We Study Billionaires - The Investor’s Podcast Network - TIP788: Simple Investing w/ David Fagan

Episode Date: February 1, 2026

Stig Brodersen speaks with David Fagan about the case for indexing and what most investors get wrong about performance, financial advisors, and risk. They explore why missing a few percentage points can delay retirement by years, how to think about rebalancing, and what it truly means to be the overseer of your investments. IN THIS EPISODE YOU’LL LEARN: 00:00:00 - Intro 00:01:57 - Why indexing works for almost everyone 00:12:49 - How to properly evaluate investment performance 00:24:58 - How to think about asset allocation and rebalancing using a simple, behaviorally sound framework 00:33:42 - What it really means to be the overseer of your investments, even if you outsource management 00:36:21 - Why missing just a few percentage points in returns can cost you years of your life 00:36:42 - Why missing 3% return means having to work another 6–7 years instead of retiring 00:44:13 - How to use expectations in the best possible way Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Mastermind Community⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members. Learn how to join us in Omaha for the Berkshire meeting ⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠. Listen to our interview with David Fagan about investing like a business owner. Listen to our interview with David Fagan about Buffett’s favorite business book.  Stig’s ⁠blog post⁠ on his portfolio and track record since 2014. Related ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠books⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ mentioned in the podcast. Ad-free episodes on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses in just a few minutes each week through our newsletter, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Check out our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠We Study Billionaires Starter Packs⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠X (Twitter)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Browse through all our episodes (complete with transcripts) ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Finance Tool⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠best business podcasts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠sponsors⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠: ⁠HardBlock⁠⁠ ⁠⁠Linkedin Talent Solutions⁠⁠ ⁠⁠Human Rights Foundation⁠⁠ ⁠⁠Simple Mining⁠⁠ ⁠⁠Masterworks⁠⁠ ⁠⁠Vanta⁠⁠ ⁠⁠Fundrise⁠⁠ ⁠⁠Netsuite⁠⁠ ⁠⁠Shopify⁠ References to any third-party products, services, or advertisers do not constitute endorsements, and The Investors Podcast Network is not responsible for any claims made by them. Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. In today's episode, I'm joined by my recurring guest and close friend David Fagan for a conversation about indexing and an uncomfortable truth most investors never hear. We talk about why indexing works for the vast majority of people and how missing just a few percentage points and in returns can quietly cost you years of your life. We also discuss what investors should really look for with evaluating track records, the benchmarks and the value provided by financial advisors, and sometimes the lack they're off. In this episode, as you also hear, we cover asset allocation rebalancing and what it really means

to be the overseer of your investments, even when you trust someone else to manage them. And finally, the conversation goes beyond investing into expectations, behavior, and leadership. We discuss how simplicity and consistency compound over time, both in markets and in life. 2014 and through more than 190 million downloads. We break down the principles of value investing and sit down with some of the world's best asset managers. We uncover potential opportunities in the market and explore the intersection between money, happiness and the art of living a good life. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the

Securities discussed. Now for your host, Stig Broderson. You're listening to The Investors' podcast. I'm your host, Dick Bruterson, and I am here today with my friend David Fagan. David, how are you today? Yeah, I'm doing great. Steg. Thank you very much for the invite. I'm really looking forward to this. Well, David, thank you for making time. And let's just jump right into the first topic here today. We're going to talk about why we should index. So with that, Very cold start. I'm just going to throw it forward to you, David. No, that's lovely. Yeah, I wanted to talk about indexing and how I use that with our family's wealth and do a bit of a deep dive of the thinking behind it. I know many of the listeners come here for value investing, concentrated portfolios and understanding individual businesses.

So this episode might not be directly for you, but it might be for someone that you're connected to. I've shared my indexing memo titled Compounding Simplicity with more than a few of our mastermind community members. And it's something that they've passed along to their friends, their family members, and anyone just starting out who needs a reliable framework to start building wealth. So today, I want to encourage you to listen to see if this resonates with you

or anyone that you're connected with, like a friend or family member, to set them up on a strategy that will teach them about the market. or the person who doesn't really want to pick stocks at all and just wants a simple plan that works, you know, sometimes there's accounts that are just too small to start out to do anything else in them. I mean, in Canada, we have what's called a tax-free savings account. And once you turn 18, you can put up to a maximum of $7,000 in it. And this is a prime example of something that you can do in an account like this starting out is indexing.

And for a lot of people, maybe you have a small allocation of your investments in index funds as well and want to learn a bit more about it. So to jump right in Stig, when someone like Warren Buffett says in his 2013 shareholder letter, my advice to my trustees of my state could not be more simple. Put 10% of cash in short-term government bonds and 90% in a very low-cost index like the S&P 500, I think that really deserves our attention. I mean, what is he really saying and telling the world when he says, use index funds? And Stig, this conversation is worth having because indexing is one of the very few investment strategies that works for almost everyone, regardless of experience and financial background. So I guess before we go a bit deeper, let's just back up and do a quick overview of what an index is.

I mean, there's countless resources out there on what it is, so I'll keep this really simple. I mean, an index fund or an ETF, it's just a basket of hundreds of companies packed into one low-cost investment. So instead of trying to pick winners and outsmart the market, index funds track the entire market and you own all the companies in that chosen index, such as the SMP 500 or in Canada, the TSX. And as those businesses grow, innovate, and earn profits, the value of the basket rises with And so you're not just betting on any one company.

You're actually buying the entire market. To share a couple fun facts about the industry, I mean, even though there's roughly 50% of assets are now classified as passive, only about 23% are held in true index funds in the U.S. market. And in Canada and Europe, it's around 12 and 13%. Index funds account for only 1% of the trading volume in the U.S. So even though they own a quarter of the market, they're hardly trading. And I feel like that means active investors are still overwhelmingly driving price discovery.

