Welcome, everyone, to the 75th edition of Bogleheads on Investing. Today, our special guest is Jason Zweig. Jason has been a personal finance columnist at The Wall Street Journal since 2008. Prior to that, he was a senior writer for Money magazine and a guest columnist for Time magazine and CNN.

And he was the mutual fund editor at Forbes. He's also the author of several books, of which we will be discussing today. Hi, everyone. My name is Rick Ferry, and I am the host of Bogleheads on Investing. This episode, as with all episodes, is brought to you by the John C.

Bogle Center for Financial Literacy, a nonprofit organization that is building a world of well-informed, capable, and empowered investors. Visit the Bogle Center at boglecenter.net, where you will find a treasure trove of information, including transcripts of these podcasts. Today, our special guest is Jason Zweig. Jason became a personal finance columnist for The Wall Street Journal in 2008.

Before joining the journal, Jason was a senior editor for Money magazine and a guest columnist for Time magazine and CNN. And in the late 1980s and early 1990s, Jason was a mutual fund editor at Forbes. He was also a researcher, reporter for the economy and business section of Time, and an editorial assistant at African Report, a bi-monthly journal.

He's the author of several books-- Your Money and Your Brain, The Devil's Financial Dictionary, The Little Book of Safe Money, and two editions of Benjamin Graham's classic, The Intelligent Investor, which we will be discussing on this podcast. I first approached Jason to be a guest in 2019, and it has taken five years for him to get approval from his employer.

But here we are. So with no further ado, let me welcome Jason Zweig. Welcome to Bogle Heads on Investing, Jason. It's great to be with you, Rick. And thank you for your extreme patience. This took years. And I'm delighted to be on the air with you. I'm sure it will be worth the wait.

Well, we'll find out, won't we? You've been a friend of the Bogle Heads for a long, long time. And we'll get to that in a few minutes. But first, I'm absolutely fascinated by the stories you tell about working with your parents who were antique and art dealers. My parents had been editors and publishers of weekly newspapers, first in Southern Ohio, along the Ohio River, and then in Connecticut, along the Connecticut River.

And it got to be a grind. And they got a little tired of working seven days a week. And they had always been fascinated by history. And they decided they would become dealers primarily in 18th century American furniture, also pottery and porcelain, paintings, and really anything that might have been in a colonial or federal home in New England or the Middle Atlantic states at any time up until maybe Andrew Jackson was president.

And my parents were very well-educated, cultured, sophisticated people. But my dad had grown up on a farm in northern New York state. And when they sold the newspaper in, I think it was 1965, they decided that they would go back to the land. And my parents bought a 120-acre farm in one of the most remote areas in the Northeast.

I grew up 18 miles from the nearest stoplight. And they opened an art and antiques business. And I helped them. I worked in the business with them all the way through high school and on my college vacations. And that meant lots of expeditions all across the Northeast looking for antiques at auctions and shows and flea markets and people's backyards and knocking on doors.

And it was a fascinating way to grow up. It sure was. We have something in common from our youth that you probably don't know about. Oddly enough, the way I put myself through college was doing as an antique dealer in New England. I had no idea, Rick. Yeah. I went to auctions and flea markets and yard sales.

And not at the level, of course, that you and your parents. But I would pick up clocks and restore them and art class. Oh, my goodness. And I would resell it at an antiques flea market in Rhode Island. Wow, awesome. I did that for many years. Wow. And so when you started telling these stories, I just was fascinated.

Like, wow, that was an interesting coincidence. But I want to hear some of your real big finds. Tell me about the church painting. Yeah, so when I was in high school, guessing it was in the summer, my parents and I went to an estate sale at an old house somewhere near Schoharie, New York, which is southwest of Albany.

And it was a big house. And it was full of junk. I mean, in the entire house, there wasn't one thing worth buying. And my dad was a very smart guy. But he had one cognitive flaw, which is he really suffered from sunk cost bias. And he would not quit.

Because his principle was, if we make a buying trip, we're going to find something to buy. Yeah, that's going to be dangerous in that business. Exactly. And my parents just kept going back and forth, up and down the stairs from room to room. And I was like, there is nothing in this house.

And I'm not going to keep looking. And I sat down on a couch in the living room of this house and leaned against the fireplace with this big painting. And it was a nasty looking thing. The painting was so dirty that you couldn't even tell what it was a painting of.

And I was bored. And I knew my parents weren't going to finish any time soon. So I had nothing to do but sort of stare at the painting. Then as I was looking at it, something occurred to me, which is it was in a big, fancy, gilded frame. Gilded, meaning gold.

