Animal Spirits Podcast - Why Andy Dufresne Would Make a Good Money Manager (EP.43)

Episode Date: August 22, 2018

On this week's show we're joined by Morgan Housel. We discuss Elon Musk's surprising announcement, the odds we give Tesla for going private, the bubble prospects in venture capital, the impressive rise of Tinder, Peloton & Slack, is loss aversion a fallacy, which fictional character we would pick to manage our money and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing, hosted by Michael Batnick and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the securities

discussed in this podcast. Welcome to Animal Spirits with Michael, Ben, and Morgan Housel is in the building today, so to speak. I was driving on the Long Island Expressway, one of the New York highways the other day, Tuesday, mid-afternoon, and I see a tweet, I'm considering taking Tesla private at 420 funding secured from Elon Musk, and I almost rear-ended the car in front of me. What did you guys think when you saw this? I mean, my first reaction was he got hacked. I think that was most people's first response. Like, there's no way that a CEO who almost certainly has a legal team surrounding him

would do something like this. So I feel like that was most people's response. And that's why the stock, even though the gap between where it is currently trading and $420 a share was pretty big at the time. and it didn't move up that much. I think most people's response was like, no way. There's no way that this is how they would announce it. And I think that's still people can't believe that someone would do that. And, of course, he's being investigated by the SEC.

But that was my first response is no way. My first response was Twitter is amazing. Like, I don't know how a big pet company hasn't bought them up yet when things like this happen on there seemingly all the time. But obviously this one was a pretty big one. I mean, this is probably top five days in FinTwit history, wouldn't you say? Yeah. It has to be. I mean, it was amazing to watch the back and forth thing. And he was like responding to people's tweets. He is, I mean, he's got to be like the biggest troll on

earth right now, right? Speaking of trolls, I just saw literally like two minutes ago. He actually sent David Einhorn a box of short shorts. David Einhorn tweeted it. He sent him a box of like 10 short shorts, which he said he was going to do on Twitter last week. And he actually he did it. And it makes me wonder, like, when he builds cars. Because I know he lives in the factory, but I feel like he's on Twitter more than any of us. And we basically do Twitter for a living. If you read like the Ashley Vance book about him or read any of the pieces about him in like the tech world, like these people are so infatuated to him after they write like their profiles. He gives them the tours of SpaceX and Tesla. And they come away, everyone who goes with

this guy, I feel like comes away a huge believer. So he's obviously equal parts brilliant and an unbelievable salesman and an unbelievable troll. I don't know and I don't know what wins out out of those three. It's hard to think of another CEO who's been like that. There've been a lot of really ambitious and a lot of wild-thinking CEOs over the year. And of course, most of them did not have Twitter at their disposal. But I just feel like I can't ever picture Bill Gates doing this even back in the day. I guess maybe John Mackie of Whole Foods comes to mine as someone who's just been like always kind of a wild thinker and like pushing the boundaries of these kind of social communication norms. But Elon Musk takes the cake so far.

So I read Space Barrens a few months ago and it is a story about basically SpaceX and Blue Origin, Bezos's rocket company or space company. And this jives what he, his current behavior jives with exactly what, how he was portrayed in the book. Just overpromising, unapologetic, just totally over the top. And when I saw this tweet, this is clearly market manipulation. Is it not? It's got to be. Yeah. Imagine like going. This is the purpose of an 8K is to have like a central clearing hub where you can make these kind of announcements in a clear regulatory fashion rather than blasting it out to your followers. Getting investigated by the SEC to own the shorts. Funding secured though is going to go down in the pantheon. Like no matter what

happens, that phrase is going to be remembered, I feel like. It was too perfect. So Matt Levine wrote about this. And I can't, some people are like sick of this. I sort of get it maybe, but I can't get enough of this stuff. So Matt Levine wrote something really fantastic on this. And I'm just going to quote it. He said, the basic premise of U.S. securities laws is that you can't raise money broadly from public retail investors without giving them the disclosures required of public companies. You shouldn't be able to get around that with such an obvious cheat. amusingly named his promotional flamethrowers, not a flamethrower,

to get around shipping rules, banning flamethrowers, and he seems to have learned the wrong lesson from that stunt. I suspect that naming his public company, quote, not a public company, won't actually work to get around security's laws. Okay, next. Finance is secured. Of course, Musk doesn't actually need any financing if he succeeds in his plan

of keeping Tesla owned by the same shareholders, but wearing fake mustaches. That's pretty good. That was pretty good. What probability would you guys give of this actually happening? If you had to put one on there right now. 30% of it actually going through and actually happening.

