Full Transcript: The 100 Year Thinkers | The Labels That Trap You

Chris Mayer and Robert Hagstrom on language, mental models, and long-term investing

Matt: You are watching Excess Returns. I’m Matt Ziegler Bogumil Baranowski is my co-host, our esteemed, eloquent, and most excellent guests. Robert Hagstrom, the Warren Buffet Way, and CIO at Equity Compass. Welcome to the show, Robert.

Robert: Hey guys, how are you? Matt Bogumil.

Matt: And, and of course we’ve got Chris Mayer, Mr.

Hundred Bagger himself, co-founder of Woodlock House Family Capital Live and in the Flush with a brand new book, Chris. Do doth my ears deceive me. Did you just write a new book?

Chris: I did. I did. It just came out. It’s called The Unspeakable Level.

Robert: Mm-hmm.

Chris: Korzybski Rai, razor and Other Ways of Revealing Available at the Institute of General Semantics.

It’s the Please, the trilogy. I’ve written two other books on general semantics, so this is the third one.

Matt: Congratulations. Congratulations. Thank you. Anyway, a new could

Chris: be on with you guys again and look forward to discussion as always. Place

Matt: and a new philosophy book. Right? Because I know we’re

Chris: we’re, that’s right.

It’s not about investing, so don’t go into that thinking. You’re getting a hundred bagger part two. It’s not, not that. Mm-hmm.

Matt: It’s

Bogumil: better. It’s better.

Matt: Well, I don’t, I don’t know if you know, but you know, other people like to sneak. Philosophy stuff. Yes. Into their investing books.

Chris: yes. I wrote a book like that too.

I think we’re gonna talk about that one too, but, yeah, I think

Matt: we’re gonna bring it up.

Chris: We smuggle, we smuggle these things in somehow.

Matt: Well, I’m all about smuggling today. We’re talking interdisciplinary frameworks in investing. Basically how philosophy, how language, how mental model, mental models, if I can talk, transform the world.

Of investing. Here’s the opening question, Robert, you’ve written that stock picking is a subdivision of the art of worldly wisdom. What in the hell do you mean by that?

Robert: Well, let, let’s, let’s give credit where credit’s due. That’s actually Charlie Munger. Charlie Munger said that in 1994. I don’t know, Chris will probably remember, I don’t know if you guys will, but Henry Emerson used to write, something called the Outstanding Investor Digest.

Chris: Great publication. Yeah,

Robert: it was terrific. And, and Henry was so nice and generous and he was the guy that was in the audience at the Berkshire meetings actually. I guess he knew how to, what is that kind of writing that you can do that’s, so fast and stuff like that? Shorthand.

Chris: Yeah, like shorthand.

Robert: Shorthand. So he would, he would pin all the, he’d pin all the Berkshire meetings. So we had subscriptions for that in the, in the early nineties. And, and, and one of them came out, I think it was the spring of 94. Yeah, Charlie had done a lecture at Professor Babcock’s class at USC, in the, in the graduate program, MBA program, and it was on the art of achieving worldly wisdom.

And, and he basically said, investing really is more of a subdivision of this meta, achievement if you will. You know, if, if, if, if you’re going about trying to achieve worldly wisdom. Yeah, the benefits will flow through down to stock picking. So let’s give credit where credit’s due.

It’s nothing I came up with. I read it in OID way back then and, and then from there, it began to sprout wings and people began to talk about it.

Bogumil: I love the concept and we’ll come back to it, but Chris, you argue that most of what we think about Wall Street risks are nothing more than abstractions.

Can you unpack that idea for us?

Chris: Yeah. I mean even the phrase Wall Street itself is an abstraction. It refers to a place, but when people use it, they’re not really referring to Wall Street. They’re just referring to the world of money, I suppose. But yeah, I mean, I think FI Finance is one of these world where, where just embedded in these abstractions, so much so that.

It’s easy to forget, the way people on Wall Street talk about small caps or large caps, caps, whether it’s a value stock or a growth stock, or even things like GDP or talking about interest rates. These are all very big abstractions and, Robert talks about worldly wisdom. I mean, for me, one of the things I discovered is, Alfred Krosky’s general semantics and, and, yeah, this is a big topic with him about. kind of unpacking what those abstractions are and getting you to focus. Again, not, not so much on the term itself, but really what, what it, what you mean, what it refers to. and trying to bring those abstractions more to ground level. so that’s been an important interdisciplinary, say, idea or philosophy that

Matt: I’ve used.

Yeah, stick. Stick with that thread just for a second longer. Chris, how does general semantics help with investing? How do you actually use it in concept?

Chris: Yeah. I mean, part part of it is, is actually to penetrate those, those abstractions, so. I mean, it’s, it’s sometimes hard to come up with the, with specific, oh.