They were very expensive back then. Exactly. And this had obviously come down from the attic, obviously been in the attic of this house for the better part of a century, which is why it was so dirty. There were wasps' nests in the frame. And the whole thing was just a disgusting mess.

But as I sat there, I said, who would put a bad painting in a gilded frame? And I got up off the couch. And I went over. And I looked at it. And it was a cloudy day. And the shades were drawn. And then I noticed the sun had come out.

So I went back to the window. I pulled the shades back. And the clouds sort of parted, coincidentally, at that exact moment. And a shaft of sunlight hit the canvas. And I was like, wait a minute. This is not a bad painting. This is a good painting. And I licked my thumb.

And I went where experience told me a good artist might sign a painting, ran my wet thumb across. And there I saw F.E. Church, 1848. And I jumped up. And I ran up the steps. And I grabbed my parents. And I whispered to them, there's a church downstairs. And they said, what?

And I said, there's a church downstairs. And suddenly, their eyes opened. And I dragged them down the stairs. And we took it to the window and looked at it. And suddenly, you could really see the detail. And we just put it right back where it was. The auction was the next day.

And we bought it. And we were very excited to get it. I think we paid. It was a couple thousand, because there was a guy who would follow my parents around to these auctions and bid them up. And we took it home. We cleaned it up. A dealer from Washington DC came, saw it, and bought it from us on the spot.

And he turned around. And he sold it to the White House. And it ended up in the Oval Office. It's an amazing story. Yeah. I want to do one more of these. You also became a expert on old books and manuscripts from that period. And you had created an indexing system for authors in first edition so that you could rummage through hundreds of books and find the one book in a pile of books that was worth something.

And you had the fortunate experience of finding a first edition of a Mark Twain book. Yeah. Yeah, so I want to tell this story, Rick, in a way that doesn't make it sound as if I'm bragging. Because believe me, I wish I could do this. No, you could go ahead and brag.

OK. Back then, I truly did have a photographic memory. I could open a book. And weeks later, I could tell you whether I read something on a left-hand or a right-hand page and almost recapitulate what it was word for word. And what I did is I took the Columbia Encyclopedia, which we had at home, and I made index cards of every major American author, I guess, up until the 1920s, probably stopped with Hemingway and Faulkner, and the dates when their books were first published.

And I put them all on index cards. And from time to time, I would flip through them to refresh my memory. And one day, we were at an auction in Glens Falls, New York. And there was a big box of old books, again, super dusty. And most of them were nothing.

But one of them, I could immediately tell from the date, was a first edition of Mark Twain's Connecticut Yankee and King Arthur's Court. And it wasn't just a first edition, but it was a presentation copy. It was the copy that the illustrator, Dan Beard, had given to a handful of his friends that Christmas of the year the book came out.

And it had a Christmas card in it from Dan Beard. And Beard was not only a great illustrator, but he was also the founder of the American Boy Scouts. And the book was spectacular. It was bound in what's called Morocco leather. It had these Florentine marbled end pages. If you know how beautiful marbled paper can be, red and blue and brown and green.

And it had gilded edges to the pages. I think we paid $20 for the entire box of books. And we gave all the rest of the books away. But that one was well worth keeping. Fascinating. I never had anything like that. I had a lot of little wins of picking up original Bristol glass and cranberry glass from the 1800s, where people didn't know what it was and they'd be selling it for $1.

Awesome. There is something that I want to talk about that ties this into investing. I noticed something in the antique business is that there are trends. There's momentum on certain things that can just end. Exactly. Take, for example, piano stools. They were just so hot back in the 1970s that if you could get your hands on a piano stool that had the swivel kind and brass cloth feet, it was like gold.

And people were just buying them just because it was a piano stool. Back then, if you could buy one for $20, you could sell it for $70, $80, or $100. Well, it turns out, here we are 50 years later, they're selling for $60, $70. I mean, it just stopped.

Yep, another one like that, lightning rod balls. Do you remember this? Yep, I do. For our listeners, old barns throughout the Northeast had a glass ball through which the lightning rods ran. So at the top of the roof of a barn, you would look up, and you would typically see, I want to say, like three lightning rods.

Yeah, I think it was like small, medium, large, or something. Yes, exactly. And each lightning rod would have a glass ball on it that was typically sort of blue-green. And they were all made in the 19th century, and they were somewhat rare. And these things were selling for hundreds of dollars a piece.

