Motley Fool Money - When Investing is Irrational

Episode Date: March 25, 2023

Should you save in a 401(k) or is it better to keep that money available in cash? Justin Richmond is the host of new podcast “Started from the Bottom”.  where he interviews successful people who grew up on the outside – people of color and people who grew up in a world where almost nobody went to college. He’s also the co-host of the popular music podcast "Broken Record" podcast alongside Rick Rubin, Bruce Headlam, and Malcolm Gladwell. Ricky Mulvey caught up with Richmond to discuss: - Learning the unwritten rules of business - How class and upbringing affects attitudes towards money - The relationship between musicians, Live Nation Entertainment, and dynamic pricing Company discussed: LYV Host: Ricky Mulvey Guest: Justin Richmond Engineers: Dan Boyd, Annie Franks Learn more about your ad choices. Visit megaphone.fm/adchoices

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getting out of college and I went to go start my first job and I was signing my onboarding paperwork and I was doing it. I was at my mom's house hanging out with my mom and so I was doing that at her kitchen table and I got to the section where I was asking me about 401K contributions and I remember asking my mom like should I should I contribute? And she was like no better to have cash in hand. Don't contribute. I'm Chris Hill and that's Justin Richmond. Host of the brand new podcast started from the bottom. He's also co-host of the popular music podcast, Broken Record. Ricky Mulvey caught up with Richmond to talk about the challenge of investing when money is scarce, the rise of dynamic pricing in music and entertainment, and the business rules that

aren't taught in college. Maybe an overly broad question, but growing up, what was your family and your relationship with money like? Um, man. Uh, yeah, yeah. Um, money felt scarce. We weren't poor by any stretch. I mean, we weren't, but it certainly money felt scarce, and it felt like a thing to be respected. There was a high premium put on looking as if you had money and not necessarily in like some gross keeping up with the Joneses kind of sense, but sort of presenting yourself as sort of you can fit in with people who, you know, the way I sort of thought about money for the longest time was, you know, that it was a scarce thing, hard to get, but was a thing to, but, but was certainly something to want to collect, you know,

it was like if I could somehow manage, you know, the other thing would be, you know, when you're a kid and you don't have a ton of money in your family, you know, but you're still a kid. Like, you still want certain things. You see your friends behave in a certain way. You behave in that way. And I just remember a common refrain in my household was, you know, you better, you better make a lot of money when you grow up if that's how you're going to sort of behave, you know, if you're going to waste food like the way you do or or want snacks from Trader Joe's, you know, like that's like

you better grow up to have some money. It sounds like your first encounter with, with social class was in kindergarten. Yeah. First time it occurred to me that, you know, racism was a thing and class and the two were sort of linked, you know, in a personal way, I guess I'll say, because I also remember like you know like there was a lot happening around the time like there was the the la riots and and all kinds of things so i of course i knew there was things out in the world but just in a personal way but first day of kindergarten i um turned up to school we were living in a new place um so we had just moved there a couple months prior and it's 1994 so of course i got my power rangers you know attire shirt lunchbox. I'm feeling pretty good about the way the day is going to go nervous, but feeling good,

feeling like I look good, and I'll refrain from the name, using the name, but I remember the kid's name. I remember being in line behind this kid and the kid turning around, this white kid turning around and asking me if I was poor. You know, and I've been in line, I've been at kindergarten all the five minutes and I'm being asked if I'm poor. And I remember it just sort of like, you know, obviously it just made me feel really bad, right? And, and, um, and, and, and, and, hurt and I didn't really get it. What do you mean? Well, you look poor. Oh, well, I don't even understand what, like, how, why? What, what did I do? And then, you know, going home that night, talking my mom and my mom sort of explaining to me that, you know, that there's, you know,

that racism is a thing I will encounter and that in a lot of white families, there's things that people aren't out and out racist. There's just sometimes there are things that are spoken behind and closed doors that that will sometimes then slip out to me. So yeah, that was that was my first encounter. And it really felt like it set up my entire public school experience. I want to touch on an idea you mentioned earlier about money being a scarce resource and how that affected your attitude toward it and in your relationship with it. Growing up was the idea of investing.

