45:27
  Speaker 1: lose millions of dollars in front of millions of people.
• 45:30
  Speaker 1: Other than that, though, really it's just a game. Other
• 45:33
  Speaker 1: than that, it's just a game. So in in a
• 45:36
  Speaker 1: sport like professional tennis, feedback is extremely reliable, in a
• 45:42
  Speaker 1: very powerful way of learning from your mistakes. If you
• 45:46
  Speaker 1: take it seriously and you practice, you will get good
• 45:49
  Speaker 1: at it. You'll get a lot better. The financial markets
• 45:54
  Speaker 1: are different. The feedback is not prompt out nor isn't unambiguous.
• 46:02
  Speaker 1: I mean, let's say you and I decide today Netflix
• 46:06
  Speaker 1: is going up, so we buy Netflix. Well, on the
• 46:10
  Speaker 1: next tick, Netflix goes up, so we're right. But the
• 46:15
  Speaker 1: next ticket goes down and now we're wrong, so we
• 46:18
  Speaker 1: get up. We go to the bathroom. We come back,
• 46:20
  Speaker 1: it's up. We're right. We go out for lunch, we
• 46:23
  Speaker 1: come back, it's down. Now we're wrong. What is the
• 46:25
  Speaker 1: feedback telling us? It's really noisy. The feedback is noise.
• 46:30
  Speaker 1: Prices fluctuated, that's what it's telling you. So there is
• 46:34
  Speaker 1: useful feedback in market prices, but it takes a long
• 46:39
  Speaker 1: time to unfold, and you have to develop a real
• 46:42
  Speaker 1: skill in interpreting the feedback, and a lot of people
• 46:45
  Speaker 1: can't do that. And the task at the same time
• 46:48
  Speaker 1: manage the money or uh, you know, pick the particular
• 46:52
  Speaker 1: securities and the consequences. The consequences for a lot of
• 46:56
  Speaker 1: people are enormous. It depends how much skin you have
• 46:59
  Speaker 1: in the game, right, how much of your reputation, your
• 47:02
  Speaker 1: personal reputation is riding on the line. If you're an employee,
• 47:08
  Speaker 1: just a face in a crowd at a giant asset
• 47:11
  Speaker 1: management firm, uh, consequences might not be all that great.
• 47:16
  Speaker 1: The consequences for you aren't in being right or wrong.
• 47:20
  Speaker 1: It's whether you're right or wrong relative to the crowd.
• 47:25
  Speaker 1: And so you're not concerned with your absolute performance, whether
• 47:29
  Speaker 1: what you did is right or wrong. You're concerned whether
• 47:31
  Speaker 1: you're gonna stand out for doing something different that might
• 47:35
  Speaker 1: make you or the firm look foolish. Career risk is
• 47:38
  Speaker 1: that is that what you're It's career risk. And so
• 47:41
  Speaker 1: if avoiding career risk steers you toward making timid or
• 47:47
  Speaker 1: sub optimal decisions, you can't learn from normal feedback because
• 47:54
  Speaker 1: the feedback you care about is am I increasing or
• 47:57
  Speaker 1: decreasing my career risk as opposed to am I doing
• 48:01
  Speaker 1: better or worse? As an investor invest investments. That's quite fascinating.
• 48:07
  Speaker 1: So so when we look at predictions in general, you're
• 48:11
  Speaker 1: looking at them with that three pronged analysis, similar to
• 48:16
  Speaker 1: the way you would look at a sporting event, only
• 48:19
  Speaker 1: the results, the timeline, and the all three things are
• 48:22
  Speaker 1: totally different. Yeah, and you know there's I think the
• 48:27
  Speaker 1: other thing that makes all of this baffling is we
• 48:30
  Speaker 1: in in daily life, we have a general belief and
• 48:33
  Speaker 1: it's been popularized as sort of the ten thousand hours rule,
• 48:37
  Speaker 1: you know, outlawyer rule, Mountain Glass exactly if you if
• 48:41
  Speaker 1: you just practice anything long enough and hard enough, you'll
• 48:45
  Speaker 1: get good at it. If that was true, wouldn't all
• 48:48
  Speaker 1: the best fund managers be the guys who've been around
• 48:50
  Speaker 1: the longest. Yes. And also if that were true, everyone
• 48:53
  Speaker 1: would be the Beatles. Everyone who's ever everyone who's ever
• 48:57
  Speaker 1: spent a lot of time plucking on and get are
• 49:00
  Speaker 1: would would be Eric Clapton. And it's not really true
• 49:05
  Speaker 1: because the second essential criterion, the other thing you have
• 49:11
  Speaker 1: to have, is good feedback. I mean, if you you
• 49:14
  Speaker 1: could spend thirty hours playing guitar, but if you're tone
• 49:17
  Speaker 1: deaf and you don't know you stink and nobody will
• 49:21
  Speaker 1: tell you stink, you'll never get good. Well, you'll figure
• 49:25
  Speaker 1: it out when they're not buying your albums or going
• 49:26
  Speaker 1: to your concerts, or when they're paying or when they're
• 49:29
  Speaker 1: paying you not to play. That's a whole different Uh,
• 49:32
  Speaker 1: that's a whole different issue. Um. Another random question. Does
• 49:38
  Speaker 1: money by happiness or is it the anticipation of money
• 49:42
  Speaker 1: that leads to happiness? Well, yeah, I talked about this
• 49:45
  Speaker 1: quite a bit in in my earlier book Your Money
• 49:48
  Speaker 1: in Your Brain and anticipation based on the on the
• 49:54
  Speaker 1: research that's been done, I think is more of what
• 49:58
  Speaker 1: I would call a hot state than I'm actually receiving
• 50:03
  Speaker 1: a gain. So thinking about or imagining or contemplating the money,
• 50:09
  Speaker 1: you'll make if you turn out to be right, is
• 50:12
  Speaker 1: probably more at least as rewarding as getting the money is.