And today, I don't know what they're worth, a nickel maybe? Right. Yeah, and then insulators for the early electricity and telegraph cables. Yes, exactly. People had to have these whenever they saw them, even though they didn't really know much about antiques. And it was like, they knew that they needed to buy this.

Exactly. And I remember Carnival Glass had its day as well. Yeah, yeah. They just bid these things up. And you're looking at them going, this is ridiculous. I don't know why these people are paying this kind of money. I don't think they really know what they're doing. Right. But it happened to be the trend of the day.

And I see that a lot in the financial markets as well. Totally, totally. You know, when meme stocks came along in 2020 and 2021, I was like, wow, these are like lightning rod balls. That's right. You remember the coin frenzy that occurred? I think it was when the price of silver went up in the late 1970s.

And everybody was buying silver coins. And the price of coins were going skyrocketing. And then it died. And that was it. Exactly. And I don't think it's ever come back. Exactly. Well, thank you for talking about that period. Because to me, and trying to figure out who Jason Zweig is and why he writes the way he writes today and the things you talk about today, I always believe that your background, doing what you did, and the idea of value versus price, something you wrote in the book, you know, what most people think is treasure is, in fact, trash.

And what a lot of people think is trash is, in fact, treasure. That influenced you to become the person and the journalist that you are today. Yeah, and I think that is true, Rick. I know I was blessed in having a very unusual childhood. One of my dad's principles was that often what people think is treasure is just trash.

And what they think is trash is treasure. And I couldn't put it better. It's really been kind of a guiding principle of mine throughout my writing career. Because you see it in the financial markets as well as in something like art and antiques. It's all around us. You currently work at The Wall Street Journal, but you didn't start there.

Tell us about the journey you took to get there. Even though I loved working in my parents' business, what I always wanted to be was a writer. I was a farm boy in a cultured house. And I was a close observer of nature around me. And I always wanted to be a writer.

And when I got out of college, my novels weren't selling. They weren't even writing themselves. So I gave up on fiction. Oh, I didn't know you had fiction books. Yeah, I tried. How many did you write? Well, I didn't finish any. Oh, I see, I see. But I tried.

I perpetrated a bunch of short stories and got probably a half dozen unfinished novels from my misspent youth. Oh, interesting. I didn't realize it at the time. But I was a very avid writer. But I had no life experience. So I couldn't really write anything that was any good because I didn't know anything.

And if you haven't lived enough, you certainly can't write anything, any meaningful fiction, anyway. So I just kind of stumbled into journalism. I knew I wanted to write. I didn't really want to be a journalist because my parents had done that. And I wanted to try and be something different.

But it just kind of happened. I sort of fell into it. And I spent a couple of years doing different kinds of writing for a couple of different magazines. And then I got picked up at Forbes, which then was certainly one of the three or four best business publications in the country.

They hired me to be a fact checker. And even though fact checking sounds very mechanical and not very creative, you also, in your spare time, were expected to generate story ideas of your own. And I really quickly found the business world fascinating. There were just a million stories then because this was the late '80s.

And the financial markets were booming. And there was all kinds of crazy stuff going on and great characters. I found out that there were a bunch of IPOs for companies in the rabbit meat industry. And the selling line that the brokers would use was it's the new chicken. I remember that.

I do. Yeah. It's better for you. It's more healthy. Yeah, exactly. And it tastes better. And it's better for the environment. And there were at least a half dozen rabbit meat companies that just, I guess I could say, hopped up out of nowhere. And the next thing I knew, I was on a plane to Arkansas.

And then I spent a day in a rabbit meat packing plant watching these people, you know-- Slaughter rabbits. I mean, you could say it. Yeah, exactly. And at the risk of offending many of our listeners, I will say, yes, I did witness that. And I just had so much fun.

I was like, this is what I want to do the rest of my life. Not slaughter rabbits, but write. But write about the crazy world of business and finance. And then you ended up moving to Money magazine after that, where one of the articles that you wrote back in 2001 was "Here Come the Bogleheads." So tell us how you got associated with the Bogleheads.

The internet was young then, as you and I, Rick, are old enough to remember. You know, I don't think most people even got online until the late '90s. And at the time I found the Bogleheads, the forum was called Vanguard Diehards. And it was hosted on Morningstar.com. And it quickly became the most active chat forum on Morningstar, which, of course, itself was a very popular destination for people looking to learn about investing online.

