Bogleheads® 2022 Conference – Fireside Chat with William Bernstein and Jason Zweig
00:00:00.000 | [ Applause ]
00:00:04.800 | So our first session this morning is a fireside chat
00:00:10.000 | with Dr. Bill Bernstein and Jason Zweig.
00:00:13.740 | Dr. Bernstein is a neurologist.
00:00:16.820 | He's also the co-founder of Efficient Frontier Advisors
00:00:20.220 | and the author of several books on finance and economic history.
00:00:23.980 | Those books include The Intelligent Asset Allocator,
00:00:27.200 | The Four Pillars of Investing, and several other e-books,
00:00:31.140 | plus four volumes of economic history, The Birth of Plenty,
00:00:34.960 | A Splendid Exchange, Masters of the Word,
00:00:37.740 | and The Delusions of Crowds.
00:00:39.540 | Bill has written for several national publications,
00:00:43.500 | including Money Magazine, The Wall Street Journal,
00:00:45.580 | and has authored and co-authored several peer-reviewed financial
00:00:49.200 | journal articles, which led
00:00:51.560 | to winning the 2017 James R. Verton Award from the CFA Institute.
00:00:58.660 | He is speaking with Jason Zweig.
00:01:01.140 | Jason is an investing and personal finance columnist
00:01:04.260 | for The Wall Street Journal.
00:01:05.480 | He is the author of several books, including my favorite,
00:01:08.700 | Your Money and Your Brain, The Devil's Financial Dictionary,
00:01:11.900 | The Little Book of Safe Money.
00:01:13.560 | He has edited and revised Benjamin Graham's
00:01:16.580 | The Intelligent Investor and co-edited Benjamin Graham's
00:01:20.540 | Building a Profession, an Anthology of Graham's Essays.
00:01:23.800 | From 1995 to 2008, Jason was the senior writer
00:01:28.780 | for Money Magazine.
00:01:30.020 | Before joining Money, he was a mutual funds editor for Forbes.
00:01:34.060 | He also serves as the trustee of the Museum of American Finance
00:01:39.080 | in New York City and sits on the editorial boards
00:01:42.000 | of the Financial History Magazine and the Journal
00:01:45.520 | of Behavioral Finance.
00:01:46.840 | So, please welcome Dr. Bill Bernstein and Jason Zweig.
00:01:50.440 | [ Applause ]
00:02:07.820 | >> All right, well, it is a distinct pleasure.
00:02:11.640 | I can't really embellish too much on Rich's introduction
00:02:17.980 | of Jason, except to say that it's a distinct honor.
00:02:22.820 | I know very few people who know more about neuropsychology,
00:02:27.480 | theory, and practice of investing,
00:02:29.760 | and especially financial history, than Jason.
00:02:32.380 | But I know of no one who commands all three areas as--
00:02:37.480 | >> I do.
00:02:38.000 | >> -- as I do.
00:02:38.540 | Well, you're very kind.
00:02:41.840 | So, the way it's going to work is I will lead off,
00:02:46.360 | and then it's going to be a two-way street.
00:02:48.540 | We're going to fire questions
00:02:49.560 | at each other, probably interrupt each other.
00:02:51.220 | So, my first question to Jason is, many of you may not know
00:02:57.600 | that he majored in art history.
00:03:00.620 | So, the question is how one segues from art history
00:03:05.840 | to the pinnacles of modern finance.
00:03:08.220 | >> Well, so, yeah, thanks, Bill,
00:03:11.560 | and thanks to the Bogle Head Center for having us here.
00:03:15.960 | And it's great to see all of you.
00:03:18.040 | Some of you I've-- I think I've known for 20 years.
00:03:22.040 | It was great to see Tim Dempsey and Gail Cox, and a bunch
00:03:27.080 | of other Bogle Heads from way back.
00:03:31.000 | So, I always wanted to be a writer
00:03:35.000 | from the time I was about 13, and maybe someday I will be one.
00:03:40.280 | I grew up in the art business.
00:03:45.300 | My parents were art and antique dealers after they got
00:03:48.300 | out of the newspaper business.
00:03:51.220 | But I just fell into journalism by accident,
00:03:57.220 | and through a series of other accidents,
00:04:00.000 | I ended up a business journalist.
00:04:02.860 | And when I became the Forbes Mutual Funds Editor in 1992,
00:04:10.020 | I thought it was the worst job in the place.
00:04:14.380 | And then on day one, I started doing a little research
00:04:18.580 | and found out that back then there was a trillion
00:04:22.460 | and a half dollars invested in mutual funds.
00:04:26.020 | And I said, if there's a trillion and a half dollars,
00:04:29.020 | there's got to be a story in there somewhere.
00:04:32.260 | And in fact, there were.
00:04:33.840 | And I just followed my curiosity where it led me.
00:04:38.620 | But I think a much better question is how does a
00:04:43.460 | neurologist with a PhD in chemistry end up so interested
00:04:48.900 | in investing finance and economic history?
00:04:52.660 | >> Well, the ugly answer is that I enjoy money.
00:04:57.980 | But, you know, the prettier answer is that I live
00:05:04.700 | in a country that doesn't have a functioning social
00:05:06.820 | welfare system.
00:05:08.060 | So I realized as a practicing physician I was going to have
00:05:10.940 | to invest on my own.
00:05:13.740 | And with, you know, the scientific training
00:05:16.100 | that I had acquired, it was obvious to me that the way
00:05:19.740 | to do it was the way you would approach any other scientific
00:05:22.100 | problem, which was to review the peer-reviewed literature,
00:05:24.340 | look at the data, consult the basic texts,
00:05:27.900 | collect data, build models.
00:05:30.540 | And when I had done all that by the mid-1990s,
00:05:35.380 | I realized that I had put together something
00:05:37.780 | that might be useful to small investors.
00:05:41.740 | So I logged on to this fancy new technology that was just coming
00:05:47.660 | to Coos Bay, Oregon in the mid-'90s called the internet.
00:05:51.100 | And I started putting my stuff out there.
00:05:53.740 | And soon enough, journalists started calling me
00:05:58.020 | and, you know, began writing books.
00:06:02.900 | And I discovered that in the process of writing
00:06:06.740 | about finance, that, you know, writing about the history
00:06:09.060 | of finance is so very important.
00:06:10.460 | If you don't know the history of finance,
00:06:12.260 | you're dead in the water when you're as an investor.
00:06:15.700 | And I segued into writing about history as well,
00:06:18.460 | because I found actually I enjoyed writing history more
00:06:21.100 | than I enjoyed writing about finance.
00:06:23.020 | So that's how I got there.
