Motley Fool Hidden Gems Investing - Motley Fool Money: 10.03.2014

Episode Date: October 3, 2014

On this week's show, our analysts discuss the surprising jobs numbers, eBay's PayPal spin-off, and Wayfair's red-hot IPO.   And we talk with John Lanchester, author of How to Speak Money: What The Money People Say - And What It Really Means. Learn more about your ad choices. Visit megaphone.fm/adchoices

Everybody needs money. That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Chris Hill. Joining me in studio this week from Motley Fool One, Jason Moser.

From Motley Fool Supernova, Matt Argesinger. And from Million Dollar Portfolio, Ron Gross. Good to see you, gents, as always. We've got a hot IPO, a spinoff we've been waiting for, and a proposed merger that we can't make sense of. Best-selling author John Lanchester will help us break down the language of money. And as always, we'll give you an inside look at the stocks on our radar. But once again this week, we begin with the big macro. The jobs report for September is out.

We added 248,000 jobs. The numbers for both July and August were revised up. Ron Gross, the unemployment rate. The rate has dropped below 6%. it sits at 5.9. First time in six years we've seen it below 6%. The big takeaway for me is that more people went back to work here. It wasn't just a function of that fuzzy math we talk about where people left the labor force. We actually have people working. The U6 number we sometimes talk about, which is a more full measure of employment, actually dipped under 12% to 11.8. That looks good

as well. The economy really appears to be picking up steam. Yeah, and Matty, there were some people looking at the numbers that we had over the summer, which weren't bad, and thinking, well, it's not going to get any better than this. This kind of sets us up for a nice end to 2014. It does. I mean, the numbers for previous months were revised up. And so far this year, we're averaging over 220,000 new jobs a month. You have to go back to 1999 when we had that consistent number of pace consecutive months with that kind of labor increases. So it's great news. So I agree with Ron. Jason, we also had some big macro news from the automotive industry.

The September sales were out, looking really good for GM, looking really good for Chrysler, not so much for Ford Motor. Not so good for Ford, yeah. It's interesting to see sort of the juxtaposition there. For the longest time, really, Ford has been sort of holding the stronger hand there. But, yeah, I mean, GM and Chrysler both benefiting from more of the higher demand for trucks and SUVs. And Ford, conversely, had to get in there and really actually slashed guidance by around $1.5 billion for the year, which is obviously very significant. I mean, Mark Fields, welcome to the big leagues, baby. He, I think, is benefiting from a company that was really set up for success with Alan Mulally's tenure there.

And so I think that he's going to be just fine. And it's good to see, I think, with GM, Mary Barra going on the offensive there, really trying to bring that brand power of GM back to the forefront of the consumer's mind. But, yeah, great, great September sales. And Warren Buffett, he's liking cars, too. He just bought a big car business. Yeah, Ford didn't do well because that's the one I own, of course. But I saw some stuff about how they pulled back on purpose on the F-150, the 2014s, 2014s to make room for the aluminum 2015s is there truth to that or is that just a bunch no there is

truth i mean i think part of ford's weaker numbers was sort of the cycling out of older models and preparing for new releases and they were going up against some really tough comps so a little bit of a victim of their own success and it's not something that i mean i think that honestly the market overreacted to those numbers and uh ford is ford's in a bit better shape than i think the Marco, to have you believe today. Yeah, Ron. This is me wiping my brow. Don't worry.

Shares of eBay hit an all-time high this week when the company announced it will spin off its PayPal business as a separate company in 2015. Jason, this is something that's been talked about for years now. PayPal represents such a huge percentage of eBay's profits. So, it'll be interesting to see how it does as a standalone company. Long-term, though, I don't know what this does for eBay. Well, I think that really, if you look at this, you compare the two, I think that eBay is the loser here, right? PayPal is definitely the winner.

And I think that e-commerce in general is the big winner from this. For the longest time, I think PayPal really served a wonderful purpose for eBay. It certainly generated a lot of traffic for eBay, gave eBay a lot of information on its customers. And this really only makes sense for PayPal because PayPal really is playing into that bigger long-term trend in mobile payments and e-commerce. Amazon.com will probably benefit from this because I imagine we'll now see PayPal being facilitated into that platform, which it isn't right now. And so, yeah, I think that eBay long term, you know, when this spinoff happens, I would not be one interested in owning eBay on its own. I think PayPal is by far and away the compelling part of this equation. I agree with Jason. I disagree a little bit about eBay.