Only 17% of individual stocks beat the market over the last decade. And as the Bessimbinder research report shows that only 4% of the stocks created all the net worth in the market going all the way back to 1930, it's a remarkable study for those that are not familiar with it. So a tiny number of superstar companies drive all the gains. And one of the reliable ways that you can ensure that you own those winners is to buy index funds. And lastly, it's hard even for the pros to beat the market after fees and expenses. So in the U.S., roughly 90% of large cap managers underperform the S&P 500. And in the last 15 years, in Canada, it's even more dramatic, 98% of the Canadian equity managers failed to beat the S&P TSX index.

And just as an FYI, I grabbed those scorecards from S&P Global using their SPIVA reports. That's on their website. And stick from my own anecdotal evidence as an accountant preparing corporate tax returns and reviewing client portfolios for more than two decades, I can count on one hand how many times I've seen long term capital returns beat a simple blend of the TSX and the S&P. And this is even after fees and allocating some taking into account some fixed income allocations, the compounding just isn't there for a lot of people.

So yes, everyone wants to be Warren Buffett and compound at 20% for decades, but very few people live in that reality. And a lot of us are playing a different game. I mean, I think of investing for myself in three silos, real estate, public equity, and private equity in Canadian small businesses. And early in my career, I was very passive with my public investments. My focus was on saving money, minimizing taxes, and building wealth through entrepreneurship. And my wife and I, we have eight accounts, four registered and four unregistered. And of course, in Canada and many other places, there's RRSPs and TFSAs, and so it doesn't take a whole lot to have a whole bunch of different accounts.

We index six of those eight accounts. And because most of our wealth has come from entrepreneurship, I don't need to chase home runs or swing for a 20% kegger in the public markets. My priority is just really staying financially independent, protecting what we've built. and indexing fits that reality for us. I mean, I do have the other two accounts that I spend a fair amount of time on, and that's where I run a concentrated portfolio. That's where I've personally chosen to challenge myself intellectually and do studying of different companies.

But indexing is the core that gets us to where we need to go, and those accounts are indexed to maintain our financial independence. I mean, I often think of what, Howard Marks talks about longevity and wealth creation and that superior investment returns isn't about ranking in the top 5% in any given year. It's about consistency and steady returns over long periods of times. I mean, he just told the story to William in their most recent podcast that early in his career, he was reviewing investment returns for different funds and he saw a pension fund that

never ranked above the 27th percentile. or that same pension fund didn't rank below the 47th percentile. Yet, after 14 years, guess what? They were in the 4% overall on the ranking. And that's a remarkable observation early in his career that has stayed with him for 40 years, which is another remarkable piece to that story. I mean, the message is simple. Avoid big losses and let consistency win.

And for me, indexing is exactly that. average market returns, but for a very long time. And I guess just to kind of finish a little bit on my early thinking of this, just to kind of zoom out and look at the macro reasons why I index and the rationale for that, in line with the Best and Binders Research Report, it's nice to know that you're owning all the winners because the winners drive most of the returns. It's good to apply Occam's Razor when you can and understand that simplicity beats complacency. And that's a whole other tangent that we could go on in terms of what that means because

that can go into many different aspects of your life. Then there's the time paradox too. I mean, both time in the market and time that you save in your life. I mean, I spend a fair amount of time and I know you do too stag on a concentrated portfolio. But the reality for so many people is that they are not going to read investor presentations in 10Ks. And so you have to understand that there's a big commitment to time if you really want to get concentrated portfolio investing, right. At least I think you should be dedicating a significant amount of time to it.

Capitalism is very competitive. The other thing about indexing is the tax side and tax minimization. Studies have shown that portfolio turnover alone can cost up to 2% of gross returns every year. And there's lots of research reports that are out there that support that. So a 12% pre-tax return can quickly become 9% after turnover and fees and the taxes. And, you know, maybe the last thing about indexing is just fewer unforced errors or as Munger would say, just being less stupid. So, you know, most people aren't going to have a 40-year relationship with any single fund manager anyways. You know, often people switch brokers and they trigger a ton of changes when that happens.

So their taxes are significant in their portfolios and you're going to introduce grinds on your returns at some point. So indexing is a plan that you can stick to for a very long time. Like, it's going to shield you from making decisions 20 years down the road and switching and getting in and out of investments. And, you know, it can also save you from a lot of the behavioral biases that there's so many people have in terms of herd mentality and FOMO and trying to time the market, all of that stuff. I mean, it helps you ignore noise and focus on what can actually have a profound impact on your

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Back to the show. So, David, let me just try to play devil's advocate here, just because I can't help myself. Some people, they hear about this 4% business binder stat. And what they think is, oh, we should, we should index because it's so hard to find and hold on to those superstar stocks. And then the others who think, well, if 4% creates all their turn, we better go out there and find those 4% stocks. With that being sad, though, I'll be the first to say that 99% of people should index.

And I'm not saying 99% of the people listening to the show. I do know that there is a certain selection bias of the people who follow our show and their interest in the stock market. But I would say that 99% of people want to compote their wealth and probably who doesn't want to spend the time on it. and doesn't have the temperament to pick individual stocks. And, you know, I can just say it's been quite an eye-opener, for me at least, to look at some of the track records of the investors that we had all here on the past

on the show. And when I were president, I started back in the day, we felt everyone in the space were way smarter than us. And I think there was probably because it was true, they're way smart on us. And perhaps they're still smarter than us today. But one of the things that we did, I know it took us, way too long to get to that was we started to look at people's track records and we're like, hey, you say really smart things. And then, you know, you study Buffet and a manga, you're like,

okay, it's one thing what people say. It's another thing what people do. And the best way, like the stronger signal you can find would be an auditory track record where you benchmark towards a revetable benchmark such as, you know, the SP 500. And it really goes to your point before David about how few investors who actually do that. And the point is not to name any names. If you follow someone and you really have a lot of faith in what they do, I think that's great. I would also encourage you to check out their track record. And if you can't find the track record, it might be because they're too embarrassed,