00:06:26.900 | So I'm going to turn the question around again
00:06:30.100 | and ask Jason, what are the one or two
00:06:35.900 | or three biggest epiphanies you've had in the, you know,
00:06:40.220 | 30 years, 35 years you've been doing this?
00:06:44.060 | >> Yeah, so I guess I'll --
00:06:45.460 | I think the biggest epiphany I had was probably
00:06:52.620 | around 2000 -- actually, I think it was --
00:06:58.180 | it might have been in the year 2000.
00:07:00.980 | I was sitting at home, and my wife was doing her homework.
00:07:07.540 | And I was reading the Journal of Financial Economics, I think.
00:07:16.140 | Sort of by candlelight.
00:07:20.380 | And my wife looked up from what she was doing, and she was like,
00:07:25.020 | "Is that interesting?"
00:07:27.140 | And I sort of, you know, put it down and looked up at her,
00:07:34.100 | and I was like, "Now that you mention it, not really."
00:07:39.420 | And so I had a business trip the next day, and I --
00:07:46.660 | when I got to the airport, and in those days,
00:07:49.780 | airport bookstores were still pretty good, I said,
00:07:53.260 | "I'm going to buy something to read on the plane
00:07:57.060 | that I wouldn't normally read,
00:07:59.900 | because I shouldn't be reading all this finance stuff,
00:08:02.740 | because I do that all day long.
00:08:04.100 | I shouldn't be doing it at night,
00:08:05.380 | and I shouldn't be doing it when I'm traveling."
00:08:07.340 | So I grabbed a copy of Scientific American,
00:08:11.300 | which then was a very good magazine.
00:08:13.620 | It's maybe deteriorated a little since, but --
00:08:17.940 | and I opened it, and of course, being an art history major,
00:08:22.620 | I turned to the article that had the nicest pictures,
00:08:27.780 | which just so happened to be an article on split brains.
00:08:34.300 | And Bill knows exactly what I'm referring to.
00:08:37.620 | There are people who suffer from intractable epilepsy,
00:08:43.380 | and ultimately, the most effective treatment for them
00:08:49.020 | is to surgically sever the corpus callosum,
00:08:53.140 | which is a thin bridge of tissue
00:08:54.980 | that connects the left and right hemispheres of the brain.
00:08:59.900 | And it turns out that when you do that to people,
00:09:03.060 | they calculate probability completely differently.
00:09:06.860 | And to this day, I still remember grabbing my red pen
00:09:14.740 | that I always carry with me out of my pocket
00:09:17.500 | and circling this in huge loops on the page.
00:09:22.900 | And the article was written by Mike Gazzaniga, who you know of.
00:09:29.340 | He was a great neurologist.
00:09:31.820 | And when I got back to the office,
00:09:33.940 | the first thing I did was call his research partner,
00:09:36.900 | who was working on this project.
00:09:39.260 | And one thing led to another, and ultimately,
00:09:43.620 | I became fascinated with neuroscience
00:09:46.740 | and the developing field of neuroeconomics.
00:09:49.060 | But it all really came from that epiphany of saying,
00:09:53.380 | why am I spending my free time reading the same stuff
00:09:56.860 | that I read when I'm working?
00:10:00.060 | Yeah, I mean, the wonderful thing about finance,
00:10:03.580 | as Jason discovered all those many years ago,
00:10:06.380 | is that to be a good lawyer or a good doctor,
00:10:09.700 | you have to read thousands and thousands of case studies
00:10:12.380 | and peer-reviewed articles.
00:10:14.940 | But the list of essential finance articles
00:10:20.140 | that you have to read is extremely short.
00:10:24.700 | What would be at the top of your list?
00:10:26.900 | Oh, of course, the Fama-French study and Fama's early work
00:10:32.140 | on market efficiency, the work on the limits of arbitrage
00:10:38.420 | that explains why you can be the world's best arbitrageur,
00:10:42.460 | the world's best hedge fund manager,
00:10:44.420 | and you're still going to be screwed
00:10:46.260 | in a bad state of the world because all your clients will
00:10:48.620 | leave you just at the time when the expected returns are
00:10:53.500 | the highest, Draymond's work on the value effect,
00:10:57.900 | and Barry, I'm trying to remember the name
00:11:00.620 | of the other co-author, who basically demonstrated
00:11:04.220 | that growth stocks, growth peters out far more rapidly
00:11:09.780 | than you would imagine.
00:11:11.020 | And they wind up being grossly overpriced for that reason.
00:11:15.940 | Those would be the top, the ones that come right
00:11:18.060 | off the top of my head.
00:11:21.820 | So what was your epiphany?
00:11:24.140 | My epiphany was much more mundane.
00:11:28.020 | There's this controversy.
00:11:31.100 | It's almost a parlor game that academic finance people play,
00:11:36.100 | which is do stocks become more risky with time
00:11:39.460 | or don't they become more risky with time?
00:11:41.260 | And the extremely simple and wrong answer
00:11:43.740 | is they become less risky with time
00:11:45.300 | because as you look at their annualized returns,
00:11:48.180 | they convert 30 and 40 and 50 years.
00:11:51.260 | Even the worst one is plus 4%.
00:11:54.140 | The best one may be plus 13% or 14%.
00:11:56.820 | But of course, compounded over--
00:11:59.420 | the fallacy there is compounded over 30 or 50 years
00:12:02.340 | is that 8% difference is just absolutely enormous.
00:12:05.780 | So that's the first wrong answer.
00:12:08.420 | The next answer is, yes, they become riskier with time
00:12:13.140 | for that reason but also because the longer dated an option is,
00:12:19.140 | the more expensive it becomes, which certainly would not
00:12:22.220 | be true if stocks became less risky with time.
00:12:27.500 | But of course, that answer is wrong, too,
00:12:29.260 | because the options are probably mispriced.
00:12:31.700 | But I realize that my epiphany was
00:12:33.740 | that's completely the wrong question to ask.
00:12:35.940 | It's not that there's a right or a wrong answer.
00:12:37.940 | But you're asking the question the wrong way,
00:12:41.060 | which is you have to add another qualifier, which
00:12:43.120 | is how old is the investor?
00:12:46.220 | So if you are an accumulator, stocks
00:12:49.500 | are really not that risky.
00:12:52.180 | And in fact, as awful as the stock market is right now,
00:12:55.540 | this is a wonderful market for accumulators.
00:12:58.780 | I mean, if I were an accumulator,
00:13:00.620 | I'd be drooling with all the bargains that are out there
00:13:04.380 | and laying my savings into them.
00:13:07.300 | On the other hand, if you are a decumulator,
00:13:11.900 | stocks are not just risky.
00:13:13.620 | They're Three Mile Island, Chernobyl toxic.
00:13:16.500 | You get the wrong sequence right off the bat,
00:13:19.700 | and you're in a sling.