I think this is one you don't want to forget about. This is still a giant in e-commerce. And I think eBay now, in a focused marketplace business, could make some serious acquisitions. I mean, I think MercadoLibre is a name that comes up quite a bit. They already own 18% of it. I think eBay is going to make some moves here beyond, once they get sort of this, I almost feel like PayPal is kind of a cloud hanging over them a little bit. I mean, it's a great business, obviously, but getting that away

and then focusing really on their marketplace business could do wonders. I love MercadoLibre, actually. I own shares of MercadoLibre. I thought it was very interesting to see that really the leadership will not be sticking around for this. You know, the leadership is going to be changing. That was surprising. Maybe not a coincidence on the spinoff of PayPal and the timing here that this comes in the wake of Apple announcing Apple Pay. I need to quote our colleague in Australia, Joe Mager, who was very quick to defend PayPal and saying, look, if you're sizing up PayPal versus Apple Pay, here's a quick summary. One already has massive adoption with merchants and consumers.

The other is Apple Pay. So he's right about that. But I don't think there's anyone who looks at Apple and thinks that they can't make a very serious game of this. No, I mean, it's huge. I mean, Apple's got the platform. I mean, it's got the hardware platform that can make all this work. And those are millions and millions of people around the world. It does.

But let's also remember that Android really is the one that rules the world here. I mean, they own the global market share with their operating system. And, you know, there was a little bit of bickering there, I think, between Apple and PayPal. I think that PayPal is going to really benefit from the proliferation of that Android operating system around the globe. On Thursday, Wayfair became the latest hot IPO of 2014. The retail company describes itself as having one of the largest online selections of furniture, home furnishings, and decor. Matty, shares rose 30% on day one. Is this a stock I want to put on my watch list?

I'm not sure, Chris. I mean, it's a $30 billion company post-IPO. This is a company that did about $900 million in revenue. last year, probably going to do about 50% more than that this year. So you're saying you're not sure? It's certainly growing, but you're paying 25 times sales for a company that, yes, home furnishings, this is not something particularly that people go online to buy. If you look at the share of home furnishings bought online, it's around 7%.

So it's not a great online category right now. If you want to get excited about Wayfair, I think you have to bet not only that people are going to be really buying things like mattresses and cabinets online, not only are going to be doing that, but Wayfair is actually going to lead that at 25 times for 2014 sales. So I'm skeptical. Yeah, Jason, I was going to say, if I want to own shares of an unprofitable online retailer, I can just buy Amazon, right? I was going to say, just go buy Amazon anyway, because Amazon, actually, one of their third party suppliers is, in fact, Wayfair. So you might order something from Amazon that comes

from Wayfair. And with Amazon, you're getting not only every benefit of Prime, but you're also So, getting, obviously, a logistical genius in Jeff Bezos, a distribution model that gets you things in one or two days flat. I think the biggest weight on Wayfair to date is they don't have that distribution presence. They're going to pay a lot of fulfillment costs, and you're still not going to get those items in a very, you know, it's not going to be a speedy process. And one more thing about the IPO. This is Class A shares that they've issued. Management's holding on to Class B, which have 10 times the voting rights as Class A. So management's holding on to the management and ownership of this company.

Investment firm Starboard Value has taken a stake in Yahoo. And, Ron, their first order of business was to send a letter to CEO Marissa Mayer urging her to basically take the Alibaba money that Yahoo is going to get and spend it to buy AOL. Yes. Well, they actually did something. We'll get to that in a second. Are you familiar with the Reverse Morris Trust, Chris? No. Please enlighten me.

First, they're recommending that they spin off the Yahoo core business into a separate entity and leave Alibaba and Yahoo Japan in the entity that we now know as Yahoo. Unlocking that value, something like that would normally cost them about $16 billion in taxes. This reverse Morris trust gets them out of that. So you save $16 billion according to Starboard. I haven't run the numbers. I must be honest. So that could be quite a bunch of savings. and unlocking value of those international components could be quite a boon to the valuation

of Yahoo overall. Now, let's get to the AOL part of that. They think about a billion dollars in cost savings and synergies. We hate that word around here. That's what Starboard says could happen from a combination. I don't love the idea. I'd like to see them return a lot of their capital that they now have to shareholders, 50% at least, perhaps more. Sure, there'll be acquisitions coming. I just don't think the AOL one makes that much sense. Well, and since Starboard sent this letter, it has sort of started this discussion online of should they or should they not buy AOL? But it seems that everyone agrees on one thing, which is that Marissa Mayer is almost certainly going to have to spend this money. And it seems

like there's going to be pressure on her. I'm just curious, at what point does the pressure really start to kick in? When does she need to make a splash? Well, I think she can appease shareholders for a while with return of capital, whether it's dividends and share buybacks. But that won't last forever. So sometimes, let's call it within the next 12 months, people are going to start to say, OK, where is this business going? There's enough financial engineering going around. We appreciate the return of capital. But where is this business going?