that they are beating all of us and they're the next one above it and they don't want to tell anyone. But also, it's the same people who are out there in the public space all the time telling you about investing. And so there is certainly a selection bias. And we're talking about some of them are, you know, some of them are billionaires. And they're just, they're great at storytelling, but perhaps less so at picking stocks. Also, and this was a shock to me, the name escapes me, but I read a book about this concept a long time ago. And it was about whenever you see a fund that's performed really, really well, then the

author went back and he looked at how many funds that was started by the same person. And he was like, hey, just by pure math, some of those funds, if they're concentrated enough, are going to show really good returns. And then the trick is that you just close down the funds that are not performing. And we see that quite often, to be frank. But you sort of like have to know to think about it like that. We're like, yeah, but again, if they set up a hundred fund and there are only two remaining, you know, they could also be that element. And so I'll be the first to say that indexing doesn't sound exciting, but that is what most people should do. And I don't want this to sound like I'm bad-mouthing asset managers who are not being the index. You know, it is

incredible, difficult to do. And I also think that if you do it for the right reasons, managing people's money is one of the most admirable jobs that you can have. But I would rather encourage you to take a step back and ask yourself why you manage money the way that you do. So, for example, if you invest with an asset manager and they tell you their job is to beat the market, well, great, and the best of luck. But then again, make sure that they actually do beat the market. And it's not like some kind of random benchmark they chose, which I also see all the time that it's almost impossible not to beat that or they continue to change the benchmark.

And the benchmark is going lower and lower. That's probably not what you want to see. But a reputable benchmark, let's say at the SB 4. 500. And so that's one thing to look at. You probably also want to look at not just, you know, the past five years, you know, not just at a period of time where everything has gone up, but at least a decade, preferably too, and make sure that you have some really painful bear markets in that track, or two, and see how they reacted. And so I can't help to encourage you to study that. And of course, if the Azure Bengers then saying, no, they haven't been being the market,

but now they've figured out how to do it and they just need your money to do it. Make sure to be careful. And also, and I'm sorry, I kind of feel I become a bit nerdy here about this. And that's just because I attract many different investors, probably to my own detriment. And I've seen so many benchmarks being used, probably also a benchmark that are not reputable. And I can see, like, I can see a point where you say, look, I'm a microcap investor and I only invest in frontier markets. Yeah, perhaps there's a good case why you won't be using the SB 500. But I think at the same time, you can also say people listening to the show, they have access

to the biggest benchmarks, typically, and they can invest in the ETF's tracking those benchmarks relatively quickly. So, I don't know. I just think that, you know, to your point, David, you can do yourself a service of, you know, comparing apples to apples. And I know you have a really good story to this year later about a woman who wants to retire. I read that. I was like, that is exactly why I keep on beating this thing here about the index and what are you really measuring. But anyways, I know we'll get to that later here in the episode. And again, some of you out there, you know, you might have been following your show for a long time and you tried to lock in the stock market and you thoroughly enjoy it and you don't beat the market. Is there anything wrong with that?

No. I think that's perfectly fine. I just think you should you should know why you're doing it and the upside and the downside of whatever kind of approach. And I think as long as you do that, you know, you can not be the market as much as you want. But really, one of the things that I also want to talk about is that, you know, whenever you, for example, David, are talking about the stock market. I think whenever we hear the stock market, we think differently about it. I think some of the listeners are thinking, ooh, that's a dangerous place to be. Let's hold cash.

cash is less risky. And I'd say that that's probably cash is the surest way to lose your money because of inflation. And I know I'm sort of like going in all kinds of direction here, but I'll be the first to say, like, perhaps the CPI number, which is, what, 2.7, whatever, that's probably not the real inflation. And you could just look at, you know, the groceries you're buying or what's happening to your college tuition, whatever. Like, it's probably not 2.7%. And so really a big reason why you might want to invest in the stock market and why it's not risky is actually because the biggest risk is not to be able to retain your purchasing power. So the last thing I just wanted to say here before I throw it over to you, David, is that

perhaps the listeners want to know if I invest in index funds. I have around 15% at the time recording in passive indexes and then closer to probably add another 7-ish percent with you include my position in Berkshire, which is an individual stock. And I think a lot of people out there would say it's sort of like a superpowered ETF, pun taken. So that's sort of like where I am. I published my own track record of my own portfolio, and I'll be sure to link to that. So please take it for what it is.

But I think it's, if you are a yo-yo like me who think they can beat the market, I think it's also perfectly fine. You see sort of like what kind of thought process, what kind of positions for you to be able to track that. So with that said, that it's a repag of you, David. I think taking a step back and asking yourself why you invest is a great question. I mean, I had a wonderful lunch with one of our mastermind community members over the Christmas break.

And one of the things we talked about was how our investment style really needs to match our temperament. And his point went a step further, not just how we invest, but generally how we make decisions and how we operate in other areas of our life as well. And that leads me to thinking about indexing from the perspective of entrepreneurship as well. We talk about risk and returns often. And since I run a business where I'm trying to make a 20 to 25% rate of return, when I look at my overall strategy across all three silos of private and public equities and real estate, as much as I want to make the largest returns I can in public securities,