I can say one, one big example that comes to mind is really, and, and this was before I knew necessarily about general semantics, but I was, doing it at that time, which is, the general financial crisis. Mm-hmm. And the way. people would talk about, or fall for the label. Aaa, AAA meant safe and, the bond markets and, and, ratings agencies would give different securities the AAA rating, and it seems absurd now, but back then that was a stamp that would be good enough to get you in a bank portfolio.

I mean, I’m, I work for a bank that had. one of these AAA securities in there and wind up taking big losses on it. And it was always ironic to me because I worked in the corporate lending department, we would never just settle for a label like that. You know, we’d always had to underwrite all the companies and like, just to extremes, like getting field audits and all these things.

And, but the treasury Department could buy a bond, if Moody said it was aaa. And so, and, and of course. You know, just because something stamped with AAA doesn’t mean it was all, there was all kinds of things under there that weren’t safe. so that’s one, one idea, but I mean, it, it permeates so many things because more like the way you think.

So general semantics will say, we’ll teach you that anytime I represents you with an either or option, your little alarm bell should go off. There’s never just an either or. There’s always. Hm, something else, or even the ex, the language I’m using now, the, English minus absolutes. So never say never, always.

Anytime you hear those little alarm bells should go off. Mm-hmm. it teaches you things about cause and effect. It’s not so simple as, one thing causes something else. You think about one event has multiple causes, so there’s a lot to it to kind of, ask that it affects your worldview and how you tackle these problems.

Bogumil: So many thoughts and we’ll come back to it. But Robert, I’m curious about the lattice work of mental models that you talk about. Monger’s idea, how, how come it resonated with you. What does it mean to you? The lattice work? Yeah, the beautiful word that describes it.

Robert: Well, that was, that was the metaphor, right, that, that Charlie used in the lecture was, you’re building a lattice work of mental models and you can think about lattice work.

You know, fences. Fences are lattice works and you know, you kind of, and my imagery was, you know. You’ve got a big wall up there and you’ve got lattice work, and each one of the nodes up there is a different discipline. And that’s kind of how I thought about it. I, I was a liberal arts major in college, and so it, it definitely resonated with me because, we had to, we had to go through the sciences, both the hard sciences and the soft sciences and history and philosophy and, we, we, you, you did the full tour mm-hmm.

Of what, what would Charlie would say is, a, a path towards achieving worldly wisdom, so. I, I was, mentally I was okay with this. the big challenge though was when I fell, asked backwards into this investment business because it was not, it was not a goal of mine. very briefly, I, I wanted to go to Washington, dc I had written in college, I’d written at Villanova and had interviewed politicians.

And my, my dream job was to go to Washington, DC and, be the next Woodward Bernstein. You know, that, that was my goal. I spent a few months down there and, and, and realized this is really a disgusting place. I’d never seen, I’d never seen such a, a pile, how of garbage that, that? I said, I just gotta get outta here.

I can’t make sense of this and, how, how this thing works and stuff like that. And put my tail between the legs and came back and wanted to get a job, writing for newspapers in, in the Philadelphia area and went back to ‘em. A suburban Wayne Times that I had written for in college and said, I’d love to have a job.

And they said, we can’t pay you, but if you sell advertising for us, we’ll let you write a column and maybe give you a little bit of a paycheck. And so I just went up and down, Lancaster Avenue outside of Philadelphia, knocking on doors. And one day I came up to something called Leg Mason Wood Walker, members of the New York Stock Exchange.

I’d never heard of it. I didn’t know what it was. I thought it was an accounting firm, a law firm. And, I walked in and said, this is who I am selling advertising. Can I talk to the manager? They took me back, I gave him the spiel, and I said, would you like to buy a quarter page ad? And he said, no.

Would you like to be a stockbroker? And I said, this was 1984. The bull market had just started, and they were looking for bodies, they were looking for people to, to dial and prospect and, and so, I I, I, I was not, I was not crafted to be an investment professional. I, I, I was coming at it.

Somewhat differently, but fortunately in my, my training program, we, our last day we read a copy of the Berkshire Hathaway annual report, which I had never heard of, written by a guy named Warren Buffet, which I had never heard of, but it resonated with me. You know, as, as Chris said, a lot of its abstractions.

The way that that Warren talks about stocks as businesses, people, products and services. All of a sudden the light bulb went off. You know, the proverbial light bulb goes off. I go, okay, now I get it. You know, I, I understand what we’re doing. The value line investment surveys. What, which was nothing more than row after row of numbers didn’t make sense to me.

Matt: Mm-hmm.

Robert: but, but Warren taught me about investing and then of course that led, legit led you to Charlie Munger. So that, that’s kind of how, the background worked. And then, I don’t know how far you want to go into it, but, but I became friends with Bill Miller. I was a broker, he was director of research, and Bill was already what I would call a.

Lattice work, a mental models type guy. ‘cause he had done liberal arts and undergraduate and worked on his PhD in philosophy at Hopkins. So he was already of that mind mindset and so his friendship in the early eighties, was very helpful as well.