What are you going to buy? Coming up, former Fed chief Ben Bernanke is reportedly making $250,000 per speech. But there's one thing his money won't get him. 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 Argesinger, and Ron Gross. Guys, shares of the Walt Disney Company up on Friday on the news. The chairman and CEO, Bob Iger, is staying on for an additional two years. Jason, this takes him through the middle of 2018. And as a shareholder of the Disney company, I could not be more happy. I was going to say, my daughters are shareholders of Walt Disney, and I know they're going to be thrilled by this news. Do they follow Mr. Iger's works?

There's a little sarcasm there, Chris. Anyway, I mean, how good is it to be Bob Iger? I mean, this guy is really in demand. And, I mean, shareholders have won just tremendously with his, you know, CEO position there at Disney. And this is going to help him sort of see, you know, the opening of Shanghai Disney, you know, starting off the Star Wars franchise. And really, he's going to be able to be a part not of only getting that kicked off, but really watching it develop and happen. And, you know, Disney's interesting, and they don't have a chief operating officer at this point. Now, I think they're going to be bringing someone up to actually maybe take that position here at some point and start trying to groom some leadership.

But, yeah, I mean, he's done so well for this company. It's just a trifecta of awesome acquisitions in Marvel and Pixar and Lucasfilm. And I think shareholders ought to be very encouraged by this. Yeah, well, you just said it. I mean, it was the acquisitions, which, you know, early on seemed pretty bold. I mean, Pixar in particular, but then Marvel. Bold and pricey. Bold and pricey.

But gosh, I mean, I don't know what the internal return on investment those acquisitions have made, but it's got to be tremendous for Disney, just given all the sort of different ways they can monetize them. You mentioned the chief operating officer. Reports are that by the middle of 2015, Iger is going to bring someone on, presumably to groom them to be CEO. There are a couple of internal candidates, the CFO, Tom Staggs, who heads up the theme parks division. I am curious, though, what are the odds that it is an outsider? Keep in mind, Iger himself was promoted from within the Disney Corporation to be CEO. But I think the smart money right now has to be betting on an internal candidate. Yeah, I think it really does have to be internal. Just because there's not a COO doesn't mean there isn't capable talent working underneath him.

And I think that really this is, you know, it's all a matter of semantics at this point. And I think to go outside, it would certainly, I think it would be belittling to the talent that they've developed in that company. And so I imagine that odds are betting on that internal hire. Former Fed Chief Ben Bernanke seems to be doing well. He's making a reported $250,000 per speech, but that is not preventing him from being denied a home loan at a conference in Chicago this week. Bernanke said the mortgage market is so tight that when he tried to refinance his own home loan recently, he was denied by the first lender he went to. Ron, what? There's no way that can be true unless he doesn't have any equity in his home. Otherwise, he's got to be a good credit

risk. Maybe the conversation went like this. What's your name? Ben Bernanke. What's your job? I don't have one right now. It's like, well, then we're denying you. Do you think that's how it went down i guess you'd have to go back to the day where there was those no doc loans where you didn't have to prove an income anybody could get it could be that telling you i mean i've refinanced two houses in the past couple years and the paperwork that's required now if you that doesn't surprise me at all just on the site of it if what's your job i don't have one okay you're declined denied not gonna happen then i mean i think maybe you have to kind of look a little bit deeper and see oh wait this is you know well my question is i mean why does ben

Bernanke even need a mortgage. I mean, he obviously, I mean, he's an economist. He's trying to maximize his capital. I understand that. But the man makes so much, I mean, I think his house, I think it was appraised at $800,000. Just buy it. Just pay off the mortgage. I will lend him money at 4%. Ben, call me. There you go. Drop us an email, Ben, radio at fool.com. We'll hook you up. Before we get to the stocks on our radar, I should mention once again, if you are looking to get started investing,

we've got a special offer on Motley Fool Stock Advisor, which is our flagship service here at The Motley Fool. It's a great way to get started, and you can find out more just by going to mfmoney.fool.com. That's mfmoney.fool.com. Check out Motley Fool Stock Advisor. Let's bring in our man from the other side of the glass, Steve Broido, as we get to the stocks on our radar. He's going to hit you with a question. Ron Gross, what are you looking at this week? I've got to go back to InvenSense, INVN, a company I talked about a couple weeks ago when Steve was out on paternity leave, I believe.

