Lessons from Jack Schwager | 10 Things Long-Term Investors Can Learn from History's Best Traders

[00:00:00] Welcome to Two Quants and a Financial Planner where we bridge the worlds of investing and financial planning to help investors achieve their long-term goals. Join Matt Zeigler, Jack Forehand and me, Justin Carbonneau, as we cover a wide range of investing and planning topics that impact all of us and discuss how we can apply them in the real world to achieve the best outcomes in our financial lives.

[00:00:14] Jack Forehand is a principal at Validia Capital Management. Matt Zeigler is managing director at Sunpoint Investments. The opinions expressed in this podcast do not necessarily reflect the opinions of Validia Capital or Sunpoint Investments. No information on this podcast should be construed as investment advice.

[00:00:28] Securities discussed in the podcast may be holdings of clients of Validia Capital or Sunpoint Investments.

[00:00:33] So Matt, today we become traders.

[00:00:35] You know, I listened to this Excess Returns interview a little while ago and I was like, I'm just going to take everything I have, I'm going to go to that roulette table and I'm going to put it all on black.

[00:00:48] And it came up on red.

[00:00:49] I did one bet though, but now I'm forever in debt.

[00:00:52] Yeah, we were going to talk about that.

[00:00:53] How does this work?

[00:00:54] But I've got eight screens in front of me.

[00:00:57] I've got the triple inverse.

[00:00:58] I mean, market's tanking today.

[00:00:59] So I've got the triple inverse NASDAQ ready to go.

[00:01:02] I mean, to be honest, I have no idea what the hell's on the eight screens.

[00:01:04] I'm not sure what I would even put on eight screens that I would be able to pay attention to, but people do it.

[00:01:08] So yeah.

[00:01:09] All the YouTube comments.

[00:01:11] You'd put all the YouTube comments.

[00:01:12] They'd all be there.

[00:01:13] That's true, yeah.

[00:01:14] Like get live comments so I could just hear people criticizing me the whole time.

[00:01:17] That would be excellent.

[00:01:18] Fantastic.

[00:01:19] But yeah, what we wanted to do today is about two years or so ago on Excess Returns, we did an interview with Jack Schwager.

[00:01:25] And it's like a weird thing with YouTube.

[00:01:27] So we basically that the interview did really well.

[00:01:30] You know, I think coming into about a couple weeks ago, it had 20,000 views, which would have been one of our top five episodes ever.

[00:01:37] But like, I'm always playing around with the YouTube covers and just slightly tweeting them something.

[00:01:42] And whatever I did, like the thing went crazy and started getting like 5,000 views a day.

[00:01:47] So as we talk now, it's in the, I think it's in the mid 60,000s and it's like headed up to, I mean, maybe you'll get a hundred.

[00:01:52] We'll see how quickly it dies down.

[00:01:53] But so it got me thinking about the whole episode again.

[00:01:57] And there's a lot of lessons as much as Jack Schwager.

[00:02:00] And for anybody who's not familiar with Jack, you know, he wrote the Market Wizards book.

[00:02:03] He interviewed some of the best traders in history and he really dove deep into what they did.

[00:02:08] And he's done a bunch of books since then.

[00:02:09] But there's like a lot of lessons for your average investor in there.

[00:02:13] There's a lot of lessons for normal investors from what Jack learned from these traders.

[00:02:16] And so we wanted to do an episode today where we're going to work some clips in.

[00:02:19] You and I are going to talk about it.

[00:02:20] And we've got 10 lessons from Jack Schwager that we think long-term investors can learn.

[00:02:25] Also super important because, I mean, I know for me, I don't know for you, was Market Wizards part of your, like, this was a critical part of my introduction to markets and actually understanding investment strategies.

[00:02:38] So many things are on my radar because of Jack Schwager and those books.

[00:02:43] Did you have a similar experience?

[00:02:44] Yeah, I did.

[00:02:45] I mean, I read that like, well, at the beginning, like, I think when a lot of people get into investing,

[00:02:48] they think they're going to be a trader.

[00:02:50] Yeah.

[00:02:50] And so, yeah.

[00:02:52] So like, that was kind of me.

[00:02:53] At the beginning, I was like, that was one of the first books I read on investing because I'm like, I'm going to be a trader.

[00:02:57] I'm going to figure out how these guys did that.

[00:02:58] And, you know, thankfully, I didn't go down that route.

[00:03:00] I mean, I think maybe in college, I played around with some stuff and realized it wasn't, it wasn't that I bought like this Canadian garbage company and it didn't go well.

[00:03:05] And I realized it wasn't going to be my thing.

[00:03:08] But yeah, I mean, it was, that was definitely one of the first books I read.

[00:03:11] And I would recommend anybody, you know, whether you're a trader or not.

[00:03:14] I mean, he talked to some of the best traders in history.

[00:03:16] I mean, he talked to Paul Tudor Jones, he talked to Steve Cohen, and he talked to people that are not necessarily considered traders.

[00:03:21] Like Joel Breenblatt was in the book.

[00:03:22] So, or in one of the books, I forget which one he was in.

[00:03:24] But yeah, I mean, he's talked to some of the best investors and traders in the world.

[00:03:28] And he does a really good job of distilling down the lessons you can learn from them.

[00:03:33] And so I think it's really good for anybody, whether you're a trader or you're a long-term investor, to read what he writes.

[00:03:38] It was one of the most eye-opening things.

[00:03:40] And these were books that I went to the local library and took out originally.

[00:03:44] And they just expose you to so many people.

[00:03:47] I think that's my favorite part, is you can get, you know, the Paul Tudor Jones story next to the Greenblatt story next to whatever else.

[00:03:56] And it's like, you get this really broad exposure to people who have had success in different corners of the market.

[00:04:02] If nothing else, just fascinating to study.

[00:04:05] It's like learning what different people on historical baseball teams did or something.

[00:04:09] You know what I mean?

[00:04:10] There's just this really cool cross-section of unique personalities.

[00:04:13] And he does a hell of a job writing them up.

[00:04:16] It's really great.

[00:04:17] What's also crazy is how good these traders were.

[00:04:19] Like, one of the things we asked him in the podcast was like, what were his criteria?

[00:04:22] And, you know, a sharp ratio of one was pretty good.

[00:04:25] Like, a sharp ratio of two was ridiculous.

[00:04:28] Like, he was like, oh, I want fours and fives before I, like, talk to these guys.

[00:04:31] And, like, he would go back and he would verify their records.

[00:04:34] And he would say, you know, prove that they're doing what they said they were doing.

[00:04:37] Like, he either wanted, like, a crazy sharp ratio or he wanted someone who turned, like, some ridiculously small amount of money into, like, millions of dollars.

[00:04:45] Like, those are the two things he was looking for.

[00:04:46] And he found people who were able to do it.

[00:04:49] And he was able to verify it.

[00:04:50] So, as much as trading is a difficult thing, I mean, he found a bunch of people who were incredibly successful.

[00:04:55] At it.

[00:04:56] And he found a bunch of people who were able to do it.

[00:04:57] There's so much to be gained sometimes by understanding the fringe cases, both because they can occasionally give you some insights of things that work.

[00:05:05] But also, they're full of the cautionary tales.

[00:05:08] And that's one of my other favorite parts about these books is just all the stories of what people did wrong, what went wrong.

[00:05:15] And sometimes you really get the sense of you can be really skilled in this area.

[00:05:19] But this is a really rare outcome for this really narrow thing.

[00:05:23] He, he, there's something about getting the exposure through this book that it sounds like you kind of had this experience, too.

[00:05:29] You read this thinking like, oh, I can figure this out.

[00:05:32] I can crack this code.

[00:05:33] But it becomes really humbling really fast to understand the types of advantage, the types of ways it has to play out for you to be, you know, to have your sharp of five or your shortino ratio.

[00:05:46] That's whatever.

[00:05:47] Yeah.

[00:05:47] All that stuff.

[00:05:48] And that sort of gets to our first lesson, which is not one of the lessons.

[00:05:52] We're going to play clips of Jack for all the lessons except this one.

[00:05:54] But our first lesson was don't be a traitor.

[00:05:56] And I think what you recognize when you read these books is how good these people were.

[00:06:01] And like you said, one of the good things I think you take from Jack's work is Jack is not writing the book like you can copy these guys and you can be this traitor.

[00:06:09] Like Jack is doing a very balanced take on this.

[00:06:11] He's explaining what they did.

[00:06:13] But you don't take from this book like I need to go drop everything and start day trading because I can, you know,

[00:06:17] I can accomplish what these guys accomplished.

[00:06:19] And I think that's a good lesson across a lot of things in investing is you always have to ask yourself, like, can I do this thing myself?

[00:06:27] It's so tempting to see the people who have had success doing the thing.

[00:06:30] And you want to say I can do the thing as well.

[00:06:32] But like I think that's one of the big things you take from reading these books is being a traitor is really, really hard.

[00:06:38] It's not impossible.

[00:06:39] I mean, some people in the long term investing world will say, like, you can't be a traitor and succeed and have a career.

[00:06:43] But the evidence will suggest that's not true.

[00:06:45] So it's just a very, very small percentage of people who are able to pull it off with a unique set of skills.

[00:06:50] I think I'm kind of like what's that Liam Neeson movie, huh?

[00:06:53] But in a particular set of skills or something like that.

[00:06:56] Which is kind of what this is all about, right?

[00:06:59] These are these again, merry fringe cases.

[00:07:01] These are not the norm at all.

[00:07:04] The norm at all.

[00:07:05] And I think to stories like Jack's in the market wizards books and all these interviews really help paint that picture of just how particular these sets of skills are.

[00:07:17] And I don't know.

[00:07:19] Again, incredibly, incredibly humbling.

[00:07:23] I forget what the West Grayism is, but something about do you really want to fight the 200 IQ gorillas or something?

[00:07:29] Like that's how this feels.

[00:07:31] You're just you look at these guys, you hear these stories and you go, man, this is this is bananas.

[00:07:36] What they put together and pulled off.

[00:07:39] Let's play that first clip.

[00:07:40] Let's talk about why not to be a traitor.

[00:07:43] Yeah.