That's what I told Michael the other day. I think that's about what I'd say. But I think I think the official stance on this is if you say 40% chance, you can never be wrong. That's right. That's true. Let's go 40. Let's go 40.

One dollar about it. No, honestly, if I had to, if I, and I'm obviously we're all just making this up, but I would say much lower than that. Like I would, I would say probably 10% chance. Have there been rumors of who is going to supply this funding? Is this a syndicate being put together? Is it all a soft bank that's going to write a $60 billion check or whatever it is? I can't tell if it's a joke or not, but I think everyone keeps saying Saudi Arabia because they put $2 billion into Tesla. But I mean, nothing would surprise me at this point. That's interesting.

All right, so let's move on and stick with private companies. Or actually, well, Tesla's not a private company, but maybe it will be by the time this is released. By the way, we are talking on August 10th. Everything that we say will probably be stale by the time this is released. But there was a lot of talk on Twitter this week, and there has been talk over the past few months about the shrinking U.S. stock market and investors are being robbed of massive growth in companies like Uber and all the other giant unicorns that are just gobbling up gigantic sums of money. What do you guys think about this? I think it's true to some extent. It's a topic that I felt pretty passionate about it in the past. I've changed my mind a little bit after just digging into some of the data and talking to other people that have done more deeper research than I have. the headline grabbing stat that I'm guilty of using before that the number of public companies is declined by like half in the last 20 years. And if you just take that at a surface level, pretty shocking. Like, that's a big deal. And I think the number of public companies today is about the same as it was in the 1970s during a period when, you know, the U.S. population is more than

doubled. So that's shocking in itself. But of course, the people that have really dug into this have shown that the huge majority of the missing companies, so to speak, are microcaps, tiny penny stocks that don't exist anymore. In some ways, they were able to exist in the 1990s and before that, before markets switched to being quoted in decimals when they're still in fractions and spreads were much wider, which made it more feasible for brokerage houses to have coverage and analyst coverage on small companies that just doesn't really exist anymore. So there have been a lot of structural changes that make sense for why there are fewer public companies today that makes it more comforting to go against the idea that,

we're not losing all the greatest companies to private money. But I think there are some irrefutable stats, just the number of money in private equity, venture capital and private equity, has grown by like $5 trillion in the last 18 years since 2000. That's most of that capital, I think, would have otherwise been in public markets. So that's a tremendous amount of capital. And obviously, not all of that $5 trillion is cannibalizing public markets. It's taking assets that otherwise would have been public, just kind of shifting them around in public markets. But to me, there's no question that public markets could be improved upon, that the quarterly earnings race is real.

I just don't know if some of the stats that people, including myself, have pointed to in the past, really make that case as much as they thought it did. Hey, Morgan, hold on, hold on. Share the mic. You're on an hour show now. Yeah, usually it's Michael stealing the mic from me. So I put out a tweet storm on this the other day because I read that New York Times article. And actually, Mark Cuban jumped in.

kind of the one that has been talking about regulation. A few other people commented. And one thing I didn't know, so we talked about the fact that it's a lot of microcaps, someone sent me a link and it says that there are over 10,500 over-the-counter stocks that trade on the pink sheets. So a lot of these crappy little companies that maybe we've gone public in the past, maybe don't live up to the regulation and the scrutiny these days. But those companies are still out there. They're just really tiny and they're not trading on the stock exchanges. They're mainly used now to enrich senators who can do insider training with them. That's the main purpose of it.

