Motley Fool Hidden Gems Investing - Michael Lewis on The Undoing Project

Episode Date: March 10, 2017

Facebook signs a deal to stream soccer. Vail Resorts heats up. And Bojangles' stumbles. Plus, best-selling author Michael Lewis talks about his new book, The Undoing Project: A Friendship that Changed Our Minds.     Learn more about your ad choices. Visit megaphone.fm/adchoices

Your summer travels deserve an upgrade. With select Chevrolet, Buick, GMC, and Cadillac vehicles connected by OnStar, you can stream, game, and more on the go. Whether you're headed to a music festival or a cottage getaway, you can access hundreds of apps on Google Play right from your center display. Explore OnStar tech today at OnStar.ca and discover how to take your summer to the next level. OnStar. Better never stops.

This episode of Motley Fool Money is brought to you by Casper, an online retailer of premium mattresses for a fraction of the price, because everyone deserves a great night's sleep. Get $50 off any mattress purchase by visiting casper.com slash fool and enter the promo code fool. Everybody needs money. That's why they call it money. Chris Hill. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Show. I'm Chris Hill, and joining me in studio this week, from Million Dollar Portfolio, Jason Moser and Matt Argersinger, and from Hidden Gems, Chief Investment Officer Andy Cross. Good to see you, as always, gentlemen.

Andy Cross. We've got the latest headlines from Wall Street. Best-selling author Michael Lewis is our guest this week. And as always, we'll give you an inside look at the stocks on our radar. are. But we begin with the beverage industry. Move over soda, there is a new leader in the U.S. According to the latest research, Americans drank more bottled water in 2016 than soda. And Jason, we've seen soda consumption on the decline for over a decade, but I was still a little surprised by this news. I actually was not. And the reason why is because I look at myself and I think,

Wow. I mean, I have been so ingrained in my Diet Coke habit for so long, and if I have made such a drastic change in my Diet Coke consumption, and I really have, you look at the kids today, I mean, soda does not maintain the same position in the typical U.S. household that it did perhaps when we were growing up. And I think that's just a real proxy of what's going on here. When's the last time someone brought a soda into this studio for this show, and just sat down in a Coke bottle right here? I mean, I'd like to believe it.

I mean, I see a water bottle, I see coffee, I see tea, we've got coffee. I feel like I did it probably at some point this week, but I mean, to your point, this really was a matter of when, not if. And if you look at just one example, look at the litany of Coca-Cola's earnings reports, where it seems like every quarter, sparkling beverage unit case volume declined 2% for the quarter, and still beverage unit case volume grew for the quarter. And that's just been the story for the last probably two to three years. And so, again, it's not a surprise. The health benefits are clear. Well, and I think I applaud Coca-Cola for making some pretty early investments in those

kind of still beverage areas, Honest Tea being one, which is a really popular one, and just diversifying as much as they can. It's still amazing to see that such a, I don't know, is it fair to say staple of the American diet has come down so much? Now, I know they have a lot of growth outside of North America, overseas, internationally, emerging markets, and so there's still obviously healthy demand for carbonated beverages. But I'm surprised too to see the decline. Well, and Pepsi was on this years ago when they expanded into the snacks business, which is very nicely profitable, and actually is under a lot of pressure as well, too, and

they're starting to diversify away from that, and trying to get more than half their sales tied to more healthy alternatives for people outside of soda and snacks, too. So, it's definitely the trend that's playing. If these guys aren't picking up, there are plenty of upstarts, and really young, innovative companies are going to come in and take that share from them. And let's be clear, while water is on the rise, it is, in particular, packaged water. So, I couldn't help but think about a company like SodaStream when I was looking at this story, where they've got the reusable bottles, and you can make your own carbonated water,

that sort of thing. And one ripple effect of this story is the ecological one. Bottle water sales on the rise, that's great in terms of health, except if we're talking about health of the planet. Well, I think more places are also setting themselves up with water coolers like we have, for example. I mean, I'm drinking more water, but it's not like I'm buying a bottle of water every time. I'm just refilling that same bottle. So, we'll probably see more and more of that type of behavior as well, which certainly doesn't hurt the environment. Yeah, and like La Croix, which offers their seltzer water in a can as opposed to a bottle,