[00:07:43] So the first one we're going to talk about is people have this idea that, you know, if you have a good system around what you do, if the thing you're doing doesn't make money, you can kind of make up for that by having like rules and a system around it.

[00:07:55] And, you know, Jack, the first thing we actually led the podcast with this and we put this clip of him talking about roulette and why that isn't true.

[00:08:01] There's a Wall Street say that goes something like this, that even a poor system can make money with good money match.

[00:08:09] I told people, you know, how many of you heard that?

[00:08:11] I can't people raise it.

[00:08:12] Good.

[00:08:13] I said, forget it.

[00:08:14] Forget it.

[00:08:14] Because it's probably one of the most stupid things ever said about investing.

[00:08:18] And the reason it's stupid, because if that made sense, think about think about going to Las Vegas and you're going to bet on roulette.

[00:08:24] OK, you got a you got ten thousand dollars.

[00:08:26] You want to play roulette.

[00:08:27] Right.

[00:08:28] And you go to you go to 100 mathematicians and tell like, what's my best betting strategy if I if I would have bet a roulette, you know, and they should all give you the same answer.

[00:08:37] And that is take the whole ten thousand and put it on black or red and then wouldn't lose walk away because the odds are against you.

[00:08:44] And the longer you play, the more greater the percentage you'll lose.

[00:08:48] Your highest percentage you're winning is on just betting one time.

[00:08:51] It's no negative, but it'll be in the penny.

[00:08:54] Well, there's a single zero double zero wheel.

[00:08:56] But, you know, if it's a single zero, it'll be four, you know, two and a half percent against you.

[00:09:02] That's your best.

[00:09:03] Those are your best odds.

[00:09:04] At least you're close to 50 50.

[00:09:05] And the longer you play, the more certain.

[00:09:07] And if you play long enough, you're absolutely guaranteed by the loss of chance to to lose.

[00:09:13] I mean, you have 100 percent probability of losing if you play roulette long enough.

[00:09:17] So the point is, if you don't have an edge, the longer you trade, the more absolutely certain it becomes that you will go broke.

[00:09:24] So, yeah, this is this is interesting to me because I think the roulette example is a great, great example of this.

[00:09:29] Like the idea is in roulette, the odds are against you.

[00:09:32] That's the whole point of a casino.

[00:09:34] So what do you do if the odds are against you?

[00:09:37] Well, the first thing you do is you don't play.

[00:09:39] Because if you go to a casino and expect that you might win the first time and to be honest, the casinos want you to win the first time because they know you're going to as long as you don't go to another casino the second time when you do the actual losing.

[00:09:49] They want you to do that.

[00:09:50] But with any of these things, like if the odds are not in your favor, repeating it and repeating it and repeating it makes you lose money.

[00:09:57] And that's true in trading.

[00:09:58] That's true in anything.

[00:09:59] Like if I've got a trading strategy and the trading strategy doesn't work, I can wrap whatever I want around that trading strategy.

[00:10:04] If I just keep doing it over and over again, I'm going to lose money.

[00:10:06] I shouldn't do it in the first place.

[00:10:07] So and like he said with roulette, like if you're going to play roulette and you have to play, the play is play once.

[00:10:13] You have a 50-50 shot or whatever it is, slightly less than that.

[00:10:16] If you win, you win, you take your money and you leave.

[00:10:19] The more you play, the worse your odds are.

[00:10:21] So I thought that was good because there's all these things like people want to trade stocks and investing.

[00:10:25] You know, they want to do all these things.

[00:10:26] And like if you don't have an edge, if the odds aren't in your favor, you're going to lose.

[00:10:31] The more you do it, the more you're going to lose.

[00:10:34] So you're saying, and I'm going to take this back to, I just realized the joke I was making at the beginning of the episode makes no sense until you've heard that clip.

[00:10:41] And I'm skewed by having listened to this earlier today in preparation.

[00:10:44] But that's that's timing for you.

[00:10:47] So you're saying you should only go on a podcast once, maximize your odds of fame.

[00:10:54] The idea of just like understanding if something compounds.

[00:10:58] That's so stupid.

[00:11:01] Like it's so obvious.

[00:11:02] But hearing the way he said it of the roulette table bet.

[00:11:06] The skew is if you win, wonderful.

[00:11:09] You're going to, you're going to be really happy you played the game, but it's not like you can like get a little bit right, get a little bit right and compound.

[00:11:16] There's not really a good snowball.

[00:11:17] Those stats are against you.

[00:11:19] So if something is kind of a true lottery, like play once.

[00:11:23] And if you win, great.

[00:11:24] Don't compound the error.

[00:11:26] Man, that's powerful.

[00:11:27] And this, this really fits well into what we talked about in a previous episode about the idea of the market being rigged.

[00:11:32] Because, you know, a lot of people in the GameStop thing were like, well, the market's rigged.

[00:11:35] And the answer is, well, it depends what you're doing in the market.

[00:11:37] Like if what you're doing in the market is buying SPY and leaving it for 40 years, that's probably not rigged.

[00:11:42] You know, you're probably going to do pretty well.

[00:11:44] Actually, it's probably rigged pretty heavily in your favor.

[00:11:46] If what you're doing is trading call options.

[00:11:48] Yes, Ken Griffin's going to get rich and that's rigged against you.

[00:11:50] So like the idea of starting by saying, like, is this something where the odds are stacked in my favor?

[00:11:56] Or is this something the odds are stacked against me?

[00:11:57] That's a good first question to ask before you do anything else to like refine your system.

[00:12:02] It's just like, is the core of what I'm doing going to work for me or is it going to work against me?

[00:12:06] And this is super valuable in the financial planning context too.

[00:12:09] Anytime we're talking to somebody about, you know, asset liability matching over five years or 10 years or 30 years or 40 years.

[00:12:16] And just going like, here are the odds on any given day, we can get totally socked in the face on any given week on many years.

[00:12:24] We can get socked in the face.

[00:12:25] We can have a 2022 or the 60, 40.

[00:12:28] Listen to the 60, 40 episode gets absolutely demolished.

[00:12:31] Stocks and bonds become correlated and go down together.

[00:12:34] But when we stretch these things out over time, we go, okay, if I'm a long-term investor, here's how I put the odds in my favor.

[00:12:40] Or here's the behaviors like rebalancing that keep the odds in my favor.

[00:12:45] Here's why we can have some comfort into repeatedly playing this way longer term game where the odds can work out.

[00:12:52] If you're doing anything where those odds are stacked against you, to your point, like if you're doing zero DTE options on some meme stock, like, yes, you are gambling.

[00:13:03] It is rigged.

[00:13:04] If you're trying to do S&P 500 for a 40-year time horizon, I hope, despite their earnings report, McDonald's can figure out how to price a chicken McNugget again.

[00:13:15] And I feel confident they'll keep the lights on.

[00:13:17] They need to call Ray Dahlia, right?

[00:13:19] Isn't he the one who helped them figure that out?

[00:13:20] That's right.

[00:13:21] Call your buddy Ray.

[00:13:23] He's just hanging out.

[00:13:24] I'm like, Ray, we need you again.

[00:13:25] But anyway, on to our second lesson.

[00:13:28] And this is another, I think this is a good life lesson.

[00:13:30] This is an investing lesson.

[00:13:31] This is everything, which is the idea that, and we'll play the clip and then we'll talk about it, but the idea that success often requires failure.

[00:13:38] So Jack talked about how these traders, most of these traders did not come out of the gate and just have tons of success.

[00:13:43] A lot of times things got very, very ugly before they got good.

[00:13:46] If you take all the Marta Wizards books together, I'd say for sure the majority of times people have early failures rather than early success.

[00:13:56] And so there's a couple of lessons in there.

[00:13:59] One is that just because you fail in the early years doesn't mean that you're doomed to failure.

[00:14:06] Because a lot of the most successful people actually, in fact, Michael Marcus, who I said before, you know, was the first chapter, the first book.

[00:14:13] That chapter is fascinating to me, at least, so far as how many times people have looked and didn't give up.

[00:14:19] So part of it is that that happens even to the greatest trade.

[00:14:24] People become great traders.

[00:14:25] And the second part of it is that part of becoming a great trader in most many cases is the ability to have enough self-confidence and resilience to be able to take that complete failure and learn from it, figure out what you're doing wrong, change, persevere, and come back again.

[00:14:43] And, you know, get knocked down and come back again.

[00:14:46] Yeah, so I think this applies to anything.

[00:14:48] You know, I remember, like, even as a long-term investor, I mean, I've made a bunch of mistakes along the way.

[00:14:53] And I don't know that I would do what I do today if I hadn't made those mistakes.

[00:14:57] I mean, obviously, everybody would like to say, you know, I just found the right thing at the beginning, whether that's indexing or whether it's whatever your strategy is.

[00:15:04] I just found it when I was 22, and I set the money aside in the S&P 500, and I came back in 60 years, and I dollar-cost averaged in the hallway.

[00:15:13] But almost everybody has something.

[00:15:15] You know, like, I had my garbage company when I was in college that I bought.

[00:15:17] Like, almost everybody has something where you get it wrong, and you need to get it wrong in order to get it right because you wouldn't have gotten it right if you didn't get it wrong.

[00:15:24] And I think that probably the best thing possible is you want to do that when you have the least money possible, and you want to do that as early in your career as possible.

[00:15:30] But I think that's a good lesson because, one, we learn from our mistakes, but two is you don't want to beat yourself up over them.

[00:15:36] Like, everybody's got their investing mistakes.

[00:15:38] And maybe we'll do a podcast with yours and mine and Justin's or something at some point.

[00:15:41] But, like, we've all got them, and we learned from them, and we got better.

[00:15:45] And, like, I think the idea that you can have investing success without mistakes along the way, you know, most people can't do that.

[00:15:50] I was thinking about this one.

[00:15:51] Did you get to watch that?

[00:15:53] I know, clips upon clips.

[00:15:55] Did you watch that Seinfeld?

[00:15:58] I think it was the Duke commencement speech.

[00:16:00] Did you get to see this?

[00:16:01] I didn't yet.

[00:16:02] I heard about it, though.

[00:16:02] Like, it generated a lot of buzz.