I am playing a slightly different game. And I think it's wise to acknowledge the risk that I'm already taking in the other silos when I put my public market investments in decisions in a broader context. I mean, entrepreneurship can be fragile. My business partner, James Allen and I, we often talk about the risk that could take our firm out of business. Yes, we want to generate high IRAs. And I mean, these are extreme scenarios, but we, you know, and that it could be highly

unlikely, but the government of Canada could say there's zero tax for small businesses in Canada. That's not completely outlandish. And so there's risk in that. I mean, we have key person risk. We could have a cyber security attack and just a plain randomness of the things that can happen when you run your own business. And you know what it's like. When you build a business, you realize how fragile things can be and how many variables you don't control. And that's where indexing can fit in so well for entrepreneurs. I mean, it gives you a foundation that isn't as fragile. And what I mean by that is if you believe that the stock market will be a decent asset class for returns over the next 40 years, this strategy can work, right? I mean, invest systematically,

dollar cost average, buy the entire market, don't use leverage. I mean, that should be a durable strategy. And, you know, you want reliability. You want something that compounds quietly in the background while you're focusing on the business that demands your energy. I mean, for the vast majority of people who don't want to read 10Ks and study public companies, I absolutely believe that indexing is the right approach for them. I mean, most entrepreneurs don't need an investment portfolio that adds more stress to their lives. I mean, I'm sure the business is already using up a lot of bandwidth, their private business that are running. So, you know, you don't need another arena where you're constantly making decisions and second-guessing yourself

and possibly adding more emotional weight. I mean, you actually need the opposite, something that reduces noise and frees up attention and something that's just going to build wealth without requiring as much mental energy. And, you know, like for so many people, indexing can act like the shock absorber to part of their wealth creation plan. It just lets the business owner worry about their business and not their portfolio. And, you know, on that same theme of entrepreneurs, for many, their businesses is all the concentration they really need in life. And their portfolio should give them breathing room. And if you're fortunate enough to generate even a 15 to 20 percent net return on your private business, your portfolio probably doesn't need to. That's the reality of it.

I mean, as an entrepreneur, you don't have to feel the pressure to beat the market. You just need to understand that your portfolio has a different job to do, to protect your wealth that you've created an entrepreneurship and compound it in another asset class. Does that make sense? Yeah, it makes a lot of sense, David. And you know, it reminds me, I was speaking with a business only the other day. And he actually told me that he was frustrated with index investing, even though he understood why you should do it, but he felt like he didn't get the reward that he got in his private business where if he worked harder, he was. would make more money. And so he was said like tongue in cheek to take it for what it is,

but he was like, if I could get 8% working really, really hard or 8% not working at all investing, I would probably just work really, really hard to get that 8%. And he said to me, he knew it didn't really make any sense, but he was just, he felt it was so counterintuitive just to buy and hold and really just, you said it and forget it. And I think, you know, from one business owner to another, we wired a certain way, like to do the hustle, and that's what you were quote-unquote supposed to do, sometimes to your own detriment, I guess. You know, once you start viewing investing through downside risk, I mean, the next logical question is, okay, if I believe that indexing is going to work, how can I actually implement

it? And I guess I want to talk to the listeners and for those that are learning. a little bit from this episode about indexing just how I do it and if they can take some education from that. In terms of implementation, I follow Warren Buffett's recommendation to as a state almost exactly. 90% of each of the portfolios that we have are in low-cost index funds and 10% is in fixed income. And that small 10% of fixed income allocation, it isn't for returns. It's actually to stabilize behavior during market cycles, you know, I rebalance once a year. And my rule for rebalancing couldn't be simpler. If fixed income falls to 5%, I trim equities. And if fixed income rises to 15%, I buy more. And this forces the behavior that every investor knows they should follow,

but really struggles to execute, sell high and buy low. And what I'm trying to do is remove the noise and keep myself disciplined around that. And maybe the last point that I want to make on why I index comes down to my own wiring stig. I mean, there's the emotional benefit that people rarely talk about. You know, I remember 2008 vividly. I was in my late 20s and I didn't have much invested in today's comparison as I did back then. But I can remember thinking that if things get any worse in the public market, society as a whole would be busted and we'd have to reinvent how we lived. I mean, people were talking about building bunkers and food security during that time. You want to talk about maximum fear and pessimism? I mean, it was a crazy nine-month stretch,

the heart of the nine-month stretch between August 2008 and March 2009. But through that period, the feeling that I had that I was losing with everyone else, because I was indexed, was oddly reassuring. I mean, I had a sense of alignment during that period. I mean, I rose with the market. I fell with the market. And again, being down with the market was oddly comforting. I know everyone is wired their own way. But for me, it made a lot of sense. And I often come back to Nassim to Leib's example of the dentist next door when it comes to indexing. Go to work, live below your means, structure your life in a way that you can save $100,000 a year for 35 years, hopefully earn an 8 to 9% rate of return and retire extremely

wealthy. And, you know, some would say Stig, it's just that simple and just that hard. So why do I index? It's funny, but to your point, indexing in some circles can just be looked down upon and some would say that it just lacks brilliance, but can't simplicity also be the ultimate form of sophistication? I mean, we've heard that so many times. And, you know, I'm rooted in indexing for this reason. There's a good chance that over the next four decades, I think that the consistency of holding index funds will be really good for our family. Yeah, I'll be the first to say that picking stocks is just such a competitive game. And it probably doesn't seem like it. You know, it's kind of like if you're watching sports, you know, you can sort of like look at the pits and you're like, oh, like, that looks hard. I probably couldn't do that. Or perhaps you're sitting there like in your couch drinking beer and like, of course I could do that. But you probably are thinking, yeah, that looks tough. Whenever it comes to stock investing, it looks relatively easy. Like, because you could be sitting on your phone in your couch, you know, buying this stock or that stock. But you know, as a business owner,

you really know how brutal capitalism is. And perhaps you don't want to start competing in stock investing in a game with less time and fewer skills than your competitors. You know, very few people can do that. It's like bringing a knife to a gunfight. And strongly consider why you don't index and if it's for the right reason. And of course, the right reasons are quite subjective too. I think, you know, personally a small part of my portfolio, even if I couldn't beat the market,

I think they would always be active. It's just because I enjoy it so much. For me, it's like a pure former intellectual capitalism to sit there and pick stocks. And I can easily understand if that's not how most people want to spend their life. But really, if you agree with your point, David, about the primary goal of your portfolio is to protect your family's wealth rather than, quote, unquote, have fun, you know, then indexing is probably for you. And indexing using a dollar cost averaging strategy is much more powerful than what it seems.