• 50:17
  Speaker 1: I've used that analysis as an explanation for sell the News,
• 50:22
  Speaker 1: and you you kind of imply that in the book
• 50:25
  Speaker 1: as well. Ye. So, so put it into context of investing.
• 50:29
  Speaker 1: Why do stock prices run up to a quarterly earning
• 50:34
  Speaker 1: then you get a good earnings number and the stock
• 50:36
  Speaker 1: goes down? Yeah, there's there's There was a fascinating study
• 50:41
  Speaker 1: published in Science magazine, which, as many of our listeners know,
• 50:46
  Speaker 1: is the is the pre eminent journal of science in
• 50:50
  Speaker 1: the US, and it it looked at monkey brains and
• 50:53
  Speaker 1: they recorded from single neurons deep in the dopamine centers
• 50:58
  Speaker 1: of the monkey's brains how they responded. And essentially, when
• 51:03
  Speaker 1: the monkey receives an expected reward, the dopamine generation at
• 51:11
  Speaker 1: the time the reward is received goes down, So the
• 51:15
  Speaker 1: dopamine activity ramps up as the monkey recognizes the predictive queue.
• 51:20
  Speaker 1: Here comes the banana. Here comes the banana. In this
• 51:23
  Speaker 1: case it was it was sugar water, but same idea.
• 51:26
  Speaker 1: Here comes here comes the banana. I'm going to get
• 51:28
  Speaker 1: the banana. The bananas coming, and that's when the dopamine peaks,
• 51:34
  Speaker 1: then the monkey actually gets the banana and he's like, oh,
• 51:37
  Speaker 1: I got the banana. I've been wanting all along. And
• 51:41
  Speaker 1: so that activity peaks and then it drops. And I
• 51:45
  Speaker 1: think that's why so often in the stock market you
• 51:48
  Speaker 1: see the price of you see the company's stock price
• 51:51
  Speaker 1: just ramp up and and go parabolic when people are
• 51:55
  Speaker 1: expecting a positive earning surprise, the company is going to
• 51:58
  Speaker 1: exceed analysts expectations. Then the actual learnings come out and
• 52:03
  Speaker 1: exactly what people thought they would be just as good,
• 52:06
  Speaker 1: and it goes down. It's a disappointment. There's a Spock
• 52:09
  Speaker 1: quote from Star Trek which I won't even attempt, but
• 52:12
  Speaker 1: it's the same concept of wanting generating more satisfaction than
• 52:16
  Speaker 1: actually having. And I find that that fascinating so related
• 52:21
  Speaker 1: to some of um these cognitive issues. Um, what was
• 52:25
  Speaker 1: it like working with Danny Kahneman on thinking fast and Slow? What?
• 52:29
  Speaker 1: What were your contributions, uh to the book? He I'm
• 52:32
  Speaker 1: trying to remember if he thanked you in his Nobel
• 52:34
  Speaker 1: speech or not, but I didn't, But I I I
• 52:39
  Speaker 1: read the book, or I read the first three quarters
• 52:43
  Speaker 1: of the book on a beach some years ago and
• 52:46
  Speaker 1: found it just absolutely fascinating stuff. Well, we're you know,
• 52:50
  Speaker 1: working with Danny was one of the was one of
• 52:52
  Speaker 1: the great experiences of of my life. Um, certainly one
• 52:56
  Speaker 1: of the great learning experiences. UM. You know. He he's
• 53:00
  Speaker 1: got a remarkable mind and um, he questions everything, and
• 53:07
  Speaker 1: he has he has that wonderful ability that most of
• 53:13
  Speaker 1: us losing our intellectual lifetime of putting ourselves almost into
• 53:18
  Speaker 1: the shoes of a child and saying just asking why
• 53:23
  Speaker 1: why is that? And he's often completely baffled by things
• 53:30
  Speaker 1: that everyone takes for granted as an as an accepted truth,
• 53:35
  Speaker 1: and he he just sort of scratches his head in
• 53:37
  Speaker 1: front of it, says, well why do people think that?
• 53:40
  Speaker 1: And it's not that he's doubting it, he just genuinely
• 53:43
  Speaker 1: doesn't know. And part of that is because he has
• 53:47
  Speaker 1: the most perfectly calibrated sense of what he knows. I
• 53:51
  Speaker 1: think of anybody I've ever certainly anybody I've ever worked with,
• 53:54
  Speaker 1: no Dunning Kruger effect. They're very, very very little. I
• 53:58
  Speaker 1: only saw it once, which was the first day we
• 54:02
  Speaker 1: worked physically together on the book in his apartment, when
• 54:08
  Speaker 1: he talked about the planning fallacy which I know you're
• 54:11
  Speaker 1: familiar with, Barry, but I'll explain it for for our listeners. Uh.
• 54:15
  Speaker 1: He likes to tell a famous a story that's become
• 54:18
  Speaker 1: famous about one of the first major projects that he
• 54:23
  Speaker 1: undertook when he was a young psychologist on the rise
• 54:28
  Speaker 1: in Israel at the Hebrew University in Jerusalem. And um,
• 54:32
  Speaker 1: he and some of his colleagues were working on rewriting
• 54:37
  Speaker 1: the standard high school psychology textbook for students in Israel.