[00:16:04] He's got this really fascinating thing in there, and it's this quote that most things do not work.

[00:16:10] Most things are not good.

[00:16:11] You know this already from your short lives.

[00:16:13] Remember, he's telling a group of soon-to-be college graduates this.

[00:16:16] You leave the house, you come back.

[00:16:17] I was trying.

[00:16:18] It was okay.

[00:16:19] And one of the big points of this that Jerry Seinfeld is making in this commencement address is find fascination.

[00:16:27] Fascination is way better than passion, and it's not so sweaty.

[00:16:31] So if you're going to fail, find fascination.

[00:16:34] Find the thing that you're really interested in and figure out ways that the things you're interested in can keep you engaged in doing the positive odds behaviors.

[00:16:43] If you know you're going to fail anyway, you might as well pick some areas to fail in that aren't so uncomfortable or that are going to keep you curious, and then you're not going to quit, especially in games where the only simple advantage, the only simple way to have odds in your favor is to stay in the game itself.

[00:17:00] If failures are going to knock you out of those games altogether, then that's a really poor approach to the strategy.

[00:17:07] Yeah, that fascination thing interests me because a lot of people will say, you know, well, you got to buy index funds, or if you're not buying index funds, you got to hire a professional.

[00:17:13] And like, I think there's good advice in that.

[00:17:15] But I also think for people who find like fascination in managing their portfolio and can do it and can, you know, have the skills at least to be able to do it in a somewhat disciplined way.

[00:17:25] Like, even if they're giving up, you know, a little bit over time, to me, it's a good thing because it keeps them engaged with what they're doing with the market.

[00:17:32] They probably have a better chance of success with that.

[00:17:35] They're going to believe more in the strategy.

[00:17:36] So, like, I think if you can find that fascination, I mean, I think most people probably can.

[00:17:40] But if you're one of those people who finds fascination in investing as part of where you find that in your life, I don't think that's a bad thing.

[00:17:47] You know, a lot of people will knock it, but I don't think it is.

[00:17:50] No, there's not a bad thing at all about it because it's, I think a lot about and, you know, working with clients who are like this and being a little bit wired like this myself too.

[00:18:00] Still having the humility that I'm not going to be what I'm not going to be a market wizard.

[00:18:04] Like, that's just, that's not going to happen.

[00:18:07] The only way I succeed is by doing other things in my life that are not involved with like strictly trading of securities intraday or something like that.

[00:18:16] But there's other advantages that you can stack and your fascination should guide those.

[00:18:21] If you're interested in markets, if you're interested in these things, it's okay to do this work and have, have pockets of more active strategies or bets you want to take or whatever.

[00:18:31] And even if it does cost you a little bit over time, staying engaged with it.

[00:18:35] I mean, if you're not engaged with it, what are you going to do?

[00:18:36] Just totally shut it off and go gamble on something else or go find something else to do.

[00:18:42] So investing with that little extra thing, even if there's a marginal cost to some of that activity, it can still really pay off in the long run.

[00:18:49] That fascination part I think is super important.

[00:18:52] And I think it also beats it being like a passion thing.

[00:18:56] I like fascination way more than passion just as a word and explaining this to somebody.

[00:19:02] So this next one is one that I really love this one because I think this applies to everything with investing.

[00:19:07] And I'll let Jack explain it, but it's a lesson from Paul Tudor Jones.

[00:19:11] And the lesson is look at your portfolios if you were starting today.

[00:19:13] Paul basically believes that you should look at your portfolio like you just put everything on that day.

[00:19:22] You know, don't get too complacent because, oh, I've got this position.

[00:19:27] I'm well ahead.

[00:19:28] I don't have to worry about, you know, what's that good thing.

[00:19:31] Question is, if you just put this position on it today, would you be comfortable with it?

[00:19:35] Or would you be comfortable with it where your risk point is, you know?

[00:19:39] So having that mentality of not getting complacent and viewing every position, not how is it since you put it on,

[00:19:48] but how does it look today, you know?

[00:19:51] Would I want this position at this price with my risk point today?

[00:19:55] So that's what I would say is, you know, one main lesson I can remember from Paul Tudor Jones.

[00:20:01] Yeah, you know, he gave this from the perspective of a trader, but the reality is this applies to everything.

[00:20:06] Like so many people will have this, you know, this sunk cost idea of like, well, I've got this in my portfolio,

[00:20:12] so I might as well keep it in there.

[00:20:13] Like MedFaber even talks about this.

[00:20:15] And whenever you're bringing like Paul Tudor Jones and MedFaber together, it's probably a pretty good lesson.

[00:20:18] And it's the idea of like, if I was starting with a clean sheet of paper today, what would my portfolio look like?

[00:20:24] Now, that doesn't mean I'm going to make that my portfolio because I've got taxes, I've got transaction costs.

[00:20:28] I've got a lot of things to prevent me from doing that.

[00:20:30] But at least if I can ask myself that question, because that gets me to what do I hold now?

[00:20:35] And what would my portfolio look like if I started it today?

[00:20:38] And maybe there are some changes I can make tax efficiently or, you know, efficiently with respect to transaction costs that do make sense.

[00:20:45] And like I'm not getting that that allows me to not get trapped in this idea.

[00:20:48] I see this thing.

[00:20:49] It's been sitting in my portfolio forever.

[00:20:51] So it's there already.

[00:20:52] I might as well just keep it.

[00:20:54] I think that's a really important question to ask yourself.

[00:20:56] Like if I was starting today, what would I do and how is it different to what I'm doing?

[00:20:59] Understanding sunk costs, understanding especially, you know, we're recording this at the beginning of August here.

[00:21:04] And tech stocks have just been, what, savaged in the last month.

[00:21:10] And so for anybody who owns any of these companies, especially as they work through earnings and everything else, just asking the question of.

[00:21:18] Looking like if you're starting today, this Paul Turner Jones idea, just OK, would you buy it today?

[00:21:23] Have you already owned it and it just went down 10 or 20 or 30 percent?

[00:21:27] Would you still buy it today?

[00:21:28] Like if you didn't own so much already, would you add more to it?

[00:21:31] But looking at this from a fresh eyed perspective of recommitting to the thing you have is an option that you have.

[00:21:39] You can also say, no, I wouldn't.

[00:21:41] The situation changed.

[00:21:42] I've changed my mind.

[00:21:43] I need to move on from this.

[00:21:45] It really helps you cut to the root of that sunk cost conversation, which is why I think it's such a brilliant point.

[00:21:51] And I just I love the way that Jack highlights this.

[00:21:55] Yeah, when you're when you're analyzing investment, there's so many different things you can analyze.

[00:21:58] But like, I think one of the things you don't want to analyze in that decision is, do I already own it?

[00:22:03] Like if you could take that out of the equation, now you can't completely take it out of the equation because taxes and other stuff like that.

[00:22:08] But if you can at least as a starting point, take that out of the equation and be like, oh, I own NVIDIA.

[00:22:13] Let me think about the reasons I would own NVIDIA today.

[00:22:16] Not the and one of those reasons can't be NVIDIA sits in my portfolio right now.

[00:22:20] One of those the reasons have to be here's what I believe about the business or here's what I believe about the trends in the market or whatever it is.

[00:22:25] I think that's such an important thing to do, even if it doesn't result in a change because I'm up 10,000 percent in NVIDIA.

[00:22:31] And if I sold it tomorrow, my tax situation would be catastrophic.

[00:22:34] You know, maybe there's some things I can do around the edges if I still don't want to own it.

[00:22:37] So if I can at least ask that question and not have the fact that it's sitting in my portfolio be one of the criteria, I think that's a really good thing.

[00:22:43] Yeah. Two people care about your position.

[00:22:46] You and Uncle Sam, right?

[00:22:49] I'm going to get I'm going to get comments for Uncle Sam.

[00:22:51] You and the IRS care about the cost basis of your position.

[00:22:55] And so understanding that the market doesn't care, the market doesn't remember that you perfectly bottom ticked it because, of course, you did because you're a genius.

[00:23:05] You bottom ticked the market, you know, whatever, five years ago.

[00:23:08] And now you've got the perfect entry point or whatever else.

[00:23:11] The market doesn't care.

[00:23:11] The market forgot.

[00:23:12] The market forgot the second that transaction cleared that you ever did this.

[00:23:16] Because your cost basis and what you have to report back to the government to say, pay your fair share of taxes if you're booking a game or take your loss if you're booking a loss.

[00:23:24] That's the only thing that that matters.

[00:23:26] So this reset in your brain to basically say, would I be comfortable committing to this company again today if I was starting from zero?

[00:23:33] It's a perfect counterbalance, a perfect flip to help you just try to pull the sunk cost fallacy out of your logical process.

[00:23:42] And hey, you know, sometimes it also is the thing that clears where when information changes and you say, yeah, this thing got knocked off its highs.

[00:23:51] Yes, I didn't top ticket on my way out.

[00:23:54] But you're right.

[00:23:55] Something material did change.

[00:23:57] I wouldn't buy it again today.

[00:23:58] I'm no longer comfortable with the look forward.

[00:24:01] And this is the way I'm going to make myself comfortable with selling it, even though my cost basis is still wherever it is or whatever the situation.

[00:24:07] I just I love anything that helps you correct for such a well-known, well-documented bias like the sunk cost fallacy.

[00:24:15] By the way, did you see that chart that was going around on Twitter about like the percentage of NVIDIA employees?

[00:24:19] They're like either millionaires or worth tens of millions.

[00:24:21] It was like a crazy high number.

[00:24:23] I mean, I didn't see that chart, but I can say from doing a lot of doing a lot of planning work, actually, with with Amazon employees and people who like were working in warehouses and other stuff over the last however many years.

[00:24:38] And I know that the rate of change in the stock has slowed down, but I was consistently I was consistently amazed with people who were like, yeah, I came I came out of school in a crappy period of time for finding a job.

[00:24:50] I ended up starting doing this thing is Amazon Prime blew up.

[00:24:54] And now all of a sudden, I'm, you know, 30 years old and I'm well on my way to a million dollars or more.

[00:24:59] And it's just because a great advice for that college kid in your life who's looking for corporate experience.