Pretty much. So I think one of the things that's at play in this conversation is availability bias, which always exists. But I'm going to point to, so I guess the thing is that this is very dangerous because mom and pop investors are being robbed of the growth of these unicorns. Again, this is, I'm guilty here, but let's use Facebook as an example. Facebook went public at a $80 billion valuation, whatever it was, and it's added $400 billion in growth to the S&P 500. So retail investors have experienced all of that growth. I just think that because there are so many private successful companies, it's easy to say that this is being concentrated in the hands of the few, the rich are getting richer here, and the rest of us are being robbed. but aren't a lot of people that invest, these institutional investors are not necessarily only rich people. Morgan, can you speak to people that have access to these companies?

Yeah, well, I mean, they're rich people and institutional investors, but institutional investors, pensions and endowments and whatnot represent mom and pop investors, you know, big public endowments and whatnot. So it's one step removed, but by and large, that money does represent what you would consider mom and pop investors. and pop investors. My counter argument to that is the fact that institutional or mom and pop investors are not going to be able to pick through these really tiny companies and figure out which ones are going to win. I mean, I guess if they had a diversified way to get those companies, maybe, but if they're trying to pick through the huge 10,000 number of stocks and pick which ones are going to be winners, I don't think that they're going to have a very good shot at doing that. I totally disagree with that. All you have to do is pick the newsletter, 2999 a month.

It's going to tell you which one to do it. It's easy. all right well the other the other counter before we move off of this the other counter is that these companies are coming public at a much more mature stage and maybe will be less susceptible to you know a 25% drop on their on their IPO day because it's a garbage company like instead of coming public at 4 billion they come in at 15 billion Morgan go ahead I actually kind disagree with that I think we've seen something with for example blue apron and snap because these companies were quote unquote mature companies while they were still venture back companies. And venture investors tend to take a much more loose view on things like profits and free

cash flow because that's not really a factor in how they invest. So when you have a company like Blue Apron that as a venture back company, people said, oh, as long as you got growth, like, don't worry about the business model. Like we can figure that out later. And then pretty much the day that they became public companies, public investors that do care about free cash flow said, what the hell is this? Where is your business model? How does this work? I don't want anything to do with this. So I know it's a small sample size, but both Snap and Blue Apron fit that bill. And I thought it was interesting last year when Stitchfish went public. And people were shocked that it was profitable.

Like the idea that you would have a VC-backed company that was profitable blew people's minds. And that's how it should be. So I think there's just a growing gap between VC and public markets that makes that when those two things collide and they try to work together, it's difficult. Okay, that is a very, very good point. And you might have changed my mind on that issue. So I guess this is just a complicated issue. I think that there is a lot of nuance here and there's good points being made on the

Mark Cuban side of things and the Ben Carlson, Josh Brown side of things. So there was an article in the Wall Street Journal last week, and this is some hell of a lead. Some old economy billionaires have a new calling, venture capitalist. Can't see what would go wrong. You were sold that one. All right. I thought it was good. Gary Tan, who is the co-founder of an early stage venture firm, initialized capital, says to get the really, really explosive growth from technology, you have to participate in private markets now.

I mean, I think in percentage terms, that's maybe true, but in dollar terms, this is going back to what we were talking about a few minutes ago. You know, look at Facebook. In percentage terms, most of the growth accrued to VC investors. In dollar terms, most of the growth has accrued to public market investors. So I don't think it's, you can really look at it one way or another. Like you said, Facebook has accrued $400 billion to public markets, but they probably accrued on making this up, you know, a million percent growth to VCs or something like that. So it's just, there's two ways. Does the fact that we have all these new people coming into venture, is it kind of like the public markets where you can see all these suckers at the poker table now? Is it actually making venture? Some people are worried, well, that's making venture capital harder to invest in.

But in some ways, does it make it easier or is the competition really make it tough to pick through the winners? I think it's different. What you're describing definitely happens in public markets because you're kind of playing in the same, you know, a sophisticated hedge fund, sophisticated investor is playing in the same sandbox as the day trader at home. Whereas in VC, it's really not the same. They're not looking at the same deals. And the really low-end new VC funds that don't know what they're doing, don't, you know, don't have a track record or reputation, don't get. the access to the same deals that the top VCs are looking at. So they're just not playing in the same game. Whereas, you know, Apple stock, it's the same Apple stock for Warren Buffett as it is a day trader.