00:13:21.540 | So the question is-- so the answer to that question
00:13:24.020 | is you've asked the wrong question.
00:13:26.540 | The real question is, how old are you?
00:13:28.340 | All right, well, I'll turn it around and ask Jason.
00:13:36.540 | You've written God knows how many pieces.
00:13:41.620 | Maybe not as many as Jonathan Clements.
00:13:43.940 | I don't know.
00:13:45.140 | Yeah, but he burned out before he did so,
00:13:50.380 | so you still might catch up.
00:13:54.460 | So what are the pieces that you're most proud of,
00:13:58.380 | and what are the ones that you're the least proud of?
00:14:02.420 | Well, yeah, so Jonathan wrote, I think,
00:14:05.060 | 1,004 columns for the Wall Street Journal.
00:14:08.740 | I just wrote my 690th, but who's counting?
00:14:11.500 | I can assure you that every single week,
00:14:16.180 | I can tell you exactly how many columns I've written.
00:14:21.180 | Well, let's start with the stinkers, right?
00:14:24.740 | I've written-- well, actually, I should clarify something,
00:14:28.180 | which is that I tend to say that between 5% and 10%
00:14:37.620 | of everything I write is garbage,
00:14:41.940 | and maybe 80% of it is just like nothing,
00:14:45.380 | and maybe 5% to 10% of it is OK.
00:14:49.340 | So with that caveat, what I would say
00:14:55.420 | is the columns that I look back on and cringe the most about
00:15:01.020 | are here's an opportunity for investors now columns,
00:15:11.220 | because I perceived something in the markets that
00:15:16.700 | seemed like a dislocation.
00:15:20.100 | And with rare exceptions, like 2008 and probably early 2020,
00:15:30.820 | it's you're usually wrong when you think markets are wrong.
00:15:37.100 | And every time I've thought markets were wrong,
00:15:42.980 | I was right that somebody was wrong,
00:15:45.660 | but it wasn't the markets.
00:15:46.700 | I've made those kinds of calls, which I guess in journalistic
00:15:53.620 | terms are kind of like market timing,
00:15:55.940 | and the vast majority of them turned out to be wrong.
00:16:00.420 | And they were pretty stupid, and somebody
00:16:04.460 | should have stopped me.
00:16:06.220 | But the columns I'm proudest of are often
00:16:12.780 | the things that don't resonate as much with readers,
00:16:17.060 | but it depends.
00:16:19.380 | I wrote a column back before I came to the journal
00:16:23.740 | in May of 1999 that was called baloney.com that
00:16:31.620 | was about the overvaluation of internet stocks.
00:16:35.180 | And in that case, the market was wrong,
00:16:37.780 | and I turned out to be right.
00:16:40.180 | But I think the lead, the beginning of it
00:16:42.660 | was something like for the next year or two,
00:16:47.540 | this may seem like the stupidest thing you've ever
00:16:50.900 | read in your life, and it might turn out to be,
00:16:55.580 | but I don't think so.
00:16:57.660 | And I once got a letter from a reader
00:17:03.300 | saying that he had carried it around
00:17:05.940 | in his wallet for two years to keep him
00:17:08.940 | from jumping into the dot-com frenzy, which
00:17:13.380 | was one of the nicest things a reader has ever said to me.
00:17:16.820 | And in fact, he enclosed the original article
00:17:19.820 | in his handwritten letter.
00:17:23.140 | So that was one.
00:17:24.100 | And then I did a story about a portfolio manager
00:17:30.260 | at BlackRock who was doing some very peculiar private investing
00:17:38.380 | in his personal portfolio that involved companies
00:17:42.100 | that he also held in his fund.
00:17:46.220 | He was obviously an active manager at BlackRock,
00:17:49.620 | and ultimately, the SEC took action in that case.
00:17:55.300 | And I think there was like a $12 million fine involved.
00:17:59.980 | So I was pretty happy that that worked out the way it did,
00:18:04.900 | because it's important to have that kind of spotlight
00:18:10.980 | shining on the industry.
00:18:13.700 | Yeah, I mean, as I've watched your evolution
00:18:17.460 | over the decades, you started--
00:18:21.060 | I started reading you, at least, at Money magazine.
00:18:23.460 | And you didn't do a lot of investigative work there.
00:18:27.180 | And some of your columns, not a huge number of them,
00:18:31.740 | are investigative.
00:18:33.260 | What do you look for?
00:18:34.100 | I mean, how do you--
00:18:34.940 | not just how do you look for, but I mean,
00:18:36.340 | how do you get tipped off?
00:18:37.460 | Is it readers that say, hey, you need to look at this?
00:18:41.340 | Well, so yeah, I mean, I wish I could do more investigative
00:18:46.780 | work than I do, because it's enormously satisfying
00:18:51.380 | and frustrating, by the way, because it's very difficult.
00:18:55.500 | Those ideas come from everywhere,
00:18:58.100 | the same way my regular column ideas come from everywhere.
00:19:02.140 | But the classic investigative instinct
00:19:07.740 | is oddball detection.
00:19:12.060 | You know what the normal pattern is in a particular field.
00:19:19.620 | The numbers always look like this,
00:19:21.580 | or the general results should sound like that.
00:19:29.140 | And you just see something that doesn't make sense,
00:19:34.820 | a footnote, a particular detail.
00:19:41.980 | And that is just like out of sync.
00:19:44.740 | I mean, one of my big investigative projects
00:19:48.100 | literally came out of an asterisk.
00:19:51.420 | There was an asterisk in a federal filing
00:19:57.700 | where everybody else would have a number.
00:20:00.980 | And I was like, what's that asterisk doing there?
00:20:04.660 | And then I went to the bottom of the page
00:20:06.940 | where the asterisk was explained,
00:20:08.700 | and the explanation said absolutely nothing.
00:20:12.340 | And that was the tip off that something
00:20:15.420 | was potentially amiss, which it turned out it was.
00:20:19.340 | So I think a lot of people in this room,
00:20:24.220 | given what you do for a living, you're
00:20:27.660 | very familiar with the normal patterns of behavior
00:20:31.580 | and reporting and how results are framed in your field.
00:20:39.540 | And expertise is simply pattern recognition.
00:20:45.540 | And when you detect that something is out of sync,
00:20:48.940 | that's a pretty good sign that there's something there.
00:20:53.380 | One pattern in finance that we all observe
00:20:59.020 | is that it's a field that is rife with psychopaths
00:21:01.980 | and con men.
00:21:04.180 | And I mean, people don't go into finance for the same reason
00:21:08.420 | they go into elementary education or social work.
00:21:11.940 | Let's face it.
00:21:14.220 | And so the question I have for you, Jason,
00:21:16.460 | is you've picked out some pretty impressive rogues
00:21:20.620 | in your investigative work.