[00:25:07] Find a rocket ship to get on.

[00:25:08] Yeah, it's like do things where the tide is in your favor is like such a big lesson because like you can grind away and like, you know, become like move way up the ladder and like this company that's going nowhere.

[00:25:18] And you can not move up the ladder in a company that's going somewhere.

[00:25:21] And like a lot of times, the second one ends up being far better than the first one.

[00:25:24] Now, it's hard to figure out in advance.

[00:25:25] I mean, who knew?

[00:25:26] I mean, just a few years ago, people were like not positive at all in video.

[00:25:29] So like who knew it was going to happen?

[00:25:31] But it is interesting.

[00:25:32] Like you can get involved in one of these companies that ends up being like a world changing company.

[00:25:36] You're going to be in pretty good shape.

[00:25:37] And then it's super hard because then if you're in that spot thinking about like, why would I sell it when this is done better than every other thing I ever owned?

[00:25:46] I can really play with your mind.

[00:25:48] I mean, that was one of the things in working with a number of employees at Amazon and a few other companies in that similar like that really benefited from kind of the tech takeoff since the great financial crisis.

[00:26:01] And certainly the turnaround after after the covid bottom was, you know, you're trying to buy a house or you're trying to do these things, how to think about it.

[00:26:08] And it's really hard to kill those sacred darlings.

[00:26:10] And it's really scary when that's a massive part of your net worth.

[00:26:14] It's less scary when it's a massive part of your net worth and you're 30 years old.

[00:26:18] It's it's downright terrifying if you're like 50 or 60 and approaching retirement and having to make some of those decisions.

[00:26:24] This this stuff flagues all of us.

[00:26:28] So, yeah, so for the listeners out there, you know, since excess returns is clearly on its way to a trillion, like, you know, anyone wants to be a video editor or anything like that.

[00:26:35] I mean, obviously, that's going to be the best decision you've ever made in your career because this thing is this thing is a rocket ship that's just taken off right now.

[00:26:41] And I got to say this, too, especially on the like the human capital.

[00:26:44] We talk about that in your career arc.

[00:26:46] So it's like the the hours of life and time you're going to commit to this company in exchange for compensation and then whatever else.

[00:26:53] I remember in coming out of college and like the early early part of the 2000s, one of the big things was going to work at like a GE or going to work at some of these places.

[00:27:04] And I can't tell you how many people in my my age range, my vintage who went and like try to do what you said.

[00:27:10] They didn't go to work for Amazon or NVIDIA or Apple or Microsoft or any of the companies who have crushed it.

[00:27:16] They went to work for these like stodgy old industrials.

[00:27:18] And in many cases, those stock prices went nowhere over those 10 year periods.

[00:27:23] And part of that part of that carrot that they dangle is like, we're going to get you stock based compensation.

[00:27:28] We're going to get you these types of things.

[00:27:30] Look at the great advantage of what was in the rearview mirror.

[00:27:32] You got to be aware of that, too.

[00:27:33] You got to really think about what's the growth on this rocket ship that I'm trying to get on and how does it benefit you?

[00:27:39] Like working at a fine establishment like excess returns, which is clearly on the way up and up and up and up with two year old Jack Schrager and use that code taking off out of nowhere.

[00:27:49] Like the only the only job offer I turned down at a college to do the startup thing, which is what I ended up doing, was was GE's management program out of Schenectady, New York.

[00:27:57] There you go.

[00:27:58] In the power, like three people who went and did that.

[00:28:00] And they weren't.

[00:28:01] You know, I didn't I didn't get on the rocket ship either way.

[00:28:04] But like I think that probably was it was a good choice, given how things that was back in the prime.

[00:28:08] You know, Jack Welch is the next legend and, you know, all those days.

[00:28:11] So it was obviously things have kind of calmed down a little bit on GE side since then.

[00:28:15] Yeah.

[00:28:15] But a lot of frustrated people with a lot of frustrated stock options from those points where it's just years and years of watching stuff, either best worthless or, you know, just be a headache.

[00:28:25] So it's it's hard to think about, but it's really important to think about and to say out loud.

[00:28:30] And again, if you're young and you have opportunities to look at stuff like this, it can be a game changer in your life.

[00:28:35] It could be a huge head start.

[00:28:36] So this next lesson, all of us have this tendency to want to make binary decisions.

[00:28:40] I mean, I'm out.

[00:28:41] I'm selling it all, whatever I'm doing.

[00:28:43] And Jack's talk to Steve Cohen about how he handles that type of situation.

[00:28:47] And I think this is really interesting.

[00:28:48] Steve Cohen, I thought talking about trading loss because I said, you know, well, yeah, but how do you get out?

[00:28:53] I said, what do you do?

[00:28:55] What is a position you have on?

[00:28:57] You just undecided.

[00:28:58] You're not sure if it's just a short term move against you or you're wrong.

[00:29:03] And he says, if he's ever in a situation where he's not sure, first thing he does is cut it in half.

[00:29:08] And if he's still insuring a while later, he cuts it in half again.

[00:29:11] He says, you know what?

[00:29:12] Before too long, you don't have a problem anymore.

[00:29:16] And it's a great piece of advice, really a stupendous piece of advice, in my opinion, because a lot of people become frozen.

[00:29:24] They can't decide, you know, hey, I get out here.

[00:29:27] I'm going to sell right at the bottom.

[00:29:29] And then the market's going to reverse.

[00:29:31] And or I hold on and it's just going to keep on going.

[00:29:34] And they think like there's just a choice of holding everything or selling everything.

[00:29:39] And they have a problem realizing that you have a continuum of choices.

[00:29:45] You could hold anything between zero and 100%.

[00:29:47] You don't have to have a zero or 100.

[00:29:49] And a decision between zero and 100 is very difficult.

[00:29:52] But so one thing to that piece of advice where you're uncertain, you know, get out of something.

[00:29:58] Get out of something.

[00:29:59] Just get out of something and then reevaluate it.

[00:30:05] So that's a good general principle is not to do everything at one time.

[00:30:10] You know, and that works for scaling into positions, scaling out of positions when you're undecided.

[00:30:17] But it's breaking, breaking trades into components as opposed to just doing everything 100% one way or the other.

[00:30:25] That's a really critical piece of advice.

[00:30:27] Yeah.

[00:30:28] So I really like this idea of selling, not just because it applies to maybe like a position you have, but because it applies to pretty much everything.

[00:30:35] Like we always want to be able to figure out like a black and white decision about anything in investing.

[00:30:39] And you see this with people like in 2008, I'm just going out of stocks.

[00:30:42] I just can't take it anymore.

[00:30:43] Like, and as much as people say you can't time the market, you can't do this or that.

[00:30:47] Like a lot of times for a person like that, maybe doing, making some small change, even if that's the suboptimal spreadsheet change is the right thing.

[00:30:56] You know, somebody that sold some in 2008 did a lot better than somebody who sold all in 2008.

[00:31:02] And I think that's something, I don't know if you deal with this, but that's something we deal with as investment advisors is sometimes, you know, to avoid the binary decision.

[00:31:09] We kind of make the decision in the middle and the decision in the middle may not be the optimal spreadsheet decision, but it can be the right decision for that person at that time.

[00:31:17] I am a massive fan of minor tweaks when you have a strong emotional response to something.

[00:31:24] If you're having a strong emotional response to something, we should talk about what those longer term odds are, what purpose it's serving in the plan and then the allocation.

[00:31:33] And then if we need to tweak, let's figure out what we need to tweak.

[00:31:37] And you can tweak on more than one level.

[00:31:39] It could be as simple as we're going to stop reinvesting the dividends of this thing or the coupons or the interest.

[00:31:44] It could be as simple as selling half.

[00:31:47] It could be as simple as taking some gains off the table.

[00:31:49] There's a million different psychological reframes that you can do that if you're feeling that emotional response where some action is better than no action.

[00:31:57] And it's a big part of our job as advisors to listen to the people, hear what they hear what the emotional response is, put it in perspective of the long term goals and objectives.

[00:32:07] But especially with the stuff, especially like with individual securities or things where we really there is no crystal ball.

[00:32:14] It's okay to make tweaks based on these responses so long as the rest of the core plan is intact.

[00:32:22] I love the case of like, even in this year with like the crazy run up in some of the technology companies, just encouraging people to do a little rebalancing.

[00:32:30] Okay.

[00:32:30] So you're selling that individual position, turn around and buy.

[00:32:33] Even if it's like, I'm selling one of the mag seven to buy an S&P 500 index fund or something and just get a little more diversification.

[00:32:40] Little giant or little tiny baby steps like that can have still giant long, long lasting ramifications and they're tweaks.

[00:32:49] Those changes can actually feel like you're doing something and can go a long way towards helping you stay the course in the broader picture.

[00:32:56] So I love the way he frames this up.

[00:32:58] And also like looking at it from the respect of situations where your plan is maybe out of whack because what's happened with that thing and look at it as I'm bringing myself back to my plan.

[00:33:07] Like that's a good way to look at those kinds of things.

[00:33:08] Like if I own NVIDIA, it's like some huge portion of my portfolio right now.

[00:33:12] Well, I don't have to make, maybe I don't make the buy sell decision on NVIDIA.

[00:33:14] Maybe I look at, well, here's the percentage I wanted to have NVIDIA in my portfolio.

[00:33:17] And here's what I have now.

[00:33:18] You know, maybe I should start thinking about getting it back to there, which is not a decision to get out of NVIDIA.

[00:33:23] It's a decision to stay consistent with what my plan was the whole time.

[00:33:26] Yeah.

[00:33:27] And understanding this, we do a lot of this.

[00:33:37] That from a baseline plan assumptions.

[00:33:38] And then how can I tweak little things to get back?

[00:33:42] A lot of these just boil down to making rebalancing decisions and just which risks I want to have on and I don't.

[00:33:49] Back to, back to that original idea.

[00:33:52] Are you doing something that's putting you at the roulette table?

[00:33:54] Are you doing something that's based on, you know, long-term returns or odds in your favor?

[00:33:58] And how are you rebalancing with an awareness of those odds?

[00:34:02] Such a valuable reframe that a good advisor can help provide.