Chris: I will say Warren Buffet would, would’ve made a great general Samanthas assistant.

In fact, I, I wrote an article, that was published in et cetera, it’s Institute’s Journal. It was all, it was on Buffet and Korzybski and comparing the two ‘cause Buffet Oh, read his, yeah. When you read Buffett’s letters, he is, I mean, he is often making those references to language and the way people use language and he’s getting behind it.

You know, like Robert said, he’s, he’s looking at businesses as. Stocks has businesses and he’s thinking about people and he’s, he’s always bringing things down to, the real practical ground level. and so, yeah, it’s an interesting connection there.

Robert: Yeah. And, and Chris would know this too, is that he just dismisses all the language of Wall Street, you know?

Mm-hmm. He says, don’t know what beta is and tracking era information ratio and all that stuff. He goes, I don’t even know what that means.

Matt: Right. But

Robert: it’s not important to me. It’s not essential. For me to make money to understand these terms, but there was, as Chris points out, there was Wall Street just doing nothing but talking in these abstractions and trying, trying to make senses out of them, which is the way a lot of people communicate on Wall Street.

And Warren was just playing a different game,

Matt: Chris,

Chris: why? It’s not, it’s not a popular idea either. I mean, when I, when I wrote, one of the reasons I wrote my book, how do is because that, mm-hmm. There was one book 1958 where the, that was about general semantics supplying at the Wall Street, but mm-hmm.

But after that, it was a big wasteland in a vacuum. So it’s not a topic that’s pursued by a lot of people because it’s just easier to fall into those abstractions and use the easy language and lingo that everybody else is using. And it takes a Warren Buffet and someone to come along and say, what, that’s a lot of baloney.

Robert: Well, and, and Chris, no, I mean, that’s, those were the professors. Those were the teachers. Tho, tho, they, if you wanted to be an investor, you wanted to go into the finance business and you got your MBA at school. This was the language that they talked about. So you had to develop that language with them.

But. I think what Chris, smartly has pointed out in his writings and Warren would say, is, I don’t get that language. That language doesn’t make any sense to me and it probably causes more problems than it actually provides benefits. So, Chris is definitely, definitely onto something. You know, that that’s, that’s front and center how Warren thinks about.

Awesome.

Bogumil: Can, can I add something real quick? I’m still blown away that after three years, 200 conversations on talking billions. Chris, your episode about general semantics in, in the top three most shared and listened episodes and we recorded this two years ago, so yeah, think about it. I away by that too.

That’s great. An amazing appetite.

Matt: Yeah.

Bogumil: Appetite for this kind of content.

Matt: Chris, I’m curious for you, where did, like Robert had this whole world of experiences. And then he stumbles into the leg mason office selling ads. Ends up with a job, ends up meeting Bill Miller, who’s drawing on all these resources.

How did you expand the, how did you end up wanting to draw from all these, like put general semantics in investing and even come up with the idea that you should be doing this other stuff?

Chris: Yeah, I mean, it’s a great question. And I don’t know, it’s like, it’s like Robert said, I mean it just seems like a lot of this just happens by accident.

You know, I’ve always liked to sort of just read and explore things that were not in the mainstream, so to, so to say. And so that just leads you reading different kinds of books and. I think, I know the first time I heard about General Semantics and Korzybski was actually reading Robert Anton Wilson, which is, I dunno if you know anything about him, but he’s, written some pretty far out books like Cosmic Trigger and things like that.

And, he said that he, he learned more from Korzybski than any other writer. So that alone was enough, in intrigue me and I remember. I found a speech he gave, at the Institute of General Semantics about Alfred kpi. So that’s kind of drew me in and, so I don’t know, Robert, I mean, some of this is you just have it or you don’t have it.

Yeah. Some people are just drawn to, the off the mainstream ideas and other people are not, it’s hard to explain.

Robert: Well, first of all, I, I tip my hat to you that you, you basically came across the concept and your, your intellectual curiosity. Motivated you to, to go down the rabbit hole. There’s not a lot of people that, that, that do this.

Right? You know, you come across something you don’t understand. Typically, you just move on to doing something that you do understand. My, I, I, I, I was clearly a cripple, intellectual cripple, and told Bill Miller and Bill would come on the Tuesday Squawk Box. Remember the old days we had Squawk Box on our desk and Tuesday morning was, the research meeting.

Bill was managing, just started managing the leg Mason Value Trust with Ernie Keeny. But he was director of research and he and Ernie had started the value trust, with Chip Mason. And, but then Bill being, he did his, he did his doctorate in philosophy, absent the dissertation. I used to beat him up saying, you should do that dissertation bill.

You get to call you Dr. Miller, and, he said, it’s just a waste of time. I, I can’t make any money writing a, a PhD dissertation. But Bill, at the end of every meeting. Or, or, or every research meeting he’d bring up some book, and it would be really obscure. I mean, it would be like, a philosophy book or a science book.

