We Study Billionaires - The Investor’s Podcast Network - RWH004: Intelligent Investing w/ Jason Zweig

Starting point is 00:00:00 You're listening to TIP. Hi there, my guest today is Jason's Y, who's probably the most eminent financial writer in America. As I'm sure you know, Jason writes the Intelligent Investor column in the Wall Street Journal. Since he started writing this column back in 2008, he's done an incredible job of guiding readers week in and week out to make smarter investment decisions and to protect them from all sorts of dumb and costly financial mistakes. Jason also edited and updated the revised edition of Banking. Graham's masterpiece, The Intelligent Investor, which Warren Buffett has described as by far the best

Starting point is 00:00:35 book about investing ever written. Jason's also the author of The Devil's Financial Dictionary, which is a very amusing, satirical book that skewers what he calls the fads and fakery of Wall Street. He also wrote a classic book called Your Money and Your Brain, which draws on neuroscience to explain how you can improve your financial decision-making. In this conversation, we talk about Jason's belief that the real secret to investment success is actually to gain control over yourself. We discuss cryptocurrencies like Bitcoin and what he thinks about investing in disruptive technologies in general. We talk about what he's learned from interviewing Warren Buffett. We discuss Jason's fascinating experience of collaborating on a book with the Nobel Prize winning economist and

Starting point is 00:01:17 psychologist Daniel Conneman. And we talk about the science of happiness. As you'll hear, Jason's a wonderful storyteller and he's full of wise and practical advice about investing and life. I'm also happy to say he's an old and dear friend of mine, so this conversation was really just a total pleasure for me, as I'm sure you'll gather from the occasional outbreaks of raucous laughter. I hope you enjoyed as much as I did. Thank you so much for joining us. You're listening to The Richer Wiser, Happier Podcast, where your host, William Green, interviews the world's greatest investors and explores how to win in markets and life. Hi, everyone. I'm thrilled to be here with Jason's Wyck, who has probably taught me more than anyone

Starting point is 00:02:12 else about the art of investing over the years and may possibly be the best financial writer around. So thank you for joining us, Jason. Well, it's great to be with you, William, and we'll leave the compliments aside. But thank you. I'm delighted to have you here. I wanted to start, actually, by asking you about your father, Irving Swike, who died, I think, when you were about 22. This is way back four decades ago in 1981. And you've described him in the past as the greatest and wisest man you've ever known. And in one of your books, you wrote a dedication to your father, and it said, For my father, who knew everything.

Starting point is 00:02:49 And I wondered if you could tell us a bit more about who he was, why you revered him, and how he influenced the person you've become. Yeah, so my dad was a remarkable guy. I mean, he was born on a farm between Albany, New York and Pittsfield, Massachusetts. During World War I, he had kids later in life because he served three tours of duty in World War II because the military lost his record. You know, he was a farmer. He was a political science professor. He was a newspaper publisher.

Starting point is 00:03:21 He became an art and antiques connoisseur. And he was an athlete. He played semi-professional baseball for a couple of. of years. He captained a boat in the Navy of the U.S. Army during World War II because the Army had a few boats and my dad was in charge of a ship, a minesweeper. So he visited his tours of duty, took him to South America, the coast of Africa, the Indian Ocean, the South Pacific. He didn't see a lot of combat duty, but he saw enough. And among the many things he taught me was that there's One of his favorite expressions was there's nothing so noble or so horrible that human beings

Starting point is 00:04:07 can't do to each other. And he was just an extraordinary man in a lot of ways. He was a great storyteller, too. He was a crusading newspaper man as well, if I remember rightly. I remember reading something you had written where he almost got killed when he was working on some story. What happened there? Yeah, that's correct.

Starting point is 00:04:27 So in the late 1940s, my dad was working on his PhD in political science at Ohio State when, as he put it, he got bit by the newspaper bug. And he just dropped everything and bought a newspaper on the Ohio River right across from the West Virginia border. In what then was a very poor part of Ohio, and I'm not familiar with the demographics today, but in those days it was quite poor. There were numerous pottery factories there because there's a lot of workable play along the banks of the Ohio River there. And apparently one of the towns, all the workers were in the grip of a corrupt union boss who was terrorizing everyone and shaking them down for money. And my dad got a bunch of tips from people in the union. And at the next union election, he wrote a lot of editorials and a lot of investigative journalism exposing this guy as corrupt. And the labor union bosses, goons came after my dad, slashed his tires.

Starting point is 00:05:36 They threatened to beat his then pregnant wife, as he recalled one of them saying, if you don't knock off them stories, we're going to beat that baby out of your wife with a crowbar. And this was my dad's first wife. And then they ran him off the road on a foggy night and almost crashed his car into the down the banks to the Ohio River. But in the end, journalism worked. Justice prevailed. The union boss was thrown out and a new guy came in. And I think my dad spent the rest of his journalism career trying to find another story as good as that one and it really did. And, you know, most journalists get a handful of great stories in a lifetime. And obviously, he had an amazing one. But he was an example of quiet courage. And I think the other story about my dad that really sticks in my memory, William, is in 1981 when my dad was dying of cancer, I was home for a visit and the phone rang.

Starting point is 00:06:37 And a voice said, is this the Zweig resonance, very polite, formal sounding man? And I said, yes. Can I help you? And he said, is Irving there? And I said, yes, but he's not really able to come to the phone. Can I take a message? And as I recall the man's name, he said, well, could you tell him that Glenn Irwin is on the phone? And I knew everything about my parents' business and a lot about their life history. I had never heard of this man. And I went and I told him at that point, it was very difficult for my dad to move around the house because his lung cancer. had spread to his legs. But he looked at me and then a light came on in his eyes and he said, oh, I'll speak to him. And he sort of with a great deal of difficulty came to the phone. And if you've ever listened to a stunning conversation that you can only hear one half of, it always sticks with you. And, you know, my dad took the phone and he said, Glenn. And after a long pause, my dad said, yes, I remember. And, you know, this, the person at the other end started telling my dad a story. And my dad kept nodding and saying, yes, I, I remember. Yeah, I remember.

Starting point is 00:07:56 And I saw something I had never seen. I saw my father cry. And I couldn't hear almost anything of what Mr. Erwin was telling him. But they talked for about 10 minutes. And at the end, my dad said, thank you very much. I hope so, which I immediately inferred, and I think correctly, that Mr. Irwin had said to my dad, I hope I will get to see you while I still can. And when he hung up, I said to my dad, who was that? And my dad proceeded to tell me the other half of the story, which is sometime around in the late 1930s. My dad was a student at Union College in Schenectady, New York, And he was walking to class one morning, and he was walking behind a student. And my dad noticed he was black. And at that time, he was either the only black student or one of maybe three black

Starting point is 00:08:52 students or handful of black students at the time. And my dad had never seen him before. And they were both walking along, mining their own business. And suddenly from behind a few trees, a bunch of white guys jumped the black student and started kicking him and being. And being, beating him up. And my dad immediately dropped his books or whatever he was carrying and jumped in and fought back and took Glenn Irwin's side, even though he didn't know who this kid was. But it was obvious to him that who was right and who was wrong. And momentarily, the campus security people came along and broke up the fight. And they all got dragged to the office of the president of the university, whose name was Dixon Ryan Fox, who was a very famous.

Starting point is 00:09:38 scholar. And of course, the white kids who had jumped Glenn Irwin all blamed him. And they said, we were walking along, minding our own business. And this N-word guy attacked us. So we had to fight back. And then this kid came along and made even more trouble. And that's what happened. And so Fox turned to my dad and Glenn Irwin and said, you know, what's your side of the story? And Glenn Irwin was so scared he couldn't speak. And my dad said, well, President Fox, maybe you remember me from when I was admitted to Union College. Because my dad had gotten a rejection letter when he had initially applied that said, you're qualified for admission, but the Jewish quota is filled because in the 1930s, most elite educational institutions in this country had a policy

Starting point is 00:10:31 that they would only admit so many Jews. And the Jewish quota had been filled. And so my dad immediately got in his family's wagon because in those days they didn't have cars and rode to Schenectady, which was probably about 25 miles away, 30 miles away. And he waited outside President Fox's office all day long until his secretary said that he could go in. And he was admitted and he said to the president of the college, you sent me this letter. And it said the Jewish quota has been filled. Well, as you know, President Fox, the winds of war are gathering in Europe. And young American men may be called into military service. Should I tell the U.S. Army that the Jewish quota has been filled when I'm drafted? So he's telling this story. And President Fox says,

Starting point is 00:11:25 yeah, I remember you, young man. Why don't you tell me what really happened? And so what happened in the end was the thugs who attacked Glenn Irwin were expelled. Glenn Irwin went on, and if I remember right, he became something like a chemical engineer and became a senior executive at a major company in the U.S. And what to me was so striking about this story is that my dad had never told any of us about this. My mom had never heard the story. In fact, the day it happened, my mom didn't even hear about it. it because all this happened between me and my dad. And that, I think, is really the definition of, like, quiet courage when you do something that noble, and you never even talk about it. And he completely transformed this man's life. And obviously, Mr. Irwin was calling because

Starting point is 00:12:20 somebody had told him, Irving's leg is very sick. And they hadn't spoken in over 40 years. That's extraordinary. So is it fair to say that this kind of... of, there's a sort of moral seriousness to your journalism, I would say, where you take seriously the idea of writing about the financial world in a way where you're standing up for people, in a sense against exploitation by Wall Street, with all of its cunning ways and self-serving ways, that there is a sort of, I was going to say, a subtle crusading element, but it's not so subtle. It seems to be pretty central to what you do, protecting people. I want to be very careful here. I mean, you know, I would never love.

Starting point is 00:13:01 I would never compare, you know, the daily or weekly practice of what people like me do to the kind of courage that, you know, my dad exhibited on occasions like that. But I am guided by something a little different, which is when I first became the mutual funds editor at Forbes magazine in 1995, Jim Michaels, the editor of the magazine, and of course, you knew him as well, William, when he gave me the editor. the job at the end of our conversation, I said to him, do you have any advice for me? Because mutual funds editor at Forbes was actually his first job when he came to the magazine, or one of his first jobs anyway. And he thought about it for a second. And then he looked at me and he said,

Starting point is 00:13:48 yeah, he said, don't get anybody's blood on your hands. And that stuck with me and has stayed with me ever since. I mean, I think it's very important for journalists not to think of themselves as crusaders, not to become self-righteous. We're not better than the people we write about. We're not even better than the people we criticize in our writing. But we do represent our readers. And what Jim was trying to tell me is that you have to treat your readers' money as if it were your own. And you have to have that sense of responsibility where you can't recommend an investment approach or critique something if you wouldn't put your own money behind what you're saying. And I think there is a moral component to that because, you know, one expression I like

Starting point is 00:14:45 to use is that in the financial food chain, the individual investor is like a piece of plankton. I mean, there's sharks and barracudas and little fish and minnows and shrimp and krill. And then down below all of those is the individual investor. And it's just so easy to pander and to tell people what they want to hear. And it's not our job to tell people what they want to hear. It's our job to tell them what they need to know. When you started covering mutual funds, which I think must have been what or around 87, something like that, late 80s, early 90s?