I recommended it at around $23, and from that moment forward, the stock started to fall. And we're about in the $20 per share range right now, and that's on the heels of them actually being in the iPhone 6, which everyone was really waiting to see. So it's a lot of kind of buy in the room or sell on the news going on, but I think it's an even more compelling buy than I did two weeks ago when I recommended it,

a company that makes motion sensors, everything from gaming systems to iPhones to digital cameras. Steve, if you liked it at 23, you're going to love it at 20. Question about InvenSense? I do love it because I'm a shareholder. But my question for you is smartwatches. Is that where this company is going to shine? I think wearables are certainly going to be a huge business for the motion sensor industry.

And generally, this particular iWatch or Apple Watch, I guess we should call it, not going to make or break it in any way. It's more about, as the CEO says, the Internet of Things is coming. and he calls it really the Internet of Sensors, and there's going to be huge opportunities across the board. Matt Argersinger, what are you looking at this week? I'm looking at SolarCity, a company, SCTY is the ticker. This is a company I'm pushing hard on my Odyssey One team and Supernova to make part of the portfolio. I just look at the market that they're going into, the value proposition of their products,

of installing and customers having no upfront costs and paying monthly fees that are much lower than utility expenses. Great business. I expect it to be huge in the future. Steve, question about SolarCity? If I'm a homeowner, do I really want to rip my roof off and put panels on and go through this? Do I want to do this? No need to rip the roof off. It's very easy to install these things. I live in a townhouse.

Where am I going to put them? All right. Steve, forget it. You're not getting solar panels. I think we can all agree Steve's hiring someone to do that job. I don't think he's doing that on his own. I could be wrong. Jason Moser, what are you looking at?

I'm going to go back to the well on MobileIron. I pitched, I think, MobileIron to you a few weeks back, and ticker is MOBL. This is a company that provides the mobile platform for enterprises, both small and large businesses. It basically allows these businesses to secure and manage mobile applications, content, devices. It gives businesses a mobile presence. So you could, in theory, see the Motley Fool one day as a customer of MobileIron, for example. But it is playing into the bigger, the long-term trend of enterprise mobility management. And for the longest time, where BlackBerry was strong there, what we're seeing, obviously, is the employees prefer to be able to choose their own device.

And that's what a company like MobileIron allows these companies to do, is to give employees their own choice. Capital-like business model playing into a bigger long-term trend there. I really do like where this company's going. Steve? Does enterprise stuff really mean anything anymore? What does enterprise even mean? It's just business, Steve. It's just business.

No, I mean, this is a market opportunity that's projected to be about $50 billion in the next few years. So it is somewhat significant. Steve, you got one you like? Well, I may go SolarCity. I'm not going to take my roof off, but I believe someone will do that. I think it's a neat idea. All right. The sun's coming up every day.

Brian Gross, Jason Moser, Matt Argersinger. Guys, thanks for being here. Thanks, Chris. Thank you. Coming up, we'll head to London and talk with bestselling author John Lanchester about the language of money. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Bestselling author Michael Lewis calls our guest this week one of the world's great explainers of the financial crisis and its

aftermath. John Lanchester is a regular contributor to The New Yorker and the New York Review of Books. His latest book is How to Speak Money, What the Money People Say and What It Really Means. And he joins me now from Motley Fool Studios in London. John, thank you so much for joining us this week. Thank you, Chris. What got you interested in this topic? It's a kind of spin-off or the publisher wouldn't want me to put it like this, but it's a kind of benign tumor that grew out of a novel I was writing. I was writing a novel about London called Capital. And I was very interested in the way that London has changed

and kind of altered over the years. And it occurred to me that one of the key drivers in that process has been what we call the City of London, which is the equivalent of Wall Street, and finance, which has got bigger and bigger as part of the national economy and the city's economy. And I suddenly realised I can't actually understand this city and indeed the modern world without getting some sense of how finance works.