• 54:42
  Speaker 1: And that's a big undertaking because it's a you know,
• 54:46
  Speaker 1: it's it's basically a core part of the curriculum. You
• 54:49
  Speaker 1: have to start the textbook from scratch and um. So
• 54:56
  Speaker 1: they asked each other, well, how long we should this take?
• 55:00
  Speaker 1: And so one of them said, oh, I mean, how
• 55:02
  Speaker 1: could it take more than seven or eight months? Another
• 55:05
  Speaker 1: one said maybe a year? And somebody else said, I
• 55:08
  Speaker 1: don't know, a year and a half or something. And
• 55:10
  Speaker 1: Danny's just sitting there listening, puzzled the same way I
• 55:14
  Speaker 1: just described. And then he so he turned, he gets
• 55:17
  Speaker 1: a lightbulb and he over his head and he turns
• 55:19
  Speaker 1: to the dean of education at the at the school
• 55:25
  Speaker 1: they were affiliated with, the Humor University, and says to him,
• 55:29
  Speaker 1: you know, are you aware of other teams, other groups
• 55:33
  Speaker 1: that have done similar projects like this one? And the
• 55:38
  Speaker 1: dean says, well, yeah, you know now that you mention it,
• 55:42
  Speaker 1: I am, And that didn't occur to me before because
• 55:46
  Speaker 1: he was one of the people who had given this
• 55:48
  Speaker 1: low estimate of ten months or something like that. So
• 55:51
  Speaker 1: Danny says, oh, so, of those groups, what what was
• 55:57
  Speaker 1: the average length of time took them to complete the textbook?
• 56:02
  Speaker 1: So the dean sort of pulls his chin for a while,
• 56:05
  Speaker 1: and everyone in the room is sort of shifting uneasily
• 56:08
  Speaker 1: in their seats, and after a long pause, he says, well,
• 56:13
  Speaker 1: I guess of those who completed a similar project, I
• 56:20
  Speaker 1: think it took on average about four years, not counting
• 56:24
  Speaker 1: the guys who were still working and having closed the
• 56:27
  Speaker 1: and so and so. Then Danny says, oh, okay, and
• 56:32
  Speaker 1: what about the ones and how many how many of
• 56:35
  Speaker 1: these teams would you say never completed it? And he said, oh,
• 56:41
  Speaker 1: I guess forty or fifty percent, And so the room
• 56:44
  Speaker 1: goes dead silent. And so the corollary to this is
• 56:49
  Speaker 1: that they finally did finish the textbook, it took either
• 56:53
  Speaker 1: seven or nine years, and if I think there's a
• 56:58
  Speaker 1: second correla, I think I'm remembering this right was never
• 57:01
  Speaker 1: actually used and yeah, it was out of it. And
• 57:07
  Speaker 1: so so the first day Danny and I are working
• 57:09
  Speaker 1: on the book, he says to me, I really want
• 57:11
  Speaker 1: to avoid the planning fallacy. And by the way, I
• 57:14
  Speaker 1: forgot Barry the just to sort of take this the
• 57:17
  Speaker 1: final turn. The reason the planning fallacy is relevant because
• 57:22
  Speaker 1: it brings out a basic flaw in human cognition, which is,
• 57:27
  Speaker 1: when we're faced with any challenge or any set of data,
• 57:32
  Speaker 1: what we tend to do is we think in very
• 57:34
  Speaker 1: narrow framing. So you and I are going to write
• 57:38
  Speaker 1: this textbook. So we think about and we talked to
• 57:41
  Speaker 1: each other and we and you say, well, you know,
• 57:43
  Speaker 1: I'm good at this, and I say, well you're good
• 57:47
  Speaker 1: at it, I'm better. And we think about how qualified
• 57:51
  Speaker 1: we are to do this, how excited we are about
• 57:54
  Speaker 1: performing this task, and all we can really focus on
• 57:58
  Speaker 1: is how we're going to do it better, faster and
• 58:02
  Speaker 1: um and more perfectly than anybody who's ever done it before.
• 58:07
  Speaker 1: But we don't ask ourselves what's the success rate of
• 58:10
  Speaker 1: people who have tried this. There's a database of all
• 58:14
  Speaker 1: the other people who've tried it, what is it? What's
• 58:17
  Speaker 1: in the data? And so we don't look at the
• 58:19
  Speaker 1: base rate. And that's Danny Kahneman is all about base rates.
• 58:24
  Speaker 1: And so the wonderful line he gave me that I
• 58:27
  Speaker 1: use all the time in my thinking and in my
• 58:29
  Speaker 1: writing is he once said to me, the single most
• 58:33
  Speaker 1: important question is what is the base rate? It's so
• 58:37
  Speaker 1: funny you you bring this up today. This is absolutely true.