And I was quickly struck by, I guess I would say, the altruistic nature of the leading personalities on the forum. Not just people whose names are very familiar to any Boglehead, like, you know, Mel Lindauer and Taylor Larimore, but dozens of other people, incredibly knowledgeable and almost selfless in the way they would devote time and effort and energy to answering other people's questions.

And it occurred to me that this was kind of a new kind of social phenomenon, that people were finding the kind of advice you used to get from a wise, older relative. - Hmm, yeah, true. It's a good analogy. - Yeah, and so I went to the Bogleheads meeting, which I think was the second one.

- It was. - Yeah. - Right outside of Melbourne and Pennsylvania. - Yeah, exactly. And I think it was the second one they ever held. The first one, I think, was in Taylor Larimore's apartment. And I was just blown away by how nice these people were, how well-informed they were, and how much they cared about each other.

And it was the first time I'd ever seen what we've all witnessed many times since, which was people who had never met each other in the real world, but who felt they knew each other from being online together, meeting in person for the first time, and hugging each other, crying, laughing.

It was, I'll always remember that, that meeting, because it was really extraordinary. It was kind of a combination of an old-time church revival meeting, and maybe almost like a substance abuse meeting, because people stood up and said, my name is so-and-so, and I'm from this town, and I used to invest all wrong.

And then I discovered the Bogleheads, and now I've got it straight, and thank you so much. And then they would start crying. - Yeah. - And I realized this is an incredibly special group of people who are doing something that's important. And even though I think very few people outside the Bogleheads had ever heard of them at that point, I felt it was a story that really deserved to be in the spotlight, because it showed that the internet had not just technological potential, but human potential.

- Yeah. - It had the ability to bring people together for their mutual betterment. - Yeah, true. I was reading a statistic that said that 70% of marriages now, people first met online. - Yes. - When you and I were in our 20s, of course, that was unheard of, where you basically met through friends, or affiliation school, or maybe at a bar or something.

- Yes. - But there is a lady at the dog park who I speak with when she brings her dog there. Her husband passed away, but she has a new boyfriend now, and they met online, and she's 72. - Yeah. - Getting online has certainly changed lives, not always for the better, but changed things.

- Not for politics. - Okay, so let's move on. Well, you moved to the Wall Street Journal in 2008, and you continue to publish great articles on kind of exposing a lot of things that are going on on Wall Street. That became your niche in many ways. I don't wanna say the bad things, but things that to you didn't seem quite right.

And you continue to do that today. You continue to bring those out. So how did that all come about? I mean, why did you feel that was your calling? - Well, being an individual investor, it's a hard, lonely job, right? It's somewhat different today, but certainly when I started, and even back in 2008, when you're thinking of, what was it like to make an investment?

Either you had something shoved down your throat by a commissioned stockbroker or insurance agent who, in the best scenario, cared about you as a person, but certainly was always partially motivated by a commission, and in the worst case, cared much more about the commission than about you. That's if you had advice.

And if you didn't have advice, you had to do your research all by yourself. Decades ago, you would have to go to a public library. Then once the internet came along, you drowned in information and misinformation and Wall Street propaganda. - Mm-hmm. - Being an individual investor is a constant challenge, and one of the things I thought a lot about when working on my latest book, the new edition of "Benjamin Graham's "The Intelligent Investor," is it's probably harder than ever to be a disciplined, independent-minded investor because the propaganda and the pressure to trade those things are more inescapable than ever.

- Mm-hmm. - Your stockbroker maybe used to be out to pick your pocket. Now your stockbroker is in your pocket. - Your phone, yeah. - You can't escape. You know, your phone is buzzing. It's alerts. It's trade this, buy that, sell this, trade options. And I just feel that individual investors, they need somebody looking out for them who doesn't have the kinds of flagrant conflicts that are so common in the financial industry.

And I would never say that I'm free of conflicts of interest. I want every reader to subscribe to "The Wall Street Journal" and to read my column. But I'm not getting commissions and fees and kickbacks and fancy trips from the people I write about. You know, my only real agenda is to try to separate sense from nonsense.

- Yeah, I mean, you've always been that way in every way that I can remember. I want to move on a little bit here because we got a lot of books to cover. The second edition of "The Intelligent Investor," Ben Graham's book, you published in 2003, but before we talk about that, I want to go through your other books first and then we'll get back to that one.

- Okay. - The book that I thought was a fantastic read, it was just so unique that you wrote in 2007, was "Your Money and Your Brain," how the new science of neuroeconomics can help make you rich. And here, you actually got under an FMRI machine and had your brain scanned while you were thinking about buying and selling stocks.