which is far more recyclable and better for the environment than the bottles that you get from some of the other providers. The battle for live sports programming just got more interesting. Facebook has signed a deal with Major League Soccer and Univision that gives Facebook exclusive English language rights to stream at least 22 regular season soccer games in the U.S. This is going to start later this month, Matty. We knew they were going to jump in at some point in a bigger way, and they've done just that. Smart move. It follows in the heels of what Twitter did last year, breaking the

ground with the NFL Thursday night games. I think, as we know, as people, we were talking before the show, as people are cutting their cord and just relying solely on the internet, one thing, whether you maintain Netflix, HBO, Amazon Prime, or maybe you have some kind of skinny bundle out there, but the one core thing that's often missing is live sports. And if I can rely on some of the social media platforms, Twitter, Facebook now, to get my sports, and by the way, I think soccer is the right place to be. If you look at Facebook's 1.9 billion monthly users, about 35% of them are connected to at least one sports page, and the vast majority of those are soccer fans, which is not surprising given the world

popularity of the sport. So, I like the bet here by Facebook. I think it's the right vertical, I think it's the right sport. I couldn't help but think of Yahoo when I saw this story, because remember, it was a couple of years back where Yahoo made headlines because they were going to live stream an NFL game. And we sat here in the studio, and one of the things we said was, this may work, this may not work, but I guarantee you that Facebook and Google are watching how this test goes for Yahoo, because if it goes well, they're just going to jump in and say, said, well, if Yahoo can do it, we can do it, too. Yeah. So, you know how with your kids, you kind of look at them and you say, OK,

there's things that happen throughout your life, and you look at them, perhaps, as examples of what you don't want to do. So, I think Facebook, Twitter, Google, they watched what Yahoo did there, and they thought, OK, that's the precise example of how not to do this. We don't want a London football game with the Jacksonville Jaguars. We like the idea, but we're not going to do it quite that way. I mean, to Matty's I think, yeah, you look at sports, it is consumed live. It's one of the most engaging things out there for sports fans. I mean, that's all they really want. And so, when you look at platforms like Facebook, Twitter, YouTube, they're trying to figure out the best ways

to boost their engagement. They have a lot of data on what their users care about. And so, we look at something like Twitter, for example, we were talking about this morning, they're going to ramp up with about 1,500 hours of video esports content this year. Part of that is because they know that that core Twitter user base really likes their e-sports. So, when you have the data where you can really cater to what your users want, it becomes kind of a no-brainer to start investing in that content, because ultimately it does boost engagement, and that's a positive. Yeah, Yahoo's got to stick to streaming the Berkshire Hathaway annual meeting. That's

about all they're doing really well right now. Guys, stop me if you've heard this one before. Shares of Ulta Beauty hitting a new all-time high this week after fourth quarter profit and revenue came in higher than expected. Andy, when we talk about retailers attempting to go after the omni-channel approach, you look at what Ulta Beauty is doing, and they're really setting a great standard in terms of how to balance e-commerce and physical stores. Yeah, you got that right, Chris. Mary Dillon came on a few years ago as a CEO and just really revolutionized that inside the Ulta business, and their e-commerce sales were up 60% last quarter. They'll probably be a little bit not that quite explosive in 2017,

probably, but still 40% growth. This company continues to just knock it out of the park on both the retail side and the e-commerce side. They have 22 million people tied to their membership rewards. I think that's twice as much as Starbucks'. It's just a substantial amount, and those people drive a lot of their sales and a lot of high return sales, both in-store and on commerce, where their comp growth still continues to be 13. I mean, I think last quarter, the comp store growth was up 17%. That includes e-commerce, but just in the retail environment alone, which we all know the struggles retailers are having. For Ulta, the retail comps were up 13%. And their salon comps were up 9%. So, they continue to do it well. And cosmetics is