00:21:24.580 | And I'm wondering, how do you pick out
00:21:26.980 | the really notable psychopaths from simply the everyday ones
00:21:29.860 | in finance?
00:21:30.380 | I know what you're trying to do with that question, Bill.
00:21:38.220 | And yes, there is one particular person
00:21:44.580 | I did interview many, many years ago.
00:21:46.820 | And I am not naming names.
00:21:50.500 | But that person went on to fame and power
00:21:56.060 | and many other things.
00:21:58.940 | One sign is that finance sociopaths, at least
00:22:10.500 | in my experience, tend to be very
00:22:13.180 | honest about their dishonesty.
00:22:16.780 | They're kind of disarming.
00:22:20.380 | They're very upfront about what they're
00:22:22.420 | doing for the most part.
00:22:25.700 | They don't really see why anybody
00:22:27.940 | would think there's anything wrong with it.
00:22:30.260 | And they're kind of amused by what they're doing.
00:22:34.060 | And people who deny that they're doing something wrong
00:22:42.500 | are a lot less interesting than the ones who just sort of laugh
00:22:46.340 | and say, well, yeah, I guess you got me.
00:22:48.860 | Yeah, the one from a historical perspective
00:22:52.020 | that comes most prominently to mind
00:22:54.340 | was Charlie Mitchell, who was the chairman of National City
00:22:59.060 | Bank back in the late 1920s and was just
00:23:07.020 | one of the most dishonest operators, worst operators
00:23:11.260 | in finance even at that time.
00:23:13.580 | And the way he was brought to justice
00:23:16.260 | was by Ferdinand Pecora, who was the counsel for the Senate
00:23:22.820 | Banking Committee.
00:23:24.300 | And Pecora was a very skilled prosecutor.
00:23:28.100 | And he understood what Jason just said,
00:23:29.860 | that the best way to get a criminal to hang himself
00:23:33.900 | was to just ask him what his normal operations were.
00:23:38.180 | And Charlie Mitchell, just very forthrightly said, well, yeah,
00:23:42.700 | I pay myself a million dollars a year.
00:23:44.260 | Why shouldn't I?
00:23:45.020 | Yeah, I engage in these duplicitous transactions
00:23:48.020 | with my wife to avoid taxes.
00:23:50.340 | Of course, who wouldn't do that?
00:23:53.100 | I do this sort of stuff because I'm smart.
00:23:56.700 | And that's how we got the panoply of securities laws
00:24:02.580 | that govern our securities markets to this day.
00:24:09.020 | So and it was remarkable.
00:24:11.500 | And Pecora, the people who--
00:24:13.100 | there were a couple of other counsels that came before him
00:24:15.580 | who didn't understand that the easiest
00:24:17.820 | way to incriminate a criminal was
00:24:19.460 | to have the criminal basically indict himself,
00:24:25.140 | which may become relevant in the not-too-distant future,
00:24:28.140 | I suppose.
00:24:30.900 | So the next question is, what are the biggest mistakes
00:24:35.100 | that you see your readers making?
00:24:40.300 | I'm sure you see them make lots of mistakes.
00:24:42.140 | What are the two or three biggest ones?
00:24:44.900 | Well, I think the biggest mistake of all
00:24:48.260 | is the mistake that is most human,
00:24:53.740 | that we all commit, every one of us, including you and me,
00:24:59.260 | at least including me and probably you, Bill.
00:25:01.980 | We'll find out in a minute.
00:25:04.460 | Which is the inability to admit you made a mistake.
00:25:11.620 | And I mean, I don't know.
00:25:15.740 | How many people in this room own cryptocurrency
00:25:19.380 | and are willing to put their hands up?
00:25:21.020 | We got Jim.
00:25:21.700 | [LAUGHTER]
00:25:24.540 | But most of them I got by 10.
00:25:26.620 | Yeah, that's right.
00:25:28.060 | That's right.
00:25:28.620 | And by the way, I'm going to say officially,
00:25:34.780 | I'm agnostic on whether that's a good or bad idea.
00:25:37.820 | But I do know that a lot of people
00:25:40.260 | bought crypto as an inflation hedge.
00:25:43.820 | A lot of people.
00:25:46.580 | And that doesn't seem to be working out too well.
00:25:49.780 | Crypto was down 4% this morning on the news
00:25:56.820 | that inflation went up.
00:25:58.620 | And that's a kind of hedge, but it's probably not
00:26:07.140 | a very effective hedge.
00:26:08.340 | Now, crypto might still work out, and that'd be great.
00:26:12.500 | But if you bought it because you thought
00:26:15.900 | it was an inflation hedge, then I would submit to you
00:26:19.420 | you've got a problem.
00:26:21.700 | And what percentage of people who
00:26:24.540 | bought crypto as an inflation hedge
00:26:28.180 | have admitted their rationale was wrong
00:26:31.700 | and have reconsidered their position?
00:26:35.300 | I would say single digits based on anecdotal evidence anyway.
00:26:43.420 | And that's true, of course, not just for crypto.
00:26:47.580 | It's true for across the board.
00:26:50.980 | No matter what you own, we all own something.
00:26:54.500 | We all invest in something that we shouldn't
00:26:58.740 | have bought in the first place.
00:27:00.900 | We should get rid of.
00:27:02.220 | Rick is nodding.
00:27:03.100 | Sorry.
00:27:03.580 | And if we were honest with ourselves,
00:27:09.780 | we would get it the heck out of our portfolio,
00:27:12.420 | and we just can't.
00:27:13.700 | So I mean, to me, that's the mother of all mistakes
00:27:16.860 | is the inability to admit mistakes.
00:27:19.220 | And there are some techniques that can help with that.
00:27:24.020 | And if we have more time at the end,
00:27:26.620 | maybe we can talk about it.
00:27:27.780 | But what about you, Bill?
00:27:28.860 | What do you think?
00:27:30.060 | And what's your biggest mistake?
00:27:32.620 | Oh, golly.
00:27:33.460 | Well, that's an easy one, which is I didn't understand
00:27:36.820 | what I explained earlier.
00:27:38.180 | It took me a while to get to that epiphany, which
00:27:40.300 | is that I should have invested more aggressively when I was
00:27:42.740 | younger, when I was streaming.
00:27:44.580 | I was always trying to look for the market bottom.
00:27:46.740 | And I found them, but it didn't do me a lot of good
00:27:50.060 | because I'd have been better off investing for the long term.
00:27:55.060 | And that's easily, easily the most expensive mistake
00:27:58.220 | that I've made.
00:27:58.820 | I've made many, many others.
00:28:00.300 | I'm in good grief.