• 58:41
  Speaker 1: I was having a discussion on the train on the
• 58:44
  Speaker 1: way in about a woman I work with work. A
• 58:48
  Speaker 1: woman I commute with is in fashion, and she's she's
• 58:52
  Speaker 1: on the train. She's always having these angry like she
• 58:56
  Speaker 1: pulls out her her phone so annoyed and she sends
• 59:02
  Speaker 1: nasty emails to people, and I go, what's today? She goes,
• 59:05
  Speaker 1: I get this email from somebody saying that they were
• 59:08
  Speaker 1: so they do these long. I won't mention the brand,
• 59:11
  Speaker 1: but one of us is wearing it, and it's um
• 59:15
  Speaker 1: it's a very well known, famous brand. And she'll get
• 59:18
  Speaker 1: this run off of a production line and three of
• 59:23
  Speaker 1: them were terrible. Oh we have three, and she I go, so,
• 59:27
  Speaker 1: why are you angry? She goes, three out of what
• 59:30
  Speaker 1: three out of fifty three a fifty thousand. I don't
• 59:32
  Speaker 1: know what this means. And I said to her that's
• 59:34
  Speaker 1: called numerator blindness or denominator Basically, they're giving you the
• 59:40
  Speaker 1: numerator and ignoring the context of how many of this? So,
• 59:43
  Speaker 1: so the denominator blindness is So, if you want to
• 59:47
  Speaker 1: impress the person who's sending you this adiotic there were
• 59:50
  Speaker 1: three bad units out of the production run, tell them
• 59:54
  Speaker 1: you have denominator blindness. You're not aware of the context
• 59:57
  Speaker 1: from the lower You're only giving me the top number
• 1:00:00
  Speaker 1: with no frame of reference. Correct. But but that that
• 1:00:02
  Speaker 1: reminds me very similar to what is the basics? What
• 1:00:06
  Speaker 1: is what is the base rate? Exactly? So you know.
• 1:00:09
  Speaker 1: So Danny says to me that first day, of all people,
• 1:00:13
  Speaker 1: I don't want to be the one who commits the
• 1:00:15
  Speaker 1: planning fallacy. I don't want us in a book on
• 1:00:19
  Speaker 1: cognitive bias, in a book that is going to talk
• 1:00:21
  Speaker 1: about the planning house. So, uh, I want us to
• 1:00:25
  Speaker 1: figure out together how long this is likely to take,
• 1:00:28
  Speaker 1: so that we know what we're in for. And so
• 1:00:30
  Speaker 1: we had a long conversation and he has a method
• 1:00:33
  Speaker 1: for d biasing the planning fallacy, and we went through
• 1:00:37
  Speaker 1: really perfectly, and at the end we concluded it should
• 1:00:42
  Speaker 1: take a year and a half to two years, two years,
• 1:00:45
  Speaker 1: and so I worked on the project with him for
• 1:00:47
  Speaker 1: two years until you know, I had other things that
• 1:00:50
  Speaker 1: were demanding my attention. Um, but for those two years
• 1:00:54
  Speaker 1: it was pretty much a full time job for me
• 1:00:56
  Speaker 1: and for him for that matter. And so at the
• 1:00:59
  Speaker 1: end to those two years, he said, I'm about a
• 1:01:03
  Speaker 1: third done, I think. And it took another I think
• 1:01:10
  Speaker 1: three or four years after that, no kidding. So so
• 1:01:13
  Speaker 1: he was right when he when he said he was
• 1:01:15
  Speaker 1: a third done. Uh yeah, except he was wrong in
• 1:01:19
  Speaker 1: the beginning when we when we decided it would take
• 1:01:22
  Speaker 1: two years. So you know, when I said that, he
• 1:01:28
  Speaker 1: he he has a remarkable sense of his own limitations.
• 1:01:33
  Speaker 1: That was one issue where I think, but even there,
• 1:01:36
  Speaker 1: he was aware of the fact that that was a problem.
• 1:01:38
  Speaker 1: He knew it was a problem. He it's just the
• 1:01:40
  Speaker 1: d biasing method didn't work well. And it's very difficult
• 1:01:44
  Speaker 1: for most people to the bias, especially considering so many
• 1:01:49
  Speaker 1: people are so unaware of their own biases. How can
• 1:01:53
  Speaker 1: you protect yourself if you simply have no conception that hey,
• 1:01:58
  Speaker 1: I have a cognitive bias he or or I have
• 1:02:00
  Speaker 1: some aside from the fact that most many of these
• 1:02:04
  Speaker 1: are already hardwired into you. If you're unaware of your
• 1:02:07
  Speaker 1: confirmation bias, how are you going to avoid it? I
• 1:02:11
  Speaker 1: tell people the reason we study this is so at
• 1:02:13
  Speaker 1: least you have a fighting chance to be biasues. That
• 1:02:17
  Speaker 1: is key. I mean, the biggest problem with the findings
• 1:02:21
  Speaker 1: of behavioral economics is that most of the biases it
• 1:02:26
  Speaker 1: identifies are unconscious, and by definition, you don't know you
• 1:02:31
  Speaker 1: have this bias. So the single most powerful thing that
• 1:02:35
  Speaker 1: you can do as an investor or for that manner,
• 1:02:37
  Speaker 1: a consumer of information, or just an intelligent citizen is
• 1:02:41
  Speaker 1: to use techniques to try to surface those biases in
• 1:02:44
  Speaker 1: your own mind, at least make yourself aware of them.
• 1:02:47
  Speaker 1: You know, It's funny because coming out of a legal background,
• 1:02:51
  Speaker 1: where the mood court exercises, basically, you prepare a case
• 1:02:55
  Speaker 1: and at any point in time you may be forced
• 1:02:58
  Speaker 1: to argue the other side of the case, and it
• 1:03:00
  Speaker 1: really gives you some degree of objectivity as to the
• 1:03:04
  Speaker 1: strength and weaknesses of your arguments. And I started as
• 1:03:08
  Speaker 1: a trader, and this was always something that was drilled
• 1:03:11
  Speaker 1: into me. Hey, it doesn't matter if you're long or short.