Was that an irrational idea for for you and your family? investing was always a mystery to me. I always heard about the market, always heard about investing, I heard about stocks. I didn't even necessarily, I don't even think at the time I could have necessarily told you that any of those three things were related necessarily. You know, I wasn't, I wasn't, just wasn't sure what it all was and what it meant. There was certainly no one in my family doing it or could explain that to me. I remember when I got, after getting, getting out college and I went to go start my first job and I was signing my onboarding paperwork and I was doing it I was at my mom's house hanging out with my mom and so I was doing that at her kitchen table

and uh they got to the section where I was asking me about 401k contributions and I remember asking my mom like should I should I contribute? And she was like no better to have cash in hand don't contribute you know and so you know I spent nearly four years at that place I spent nearly four years at a company that matches 401K contributions, not contributing, you know? So I would say it felt like, again, with money, I guess the idea is, yeah, with money being thought of as a scarce thing, it's like, why would you give it away to this imaginary sort of place that maybe you get it back somewhere down the line? But if you really need it, then you're going to get taxed on it.

And it's like, just, no, no, no, just keep the money in your account. You know, you could grow it in a savings account, you know, was sort of, I guess, maybe the thought. So I guess, yeah, I guess it was thought of as irrational, you know. And irrational enough that, to be honest, I didn't know what it was for the longest time. It just was never even explained to me. I guess irrational was a leading way, but I think that like our expectations around investing, I think changed dramatically based on your upbringing.

And it's, I think it's easy to say like, why wouldn't someone contribute to their 401K, why wouldn't they invest? And for many, it's, it's, uh, if, not only if you don't know, you don't know, but also why would you when, why would you give it away to that imaginary resource? Yeah. Well, and I'd also say too, like, you know, like having, you know, gone into college around the great recession too, like also completely changed my conception of what money was. If before I thought it was a scarce resource to be sort of hoarded, you know, and I sort of was thinking like, well, how can I get a career that will make me lots of money? When the Great Recession happens, and again, I was, you know, 18, 19, 20, I had a little

understanding of what was going on, but not a really sophisticated understanding of what was happening. It appeared to me, from a layman's point of view, that no matter how much money you endeavor to make and make in your career, it can just be taken away from you in this very unfair way, you know? That's the way I read it as an 18, 19 year old. And so that sort of became to me and I think that's probably why I ended up going into journalism, which is felt more like a passion for me because I felt like, well, why would I go into something that makes a ton of money when I'm not even sure that I'm going to end up with all that money that I'm earning, you know, over the years, you know.

Talk to me about your education then in investing and maybe how your mind changed a bit. Well, yeah, certainly my mind's changed a lot. I would still say I'm not necessarily a sophisticated investor by any stress. But I certainly see the value of it. I certainly see much more of a value in putting a certain amount of money aside every month to put into In you know like I don't do I don't do Short-term investing you know anything I'm investing is pretty My money's pretty spread thin in my investment portfolio and you know like I death but I definitely see it as being much more of an asset than just sitting in You know a savings account somewhere you know collecting a very minimal interest so

So, you know, now there's times when I invest a lot of my income, and then there's times when I pull back and I contribute a little less, but I'm always contributing. In your conversation with Malcolm Gladwell, you kind of mentioned that early in your career, you didn't understand the jargon of business in the unwritten rules. What were the unwritten rules? I'm still not sure I know.

But, you know, like imagine me, like I don't, again, like I don't know the jargon, and I'm showing up to meetings with people with the hair the way my hair looks, you know, which is, I can say it, maybe you can't, Ricky, but I'll say it. It's, you know, it's unkempt, you know? Like, I have a pretty natural afro going, you know, and I like it.