Starting point is 00:15:27 Well, I became the mutual funds editor at Forbes in 1992, but I had done a little bit of fund reporting before that. Were you startled to see the sort of things that were going on on Wall Street and the way that money was managed, the way that funds were sold, the self-interest, the conflicts of interest, What did you see that started to make you pretty cynical about the ways of Wall Street and to see, actually, instead of me just picking great fund managers and telling people, you have to invest in this now, you were kind of saying to people, you better beware because there's stuff going on here that I'm not sure you understand. Well, I guess a couple things. I mean, I had great mentors at Forbes.

Starting point is 00:16:13 Jim Michaels was one. Bill Baldwin was another. maybe even more importantly because I worked more with them, Alan Sloan, Gretchen Morgensen, Alan Frank, Howard Wignitsky, there were just incredible reporters at Forbes in those days. And Forbes was a journalistic culture of cynicism and skepticism and also a fair amount of, let's say, anger. People, the reporters and writers really did. didn't like the way corporate America and Wall Street behaved a lot of the time. And I just sort of drank that up and absorbed it.

Starting point is 00:16:55 It was also fearless, which is unusual. For people who don't know Jim Michaels, Jim, who looked a bit like Burns in the Simpsons episode, who was a sort of small, small, sort of satanic-looking guy who was just so fearless and tough. And he edited the magazine for 37 years. And before I joined the magazine, I wrote a test story exposing a guy who was worth hundreds of millions of dollars. I think the headline was mining the suckers because he was a mining entrepreneur. And the guy didn't talk to me. And on my very first day at Forbes, when I've been hired after this trial story, this guy, the centi millionaire, flies in from Singapore to tell Jim Michaels what an appalling guy I am and how I should be fired. So I literally, on my first day in this

Starting point is 00:17:40 job, was like, I'm going to get fired on the first day. And I remember Jim Michaels writing to me and asking me for the facts. And I sort of backed up various things that I'd written. And he wrote back and he said, all right, I'll just politely tell him to piss off then. And it was just so phenomenal to have some, to have an editor with that courage that he was prepared to take on interests that were powerful and could sue. And I'm not sure that would happen anymore. I don't think there are that many magazines and newspapers that are willing to take on those powers with that kind of fearlessness. because the business isn't so lucrative that you can survive that sort of war. That's right.

Starting point is 00:18:20 Well, Forbes was in a handful of other publications, had the luxury then of being incredibly profitable. And although I don't remember the company, I distinctly remember writing a story that was so critical that the company pulled all of its ads from Forbes for the next year. I couldn't tell you. It was so long ago, I don't remember who it was. And I remember after this happened, right after it happened, bumping into Jim, maybe in the hallway or someplace. And he said, congratulations. And I said, what did I do? And he said, you got them to kill all their ads per year. And, you know, the thought that an editor would say that to a reporter today

Starting point is 00:19:08 is a little, is pretty far-fetched. But in those days, it was really a badge of honor. That's impressive. Yeah, I remember once having a story killed by a major magazine, really prominent magazine, because the company I was writing about had an ad in that issue. And that was at least a decade later. And so I think that showed the vulnerability of these very powerful publications. So I think we were very lucky that we were groomed in that environment in which we just had a boss who was fearless and had money and power behind him. It was a fantastic schooling. So years later, when you wrote this wonderfully cynical and witty book, The Devil's Financial Dictionary, which satirizes Wall Street's way of operating, you wrote, if I remember rightly,

Starting point is 00:19:52 no matter how cynical you are about Wall Street, you aren't cynical enough. And there was a point where, I think one of my favorite bits was when you were, your definition of clients, you said noun, also known on Wall Street as Muppets, flunkies, chumps, suckers, marks, targets, victims, dupes, baby seals, sheep, lambs, guppies, geese, pigeons, and ducks. as in when the ducks quack feed them. And I was wondering if you could talk a bit about some of the things that made you skeptical and made you see. I've actually, I've got to cover the business of investing and how money is managed in a deeply skeptical and wary fashion. Yeah, so I think one formative experience that I can remember was, I mean, this was probably,

Starting point is 00:20:37 I think this was before I was in Mutual Funds Editor, maybe it was right after. We did something that at the Wall Street Journal today, we would not be able to do. But at Forbes then, it was permissible, which is I and I think another reporter, called every major brokerage firm and basically impersonated an investor and said, you know, I'd like to buy some mutual funds, you know, how do I go about this? You know, what's the sales commission? What will it cost me every year, you know, asking about the expenses of the fund? And, And so far as I can recall, not a single one of those conversations was truthful. Virtually every broker we spoke to told us something that was false.

Starting point is 00:21:24 And I guess I learned two things from that, which one, don't trust anybody. But two, not everybody tells you things that are false because they're lying. A lot of people tell you things that are false because they don't know any better. The problem is, from the point of view of the end consumer, the individual investor, it almost doesn't matter. I mean, if somebody is misleading you, you don't really care whether that's intentional or not. But the conclusion I came away with is that a lot of people are either lying or ignorant in the community that sells investments to the public. And that view has never really changed. I mean, do I think that the average financial advisor is a liar or a fool?

Starting point is 00:22:18 No, I think most of them are honest people doing their best to earn a living and help the people they work for. But there's still way too many of them who aren't. And, you know, woe betide the client who makes the wrong match. And even the phrase financial advisor is a little bit of a euphemism, isn't it? Of course it is. The big problem I have is that most financial advisors don't give financial advice. What they do is they recommend portfolios. And they're basically investment managers who aren't really qualified to manage investments, which is why they're financial advisors rather than portfolio managers working for Fidelity or another major firm. And they call what they do financial

Starting point is 00:23:10 advice, but really all they're doing is recommending portfolios. And most clients need more than just portfolio recommendations. They need financial planning advice. And most financial advisors would rather run these little portfolios than give people the advice they need. You and I worked together at Money Magazine back in the late 90s for about five years, I think. And despite the fact that I was much younger and less experiencing you, I had the pleasure of editing your column, which must have been torture for you. And my sense back then was that even then you always were investing your money basically in index funds instead of trying to pick the best active fund managers.

Starting point is 00:23:50 And I figured that you were one of the few people who was actually in a perfect position to pick truly exceptional fund managers, that you got to interview a lot of them. both at Forbes and then at money and when you were guest columnist at Time and elsewhere. And I thought that was really interesting. There was something very telling to me about that, that despite being in a position to pick potentially winning fund managers, you chose to index. And I always kind of was a little bit more schizophrenic about the choice. Like, I've always indexed a part of my family's savings, particularly my wife and kids'

Starting point is 00:24:23 money because I don't think they should pay for my own self-delusion. but I've always erred towards investing my own money with active fund managers, at least to some extent. And I wondered if you could talk us through why you ended up being such a passionate advocate of indexing, despite the fact that you actually did have that opportunity to find exceptional fund managers, active fund managers. Yeah. So at the risk of disappointing you with a simple answer. I'll say that I've always loved my work so much that I throw a lot of myself into it. And when I'm not on the job, I don't want to think about my job. I don't want to do my job when I'm not doing my job. And for example, I think the only movie about, I've only seen two financial movies, I think ever, Wall Street and the big short,

Starting point is 00:25:24 I make a point of not watching any movie that's about finance. You've got to see the Wolf of Wall Street. That would complete the chair. Yeah, and you're a boiler room, and I guess that's the four best, but I haven't seen them, and I don't plan on it, because I don't want to think about investing when I'm not thinking about investing. So that's really the answer. I don't want a portfolio that I have to monitor when I'm not monitoring,

Starting point is 00:25:54 monitoring portfolios. When I'm not working, I want to be doing something else. So if you were trying to beat the market, which obviously is a very difficult game, I'm curious how you would go about it because I think about this a lot, obviously, myself. And I often think that if I had the talent and the temperament, which I most definitely don't, what I would do if I was setting up as a young money manager and I actually really wanted to beat the market is I'd run a small portfolio with, say, 8, 10, 12 stocks. And most of the time I'd just sit my hands and do nothing. And then once in a while, when there was some sort of disruption in the market or in that sector, I'd try to load up on cheap stocks and when they were out of favor

Starting point is 00:26:32 and then hold them for years. So in some ways, the type of approach that people like Joe Greenblatt or Nick Sleep or Lee Lou, I guess, have taken over the years, and maybe focus a bit on less efficient areas like microcaps or spin-offs where you're more likely to find a misprice stock. And I was wondering, is that the way to win the game or are there many ways to win the game? And what would you do if, despite a lifetime of preaching the virtues of indexing, you said, yeah, actually, I'm going to try to beat the market? Well, first of all, I think there are many ways. You know, Max Heaney, who was Michael Price's mentor at mutual shares, used to say there are

Starting point is 00:27:11 many roads to Jerusalem. And I think that really is true. I mean, just as the sort of concentrated small-cap value approach that you describe has a lot of appeal, the opposite does too. There's tons of money managers out there who, you know, have built amazing records buying overpriced momentum stocks. So I think the key is the thing that people don't talk about very much. The key is structure. A money management firm that isn't structured from the start to optimize for a long-term outperformance is never going to be able to do it. never going to be able to sustain it. And one of the keys is having a mental and economic alignment between the manager and the clients. I mean, if you have the wrong clients, it doesn't matter whether

Starting point is 00:28:06 you have the right portfolio. If you have the wrong portfolio and the right clients, they'll be able to see it through with you. You know, I think when I read about firms or I encounter or I talk to managers at firm that have designed the structure very deliberately. Like, how are the fees set up? You know, will you close to new investment when assets grow beyond a certain level? How do you handle redemptions? You know, how often do you communicate with your clients and what do you tell them? I think the firms that invest the most in that kind of design and recognizing that successful

Starting point is 00:28:52 investing is about creating a community. So the members of that community are the companies that the portfolio is invested in. Those are your investees. Then there's your investors, your clients, and then there's the investment manager. And you should think of those things as a triangle. And unless it's an equilateral triangle, it won't be able to sustain its own weight. Because when push comes to shove and markets go haywire, one or more of the legs of that triangle will snap.