[00:34:05] So I don't know, Matt, with all my eight screens here, my triple NASDAQ's going against me a little bit.

[00:34:08] Maybe the market's rallied a little bit.

[00:34:10] Like, I don't know what to do.

[00:34:11] I mean, do I sell half?

[00:34:12] It's like, I'm trying to apply these rules in the real world and I'm not sure what to do.

[00:34:15] Okay.

[00:34:15] Question one.

[00:34:16] Is your name Steve Cohen?

[00:34:18] Yeah, it is not.

[00:34:20] Well, then this case actually sell-all is probably the right decision, right?

[00:34:24] If you're in the triple inverse NASDAQ, sell-all is probably immediately is probably the correct decision no matter what.

[00:34:30] There you go.

[00:34:30] We've solved another problem.

[00:34:32] So this next clip is another lesson, Joel.

[00:34:35] We are Jack gave here at the end.

[00:34:38] We had asked him at the end.

[00:34:39] We usually do this question like, what's the one lesson you would teach the average investor?

[00:34:42] And we decided with him, we would ask him, what's the one lesson you would take from a bunch of people he's talked to for the average investor?

[00:34:49] And we did Paul Tudor Jones and we did Steve Cohen.

[00:34:51] And this next one is an interesting one.

[00:34:53] So this is one from Joel Greenblatt.

[00:34:55] Joel Greenblatt, who interviewed one of my, got the Coffin Capital interviewed in one of the books.

[00:34:58] He said, oh, I think he quotes Buffett on this.

[00:35:00] He says, there's no cold strikes at trading.

[00:35:02] You know, you don't, it's not like you have three chances in the round.

[00:35:05] You can look at as many pitches as you want.

[00:35:07] So, you know, the point is to wait for the right pitch.

[00:35:10] And that's, a lot of people are different to believe in that.

[00:35:12] And in his latest book, like I think somebody at the camera would sell.

[00:35:16] And I asked him what, you know, he worked in a prop shop and saw a lot of traders.

[00:35:21] I asked him what kind of differentiates the losing traders.

[00:35:25] And he said a lot of losing traders just, they try to make money every month, which sounds ironic because that sounds like a good thing.

[00:35:31] Hey, let's try to make money every month.

[00:35:32] That's a good, that seems like a good objective.

[00:35:34] The trouble with that is, every day of a month, whatever your approach is, it can be months when the market's not giving you any opportunity.

[00:35:40] And if you're trying to press to make money when there's no opportunity, what you're getting up is losing.

[00:35:44] And that comes up in a number of interviews.

[00:35:47] So, it takes a lot of discipline to not trade when there isn't an opportunity.

[00:35:53] That's an important element.

[00:35:54] So, I like this idea of, you know, he references the Buffett idea of there's no cold strikes in investing.

[00:36:00] And he talks about waiting for the fat pitch.

[00:36:01] But I think this applies, like in a lot of ways in investing because, and I think the bigger lesson is here, people always want to do something.

[00:36:08] Like, if you have a period where your investing plan or whatever strategy you're running doesn't call for doing anything, like there's this tendency to be like, I got to do something.

[00:36:16] Like, I got to buy something.

[00:36:17] And like, that's what he's getting at here is like, Greenblatt would be incredibly patient to wait.

[00:36:22] If he didn't see anything he liked, he would just wait.

[00:36:24] And like, waiting is the hardest thing, especially like in the world we live in now with investing because we can put all these screens up and we can have all kinds of stuff changing in the market.

[00:36:32] And we're getting Twitter where people are telling us about this and that and the economy.

[00:36:35] Like, a lot of times the best thing to do is just to wait.

[00:36:39] And that, but that's really, really hard to do when you're bombarded with like all this information we're bombarded with.

[00:36:44] And when that information affects your emotions as much as it does when it applies to your own portfolio.

[00:36:49] There's dramatic through lines in these things too.

[00:36:51] You don't have to make a change.

[00:36:54] You can just opt to wait.

[00:36:56] You can opt to look at this thing and say, yeah, I would buy it still today.

[00:37:01] Therefore, I'm comfortable holding.

[00:37:03] You can opt to sell half or do the little tweak in the Cohen sense.

[00:37:07] I love, I actually, I'm not sure.

[00:37:10] It might be whatever market wizards book.

[00:37:14] I can't remember if this is like, this is definitely close to the awareness I had of like really diving into Joel Greenblatt, like more seriously and going through all the books and all the writing and all the college lectures and all the other stuff as somebody who's really deeply learned a ton from Joel Greenblatt over my professional career.

[00:37:30] But this idea of, you know, you'll, you'll get 300 pitches.

[00:37:34] Why are you worried about three strikes?

[00:37:36] It's okay to sit them out.

[00:37:38] It's, it's, you'll have plenty of opportunities.

[00:37:40] You'll have plenty of chances.

[00:37:41] You got to give it time to cook.

[00:37:43] Do you, are you watching the Olympics at all?

[00:37:46] I watched some of it.

[00:37:47] Did you see like surfing, which just boggles my mind.

[00:37:55] And I remember watching it like X games or whatever years and years ago.

[00:37:58] But one of the craziest things about surfing is how these guys frigging pick waves.

[00:38:03] Cause it's, it's so unfair, you know, or at least in my, as a non-surfer, you have to, you're basically in, in the frigging ocean waiting to see if the ocean is going to produce the right waves for your run when it's your turn.

[00:38:17] And then when it's your turn, you're on the clock to pick how many of these waves can I possibly get in to do this thing, to get my routine and get my points clocked up.

[00:38:24] Like there's so many things working against you that the only thing you can do is try to go.

[00:38:30] I don't have to take every wave.

[00:38:31] I don't have to take everything.

[00:38:32] I just got to look at the things that I can do to my advantage and get my run out of it.

[00:38:36] And then I got to make, Hey, if I get a really good wave, if I get a really good opportunity.

[00:38:41] There's so many times in investing where it's just like, Hey, you just got to let that one go.

[00:38:46] Or you just got to look for the right conditions that you really want to take your swing.

[00:38:49] Yeah. And also like accepting if you're emotionally able to do that.

[00:38:52] So like a lot of these guys that wait for the fat pitch and stuff, like they're, you know, they'll sit in cash for years or something because they, they believe, you know, that they're going to get their opportunity.

[00:39:00] And they have the patience and the discipline to do that.

[00:39:03] Like that's not the strategy for your average investor.

[00:39:04] Like your average investor sitting there waiting for their opportunity for years.

[00:39:08] You know, a lot of people, you can just take these decisions off the table.

[00:39:10] You know, you run a systematic strategy, you run a index based strategy.

[00:39:15] You don't have to sit there and wait for the fat pitch.

[00:39:17] You know, you're just, you're just in there and you don't worry about it and you move on with your life.

[00:39:21] Like that's a good strategy too.

[00:39:23] But for people who are doing those kinds of things, I thought, I thought this was like a really good lesson.

[00:39:28] Yeah. And another one that I always think of with even inside of the Joel Greenblatt, like scope of work, the, uh, the scenarios too, where you put something on and it doesn't work for you right away is very, very value investor lesson.

[00:39:42] You know, on average, it's going to take in many cases, traditional value investing.

[00:39:46] What it takes a series of months, if not years that you want to have as your general period for that valuation gap to close.

[00:39:53] So it's, I can take the tomato.

[00:39:56] I can throw it in the pot.

[00:39:57] It doesn't just turn into like spaghetti sauce immediately.

[00:39:59] I don't have a marinara, like the second the tomato goes in.

[00:40:02] There's going to be a time period where I got to let the thing cook.

[00:40:05] And oftentimes with, especially with value stocks or with stuff in a composite value strategy where it's like, yeah, I, I, I put the thing in because it's got enough of the right conditions.

[00:40:14] And then I got to just let time work because time is actually part of the strategy often too.

[00:40:20] And this is a great reminder of that.

[00:40:22] Yeah.

[00:40:23] So this next one is interesting because, you know, Jack Schwager was a trader himself.

[00:40:26] I don't know if he still is today, but he did do trading himself.

[00:40:29] And, you know, he was not, he was a discretionary trader.

[00:40:32] And then he decided at one point that he was going to try to be a systematic trader.

[00:40:36] And here he talks about what happened.

[00:40:37] It's very difficult, you know, cause you have to, and it's always, how do you know, especially for systematic traders?

[00:40:41] I had even worse for trend following systematic traders because by its nature, if you're going to allow trades to work, you have to take while you're going to, you know, you're going to have drawdowns, large drawdowns as intrinsic to that approach.

[00:40:51] And how do you differentiate when a drawdown is like the system's not working anymore to where it's just a normal correction.

[00:40:56] So it's a difficult thing.

[00:40:57] And I, for one point in my career, I had switched to systematic trading and trend oriented trading because I wanted to take the motion out of trading.

[00:41:04] And I eventually discovered that actually I couldn't, I wasn't comfortable doing it because actually it was more, because you have to kind of abandon your own, your own controls to let the system do it.

[00:41:14] And you have to be willing to ride these drawdowns without, you found it interfering.

[00:41:17] And I found that much more difficult than just having, being able to say, I'm making a discretionary decision and I'm going to risk this much.

[00:41:22] I'm getting half a goes there.

[00:41:23] And I know what my worst case losses.

[00:41:24] And I found it oddly enough that that type of discretionary trading took far less emotional toll than did systematic trade for me at least.

[00:41:30] So, and the irony is I did it because I thought it'd be less emotional and it ended up being more much.

[00:41:35] So this one's really interesting to me on two levels, because I think there's two, two good lessons in this.

[00:41:40] So the first good lesson is a lot of people think systematic and quant strategies are not affected by emotion.

[00:41:45] And that's totally wrong.

[00:41:47] You know, you could see Jack have it in this clip.

[00:41:50] Like if you're running a systematic strategy, you're going to question the systematic strategy.

[00:41:54] And what you do when you question the systematic strategy is going to determine if you're successful with it.

[00:42:00] I mean, that's a huge, huge thing.

[00:42:02] And, you know, I don't think people recognize that people think people like me that are quants, you know, we just kind of like go sit in the other room and like don't do anything.

[00:42:08] Like I've got to think all the time.