So it grew really from there, from wanting to just understand the world of money and economics and how it works. One of the great examples that you give very early in the book comes out of the financial crisis, which is, and I had to write this down because this is something I would never remember on my own, a financial derivative that played a role in the financial crisis, which is referred to as and i'm quoting here a vanilla mezzanine rmbs synthetic cdo i know i mean i can understand how certain words evolve over time but john this sounds like something where people were going out of their way to create investment vehicles that made no sense whatsoever That's right, Chris.

And I think, you know, it's interesting. Whenever you have a book out, you're asked a question you aren't really expecting and it keeps coming up. And the one that keeps coming up in relation to this is, is it deliberate? You know, I wasn't expecting that to be such a preoccupation, but lots of people are really interested in the fact of whether the kind of obfuscation that you're talking about, you know synthetic cds is vanilla mezzanine all that whether in some sense it's intentional or whether it's kind of accidental byproduct of the of the complexity of the things they're talking about and i i think my view of that is is that it doesn't really matter you know someone who's

the levels of language of that level of obscurity you know super synthetic cds is made of synthetic CDOs based on RMBS you know is that a deliberate attempt to pull the wool over our eyes or is that just someone spouting super complex acronyms and actually it doesn't matter because if you're bamboozled and you know flummoxed and don't know where to begin to get your head around understanding these things it doesn't really matter whether the person doing it to you is doing it on purpose or not the net effect is that you can't even begin to follow what's being talked about. And then, of course, you know, there is a question about whether that the underlying complexity is so great that in a sense, these things shouldn't exist. And maybe it's too crude

and too simple. But there's something interesting about the idea that if you can't explain it simply, that that product is actually too complicated. Well, this investment vehicle aside, you also write about words that have essentially come to mean the opposite. This is a process that you refer to as reversification. And let's start with the word credit. Credit is the real biggie, I think, because, you know, you don't have to be all that old to remember when there was this really scary, bad, negative thing called debt. And people were brought up thinking that they should avoid it. And they were brought up thinking that debt cast a shadow over your life. And if you had debt that you were in a form of

servitude you know you were working to pay off someone else and that debt was a bad thing and you shouldn't have it and then suddenly you know it's difficult to put your finger on the exact change but i think it happens probably some point in the 1980s it turns out that there's this new thing the financial service industry has a new thing which is actually really great which you want lots of which opens up possibilities and expands your life and makes you know um impossible to do things you wouldn't otherwise dreamed of and this new thing is called credit which of course is just debt it's just it's magically turned into this other thing and debts associations are entirely negative you know etymologically it's linked to ideas about owing whereas credit is

linked to belief and faith and it's completely positive and there's the gigantic explosion in in debt which is i think you know a martian economist studying planet earth's accounts would be the thing they were most struck by from about the 80s onwards is just how debt corporate but personal and governmental debt has rocketed. And I think a lot of that part is just to do with this, what I call reversification of the thing that used to be called debt now turning into this thing called credit. You're listening to Motley Fool Money, talking with John Lanchester.

His new book is How to Speak Money, What the Money People Say and What It Really Means. It was this time, six years ago, that the financial crisis was unfolding. now that you have six years worth of a rear view mirror what is your main takeaway from the financial crisis i think for a lot of people the the sense i get is that it's actually still 2008 you know we're still in that moment um and the various ways in which the system might have changed or reformed to have worked better for ordinary people haven't really happened i think

there's a really, really strong sense that we're like flies stuck in amber, you know, still in that moment. I think that, of course, if you talk to people inside the world of finance, they say that's completely wrong. There are 847 billion new rules. Everything's changed. It's, you know, there are a plethora of new regulations and marginal changes and alterations. And, you know, I think banking is much less fun than it used to be, people keep saying, to which I say good for a start and also um crucially that the big systemic changes haven't really happened i think you know the reasons why another version of the crash couldn't come along again next week are hard to seek really so the the main thing i i feel about it i think about it is that

the kinds of change that ought to have been implemented not so much at the time of the bailout because i think with even with the fully functioning rearview mirror i think it's hard to see how the system didn't need rescuing. But the reform that should have happened afterwards just hasn't happened. There's a gigantic missing piece, which is that the stuff that states collectively needed to do to fix this didn't happen. Well, and there also seems to be the ongoing challenge of dealing with innovation in the financial industry as well. We had Michael Lewis on the show recently, he was talking about his most recent book, Flash Boys. And one of the things he talked about was just how few people