Starting point is 00:29:29 And the best firms are the ones that really plan for that in advance. And if you think about the managers who've built amazing track records over the course of decades, like Buffett, Munger, like Wilmot Kid at Central Securities, whom I wrote about late last year, these are people who really have designed their business as if it were an investment. And that's a large part of what's enabled them to succeed. It's not so much what you invest in. It's not even so much how you invest. It's how you integrate that process with the business and with your clients.

Starting point is 00:30:09 so that it all works together. And you minimize the risk. You're not just managing investment risk. You're also managing the business risk of people getting too enthusiastic and euphoric at the wrong time and also people getting too pessimistic and pulling their money at the wrong time. You've written before that making and keeping wealth is impossible without luck. And I'd say even with a lot of these great investors, the timing. had to break right for them. Someone like Michael Price, who you mentioned before, I remember many years ago interviewing me, and he said, look, I went to work with Max Haini, or Haini, I can never pronounce his name.

Starting point is 00:30:50 I've got that name wrong for 25 years, and I'm sticking with it. He said, look, I started with him at the bottom of the bear market in, I think, 73, 74. So I start with a guy who's a brilliant bargain hunter at the bottom of the market. He's like, how could I fail to make an unbelievable amount of money? Or you think of Peter Lynch, who had this great 13-year run. And however smart he was and talented he was, maybe the smartest thing was that he got out when he was at the top. So we remember him as this kind of genius.

Starting point is 00:31:20 And I wondered if you could talk about the element of luck versus skill. Clearly, these guys have to have skill. I remember people telling me that they had been in investment meetings with Peter Lynch at Fidelity. And they would say, look, I came out of the same meeting. I heard the same information from the same companies. and he made more money than I did again and again. So it was clearly something he had. And yet there is an amount of luck that I think we can't deny. Can you unpack that a little for us?

Starting point is 00:31:47 One way I like to think about it is that there's a skill to being lucky. And I know you've heard me tell this story before William and technically it has nothing to do with investment management. But, you know, people often ask me how I got to edit Graham's book, The Intelligent Investor. And, you know, They expect me to say, oh, you know, the publisher did a beauty contest and brought in, you know, ten different writers and had each one write a sample chapter or they interviewed people or whatever. And it's like, no, that's not what happened at all. What happened is this? So I had read a book and then interviewed the author, a book called The Luck Factor by British

Starting point is 00:32:27 psychologist named Richard Wiseman. And he had done a sort of big nationwide survey of people's attitudes toward luck. And when all the surveys came back, he and his team were going through them. And there was one that really jumped out in him, which was, and I'm massively paraphrasing, I'm going to get all the details wrong, but the essence of it is correct. This woman had said, my husband died. Two of my kids have cancer. I lost my job. I got it back. But I'm a very lucky person. And he said, I really need to interview this woman. So they brought her in. And he said, you know, you described all these terrible things that happened to you and you say you're lucky. Why do you say that? And she proceeds to tell him this story. And she says that after her husband died and her kids got sick, she was, you know, she felt very depressed as anybody would. And she was really struggling.

Starting point is 00:33:26 And then she decided that she needed a rule. And the rule she came up with was whenever she's about to go into a room full of people, she thinks of a color. Then she goes into the room and she walks up to the first person who's wearing anything of that color and says, hello, my name is, whatever her name was. And so she looks at Professor Wiseman and he looks at her and he says, well, what does that have to do with luck? And she says, I always have a date on Saturday night. So I have just read this and heard the story from him. And there was a huge party at Time Inc where you and I, I think both, were working there at the time. And hundreds of journalists were there. I forget what the occasion was. And I was talking with,

Starting point is 00:34:12 as usual, my closest friends and not really socializing with the group. But before I had walked in the room, I had said to myself, and I'm not sure which color it was, but I'm going to say blue. I had said blue. And so I looked across the room and there was somebody I knew. And there was somebody I knew wearing blue. And I said to my friends, you know, excuse me, I really have to go talk to her. And it was our mutual friend, Nina. And this is Nina Monk, who's a wonderful writer? Yeah. And so I lost her in the crowd. And I was like, you know, I haven't talked to her in like three years or four years or something. And I was like, ah, the heck with it. Forget it. And then I was like, no, I have to talk to her because she's wearing whatever color plus blue. And I found her

Starting point is 00:35:00 because I was looking for the color. And we had a wonderful talk about nothing in particular. And life went on. And, you know, I went back to work the next day, et cetera, et cetera. But it turns out a couple days later, her book publisher takes her out to lunch to congratulate her for finishing her wonderful book on the merger, the takeover of Time Warner by AOL. Fools rush in. Fools rush in. And her publisher says to her own.

Starting point is 00:35:24 And we were working for those fools. That's correct. And her publisher says to her, oh, Nina, you can. could help me with one thing. You know, we have this book by this guy who's dead. Benjamin Graham, I think his name is. And, you know, it still sells, but it's old and we need to update it. Who do you think would be good for that? And she said my name. Now, she insists to this day that she would have said my name anyway. But I'm not so sure about that. I think she might have said, well, I don't know. You know, there's like five different people you could try. You know, one of them is

Starting point is 00:35:57 Jason Swig, but instead, because I just so happened to run over to her because she was wearing the right color, she said my name. And that's why they hired me. And so the thing is, that was despite the fact that I was trying to outwork everybody else in financial journalism, despite the fact that I had all these great contacts, despite everything I threw into my job, Why did I get this in honor of a lifetime? Because Nina Monk happened to be wearing a dress whose color I had thought of because I had read a book. So skill is hugely important and it matters. But much of life, maybe most of life, is shaped by just these weird moments of random chance. And the more professional you are and the more intellectual effort is involved in what you do,

Starting point is 00:36:54 the more vehemently you will deny the importance of luck. But it affects everyone in every field. And it's hugely important in asset management too. Jason, a few years ago, I don't know if I'm speaking out of school, but someone asked you to write this book where they had these amazing photos of guys like Buffett. at Amonger and Howard Marks and Oving Khan. And you, I think, asked the Wall Street Journal if you could do it. And they said, no.

Starting point is 00:37:22 And so they said, well, so who else could do it? And you recommended me. So I ended up writing the Great Minds Investing, which got me back into writing about great investors after a hiatus when I'd been working at time as an editor. And that book led me to write Richer Wiser Happier. And that book led me to be doing this Richer Wiser Happier podcast, which is why you and I are here today. So there's always this really strange sequence of events, I think. You wouldn't have recommended me if you didn't think I would do a decent job, just as Nina wouldn't have

Starting point is 00:37:53 recommended you if she didn't think you would do a decent job. But I love the fact that Howard Marks always talks about his realization that he's just a lucky guy and that that makes him happier. And it also protects him from what I like to call Master of the Universe syndrome, where you start actually to believe that you're really good. And I do think you have to be really good, but it's just not enough. Yeah, it's not. And, you know, I don't understand why people get so angry when others attribute their success to luck. I mean, it's, I don't find it threatening that I'm lucky. I mean, the one thing I worry about is that my luck will turn. But being lucky doesn't diminish you. It doesn't make you less skilled, it just means that on top of whatever skill you have, you've also been

Starting point is 00:38:44 blessed either by, you know, powers above if you believe in that, or by random coincidence, you've been blessed with luck. And that's a very important thing to remind yourself of. The first conversation I ever had with Warren Buffett, we were speaking off the record, but I think I can share this part of it. One of the first questions I asked him is, how do you think about yourself? I mean, given all the praise that you get and the track record you've built up over the decades, this was summer of 2003, you think you're a genius with all the people telling you are? And he paused for a long time. And then he said, just very matter-of-factly, said, no, I think I'm lucky. And then he went into his concept of the ovarian lottery,

Starting point is 00:39:31 which I think is incredibly powerful and it's also irrefutable. If Warren Buffett had been born in another time or a different place, he wouldn't have been Warren Buffett. If he'd been born a century earlier, maybe even a decade earlier or a decade later, he wouldn't have amounted to what he ended up achieving. And if he'd been born in a different place, I mean, what if he had been born in Wagadougou, Burkina Faso, or Yangon in Myanmar? We've never heard of them. Let's take a quick break and hear from today's sponsors.

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Starting point is 00:44:02 Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. I remember him telling a story to Guy Speer and Monashire. Pavarite when he had a charity lunch with them back in, I think, 2008, something like that, where he had just come back from a trip, I think, to China with Bill Gates. And he was talking about how he had seen some guy pulling in the boats.

Starting point is 00:44:28 I think I'm remembering this correctly or roughly correctly enough that we can get away with that, that he'd seen this guy pulling in some boats. And he said, that guy, however smart he is, could never have done what I've done because he just wasn't born in the same place. He didn't have at that time, Ben Graham's books weren't available in Mandarin. And so even the good fortune, not just of being born in America at that time when it was booming, but actually having access to Ben Graham was transformative. I wonder if we could actually switch to go in greater depth about Ben Graham because he's such a formative figure in the history of investing. And I don't think there's anyone other than Buffett who actually knows more about him than you because I think back in 2003 you edited the revised edition of the intelligent investor and you added a commentary and updated it.

Starting point is 00:45:13 He also did a really excellent book on a collection of his other writings, which I liked a lot. I wondered if you could talk a bit about Graham as actually a human being, because he was such an extraordinary figure. I remember reading your introduction in one of those books before he even graduated from Columbia in 1914. I think he was invited to teach English, math, or philosophy at Columbia. And I suspected he could have taught classics as well if he had wanted to. And can you just tell us more about what a towering figure he was?