00:28:01.140 | I bought Palladian Futures around 1990
00:28:04.220 | on the Ponds and Fleischman Cold Fusion work.
00:28:07.140 | Talk about stupid.
00:28:10.020 | So I mean, the biggest mistake that I see investors make
00:28:18.020 | everywhere I go is they see their portfolio
00:28:23.740 | as their net worth.
00:28:25.900 | And that's really a fatal mistake
00:28:27.580 | to make when you're older because you've
00:28:31.060 | got risky assets, and you've got riskless assets.
00:28:33.500 | And the risky assets really may not pay off for a decade or two
00:28:38.180 | or three.
00:28:40.540 | And so if you think that this is my net worth,
00:28:44.260 | and you just saw it go down by 20% this year,
00:28:48.300 | and you translate that into that is imperiling your retirement,
00:28:53.860 | you've made a mistake of not understanding
00:28:55.660 | that paying for your retirement is all about your safe assets
00:28:58.180 | and not about your risky ones.
00:28:59.980 | And Christine likes to talk about all the different buckets
00:29:03.260 | that she likes, and I think it's a good way to do it.
00:29:05.860 | I'm happy with two buckets, risky and non-risky.
00:29:10.300 | But if you want to take the riskless one
00:29:14.060 | and parse it out for different purposes, that's fine, too.
00:29:19.780 | That's the biggest mistake I see people make.
00:29:21.660 | And probably equal to that, everybody
00:29:25.420 | talks about overconfidence, if you're
00:29:27.340 | familiar with even the basics of neuropsychology,
00:29:29.980 | you understand that human beings are a very, very
00:29:33.820 | overconfident species.
00:29:35.500 | But the most fatal overconfidence
00:29:38.580 | is overconfidence about your risk tolerance.
00:29:41.300 | It's to be able to look at the Ibbotson graph, which
00:29:44.100 | is this horribly deceptive graph that
00:29:46.060 | is on a semi-log scale, and it makes
00:29:48.380 | it look like there's hardly any fluctuation in the market.
00:29:50.800 | It's just this straight slope that goes up,
00:29:53.220 | until you realize that 1987 didn't even show up in that.
00:29:57.780 | The growth financial crisis on a semi-log scale
00:30:00.940 | is a barely visible blip, and you just
00:30:04.780 | don't understand how awful you feel when the market really
00:30:10.240 | does go down.
00:30:10.820 | There's this wonderful quote, which
00:30:12.280 | I can almost do from memory, and maybe Jason
00:30:14.060 | can correct the grammar, but there's
00:30:16.020 | this wonderful book called Where Are the Customer's Yachts
00:30:18.460 | by a wonderfully funny man named Fred Schwedt.
00:30:22.340 | And the quote goes something like,
00:30:25.220 | "There are some things that cannot be explained to a virgin
00:30:28.340 | either by words or pictures."
00:30:31.900 | Nor can any words that I could write in this book
00:30:34.660 | now describe to you what it feels
00:30:36.620 | like to lose a real chunk of money that you used to own.
00:30:41.360 | Yeah, that's correct, and it's illustrated with a cartoon
00:30:44.620 | by Peter Arno, who was a cartoonist for The New Yorker,
00:30:49.940 | of Adam and Eve standing naked under the tree of knowledge.
00:30:53.620 | Yeah, yeah.
00:30:56.380 | All right, well, I think what we'll do now
00:30:58.700 | is Jason and I wanted to save some time for Jack anecdotes,
00:31:06.420 | and then I think we'll probably open it up for some questions.
00:31:10.980 | So Jack, I'll ask you, what is your favorite Jack Bogle story?
00:31:17.780 | Well, so I've got a bunch of favorite Jack Bogle stories,
00:31:20.340 | but I guess the one I'll tell is one
00:31:24.060 | that was about a direct interaction that he and I had.
00:31:29.540 | So in 1995, I was still--
00:31:36.500 | I was the mutual funds editor at Forbes,
00:31:38.380 | and I got an offer to go work at Money magazine,
00:31:42.060 | where I was before I came to the journal.
00:31:44.980 | And I was torn.
00:31:47.140 | I didn't know whether I should go.
00:31:51.100 | Money magazine then was kind of promissory.
00:31:56.300 | They used to have all these cover stories, 10 hot funds
00:31:59.740 | to buy now and stuff like that, which I found kind of creepy,
00:32:03.180 | to be honest.
00:32:03.900 | But it was a very attractive design your own job kind
00:32:10.820 | of offer.
00:32:12.740 | And so I did something that I'm not
00:32:14.780 | sure I've ever done before or since,
00:32:18.060 | which was I called a source to ask for personal advice.
00:32:23.300 | I mean, it's not the kind of thing journalists generally do.
00:32:27.860 | But I called Jack, and I said, can I
00:32:31.260 | ask you a personal question?
00:32:33.740 | And he said, of course.
00:32:35.500 | So I explained the situation, and then he said to me,
00:32:39.420 | and I, well, what are you afraid of?
00:32:42.900 | Which was, of course, cut to the heart of the matter.
00:32:51.180 | Because I hadn't been thinking about it in those terms, right?
00:32:55.060 | And I realized, actually, he's right.
00:32:59.180 | I am afraid.
00:33:01.780 | And what am I afraid of?
00:33:03.620 | And I said, I just blurted out, I said,
00:33:06.660 | I'm afraid they'll take my integrity away from me.
00:33:10.460 | And he said, if they can take your integrity away from you,
00:33:13.420 | you never had it in the first place.
00:33:17.020 | And I was like, I guess I'll take the job.
00:33:19.420 | [LAUGHTER]
00:33:22.540 | Yeah, I have two fast ones.
00:33:24.420 | I don't have the depth of experience
00:33:26.580 | with Jack that you did.
00:33:28.220 | But 13 years ago, I was cleaning out our house
00:33:34.780 | for the inevitable downsizing we all have to inevitably do,
00:33:40.260 | or at least some of us do.
00:33:41.860 | And I came across a two-page, single-spaced letter from Jack
00:33:51.020 | that was in response to a letter that I had written him sometime
00:33:54.420 | in the 1980s when I had no presence in finance at all.
00:33:58.140 | And I was grousing about something stupid,
00:34:01.140 | about why they didn't have an unhedged international bond
00:34:04.500 | fund.
00:34:06.460 | And he wrote me about 1,000 words explaining
00:34:11.620 | why Vanguard didn't have it.
00:34:14.020 | And I was just one of many hundreds of thousands
00:34:17.260 | of Vanguard customers.
00:34:18.820 | That, to me, epitomized Jack.
00:34:22.700 | My favorite story, though, is I did go out to dinner with him
00:34:26.700 | on occasion.
00:34:27.740 | And this was early 2000.