on Wall Street really understood what was going on with high frequency trading. So the lack of understanding was extending to senior executives on Wall Street and presumably in London in the city as well. Yeah, it's a straight, you know, funny thing is, once you educate yourself more about this stuff things don't necessarily seem less surprising sometimes the more you find out about it the more surprising things it are and i think that you know never fails i can't quite get my head around this thing about these gigantic systemically central publicly underwritten institutions the banks at the kind of director and senior level literally not knowing what they were doing you know it's very hard to process that that you have people in these institutions

who literally don't know what their own firms are doing and i think it is linked to the question of complexity and it's also linked to a thing about you know what the financial sector means by innovation because you're right to use that word and it's the word they use and at the same time you know for the point of view of people listening to this show you know it'd be quite nice to have some innovations that benefit us? You know, the innovations are always of carving out extra pieces of rent, or carving out extra percents from the gigantic flows of capital that happen all around the world. But what about innovations that actually benefit us? And I think it's an astonishing indictment of the sector that that thing Paul Volcker said now Paul Volcker is no bomb throwing,

you know weatherman slash hippie slash revolutionary trotskyite he was a central figure in in the global financial system he's the guy who broke inflation really under first carter and then reagan he's a you know he couldn't be more of a uh a capitalist than the free marketer and looking back over his long career the thing he said when he thinks about innovations that have benefited ordinary consumers and ordinary customers the only he can think of only one and it's the ATM machine. And, you know, I know it's funny, but it's also really, really dark that that's true, that we have half a century of alleged innovation. And all we have to show for it is the ATM. Coming up more with John Lanchester. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money. Chris Hill talking with bestselling author John Lanchester. So what is the net effect for people like you and me or for people who struggle with being able to speak money or really understand? Because I don't want to get too dark here, but part of me is genuinely concerned when I hear things like senior executives on Wall Street don't understand what's going on with the own systems that they themselves have helped create. But it's also possible that you can't understand them when, you know, the guy, there's a director of stability at the Bank of England, which is the equivalent of the of the Fed. And I mean, I also, by the way, I love the idea of there being someone called director of stability. I'd quite like to have my own director of stability. We could all do with one. And, you know, when you look at some of the these derivative, these black box, black box derivatives, as they're called, because the people buying them don't know what's inside them and all the people selling them. they're designed by the the computer geniuses they have up to a billion lines of computer code

now the thing about that is actually you can't understand that there's no um point thinking that there's no grown-up in charge there is no adult supervision there's no there's no cop and the i think the takeaway from that is that the regulation you know it can't tweak and fiddle and adjust things at the margin it needs to be much more fundamental and i think it needs to head in the direction more of um something like the um the drugs business you know the medicine business where products are products are banned until they're proved safe is where it's that way around where you have to prove that a product can't implode and cause serious losses not to the investors because you know that's up to them big boys don't cry and all that but to um to the to

the people who underwrite the banks i.e the taxpayers and i think a move in that direction towards a much more sort of simpler model for what banking is supposed to do would be, you know, positive for all of us. Speaking of bankers, your father was a banker. What did you learn about money from him? He was. I mean, it wasn't the kind of go, go, let's use derivatives. Oh, whoops, we've accidentally blown up the global financial system type banking so popular today. No, it was much more the old deal where, you know, you looked at someone's business plan,

And you talk to them and decided whether or not to lend them money, which is now sometimes mocked as what they call the 3-6-3 model, where you take deposits at 3%, you lend money at 6%, and you're on the golf course by 3 o'clock. But, you know, that kind of banking seems to me fully defensible. You can see the social utility of that. You can see what it does for you and me. You know, that's kind of my mortgages. If I had a business, that's the kind that would be lending me money. And you're getting some exercise with the golf. Unless you use one of those really cool cart things.