Starting point is 00:45:40 And then if we could talk a bit about why is Graham still relevant? What should investors be learning from him now? Yeah. So Graham was just extraordinarily brilliant. One detail you omitted William was that he was offered those three positions on the faculty at Columbia at age 20 because he was admitted when he was 16. And the other detail I love is that Graham applied to matrici. He calculated Columbia when he was 15, and Columbia, as only Columbia could, lost his application because otherwise he almost certainly would have been a college freshman at age 15. And, you know, he was such a star student that three of the university's strongest departments at the time wanted to hire him to teach before he even graduated. So that gives you some sense of his brilliance. The other anecdotes I love about Graham are that late in his life, after he retired,

Starting point is 00:46:45 he was traveling, I guess, in Latin America. And he heard about this wonderful novel that was published in Spanish by Uruguayan writer. His name, I think, is de Benedetto, I think. And so Graham taught himself Spanish and translated the novel. And he also wrote a Broadway play that was produced on Broadway. He held several patents, including a patent for an improved calculator. And when he was 21 or 22, he had an article on advanced calculus published in the Journal of the American Mathematical Association. So Graham was as close to a Renaissance man as Wall Street has ever seen. You know, one of his hobbies was

Starting point is 00:47:33 translating Homer into Latin and Virgil into Greek. And he used to play multi-language scrabble with people when he lived in the south of France. You could make a word in whichever language you chose, and Graham would, of course, try to intersect your word with a word in whatever language he felt like. And something tells me he won most of those games. So he was extraordinarily brilliant, and I think that really helped him. That really helped him as an investor. One of the most indelible memories I have as a financial reporter, and I'm not going to name any names, but many years ago, probably in the 1990s, I was at the Morning Star Investment Conference in Chicago. And after the day's sessions, a bunch of portfolio managers went out to dinner.

Starting point is 00:48:22 I tagged along, and we got a private room at some restaurant in Chicago. And I would say there were probably a dozen managers around the table. And at one point, there was sort of a lull in the conversation. And I said, I have a question for everybody at the table. I'm really curious. And they all went silent. I had made it clear we were off the record. So nobody would ever get named or anything. We were talking freely. And I said, I want each of you to tell me what your hobby is. And so I point to the first manager and he says, golf. Second manager says, golf. Third manager says, yeah, I like golf. And Around the table it went. And finally, the last guy, after everyone had named golf, the last guy said, my hobby is tennis. And so my point is that what made Graham, part of what made Graham so great, was that he was multidimensional. Most professional portfolio managers are extremely dull people. They work very hard. They sort of do nothing but think about investing. A lot of them think about investing all day long, all night long, all weekend long. Peter Lynch used to brag about, you know,

Starting point is 00:49:36 taking a briefcase of papers home and, you know, spending his weekend reading 10Ks and 10 Q's. And I personally find that very credible. Graham wasn't like that. You know, when Graham was still, he wasn't a young man, but he was not an old man when he was about 60, he quit. And he stopped running professional portfolios. And he just decided he would go read books and write books and do the kinds of things he enjoyed. There was a lot of romance involved as well. I mean, that's one of the fascinating aspects. That was when he was a little younger, I think.

Starting point is 00:50:10 Yeah. I mean, there's a footnote, I think, in one of your books where you talk about Graham being flagrantly unfaithful to his first three wives. And I felt like there's a lot you could unpack from that sentence. There's a lot not said in that sentence. Well, in other contexts, I have called Graham the Will Chamberlain of Wall Street. He was a big believer in free love. Let's put it that way.

Starting point is 00:50:37 He got around the old boy. And yet at the same time was also a kind of model of integrity when it came to the way that he treated his clients in the investment business. He's a fascinating character, right? There's a complexity and a contradiction there. And I suspect some of that obsession with integrity. and fairness and also being a teacher and sharing your wisdom was very much inherited by Buffett. Buffett also cloned that structure of the partnership from Graham with his limited partnerships.

Starting point is 00:51:08 And it's interesting when you see people like Monash Pabry and Nick Sleep and Josh Tarasoff, all of these guys, Brian Lawrence, they all have cloned the structure basically that Buffett cloned from Graham. That's fair because it aligns your interest with your shareholders' interest because you're not just gouging them and getting fees when you don't perform. That's interesting that emphasis on integrity, I think. Yeah, I think that's totally right. And it is interesting and complicated. I mean, Graham was not the person you would want to take relationship advice from Ben Graham.

Starting point is 00:51:39 I think all married people or anyone who has a partner or spouse or significant other should be very glad if their partner doesn't act like Ben Graham. However, anybody who's a client of the money management firm would want your portfolio. manager to act exactly like Graham. And he succeeded in compartmentalizing that. You know, maybe it even in some odd way, maybe it helped him. Maybe being a little disorderly and breaking the rules in one part of his life helped him observe the rules in the other. It's interesting to speculate about it. I'd never really thought about it that way. I wrote about Graham and Richard Weiser happier about his early life, which is kind of fascinating, like

Starting point is 00:52:23 that he came from this prosperous family that I think imported porcelain from Europe. And his father died at the age of about 35 and the mother was widowed and left with three kids to bring up. And the business collapsed and she ends up turning their home into a boarding house which failed. Then she borrows money, gets wiped out in the panic of 1907. And then Graham grows up, instead of growing up with a cook and a maid and a governess, which he'd always had when they were this prosperous family when his dad was alive, sees the family actually forced to sell its possessions in a public auction and never really recovered from that kind of public disgrace. And then lives through World War I, the Great Depression,

Starting point is 00:53:01 the crash of 29, where I think from 1929 to 32, he lost like 70% of his money, and then lives through World War II. And he's from a Jewish family who's born Benjamin Grossman, as you know, and had come from Poland, same sort of area that your family and mine had come from as refugee Jews. And what's fascinating to me is that his... His entire investment credo is built on this idea of the margin of safety. And here's a guy whose youth is in a sense the epitome of chaos. Even as a Jewish guy coming from Poland, if I remember rightly, I think his grandfather may have been the chief rabbi of Warsaw.

Starting point is 00:53:40 So this is kind of fascinating to me because my background is similar and your background is similar, right? My family came from Russia, Poland and Ukraine. Yours, I think, came from Ukraine. I remember your grandfather was from Ukraine. And I'm wondering if you could talk about that connection, the link between this kind of personal chaos and his sense that you have to find a way of investing that protects you against chaos. Yeah, that's such a good observation, William.

Starting point is 00:54:06 The anecdote that stands out for me from Graham's life story is when he was a very small child, this was after his dad had died, his mother had to cash it. check at the bank. I think she asked Graham to take it to the bank. I forget whether to cash a check or make a withdrawal, but in any case, Graham had to go to the teller. And the teller said out loud, sort of to the bank floor, is Mrs. Graham good for this amount? And it just stuck with him. It was maybe $5 or something like that, which, of course, in those days was a lot more than it is today, but it still wasn't much. And I think he was, Graham was traumatized by loss. And, you know, in several of his books and articles, he has this expression. He says the future is something to be guarded against.

Starting point is 00:55:03 And, you know, this is the biggest knock on Graham. It's the criticism so many people make of him today and have been making for 20 years. And I think it's valid. Charlie Munger makes the same point. You know, one of the first times I interviewed Munger, he said to me, Graham was afraid that the depression would repeat. And he always saw another depression around the corner, and all he cared about was surviving that. And in the intelligent investor, he talks about the difference between protection and projection. And effectively, growth stocks, growth investors are in the projection business. They're trying to extrapolate on a, you know,

Starting point is 00:55:47 a fabulous line of growth into the future. They're projecting it. And Graham cares about protecting. He's worried about the downside. And that's because he really suffered it. And he really felt it. And both Buffett and Munger went through the Great Depression, but they were much younger than Graham.

Starting point is 00:56:08 And they saw the country come roaring back. To Graham, you know, he had been through many more severe cycles. And of course, he, you know, he was a young adult when the Federal Reserve was created. So he had lived through the panic of 1907 when there was no lender of last resort. And it wasn't clear if the financial system would survive. So he was obsessed with the downside and protecting against it. And, you know, if I were revising the, book today, that would be the main issue that I would be struggling with, which is how do we reconcile the need for protection with the importance of projection? I mean, we're not investing for today. We're investing for tomorrow. And if you don't project, if all you do is protect, then how will you prosper tomorrow? And I think that's a valid criticism of Graham's approach. It's a profound conundrum. I remember having a revelation at one point when Howard Marx, who's great at articulating these conundrums, said at a certain point, risk avoidance becomes return

Starting point is 00:57:19 avoidance. And I have that kind of fearfulness and anxiety about the future that I suspect to some degree is an inherited thing from our families having gone through the trauma of having fled from Russia and Poland and the Holocaust and the like. And I remember talking to Chuck Akrae about this at one point saying that I'm kind of a pessimist, and he's like, good luck with that. He was like, look, as an investor in stocks, you need to be an optimist. I see you conflicted about this as well, right? Because you've written, I think, that uncertainty is the most fundamental fact about human life and economic activity. So I think you temperamentally, in some ways, are on my side and Ben Graham's side more than on Chuck Akre's side temperamentally.

Starting point is 00:58:02 Yeah, I mean, sure, I'm a worrier, but, you know, I also am an optimist. I mean, I've seen too many good things happen in my own life and, and frankly, in the world's life, to be a pessimist. I mean, I forget who it was. An Israeli prime minister, naturally, said, to be a realist, you have to believe in miracles. I think it was, it might have been Ben-Gurion. Yeah, either Ben-Gurian or Golda-Mayer, one of those two. Yeah, and it's kind of true. I mean, you think back a decade ago, who would have expected, well, a little more than a decade, but who would have expected, you know, cloud computing and fracking, you know, the U.S. is energy independent.

Starting point is 00:58:48 That seemed impossible 15 years ago. And, you know, progress doesn't stop as negative and horrible as a lot of the headlines are. And as worried as I am, as I think any thinking person has to be about the polarization in our society and the rising resentment and distrust of expertise and the anger across the political spectrum at the other side, I just don't know how you can really be a pessimist. Yeah, I tend to feel, having talked to a lot of great investors who are smarter about this stuff than I am, that it's a kind of general upward trajectory that's interrupted by these periods of tremendous disruption. I think that was Ray Dalio's view when I interviewed him recently.

Starting point is 00:59:38 There's a that if you look at the very long-term picture of productivity, longevity, you know, human lifespan, quality of life, it's hard not to be optimistic, but there are these periods of disruption. And so it seems to me that part of the key to investing well is to set yourself up for survival. And I remember you having a great, a great interview with Peter Bernstein, where he talked about just this recognition of just how badly things can get wrong when you asked him about the biggest mistake that you can make in investing. Can you talk about what you learned from that? Yeah. I mean, what Peter said was that, I think he said survival is the only path to wealth. And for anybody who doesn't know, I mean, Peter was just this extraordinary figure.

Starting point is 01:00:23 I mean, he was over 90 when he died. He worked on Wall Street for over 60 years. He was an economist, a portfolio manager, and probably the most sophisticated observer of the investment management business I've ever come across. And wrote a beautiful book called Against the Gods, A History of Risk, which is one of the great books, which somehow I realize I have a signed copy that he's inscribed to me. I have no recollection at all of whether he gave it to me. This is the joy of middle age.