It's like riding a tailwind, really. I mean, sometimes, yes, the wind is blowing stronger than other times, but it's always there. And you automatically recycle the worst companies out of the index, and then you include better companies in index such as the S&P 500. And also because you compete so much against so many biases whenever you pick individual stocks. You know, one of them is anchoring. That's one of my favorites because I'm so susceptible to it myself. And it's so easy to think that the original price of what you bought a stock at,

call it 100 bucks, that is some kind of cosmic average. And then you see the stock price slide and you continue to average down because it looks cheaper and cheaper. But actually what happens is that you're probably doubling down on a folding knife. That's probably really what's happening. And so unless you're wired the right way for the actual. your strategy, individual stocks are probably not for you. And really to the point you had before there, David, like, think about if you do run your own business or you work in a corporation,

think about how many things you cannot control. Of course, you can control even fewer things if you're a public investor. But like even in your position or in my position where you run your own company, you're supposed to be in control, I look at something like podcasting. You know, podcasting used to be listened to on iTunes. And some of the younger listeners are sitting out there and like, what's iTunes? Back in the day, you listened to podcast. And it was only audio, no one thought of video. And it was two dudes talking about a niece topic, fly fishing, whatever.

And today, it's video, it's on YouTube, it's two celebrities shooting the breeze. Like, everything is changing. And so we have no control over that, you know? So, and again, you have even less as a public investment. But you get that control back from investing in, let's call it, 500 stocks in the SEP 500 or Vanguard's VT. It's 10,000. Essentially, there's not a big difference between 510,000 companies. But, you know, it's a way of as much as it feels like you don't have control, you actually take back some of the control through diversification. And I really like that you talk there

about the great financial crisis. Like, it seems forever ago today. And, And I think many of the people perhaps listen to the show that don't remember how brutal it was. Some people might think of COVID, but COVID was just, it was just so different in so many ways. But also, especially if you're looking at the financial markets, that kind of like V shape and everything just popped up again. That was not at all. What happened during the great financial crisis? It was very different and it felt very painful in a different way. And so you really have to figure out how you're wired.

And for better, for worse, I always felt like a bit of an outsider. So I want to say that I probably never had a problem standing outside the crowd, sometimes to my own detriment. And that's probably also why value investing resonates so well with me. But more often than not, there's a reason why the crowd do certain things, and you probably want to follow the crowd. And getting market returns is kind of wonderful because you'll become wealthy if you're if you're patient, you live within your means. And because humans

are humans, for the vast majority of us, it's actually quite good for a stress level that we make money when other people make money, but lose money, whenever other people lose money. I know that's not supposed to be that way. And I know it sounds boring and it sounds like a bit of a defeatist approach, but we all humans. And so no, you won't be thought of as the next Warren Buffett if you index, but perhaps you can optimize for other things in your life that you are, that's more suited for you in the first place. And I would probably make a somewhat bold statement that 99% of people should be happy with that lower stress level and the market returns that would follow. Yeah, and absolutely. You know, to a lot of the things that we've already

talked about, I want to transition a little bit to overseeing your investment results. it's an angle that we have to pay attention to and oftentimes goes completely unnoticed. You talked about this earlier. It's the idea that you should be overseeing your results when you've outsourced the management of your investments. And to a lot of listeners, it's going to be hard to believe that some people don't spend any time understanding how their investments have actually performed relative to their risk profile and the broader markets. I've spent decades as a chartered professional accountant helping business owners build stronger financial futures. And it's something that I've seen over and over again when I talk to clients.

Last year, Stig, you talked about your track record and how intentional you are about measuring it and you think about it often. But for some people, they're simply not interested in following the results and it can be a fault. It can actually get to the fault stage. I mean, I don't recommend people check their investments all the time, but you should check them enough to know whether you're on track. I mean, it'd be similar to playing 18 holes of golf and never keeping score and having no idea whether you're improving or not. I mean, you know, when I ask people about their investment returns, this is a very quantitative

questions. I usually hear one of three things. It often starts with, I'm not sure, but my advisor is a great friend. I trust my advisor or my advisor is a really nice person and every time I hear that I smile a little bit because trust is a wonderful thing, but it can be dangerous when it replaces oversight. I mean, your investment returns, they aren't just numbers, they're your livelihood. You know, being the overseer doesn't mean that you have to manage your own money. It just means that you have a job.

You have to stay aware and ask the right questions and know your numbers just a little bit. It would be like handing your kids over to someone and never checking on them and asking how they're doing. It's just something that you probably shouldn't do. So let me share the story that I shared with you earlier of getting ready for this about how this reality has shaped my life. I had one of my longtime clients who started her career later in life. She was saving $100,000 a year and she did this for 16 years. And she sat across from me one day in the boardroom and said, David, listen, I'm talking. and I'm tired and I want to retire.

And I realized something very painful in that moment. Her investments had averaged about a 5% compounded rate of return for those 16 years. And she didn't have enough to provide for her family with the lifestyle she wanted to in retirement. If she had earned just 8%, I could have told her in that meeting on that day, yes, I think you're ready to retire. Missing that 3% meant that she had to work another 6 to 6 to 6. seven years. And she did everything right. Her shortfall wasn't necessarily her fault. I mean, in part, it was mine. I mean, early on, I didn't pay enough attention to her investment returns. And later in my career, I avoided the uncomfortable conversation with her broker. I mean,