[00:42:10] Like, do I adjust my strategy?

[00:42:11] Do I change it?

[00:42:12] You know, it's something like, how do I build it?

[00:42:14] How do I use past data to build it in such a way that I'm not impacted by like knowing what I know now?

[00:42:18] Like there's so many different things you do there.

[00:42:20] So like quant strategies are not at all.

[00:42:24] You know, they're not at all.

[00:42:25] They aren't able to completely avoid emotion no matter how you look at it.

[00:42:30] You talk about things that nobody cares, wearing out things that nobody wears.

[00:42:34] You're calling me, but I got to make clear.

[00:42:36] I can't say baby where I'll be in a year.

[00:42:38] Sweet emotion.

[00:42:39] Can't you feel it, Jack?

[00:42:40] You're feeling that aerosol thing.

[00:42:41] I love it.

[00:42:42] You're going to wrap some scarves around your microphone stand for these podcasts.

[00:42:45] Go full Steven Tyler on excess returns.

[00:42:49] I've always wished we could use like these clips without having some copyright problems because I would always just put them in when you reference these songs.

[00:42:54] But I'm pretty sure we can't do that.

[00:42:56] Yep.

[00:42:57] Yep.

[00:42:57] We're, we're done.

[00:42:58] So if we, we try to do that, the YouTube algorithm doesn't like song song hits, but yeah, like emotions are just in everything.

[00:43:06] You can't say baby where I'll be in a year.

[00:43:08] It's, I mean, that's just, it's just the reality of things.

[00:43:11] You can build the most eloquent strategy.

[00:43:13] You can build, and I think this is the next clip we're going to play.

[00:43:17] Like you can do whatever you want, but sometimes things change.

[00:43:20] And when things change, you got to have a system for making, making sense of that because we're humans.

[00:43:26] That's it.

[00:43:27] That's it.

[00:43:28] We're humans.

[00:43:28] And you know, I think the other good lesson here is you've got to do what you believe in.

[00:43:31] And you know, the reason systematic investing didn't work for Jack Schwager is because Jack Schwager ultimately didn't believe in systematic investing.

[00:43:37] It's not, you know, he talks in the, in the books, there's, there's systematic guys that work.

[00:43:41] There's guys that are not systematic that work.

[00:43:42] So it's not like there's some flaw in one or the other.

[00:43:45] It's that these guys have to be, especially traders, because they're under a lot more pressure, I think on a day-to-day basis.

[00:43:50] You know, they have to believe in what they're doing.

[00:43:52] And if you don't believe in what you're doing and if you're going to abandon it when it doesn't work, like it wasn't good for Jack.

[00:43:57] You know, I'm a big believer in systematic strategies.

[00:43:59] It wasn't good for Jack Schwager to be a systematic investor because ultimately he believed more in the other approach to trading than he believed in the systematic one.

[00:44:07] If you're going to be systematic trader, be more Jack forehand and less Jack Schwager.

[00:44:11] That's the clear lesson we're making here, right?

[00:44:13] Well, yeah, you can't exactly call me a systematic trader.

[00:44:16] I mean, maybe you can now, but that is, that is not the direction.

[00:44:18] I would be a horrible systematic trader as well, because I'm not capable.

[00:44:21] I'm definitely have a longer term mindset and I'm not capable of dealing with the day-to-day stuff with that.

[00:44:27] Yeah.

[00:44:27] So, so moving on to this next one, you alluded to this a little bit before, but one of the interesting things about a lot of these traders is they didn't just have their strategy

[00:44:35] and they found something that worked and they stuck with it for their entire career and they changed nothing.

[00:44:40] That's not the way it works.

[00:44:41] So here, Jack will talk a little bit about this idea of being able to pivot your strategy.

[00:44:45] Yeah.

[00:44:46] People may have an edge in a certain way, but then the markets change and, and they have to change and you have to change with it.

[00:44:52] So, so edges aren't constant.

[00:44:55] The edge, sometimes, sometimes an edge can be, can be a constant, like in a way that somebody has a really good instinct for markets and, you know, the way they look at charts and the way they interpret the way the market reacts to whatever.

[00:45:11] They just have these, there's natural traders and that edge may stay there, even if markets change in a way.

[00:45:17] But sometimes the edge is dependent upon the nature of the market.

[00:45:25] So, I think that there was one, there was only one systematic trader in this last, was it, you know, it was one guy was purely, everybody was, was discretionary, but one guy was purely systematic.

[00:45:38] But in this case, what was interesting was that he started out with an approach and had an edge and, you know, he was kind of making money, you know, almost every, you know, not every month, but he was making money every year and doing well.

[00:45:50] And then all of a sudden, you know, after about five years of doing this, well, he hits like these month after month, he starts losing money.

[00:45:59] And Kona says himself that it must be because the markets are becoming faster.

[00:46:03] And he was trading at the end of the day, he now has anticipated to change his system and everything else.

[00:46:08] And he became, he became profitable.

[00:46:10] And a couple of times in his career, he had to change system like that.

[00:46:13] Yeah.

[00:46:13] You know, this is something that applies to everyone again.

[00:46:15] I mean, we've talked about this over and over on the podcast.

[00:46:17] Like this applies to us as value investors, as quant investors in general.

[00:46:22] Like we have to be able to say, is what we're doing working?

[00:46:26] And that can be at a high level.

[00:46:27] Like is value investing in general, still something we should be doing?

[00:46:31] That can be at a level below it.

[00:46:32] How are we practicing value investing?

[00:46:34] How are we considering intangible assets in this new world?

[00:46:37] Like you have to be able to look at that all the time and reconsider what you're doing.

[00:46:41] And most of the time, if you're using a strategy that works over the longterm, most of the time, you're going to say, you know what?

[00:46:47] It still works.

[00:46:48] I'm still going to do it.

[00:46:49] But there's definitely going to be periods where you have to tweak things around the edges.

[00:46:52] And there might even be periods where you say, I'm going to take this strategy.

[00:46:55] It's been working for 30 years.

[00:46:56] I've got to abandon it because I don't, I don't believe it's going to work anymore.

[00:46:59] And so I think this idea of pivoting your strategy is really important.

[00:47:03] And then the second point would be, it's really, really freaking hard.

[00:47:06] Like being able to look and, you know, we've talked about Corey Hofstein's factor, Fimblewinter thing, where he's, he's kind of showed that.

[00:47:11] But we can't really say whether price to book is dead with the amount of data we're going to have in our lifetimes.

[00:47:16] Like making that decision, do I change the strategy?

[00:47:19] It's not a systematic thing.

[00:47:21] It's not a quantitative thing.

[00:47:22] It's something that's in your mind.

[00:47:24] It's something you've got to analyze the evidence and make the decisions.

[00:47:26] And probably that's why these guys were really good traders is they had that ability to do that.

[00:47:31] And they had the ability to say, oh, I've been doing this thing for a long time.

[00:47:34] It's worked, but I don't think it's going to work anymore.

[00:47:35] Now I'm doing this completely different other thing.

[00:47:37] And like, that's really, really freaking hard for anybody to do.

[00:47:40] So I had to go talk to a client this morning and I had to go back in the area that I grew up in last few years here for after being gone for a while.

[00:47:50] And I had to go basically to the town my high school was in.

[00:47:54] And oddly enough, and it's only several miles down the road, but I'm in the town where the, like the sports fields are, or specifically the soccer field is in the town I live in now.

[00:48:04] It's almost, it's very close to, very close to our house.

[00:48:07] And so I was thinking we used to have to run from that high school, like multiple miles, you know, down the road sidewalks.

[00:48:20] But still we'd run multiple miles across several towns and then have like, you know, soccer practice.

[00:48:26] And especially in the summers, like this time of year when it's hot and miserable and gross and whatever else.

[00:48:30] And I was thinking as I was doing this drive and I mean, it's, you know, it's several miles.

[00:48:35] It's one of those things where it's like, okay, we would run three or I think it's three, if not five miles.

[00:48:41] It takes you a good, like 10, 15 minutes because of all the traffic lights to do this thing.

[00:48:45] But I used to run that in like 90 degree heat and then run around for multiple hours after that.

[00:48:51] And then in some cases run back or, you know, mom and dad would come pick you up in the car and drive you home or a friend would drive you home.

[00:48:57] I would die. Like I would die if I even tried to do this today.

[00:49:02] There's there's just no way I can physically handle that amount of emotional duress, at least not without gearing up to it.

[00:49:10] So you have to pivot your strategy when it could result in death is basically the lesson here.

[00:49:15] But how many times does that show up in life at all different things?

[00:49:18] It's like, I, you can't invest like, uh, you can't YOLO like some crazy kid when you're 65 years old and you need to start taking distributions because you're not making contributions anymore.

[00:49:29] There are so many meta ways that this plays out and it's so ingrained in so many aspects of our lives.

[00:49:34] And sometimes the habits, sometimes the things that are normal and perfectly acceptable, we don't think twice about just different phases, different seasons of life.

[00:49:42] We have to change the approach completely.

[00:49:45] There's a lot of humanity and admitting that this is just part of life.

[00:49:49] And certainly from a portfolio management perspective, like, of course, it's going to show up there too.

[00:49:56] It's funny.

[00:49:56] You mentioned that because I was just on my, I run two miles every weekday and I was on my run earlier and like probably like three quarters of the way in my hips started hurting a lot.

[00:50:05] And like the young Jack approach to the hips started hurting a lot.

[00:50:08] It's just, you keep running and it's fine.

[00:50:09] And I'm like, I have to like fight myself now because I'm in my forties.

[00:50:13] You know, I'm like, I got to shut this down.

[00:50:15] This is going to end up really badly.

[00:50:16] So like I had to pivot my running strategy to say like when there's something that's causing pain, you got to shut it down for a couple of days and let it recover.

[00:50:23] You can't, you can't just fight through it anymore.

[00:50:25] Yeah.

[00:50:25] Especially if it's a weird pain or an unknown one, I get this weird thing that happens.

[00:50:30] Like, yeah, we just tell old man stories at this point.

[00:50:32] It's like, ah, I got that twinge in my elbow.

[00:50:34] So, yep.

