The Compound and Friends - The Book That Changed My Life (with Michael and Josh)

Episode Date: May 14, 2019

osh here - on the 20th anniversary of Simple Wealth, Inevitable Wealth, I discuss why it's the book that changed the entire trajectory of my career and laid the groundwork for my investing philosophy. Many books and authors have been influential and important to my understanding about how the market works. Simple Wealth, however, was the first book that made me want to dedicate my life to helping others invest and make sure they don't fall prey to all the wrong information and advice they're being assaulted with on a regular basis. Nick Murray has taught thousands of financial advisors about the inherent dignity of our careers and the absolutely necessity of our work for the improvement of society. Building, managing and living with a portfolio's ups and downs can be simple, but that doesn't mean it's going to be easy. Our job, according to Nick, is to continuously remind people why they must bear risk and endure a lifetime's worth of volatility if they're going to truly succeed in the markets and in life. Michael makes a point about finding the right book at the right time in our lives, and for me, finding Nick's writing ten years ago was exactly what I needed. Other books mentioned include Jack Schwager's Market Wizards and Ben Graham's The Intelligent Investor. Nick's book is only available at http://nickmurray.com/ Enable our Alexa skill here - "Alexa, play the Compound show!" https://www.amazon.com/Ritholtz-Wealth-Management-LLC-Compound/dp/B07P777QBZ Talk to us about your portfolio or financial plan here: http://ritholtzwealth.com/ Obviously nothing on this channel should be considered as personalized financial advice just for you or a solicitation to buy or sell any securities. Please see this 3,000 word terms & conditions disclaimer: https://thereformedbroker.com/terms-and-conditions/   Subscribe to the mini podcast on iTunes or Spotify Enable our Alexa skill here - "Alexa, play the Compound show!" Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

In 2010, I read a book that changed my career and definitely changed my life forever. The 20th anniversary of that book, the 20th anniversary edition of that book has just come out. I want to talk about it and more importantly, I want to talk with Michael Batnick about why it's so important to come across the right books at the right time in your career. Stick around. I think this will be really interesting. All right. So, Mike, let me get into this real quick. Nick Murray, who I guess the best way to describe him is he is an advocate for financial advisors

and writes investment books geared toward professionals who have to explain investing. He's like an advisor to the advisors. Yeah, that's right. He's like the advisor's advisor. Okay. So I'm an acolyte of Nick Murray's. I'm a huge fan. And this book – I don't know.

Do I have this in the frame? You do. I got it. Okay. So Simple Wealth, Inevitable Wealth. You can't buy it on Amazon. You have to buy it on nickmurray.com. A lot of advisors buy boxes of them and give them to their colleagues or to clients. He's written a bunch of books. This is my favorite. And after I read it, I put it down. I remember saying, okay, now I get it. I understand what

my purpose is. I understand the most important things about investing that no one had ever taught me before. And I was thinking about this week, Nick sent me an autographed copy of the 20th anniversary edition. I was really excited. I was thinking about like how important that book was to me and what if I had never come across it? And Michael reads like a book a week or maybe more at this rate I wanted to ask what you thought about this concept of like you have to read the right things

early in your career so you don't get led astray or maybe being led astray early in your career is actually a good thing so

if you find your way back yeah one of the first things that I read was Market Wizards and I think everybody who reads Jack Shwake

shout out to Jack Shwake everybody who reads that book probably thinks that they're going to become the next Stanley Druckenmiller. Because how could you not? You underline the shit out of it. You're so inspired to make it sound so simple. And then you got it in trade and you're like, oh, wait a minute. You know what's so great about that book, Market Wizards though? The format is basically him doing these interviews and then he edits them so that there's so much like every paragraph seems like it's another pearl of wisdom yeah he probably speaks to these guys

though for eight hours so it was it was like a podcast in book form like 30 years ago yeah yeah so he interviews like the best hedge fund managers on the planet early in their careers and that's why the book is a classic it It was great. It was terrific. As an investor, it's more, you're saying like, it's more interesting than it is a manual. Well, I don't,

I don't, I don't really think that any books can necessarily teach you how to be a good investor. Do you agree with that? No, I think that's the opposite of what I think. You don't think any books can teach you how? Okay, wait, let me, let me clarify. I don't think any books can teach you how to... Okay, wait. Let me clarify. I don't think any books can change your temperament

or your disposition and your emotional proclivities. I don't think a book will change, but I think a book will instruct you on big mistakes that other people have made, things not to do,

maybe refocus you on the whole purpose of investing. That's what Nick's book did for me. Okay, fair. My point is that you have to figure it out on your own. So you could take things from certain books and ideas, but nobody is going to tell you how it feels to lose money or what the perfect asset allocation is or anything like that. Oh, that's true. You have to live through it. I agree. Now, what if you read a really important book, but too early before you've gone through all that experience?