• 1:03:14
  Speaker 1: You have to be ready when the circumstances change to
• 1:03:18
  Speaker 1: get out of that position to take the other position.
• 1:03:21
  Speaker 1: I think a lot of people don't go through those
• 1:03:23
  Speaker 1: sort of processes of saying because we have this whole
• 1:03:26
  Speaker 1: conversation all the time, Hey, are you a bull or
• 1:03:29
  Speaker 1: a bear? Uh? You know, I'm whatever makes sense at
• 1:03:32
  Speaker 1: the moment, and don't feel the need to declare a
• 1:03:35
  Speaker 1: major and stick to that regardless of what what the
• 1:03:38
  Speaker 1: evidence says. Yeah, and it isn't an interesting barrier that,
• 1:03:41
  Speaker 1: despite how badly reviled, the legal profession is almost as
• 1:03:46
  Speaker 1: badly as financial journalism. When people are trying to figure
• 1:03:52
  Speaker 1: out whether there's a conflict of interest at hand, they
• 1:03:55
  Speaker 1: do call in lawyers because lawyers are better at evaluating
• 1:03:58
  Speaker 1: that than most other profession. Doctors are not good at it.
• 1:04:02
  Speaker 1: People on Wall Street are not good at it, and
• 1:04:04
  Speaker 1: a lot of financial journalists, for that matter, are not
• 1:04:07
  Speaker 1: good at it. You have to be able to step
• 1:04:09
  Speaker 1: back and look at both sides of the argument, and
• 1:04:12
  Speaker 1: that's a bigger challenge. That's that's a skill set that
• 1:04:16
  Speaker 1: you have to learn. It doesn't necessarily come easy. Once
• 1:04:19
  Speaker 1: you kind of get into a groove of it, it
• 1:04:21
  Speaker 1: becomes something that can be done. All right, I know
• 1:04:24
  Speaker 1: I don't have you all day, so let me get
• 1:04:25
  Speaker 1: to some of my favorite questions that I ask everybody. UM.
• 1:04:31
  Speaker 1: In the last ten or fifteen minutes we have, UM,
• 1:04:34
  Speaker 1: you've mentioned some of your mentors. Who are your earliest mentors,
• 1:04:38
  Speaker 1: either as a journalist or a UM neuroeconomic neuro economists,
• 1:04:46
  Speaker 1: neuro finances as a journalist who your early mentioned I'm
• 1:04:49
  Speaker 1: gonna I think I'm just going to mention one people,
• 1:04:52
  Speaker 1: one person out of all the people I could mention.
• 1:04:56
  Speaker 1: UM my beloved editor at Forbes, jim My Coles, who
• 1:05:00
  Speaker 1: was the long time editor of the magazine and far
• 1:05:05
  Speaker 1: and away one of the most brilliant editors I or
• 1:05:08
  Speaker 1: anyone else I have ever encountered. And in when I
• 1:05:14
  Speaker 1: was a young reporter at Forbes, Jim uh decided that
• 1:05:18
  Speaker 1: I would be the mutual funds editor, and I'm uh.
• 1:05:24
  Speaker 1: The one thing I remembered in the nick of time
• 1:05:27
  Speaker 1: was that that had been his first major job when
• 1:05:30
  Speaker 1: he came to the magazine in the nineteen fifties. So
• 1:05:33
  Speaker 1: I knew better than to show disappointment on my face
• 1:05:37
  Speaker 1: at having been handed such a boring assignment. So I
• 1:05:42
  Speaker 1: said to him, do you have any advice for me?
• 1:05:44
  Speaker 1: You did this job once, and he thought about it
• 1:05:47
  Speaker 1: for a second. He looked at me and he sort
• 1:05:49
  Speaker 1: of half smiled, and he said, don't get anybody's blood
• 1:05:52
  Speaker 1: on your hands. And I never forgot it, and I
• 1:05:57
  Speaker 1: know exactly what he meant by it, which was, you know,
• 1:06:00
  Speaker 1: don't do your best not to give people advice. You
• 1:06:05
  Speaker 1: wouldn't take yourself the hypocritic first, do first, do no harm,
• 1:06:09
  Speaker 1: not not a bad thing. We've been talking a lot
• 1:06:12
  Speaker 1: about books and investors, and you mentioned The Intelligent Investor
• 1:06:16
  Speaker 1: by Benjamin Graham. What other books really stood out to
• 1:06:19
  Speaker 1: you as you developed your your your your BS Detector,
• 1:06:25
  Speaker 1: your your journalism chops, and your finance jops. Yeah, there's
• 1:06:29
  Speaker 1: a couple of books I really love. I mean, we
• 1:06:31
  Speaker 1: talked about Richard Feynman before. I think anybody can pick
• 1:06:34
  Speaker 1: up any of the oral history books. You just Mr
• 1:06:39
  Speaker 1: fineman or um, what do you care what other people think?
• 1:06:44
  Speaker 1: Is another wonderful one. Uh, those books are fabulous even
• 1:06:48
  Speaker 1: for someone with no background in science. They can teach
• 1:06:51
  Speaker 1: you a little bit about how to think like a scientist,
• 1:06:54
  Speaker 1: and that's critical. There's a wonderful little book called um
• 1:06:59
  Speaker 1: How to Lie with Statistics by Darryl Hoff. It's literally
• 1:07:02
  Speaker 1: sitting on my night tap, which is such a fabulous book.