[00:50:35] Week off.

[00:50:35] I'm working out.

[00:50:36] We're going to be like 70 years old.

[00:50:37] Still doing this podcast.

[00:50:38] We're just going to be like shaking our fist at the world.

[00:50:40] It's going to be great, Matt.

[00:50:41] It's going to be amazing.

[00:50:42] I can't wait.

[00:50:43] We're going to have amazing YouTube covers by that point.

[00:50:45] Everything is a lot more subscribers by then.

[00:50:48] If we keep doing this that long.

[00:50:49] Well, we're on a rocket ship.

[00:50:50] We've established that at least.

[00:50:51] So.

[00:50:52] So, so, so yeah, we've got two, two more to close up.

[00:50:54] And this is, this was not necessarily a lesson as much as I thought it was really interesting

[00:50:58] because I thought it was, it's interesting like how someone like a trader, like Jack

[00:51:02] Schwager looks at value investing.

[00:51:04] So I'll run the clip here and then we'll talk about it after.

[00:51:06] But it's true of any of the most fundamental approaches or many fundamental approaches is

[00:51:10] that you're putting this risk management dilemma because if nothing changes and your analysis

[00:51:19] about value is correct, then the more the market goes against you, the better of assuming again,

[00:51:26] important proviso here, assuming nothing has changed and assuming your analysis is correct.

[00:51:31] Oh, if nothing has changed and your analysis is correct and the more the market goes against

[00:51:36] you, the better the trader becomes.

[00:51:38] And it's kind of that sort of fight by its risk management about not letting your losses

[00:51:41] run and so forth.

[00:51:42] So that's a difficult thing, but you have to have the mentality of being willing to stay

[00:51:46] with that and ultimately come to the other side.

[00:51:50] Because if, if you, if you can take that type of a situation, then value, value investing,

[00:51:56] no matter what the numbers are, it will work for you.

[00:51:59] So, yeah, this is interesting from the perspective of like, from the perspective of a trader, there's

[00:52:03] like this risk management conundrum in value.

[00:52:05] Because the idea is if nothing's changed in the fundamentals of a company and it goes down,

[00:52:10] like I like it more as a value investor, but traders who have discipline and stop losses

[00:52:14] and stuff are like, well, I like it less.

[00:52:16] And so like, it's interesting, like those are two worlds that are tough to meld together.

[00:52:20] Now you want to meld it together to some degree, because like even us as value investors,

[00:52:24] we have certain stop criteria where we will get out of a position, but it's not, it doesn't

[00:52:28] look anything like a trader would look at.

[00:52:30] It's not, you know, the thing's down 10% or it's down 15% or it's even down 20%, you

[00:52:34] know, it's time to get out.

[00:52:35] Like a lot of times as a value investor, that's what you, you have to be able to hold

[00:52:38] through those kinds of things or you don't get your returns.

[00:52:41] But it's just interesting to see someone like Jack think about it because there is like

[00:52:44] thinking about it from his perspective and not from mine as a value investor, there is

[00:52:47] that conundrum there, which is I want risk management, but like value is one of those

[00:52:52] few things that when, you know, it goes down, I actually like it more than when it was

[00:52:55] up higher.

[00:52:57] It's that old thing.

[00:52:58] Like if you liked it a hundred, you'll love it at 50.

[00:53:01] And that's not exactly good risk management.

[00:53:04] It's a really dangerous game to play.

[00:53:06] I think this is one of those things that, and I love that it's the risk management dilemma

[00:53:11] of value, but it goes back to that, that idea of just reset the curve again.

[00:53:18] Do you actually, did you like it at 100 and now you love it at 100 because the opportunity

[00:53:23] set is all that different.

[00:53:24] And how can you, how can you re-understand that through the lens today with, again, the

[00:53:32] market doesn't care when you bought it.

[00:53:34] You and the IRS are the only ones who really care what that cost basis adjusted value is.

[00:53:40] Everything else you, you have to make the decision with a blank slate.

[00:53:45] Yes.

[00:53:45] That's a dilemma.

[00:53:46] Yes.

[00:53:46] That's one of those things in your strategy that might work against you.

[00:53:49] So you best believe the psychology of that, you best understand the psychology of that

[00:53:53] as you make those decisions.

[00:53:55] And Hey, guess what?

[00:53:56] It can also make for some tremendous opportunities if, you know, truly you're using risk management

[00:54:03] over time through this lens, whatever else.

[00:54:06] Yeah.

[00:54:06] One of the big challenges for me has not been the idea that like, if the stock goes down

[00:54:09] and the fundamentals hold, like I should like it more because I do like it more.

[00:54:12] Usually the challenge for me has been the stock that was a hundred now it's at 70 and things

[00:54:17] have deteriorated with the business.

[00:54:18] So I really should like it less at 70 than I liked it at a hundred.

[00:54:21] Like as a, as a, someone with a value mentality, that's the hardest thing is to admit, all right,

[00:54:25] things have changed.

[00:54:26] And even though the thing's gone down and it seems like more of a value, it's actually less

[00:54:29] of a value at 70 than it was at a hundred.

[00:54:31] Yeah.

[00:54:31] My analysis, my analysis has now changed, not just the price of the thing relative to my

[00:54:38] prior analysis.

[00:54:41] That's one of the things when you're doing due diligence on somebody with a value bias and

[00:54:44] you're looking into the portfolio, it's really critical to understand how those factors move

[00:54:48] and evolve over time.

[00:54:49] And at what, at what pace and speed and with what bottlenecks in place for the professional

[00:54:54] managers process.

[00:54:55] Cause this is, this is one of those things where you can spot logical traps and places people

[00:55:01] can paint themselves in the corner real fast.

[00:55:05] So our last one is a little bit outside of investing, but I thought this was really interesting.

[00:55:08] So we've done, I believe 275 or so excess returns interviews at this point.

[00:55:12] Actually, we haven't done that many interviews cause some of them at the beginning weren't

[00:55:14] interviews, but we've done a lot of interviews.

[00:55:16] We've certainly done 200 plus interviews.

[00:55:18] And one of the things we've done is because we're always doing, doing a deep dive into a

[00:55:22] specific topic.

[00:55:23] And I find that like having a map for how I want to do that to make sure we get through

[00:55:27] the entire topic in the right way that someone can understand it works really well.

[00:55:30] So one of the things we always do is we always give the guests like an outline of what

[00:55:34] we're going to talk about.

[00:55:35] And I find like, it helps for us to get through everything because they know what we're going

[00:55:38] to cover.

[00:55:39] It sometimes helps them to think about a topic.

[00:55:41] Maybe they weren't going to think about and give a better answer.

[00:55:43] Like, especially with our closing question, which is, you know, what's the one lesson

[00:55:46] you teach the average investor?

[00:55:47] Like people usually give a better answer to that if they've thought about it.

[00:55:50] But so we always do that.

[00:55:52] And there's been one time in the history of excess returns where someone was like, no,

[00:55:56] take it back.

[00:55:56] I don't want it.

[00:55:57] And that was Jack Schwede.

[00:55:58] And so, and that says a lot.

[00:56:00] And I asked him this question, so I'll, we'll play his answer here, but it says a lot

[00:56:04] about what he thinks about the best way to do an interview.

[00:56:06] Yeah.

[00:56:07] And you're not the first people dealing with the viewers to offer me that.

[00:56:11] I said, Leo, thanks, but no thanks.

[00:56:14] And the reason I personally do that, but it's also exciting.

[00:56:17] I've often been on the opposite side of being on your side, obviously, through the books.

[00:56:21] And I, you know, I don't tell people what I'm going to ask.

[00:56:24] I don't know.

[00:56:25] So, but talking from this framework, the reason I don't want to know the questions is because

[00:56:31] I want it to be spontaneous.

[00:56:33] I don't want to, even if I don't prepare for it, if I know what's coming, it, there's too

[00:56:38] much of a chance of a canned answer.

[00:56:39] It, uh, it takes some, you know, it takes a spontaneity on it.

[00:56:42] It takes a, takes some of the interest out of it.

[00:56:44] So I think you get a better interview if, if people don't know what's, what's, what

[00:56:48] the questions would be.

[00:56:49] I, now, as far as what I do, if they're doing, when I, when I did the first market

[00:56:53] wizard book, I prepare, I still kept going.

[00:56:55] We said, I don't even have the thing here.

[00:57:00] I did hold on to it.

[00:57:01] Oh, not that I've used it, but I'd go, there it is.

[00:57:08] Um, so we'll stack with index cards with cool shins on it.

[00:57:13] And so I came up to that question, but I, I quickly learned that, uh,

[00:57:19] the way to do the interview was, was not to come, not to have questions and ask questions.

[00:57:24] It was fun.

[00:57:25] You have, you know, your first question or two, maybe, but, um, just to have a conversation.

[00:57:30] So that's a really important thing is to, is to make it a conversation and not to make,

[00:57:36] make it, you know, prepare a question and answer type of situation, because then it becomes

[00:57:42] very boring.

[00:57:43] And tied in with that, it's really important to listen to what the person's answers are,

[00:57:49] because sometimes and often the best parts of an interview are not something you plan to

[00:57:56] ask, but somebody sent something.

[00:57:58] And that led to another set of questions.

[00:58:00] And that takes you off of a tangent that you didn't anticipate.

[00:58:03] Okay.

[00:58:04] And that often ends up being the best, best material.

[00:58:07] So, uh, it's very important to, um, to, to, to, you know, like have that conversational

[00:58:12] style where you're listening and going off with the person said, rather than folks seeing

[00:58:17] what your prepared questions are.

[00:58:18] Now I still carry that stack of index cards around, uh, from interview to interview.

[00:58:24] What I would normally do that was I had the full interview, whether it was over a one

[00:58:27] day period or multi-day period.

[00:58:29] At the end, I would just flip through the questions and see, did I miss anything, you

[00:58:32] know, uh, cause those are questions I always want to ask everybody.

[00:58:36] And that often, often I basically get everything anyway.

[00:58:40] Uh, so that's my advice about interviews is, is keep it as spontaneous as possible, as

[00:58:45] unprepared as possible and make it a conversation.