So is there a bubble in private markets? Yes, but it's going to play out totally different than you see in any other market just because the funds have 10-year lockups. So there can't just be a rush to the door, which is usually the defining feature of the end of a bubble, whereas it just can't really happen in private markets. Yeah, I would say yes, but I just don't know. what it's going to look like in the end. That is interesting. The fact that all those companies went public in the 90s probably helped accelerate that bubble where the fact that companies aren't doing it these days, I agree.

It's going to play out much differently than it did in the last one. So I don't know anything about the financials of this company. So I'm just making the shit up. But the e-cigarette maker Jewel Labs raised $650 million in July at a $15 billion valuation. I mean, I don't know anything about it either, but the number of companies that you would think intuitively would need be raising 10, 20, 50 million that can now suddenly be raising 200, 500, raise a billion dollars. That to me is one of like the warning bells going off. And I think a lot of it, you know, there's a lot of funds in it, but like soft banks vision

fund, that's something when you have basically a hundred billion dollar quote unquote VC fund, you have companies that would otherwise be raising 10 or 20 million that now have the opportunity to raise 100 million, 200 million. And that's when things to start getting wacky. And that's not just like, oh, great, pad the books. When a company raises more money than it needs, like, the natural, the path of least resistance is to just blow it on crazy acquisitions, expansions that are way ahead of the demand for your product. So it'll probably be ugly. But again, I have no idea what the end game looks like. Plus, I think you're discounting the fact that vaping makes you look really cool. Really cool. Yeah. Yeah, that's true. So a lot of these private companies

are actually doing really, really well financially, which we'll get to in a minute. But Morgan, are you watching Succession? No. Okay. So this is basically the plot of succession from this Wall Street Journal article. Now that Disney is closing in on its $71 billion purchase of 21st century Fox assets, James Murdoch is expected to leave the media company his father founded and plans to start a venture capital fund to invest in digital and international media businesses.

By the way, I think you forgot to say spoiler alert on that. Sorry. Do you think it was the same in 2006 where everyone was starting a hedge fund? And this is just like the next iteration of it. Because I feel like that was the story in 2006. Every successful Harvard grad and every successful, like, former entrepreneur, what did they do? They went out and started a hedge fund. And most of those blew up.

And I feel like VC is kind of the next iteration of that. This is just like in 1965 when everybody was starting a mutual fund. So, Morgan, are you seeing this? Also sticking with this article, there was a part of it that it said that people are leaving Silicon Valley. So, quote, although California-based firms accounted for more than half of venture funds managed at the end of 2017, states such as Missouri, New Mexico, Nevada, and Washington saw double-digit increases in VC capital assets on their management, blah, blah, blah. Are you seeing this? And what are your thoughts on the geography of how this thing plays out? Yes, definitely a hell of a lot more growth in those tier two, tier three cities, let's call it. But it's still a tiny fraction. It's a lot of growth among like 1% or something of deals. I'm making that up. But it's still. I mean, still, the huge vast majority of VC deals are New York and San Francisco.

That's 80, 90 percent of it. And then after that, Los Angeles, Boston, Seattle. But so there definitely is growth, particularly in consumer companies across the rest of the country. But it's still, it's not even a, it barely makes a dent. I do find it ironic that all the technology that's being made is making the world more interconnected, but you still have these two cities where everyone in VC has to be, which is, I don't know, what is it, 90% in Silicon Valley. and 10% of New York, basically.

Yeah, exactly. It connected the entire world, but pretty much all of it goes on on like two streets in San Francisco. Right. I just saw this on Twitter. Sorry, I'm on Twitter while we're doing this. I'm addicted. What can I tell you?

Tech billionaire Henry T. Nicholas III was arrested on drug trafficking charges this week at a Las Vegas strip casino resort alongside the ex-wife of an heir to the Wells Fargo Fortune, according to new reports. Wait, what? This guy was busted Tuesday on suspicion of trafficking. heroin, cocaine, meth, and ecstasy. Well, that's what happens in your fund is a down year. You've got to make it up some more else.