• 1:07:06
  Speaker 1: You know that came in out and I want to
• 1:07:08
  Speaker 1: say the late fifties. Yeah, it came out in the
• 1:07:10
  Speaker 1: fifties as a wonderful book. It doesn't seem dated at all.
• 1:07:14
  Speaker 1: It's it's not, it's not. It will never go out
• 1:07:16
  Speaker 1: of style. And where are the customers? Yachts? By Fred
• 1:07:20
  Speaker 1: Schwade Jr. Which was published in and I've never read that,
• 1:07:25
  Speaker 1: have the book, and I've been dying to get the
• 1:07:28
  Speaker 1: free time. I can't believe I came on your show
• 1:07:30
  Speaker 1: and you've never read that. I'm not I'm leaving right now.
• 1:07:33
  Speaker 1: I'm not exaggerating that. I actually mentioned that to someone
• 1:07:37
  Speaker 1: in the beginning of the summer, that that's my book
• 1:07:40
  Speaker 1: to read the summer, and know you're going to read
• 1:07:42
  Speaker 1: it tonight. It's I started the first chapter and really
• 1:07:48
  Speaker 1: enjoyed it. What I want you to do is read
• 1:07:50
  Speaker 1: it aloud. I want you to read it aloud to you.
• 1:07:53
  Speaker 1: The second person who's mentioned that technique, we didn't allowed
• 1:07:56
  Speaker 1: to yourself, all right, or to other people. You I'm
• 1:08:00
  Speaker 1: walk in a room start reading aloud from it. People
• 1:08:02
  Speaker 1: stop what they're doing, really, and now look at you. Well, normally,
• 1:08:05
  Speaker 1: when you walk into a room and just start reading
• 1:08:06
  Speaker 1: a lot from a book, people stop what they're doing.
• 1:08:08
  Speaker 1: And yeah, but but after they listen for a while,
• 1:08:10
  Speaker 1: they'll go back to what they're doing. They won't do
• 1:08:12
  Speaker 1: that with this book. All right, I'm gonna I'm not
• 1:08:15
  Speaker 1: exaggerating when I say, of all the Wall Street books
• 1:08:17
  Speaker 1: I have not read, this is the one that I've
• 1:08:20
  Speaker 1: been most looking forward to reading, not on my night table,
• 1:08:24
  Speaker 1: on my dresser, but literally in the bedroom. It's it
• 1:08:28
  Speaker 1: is easily one of the five best books ever written,
• 1:08:31
  Speaker 1: so ahead of the Goldman sax Elevator book. But move
• 1:08:35
  Speaker 1: move this up the queue. Okay, it's in the top three. Beforehand,
• 1:08:41
  Speaker 1: I'm I'm finishing, had a lie with statistics and this
• 1:08:45
  Speaker 1: was next in my You have to I'm embarrassed to
• 1:08:49
  Speaker 1: admit that I've had this sitting waiting to be read
• 1:08:52
  Speaker 1: for six months and I just haven't read it. It's
• 1:08:55
  Speaker 1: a wonderful book. And uh what other investors influenced you? Uh?
• 1:09:01
  Speaker 1: You know. Fairly early in my career, I was lucky
• 1:09:04
  Speaker 1: enough to get to know a bunch of really great
• 1:09:09
  Speaker 1: wise people, UM, Sir John Templeton, m Phil Coray, Irving Khan.
• 1:09:17
  Speaker 1: These were all people who had lived through the crash
• 1:09:20
  Speaker 1: of and had really benefited from it and developed sort
• 1:09:26
  Speaker 1: of incredibly powerful long term perspective. UM. And I learned
• 1:09:32
  Speaker 1: a lot from from those guys, Uh and UM, and
• 1:09:37
  Speaker 1: also from some other people I was lucky to spend
• 1:09:39
  Speaker 1: time with when it was easier to spend time with them,
• 1:09:42
  Speaker 1: Michael Price, Bill Miller. UM. Folks like that who you know,
• 1:09:47
  Speaker 1: sort of gone on to fame and fortune and in
• 1:09:52
  Speaker 1: some cases some some misfortunes. I'm trying to get Templeton
• 1:09:55
  Speaker 1: on the show, but as people never response, yeah, he's
• 1:09:57
  Speaker 1: not returning calls anywhere. U. Miller is a guy who's
• 1:10:01
  Speaker 1: actually enjoying a little bit of a resurgence. He would
• 1:10:04
  Speaker 1: be interesting to have a conversation. UM. So we talked
• 1:10:07
  Speaker 1: a little bit about the changing nature of financial journalism
• 1:10:11
  Speaker 1: and and media. What do you see as the next
• 1:10:14
  Speaker 1: major shifts that are that are coming in this space? Well,
• 1:10:18
  Speaker 1: I think I think what is still desperately needed, UM
• 1:10:23
  Speaker 1: is UM filters. Um. You know, Twitter does a lot
• 1:10:28
  Speaker 1: of that, but if you set it upright, if you
• 1:10:30
  Speaker 1: use it, you have to you have to approach Twitter
• 1:10:34
  Speaker 1: very very deliberately and intelligently to make it work for
• 1:10:37
  Speaker 1: you instead of against you. And I think the time
• 1:10:41
  Speaker 1: is coming when there will be platforms or applications that
• 1:10:46
  Speaker 1: will intelligently filter material for people and do a real service.