probably one of the only areas really doing well inside retail, if you're not named Amazon. Or if you're not a home improvement retailer like Home Depot or Lowe's. True. Good point, Matty. Yeah, it's remarkable. Looking at Ulta, we've had Ulta on our million-dollar portfolio watch list and not bought it, stupidly, for a long time. But you try to identify those businesses that are truly Amazon-proof, and by all accounts, Ulta looks like it's completely Amazon-proof. Yeah. Just another factor, Chris, is that their sales are up 25% in the quarter

and up 24% for the year, and their store footage was up 11%, and their average inventory per store was up 11% as well, too. So, you just think about the economics, that works its way through to the bottom line, and that's why their earnings grew 30% last quarter and 30% for the year. Well, Andy, you talk about the cosmetics industry in general. e.l.f. Beauty also hitting a new high this week. They had strong fourth quarter results. I was completely unfamiliar, I mean, come on, the name of the company is e.l.f. Beauty, which, as I sense learned, e.l.f. stands for eyes, lips, and face. Yeah, don't Google that. You'll get some interesting little photos if you Google

e.l.f. Beauty. It does stand for eyes, lips, and face. It's a really relatively new company, newly public, so all-time high. It's all relative. Venture Capital still owns most of the stock, 40% of the stock. And you're right, it's basically a fast fashion business, cosmetics business, that is offering own-brand products, much different than Ulta does, which offers 20,000 different products across 500 different brands. E.L.F. is really just its own thing. It's a $1.2 billion company, $1.3 billion company compared to the $17 billion for Ulta. So, much different business. And I mean, Ulta continues to grow actually faster than E.L.F. does even on the size. E.L.F. has some opportunities because of the way they operate

to potentially juice those growth rates, which has investors excited, which is why it sells at six-time sales versus three-time sales for Alto, but that's a lot of growth baked into a very young company. Shares of Children's Place hitting a new high this week. The Kids Apparel retailer putting up strong numbers in the fourth quarter and announced that they are doubling their quarterly dividend. Jason, this is not like $0.02 to $0.04, they're going from $0.20 to $0.40. Yeah, and we talk about this challenging retail environment. You would look at this

Children's Place news and think, oh, these guys must be immune to all of this. That's not actually the case, really. This has been a fascinating stock to watch. If you look over the past five years, top-line revenue for this business has remained ultimately flat. It's gone nowhere. But in the same period, we've seen the stock price more than double. So you start trying to wonder, what are they doing to actually make that happen? At least over the past couple of years, they're relying on that big retail buzzword we've come to know so well, omnichannel. As the internet takes over and e-commerce spreads its presence where these businesses are trying to take advantage of their physical infrastructure

and translating that into more digital sales. I think that Children's Place is doing that to a degree, but I think they're also letting technology wring out some efficiencies in the business. And so, while sales have remained flat, margins have improved. And I think that is something that's slated to continue. And ultimately, I think management has just done a very good job of bringing results down to the bottom line. I mean, we can see that through modest growth in net income, better growth in earnings per share. And that is partly because they brought the share count down about 25% over that same period of time. So, this is a good example of where, no, it's not a business that's sort of firing on all

cylinders as Ron Gross might say, but management is really doing right by shareholders here in managing the business well and ultimately looking out for all stakeholders involved. And ultimately, this brings me back to one of my better investments I ever made, and that was in Gymboree. And it was right after I'd become a father. And as you guys know, I have two daughters. So, I made the leap pretty quickly that with Gymboree, if a company had figured out how to make it easy for a dummy like me to buy clothes for little girls and actually do okay with it, there was something there. And I think that Children's Place is a similar style of investment. I mean, that is just a specialty retail niche that really

is tough to disrupt. Gymboree was taken private not too long after that by Bain Capital. I wouldn't be terribly surprised to see private equity take an interest in Children's Place either, because this is a good business. I mean, they're not going to be growing that store base, but I think we can expect to see modest top-line growth and continued operational efficiencies play out pretty well for shareholders. Coming up, more earnings and a few stocks we've got on our radar. Stay right here. This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about,