It feels, it feels natural to me, you know? You know, when you go, then you go into a place and everyone's suited and they have their hair cropped and quaffed perfectly, and you're sort of like, and then they're using, words and jargon and slogans that you're not 100% you know it becomes a very intimidating experience for me it was revealing of something I just lacked growing up which was a mentor or someone

just in my life whether someone in my life like in a neighbor in my family of a friend's dad I had anyone that looked like me that had experience in this arena, you know, someone at church, like nowhere did I have anyone that looked like me that had experience in this arena that I could go to and be like, hey, like, I'm not, I don't feel like these meetings are going the way they should be going. And I feel it's partially because I don't understand how to approach them, you know, that was sort of the impetus for this show. I felt like, well, I bet if I could just go ask a bunch of very successful black men,

what they do for a living or how they got to where they got. I would start to sort of see a path for myself, you know. And then as I was talking to other friends from various different backgrounds, and as I was talking to, you know, my women colleagues and friends, they felt similarly. You know, they didn't have women role models in their lives growing up or presently necessarily that they could go to and confide in these ways and be like, I don't know how to approach these sorts of scenarios.

And so I thought, well, maybe this could be useful. One thing I've heard you mentioned in the previous interview is that You said you were less successful in business professional settings when you code switched. Why? Yeah. So obviously, you have to temper yourself and stuff, right? We bring different versions of ourselves everywhere we go. But if the version of yourself that you bring to work or to family or wherever it is is like really inauthentic,

I don't know that you're bringing. in other words, when you get hired to a position, you should be bringing, and I believe now at this point, something intangible to that position. Like you are hired to bring you to that position, not only to fulfill all the generic duties of that position that need to be fulfilled, but you also need to bring that intangible thing that is you, like your unique perspective to that, right? And I think if you're being inauthentic, or in other words, code switching, you're not not bringing your authentic self to that job and therefore you're not you're really only doing the

bare minimum that that job requires and you know sometimes you find out like I think I did at NPR that like you know your authentic self isn't necessarily valued and that can hurt but it's also a good thing to know because it's like great well you know this may not be the place for me let me go to a place where I am valued where being authentic self of course tempered for the workplace for a professional setting provide some extra value and you know I've landed at a place like Pushkin with Malcolm Gladwell where you know being authentic self was was was encouraged and and certainly seemed to bring a lot of value and so I don't know how you can be successful when you when you are a code switching in a place because you're ultimately

You're going to be miserable. You're only bringing the bare minimum to that job. And you don't know if you're really compatible, you know? Or you're a psychopath and you can be anyone anywhere all at once. Sure, sure, sure. There's that too. Not many. There's not many who could sustain something like that, though.

You speak to a lot of musicians on Broken Record. And I want to talk about Live Nation and Ticketmaster. There's a lot of headlines. I think Zach Bryan is, thumbing his nose at Ticketmaster with his latest tour. Taylor Swift is the biggest controversy. But a lot of artists

seem to work with Ticketmaster, and you don't hear much from them. From your conversations, what are the relationships between artists and Live Nation like behind the scenes? I think strained. You know, I think right now strained. I mean, I think because there's so, it's very hard to make a living as an artist now.

I mean, I imagine artists are, to some degree okay with making sure they're maximizing the value of their ticket prices, right, for concerts. But I think what's happening now is like we've seen them a period of like, you know, basically no concerts for two years. People are starved for live experiences. We're coming back. There's this, you know, crazy inflation.

And now the couple of major ticket services that exist are, are. using dynamic pricing and I and I think it's really ticking fans off and I think it's rather than on some level there's there's very savvy fans the Swifties the Taylor Swift fans are very savvy group of people and they're they're sticking a ticket master with like a lawsuit but I think I think you know a good amount of fans aren't you know sort of directing their ire at at the ticketed services but at the artist you know like the amount of people I've seen angry at Bruce Springsteen in particular because of the cost price of his concerts. You know, it's just like, or Beyonce.

Like, you know, some of the blowback is getting back to the artist. And so I would say it's strained right now. And I wonder if that keeps increasing sort of the blowback that artists are receiving based on ticket prices and ticket pricing strategies if we'll see the relationship become more and more strained. And if we'll see artists become more vocal. if the ire of audiences are not getting back to the artist I don't really think it behooves them to be vocal against ticket master

or or or XS or any of that right but you know obviously if that is coming back to them and hurting them and their image and their fan base I think we'll probably see artists be more vocal about it slightly gross way to put it I can't afford to go to the concert I wish the ticket prices were lower for Bruce Springsteen he's selling out no problem like he can listen to them He's also selling out arenas.