Starting point is 01:00:52 is that I truly can't remember if I even met him. Well, you have to hang on to that. But it's really true because Peter is giving us the bridge that sort of solves this conundrum that you raised with Graham, the bridge between protection and projection, right? Which is if all you do is project, you may well not survive. And if all you do is protect, then you may not have enough growth to really thrive over the long term. So you need to do both. You need to protect. You need to protect your downside. You need to have that margin of safety, but you also have to ensure that you haven't truncated your

Starting point is 01:01:36 upside too much. And, you know, that's Graham got out of the market in, you know, I don't know, the late 1960s or something and never really got back in. You know, he was probably more, a lot more conservative than he needed to be. On the other hand, there's that wonderful expression, you know, once you win the game, stop playing. He had all the money he needed or wanted. So what would he put it at risk for? You know, one of the, I think the single most important principle any of us can take from Graham's emphasis on protection is, you know, don't take a risk. need to take. I mean, that's true if you're a professional portfolio manager. It's true if you're just an individual investor. You should take intelligent risks, which means they are risks you

Starting point is 01:02:32 need to take and you understand. Yeah, it seems to me that focus on just catastrophe avoidance is so central, just constantly asking yourself, what's the consequence if I'm wrong? And that was something Bernstein talked about a lot as well, right? That it was consequences. He said, It's something about consequences matter much more than probabilities. I mean, Peter was a huge fan of Pascal's wager. And for anybody who doesn't know, you know, the great theologian and philosopher Pascal proposed this thought experiment, which has become known as Pascal's wager. And the basic idea is, you know, either God exists or he doesn't.

Starting point is 01:03:13 You have a choice between living an ethical life or not. If you live an immoral life, you'll have a lot of fun while you're doing it. And if you live a moral life, it probably won't be as much fun while you're living it. So you're basically wagering. Is there, does God exist or doesn't eat? And if God exists, then you don't lose anything as the person who lived the moral life. But the immoral person is in a lot of trouble. And so Peter really emphasized framing things in terms of Pascal's wager, which is not so much the way most people think when they invest. Most people think, how much am I going to make if I'm right? But Peter's point is you also need to ask, how much am I going to lose if I'm wrong? And it hurts a lot more to be wrong than it feels

Starting point is 01:04:06 good to be right. And being wrong once, if you're too wrong, can take you out of the game permanently. I mean, if you get wiped out, you're done. And you've said, I think the first phrase you used at one point was that a diversified portfolio is the closest thing to a sure thing in all of finance, that ultimately the best insurance policy other than not investing, which doesn't lead to a great outcome either with inflation and the like, that the best insurance policy is to diversify. Is that also one of the just the most simple and basic but timeless lessons that we get from someone like Graham, who was probably much more diversified than Buffett? Yeah, correct. I mean, it's kind of interesting. This is another area where

Starting point is 01:04:46 Buffet and Munger really diverged from Graham. Graham invested in categories of security. You know, if railroad stocks were cheap, he would just buy every railroad stock that was cheap. He wouldn't buy one. He would buy a dozen. If he thought utilities were cheap, he would buy every utility he could find that was cheap. Graham was a huge believer in diversification. And Buffett and Munger are not. And, you know, I think there was a... right way to think about it is that diversification is inverse to the likelihood that you have superior knowledge and you're actually right. So the more sure you are that you know what you're doing, that you're doing something that not everybody else is, and there's an asymmetry

Starting point is 01:05:44 between the downside and the upside, the more you should put in that asset. And great investors will tend to be under-diversified, great active investors, because they feel or their experience tells them that they should concentrate. The problem with that is that people aren't very good at assessing how valid their signals of confidence are. And it's part of normal here. in behavior to be overconfident. And if you're overconfident about the things you're over concentrating in, the result is not likely to be very accretive in the long run. Yeah, I remember once saying to Bill Miller when he was, I think he had bought 15% of Amazon. This is back in 2000, 2001, and everything was going to hell in the market after 9-11.

Starting point is 01:06:39 And he was, I was with him while he was investing hundreds of millions of dollars. And I said to him at one point, God, you've got to have so much balls to do what you do. He said, yeah, I've also got to be right. And it was one of those moments where you were like, oh, yeah, it's like so many of the truths that you hear in investing are so simple. There's emphasis on survival, this emphasis on diversification, this emphasis on being right, this emphasis on being long term and patient. They're all so platitudinous that our eyes kind of glaze over and we don't take them seriously.

Starting point is 01:07:05 But it's like, yeah, if you're going to concentrate really heavily in a few positions, you better be really smart and right. Yeah, and it's worth emphasizing for people the sequel, right? Because Bill was almost looking forward in a way. He was almost looking ahead because he did the same thing seven or eight years later with financials. And he wasn't right. And then the sequel to the sequel, which is then he did the same thing with Bitcoin and Amazon. And he was right.

Starting point is 01:07:36 And was right. So I mean, I think to some extent when I look at these great investors, I was thinking about this recently with Bill Ackman as well, where I was reading in the journal the other day about how he just made $4 billion during the COVID meltdown and then the recovery. I was just thinking one of the keys is just to be true to themselves. You have to kind of embrace your own form of craziness to some extent to be extraordinary at anything. You have to play the game in a way that suits your particular form of brilliance and craziness. Does that resonate for you? Yeah, it does. And I think, you know, I think the challenge all great professionals face is this push and pull between the sense you have that you are exerting actual skill and the need for humility. I mean, you know, whenever I hear anyone talk about being humble, I just, I mean, I want to throw up. I mean, it's like if you're talking.

Starting point is 01:08:35 talking about your own humility, then you don't have any. I literally, Jason, had a conversation a few years ago where I was talking with a guy I was friends with who I was helping with a memoir that hasn't been published, who's multi-billionaire art collector. And I was talking about, you know, someone had said something about humility and vanity and the like. And he said, no one is more humble than I am. And I sort of burst out laughing and I thought, I thought he was joking.

Starting point is 01:09:01 And then I realized, no, no, he's totally serious. Here is this multi-billionaire saying nobody is more humble than I am. Bosting about its humility. It was just wonderful. I'm the best at being humble. Look at me. I think the key is that combination of you can't be good at something if you don't think you're good at it. And if you've been a professional investor for years and you have a successful track record,

Starting point is 01:09:28 it's sort of inconceivable that you don't come into the office each day and saying, oh, God, what am I going to screw up next? You come in, you have a sense of exerting your skill and demonstrating your power and your facility and your knowledge. And without that, you'd be lost. On the other hand, you can't let it go to your head. And, you know, there's ultimately, I think humility, the only way to resolve it is with paradox, right? I mean, there's a wonderful expression.

Starting point is 01:10:07 I think it's somewhere in the Talmud, actually, that says the truly healthy man has a soul without knowing it. And it's something like that. It's that you want to be humble and you seek to be humble, but you don't really expect to achieve it. Because if you did, if you did expect it, you would end up sounding like the person you were just describing. To go back a bit to what we were talking about before with Buffett, Buffett obviously learned immensely from Graham and Graham had a profound impact on him. But in many ways, the student far surpassed the teacher. Buffett has become a much greater investor, I suspect, something much richer investor. You've interviewed Buffett multiple times. And I wondered, A, if you could give us a sense of what that

Starting point is 01:10:58 experience was like for you, what you took away from it. But also, if you could talk to us about Buffett's emotional makeup, which seems absolutely critical, because it seems to me that he does have an emotional or temperamental advantage over Graham. And I remember you once saying to me that you regarded Buffett as inversely emotional, if I'm quoting you correctly. Could you talk about that a little bit? The first time I ever met Buffett, which, as I think I mentioned earlier, was in July 2003, what really struck me about him was his warmth and empathy.

Starting point is 01:11:36 And it really feels as if you're the only person he wants to talk to. He is incredibly good at focusing his attention on you as a person. And, you know, he asked, me at least as many questions about myself as I asked him and very interesting questions and more about his background and development as a person. I realized that that came to him after decades of relentless what must have been brutal effort. Because if you read the Alice Schroeder

Starting point is 01:12:28 biography of Buffett, he was so shy when he was young that he was almost literally socially paralyzed. He couldn't speak to people. So he, through Dale Carnegie courses, through just discipline and effort, he remade himself into the kind of person he wanted to be. And how many people do any of us know who have completed a self-transformation like that? It's almost, it's almost like someone who I know most alcoholics would never use this term. It's almost like someone who's a recovered alcoholic. He didn't want to be the person he had been and he became somebody entirely different. And I think he's applied that kind of emotional, discipline and steely power to his day job as well in a way that most of us probably aren't

Starting point is 01:13:33 capable of doing. Every investor I've ever met, if you say to them, you know, will you buy more stocks if the stock market goes down 10%. I've never met anybody who would say, no, I wouldn't do that. But when the stock market goes down 10%, it's gone down 10%. it's gone down 10% because a lot of people were selling. So, I mean, what does that tell you? And when the stock market goes down 10%, Buffett sits up and he starts looking because he says, oh, this is getting interesting. And the more it goes down, the more interested he gets. And that's why I use that

Starting point is 01:14:11 term inversely emotional. And when I've discussed it with him, he says, yes, that's correct. I use other people's emotion as a cue for my own. And when other people are enthusiastic, I become pessimistic. And when they're negative, I become positive. When you wrote your book, Your Money and Your Mind, which I think came out in 2007, which was one of the first books about neuroeconomics. Yeah, your money and your brain. Sorry, your money and your brain. And you're showing how our brains mess up, as I just did, particularly when we're making decisions around money. And I, I, I remember I was rereading it the other day, and I'm having to say I still have the advanced copy from before it came out that you gave me all those years ago.