I was only 28 years old when I started working with her. But I told myself, just stay in your lane. You're her accountant. And, you know, maybe I should have been doing a more holistic job and acting as the overseer of her entire financial life. Missing that 3% represented time, time she could have spent with her family, traveling, or more importantly in that meeting at retiring after decades of a demanding career. And that was the real cost of not paying attention to those investment returns. So, you know, really for the listeners of this call and for those that share this episode with people that are learning a little bit about investments as well, I'd encourage everyone to understand

how their investment results are doing. And to do this, you just need to set clear goals. You have to know exactly why you're investing, whether it's for retirement or freedom or helping your kids or building a legacy. You've got to review your actual results every six months. And this is the important part. You've got to ask yourself, what is my return and how does it compare to? to the market given my risk profile. You don't have to know all the technical details, just whether or not your portfolio is doing its job. You also, you've got to know the fees that you're paying. I mean, if you're paying over 2% in management fees, cutting that in half alone can save into hundreds of thousands of dollars over time, I will caveat with the, I mean,

if you're paying 5% or 6%, but are getting rates of returns that are doing well, because then that's wonderful, but you have to know the relationship there. And when you talk to your advisor, you have to ask direct questions. You can't settle for vague answers like, you're doing fine. Like, you have to, you should ask, like, how are my results compared to a balance index portfolio? How am I doing? I mean, this question shouldn't be confrontational. It's just now you doing your job. And finally, you just have to stay curious. You don't need to be an expert. You just have to stay engaged enough to notice whether your money is compounding the way it should. And like I like to tell people when you hire an investment advisor, trust feels good, but the results are your livelihood.

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slash income. This is a paid advertisement. All right. Back to the show. I love that point, David. Compounding is such a powerful force. And it will test your patience in the beginning and then your establishment later. And again, if you want to work, to your point, if you want to work with the advice,

think that's perfectly fine. But think about the value they provide and whether or not it's worth it. So what I would suggest is basically to do this, compare your returns with a globally diversified index. And we talked about Vanguard's VT before. So the expense ratio is six basis points. That's 0.06%. That's very cheap. I just want to say for the record. So now you own a small slice of 10,000 of the best companies in the world. And then, you know, compare those, called the six basis points, to what you are paying your financial advisor. And keep in mind that you also, if you work with a financial advisor, you are paying both

expenses. You're paying the fees to the advisor, and then you're also paying the ETF cost. And how does those return stack up to whatever kind of benchmark you're looking at? And if you have an advisor that's a little too fancy with, you know, picking individual stocks, you know, that's one way to go. That could be a concern, especially if you're underperforming the market. And there's also a bit of a selection bias here. And I don't know if I forget to offend anyone here.

I kind of feel I've been offending a lot of people. But also, to some extent, there is a selection bias, right? If this person you were sitting next to were the next Warren Buffett, why is that guy sitting in that chair speaking with you about XYC? there's also selection bias there. So I think it's really up to you to figure out what is it that you're paying for. Definitely, there could be something optimizing for taxes, that could be rebalancing, there could be a lot of good reasons why you want to work with an advisor. But if it's a question of you going to get some kind of generic portfolio allocation, like 60% stocks and 40%

bonds or whatever, like you can go to YouTube and what's a free video. and you probably have to go through some painful YouTube ads first if you don't have YouTube premium, but that's the cost. And then the time, like, it's sort of like, whenever you rephrase that, you know, okay, I'm going to spend, you know, an hour of my life. And then I won't be paying 1% out of a million dollar portfolio. So, okay, that's $10,000 for an hour of your time trying to, you know, figure out on a free YouTube video, how to do it yourself.

Like, you could take your family on vacation for that $10,000 or donate it to, to, charity, you know, there's, there's no reason to donate it to the financial advisor without Yacht Foundation. Plenty of people have been contributing to that foundation. You don't have to do it. And really, it's a bit like going to fitness. Like, the more you move, the more you lose. And unfortunately, that's also typically how it is with many advisors and inactive money managers. So you move around a lot, just to bring the metaphor back home here. And then, no, not losing weight, but probably losing some dollars along the way. And, you know, there's this, This is going to sound so draconian, but there's this saying that if you want a good friend in politics, you should get a dog.

And to David's point before, I'm sure your financial advisor is nice. That's very often what you hear is like, oh, but you know, Brian is so nice. How can, like our family has been using Brian for decades. How can we, you know, I get that. Like, it's emotionally, it's very, very challenging. But you're dealing with your financial future and your family depends on you. And being a nice person and building generic portfolio should not be enough to earn your business.

And the last point I just wanted to drive home here is that no one cares as much about your money as you do. And just always make sure to remember that. Yeah, there's a lot to unpack here in that one. But I think I'll start by saying, like, I don't think there's anything wrong with hiring a financial advisor. And in many cases, it could actually be the best move that you may. make. I mean, if you, it's like if you have a coach helping you on the behavioral side, making

sure that you don't make major mistakes out of fear and emotion. And I feel like there's a lot of value in that. And Stig, sometimes it really does pay to outsource. I mean, you and I've talked about this before. You're more than capable of filing your own corporate taxes. I mean, you taught accounting at university. You wrote a book on Warren Buffett's accounting. And yet, you still choose to hire someone to handle your corporate filings. That's a conscious decision around time, focus, and behavior. And, you know, we all have to make tradeoffs like that. And when someone just isn't wired to manage their own wealth, but is fortunate enough to have it, hiring the right person can make a lot of sense. And, you know, I guess just to transition a little bit here,

Stig, because we're talking about the behavioral side, I do want to tie in some stuff that I've been talking about around expectations and leadership and knowing when to simplify things that are in your life and how leadership and the role of expectations can play in how people show up. And there are some parallels with investing in this. And as you know, Stig, I look at almost everything in my life through the same three lenses, investing. Investing. business and life. And of course, life has a big package there in terms of where that can take you. In a previous podcast, you and I talked about how being a better business person makes you a better investor and a better investor makes you a better business person. Those worlds feed on each other.

And recently, I've been thinking a lot about leadership through that same lens and specifically how expectations can shape the people around us. I mean, in investing, we, We expect durable businesses and we expect certain returns and we track our performance and then we re-incess. But do we apply that same clarity inside our organizations? I'm finding that expectations can quietly elevate someone or limit them without even realizing it. Sometimes a challenge in leadership is that we hold on to old judgments far too long.