[00:58:48] So yeah, Matt, this is really interesting because you and I are very different on this.

[00:58:51] Like, you know, we, we've been, you know, you've done some of the excess returns interviews

[00:58:54] and, and we, you just did one the other with Wade Pfau, which came out really great.

[00:58:57] And like the way we set up for that interview was very different than the way we set up for

[00:59:01] our other interview interviews.

[00:59:02] It was like, it was a much less structured thing.

[00:59:05] And I've kind of learned over time, like people operate in different ways and depending on

[00:59:09] what you're trying to accomplish, you can accomplish that in different ways.

[00:59:12] There's no right way to do an interview.

[00:59:13] Like they always talk about the fact that like, what was the inside the actor's studio is

[00:59:16] like James Lipton.

[00:59:17] Was that his name?

[00:59:18] Yeah.

[00:59:18] Yeah.

[00:59:18] Yeah.

[00:59:18] He basically had those index cards and he read those freaking index cards.

[00:59:22] It didn't matter what, if it didn't matter if you gave him an answer that

[00:59:24] was like so ripe for follow-up, he read the next index card.

[00:59:27] He didn't care.

[00:59:28] And then like on the other end of the spectrum, like Larry King, I believe did not, no preparation

[00:59:31] whatsoever.

[00:59:32] I think he just kind of showed up and like did whatever.

[00:59:34] And both of them worked really well.

[00:59:36] And so there's no right answer to this, but you and I are on that spectrum.

[00:59:39] Like I'm more on the, I want to be prepared for these things when I'm doing them.

[00:59:42] You're more on the, let's let this be a freewheeling conversation.

[00:59:44] And there's no right answer, but like, I don't know what your thoughts are, but to me,

[00:59:47] it's interesting to think about.

[00:59:48] Um, so I bring, this is the personal thing and I'm very partial, funny enough, like Larry

[00:59:55] King's one of the people that I've, I learned a lot of this stuff from watching him and

[01:00:00] being a fan of his and like kind of studying that years ago, because it actually applied

[01:00:05] a lot to client work for me.

[01:00:06] And it still does.

[01:00:08] I, I really like to have.

[01:00:11] So I love, sometimes you have to do the diagnostic checklist and you're uniquely gifted at that.

[01:00:17] And especially in one of my favorite things about the channel is when you're talking to

[01:00:20] people who have really systematic ways of thinking or really nuanced points, then it's really good

[01:00:25] to have that diagnostic checklist because sometimes you need a sequential order that things can build

[01:00:29] on, or you just want to make sure you get the 16 different perspectives that somebody

[01:00:34] has on different things and you try to get it all into this format of, you know, 45 minutes

[01:00:39] to an hour and a half into a way where it's like, yeah, this is interesting and entertaining.

[01:00:43] I know what to expect and it can be really useful.

[01:00:46] The other side of that coin.

[01:00:47] And usually my approach, certainly my approach with clients for me saying ad nauseum, if I'm

[01:00:53] doing client work or doing financial planning, it's really, especially if it's the first time

[01:00:57] I meet somebody calendar, cashflow balance sheet, simple as that.

[01:01:02] I have those things in my head and then I just want them to tell me the story about different

[01:01:08] things that are going on with those.

[01:01:10] They don't have to present it sequentially, but I'm going to organize it sequentially.

[01:01:14] It's, it's funny.

[01:01:15] The, the intentional investor interviews I have that can go anywhere.

[01:01:18] And much like Jack Schwager, uh, we have very special one coming out soon with, with Grant

[01:01:22] Williams, who same thing was like, I don't want the outline.

[01:01:26] If I make people just go anywhere with me, I have to, I have to be subjected to it, which

[01:01:32] I love.

[01:01:32] But when I do those intentional investor interviews, I have this note card.

[01:01:36] That's basically five kind of general areas.

[01:01:39] And the only reason I even have that note card is just as a reminder, if I see a through

[01:01:44] line or if I see something in any of those five directions, that's where I want to go.

[01:01:47] That's my, that's my CCBS of the financial planning conversations I've been having for the last

[01:01:52] 10, 15 years of my career.

[01:01:54] And now in the interview conversations, it's the same format.

[01:01:57] If you know the directions, and I absolutely love the way that Jack Schwager kind of positions

[01:02:02] this where he goes, you will often get the answer to a question you never would have asked.

[01:02:10] And as an interviewer, I don't know if there's any better feeling than either somebody going,

[01:02:14] oh, I've never been asked that question or man, I never tell this story.

[01:02:17] That's the greatest feeling in the world.

[01:02:19] Do you know the story about Larry King and Frank Sinatra and interviewing him?

[01:02:23] Like, so basically he has no notes, but they're like, there's the one thing you can't ask.

[01:02:28] So they tell him you're not allowed to ask Frank Sinatra about the, uh, the kidnapping,

[01:02:33] uh, kidnapping of his kid and this whole crazy traumatic experience.

[01:02:36] And that makes sense.

[01:02:37] So he's like, okay, so he's not going to ask, but then he finds himself halfway into the

[01:02:41] interview where all of a sudden Frank is laying this story bare.

[01:02:44] About this kidnapping situation.

[01:02:46] And the people are looking at him and he's like, I didn't ask the question,

[01:02:51] but this is the real goal of the interviewers make the person comfortable.

[01:02:55] And then again, they'll answer the question you didn't even ask sometimes.

[01:02:58] And those make for, in my opinion, those often make for the best interviews because you get

[01:03:02] an authentic representation of the guest across.

[01:03:04] I find the same thing is true with client work all the time.

[01:03:07] If I understand the structure, I can get them telling me things that not in some manipulative

[01:03:12] way, but just in a genuine, authentic human connection way.

[01:03:15] And just like all the stuff we talked about, it's all about human emotions and the way we

[01:03:20] irrationally process information.

[01:03:21] So God, I love this answer so much from Jack.

[01:03:24] And I think it's a lot of it's about what you're doing.

[01:03:25] So like we have our show us your portfolio and you have your intentional investor.

[01:03:28] And like for our show us your portfolio, like we have a certain series of steps we need

[01:03:32] to get through to make sure at the end, someone knows what's in the portfolio.

[01:03:35] Like they, they know the basic questions about the portfolio.

[01:03:38] Like it would, so the structure thing might work a little bit better there.

[01:03:41] Like for what you're doing with the intentional investor, if somebody like halfway into their

[01:03:44] life story tells you about this amazing event, and then you're like on your note card, like,

[01:03:48] oh, let's move on to the next question.

[01:03:49] I'm not going to ask anything about that.

[01:03:50] Like my interviewing thing would, would be a complete catastrophe in that people would

[01:03:53] be like, why the hell are you not asking about that?

[01:03:55] Whereas you could stop there and you could like the rest of the interview could completely

[01:03:58] change because of their answer to that one thing.

[01:04:01] And like, that's a perfect fit for that type of interview.

[01:04:03] I think.

[01:04:05] I couldn't agree more.

[01:04:06] And it's just, it's knowing just like an investment strategy, knowing the things that

[01:04:10] you're getting yourself in for.

[01:04:12] If you have a good idea of not only what you're getting in for, but what you want to get out

[01:04:16] of the conversation.

[01:04:17] If in a show, it's your portfolio, like part of the end result, part of the way you stick

[01:04:22] the landing is to make sure you get them showing them or showing you and the audience

[01:04:28] in their portfolio.

[01:04:28] You can't go off in the left field, but an intentional investor where I'm trying to

[01:04:32] unpack, how do they think about not just investing in financial markets, but investing in their

[01:04:37] family and their job and their career and their time and their energy and all these things.

[01:04:41] And somebody is like, well, I never told about the time that I was a male model and went halfway

[01:04:46] around the world.

[01:04:47] That's in a forthcoming episode.

[01:04:49] You know, it's like, they're like, I get an email afterwards.

[01:04:52] I never tell that story.

[01:04:53] And yet, do you want me to take it out?

[01:04:56] No, no, no, this is, this is an integral part about me.

[01:04:58] And I just didn't make sense in my career progression.

[01:05:01] Why I would have seized that opportunity because following my fascination.

[01:05:05] Different ways to, again, just get that human experience out and onto the table for the purpose

[01:05:11] of, well, hopefully what makes these things entertaining when a couple of people subscribed

[01:05:15] so far.

[01:05:15] So apparently somebody likes us.

[01:05:18] Yeah.

[01:05:18] So just to recommend it, it's on the Epsilon Theory channel, The Intentional Investor.

[01:05:21] And you're going to see two things a lot, which is people saying stuff they've never said

[01:05:23] before because Matt is a way to somehow figure that out.

[01:05:25] And you'll also see some crying, which I certainly have never got any guests to cry.

[01:05:29] So I am not the guy to host that, but you are.

[01:05:32] You haven't had me show you my portfolio yet.

[01:05:34] That's true.

[01:05:36] But it won't be driven by me.

[01:05:37] It'll be driven by you, the crying.

[01:05:40] But anyway, we'll end on that note, but definitely check that out on the Epsilon Theory channel,

[01:05:43] The Intentional Investor.

[01:05:44] And again, if you have any feedback on this, we're trying to do some more of these shows

[01:05:47] with clips.

[01:05:48] We're trying lessons from certain episodes.

[01:05:49] We're trying some different things.

[01:05:50] So anybody who has some feedback, leave it in the comments or accessreturnspod at gmail.com.

[01:05:55] Thank you, everybody, for joining us.

[01:05:56] And we'll see you next time.

[01:05:57] Hi, guys.

[01:05:57] This is Justin again.

[01:05:58] Thanks so much for tuning into this episode.

[01:06:01] You can follow Jack on Twitter at Practical Quant.

[01:06:04] You can follow me on Twitter at JJ Carbono and follow Matt on Twitter at Cultish Creative.

[01:06:10] If you found this discussion interesting and valuable, please subscribe.

[01:06:14] In either iTunes or on YouTube or leave a review or a comment.

[01:06:18] Also, if you have any ideas for topics you'd like us to cover in the future,

[01:06:21] please email us at accessreturnspod at gmail.com.

[01:06:25] We would like this to be a listener-driven podcast and would appreciate any suggestions.

[01:06:29] Thank you.