00:34:32.460 | And I waited until he had had his second martini.
00:34:37.780 | And I said, so, Jack, have you altered your asset allocation
00:34:42.940 | at all in this FACACTA market?
00:34:47.540 | And he just sort of conspiratorially
00:34:51.300 | looked over his shoulders and said, I sold off 5%.
00:34:54.420 | [LAUGHTER]
00:34:57.740 | So that's my Jack anecdote.
00:35:01.620 | That's really interesting.
00:35:02.740 | All right.
00:35:03.740 | So I think what we'll do is we'll have people come up
00:35:07.060 | and ask questions.
00:35:08.140 | And I think what we'll do is I will give up my microphone
00:35:11.340 | to anyone who wants to ask a question.
00:35:12.900 | And then you and I will share a microphone.
00:35:14.700 | Yeah.
00:35:15.200 | Put your hand up.
00:35:20.460 | Don't be shy.
00:35:21.700 | We have one in the way back, Jim, on the left.
00:35:24.700 | Hello.
00:35:36.000 | Thank you.
00:35:37.860 | Bill, you mentioned that people are overconfident.
00:35:41.940 | And I thought, does increasing technology
00:35:46.580 | increase our overconfidence or decrease?
00:35:48.900 | Like, we're hunter-gatherers more or less confident--
00:35:52.020 | overconfident than we are now.
00:35:54.420 | Well, I'm a big believer in the immutability of human nature.
00:35:59.540 | I mean, it's a process which has evolved
00:36:01.300 | over tens of thousands of years.
00:36:04.340 | So I don't think that human nature has made us--
00:36:09.300 | that part of it has changed.
00:36:10.980 | But it certainly has given us access to information
00:36:16.220 | that feeds our overconfidence.
00:36:19.500 | There's always-- it's very easy to find a bubble
00:36:25.060 | you can slip into.
00:36:26.180 | And in fact, that's something that's increasingly
00:36:28.140 | happening in this country.
00:36:29.220 | We're all selecting where we want to live
00:36:31.300 | and who we want to live around.
00:36:32.780 | And so we wind up living around people who are like us.
00:36:38.540 | So there aren't a lot of evangelicals
00:36:40.180 | who moved to Portland, OK?
00:36:41.380 | There aren't a lot of political liberals
00:36:43.060 | who moved to Lubbock, Texas, all right?
00:36:44.900 | And that's what's happening here.
00:36:46.540 | And the same thing happens in finance, OK?
00:36:48.780 | You're able to find the bubble, the person
00:36:50.580 | you want to listen to.
00:36:51.820 | So I suspect that feeds your overconfidence.
00:36:53.940 | I don't know if that was a very good answer.
00:36:55.780 | Maybe you can do better.
00:36:56.820 | Well, I mean, just sort of as a follow-on note,
00:37:01.580 | I mean, you don't have to look far.
00:37:04.020 | I mean, just look at Wall Street bets.
00:37:07.580 | You know, to me, that's--
00:37:11.060 | I mean, I was a teenage boy once.
00:37:14.380 | At least half the room was teenage boys once.
00:37:19.420 | Investing should not be a game of chicken.
00:37:23.740 | But Wall Street bets is like an electronic game of chicken
00:37:29.020 | where a bunch of teenage boys are trying
00:37:32.140 | to drive their cars as fast as possible down an unlit highway
00:37:38.300 | at 2 in the morning.
00:37:40.560 | So they can get bragging rights and maybe get killed.
00:37:44.820 | So I think technology, in general,
00:37:50.140 | has given investors more tools and capabilities
00:37:55.980 | than they've ever had.
00:37:57.580 | And it's arguably the best time in human history
00:38:00.660 | to be an investor because the playing field has
00:38:04.140 | been so radically leveled by technology.
00:38:07.980 | But technology is a tool.
00:38:10.540 | And you can use nuclear energy to cure cancer.
00:38:17.180 | And you can use it to cause cancer.
00:38:20.820 | You know, you can pick up a hammer and build a house.
00:38:24.180 | Or you can knock a house down with a hammer.
00:38:26.940 | And you know, the internet and social media work the same way.
00:38:31.260 | If you have good instincts and good judgment,
00:38:34.860 | you can use them to your advantage.
00:38:36.740 | And if you don't, you can destroy yourself.
00:38:39.620 | So maybe that helps.
00:38:41.820 | Hi, good morning.
00:38:46.900 | Bill, you had mentioned in terms of retirement
00:38:51.020 | to be dependent on your secure assets
00:38:53.960 | versus the insecure assets.
00:38:56.420 | So in essence, you can talk about secure assets
00:38:59.860 | for those who haven't followed for a while.
00:39:03.820 | But the real issue here is how do you
00:39:08.820 | invest in which secure assets in order
00:39:11.940 | to minimize your taxes and the implication of Irma
00:39:18.340 | at the end of the day here?
00:39:20.180 | And so I'd like to really understand
00:39:23.240 | because I think at the end of the day,
00:39:25.980 | no matter what model you're trying to go through,
00:39:28.960 | you're still being hit with either Irma or taxes.
00:39:34.040 | And even before retirement, doing Roth conversions
00:39:38.080 | to be able to minimize the taxes on your social security
00:39:41.480 | and so forth, it's still an unending
00:39:45.960 | trying to keep as much money as you can when you retire.
00:39:52.960 | Thank you.
00:39:54.800 | I'm philosophical.
00:39:56.000 | And this may sound like a--
00:39:57.560 | I hope this doesn't come across as insensitive.
00:39:59.960 | But if your biggest problem in retirement is your Irmas,
00:40:05.000 | you don't have that big of a problem.
00:40:06.920 | You're in the upper 2% or 3%.
00:40:11.280 | Every rare now and then, I'll hear
00:40:15.480 | someone complain that their required minimum distributions
00:40:19.920 | put them in the top Irma bracket.
00:40:23.000 | Well, think about that.
00:40:24.800 | That means that you're getting $300,000 or $400,000 a year
00:40:28.560 | in RMDs, which means you've got close to an eight-figure
00:40:33.440 | portfolio.
00:40:35.680 | I mean, I don't mean to be vicious or sound mean,
00:40:38.780 | but let's get out the world's smallest violin, all right?
00:40:41.780 | I mean, I didn't--
00:40:48.520 | and again, this maybe sounds cruel,
00:40:50.720 | but I didn't serve in the military or serve in combat.
00:40:54.960 | I didn't even serve in the Peace Corps.
00:40:56.760 | So I figure that the most patriotic thing
00:41:00.000 | I can do for this marvelous country
00:41:01.560 | is pay my taxes and not complain about it.
00:41:03.640 | But the question is-- it's a more serious question, which
00:41:11.400 | is, how do you invest your risky assets
00:41:13.320 | and how do you invest your riskless assets?