We freeze people in time based on where they were instead of who they've now become. I mean, we can certainly apply the same thought process to a specific investment that we might have that we still hold on today, but maybe for the wrong reasons. And early in my career, I certainly carried a childhood impression of someone well into my 20s that it took me far too long to update my lens on. And even today, I have to be mindful of catching myself. forming impressions too soon and too early. You know, those old judgments, you know, they can turn into expectations before we even say a word.

And I find that people can fall or rise to the expectations we hold of them. And the truth is that people can often feel our expectations long before we even speak them out loud. You know, we talk about quality in our mastermind community and how there's a frequency to quality. And I feel like there's a frequency to expectations that often go untalked about and unsaid. There's a famous study that was done in 1968 by psychologist Robert Rosenthal and Lauren Jacobson called Pygmalion in the classroom. And these teachers were told that certain students, these students were chosen completely at random, had exceptional potential. Nothing about these students change. Only the teachers.

expectations of those students changed. Eight months later, those students posted significantly larger IQ gains. The teachers change their belief and their tone with those kids and then their encouragement, and that belief changed the student's performance. I mean, it is an unbelievably remarkable study, just how changing expectations can change outcomes. I mean, only if investing were that easy stick. if we could just be so lucky to expect a 15% rate of return and it just happened just like that.

But there is a parallel here. In investing, discipline can compound returns. And in leadership, I feel that the right expectations can compound behavior. And, you know, for listeners who don't know who Helen Keller is, she's a wonderful example of how expectations can elevate someone. I mean, she went blind and deaf at 19 months old and lived in silence for years. Most people thought that she would never communicate. Then Anne Sullivan arrived and eventually became her lifelong friend. I mean, Anne was around 20 years old when they met. I think Helen was maybe around 9 or 10.

And Anne carried one unshakable expectation that Helen could learn. She treated Helen as capable of learning long before Helen believed it herself. And as their story unfolds, the moment that Anne spelled water in Helen's hand while running cold water over her other hand, everything changed. Helen made the connection that what she felt in one hand was water and spelled in the others. And her world opened up after that. I mean, her learning sped up. and she went on to graduate from Ratcliffe College and published books and lecture globally. I mean, it's quite a story for those who aren't familiar with her.

And, you know, Helen and Ann's story was an amazing success of expectations and, you know, what they can do. Just know that expectations can go the other way as to. And I'll just share a short story here. You know, back when I was in school, I knew a couple of students that were getting ready for a Christmas concert that was coming up. up. And the two of the kids in this Christmas concert were really struggling with their tone. And the music teacher, who was completely impatient, move them to the back row. And over time, she expected less and less of them. And then, obviously, what's going to happen is those students started expecting less of themselves. I mean, it's not a great story. I mean, this is just, and then the final blow was a week before the concert, she actually asked them to lip sync during it. I mean, one small sense. sentence and it became a lifetime wound for these kids. And I am not making this story up. I mean, this is awful. And that's the quiet destruction of negative expectations. And of course, the comment was just that much worse. But, you know, there's, you know, I said this before,

there's a frequency to expectations that we have to respect. And people can feel them even before we speak them. And I love this quote from John Wooden. He, John Wooden was a was the legendary UCLA coach who won all those national championships. And he said it beautifully. He said, the best leaders are those who expect greatness from others and communicate that expectation with belief and not pressure. And, you know, when someone believes in us, that belief transfers. I mean, it changes behavior and ambition and those expectations fuel effort.

Effort drives results. Results reinforce belief. and it becomes a flywheel just like compounding. I mean, compounding starts small, then accelerates. And if we can remove some of the noise and bias in investing and we put systems in place and let the investments do their job, that's the same idea behind the right expectations. And when we set the right expectations, we can uplift someone and give them direction and start to see them compound their behavior in a positive way.

And, you know, expectation can be just a power. powerful compounding engine for leadership. And we can use them to elevate people or relegate, but the choice is ours. And, you know, Stig, I know you run a small business similar to the size of mine. And I'm wondering who in your world might rise if you simply expected more of them. And does the Rosenthal study resonate with you? It very much resonated with me. I had to say that I've forgotten everything about it until, well, I saw the outline.

We've sort of like been chatting back and forth. and we talked about the study, and then something from my childhood sort of like popped up. Because I remember my mom telling me about it whenever I was a kid. So I haven't been thinking about it for the longest time. And some of you might be thinking, that's the weirdest thing for a mother to talk to a kid. I don't know if that's what you're thinking. My mom, she's retired now, but she used to work in early childhood education. So we probably spoke a bit more about children's psychology around the dinner table compared to the average family.

So anyways, no, it is a study I'm quite familiar with. And I can't help but say tongue in cheek that I'm a child of the 1980s. I was born in 1980s. I was born just before kids were special. And I know I'm going to sound like a grumpy old man as I'm going to say this. You know, Socrates said like 400 years BC or so. There's like this, I'm going to butcher the quote, but it's something along the lines of, the children now love luxury.

They have bad manners, contempt for authorities, they disreservation, they disres, respect elders and the love chatter in place of exercise. Children are now tyrants and not servants of the household. And so I know how ridiculous is going to sound whenever I'm bashing the younger generation because old people such as myself has been doing that for centuries. That said, I sometimes wonder about the new generation entering the workforce today who have been told that they can do anything they want and who have parents who have removed every obstacle in your child's way. And, you know, we tried to fill a position at some

point in time here in our company and someone's father applied on behalf of his son. And needless to say, the son didn't get the job. But it's, I kind of feel like I'm a bit torn, right? Because it's, it's super empowering that kids are told, oh, you can do anything. But in reality, of course, kids are like the rest of us. They're humans and they have a lot of potential and they have a lot of limitations. And whenever they start, you know, after graduation or whatnot, they started the wrong of the ladder. And there, I've noticed that a lot of people are completely unprepared for the fact that few, if any, are going to listen to them. You know, they've taken this very nice education and the study management and they're like, I'm going to be the new CEO. And then they

get their own cubicle and no one cares. And they're on their own and they probably haven't developed the social skills to navigate a workplace with adults. I certainly hadn't. After I started management, now I came out of school. But anyways, you know, striking the balance of setting the right expectations and then lift up young people is not easy. And again, most things are done with the best of intentions. You know, I know you kindly asked into the team here and I'm seemingly just going to use myself as an example here. But take it for what it is, David. But I remember, I was probably 11 or 12. That's not. that's how I remember.