And he was probably doing diligence for a fund. I don't know. All right. Hey, it happens. So. You've yet to have a breaking news tweet that's landed. I'm sorry. I'm going to keep trying.

Modest proposal tweeted that Tinder is on track for over $800 million in 2018 revenues. Holy moly. This company, no, this, it, is amazing. And I'm too old to even understand the whole Tinder thing, but it's the kind of, it's one of those other companies where you're like, oh, that idea is so easy and simple, like what they did. And why didn't I think of that? That's the perfect company for that thought. I could totally see Tinder becoming like the altru of the next generation. A sin stock that

people don't want to talk about. Maybe a lot of people don't want to own. But at its core, it's just minting money off of a human urge that's never going to go away and they're going to keep minting money off of it. Yeah, that is good. I'm surprised Scott Galloway hasn't talked about that since he talks about those human urges in terms of Apple, Google, Facebook, and Netflix. Well, Scott, you're welcome. Tinder is the 13th horseman. There you go.

So stick with another company that's doing relatively well, or actually really well in the private markets, is Peloton, which is something that I really don't know anything about. It's new to me because I am not a fitness person. Peloton was founded in 2012, and it makes a $2,000 stationary bicycle, which most people use at home and they pay $39 a month to stream live classes, which I think is a freaking brilliant idea. And the company is on pace to generate more than $700 million in revenue this year. I mean, I think it's a brilliant idea as a business, but why can't you just do that yourself? I don't understand the need for it. I guess I'm just not the target customer for

something like that. Just buy a bike and go out. I mean, the only thing that would worry me about this, and I'm sure they can kind of pivot if they need to, but it's such a fadish industry. Fitness is just like dieting where there's a new one that comes along all the time. I do see they're positioning themselves as a Netflix of fitness, which I assume that means we can retire the Uber of in terms of businesses. It's now the Netflix of is the next thing. It is surprising me that they're getting people to pay two grand for the bike and then an extra $40 a month for, I mean, I go to one of those planet fitness gyms and I pay $10 a month, which is another public company that I really don't know how their business plan survives. But to make things easier for people

in terms of time management, I guess I can see it in that sense. But I guess the point is a lot of these private companies are doing really, really well. This is not like the late 90s when companies without revenue were coming public. Yes, they have numbers. That's true. But even a lot of the big private names have a ton of revenue, but still, once you move further down the income statement, the cash flow statement, it's still pretty bad. Well, Snap is a public company that is, they just reported earnings last week. And here's the lead of a TechCrunch article.

The Stories War has officially killed Snapchat's growth, leading to its first user count decline ever. In Q2 2018 earnings today, Snapchat Daily users shrank 1.5% to 188 million, down from $191 million. And they did beat earnings expectations and revenue expectations. They did $262 million. But, Morgan, to your point, they still lost 14 cents to share. I mean, one stat that I heard, this is last year. I'm sure this is a little dated now, but I heard that's half of Snap's revenue. goes to Google Cloud Fees, which is just an example of like, you have these big vanity metrics

of tons of users or in the past, tons of user growth. But still, if you look at it as a public company business, that's going to be value based off of long-term free cash flows, forget about it. The stat that I read yesterday was Instagram had more new users last year alone than Snapchat has altogether. So it seems like if Facebook wants to, they can just kill any of these companies. I mean, have you guys ever used Snapchat before? I mean, I feel like a dinosaur. I've never used it. All three of us are kind of outside that. I used it and deleted it. Yeah, we're not the target audience for Tinder or Snapchat. That's for sure. So this is a great line. Snaps net loss decreased by 20% year over year. So it only destroyed $353 million this quarter compared to $385 million

last quarter. Pop the funding. And so the stock actually, actually the stock popped 11% after hours and then it closed down to 7% the next day. Funding secured. Nailed it. Well, actually, Finally, funding is secured because Prince Al-Walid Talal tweeted a video of him and Evan Spiegel. He invested $250 million in exchange for 2.3% stake in the company. And the picture that he posted is hilarious. We'll share that one. Okay. So this morning, Michael gave me Ann Morgan some homework, and I put in way too much time