00:41:15.240 | And I have to--
00:41:16.280 | I was going to try not to talk about this
00:41:18.400 | and maybe leave this for the next panel.
00:41:20.240 | But it's hard not to observe that I can--
00:41:23.240 | that all of us who are retiring right now
00:41:26.600 | and don't have a lot of income, salary coming in,
00:41:30.680 | can defease our future living expenses,
00:41:34.400 | our real living expenses, 30 years into the future
00:41:37.200 | by buying a TIPS ladder that will yield close to 2%.
00:41:42.560 | And that's the first time that's been true for a long while.
00:41:45.600 | So we have a stock market which is still very highly priced,
00:41:49.120 | even at current levels.
00:41:50.400 | And you can convert that into a stream
00:41:53.720 | of real, very safe assets that will let you sleep at night
00:41:58.360 | and let you laugh when the rest of your portfolio
00:42:00.680 | goes down 25%.
00:42:01.520 | Hi.
00:42:06.680 | Aaron Harris, very good to meet you both.
00:42:09.720 | Jason, I really enjoy reading your column every week.
00:42:12.840 | I look forward to it on Saturday mornings.
00:42:15.360 | And I always wonder, I think, well,
00:42:17.160 | this is such a wonderful column.
00:42:19.760 | It's so balanced.
00:42:20.680 | It has such a great perspective.
00:42:22.960 | How can-- and then you turn the page
00:42:25.600 | and you see ads for mutual funds and for these large hedge
00:42:29.640 | funds.
00:42:30.800 | And maybe this goes back to the question about the integrity.
00:42:34.680 | I'm glad you answered that because you
00:42:36.920 | write with such integrity.
00:42:38.480 | Has there ever been a situation where maybe the Wall Street
00:42:41.600 | Journal has said, maybe don't talk about this topic,
00:42:45.280 | or can you give a little bit more exposure to this topic?
00:42:49.120 | And how do you balance what you know
00:42:53.000 | is important to write with maybe what
00:42:55.000 | the editors of the Wall Street Journal want you to convey?
00:43:01.240 | Thank you.
00:43:03.080 | You need to get out more, but thank you.
00:43:09.320 | So I can report truthfully that I don't
00:43:16.440 | face those kinds of pressures.
00:43:18.160 | I mean, nobody tells me what to write.
00:43:21.920 | Frankly, I wish they did a little more
00:43:25.280 | because coming up with 50 ideas every year
00:43:28.760 | is no trivial task.
00:43:30.920 | I just-- I mean, I've been at the journal for 14 years.
00:43:38.160 | And I've never written anything that they wouldn't publish,
00:43:43.560 | and I've never written anything that I was like ordered
00:43:47.280 | to write against my wishes.
00:43:49.640 | You know, a few times a year, I do
00:43:51.120 | get suggestions from the editors,
00:43:52.920 | but they tend to be pretty good.
00:43:54.800 | And when they're not, I usually find a diplomatic way
00:44:00.680 | of saying maybe somebody else could write about that.
00:44:04.560 | So the ownership may tell our editorial page what to say,
00:44:12.600 | but nobody tells us in the newsroom what to say.
00:44:17.560 | We have complete independence.
00:44:19.720 | I and all my colleagues, actually, so.
00:44:22.120 | Yesterday afternoon, one of the speakers
00:44:28.480 | mentioned that it is extremely difficult to buy stocks
00:44:32.280 | during a market that is going down like at present.
00:44:35.680 | Perhaps my neurons are wired the wrong way,
00:44:37.960 | but that's a market that attracts me very keenly.
00:44:42.400 | So I'm somebody roughly about five years, seven years out
00:44:45.960 | from retirement.
00:44:47.360 | And on January 1 this year, I had probably a 60/40 stocks
00:44:51.960 | to bonds ratios.
00:44:53.480 | And right now, it has changed to around 68/32.
00:44:57.640 | And my plan is to go down up to 30/70
00:45:01.640 | by the end of the year if the stock market continues
00:45:04.480 | to go down.
00:45:05.640 | Now, is that a reasonable option, bad option,
00:45:09.280 | for which I should get a rap on my knuckles?
00:45:11.280 | Or would I be expelled from this place here?
00:45:16.960 | Well, there's a parameter that doesn't
00:45:19.160 | get talked about enough when that question gets
00:45:23.240 | asked, which is, what is your burn rate going
00:45:25.160 | to be in retirement?
00:45:27.480 | And the answer to that-- so the way
00:45:30.160 | you would answer the question is,
00:45:32.320 | if your burn rate in retirement is 2% or 3%,
00:45:37.520 | it really doesn't matter what your portfolio looks like.
00:45:40.240 | You're fine, short of some sort of cataclysm.
00:45:45.800 | If your burn rate is going to be 4% or 5% or 6%,
00:45:50.680 | then how many more years are you working?
00:45:53.160 | You better work more years if it's going to be that high.
00:45:56.600 | And if your burn rate in retirement
00:45:58.640 | is going to be higher than 6% or 7%,
00:46:04.880 | you better hope that a couple of your kids
00:46:08.000 | are fairly well-situated.
00:46:09.560 | And by the way, I mean, people are wired differently.
00:46:17.240 | There are people who-- I mean, I've
00:46:19.920 | met men who've flown aircraft in combat who threw up
00:46:25.840 | when their portfolios lost 5%.
00:46:29.920 | And on the other hand, I know people
00:46:31.760 | who can bear the kinds of 2008, 2009 losses with equanimity,
00:46:38.440 | and they sleep very well.
00:46:39.640 | So it takes all types.
00:46:42.000 | I think the median beta tolerance--
00:46:44.920 | that is the median, the maximum, the typical stock exposure
00:46:49.840 | of the median person is somewhere around 50-50.
00:46:52.520 | I mean, there's a reason why that's roughly what
00:46:55.880 | the market portfolio looks like.
00:46:57.360 | Thanks, as always, for sharing your insights.
00:47:02.840 | Given the vast amount that you've
00:47:04.720 | studied and written about, what still surprises you?
00:47:09.840 | Oh, boy.
00:47:11.480 | Jason, I'll let you answer that, and then I'll think about it.
00:47:14.840 | I was going to say the same thing to you, Bill.
00:47:18.920 | Well, what still surprises me?
00:47:21.240 | I guess what surprises me is the riddle
00:47:29.920 | that I've been trying to answer for most of my career, which
00:47:32.880 | is why are smart people so stupid about money?
00:47:39.120 | And we see it at every level.
00:47:43.240 | We see it among individual investors, none of those
00:47:46.480 | in this room, of course.
00:47:49.240 | We see it among professional investors.