So maybe I had to – like I came across this book 10 years into my career. Maybe that's the way it should have been. And if I had read it in 1999 or 2000, it might not have resonated. So one of the first books that I read – so I read The Intelligent Investor. I think that was like my first dive into the market like everybody else's. What? Ben Graham annotated by Jason Zweig? Yes. Okay. And the Mr. Market was like a light bulb like it market like everybody else is. What, Ben Graham, annotated by Jason Zweig? Yes.

Okay. And the Mr. Market was like a light bulb, like it is for everybody else. You're like, oh my God, this is so terrific and clever. And oh, that's how it actually works. How Mr. Market's job is to frustrate the most amount of people. That it's all psychology and it's not all about calculation. When did he write that? Was that in the 30s? It was 19...

It was 19... 40s? I think it was 39. I don't know. Maybe I'm wrong. And early on, I also read Jack Bogle's little book of common sense investing. And it made sense how Warren Buffett is going to put 90% of his money in index funds when he dies. But it's like, nobody wants to open up a brokerage account and buy index funds. It's boring.

So maybe that's the sort of book that it's good if you read early on because you sort of get a flavor, but then you're like, ah, but no, I'm not going to do that. And then you come back to it later on. Right. Maybe. So this is the book that when people are like, oh, I go to conferences all over the country, all over the world. I meet young advisors and one of the first questions I always get is, what should I read? And I think they're talking about who should I follow on social media

or what blogs. But I try to inject books into the conversation. And you could give people a list of 10 books. They're not going to read them all. So if you have to give them one, this is the one. What do you tell young people and just advisors? What do you tell them they should be reading? Do you give them a book recommendation? Well, the Intelligence Investor was 1949. No, that's important. That's what you tell them?

No, no, no. I was just correcting myself. If like one book, I don't know. That's kind of hard. Okay. What do you tell investors? I don't like – that's not my thing. I don't like giving people advice because –

It's not advice but you've read like a thousand books. Yeah, but it's so personal. Some people love Market Wizards and they're just trading and that's it. And other people – the random walk down Wall Street will resonate with certain people. Oh, it's hard to know like what book will make an impact on everyone. Yeah, like you could recommend a random walk and somebody's like that was garbage like why would i read that bullshit so maybe the maybe the right thing is a list and then just hope that people pick the right well i would say like

well well what are you into like no seriously like what are you into what are you into what's your whole deal yeah um do you think that do you think that there are books that you have not gotten to that might have been really helpful for you if you had? Do you worry about because in everything that you're reading, it seems like you're getting through a lot. You're definitely reading way more than I am, obviously. Do you feel like maybe you're you're not reading the right stuff or you're reading things that are coloring your opinion the way they shouldn't? Or is life too short to really worry about that? Nah, I don't think that. So here's the analogy I get for like reading. I think that once you start reading, you become more interested in reading because you realize how big the world is and how little you know.

So it's sort of like when you turn on an iPhone and you press your thumbprint in and it just fills in and fills in and fills in and fills in and all the gaps keep getting filled in. That's like how I feel like with reading like history and stuff like that. I know exactly what you mean. But it takes a long, long, long time to get there. So I feel like reading is sort of like going to the gym. Like it feels like it's a pain in the ass and it's work and it's a chore. But once you get into the routine and the groove, it becomes sort of second nature.

You know, the other thing about that just to wrap up is like um if you don't do it all the time uh like like it compounds on itself like getting things out of books if you like just pick up a book once a year you're not really going to get as much out of it as if you were just generally in the habit of reading and then i think you won't feel as bad when you finish a book and three weeks later you can't remember most of what you read like if you're just regularly reading and digesting that's okay that happens to me all the time yeah and it's just but it's like the same thing with with movies and tv you watch it for entertainment i mean i'm not reading because i feel like i'm taking a quiz the next week i do because i enjoy it are you still highlighting an underlying shit or are you just like enjoying the book and putting it down uh no

i'm i'm like i don't write in it i just like mark it up. So I'll maybe put a star on the top of a page so that when I flip through the book, I remember, oh, yeah, I wanted to go back to this. But beyond that – I've never written – I just want to enjoy it. Yeah, I've never written like, oh, my God, this reminds me of the time. Well, so I read some of books that you had been through years ago and you were like highlighting underlining circling stuff and I was just like man I'm jealous that this guy's like reading in such a disciplined way I just never I don't know I guess I enjoy the book more if I just read through it I don't know if there's a

right or wrong