and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argersinger, and Andy Cross. Shares of Vail Resorts hitting a new high on Friday after second quarter profits and revenue both came in higher than expected. Matty, they are crushing it. If you want to see a thing of beauty, a beautiful mountain,

look at Vail's stock price over the last five years. from $40 to over $190 on Friday. It's a thing of beauty, and so is Vail's business. They're not making new mountains, and so Vail's got some of the most premier resorts. That's a tough business to get into. It is, but once you're into it, some of the premier resorts across the world, Vail, Breckenridge, Keystone. They recently acquired Park City in Utah, Whistler. They actually bought Stowe Resort in Vermont, which is a mountain I used to ski when I was growing up in New England. So, they have just some of the best mountains across the country. And they have the Epic Pass,

which, if you don't know, is this annual pass that skiers can buy. And it gives you unlimited access to all the resorts. You can ski as much as you want. And as that portfolio of resorts grows, that becomes more and more compelling. And of course, if they get you to the mountain, you're buying equipment or renting equipment, you're buying food, you're staying at the hotels, that's all money flowing directly to Vail. And so, great results. They raised their dividend 30%, by the way, too. I would just add that this is a company that's made a lot of acquisitions, trades at a high multiple, and at some point, there just aren't enough good mountains to buy anymore. So, the growth is probably going to slow down at some point.

Bojangles' fourth quarter was the company's 27th straight quarter of growth, which is good because same-store sales fell off a ledge in February. And Jason, that's not my observation, that is Bojangles' CEO, Cliff Rutledge. They fell off a ledge. You never want to hear the CEO say that. No, you don't. And I think that's really the base question for this company in 2017. The stock was off to a good start for the year, but they have really had a lot of challenges growing those comp numbers. And guidance for 2017 is not all that encouraging. There's a lot of competition out there, it's just fast food. I certainly love the food that

they're lobbing up there, but there is a lot of competition. I think the restaurant brands deal to acquire Popeyes, which is a bigger competitor in the space anyway, is probably going to add to those competitive headwinds. And let's not forget, the wild card in all of this, hey, the Bojangles of the future, right? I mean, that actually is a technical thing that they're doing. It's improving their store experience. I feel like we've kind of left this one slide lately, but let's go back to the Biscuit Theatre that they're talking about there. I mean, you walk into a Jangler and you're sitting there watching the Biscuit Theatre? I mean, that sounds compelling, Gross. I don't know about you, but I at least want

to go check it out. I would definitely check that out. All right, let's get to the stocks on our radar this week, and we'll bring in our man Steve Broido in from the other side of the glass to hit you with a question. Andy Cross, you're up first. What are you looking at? Nike is reporting sometime in the next week or two. Obviously, a well-known brand and well-followed here at The Motley Fool. Continuing to look to see if they can maintain some gross margin and what's happening on the international growth side. So, I think it's a stock that's reasonably priced. I think it's a stock you can buy and hold through thick and thin.

Phil Knight's still tied to it. Lots of great, amazing brand power in Nike. And Under Armour's struggling a little bit, so Nike may be a way to go. And the ticker? N-K-E. Steve, question about Nike? What's Nike doing in the personal fitness space, a.k.a. Fitbit space? They pretty much got out of it with their Nike Fuel Band,

which I actually still have a couple at home. I'm looking at maybe putting them on eBay. They have gone the other way than Under Armour, who has spent, I think, close to a billion dollars in that space. So, I think they're patiently saying, you know what, we're going to own apparel and own it well. Jason Moser, what are you looking at? Yeah, we always talk about ways to get healthcare exposure, and one of the businesses

I've been looking at, HCA Holdings, ticker HCA. Healthcare is tricky. You want to look for the leaders in the space that have advantages that are a bit more difficult to displace. I think the facilities themselves are pretty difficult to displace, and that's what HCA does. they operate 170 hospitals, they have 118 freestanding surgery centers all around the country. And I generally think there's a lot of high fixed costs that come with a business like this. But healthcare, it's not like the restaurant business, right? It's pretty resilient and everybody's looking for it. So, generally speaking, I like what they're doing and the stock has performed very well. It's one I got my eye on. Steve, question about HCA?