Just something off the reservation. And, and, and I was curious enough, I guess I was pledging, I wanted to be successful. I wanted to be, do well. And, and so I, I would, I would write down the book and I’d go to the local bookstore, ‘cause that was before Barnes and Noble and Borders, and certainly Amazon.

I’d say, can you order this book? And the guy would look at me like I had three heads. He goes, what are you doing with this? This makes no sense. I said, yeah, I don’t know either, but you know, this guy’s pretty smart. And he’s reading it. Yeah. And I would read it and understand maybe a half of it, and I’d call Bill, or, in those days.

And I said, bill, I, I’m reading this book and you help me and blah, blah. And he was just intellectually generous enough to say, sure, think about this, think about that. So, I had almost a tutor. You know, before he became a superstar in the nineties, I had this guy that was generous and he was a teacher, he was a grad, a grad, graduate, profe, take, he did some teaching at the undergraduate level, so I guess it was in his DNA, but unlike Chris, who basically.

Curiosity grabbed him and he motivated himself. I had someone take me by the hand and walk me through, the library and books and, and actually would tell me what was going on. And you cannot, I cannot overestimate how incredibly valuable that was to my investment success without Bill Miller. You know, I don’t think I’d be half of where I am now.

I, you know. I say this, but you know, people say, Robert, you did your dissertation on buffet writing the Warren Buffet way, and you did your practicals with Bill Miller, where you actually went in from the theoretic to the practical because if you don’t beat the market, shame on you. And, and, and that’s exactly right.

I mean, I was fortunate enough to do the dissertation on the buffet, but let, make no mistake doing the practical, working with Bill Miller for 14 years when he hired me after the Warren Buffet way, 14 years being at his side. Was a benefit. You cannot even begin to imagine how important that was.

So I, I, Chris and I got to the same place in, in many ways, but he did it by himself. I had, I had a lot of help along the way.

Bogumil: So tying it all together, bill Miller, Warren Buffet, they’ve owned stocks that some people call value stocks. Some of them call are called growth stocks. Maybe there’s another label going back to labels.

Chris, you wrote that value investing is a term that really has little meaning and you actually warn against the value versus growth. Categories that so many people use. Can you talk about that? Should we drop those labels altogether?

Chris: Yeah. And as an investor, I don’t see why they should influence you at all.

I, and you know, again, buffet has talked about this before, that there is, he’s, he even says himself, they’re not, looking at just value stocks. I mean, growth is a component of value. And so they’re just looking for, good opportunities that meet their other criteria. And so that’s the way I think.

Any investors should think. it’s really, those designations are things that have. are packaged together by Wall Street because they have something to sell. You know, a certain mutual fund, they’re, yo, you gotta have exposure to this and that. And if you’re a professional running a certain kind of fund that has to be in a certain kind of stock, maybe you have to pay attention to it.

But as a individual investor, never. I mean, why does it matter if what other people call, if, if other people call it a value stock or a, a growth stock? also the same stock can be called to both, both have both labels. And you see this in ETFs, you can see value ETFs and they have both name, same names in there for growth.

So I mean, it, it’s not, it’s not so simple to call what, whatever one is the other. And at different times, one, one can seem more like the other. But yeah, I mean, I don’t see they have much relevance at all to what, what you’re doing.

Robert: Yeah. And, and, and Warren, here’s the thing, Chris, I’d love to hear your thoughts on this, which is, if you go back to 1992 and the Berkshire Hathaway annual report, Warren laid it out.

He basically said, look, value investing is all about buying something for less than it’s worth. It has nothing to do with price. Earnings ratios it has nothing to do with price to book. We carve up the world that way. He goes, but investing has not. He goes, just because the stock is a high PE stock with a high price to book, does not mean that it’s not a value stock. Nor is a low PE stock with a high, a low price to book value, necessarily a great value investment if, you can’t sell it for more than what it’s worth, what you think it’s worth. Mm-hmm. But, but then, Chris, I feel like, Don Chiyote swinging at the windmills after 30 years.

I didn’t give up. I mean, you, you try to explain it to people that there’s. There’s no difference between, value is just trying to figure out what something’s worth, whether it’s slow growing, rapidly growing, high price to book, low price. You know, you’re just trying to figure out what things are worth and, and they, and they, it’s, it’s like the Godfather, they pull you right back in trying to get out this mess, and they’re pulling you right back into this nonsense.

And today it’s, it’s still the same thing. Value stocks from low pe, low vol. You know, low downside risk, price, risk growth is something else. And Warren said, that’s just stupid. But you know, he wrote that, 30 some odd years ago and we’re still mentally not doing it correctly. Yeah.

Chris: And this comes up all the time, even on the annual meetings.

And I remember someone who asked, asked him once, whether there was a limit to the price rings ratio he would pay.

Robert: Yeah.

Chris: He said, no, there isn’t a limit. He goes, some things like when they bought Geico is losing money. So had mm-hmm. No, no pe you know?