Talk about this. - Yeah, so I did that quite a few times, Rick. What neuroscientists have done, or many of these folks call themselves neuroeconomists because the science is kind of a blend of economics, psychology, and neuroscience. And some of these people have PhDs in economics, some have them in psychology, some have them in neuroscience, and some have them in two or more of those fields.

It's an amazing group of researchers. And what they do is they take the kinds of behavioral experiments that psychologists and economics, economists for that matter, have long done, and they conduct them using the tools of neuroscience. So that might mean an EEG, like an electroencephalogram, where you have a helmet of electrodes on the outside of your head that's monitoring the electrochemical activity in your brain.

They will also do what's called an FMRI, or Functional Magnetic Resonance Imaging Test, which monitors the levels of oxygen in the blood within your brain. And those are two of many methods that can be used to monitor which parts of the human brain are activated by which sorts of tasks.

And it enables these researchers to pinpoint the brain circuitry that's involved in various kinds of decision-making. So I participated as a subject in well over half a dozen, may have been 10 different experiments, in labs throughout the US and also one in the UK. And I learned a lot about my own brain in doing all this, mainly about its limitations.

- That's always a danger of doing these kind of tests. - Yes, although I can't say I was totally surprised to learn that my brain had severe limitations, but it was fascinating because several of these experiments can demonstrate things that you might not otherwise be consciously aware of. - Interesting.

- You know, I spent a couple of years doing that research and I read hundreds of scientific articles and dozens of books and participated in all these experiments. And really the idea was to take the data that economists and psychologists have been gathering for decades, really going back to the 1970s at least, about the suboptimal way that people make decisions about risk and reward over time.

And what neuroeconomics does is it takes it down to the biological level and says we can observe these behaviors in how people make decisions about their money, but let's now observe which circuits and structures in the brain are driving those decisions. And that's particularly interesting because it enables us to connect these decisions with the fundamental emotions that those brain circuits generate in other contexts.

For example, we can learn that one of the reasons people are less effective at selling stocks than buying them is because these experiments have shown that if you sell at a loss, that transaction will be processed in the same part of the brain that's involved when you smell vomit or step in dog manure.

It's the disgust circuitry in the brain. - And a short-term gain, what does that do to your brain? - If it's part of a sequence so that it becomes like a predictable pattern, let's just say you bought a stock and you're watching it on your phone, maybe you have a Robin Hood account, and it's green because it's going up.

And those slot machine wheels that represent the stock price on the app keep spinning and they keep spinning green and the price keeps going up. Very quickly, the same circuits in your brain will fire in the brain of a cocaine addict who's about to get the next hit. - Wow.

- It's literally physiologically addictive. - Wow. That's a great book, I love that book. - Thank you. - And then you came out with another book a couple of years later called "A Little Book of Safe Money." And this came right after the financial crisis, ironically. Little marketing there, perhaps?

- Perhaps. - I mean, little books, if you remember, were kind of a trend back then. There was a little book on this, little book on that. So you came out with your little book. You talk about your cash, selecting stocks and bonds, choosing the right financial advisors. You want to talk about that little book?

- I will talk a little bit about that little book. First of all, the best little book, of course, is Jack Vogel's little book, which is wonderful. The publisher, John Wiley, approached me and asked, could I write something that was, I guess, attuned to the financial crisis? And I just wanted to write a very basic book that would be a guide for people who didn't have the patience to read anything long or particularly challenging.

I think it's very digestible. It was sort of a suggestion of what to do and what not to do, particularly during a financial crisis. - Okay, very good. And then we'll go to the next one, which is "The Devil's Financial Dictionary." It is a dictionary, but not really a dictionary name.

It's more of a satire of financial humor. Funny to read and true, by the way, most of the definitions you have in there. Talk about that. I mean, was it just something that was kind of irking you or were you collecting these things over the years? - Yes, so I'm a huge fan of someone I regard as a very unjustly neglected great American writer named Ambrose Bierce, who was roughly a contemporary of Mark Twain's, who died in, I think, 1914, 1917, around then.

And he was one of the most cynical people who ever lived. He was much more cynical than I am. I think I would say I overall have a very positive view of human nature. You would not say that about Ambrose Bierce. He was called Bitter Bierce because he was so negative, but he was also incredibly funny.

And he wrote a book that was published in 1911 called "The Devil's Dictionary," which is just this collection of brutally sarcastic short definitions of words. And I'd always loved it. I own at least two copies of the book. I may have three. I've read it probably dozens of times over the course of my life and it never gets old.