Do you worry in the face of repealing potentially of Obamacare and Trump's stuff? Is this concerning to you, healthcare-wise? Listen, I'm just trying to figure out a way to get done in the studio so I can get to my emergency center and get this cough checked out, Steve. I'm going with Crown Castle International, ticker CCI. I think last time I was on the show, I mentioned American Tower. I just love the wireless infrastructure space. You've got one of the biggest tower operators here alongside American Tower. So, Crown Castle, nice 4% dividend yield. Steve, question about CCI? Who's your cell phone provider? I'm an AT&T guy, regrettably sometimes. Steve, three very different businesses.

You got a stock you want to add to your watch list? I'm going healthcare today. I like it. All right, we'll wrap up so Jason can get out of the studio and get his cough checked out. Andy Cross, Matt Argersinger, Jason Moser. Guys, thanks so much for being here. Thanks, Chris. Up next, it is the one and only Michael Lewis.

You're not going to want to miss this, so stay tuned. You're listening to Motley Fool Money. Yeah, we'd save it all up for a rainy day, but it's always sunny. Guess all the happiness in the world can't buy you money I got an old work truck, it'll barely get me to town and back I'd try and put in a little more overtime, but that don't pay no... All right, before we get to Michael Lewis, got to say a quick word about Casper, an online retailer of premium mattresses for a fraction of the cost. Casper is revolutionizing

the mattress industry by cutting the cost of dealing with resellers and showrooms and passing that savings directly on to the consumer. Casper is made of supportive memory foam for a sleep service with just the right sink and just the right bounce, and they offer free delivery and painless returns within a 100-day period so you don't have to lie down in the showroom, which no one wants to do. That's the worst part of buying a mattress, is going to some bright showroom and lying down and trying to pretend like it's actually the room you're going to sleep in. Casper's mattresses are made in the U.S. They offer free shipping and returns to the U.S. and Canada. And you can save an additional $50 towards a mattress purchase by going to casper.com slash

fool and entering the promo code fool. That's casper.com slash fool and enter the promo code Fool. Terms and conditions apply. Welcome back to Motley Fool Money. I'm Chris Hill. Michael Lewis is the author of such bestsellers as Liar's Poker, Moneyball, and The Big Short. His newest book is The Undoing Project, A Friendship That Changed Our Minds. Michael Lewis, welcome back to Motley full money. Thank you, Chris. The Undoing Project focuses on the relationship between two Israeli psychologists, Daniel Kahneman and Amos Tversky, who created the field of behavioral economics. What should investors know about the work of Kahneman and Tversky? You know, if you go back to the beginning of what is one of the great secular changes in investing,

which is away from stock picking and towards indexing, you find the people who are writing about that referencing them because they're saying at the same time you're saying uh you know stock pickers are no better than throwing darts at the wall street journal why is it these experts get these wrong get things wrong and and commentary explaining that so they they're they they're woven into the history of wall of wall street in addition i'd say i'd say that since what they were doing was showing you the way your mind makes systematic misjudgments when it's dealing with uncertainty. You are, in the markets, constantly dealing with uncertainty, and your mind's constantly making these sorts of mistakes they describe. So it's nice to be

aware of them. These are two very different people. Amos Tversky is an extrovert, very self-confident, very comfortable being the center of attention. Danny Kahneman is not just an introvert. He is, as you go through this book, he is plagued with self-doubt. I'm sort of tempted to ask, how in the world did these people deal with one another? They're just so different. Well, it's funny because their colleagues, when they met at Hebrew University, asked the same question. Nobody could understand why they'd have time for each other. And I think the answer is that they're both actually totally original, totally interesting minds, and were able to see the interest in the other person's mind right away