Starting point is 01:14:59 And you were talking about how when you're making money in the market, for example, it's like being high and that it has basically the same neural effect. And as part of your research, I remember you had your brain scanned in various MRI machines and took part in various experiments in different research laboratories. And I'm wondering what you learned about your own brain that surprised you. that made you think, yeah, I'm not Buffett, I'm not munger, I'm not unemotional, or these are the forces that are unconsciously driving my decisions, that I wasn't even aware were driving my decisions. I think the most remarkable experiment I participated in was at Emory University,

Starting point is 01:15:38 and it's a little, I think it's a little too complicated to describe here, but to boil it down to the essence, what was astounding to me is I was, I was presented with a problem, like a choice problem, sort of A or B, and there was reward associated with the choices. And I was in the MRI scanner trying to solve these problems while my brain was being scanned. And my conscious mind was working like crazy, trying to figure out what to do. And while I was deliberating what the optimal choice was, my right hand, which was, which was, was hovering over the button press that you use to record your responses inside an MRI machine, my right index finger was going ding ding ding ding because my unconscious mind had figured

Starting point is 01:16:38 out the answer, even as the sort of prefrontal cortex of me was totally flummoxed by the problem. The unconscious mind, the one that had gotten the reward, was like, oh, the reward is over here. Stop thinking and go get the sugar water, because that was the reward. It was basically like, you know, a sweet drink that they were piping into my mouth. And I remember flying home on the plane, looking out the window, and just saying, oh, what just happened to me? And it's really humbling when you discover that, you know, there's this sort of subterranean creature living in your head doing all this stuff and you have no awareness that it's going on. And frankly, you never will unless you're exposed to, you know, those kinds of conditions, which are obviously

Starting point is 01:17:37 extraordinarily rare. So given that our emotional reactions are kind of crazy and that we're driven nuts by things like the thrill of gain or our fear of the pain of loss or cravings for whatever feels likely to be rewarding in the short term. What can we actually do in practical terms to protect ourselves? Like, there are procedures that you would recommend or that you put in place yourself after discovering that you were a little nuttier and more emotional and driven more by your subconscious mind than you thought? What can we actually do? As I know, you're aware, William, because you helped him do it. You know, Guy Speer has written a lot about the importance of, I'm going to call it investing hygiene. And, you know, that term, the term hygiene

Starting point is 01:18:27 comes up a lot. Danny Kahneman uses it in his new book noise. He uses the expression decision hygiene. It's a term I love. And I think that's the key. You know, one of the phrases is I like that I've often used when I talk with fund managers and institutional investors is, you know, anything that can be made a matter of policy and procedure should be made into a policy and procedure. The idea is you want to take your subjective judgment out of the process, out of the decision process, as. often and as thoroughly as you can. You don't want to remove it completely because you're not a machine and you haven't been hired

Starting point is 01:19:18 to be one. Wherever it isn't essential, you want to get rid of it. And so you want rules and policies and procedures and you want a lot of if-then statements in your investment process. If this stock goes down 25%, then if If I own it, I must then reevaluate it to see if I should be buying more and averaging down or whether something fundamental about the company has changed and I should sell. If I don't yet own it, then because it's on my watch list, I should be evaluating it as

Starting point is 01:20:01 a purchase because it's just gotten a lot cheaper. And everything should be an if then statement that can be an if, then statement. And the more rules and policies and procedures you have, the more checklists and watch lists you can build into your process, the better your hygiene is. And then, of course, the other key, which, you know, which Guy Speer has written about and you've written about extensively, it's not just what you do, but it's where and how you do it. Sir John Templeton managed money from LifeRut Key, Buffett manages money from Omaha. You don't have to work on Wall Street or in Manhattan or on Bay Street in Toronto or, you know, in the London Financial Center or Hong Kong

Starting point is 01:20:53 or whatever. It could be very constructive for you to be doing what you're doing in the middle of nowhere where you don't have those influences. And anything you can do, to break the usual pattern of reaction and response and hot emotion can be really powerful. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. Vanta automates your compliance process and brings compliance, risk, and customer trust

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Starting point is 01:24:28 risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. Yeah, one thing that you helped to clarify for me in the last week when I was rereading all of your books in an insanely obsessive way to prepare for this.

Starting point is 01:24:51 There's a beautiful definition in the devil's financial dictionary, which is for people who don't know a kind of satirical book of definitions that show the distortions and hypocrisy and spin on Wall Street. And there's a definition of self-control as the secret to success as an investor. And you write, I think this was in that book, within you lurk an angel, a devil, a scholar and an idiot. If the angel and the scholar ever let down their guard, the devil and the idiot will wreak havoc that will take years of work to undo. Those investors who control their own behavior and abandon the futile effort to control the markets around them are the only ones who will ultimately prevail. And it really struck me. I mean, A, it's a beautiful piece of writing

Starting point is 01:25:35 and reminded me without trying to be of secrets of what a gifted writer you are. But B, it's really clarifying to come back to the realization that this is something from Ben Graham as well, right? This idea that you're your own worst enemy and that the real game, at the heart of investing is what you call it the struggle for self-control. Well, first of all, thanks for the kind words, William. And I think we should tell our audience that over the years, you haven't just edited me, but I've also edited you, and taken great pleasure, regardless of which side of the red pen I was on. But, yeah, you know, I think one thing that is important for everyone to think about is that

Starting point is 01:26:20 investing is a head game, but isn't everything? I mean, when you watch two of the world's greatest tennis players hammering the ball at each other across the net, who's going to win, the one who's bigger, stronger, faster, maybe? Or is it going to be the one who stays focused? and who doesn't let his or her own mistakes ruin the match. You know, I'm a very poor recreational tennis player, and one of the reasons I sort of stopped doing it was I found I would get so frustrated that my own mistakes that I couldn't calm myself back down.

Starting point is 01:27:10 And, you know, there's a useful lesson in that, which is that skill in one domain doesn't really carry over to every other. I think I'm very good at managing my investment emotions, but I'm really bad at managing my tennis emotions. But look, investing is above all else a head game, because everyone we're competing with in the financial markets has pretty much the same resources at their disposal. You know, after reg FD in the United States, you know, no analyst really gets That's some inside scoop before some other analysts. Everybody has a Bloomberg machine.

Starting point is 01:27:52 Everybody reads the Wall Street Journal. Stock quotes are instantaneous. There's, you know, 100, whatever it is, 180,000 CFAs around the world. You know, it's an unbelievably competitive marketplace. So what would distinguish the greats from the very goods? it kind of has to be something they're bringing in from outside, which is their own character. And if you want to be great, you're going to have to put as much effort into cultivating your character as you do into managing your portfolio. You spent a couple of years helping Danny Kahneman, the Nobel Laureate, who you mentioned before, when he was first working on his book, thinking fast and slow.

Starting point is 01:28:40 And obviously, Kahneman is one of the great experts on biases and the way that we sabotage ourselves when making decisions. And I was wondering, having seen him up close, how rational was he? Because my guess is he was, you know, he's a brilliant, but not an easy man. And maybe that's unfair. But I was wondering, A, what the experience was like of working with him and whether you learned anything from him that's really changed the way you operate in the world. Yeah.

Starting point is 01:29:05 So the first day we officially started working together, Danny did something amazing, which is he, he did the, he did the sort of the planning fallacy exercise with me. So the planning fallacy for anybody who doesn't know is that when people commence large or complicated project and estimate how long and how difficult they will be, they look at the inside information. that's available to them. Like, who are we? Who's doing this? What are we trying to do? What resources do we have available? How good are we?

Starting point is 01:29:47 And that's the inside view. And the outside view is, who else has tried stuff like this? And how hard was it for them? And how long did it take them? And so Danny sat me down and we did a planning foul was the exercise. And he's like, so how long does it take? typically take people to do a book.

Starting point is 01:30:09 And eventually we got into the kinds of details like, you know, how many words a day is it realistic to write? And how many days in a row can people write? And so we went through all this and he was very open and very adamant. He said, you know, I'm doing this because I want us both to be realistic. about what we're getting in for, and because I know that if we don't do this, we'll be absurdly over-optimist. And so at the end of the exercise, after he had grilled me for, I don't know, it was probably over an hour, we sort of mutually decided it should take a year and a half. It might take two. And so that would have been 2007, and the book came out in 2000.

Starting point is 01:31:05 But he almost quit about 20 times. And so, you know, we missed. We underestimated by at least half. And that is the remarkable characteristic that Danny has, which is that he approaches everything with a clean slate. And he doesn't take anything for granted. And I remember at one point we were just making small talk about something. and my kids were very young at that point.

Starting point is 01:31:38 And I said something along the lines. It was true small talk, just filling the empty time. I said something like, oh, you know, my wife and I were kind of, you know, sort of strict parents. And he turned to me, he said, why? And I suddenly realized I didn't know. And I was like, why do we do that? I don't know. And another time we were walking along the street and someone came by.

Starting point is 01:32:04 by sort of gushing over their dog. You know, like the dog was on the leash and the person was sort of goo-goo talking to the dog. And then he said, that's something I know nothing about. Why do people do that? I said, our dogs are wonderful, Danny. And he said, no, but why do people love dogs as much as they love people?

Starting point is 01:32:28 And that ability to look at the world as if you've never seen it before is really extraordinary and to like take every sort of take every fact that's presented to you and just treat it as some kind of alien object that you know nothing about. That was the, he gave me many gifts when we work together, but I think that was the, that was the greatest along with letting go of sunk costs, which I think is so important. And he really taught me that. Would you apply how?

Starting point is 01:33:05 So we had worked very hard on chapter of the book. I'm not sure at this point which one it was. I'm going to say it was probably the chapter about Paul Neal's research. Paul Neal was one of the great psychologists of the 20th century and a hero of Danny's. And we had worked on this chapter for weeks. and we finished it and it was beautiful. I went to bed that night, feeling very pleased at what we had accomplished. And I woke up the next morning and I had all these Danny Grams in my mailbox.

Starting point is 01:33:44 And anybody who knows Danny Connemann well talks about Danny Grams, which are these emails that he starts sending around two or three in the morning and are incredibly dire and pessimistic, and they just keep getting darker. And I think the first one started out, the subject line was something like, this will not do. And then it became,

Starting point is 01:34:09 and this is terrible. And then it became, the subject lines became things like horrible. I am ashamed. This is ridiculous. And then I think there was one that said, disaster. And then, so I'm reading these and I'm sweating. My forehead is dripping sweat.

Starting point is 01:34:35 My palms are sweating. I'm feeling as if feeling nauseous. And then maybe around 8 in the morning comes an email and it says, I think I can fix it. And Danny is not much of a sleeper. And when he wakes up in the middle of the night, he, just gets up and does this. And by the end of the day, he had completely rewritten the entire chapter. It was as if it had been written by another person, almost a person from another planet.

Starting point is 01:35:11 The tone was different. The substance was different. The organization was different. The materials he used to make the points were all different. and it was great. And the next morning, I went down to his apartment as I did every day at that point. And I walked in the door and I said to him, Danny, how did you do that? How?

Starting point is 01:35:38 And he just turned to me. He was making coffee and he turned to me and he said, I have no sunk cost. And that was just his way of saying that, you know, if it didn't work, try something else and see if that'll work. And for a writer, and I think for anybody who makes decisions of any kind, that's a very valuable lesson. I mean, you can't let go of everything you do and start from scratch. But whenever something isn't working beautifully, then you should smash it and start over and see if you can make it work beautifully. I asked last week for people to submit questions on Twitter that I thought they might like me to ask you.