But a family friend told me that it was expected that I would win at least one Nobel Prize. And perhaps it was just said as a joke. I don't know. Today, I think that comment did more hard than good. And I don't know if anyone is familiar with Cal Grex's growth and fixed mindset. But I think I'd probably because it spoke to my ego. I don't know. But I think that experience, perhaps a few others, kept me very much.

in a fixed mindset for the longest time. David, to your point, you know, whenever you are a business leader, you are a coach for everyone in your organization, especially in a small organization, like perhaps in large organizations with tens of thousands of employees, you're more indirectly involved in the development of the people. But the first thing you want to learn is how this specific employee is wired and what makes them tech. And there's this saying that to treat everyone equally, You have to treat them different. And the kind of thing, that's very true. Like, everyone wants to feel appreciated.

But how they feel appreciated can vary. Some people like to be giving very few guidelines on a major project and then go out into the world and solve it and then hand it back to you. And then others like constant feedback and make sure them the right path. But then the first group might feel like they're micromanaged, if you give the constant feedback, even if that's what you think that they want. So as a business leader, you are responsible for helping your team become the best version of yourself. And of course, I've been on both sides of the table, both as an employer and as an employee.

And I've heard, you know, as an employee, I've heard my colleagues complain about their bosses, about a million different things. But I've never heard an employee ever complained about their employer telling them too often how much they were appreciated. that's still left to be seen. And I've since taken that to heart and promised myself that if I ever had something nice to say to someone on the team, I will let them know because why wouldn't I? So this comes to mind because as I got this message from you the other day, David, I was reading a book about Michelangelo. And it talked about how he was asked by the Pope about the famous David sculpture that you can see in Florence. And Michelangelo said that David was always there in the marble.

He simply took away everything that was not David. And I want to make sure that a new host or newish host, Daniel, he's already been with us for a year now. It's like, that was just the first thing I thought of. Like, that dude has so much raw talent. Like, it's unbelievable. And a part of my job is sort of like metaphorically to see this big blog of marble, but then find that future.

masterpiece that's there and help and guide him. And I don't necessarily know if I should do sort of like my annual performance review here live on a podcast. But you know, it was just like one in real time example of, hey, I want to tell Daniel how much he was appreciated. So I did that the very next morning. And I sent him a message about how awesome he was. And I hope he was happy about that message. And so I guess that's my way of saying that to the employers who are, who tuning in. Like, please never hesitate to tell your team how much they are appreciated. Most bosses get their employees they deserve, and most employees get the bosses they deserve.

And whenever you think about it like that, you might do a few things differently. But appreciation takes many shapes and forms, and much has to do with what we are telling ourselves, because expectations are a complex thing. You know, most people have good intentions, but they can backfire, as we've seen so often. You can think of the parents who figuratively and metaphorically went hungry because they were wealthy and gave their kids everything they ever wanted because they did not want their kids to experience what they did. But really what they achieved was that they ruined their kids in the process.

And so the way I approach people on my path is to access the current level. help guide them to the next level, whatever that next level it is. And I typically would encourage also listeners here to extend trust and providing loved ones with those resources that they need. And then together with them, for example, let's say that this is a team you're working with, we define goals, but then also make sure to get out of the way and then observe what happens whenever they do their magic. And of course, the world isn't always that kind. You know, some ships will find a harbor and others won't, but your team will always grow in the process. And finally, I want to mention that you as a boss might be the best person to see the potential

in your team, but you might also be the worst because you might have these preconceived notions of what they can and can't do, which goes back to your original point, David, about, you know, you have to update your lens all the time. Yeah, I mean, expectations, they can be. be complex. This is a wonderful conversation. And, you know, maybe sometimes they can have unintentional consequences. So, I mean, sometimes if we set the bar too high, people, and people don't rise to them, they might freeze, they might stop taking risk because they're afraid of letting you down. I mean, I think of this a lot as a parent. And there's such a fine line between setting

expectations that can motivate your kids and pushing them so hard that they, burn out or feel like they can never quite measure up. And you know, you've just shared some personal stories on that. I mean, often in sports, the kids who last late into their teens and go beyond maybe high school and play at the next level at college and whatnot, sometimes I've noticed that those are the kids that come from parents who didn't push their kids too hard. Yes, there's the Tiger Woods and Serena Williams parents of the world. But, you know, they're, there's, There's more that I've seen in my life where the kids who get to the next level, they're ones that didn't have too much expectations put onto them.

I mean, it's complicated, and I think we'll just stop talking about parenting. Now we can tackle that on another episode. But to your point about getting the boss and the employees you deserve, the older I get, the more I appreciate culture inside an organization. It's incredibly important and often underestimated. I mean, I wish there was a screen for public companies on culture. Like, what is your culture like? And there was a box you can tick and get some information that way.

I mean, maybe I'll just have to step up my scuttlebutt games. I don't know. But, you know, in terms of culture, to your point that you talked about, I mean, it's amazing how far simple things go. I thank you and recognizing someone for their efforts. I mean, those small signals can compound over time. I cannot think of a better way to end this episode, David, then with those words. This is lovely. Thank you so much. I just want to give a small shout out to some of the

TIP community members that we have and we're able to connect with and just thank Kyle and Clay for all the hard work in the community. It's lovely. Thanks for listening to TIP. Follow We Study Billionaires on your favorite podcast app and visit The Investorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs.

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