and operate on a level with them in a way that two really great tennis players who never play with anybody as good as themselves but might enjoy playing with each other, they enjoy just the play. And I think that beyond that, Kahneman was constantly like a snake eating his own tail. He was constantly tearing up his ideas as soon as he had them because he was so doubtful about himself and them. And I think that the richness in the work grows out of Tversky giving Kahneman the confidence to think his thoughts and stick with them

and to see the value and help him see the value in the thoughts. So it starts, I think, just with pure pleasure. They're like, oh, my God, this person is as good at thinking as anybody I've ever met, And I can play with him in a way I don't play with anybody else. And it ends with, oh, my God, we're going to play in the field of the mind. We're going to figure out how people think. And we keep stumbling upon insight after insight after insight that we both find interesting. So it must be interesting.

You have visited full headquarters here in Alexandria a few times. One of those times was after the book Moneyball was published. And you said that one of the central lessons of Moneyball went largely ignored. And the lesson was that essentially be careful what you measure because it can become fetishized. Do you think there's a lesson from Kahneman and Tversky's work that is being ignored or misinterpreted in some way? Well, yes. The big lesson is the big misreading of their work is that people are stupid. That's not what they were saying.

What they were saying is that the mind is wired to make certain kinds of mistakes. the fellow who were hardwired for certain kind of fallibility there's different from stupidity it's not like smart people won't make these mistakes fakes and stupid people will if we will all make these mistakes it's part of human nature uh... so it's wrong to demonize uh... the era it's funny because you say that

you know it is true that one of the federal weapons of moneyball people ignored that they just held this week misleading statistics were baseball before people started to think about the rigorously vividly you know batting average become fetishized uh... and it's actually not a very good indication of your value to an office uh... davis actually took it further in their work by showing that

any kind of number that you introduce into a discussion numeric discussion uh... will completely discord distort the discussion if u it where they did if you have people spin a wheel of fortune with the numbers 1 to 100 on it, and then ask them what percentage of the countries in the United Nations come from Africa. If they spot a high number, they guess a high number, and if they spot a low number, they guess a low number. I mean, we get anchored in numbers and statistics in a way we need to be really wary of. Did your work on this book change the way that you think or the way that you make decisions?

because part of my reaction to this book is it's a little unsettling just to think of how, as you said, how the brain is wired and how there are just far more mental traps out there that we have inadvertently set for ourselves. So the answer is yes. and there are some specific examples I can think of that I now kind of adjust for. Mistakes I know my mind is making that I adjust for. One example is they show very clearly how the mind thinks in stereotypes. Even if you don't think you're racist or sexist or whatever,

and you aren't at some deep level, you still think in stereotypes. If you've never seen a woman in a certain role, you don't think you don't think of a woman in that role and uh and so um in my life when i'm choosing people for roles in my life i lean against that now that if i see someone who's looks exactly like they belong in the role i'm suspicious and if like i don't know if someone who's going to be my doctor doesn't look like a doctor i feel better because i figure that if they don't look if they don't look the part maybe their only reason they are the part is they're good at the part um i do you know danny had this observation um while he was training uh

israeli fighter pilot instructors uh that the the instructors told him how criticism was much much more like valuable as a as a teaching tool than praise because and he said why he said because when they do something really great when they're flying and we praise them they get worse and when they do something really when they're flying and we praise we and we criticize them they do better And they point out how, you know, that's just regression to the mean. It's an illusion. Your praise and your criticism is not why they're regressing to the mean. So actually in my life with my kids, and when I coach all my kids' teams,