Robert: Yeah.

Chris: And he made that point again, that something can have a very high pe but for whatever reason, it’s, it’s gonna do a lot better.

And, so yeah. I mean there’s this book I’m reading now, buffet and Mung are unscripted. Yeah, it’s good. Edit, edited by Alex Morris. It’s a great idea, right? Mm-hmm. Just goes through all these annual meetings in the past and then organizes and. you know, relevant excerpts and just reading that you, you get a sense for what Robert’s talking about.

I mean, he’s been at this for decades saying the same thing, saying it four or five different ways, but the, nobody listens. Yeah, nobody listens. You know, it’s,

Robert: it’s funny ‘cause when I was writing the Warren Buffet away and then did the portfolio book, people said, quit writing about buffet.

You’re giving all the secrets away. I said, I’m not giving the secrets away. They’re right there in the annual reports and they’re in the annual meeting. And by the way. It doesn’t seem to matter because no matter how many people read the annual report, how many people go to the annual meeting, how much the press covers it, yeah.

We still fall back into that mental trap. That value is low price to book or low price. Earnings and growth is speculative and high pe and it’s not value. And I’m like, it doesn’t matter. Mm-hmm. I mean, people are, it’s very coonan. You know, if you go, go back to Thomas Coon’s theories of, paradigms in collision, you get these paradigms going and people just latch onto ‘em and they’re not changing, you know?

People who believe that pe, low PE is value and high PE is not value. That’s how they believe the world is. And they’re not gonna change, they’re just not gonna change.

Chris: Kudos for, bringing in Kon,

Bogumil: but I think it’s better for us. You know, let them stay confused. And the few of us that pay attention anyways, Matt, it’s, it’s not a, yeah, it’s

Matt: not a bad thing and I’m still gonna be stuck on, uh.

You know, Robert, if, if you’re Don Otte, does, does that make, Chris Sancho ponza like no, the other way around. Okay. Okay. Just wanted to clarify. Chris, I’m thinking about you while, while, you’re going back and forth on this and this idea of language and meaning. You’ve said words don’t have meaning.

People give them meanings. Yep. And, and can you almost extrapolate that another step further, like Wall Street gave words, meanings. Buffet flipped that on its head. Now you guys are talking about it a second layer. Does that just keep going down? Is that turtles all the way down forever. Meaning upon meaning upon meaning?

Pretty

Chris: much. I mean, one of the little snidbits tidbits I remember is, if you look at like the top 500 most used words in the English language for those 500 words, there’s 14,000 definitions. So we have, we have, we have these words doing a lot of, carrying a lot of freight and, and so yeah, I mean, it sort of reminds me all the time when I think about that.

That it is useful to clarify terms with people. Mm-hmm. You know, well, what do you mean when you say X? Yeah. And then you can have a better conversation rather than just assuming, that people know what you’re talking about. yeah.

Robert: Yeah. What, what Chris is, spot on and he, he, Chris, I, I, I, I just implore you to do, do more work and do more publicity, and you’re doing it right here and now with your new book.

With Bill, it was all about philosophy. His philosophy of language is, the study of semantics and witkin. He, bill was a big Wittgenstein guy. Mm-hmm. You know, he loved, lived with Wittgenstein and, and towards the end of his life, he, he pivoted and, and, and got into the philosophy of language.

And it’s the same thing that Chris is pointing out is that. You know, and, and, and when you gave me the notes, I went, this is perfect. Which is, Stein said, the words that you choose give something, meaning, meaning gives you the description of what you think is going on, what ultimately forms your explanation.

Matt: Mm-hmm.

Robert: And Bill was very big about this, so he said, alright, explanations are descriptions, descriptions are made up of words that you have then give them meaning you’re, you’re giving meaning by the words that you choose. Mm-hmm. But the, the, the point of it all was that failure to explain when you make mistakes and invest, failure to explain, is caused by failure to describe, if you go back and look at every one of your errors, at least my errors, I had the wrong description.

What I thought was going on was not going on, you

know? Mm-hmm.

The way that I thought it was gonna turn out didn’t, so my, my, my, my description was wrong, therefore, my explanation was wrong. But then when I go back and say, okay, well then how did you start with the description? And this is where Chris has got it, bullseye.

Matt: Mm-hmm.

Robert: I, I selected words, I, I brought meaning to the table and my meaning was wrong. And when you start to think about it at that level, boy, there’s a whole lot of excess returns to be made in the market by people mis describing what’s going on.

Bogumil: Mm-hmm. I’m very curious about. Time horizon and evaluation frequency as we’re talking about.

Investing here. And to me it’s the question, how much time do I have to be right? And you both wrote about it from different angles, but Chris, you wrote about this myopic loss aversion and the dangers of frequent evaluation in investing, we have numbers that can be collected daily, minute to minute. You and I spoke about it, but we really have to expand that time horizon and feedback loop so we’re not judging things too quickly.

Can you talk about that?