Starting point is 01:36:26 And I've pledged that if I use a particular question with each interview I do on this podcast, I'm actually going to send them a signed copy of my book, Richard Weiser, Happier, which unfortunately this one I have to send to Spain, which knowing UPS will cost me about $200. An Israeli guy called Alon Michael, I think, or Mikhail, I don't know, who lives in Madrid, who asked me to ask you, what bias is your? especially vulnerable too that prevent you thinking rationally? What have you had to work hardest to root out? And what did you do in practical terms to overcome it? Yeah, well, for me, and thanks for the question alone, and enjoy the book. I don't think there's any doubt in my own mind, which bias has

Starting point is 01:37:09 been most harmful and difficult and difficult for me to overcome, although, of course, I could be wrong. But for me, it would be overconfidence. A few years ago, I wrote an essay called overconfidence, an autobiography, in which I told a story about my first week in college, in which I made a total, complete idiot out of myself in front of all my classmates without understanding. That's what I was about to do. And it's a moment that has lived with me ever since, and I don't think I'll ever forget. But, you know, one of the beauties of working at the Wall Street Journal and having, you know, hundreds of thousands, and I guess millions of readers is you can't really make a mistake and get away with it. To the best of my knowledge, within about 30 seconds of when

Starting point is 01:38:02 a column of mine is published that has an error in it, the emails start to come in. And that does keep me honest and making mistakes is not enough to keep you from being overconfident. What helps is making mistakes and learning that you made them. And I'm very fortunate that I have an audience that will immediately let me know if anything I say isn't accurate. And it also helps to be married or to be in a long-term relationship with somebody. I don't know if you if you know a wonderful line from H. L. Mankin, William. Mankin was a great American journalist in the early part of the 20th century. And I love one of his expressions that a man may be a fool and not know it, but not if he is married.

Starting point is 01:38:59 I was so lazy yesterday that I saw a footnote in one of your, in something that you had written that quoted Mencken's chrystomopathy or however you. Yes, Christomathy. And I know that I have it in my house. Instead of go look for it, which is a really hard thing to do because I have thousands of books, I just ordered another copy. It was a terrible, terrible act of laziness. There was a beautiful thing in that essay that you wrote about your autobiography of

Starting point is 01:39:26 your overconfidence, where I think if I remember rightly you said something about how you were the most dangerous of all people, the fool who thought he was a gene. years. And it seems like that's something that you've worked on a great deal over the years, whether it's learning from Peter Bernstein or from your father or others, just the importance of realizing how little we know that, again, these things are kind of platitudinous, but really profound. You spent the last 60 years reading obsessively, and yet you discover actually, I still can't predict anything about the future, for example. I had both the incredible good fortune and the misfortune of growing up in a very unusual way. So, you know, I grew up on a farm at the end of a

Starting point is 01:40:13 dirt road, 12 miles from the nearest stoplight in the middle of nowhere. And I was far and away the best student in my teeny class and probably the entire school. And so by the time I was 18, I thought I was brilliant because I guess by comparison, at least academic comparison, that's what the numbers were telling me, right? And then, of course, I got to college and found out that everybody else was brilliant too. And suddenly I wasn't valedictorian of a class of 31 students because five of them had dropped out over the course of my senior year in high school, I was near the bottom of my class. That was a really powerful lesson to me. You know, the other difficulty you run into is when you do anything for a long time,

Starting point is 01:41:16 you eventually learn stuff. And the real danger for a journalist, and I think for investment managers as well, or any kind of investor is thinking you know all the answers and eventually running out of questions. So that's what I thought. The longer I do this, the harder I work at making sure I don't run out of questions and trying to keep digging into things I don't know enough about or things I know nothing about to keep myself hungry so that I don't, that's another way I think you can try to keep your head from swelling, you know. You've talked a lot about learning from your own mistakes and other people's mistakes

Starting point is 01:42:06 and the importance also of learning from historical mistakes. And one of the things that I've been tearing my hair out, little as left of it lately, is sorry, I bring up that sensitive subject, Jason. For people like us who tend to be fairly skeptical of crowd euphoria, at times when people get carried away, you look at things like the speculative excitement surrounding stuff like the Ark Fund, Kathy Wood and Tesla soaring or cryptocurrencies going wild. And my instinct is always to look at those things and say, okay, so it's just a repeat of the euphoria of 1928 or 1972 or 2000. And yet I also have to be aware that I actually don't know, that I don't know very much. I don't really understand technology very well. And maybe something

Starting point is 01:42:52 really profound has truly changed and that there are these disruptive technologies that we should be profiting from rather than just saying like Templeton that the foremost expensive words in the English language this time is different. And I'm wondering how you think about these, this sort of latest manifestation of new paradigmism, new euphoria. What do you think? Is it the real deal? Is it something to beware of? Is it, how do you think of it? Well, I guess I would say that I'm sort of quoting myself from the column that I did today. I mean, you can be right about the future and be wrong about how to profit from it. You know, think back to the fourth quarter of 1999 or the first couple months of 2000.

Starting point is 01:43:43 If you believed as an investor that the Internet was going to change the world and that it was going to be the biggest fundamental shift in how the economy, worked in at least a generation, you would have been absolutely right. But that doesn't mean you should have gone out and bought Yahoo and Cisco and WorldCom and Global Crossing at hundreds of times earnings. The question isn't whether a technology is disruptive because new technologies come along all the time and a lot of them are disruptive. The question is whether it's disruptive and priced appropriately. And, you know, a lot of the estimates of, you know, the future market for various disruptive technologies are very aggressive. You know, back in the late 90s, people were making estimates for the growth

Starting point is 01:44:51 to the internet that were ridiculous, which is why every internet stock traded at bubble valuations. And if you had bought only Amazon and maybe a couple others, maybe eBay, you would have done very well. But if you had bought all of them, you would have done terribly. And if you had bought indiscriminately, you would have lost almost all your money. So that's the real question. And then I think there's another, There's another element that people are missing, which is that disruptive technologies don't just disrupt the entrenched technologies. They disrupt themselves. You know, it's entirely possible that what we'll see in crypto is this kind of massive, endless

Starting point is 01:45:41 cannibalization where, you know, new coins arise constantly and push the earlier coins aside. And one element that I do think a lot of younger investors don't fully appreciate is that entire markets can disappear. And this is one reason Graham was pessimistic. And I don't think he was wrong in this respect. I mean, just because there's been a deep liquid active market for an asset for a long time doesn't mean there always will be. Because if the world changes and it moves away from that asset, the market for the asset and the asset itself will basically disappear. I mean, after my parents were in the newspaper business, they became art and antique dealers. And they specialized in 18th century American furniture.

Starting point is 01:46:38 and pieces that we would have sold to, you know, some of the finest museums in the country for, you know, 10 or $20,000 or more in the 1970s, today are probably worth a quarter or a third of that, because nobody wants 18th century American furniture anymore. The market has basically gone away. And my dad loved to tell a story about Piffany lamps. So when he was a teenager during the Depression, my aunt, his sister, was just starting to date. And my grandfather, who, in addition to being a farmer, was also sort of an estate dealer. he would buy entire houseful people's houses.

Starting point is 01:47:42 He would just buy all the furnishings and resell it as a way to make it through the Depression. He had bought the estate of a New York State Senator who lived in Albany. And contents of that house included a very large collection of Tiffany lamps, dozens of them, in fact. And my grandfather brought them all home. stuffed them into their farmhouse. And my aunt said to her brothers, I can't bring any boys home because of these ugly lamps. And my grandfather went on a horse buying trip out to Montana or South Dakota or something, as he did every summer. And he was gone for two weeks or a week or two.

Starting point is 01:48:32 and finally my aunt complained so much about the lamps that my grandmother said it's okay I'll take the risk get rid of the lamps and so my dad and his brother brothers loaded up the farm wagon with all the Tiffany lamps and they drove to the local dump and it was a beautiful sunny day and they had a javelin contest picking up the Tiffany floor lamps and heaving them onto the top of the dump. And my dad described how beautiful they were, smashing in the sun, all red and green and blue and yellow. And my grandfather came home a few days later and, you know,

Starting point is 01:49:16 beep all the brothers. And, of course, you know, my dad was telling us this story, I don't know, in the late 70s or early 80s. And today those lamps would be worth millions of dollars collectively. but in 1932 or whatever that was, they were junk. Nobody wanted them. And they were such junk that my aunt couldn't bring any boyfriends into the house because they would make fun of her for having these ugly old lamp.

Starting point is 01:49:47 That's what can happen. Markets can just like disappear for generations or permanently. And you can't take a liquid market. market for granted. You know, ask somebody who owned equities in Russia in 1913, you know, in Germany in 1938. That's why Graham believed in, you know, preparing for disaster and for, believed in the importance of protection. And, you know, if you're investing in a speculative asset class and all you're doing is projecting and you're not putting any energy into protecting, You're not asking yourself what could go wrong and what would happen to me if it does, then you're not really investing.

Starting point is 01:50:36 You're speculating. There was a beautiful thing I looked at in the interview that you did with Peter Bernstein all those years ago where you asked him what the biggest mistake is that investors make. And he said the refusal to believe that shock lies in weight. That was just a lovely way to put it. Just this awareness that things can happen that you could just never, you could, Never predict. Think of the pandemic, shutting down everything around the world, forcing us all to, I was talking to a friend of mine who was visiting from South Africa the other day, and I was asking him why he didn't have any wine with his dinner. I've never seen him not drink a couple of bottles

Starting point is 01:51:10 of wine at a dinner. And one of the things that had happened is I think he'd been in lockdown for 50 days in South Africa, and they had closed all of the off licenses. Nobody was allowed to buy any alcohol, and he'd basically gone kind of totally dry for 50 days. And it was kind of to protect all of the hospitals, I guess, from car crashes and domestic abuse cases that were stirred by alcohol. You could never predict. If you were running a bar or a restaurant that relied on alcohol sales or an off license, it never occurred to you in a hundred years that that could happen, that the government,

Starting point is 01:51:47 because of a pandemic, you were going to have to close down your, you'd lose all liquor sales for 50 days in South Africa. Right. Of course. I mean, look, I think, you know, all of us know from our own personal lives that wildly unpredictable things happen all the time. And then, you know, we turn to our investment portfolios and we say, well, you know, we're in control here. And it's kind of like, no, that's not the way the universe works. And you just have to, you have to accept that. You've spent a lot of time studying happiness research over the years from Kahneman and that whole crew of behavioral finance gurus. And I'm wondering if any of the things that you've learned have affected the way you live your life. And I remember in your money and your brain should have been called your money and your

Starting point is 01:52:41 mind. It would have been easier for some of us. I would have remembered it better than. In that book, your last chapter was about happiness, right? And I remember you talking. There was a lovely bit where you were talking about the importance of maximizing your self-worth rather than your net worth. Can you talk a little bit about if there's anything you've really applied in your own life that's grown out of that research to tilt the

Starting point is 01:53:03 odds of you having a happy life? Well, I wish I could say that I have a really good work-life balance, but I don't. The pandemic has really wreaked havoc with that, and I'm not proud of it. I've been working way too hard and not playing nearly enough. But yeah, I mean, the important principle, I think, to the whole question of money and happiness is people don't really learn from their own mistakes. So they say things like, you know, I really want that new car, or, you know, I really want to renovate my kitchen, or I really want that piece of jewelry or those shoes, or, you know, these $500 sneakers or whatever it might be. you know, the new Peloton bike.