I have started to lean against my tendency to criticize because I know the world is trying to tell me that my criticism is more valuable than my praise. There are lots of little things like that. The bigger thing that they did for me is just give me a lens, you know, that I look through the world, when I look at the world, I sometimes think, what would Amos and Danny think of this? And that often leads to interesting answers. So when you look through the lens of Kahneman and Tversky at the presidency of Donald Trump,

what do you see? Oh, my God. Well, in the first place, he's like a lab rat for them, because he's pure intuitive judgment. He has no sense of needing to check his gut instinct. and so he makes all the mistakes that they would predict someone would make who is not checking their intuitive judgment. Watching the election through their lens, it was really interesting to see

the way all sorts of people who never predicted that Donald Trump would win the election afterwards had very detailed explanations about why he won the election. So as if it were predictable all along, which it wasn't. Even Donald Trump didn't think he was going to win the election. I know for a fact his whole family liked making vacation plans afterwards. And then, oops, he won. So Danny Amos were very good at showing the way people kind of cover their mental mistakes, the tracks of their mental errors, by making up stories, explaining,

either explaining them away or explaining why they basically could have seen what they didn't see all along. So essentially eliminating the uncertainty in the world, making the world seem more knowable than it is. And I'd say that's a big thing I see when I'm watching Trump, is that what he's done is introduce a whole new level kind of degree of uncertainty into our lives, which is why it feels so unsettling. You never know what he's going to do next and what's possible seems to have expanded. And people are constantly kind of covering this up or trying to rationalize it. And when it's not rational at all, it's just pure uncertainty. I mentioned Moneyball before, and one of the things that comes up in Moneyball and other books of yours, including this one, including The Big Short,

there's this theme of the role that confidence plays, for better and for worse. What separates people who are able to successfully harness their confidence from those who are just blinded by overconfidence and end up paying the price? well i'd say the big difference is uh is an ability to know at a deep level when you're dealing with an uncertain situation some judgment you have to make some risk you have to take um that all you can control is the process that the the outcome is inherently unpredictable and so what you do is you bring that spirit of confidence to the creation of a really good process.

You don't bring it to, oh, I'm going to promise an outcome. The manifestation in the markets of overconfidence is people trading too much. People make way more decisions than they should make because they think their decisions are good. And that's the deadliness of overconfidence is making decisions you don't need to make. Coming up, I'll talk with Michael about the business of writing and we'll play a round of Buy, Sell, or Hold. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money. Chris Hill here in studio talking with bestselling author Michael Lewis about his new book, The Undoing Project, A Friendship That Changed Our Minds. I want to ask you a couple of questions about writing before we wrap up with a round of Buy, seller hold. When you pitch this book, the relationship between Danny Kahneman and Amos Tversky to your literary agent, to your publisher, was there any pushback at all? Because sort of on the surface, other than the fact that you're the one writing it, on the surface, this doesn't seem like a book that a publisher is rubbing their hands together with glee at. It's funny you say because the reverse was true i i i was the one who was um i i i i created my own pushback my

publisher when i told them what i wanted to do was riveted by it uh and pushed me um and said don't worry about it being a little bit of an unlikely subject for you so was money ball when you took on baseball. And I thought that being innocent to the field of psychology and being only partially informed about the state of Israel and having a dead subject in Amos Tversky was going to be debilitating. And that made me very nervous, so that I dragged my feet for six or seven years before I actually got to the book while I was gathering strength. The publisher said, don't worry about it. This touches so many aspects of human life. If you do it well, lots of people will be interested. It seemed like a little bit of Danny Kahneman's

self-doubt creeped in. Yes, that's also the problem. This is absolutely true, that I'm a bit of a chameleon, and I take on the colors of the people I'm writing about. And Danny Kahneman does not give one confidence. Well, and not to give too much away from the book, but there's a part where he's trying to get friends of his to convince him not to publish a book. Yeah, he pays them. He pays them the right hatchet jobs of his book to persuade him that he shouldn't publish it. So that's the spirit in which he engages in his literary life. I can't afford to be that way, and I'm not that way.