It's funnier every time you read it, actually. And I just had always wanted to write something like that for investors. And I started writing it as entries with no notion that it would ever become a book. And what I did is I would write one definition and I would just post it to my website.

And people started tweeting them and emailing them around and asking me, "How many more of these do you have?" And then one day a book publisher said, "I could make a book out of that." And I said to my book agent, "I wanna turn this into a book." And he said, "Nah, that's not a good idea." And I just kept doing it.

And the next thing I knew, I had hundreds of them. And at home in the evenings, my wife made me move out of the kitchen where I would sit with my laptop because I would be giggling to myself and distracting her from what she wanted to do. And it finally dawned on me that if I find this stuff funny, maybe other people would.

And so it didn't begin as a book. It just began as kind of a hobby. - Yeah, that's what it seems like. Could you give us just an example of one of your more favorite definitions? - Yeah, I should have prepped for this, Rick. But bearing in mind that this is organized like a true dictionary where you have the word, the part of speech, and then the definition, I think the shortest two definitions in the book are day trader, noun, see, idiot.

And then the definition for idiot says noun, see, day trader. - It's a funny book. I've been reading your little definitions for years and enjoy reading about that, particularly in the financial advisor community, which is where I come from. Which you have a few of those in there. - Yes, I do.

- All right, we're gonna go now to The Intelligent Investor. This is the third edition. You did a second edition in 2003, and you also edited a book on Benjamin Graham back in 2009. Benjamin Graham has been a huge influence on your life. So what was the original thought back in 2003, or before then when you started working on the book?

What was it about Benjamin Graham? Why did you take up this cause? - Well, I took up this cause because the publisher asked me. Let me say that when the project editor called me and said, "We're thinking of publishing an update to Benjamin Graham's The Intelligent Investor. Would you be interested in talking to us about that?" I said, "Yes!" (both laughing) With, I think, several audible exclamation points.

It was the thrill of a lifetime to be asked to participate in this project. I mean, Graham was one of the most brilliant investors of all time, and I think there's a strong case to be made that he was one of the most brilliant people of the 20th century, no matter how you define brilliance.

And it's just been a joy from start to finish to be involved in this project, an incredible honor. The last person Graham asked to collaborate with him on The Intelligent Investor was the great financial writer, Adam Smith. That was his pen name. His real name was Jerry Goodman. And Graham asked Adam Smith only because his first choice turned him down, and that was Warren Buffett.

To be in the company of those people is just an unbelievable honor. My only objective in editing the book is to help Graham speak for himself 48 years after he died, to keep the memory of his ideas alive and to keep that flame burning. In a time when I think his message is much more important than it ever was.

- Speaking of Warren Buffett earlier, even though Buffett did not participate in the book, he called it the best book on investing ever written and still does. - Yeah, and he still advises people to read the book. People criticize Graham all the time for being old-fashioned, for having these formulaic techniques for valuing stocks, a price earnings ratio of this and a price to book value ratio of that.

And you should multiply net working capital by X. And then people say, "These things are all outmoded. "Nobody invests like that anymore. "Nobody should." And that completely misses the mark for two reasons. First, during his lifetime, Graham revised the book several times. And every time he revised it, he changed all those formulas.

He updated them to reflect the new market realities at the time the new edition of the book was coming out. And if he were still around today, of course he'd be 130 years old, but if he were still around today, he would update all those formulas all over again and they would look nothing like what's in the book.

So that's the first objection. But the second objection is much more basic, which is that's not Graham's message. Graham's message is that if you're an individual investor, you have to identify what is the game I am playing? What playing field am I on? Am I playing against Fidelity and Goldman Sachs and Citadel Hedge Fund and Renaissance Technologies and all these other big firms?

Or am I playing some other game on some other playing field? And Graham's message is that if you try to play the same game as Wall Street itself, you will lose. Why? Because most professional investors lose that game. Why would you even wanna try playing that game when people with millions of dollars of resources and trillions of dollars of assets can't win that game?

Roughly 80% of all professionally managed funds underperform the S&P 500. Why would you try to chase other people? What Graham teaches is you win as an individual investor when you set clear objectives for your own needs and you then build a portfolio that's organized around one principle. How can I put in place policies and procedures that will maximize my probability of reaching my unique financial goals?