and energy thinking about this. But I think it's a good question. And you got it asked at a CFA event. Is that right, Michael? Yes. So this was, Sloan Artel did this think exercise last night. And so the question is, if you could pick any fictional character to be the manager of your portfolio, who would it be? And I, by the way, I came up with 12 names here. So I'll go last. Morgan, why don't you go ahead? I mean, it has to be Scrooge McDuck, right? There was an episode where you could turn anything in the gold. That's a given. But I have two others for you. One is, is Kenny from South Park because he was always, he was always getting killed, but he always came back. He was just, just that endurance. You just kept coming. Just anything that hit him, he was back.

And then, and I think Linus from Snoopy, you know, they was always, he was, he was super wise and they were always picking on him and beating them up, but he just kept going. So that's what I want someone to manage my money and someone who can just keep taking the punches, but keep going. Good answers. All right. So I have two. And this was really hard.

Maybe I'm just not creative because it took me a while to think of these. And I don't know why I thought of these. This is probably really bad answers. But anyway, my first answer is Mori Ballstein from Zoolander. I don't get that one. We took this in a different track. Well, I'll tell you why. Because he could spot talent really quickly.

He had an eye for Hansel. He was early on the Hansel train. And he knew that Zuland, there was an idiot. And if he is your portfolio manager, you could say that. I feel like I'm taking crazy pills all the time to him, right? That's exactly right. And then the other one is Sherlock Holmes for obvious reasons. I had Sherlock Holmes on my list.

All right, here's a few of mine. All right. So first I thought, how about Rain Man? But then he would for sure blow you up like LTCM. Then, of course, the easy one that I think a lot of people would pick is Dr. Spock because he doesn't have emotions. I also put Will Hunting on here from Goodwill Hunting, but he'd probably get overconfident. And I just thought, but Lisa Simpson would be a good one I thought.

Wait, hold on, hold on, hold on. I know, I got a lot of these to get through. All right, I have on here Bradley Cooper's character from Limitless because he takes those pills that make him ridiculously smart. Professor Xavier from the X-Men because he can look into the mind of other investors. Would that be insider trading? Oh, that's true. Maybe that's what Eon Musk is doing.

I had Marge Gunderson from Fargo, because she's such a good, you know, the movie Fargo? That's one of my favorite movies. How the hell did you think of that? I feel like you have to be a good, like, detective. Like, they always say a good reporter has to be a good detective, and she was good at that. And then finally the- Hold on, hold on, question. What?

So when William H. Macy leaves, when she's in his office and he's getting like really perturbed that she's asking all these questions about the car and the lot. And he leaves and she says he's fleeing the interview. And she's like sort of frantic scraming. That's one of the best scenes ever. Yeah, she's great. Now, so here's my final answer, though. Andy Dufrein from Shawshank. You put a lot of thought into this. I really did. But he's, I mean, he's a good member, how he took the warden for all his money and he's a good CPA. So he'd watch my taxes. And so I feel like Andy Dufrain is the answer. I can't wait to read the follow up blog post to this. That's true. It could be a lot. Yeah, Ben, yeah, this would be a good post, Ben.

Morgan, what's your favorite book of the summer or even if it's not new? What's, what's been on your brain? Two of them that just came from you. I'm curious where you found these books, but one was the biography of Walt Disney. It's called American Original, which was fascinating. Walt Disney is a character that obviously everyone knows, but no, I feel like I didn't know anything about him other than his work. but reading about his personality, he was just a crazy lunatic maniac manager, but the most visionary genius of all time, I think. And then the other book that you recommended was Rocket Man by Robert Carson, which is a story of Apollo 8, which is, again, something that I knew pretty much nothing about. And Robert Carson is such a good storyteller, that that book was one of those. Can't put it down once you start it.

So both of those recommendations came from Twitter. The Disney, I can't remember who it was, but I just saw somebody tweet to somebody else. Somebody asked the question of which Disney book do I read because there's a really, there's like a 700 page book one. I forget what it's called. I got the long one and I couldn't make it through it. Okay. So this one was authorized by the family.