• 1:10:51
  Speaker 1: I don't think we're there yet, and I don't know
• 1:10:53
  Speaker 1: what it's going to look like, but I know it's
• 1:10:55
  Speaker 1: coming and I hope it comes soon. That's that's that's
• 1:10:59
  Speaker 1: really interesting. And I find that a handful of UM
• 1:11:02
  Speaker 1: aggregators are are enormously helpful. I not only read a
• 1:11:07
  Speaker 1: ton of stuff when I put together my morning reads,
• 1:11:09
  Speaker 1: but I also look at a handful of other aggregators
• 1:11:12
  Speaker 1: and see what they're looking at. And I don't want
• 1:11:15
  Speaker 1: to have too much overlap. I want to look and
• 1:11:17
  Speaker 1: find interesting. But but that's human driven, that's not robot driven. UM.
• 1:11:22
  Speaker 1: Twitter is really something that I think has so much potential.
• 1:11:26
  Speaker 1: So long as you mute the annoying and block the
• 1:11:30
  Speaker 1: intellectually dishonest, that that eliminates a lot of the noises.
• 1:11:35
  Speaker 1: And I think there's one other. There's one other tip,
• 1:11:37
  Speaker 1: Barry and and I know you do this and I
• 1:11:40
  Speaker 1: work very hard at it, which is you really want
• 1:11:42
  Speaker 1: to use a service like Twitter. Two feed yourself as
• 1:11:46
  Speaker 1: much disconfirmation as you can. You really want to follow
• 1:11:50
  Speaker 1: people and try to be followed by people you don't
• 1:11:54
  Speaker 1: agree with, people you think are wrong, but you think
• 1:11:57
  Speaker 1: they're intelligently wrong. I have that cast has always had
• 1:12:01
  Speaker 1: that role with me. We are frequently on the opposite
• 1:12:04
  Speaker 1: side of the trade. And if I like a market,
• 1:12:08
  Speaker 1: or if I'm long term bullish and Doug this short
• 1:12:10
  Speaker 1: term bearish, he forces me to sharpen my argument. On
• 1:12:16
  Speaker 1: the other hands, I've been negative on gold for about
• 1:12:20
  Speaker 1: four or five years, and when someone challenges me and
• 1:12:24
  Speaker 1: their Twitter handle has either the word gold or bullion
• 1:12:28
  Speaker 1: in it, I know I'm not getting a honest, objective analysis.
• 1:12:34
  Speaker 1: On the other side, I want someone to explain to
• 1:12:36
  Speaker 1: me why I should own gold when I don't want
• 1:12:39
  Speaker 1: to own gold. Um, in a way that's objective and
• 1:12:43
  Speaker 1: neutral and dispassionate. Don't go looking for that on Twitter.
• 1:12:47
  Speaker 1: You're not gonna find them. And UM my favorite two
• 1:12:50
  Speaker 1: questions I asked of all my guests. First, what advice
• 1:12:54
  Speaker 1: would you give to a millennial or recent college graduate
• 1:12:58
  Speaker 1: who is just beginning their career in financial journalism? Well,
• 1:13:05
  Speaker 1: I would First of all, I guess the first advice
• 1:13:08
  Speaker 1: I would give you is to make sure you're in
• 1:13:11
  Speaker 1: the right field. There are a lot of smart people
• 1:13:14
  Speaker 1: who would tell you you're crazy for trying to be
• 1:13:17
  Speaker 1: a financial journalist right now, and you might want to
• 1:13:20
  Speaker 1: listen to them. They could be right. The second thing is,
• 1:13:23
  Speaker 1: I'm I arrive earlier and leave later than everybody else.
• 1:13:30
  Speaker 1: Every day I'm find the smartest people you can possibly
• 1:13:36
  Speaker 1: find and learn everything you can from them. Ask everyone,
• 1:13:40
  Speaker 1: what do you read? Whom do you admire? Who's the
• 1:13:45
  Speaker 1: smartest person you know? Um? You know, when I started
• 1:13:49
  Speaker 1: at Forbes in seven, every day I would I would
• 1:13:52
  Speaker 1: read the Wall Street Journal and I would circle in
• 1:13:55
  Speaker 1: red pen every quote from somebody who knew more about
• 1:14:00
  Speaker 1: whatever it was than I did, and then I would
• 1:14:03
  Speaker 1: call that person up, because in those days you had
• 1:14:06
  Speaker 1: to call and I would say, I want to buy
• 1:14:08
  Speaker 1: you breakfast, lunch, dinner, drinks, and then I would just
• 1:14:12
  Speaker 1: download from the person's brain and then I you know,
• 1:14:15
  Speaker 1: I learned something I didn't know before. That's quite fascinating,
• 1:14:18
  Speaker 1: and that worked. You can pick up the phone and
• 1:14:20
  Speaker 1: call somebody. It worked then, and I think it works
• 1:14:24
  Speaker 1: now too, although email is easier obviously, to say the least.
• 1:14:29
  Speaker 1: And and our last question, what is it that you
• 1:14:32
  Speaker 1: know today about financial reporting, investing and journalism that you
• 1:14:37
  Speaker 1: wish you knew thirty years ago? Well, my dad, who
• 1:14:42
  Speaker 1: was a very wise man, had a wonderful expression, which
• 1:14:47
  Speaker 1: was that, And I think I remember this verbatim. It's
• 1:14:51
  Speaker 1: remarkable how much you have to learn about something in
• 1:14:56
  Speaker 1: order to discover how little you need to know about it.