Well, but then there was like, but oddly enough, like, and again, like Bruce is like an artist where you think, and I love, I love Bruce Brinkstein. In fact, I wish, I wanted to go see him on this tour. I don't think I'll get the chance. But, you know, like you were hearing reports about, like, certain cities where like it was, like, there were like tickets ultimately weeks leading up to it going for like $2, you know, because like, you know, there weren't, there wasn't selling out. I saw Bob Iager, I think just yesterday was, you know, this is a slightly different. but talking about he felt like maybe they were being too aggressive on the pricing for park admission for Disneyland and for a couple of their experiences at the hotels because basically those the hotel experiences were flopping and in and prices had gone up I mean

perhaps 100% I can't remember the exact numbers at parks over the last couple of years and they're maybe looking at revising that and I do think you know I think people are trying to make up for last money coming out of the lockdown but I'm wondering if we're going to have to start changing changing the pricing strategy around tickets be curious to see what happens with the movies you know I see I see movies are you know movie theaters are going to now experience with the or experiment with like variable pricing and I wonder how that impacts that you know it's already hard to get people to get to a theater now if you're going to start not if you're not

going to know as a consumer what a movie tickets going to cost like do you go I don't know my cynical take on the movie theater ones though is that it's very easy to jump seats in a movie theater compared to a arena or ballpark. If you're seeing a Wednesday night showing, why wouldn't you just pay for the cheapest tickets and then see what's open at showtime? Do you really think the guy or the woman working at AMC theaters is going to check your ticket and drag you out? You are very unlikely to have to do the long walk of shame

from the back to your seat in the way you would have to that. like a ballpark or something. In working on broken record and talking to a lot of these artists, it seems like a lot of musicians have incredible stories and just little anecdotes that are completely unbelievable. Are there any anecdotes, stories from doing that show or maybe not doing that show that you just like can't get out of your head? Okay.

I'm definitely not going to tell it in any way as eloquently as he does the way he takes you through his moods and such. But in the early 90s, DMC from RunDMC found himself incredibly depressed, very depressed. I mean, he has a wife, he has a kid, he has a career. Of course, Run DMC aren't necessarily like the hot new thing anymore, but they're still Run DMC, get a lot of respect from their peers and from at that point artists who were a bit younger and they were still able to go on tour and release records and make money. So everything's fine career-wise, really, but he's in this deep depression.

And you just can't figure it out to the point where he's suicidal. And if I'm remembering it correctly, he got landed back in New York from a tour date and was in a back of a car, courier service, going back home. If my memory is correct, it's like that he was going to go home to kill himself. and the song he's in the car in the song Sir MacLachlan's song

in the arms of an angel comes on and he breaks down crying and sort of has this spiritual renewal like where all of a sudden his like depression or I don't want to say miraculously but he has this like a spiritual it makes it lifts him enough out of the depression that he's now not suicidal

but he goes and he gets the song and he just plays it on repeat for, I believe, for months, until the song literally lifted him out of a depression. It was amazing. There's a story we've done there about him. There's a bit we've done there about him actually getting to meet Sarah McLaughlin before he actually is lifted all the way out of his depression. And ultimately, he gets to collaborate on her with the song,

with her on a song. But it is just this gorgeous story of sort of someone struggling and sort of trying to find their way. And this song, out of nowhere, lifts him up. And I can't listen to that song now without thinking about that. And that song has totally changed in my mind from sort of like a song that I didn't take all that seriously or thought of as sort of being that ASPCA, you know, infomercial song to like a really gorgeous, gorgeous, gorgeous song. I was listening to it actually like not that long ago. My wife was looking at me like, what are you?

Listen, just listen, it's beautiful, okay? Just leave me alone. Totally changed my perspective on it. 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 herself stocks based solely on what you hear. I'm Chris Hill. Thanks for listening.

We'll see you tomorrow.