That's true. But yeah, so he didn't talk much about it. But it did give me a sense that I think a lot of people feel kind of put off this subject in advance. What I call pre-baffled. You know, they've sort of decided that it's impossible to get their heads around it. And because my dad worked for a bank and therefore I knew it was just, you know, fallible people making decisions for, you know, what seemed like good reasons to them but might turn out to be mistakes afterwards,

that it gave me a feeling that, you know, I could get my head around to it, that it's not sort of inherently too complex to follow. I think that was very important for me. I think the feeling that I had permission to understand it, because I think a lot of people don't feel they do have that permission. I listened to a previous interview you had done where one of the things you mentioned was your dad's belief

that if you don't spend time thinking about money, then then you're doing pretty well yeah when i was at college my dad didn't like talking about money in general but when i was at college he once said to me completely out of the blue have you got enough money which was out of character for him as a question i remember thinking because those days the state paid for education in the uk so i said i don't know i never think about money and he instantly in a very heartfelt way said oh well that means you're rich and i i often think about that i've never forgotten it because it struck me as a very profound idea that you know what we all want really is just never to have to think about it

um for money to be in effect solved for us and so i think there's quite a deep you know we as it were because we're we're grown-ups we have to engage with this stuff because nobody's going to do it for us and you know i deeply agree with the whole motley fool project in this respect i think it's really important to democratize this stuff and give people the tools and at the same time, in a way, in an ideal world, none of us would devote a second's thought to it. How do you invest your own money? I just do what I'm told, actually. I had a financial advisor. Who's telling you to do this?

I had a financial advisor from a zillion years ago. The first, I mean, I didn't earn enough money to, it wasn't an issue until my first book came out and I had a few quid. And I just, you know do what i was told with him in relation to um it's a british equivalent of a 401k and i just stuck it in there um but i don't um you know i don't follow it very avidly mainly because i have a fair you know a fairly deep distrust of the industry and also because the way that the rules you know the governments can constantly rewrite rules on savings and pensions and stuff like that. And I think it's very easy to always underwrite the element, underestimate the element of regulatory risk in these things. So the main thing I think about that is I just

keep trying to work hard. So we know there are no real easy answers. I don't think it's reasonable to expect, whether it is intentional or not, that the people behind some of the language we've discussed are going to cut down on the obfuscation. With all that in mind, what is one thing that our listeners can do to better speak money, to better understand money? Well, I think, you know, most of your listeners are the people who are already taking charge, I suspect, you know, that I think that what they're doing is the right thing to do and i think the the first step the crucial step is is a psychological one of realizing that you are the grown-up you know there is no no one's gonna come along and do it for you there's a wonderful old peanuts cartoon from back in the day

about that feeling that you have when you're in the back of the car you remember that feeling when you're back in the back of the car and your parents in the front and you know you feel completely safe and looked after and you know where you're going and they're taking care of it and i can't remember who says it what to who i think maybe it's linus or lucy someone says you know the thing is the day will come when you're in the front of the car and there won't be that feeling anymore and whoever he's talking to just says hold me and the thing about this in relation to money is we're in the every single one of people listening to this are in the front of the car but i think the crucial thing is if they're listening to motley fool and following it that

they already know it and i think that's the main thing before i let you go i have to ask because in a previous life you were a restaurant critic now there are a lot of we all have guilty secrets i you know there were a lot of uh there are a lot of questions i could ask you about the restaurant business that sort of thing but uh our producer matt greer said that the question i really should ask is if the next time i go to a restaurant i want to subtly or not so subtly make the people working at the restaurant believe that i am a restaurant critic and therefore i may be able to dupe them into getting better service better food etc what should i do i the full and complete answer to that can be given in one word notebook because the restaurants are full of

people typing away at cell phones and um you know messaging each other and messaging the person who's sitting across the table for them and you know updating their facebook status photographing the food all that so when i was trying not to be noticed there's one because i've been a restaurant critic twice with a 20-year gap and the thing that changed the second time it was much easier to be anonymous because everyone spots a notebook, but if you're typing stuff on your phone, no one can see it. Whereas the only people who write things down in a notebook at a mealtime are professional restaurant critics. And I've seen it. I mean, you know, many, many times and all my peers and colleagues in the business all agree that, you know, the one thing you can't do if you don't

want to get busted is take notes in a notebook. We have to wrap up the interview. I have to go buy a notebook immediately. The book is How to Speak Money, What the Money People Say and What It Really Means. It is already a bestseller. So by all means, go out, pick up a copy of wherever books are sold. John Lanchester, thank you so much for being here. Thank you very much, Chris. That's going to do it for this week's edition of Motley Fool Money. Remember, you can always drop us an email, radioatfool.com is our email address. That's radioatfool.com. Our engineer is Steve Broido. This week's show is mixed by Rick Engdahl. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening, and we'll see you next week.