Somebody tweeted that. So that sold me on this one. And to your point, I also knew nothing about the man and his partnership with his brother and all the stuff that he did for World War II. I think I said, I watched that entire video. I was like, holy shit, this is insane. And then the other one, Rocket Men, that is the same author of Shadow Divers, which I think Patrick O'Shaughnessy brought to finance Twitter. And that was recommended to me by somebody on Twitter, Deep Blue, sent me that.

And that was probably my favorite book of the summer along with Bad Blood. It was the way that it was written, the space race, the history of 1968, which was just a truly iconic year. Maybe iconic is the wrong word, just a huge year for our country. here maybe. Yeah. Okay. So my one, I don't know if I'd recommend this one to the masses, but so this was a Michael Mobison recommendation. I can't remember what podcast he set it on. But this book called Behave, the biology of our humans that are best and worse. And I'd recommend this one to you, Morgan, if you haven't read it yet. It's like 700 pages. So it probably took me six months of picking it up and putting it down. But this guy, Robert Sapolsky, I've

never heard before, basically goes through every single biology and neuroscience study ever published before. And his whole point of the book is how you're, it's kind of like a nature versus a nurture thing, like what impacts your decisions and your actions more? And his conclusion is kind of like, it depends what kind of person you are and what environment you're in. And it shows how the way that we're wired, that definitely impacts how we make decisions, but it's also what situations you're in. And so it's, it's like, I had to put it down because it almost got too technical at times, but for someone who's into money and psychology, this one was definitely worth slugging through.

Speaking of money and psychology, there was something this week that was sort of a head scratcher and I didn't read it, but the thing about how loss aversion is not a real thing. To me, that's one of the- Barry right on my recall on it, yeah. To me, that's one of those things that I can't prove or disprove, but I just know it to be so, just based on all of my experiences and everything that I've read and seen, I don't think that's controversial. I can't even understand how people,

don't feel losses twice as strong as they feel gains and why we hold on to our losers and sell our winners. Everything in me tells me that the disposition effect is very, very real. What is the argument, the short argument for why it's not real? Honestly, Barry came in and tried to talk to me. I said, honestly, I don't even want to hear it. I don't stop. I don't care. I think a lot of it had to do with the fact that they were trying to replicate the studies and they did them a little differently. So my favorite, like, real world example of this, have you guys ever read Andre Agassiz's biography? It's really, it's really good and it goes kind of beyond tennis. He said, he kind of said, winning the winning

Wimbledon changes nothing and he said, a win doesn't feel as good as a loss feels bad and the good feeling doesn't last as long as the bad. So he was saying that like he remembers his Wimbledon losses way way than the wins. And I feel like that's a perfect way to explain loss of version. Well, here's another. I feel like the three. Go ahead, Morgan. As I say, I feel like the three of us know this as writers, whereas if someone compliments a post, it feels good, but you forget about it where someone criticizes a post, really your week. Yes, totally. So, well, here is some data to back this up is I forget where exactly this shakes out,

but the experiment, would you rather a 50-50 chance of winning 1,000 or zero or a short gain of 500? Basically, everybody takes the $500. But if you flip that question and you say, would you rather a 50-50 chance of losing a thousand or zero or locking it a $500 loss, everybody takes the gamble. everybody will toss the coin, right? Because we view losses and gains asymmetrically. And to me, that's like the short and the long and the short of it. That basically steals it for me. I feel like so many of these studies that try to ask people questions like that are probably

overestimating people's ability to really think through that question. So even if the study shows one thing, it's like, no, in the real world, if you lose money, it hurts. That's just what you got to know. And that's why I think your reaction, Michael, of like, I don't care what the study says, this is real. I put more faith in that than the question, than the, studies and ask people these elaborate questions about probability. And by the way, I think that's the first time I've ever, ever reacted so strongly about something where I was like just so dismissive. I honestly don't even care. I don't want to know about it because I just, I know this to be true. I'm with you. All right, gentlemen, this was good fun, good clean fun, was it not? We really did

it. Good times. We did it. Made it.