00:47:52.120 | We see professional investors do absolutely
00:47:55.360 | idiotic, ridiculous, moronic, cretinous, well,
00:48:04.040 | very foolish things all the time, constantly.
00:48:09.120 | And I don't think that'll ever stop surprising me,
00:48:13.680 | because there seems to be an endless number of ways
00:48:20.200 | that smart people can be stupid with money.
00:48:23.760 | I used to think there were only a couple dozen ways,
00:48:26.720 | and I'm up to a few hundred, and there may be thousands.
00:48:32.000 | Yeah, I mean, almost nothing surprises me, because--
00:48:39.720 | like Jason-- and that's why we both had such a hard time
00:48:42.640 | answering this, is we both know enough financial history
00:48:45.400 | to know that the wellspring of human stupidity and gullibility
00:48:48.640 | is bottomless.
00:48:51.240 | And so I'm really not surprised by anything.
00:48:56.480 | If I'm surprised by anything, it's
00:48:57.960 | because I haven't learned enough financial history,
00:49:00.120 | or at least I forgot the parts I should have remembered.
00:49:02.600 | And the one thing that did surprise me,
00:49:04.600 | and very unpleasantly, was during the '08-'09 crisis.
00:49:09.880 | I knew that stocks could lose 50%, sometimes even 90%
00:49:15.800 | of their value, or occasionally in the course of history,
00:49:18.840 | 100% of their value if you're in the wrong country
00:49:21.080 | at the wrong time.
00:49:23.080 | But what surprised me, and shouldn't have surprised me,
00:49:26.920 | was--
00:49:28.040 | and shocked me-- was how badly non-treasury fixed income
00:49:35.120 | securities did.
00:49:36.240 | Even TIPS got hammered because of liquidity problems.
00:49:40.440 | But corporates, municipals got hammered as well.
00:49:43.880 | And I was surprised and shocked by that.
00:49:46.440 | And the only reason I was surprised and shocked by that
00:49:48.680 | is I hadn't internalized enough historical data.
00:49:50.960 | I should have known better.
00:49:52.920 | And I may be shocked and surprised by something
00:49:55.600 | in the future as well.
00:49:58.920 | There may be a failure mode I hadn't considered.
00:50:02.160 | But I'll be surprised when that happens too.
00:50:06.080 | I have a simple question.
00:50:08.560 | What would be your definition of financial wellness
00:50:11.800 | beyond the absence of poverty?
00:50:14.760 | Jason, I'm going to let you [INAUDIBLE]
00:50:26.200 | Well, I guess I have to invoke a line from Benjamin Graham.
00:50:34.760 | In his autobiography, he said he thought
00:50:38.120 | that happiness meant living well within your means.
00:50:42.840 | And I love that line because the word "well" is ambiguous.
00:50:50.960 | Did he mean living well within your means?
00:50:57.000 | Or did he mean living well within your means?
00:51:03.280 | And unfortunately, we can't ask him.
00:51:05.680 | He died in 1976.
00:51:09.040 | My hunch, because Graham was an incredibly sophisticated
00:51:14.240 | writer, I think he meant both.
00:51:18.840 | And I think that's a pretty good definition, actually.
00:51:24.600 | And on the fly, that's the best I can do.
00:51:26.800 | Here, Bill.
00:51:28.400 | No, you did very well.
00:51:29.840 | I mean, that phrase reminds you of the famous Wintruss book,
00:51:34.000 | Eats, Shoots, and Leaves.
00:51:36.720 | And it, of course, gets to another title
00:51:39.720 | of one of Jack's more famous books, which
00:51:43.680 | was named in the story of Joe Heller and Slaughterhouse Five.
00:51:52.200 | Who am I thinking of?
00:51:53.440 | Yeah, Kurt Vonnegut.
00:51:54.720 | And Vonnegut-- they're at a fancy Long Island party.
00:51:59.880 | And Vonnegut looks at Heller and says,
00:52:02.440 | that guy over there who's giving the party,
00:52:05.040 | he makes more money in one month than we'll
00:52:07.200 | make in our entire lives.
00:52:09.280 | And Heller looks at him and says, yeah, Kurt,
00:52:11.200 | you know, he's got one thing--
00:52:12.880 | we've got one thing he will never have.
00:52:15.400 | And that is enough.
00:52:18.400 | So with--
00:52:19.520 | Yeah.
00:52:20.400 | --enough, yeah, exactly.
00:52:22.160 | So I think-- we might have time for just one more question.
00:52:28.760 | I don't know how quick it'll be, but you both
00:52:31.280 | mentioned the importance of identifying your mistakes.
00:52:34.800 | And you both gave examples of things
00:52:37.160 | that were obvious mistakes because they turned out poorly.
00:52:41.240 | How do you identify mistakes that
00:52:43.080 | have turned out extremely well and get yourself out of them?
00:52:45.920 | Or do you have advice on that?
00:52:47.560 | Because I think all of us also probably
00:52:49.320 | have an investment or two that has done absurdly well
00:52:53.560 | and shouldn't have and is incredibly
00:52:55.880 | painful to get rid of.
00:52:57.280 | Yeah.
00:52:57.760 | I mean, how do you know when you've
00:52:59.360 | played Russian roulette without knowing it
00:53:01.120 | and you got the empty chamber?
00:53:03.080 | And I guess you--
00:53:06.560 | I'm trying to remember who--
00:53:08.640 | I think it was Bismarck who said that I never
00:53:11.600 | learn from my mistakes.
00:53:13.080 | I learn from other people's mistakes.
00:53:15.360 | And that's probably the best way to do it.
00:53:17.520 | Yeah, I mean, I think--
00:53:20.200 | I mean, the best way to frame a decision like that
00:53:23.400 | is if I were making the decision whether or not
00:53:29.960 | to buy this investment today, would I buy it?
00:53:33.680 | And if the answer is no, then you should probably sell it.
00:53:38.800 | Wall Street has the famous continuum in recommendations
00:53:46.000 | like buy, sell, or buy, hold, or sell, right?
00:53:49.960 | And they use all kinds of lingo for it,
00:53:52.040 | like accumulate and all that stuff.
00:53:54.280 | But the thing is, it's bogus.
00:53:58.800 | I mean, because every investment is either a buy or a sell.
00:54:05.000 | It's not a hold.
00:54:06.400 | I mean, if you wouldn't want to buy more,
00:54:08.160 | then you shouldn't be holding it, right?
00:54:10.880 | So that's the way I would frame the question.
00:54:14.140 | And maybe that would help you make an exit.
00:54:18.280 | So I think that's--
00:54:22.400 | we're done.
00:54:23.080 | And I thank all of you for your questions.
00:54:27.200 | [BLANK_AUDIO]