Chris: Yeah, I mean it’s, it’s hard to do and I think it’s, I think this is one area where it’s easier when you’re an individual investor than a professional, because even you’re a professional trying to put out your time horizon. You still, I mean, your investors get statements. You’re, they’re getting in a quarterly updates or whatever, and it, and it.

Even your own incentives are often tied to, where you wound up at the end of the year. So it makes it diff more difficult, and, and you’re expected to, have an opinion and a view on lots of different things that are happening now. So I would say, I mean, it’s not, it’s never easy, but I mean, one thing is we try not, not to look at stock prices during the day and focus more on the, the businesses and the things we own.

And most, most of the time. You know, nothing really important happens in any particular day or week. Mm-hmm. even when you get quarterly results, I mean, the market makes a big deal about quarterly results, but even that, it’s not really that important in the grand scheme of things. So, he’s constantly reinforcing that message and trying to push out your time rise.

And part of it also is being careful what you allow to grab your attention. So, I don’t watch any of the financial. TV shows or pay any attention to that. Of course. And even when it comes to news, I remember I, when I was younger, I used to like consume like the Wall Street Journal of Financial Times.

Every day I’d have ‘em back when they were still delivered and I’d sit there and flip through it. I mean, I don’t do that anymore at all. I mean, the only time I might go look at the Wall Street Journals, if I’m researching and, and hunting for some something and stories or things that have been written.

Mm-hmm. so you gotta disengage yourself a little bit from. That news cycle and get outside that as much as possible. And again, it’s, it’s not easy. So I’d be interested to hear how, how Robert does that as well.

Bogumil: Robert, can I, can I frame it for you and quote a certain research that you did? You shared that when you look at the largest 500 companies and 40% of them, almost 40% doubled over rolling five year period just to, yeah.

Give the image for the audience, but only 3% did so in any single year. 40% and three. Yeah.

Robert: Yeah. We need to put that into context. I, I had written, an article for Bill, a commentary for Bill. This was actually after the, financial crisis. But ‘cause everybody, we thought we were into a sideways market and, and mm-hmm.

And these come up from time to time. People go, okay. You know, the market’s been up 15% for the last three years. It’s gonna go, Vanguard says it’s gonna be up 3% per year for the next decade or something. You know, you, you, you, you get these people saying sideways markets. Well, I remember, we went back and looked at all sideways markets and the one that was really hair of the dog was 75 to 82 after the 73 74 crash.

You know, and, interest rates going through the roof, inflation going through the roof, the Dow. From 75 through 82 did not change in price. Mm-hmm. The only thing that went up, they had 5% dividend yields. Back in those days, Chris, you had, you had four and 5% dividend yields in stocks.

Matt: Mm-hmm. And,

Robert: and so the Dow did get, did nothing.

I think the s and p was up 3% average annual in price, plus the dividend about eight. But then I remember that B killed it. Not only did Berkshire kill it, Sequoia fund was killing it ‘cause we had done the work on it. Mm-hmm. And we began to look at some of the stocks in the portfolio and we went, man those stocks were killing it between 75 to 82.

And, and, and so that basically charged me, I think, to go back and look at 75 to 82. So we just took the s and p 500. And we said, well, how many of them doubled in a year? And, and bug mill you pointed out, there just wasn’t that many, like 18 to 20 stocks doubled in any one year.

Matt: Mm-hmm.

Robert: And then you went out, three years and five years, and when you got to five years, it was 30 some odd percent of those stocks on rolling five year periods.

Matt: Yeah.

Robert: Actually we’re doubling. And, and so it kind of said, okay, well that, that doesn’t sound like a sideways market. Right. If you, you got 30 some, 38% of the portfolio going out, and doubling every five years. you know, something else is going on. So it, it brought up what was called the difference between the trends of the system and trends in the system.

So the trend of the system was flat.

Matt: Mm-hmm.

Robert: Didn’t go anywhere, but the trends in the system were doing this. And so then you, you, you dialed back and looked at that, which was outperforming and it was the oil stocks and the industrials as you imagine. ‘cause we had the old embargo back there during the Israeli wars.

Mm-hmm. Mideast wars. But the, the second best performing was consumer discretionary. Yeah. So you went through the consumer discretionary and said, okay, who’s outperforming? Mm-hmm. And it was newspapers and advertisers and magazines and all that stuff, which Warren owned, he owned the Washington Post affiliated, he owned Ogilvy and Mather.

He owned all these businesses. They had low capital investment needs. They could price and, and inflation to price, and he killed it. I mean, stocks were going up hundreds of percent. And so it, it, it led me to believe that, you know. That, that it’s called a patient’s premium or what’s called long horizon arbitrage.

Basically that’s where the excess returns were for me, for me and, and my psyche was trying to figure out what can compound on a consistent basis over 3, 4, 5 years and, and you know, if, if Graham is right on the weighing machine, those economics drive the price, and sure enough it does. But to Chris’s point.