And if you think the only way you can do that is by beating the S&P 500, that makes no sense. - I'm gonna go back to the first part of your answer, which talked about when the original book was published in 1949, they had different formulas that were appropriate back then, maybe high dividend yield and some sort of ratios based upon dividends, which prior to the 1950s, stocks paid more dividends than...

- Oh, yes. - More yield than bonds paid. - Yep. - And so there was this idea that, well, you buy the stocks that have higher dividend yields than bonds, and when they go below it, you sell them, and just different things like that. But there's something that in the first edition, 1949, first edition of the book that Graham wrote, which he took out in later editions, but I wanna read that to you because it really gets back to what you said about these changing formulas.

Here's what he wrote. "Though business conditions may change, "corporations and securities may change, "and financial institutions and regulations may change, "human nature remains the same. "Thus the important and difficult part of sound investing, "which hinges upon the investor's own temperament "and attitude, is not much affected by passing years." And I think it's really appropriate to what you were saying.

Things change within the markets, and different companies change, and we have this rotation at the top, and different industries, and laws, and taxes, and all of that, but what really is important is your own temperament and how you approach it. - Exactly, and Rick, Graham does a beautiful thing in the first edition in "The Intelligent Investor," which he kind of scrunched and made shorter over the years, which is he sort of expounds on what he means by an intelligent investor.

I mean, it's an interesting term, and he says, and I'm paraphrasing him, "I don't mean that you have high intelligence "as it's conventionally measured. "It's not that you have an IQ of 180 or something like that, "or that you have a PhD in economics or finance, "or that you even have formal training "in economics or finance.

"It doesn't mean that you have a CFA or an MBA "or any other degree or designation "that confers professionally recognized expertise. "What I mean," says Graham, "is that you have good judgment, "that you think independently, that you're skeptical, "that you're patient, you're analytical, "and that you cultivate the ability "to separate information from noise." And he makes all this very clear.

And I think over the years, the financial services industry has invested massively in complexity that is designed to bewilder the average investor and to make us feel that we're unqualified to manage our own money. And the beauty of Jack Bogle and the original Vanguard experiment was what Jack often called the power of simplicity.

Just let's make investing as simple as it possibly can be and see what happens. And as the Bogle heads have shown, what happens is you empower people. You let them know it's okay to have the confidence to invest your own money in strategies that make sense, that you can understand.

And Graham was all about clearing the way for that. I'm all about this one phrase. I think I coined it. Complexity is job security in the investment industry. - Oh, yes. I'm not sure I've ever written it down, but somewhere I'm sure I've said the real product of the financial services industry is complexity because complexity is where fees come from.

The simpler you make something, the less willing people are to pay high fees to buy it and the less justification there is for the fees in the first place. - Let's move on to one topic that Graham talks about and you also opined on, and that is the difference between investing and speculating.

- Yeah, so this is something Graham was really passionate about, and it's a topic I care a lot about too. His book, "Security Analysis," which he published with David Dodd in 1934, Graham says, and I think I remember this verbatim. We'll find out in a second. He says, "An investment operation is one which, upon thorough analysis, promises safety of principle and an adequate return." Yeah, I think I did do that right.

And then he adds, "Operations not meeting this definition are speculative." And so Graham has a very clear, simple definition, which is if you are buying a stock without understanding that it represents a company and without knowing anything about the underlying business, you're not investing, you're speculating. Now, he hastens to add that speculation isn't all bad.

Everybody likes to go to Las Vegas or Monte Carlo or wherever your favorite gambling place might be. Maybe it's a riverboat casino somewhere. And there's nothing wrong with that. If you find it fun, if you limit your losses, and if you can afford to lose everything you stake and you don't care because you're there for the music, the show, the fun of the drive, back and forth, whatever, the flight, whatever it might be.

But if you go to a casino thinking that you're gonna make money doing it and you lose everything you put up because you don't have a system you just think you do, then you're speculating and it's really harmful. And so that's the analogy he uses. And in my opinion, many people who call themselves investors are really just speculators and we should call them that.

We should stop calling people investors when what they're doing is guessing. - Some people would go further than that as to what's an investment. You highlighted this, Seth Klarman, quote your commentary on chapter five. And I feel like personally, I fall into this camp. This is what Seth says the difference is between speculation and an investment.

The line I draw in the sand is that if an investment has cashflow or the likelihood of cashflow in the near term, and it is not purely dependent upon what a future buyer may pay, then that's an investment. If an asset's value is totally dependent on the amount a future buyer might pay, then its purchase is speculation.