Starting point is 01:53:51 Possessions and material goods don't really do much for people's happiness because of adaptation. It's like as soon as we possess something and we like take it in to our daily lives, we start to get used to it, we acclimate to it, we adapt to it. And the simplest way to think about it is think about new car smell, right? Like the last time you bought a car and you got in and you smelled that new car smell, whatever that is, I don't know how the automobile scientists generated, but it's some aroma. And you're like, ah, I love the smell of this car. And then, you know, it's gone after two weeks. And, you know, after a month or two, you know, the cat has scratched.

Starting point is 01:54:41 the back seat, the kids like vomited on the upholstery. There's like muffin crumbs in the gear shift and coffee stains on the upholstery and there's mud on the floor and the offenders are dented and a little while later, you know, the mechanical problems start. And that's kind of the way all material, most material possessions work. The way you use money to improve your happiness is through purchasing experiences, which means basically memories that you create with friends and family, you know, vacations, celebrations, flowers, and feasts,

Starting point is 01:55:25 as Danny Kahneman likes to say, anything that brings people you love together. Because as time passes, the event actually grows in positive emotion for you when you think back on it. And the other thing is making yourself a better and more well-rounded person, taking courses, joining, volunteering for nonprofits, committing to your place of worship, anything that puts you in a position to join with other people, doing things that help other people that can bolster your spiritual growth. And so, you know, you don't just write a check to your,

Starting point is 01:56:07 your favorite philanthropy, but rather you would volunteer for that philanthropy and you would wash the floors or serve the food at the benefit or whatever it might be, something that commits you not just with your wallet, but body and soul. When you did a Google talk a few years ago, I remember you talking about various causes you want to support. You weren't specific about it, but you were saying, look, I'm investing for the next hundred years because I've got children I want to help. I've got causes I care about and I want to build a long-term legacy with my family's wealth. And I was wondering when you think about

Starting point is 01:56:44 the benefits of all of these decades of prudence and deferred gratification in your investing, you know, you've got to a point where you don't really have to work. So you're working and saving money and investing it prudently for the future. What for? What's the end game here? I mean, it's wonderful that you have this prudent, deferred gratification gene that Charlie Munger talks about, what do you think about what the end game is, who it can benefit? Yeah, I mean, I do have causes I care about. In my case, a lot of them are environmental, and there's some others as well. I also want my kids to have some security. I mean, Buffett has that wonderful expression. You should give your kids enough money so that they can do anything, but not enough so they can do nothing. And I think

Starting point is 01:57:29 that's pretty wise. You know, I think for any of us, when we think about, like, leaving a legacy, it's usually about something we do, not something we have. And I guess, you know, if the best epitaph I know of was actually the motto of the great Flemish artist, Jan Van Eyck, which was Alts Ichkan, which means, and loosely, translating, I did the best I could, which I think is wonderful. I mean, what more could you, what more could you ever ask from a person, you know? If the legacy you leave is that other people would say about you, you know, he did the best he could or she did the best she could,

Starting point is 01:58:20 they did the best they could. That's, that's pretty good. I wanted to end kind of where we began with your father. And there was a brilliant article that he wrote. that you have on your website about the complexity of his own father, who we mentioned before, your late grandfather, Sam, who beat everyone up over the broken Tiffany glasses. And Sam, by your father's description, was a very tough, illiterate, violent, rage-filled immigrant from Ukraine, who was kind of a miser, who started off working in a sweatshop in New York and then saved up to buy a farm near Albany. But your father wrote this beautiful obituary where he said he was not a kind man, as

Starting point is 01:58:59 kind men are known by accepted standards. He never stooped to give. Only after he died, did people fully understand the essence of his charity? And they came in overwhelming numbers to say, I'm where I am today because he helped me. I thought it was a wonderful description of a man with great flaws and great strengths and virtues. You similarly, you wrote a wonderful piece about your own father. And I'm wondering for you as someone with two daughters now in their 20s, how you'd want to be remembered by your own children. Oh, boy. We're really ending with the morbidity, aren't we?

Starting point is 01:59:36 I hope my kids would remember me as fair and always honest. Honesty is, I think, my greatest, maybe my only virtue as a parent. I think I've always been honest with my kids. the thing that I hope I imparted to them is the importance of trying to find something you believe in and just like give it your all. And you know this story, William, but maybe not everybody listening to us has heard this. But so when my dad was very sick, a couple months before he died, I came up from college to visit home. As he always did, my, when I, not long after I got there, he asked me what I was reading because books were very important in. And of course, I was, I was a college kid, so I was full of myself.

Starting point is 02:00:38 And I very proudly said, when he asked me what I've been reading, I said, Kierkegaard, you know, the Danish philosopher, was pretty dark, by the way. and my dad said, what is he telling you? And I happened to remember this beautiful line that I had just read while I was on the train that Kirkegaard wrote, which was no individual can assist or save the age. He can only express that it is lost. And I thought this was so beautiful and sad and sort of jaundiced and existential. And my dad, he was in a lot of pain at that point, but he said, yeah, he's right. And he paused and he said, but that's why you have to try to save and assist the age.

Starting point is 02:01:31 And I thought that was just incredible. Not just that my dad had out existentialized, the great existentialist, but that he had put his finger on something that was incredibly profound, which is, you know, a life is, Life is hard work, and careers are hard work, families are hard work. You know, it can be very tempting to sort of give in and say, this is bigger than I am. But that feeling is part of what should keep you going. Yeah, and I think you sort of resisted at the start of the conversation when I was saying that you, you to some degree had inherited your father's crusading quality as a journalist. I do think, I do think there's an element in what you've done over the last 30, 40 years as a journalist,

Starting point is 02:02:23 where you are saving and assisting the world. And there's, I remember once you gave a speech where you picked up some award and you were, you were saying, look, we are sometimes kind of embarrassed about what we do, writing about money, but actually money is hugely important. And I think Peter Bernstein had said that if you want to really know about someone, look at how they deal with money, that it's so central to our lives, the way we invest, the way we save, the way we spend our money, the way we share our money, all of those things. And I think there's deep honor actually in the sort of service journalism that protects people from getting taken advantage of, protects them from their own stupidity and bias and ignorance and

Starting point is 02:03:06 emotion and kind of arms them to make better decisions and to take care of their families and the like. So I feel like you may be wary of giving yourself credit for this, but I feel like you've done a great servicing continuing that tradition. Well, thank you, William, although aside from embarrassing me, you're also making me feel old. But yeah, I mean, it's like I'll see a con. I mean, you know, you just do the best you can. And I just place a lot of store in what Jim Michaels said that we talked about at the beginning, that, you know, you don't want to get anybody's blood on your hands. And that's kind of, you know, that's a pretty good guide. And, you know, I often tell fund managers that they would be better off if their firms always asked, should we, would we want our mothers to invest in this?

Starting point is 02:04:04 you know it's like you know out out south and in the west you'll often see this bumper sticker on cars you know w w jd like what would jesus do and i'd like to see a bumper sticker w w mb what would mom buy you know and you know if you're designing some investment product that you wouldn't be proud to have your mom own maybe you should like bury that out back and not try to sell it to the public. Because if it isn't good enough for your mom, it isn't good enough for anybody else either. And I think that's one reason why we revere Buffett and Munger

Starting point is 02:04:46 is that they're not just great at making money. They've done it in a pretty honorable way, treating their shareholders as partners and transparent and admitting their mistakes. So, yeah, I think the manner of the victory matters as well. Absolutely. I think that's really important. Is there anything else you'd like to add before I let you go?

Starting point is 02:05:07 No, I don't think so. I think we covered a ton of ground, as long as we fully disclose to people that we've been friends for a very long time. Hopefully that survived this interview. Barely. Okay, great. I'd like to thank you, Jason, for being a great ally and supporter and truth-teller and role model over the years. And thank you to our listeners for being here with us. I hope you've enjoyed this conversation.

Starting point is 02:05:34 Yeah, my pleasure, William. Always great to be with you. That's a real delight. Thank you, Jason. All right, thanks. All right, folks, that's it. Thank you so much for joining us today. If you'd like to learn more from Jason, the first place to go is his website, jason'swig.com,

Starting point is 02:05:50 which has a lot of terrific resources for investors, including many of his old articles. I'd also strongly encourage you to read his weekly column in the Wall Street Journal, which is called The Intelligent Investor. As I'm sure you'll see, he does a fantastic job of looking out for his readers and protecting their best interests. Meanwhile, thanks to everyone who wrote to me on Twitter to suggest questions to ask Jason. I ended up asking him a question about his own biases that came from a listener named Alon Michael, who lives in Spain.

Starting point is 02:06:17 As a way of saying thanks, I'm sending Alon a signed copy of my book, Richard Wiser-Happier, which is based on hundreds of hours of interviews that I've done over the last 25 years or so with many of the world's greatest investors. Please feel free to follow me on Twitter at William Green 72 and do let me know how you're enjoying the podcast. We've got some wonderful guests coming up, including Aswatamodran, Monich Pabri, Arnold Vandenberg, and Bill Miller.

Starting point is 02:06:42 I look forward to being back with you again soon. Until then, stay well. And thanks a lot for listening. Take care. Thank you for listening to TIP. Make sure to subscribe to We Study Billioners by the Investors Podcast Network. Wednesday, we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets.

Starting point is 02:07:03 To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision consult a professional, this show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - RWH004: Intelligent Investing w/ Jason Zweig

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