Yeah. If you’re looking at data, I mean, I, my personal opinion, Chris, is myopic loss aversion is the single biggest reason why people can’t make money in the market.

Mm-hmm. Yeah. They

just can’t divorce themselves away from a decline in price. Even though Graham said there’s a difference between short term price, quotational loss

Chris: Yep.

Robert: And permanent capital loss, and the two are totally different. Mm-hmm. It’s very hard. Yeah. But people cannot wrap their hands around that. When something goes down in price, Chris people freak out. They think something’s wrong. Mm-hmm. And I’ll, I’ll stop here, but I would say you’ve gotta figure out who’s on the other side of the trade.

And there’s lots of reasons why stocks go up and down in price. And it’s not always because of valuation or intrinsic value there. There are lots of different games being played, multiple games being played all the time by different people with different money.

Matt: Mm-hmm.

Robert: And so if you think that price is the all knowing, well, you better, as Buffet says, if you’re in the poker game for 30 minutes and you don’t know who the Patsy is, you’re the patsy.

Mm-hmm. So if you think price is always right, get outta the game or go to index. Mm-hmm. But I’m repeating myself. My epic loss aversion is the single biggest reason why people can’t make money in the stock market.

Chris: Yeah. Like Buffet often said, the market is there to serve you, not instruct yourself.

Absolutely. 100%. If you’re looking at market prices for your cues, then you’re, you’re starting from just the whole wrong foundation. And you know, a lot of times, I, I love to look at companies and just put like even five or 10 year spreads of some metric.

Like, could be, free cash flow or whatever. You just see this ladder step. but if you look at the stock price, you’d never, you’d never know. I mean, it’s like up and it’s down and all, all over the place, but if you just looked at the business itself and ask yourself, would I, would I ever sell this business?

Or why should, why would I sell this business? Yeah, you were just inclined to let it be.

Robert: Yeah, when I was writing, doing some of the books, I would, I talked to Debbie Benik, who’s still Warren’s secretary to this day. I think she was 17 years old when she went to work for him, ‘cause she’s still his secretary today.

But I, I had to have a conversation. We’re doing something. I had to have a conversation and, and, I did ask her one day, I said, does Warren watch CNBC? And she goes, well, I’m not sure I would call it watching. I said, well, what, what? He goes, well, he never has the sound on. Okay, well I like that. I like that part.I said, why is it on? And he goes, well, it’s kind of like a tape. And, and, and if there’s a news headline, because he doesn’t have a Bloomberg, he doesn’t, he mm-hmm. You know, the computer that he got was to play bridge in the beginning, right? Mm-hmm. He goes, he doesn’t, but he has it on and he does.

If, if there’s an emergency or some big news item. He can look at it, but he goes, he never has the sound on. And I went to him. I, and that’s Chris’s point, right? Turn it off. At least. Turn the sound off if you gotta have, yeah, I like that. Yeah. If you gotta have it on, just turn the sound off and you can look at the tape, you know?

Right.

Chris: And also when you turn the sound off these things, I, I think it sort of somehow makes the absurdity of it more obvious. I don’t know, someone’s sitting there talking and there’s no sound. It just, it’s like, what are we doing here? What is going on? Yeah.

Robert: Well, you remember the old days when the cable came out, they were gonna put a V chip in your tv, it’s called a violent chip.

So anytime there was violence on TV that that television would automatically go dark. You know, and they, they never perfected it. Now they put the, the, the, the things in the beginning, adult, you know. Mm-hmm. Violence, drug use, whatever the case. But I thought that would be perfect because if you had a speculative chip on cn b, C, anybody who wanted to forecast the market or make a prediction about stocks, it would go blank, you know?

Bogumil: You would just watch the commercials. I wanted to have CNBC

Robert: with a speculative chip in there so it would turn itself off every time somebody speculated about stock prices. Right.

Matt: Well, apart from CNBC being the ultimate fish tank in Warren Buffet’s office, which is, which is a beautiful image that I’m gonna carry with me, I think for a while.

Yeah, that’s good. It’s related. the, the talk, Robert, that you were saying, I feel like is related to your work on complex adaptive systems. Yeah. And who wants to be where, and I’m thinking of the, I might mispronounce it, the L Ferrell problem.

Robert: Oh, yeah.

Matt: Do you wanna explain what that is? Because I, it feels really

Robert: hard.

Yeah. And, and once again, guys, I mean, you’re gonna think without Bill Miller, I’d probably, be a high school teacher in history or something like that. Even before I went to work for Bill, this was after, after I wrote the Warren Buffet way, and, and Bill invited me out to the Santa Fe Institute, which was started way back in the 1980s.

A bunch of guys came over from Los Alamos National Laboratory to start a new independent research, facility and institute, so to speak, and, and, and it, it, it got started ba basically by guys like Ken Arrow and Phil Anderson and, and, and guy, a guy named Brian Arthur who were. Two of ‘em were economists who said, the classical equilibrium models of economics make no sense.