• 1:15:02
  Speaker 1: He goes right back to Dunnan Krueger. There's the experts
• 1:15:05
  Speaker 1: know their own skill set. Amateurs have no clue, right,
• 1:15:09
  Speaker 1: And I think the other the other thing he was
• 1:15:12
  Speaker 1: driving at is that in order to learn those few
• 1:15:16
  Speaker 1: true things that are at the core of everything, you
• 1:15:20
  Speaker 1: have to learn an enormous amount about them. And I
• 1:15:24
  Speaker 1: guess the thing I most wish I had known at
• 1:15:27
  Speaker 1: the beginning was where all this would come out, which
• 1:15:34
  Speaker 1: is that ultimately success as an investor depends on one thing,
• 1:15:41
  Speaker 1: really only depends on one thing self control. M hm.
• 1:15:45
  Speaker 1: And you know when Benjamin Graham said, uh, the investor's
• 1:15:51
  Speaker 1: worst enemy is himself. He wasn't kidding, And in a
• 1:15:57
  Speaker 1: lot of ways, the entire book The Intelligent Investor boils
• 1:16:01
  Speaker 1: down to that one sentence. And great investors have self control,
• 1:16:07
  Speaker 1: and everyone else can't be a great investor. If you
• 1:16:12
  Speaker 1: don't have self control, you don't belong in the game
• 1:16:15
  Speaker 1: where you're not going to prevail at least. Hmm. That's
• 1:16:18
  Speaker 1: quite fascinating. Jason, Thank you so much for spending so
• 1:16:22
  Speaker 1: much time with us and being being so generous. If
• 1:16:25
  Speaker 1: people want to find your work, the entire body of
• 1:16:29
  Speaker 1: your work, I would be remiss if I didn't mention
• 1:16:32
  Speaker 1: Jason's Wide dot com. For those of you who follow
• 1:16:36
  Speaker 1: me on Twitter, and you will notice each morning around
• 1:16:39
  Speaker 1: six ish, you occasionally will see a Today in seven
• 1:16:46
  Speaker 1: and I will reference what happened that day, and I
• 1:16:49
  Speaker 1: probably do that once or twice a week. That comes
• 1:16:53
  Speaker 1: directly from this day in financial history, UM, which I
• 1:16:57
  Speaker 1: then have to edit down to a hundred forty characters
• 1:17:00
  Speaker 1: because it usually starts at about three or four hundred characters,
• 1:17:03
  Speaker 1: and there is an art to getting a paragraph into
• 1:17:06
  Speaker 1: a tweetable sentence. UM. But I find that fascinating. There's
• 1:17:11
  Speaker 1: a lot of great quotes there, there's basically who you are,
• 1:17:14
  Speaker 1: what you've done. Is it safe to say just about
• 1:17:17
  Speaker 1: every column you've written is either there or linked to
• 1:17:21
  Speaker 1: from there? That it can be gotten? Yeah, I mean,
• 1:17:23
  Speaker 1: I'm plus your books plus everything. I like a good
• 1:17:26
  Speaker 1: hedge fund manager. I'm backfilling. But it but it, but
• 1:17:32
  Speaker 1: it takes time. I think I have everything back to
• 1:17:36
  Speaker 1: two thousand thirteen and a lot of stuff back uh ten,
• 1:17:40
  Speaker 1: fifteen or twenty years or more. In fact, I recently
• 1:17:44
  Speaker 1: pulled something from your site that you had re added there.
• 1:17:49
  Speaker 1: I'm trying to remember. It was was like fifteen years
• 1:17:52
  Speaker 1: ago as a speech you had given, and I linked
• 1:17:55
  Speaker 1: to it in the Weekend Reads because it was the
• 1:17:57
  Speaker 1: longer form thing and it I love when I will
• 1:18:01
  Speaker 1: find something that people haven't seen yet and then it
• 1:18:04
  Speaker 1: starts just hanging around going viral, and I'm like, oh,
• 1:18:07
  Speaker 1: I guess everybody else liked it. Also, it was I
• 1:18:09
  Speaker 1: wasn't out on a limb. That was a speech you gave.
• 1:18:13
  Speaker 1: Do you know what I'm referring to? I think it
• 1:18:14
  Speaker 1: was a speech I gave that that I called fat
• 1:18:18
  Speaker 1: tails thin ice. That the one and and that fifteen
• 1:18:22
  Speaker 1: years not seen online for a long time and suddenly
• 1:18:26
  Speaker 1: that goes viral. It's a speech I gave at the
• 1:18:29
  Speaker 1: Morning Star Investment conferency and UH two thousand one, I think, UM,
• 1:18:36
  Speaker 1: where I sort of talked about UH, I guess what
• 1:18:40
  Speaker 1: would I say? A few risks that I'm materialized later
• 1:18:47
  Speaker 1: and UH that I thought the financial advisor community was
• 1:18:53
  Speaker 1: dangerously overlooking. Well, I'm We're out of time, and I
• 1:18:58
  Speaker 1: just wanted to thank you again for spending so much time. UM,
• 1:19:02
  Speaker 1: you've been listening to Masters in Business on Bloomberg Radio.
• 1:19:05
  Speaker 1: If you enjoy this conversation, look up an Inch or
• 1:19:08
  Speaker 1: down an inch on iTunes and you could see any
• 1:19:11
  Speaker 1: of the other five dozen such podcasts we've had over
• 1:19:15
  Speaker 1: the past year and change. UM, Jason's wife, thank you
• 1:19:19
  Speaker 1: again for for coming by my pleasure. Parry, thanks for
• 1:19:22
  Speaker 1: having me. You're listening to Masters in Business with Barry
• 1:19:25
  Speaker 1: Ridholts on Bloomberg Radio.