How do you feel about that definition? Obviously, you have some feelings about it because you put it in the book. - Yeah, well, I think it's pretty darn good. I think there might be the occasional exception. I think if you buy a Rembrandt painting and you hold it for the rest of your life and then you either donate it to a museum or your heirs inherit it, I'm not sure that's a speculation.

It certainly doesn't have positive cashflow. Your insurance bills alone would cost you tens of thousands of dollars a year. Another example might be if you know your town very well and there's a big piece of land at a key intersection of two roads and you say someday there's gonna be a Walmart or a Costco or whatever it might be on that piece of property and you buy it, you might hold it for 20 years, but eventually some developer comes to you and says, "Rick, we'd really like to build an office park "or a data center for AI or a nuclear power plant." I'm gonna push back a little bit on that because to me, I think a Christmas tree seller and the firework seller.

I might buy that piece of land on the corner, but while I'm waiting for Walmart to come along and buy it from me or a data center, I can rent it out to a Christmas tree seller. I can rent it out to the guy selling fireworks on the 4th of July so I can get revenue from that land or I can just rent it out to a farmer and lease it and get revenue from it.

So that's my pushback on that. - Yeah, that's true. I guess some people might leave it as undeveloped land, but there's always the potential to use it to generate cash flow. So yeah, I mean, if there are exceptions to Seth Klarman's definition, I think they're rare. - Yeah, I think so too.

We've only scratched the surface on this book and our time is coming to an end. I did want to talk about investment advisors a little bit, and you do write about investment advisors. And the area I wanna go to is something that you wrote about that was a story that Alan Roth tells.

I always found this to be a humorous story, a true story. And it had to do with obtaining a certain recognition as a top financial planner. So, I mean, you told the story in the book. Alan has told it many times. Could you just, let's just end with this because I think it's so hilarious.

- Alan was approached by some organization, I forget the exact name of it, but that gives out these so-called awards to top financial planners. And I think the award is actually called one of America's top financial planners or something like that. And Alan sort of scrunched up his face as I think you and I can both picture him doing and said, what is this thing?

And why am I being honored by people I've never heard of? So he submitted an application for somebody else he knew to see whether that person could also be eligible. And right away, he was told that all he would have to do is send in a check for whatever it was.

I think it was like $150. And this friend of his, Max, could easily also become one of America's top financial planners. So Alan did and the plaque came in the mail and Alan gave it to Max, who was very proud of becoming one of America's top financial planners. Alan said, would you like to put it on your desk in your office?

And Max didn't really answer because Max was Alan's dog. - Max Tailwagger. - That's right. And so Alan's little dachshund puppy became one of America's top financial planners because Alan just basically bought honor for his dog. Some people call these things trust badges. Investors should always be wary in a crowded, actually overcrowded financial marketplace where it is very difficult for investment advisors and financial planners to distinguish themselves.

And where so many people just charge the same price of 1% of assets per year, how is a consumer supposed to distinguish good advice from bad? Well, these third-party organizations say, oh, well, Max is one of America's top financial planners. So he must be good. And Alan's point is, well, he is a good dog.

I say good dog to him all the time, but he's not a good financial planner. And it's just a very useful reminder that to get high quality, reliable financial advice, you have to do a little bit of homework. And there's really no way around that. You need to dig into a person's background and credentials and what they do with money when they manage it and how they charge fees on it to make sure you're comfortable with that rather than just going with your gut and saying, oh, he's a top financial planner.

He has a plaque on his wall. - Or he's a vice president. - Yes, a vice president, yeah. - When I first got into the financial services industry back in the 1980s and I got a job at a brokerage firm and they made me a junior vice president. And I mean, I didn't know anything, but you know, vice president.

We could go on for hours here talking about the book. - We could go on for a week. - But I want to thank you so much for being on the podcast. Love to have you on again sometime. - Yes, I think now that I've been on, I think that some of the institutional barriers may have fallen away.

- Well, that's great to hear. - I hope so. - Good luck with the book. Thank you again for participating on this podcast. - Well, it was an absolute pleasure, Rick, a total joy. And thanks for the great questions. And I really appreciate the opportunity. - This concludes this episode of "Bogleheads on Investing." Join us each month as we interview a new guest on a new topic.

In the meantime, visit boglecenter.net, bogleheads.org, the Bogleheads Wiki, Bogleheads Twitter, the Bogleheads YouTube channel, Bogleheads Facebook, Bogleheads Reddit. Join one of your local Bogleheads chapters and get others to join. Thanks for listening. (upbeat music) (upbeat music continues) (upbeat music)