But a bit of him did indeed rub off on me, and he was dubious enough about the project that he contributed to the speed at which I moved. So I think this question is not so much about your writing, but maybe about your emotions around your writing. A number of your books have been optioned for movies, The Big Short, The Blindside, Moneyball. And I know that you are largely not involved once that happens, once the book gets optioned, you get your money, and then the studio does what it does. I am curious, though, does it affect your emotions when you start to hear news of who's involved in a movie, when you hear that Brad Pitt is the one who's championing

Moneyball, or that Aaron Sorkin's going to write the script, or that Adam McKay is the one who is at the helm of the big short? Do you get more excited, or are you detached from the moment you get the check? well so all this happens well after the book is done so it doesn't affect how i'm working on the book uh how i i regard all of entertainment so and i don't take much of it that seriously because i get told a lot of things that end up not being true so you never know uh when the movie actually starts to get made it's great it's fabulous especially if you feel like it's in the right hand and i've never felt it was in the wrong hand so it's you think oh this story is going to get

out in a different way to a much bigger audience. So from my point of view, the movie business has basically been pure pleasure. All right, we'll wrap up with a buy, sell, or hold. This is a private company with embattled leadership. Buy, sell, or hold the future of Uber. Hold. Why? I mean, the idea is conquering the world. I'm more worried about who's going to – the guy who's running the place clearly has some issues, and that's a problem. They do have competition. That's a problem.

I don't think the political pushback from taxi cab companies is going to be a problem in the end. The consumers are going to get what they want. So I worry they're going to find just competition in the marketplace, that they do have first mover advantages, but those aren't insurmountable. If people get really pissed off, they move to Lyft or wherever. So Uber, I feel okay about it. I'd hold it. But I wouldn't go buy more. Next week, the SEC is expected to decide on a proposed rule change

that would clear the way for a first-of-its-kind ETF. Buy, sell, or hold Bitcoin? So you're asking, do I think the value of Bitcoin is going to go up? Yes. Do I buy Bitcoin? Well, I never have. uh... and i could

i guess um... here's the problem i thought i think cell and i tell you why uh... that bitcoin at its heart is basically a oh uh... a libertarian enterprise uh... it's basically anti-government anti-central authority uh... so on and so forth and

open money to really work require some central authority behind it. And I don't believe Bitcoin is going to be socialized. I don't believe that we're going to have, I don't believe that the society is going to organize itself around it or behind it. That's not to say it's not going to pop up a little bit here and there, but I just don't, I wouldn't buy it. I wouldn't buy it. I don't trust it. This is the next big thing, unless of course it isn't, buy, sell, or hold driverless cars. by um well i think one day but this is a long-term a long-term buy um one day people

are going to look back and say how on earth did we ever let people behind the wheel of an automobile they read connor and tversky's work uh i mean it's in the carnage in the world as a result of human drivers is spectacular you know a million people die every year in automobile accidents worldwide, a million people. I mean, with driverless cars, there will be people who will die, but it won't be anything like those numbers. So I think one day it will be illegal for a person to drive a car. And finally, Las Vegas bookies give them the second worst odds to win the American League pennant. Buy, sell, or hold the Oakland A's going to the World Series in 2017. So that's just a, you're not even giving me odds. You're saying 50-50 shot. Well,

that's a that you don't you don't you sell that um come on the cubs the cubs last year gave me the bookies odds i take them right now because i think they i think they always they always underestimate the a's but um but you'd have to give me the odds right now i think the odds are about 90 to 1 i take them absolutely i take that the new york times calls the undoing project one hell of a love story. It is available everywhere, and it is a bestseller because it's written by the best nonfiction writer in America, Michael Lewis. Always great to talk to you. Thanks for having me, Chris. Remember, you can check out past episodes of Motley Fool Money and all of the Motley

Fool's podcasts at our podcast center. You can get there just by going to podcast.fool.com. You can also find us on iTunes, Spotify, Stitcher, Google Play. Anywhere you find podcasts, you'll find The Motley Fool's suite of podcasts, including our two daily podcasts, Market Foolery and Industry Focus. Next week on those two shows, it's South by Southwest week. You're definitely not going to want to miss that. We're going to be going to Austin, Texas for the South by Southwest Interactive. So, check that out. That is going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.

Thank you.