And everybody said it’s more of a biological interpretation than a physics-based interpretation. So Bill, took me by the hand, put me on the plane, and we went out to Santa Fe and I remember our first lecture we went to was a three day lecture, three days of it. And I came out and I said, bill, what does this have to do with me buying or selling IBM?

And he goes, it has nothing to do with. Buying or selling IBM, it is all about helping you to understand how to think differently about markets. And I went, oh, he goes, when you begin to think of ‘em as biological animals who evolve, adapt and change, versus a physics based reversion to the mean animal, if you will, your thinking changes immediately.

So when you study complex adaptive systems, you’re getting the biological interpretation. But then that brings in not only biology, it brings in philosophy of pragmatism and other things that help give you, a map if you will, an intellectual map, how to navigate things. And it was the Santa Fe Institute, along with William James philosophy of pragmatism that helped build, wrap his hands around technology.

Matt: Mm-hmm.

Robert: Because the Santa Fe guys were all over the internet and the coming of network economics and stuff like that. And his philosophical background studying pragmatism at Hopkins. you know, both of ‘em collided at the same time and he was off to the races. So, complex adaptive systems is what the stock market is.

It’s what the economy is, it’s what your immune system is, it’s what the ecology is. That’s what it is. And when you begin to describe and think of it in those terms, it, it, it changes you a little bit than just, reversion to the mean is such fifth grade mathematics. I can’t believe that people continue to believe that reversion to the mean is.

A way to generate excess returns. that’s just bonkers to me. And, and, and so you get out of that mentality of reversion to the mean, it’s all powerful. As Buffet says, polling does not replace thinking if it was that easy, you could sell what’s popular and buy what’s unpopular and you’d be a billionaire.

Well, obviously that’s not the way it works.

Bogumil: So thinking about complexity Yeah. Sometimes we can oversimplify the world looking for the cause and effect. And Chris, you shared an example when we spoke, on some occasion how butter production in Bangladesh, air quotes here, explained 99% of the s and p 500 movements.

Let’s unpack No air quotes. I believe this. Tell me more.

Chris: Yeah, I mean, that was a, there was a, I forgot his name, but he, uh. He had something like he used to run these, correlations. Was it the Spurious

Matt: Correlations blog? Yes. Yes. Such a great website.

Chris: So it would be like, butter production in Bangladesh, really closely fit.

The s and p and he would do it all statistically, valid way that what three people do it, you have regression analysis, all the data. Nobody would have any qualms with what he was doing statistically, but he would draw all these spurious correlations, cheese production in the us, how many people died in strangulation or whatever it was.

It’s just like bizarre statistics. And he’d find them where they’d best fit lines to the s and p or something else to explain it. Mm-hmm. And of course the point is, those are. We can laugh at those. Those are obviously seem unconnected, but the point is that there’s lots of things that we do like that, that seem plausible. but those are the tough ones. So, what, just because something is plausibly linked doesn’t mean that they are necessarily, linked. So, yeah. and what we get in trouble that all the time, um. There’s lots of examples. There’s some, some good examples I have in the book. I remember particularly like where, if you’ve gotten the prediction exactly right, you still made no money, so.

Mm-hmm. one of them was like gold. You know, gold was up big in whatever year it was, and you would. Deduct to yourself, deduce, okay, well maybe I should own a gold miner, and if you own Newmont Mining, the stock actually went down, you know? Mm-hmm. There are other reasons. There are other factors involved.

It’s not such a simple cause and effect relationship as that. Or, or when people say interest rates go up, remember that that was gonna tank the market not too long ago. And of course, stocks continue to go up because it’s not just interest rates, it’s a, there’s lots of other factors going on, so. Yeah, I’m fascinated by this cause and effect because we’re so, I don’t know, it’s something about us.

Mm-hmm. We wanna reduce it like X causes Y and we want to hang onto those relationships, but really they’re so tenuous and it’s so difficult to really know, what one factor is gonna cause something happens. Lots of things going on.

Robert: Yeah.

Chris: I endlessly.

Robert: I apologize. I was supposed to tell you about the L Farrow problem, just to make it simple.

People listening to the podcast should just go to AI and look up Brian, Arthur and L. Mm-hmm. Farrow. L is e, L and then the second word, Faroh, F-A-R-O-L. Problem. And it was basically Brian saying how you cannot predict the stock market. Mm-hmm. And it was about an Irish bar in Santa Fe. Yeah, most of the time, there was a hundred some odd people and it’d get rowdy and loud and rambunctious, and the perfect time was 60 people in the bar seemed to be, you could listen to the music and enjoy it.

So he goes, well let’s, let’s kind. The problem is how do you predict whether there’ll be 60 or a hundred people? Mm-hmm. And the bar next week. And he goes through all these iterations and Chris is spot on, which is, you know. The, the spurious relations. Is it the weather? This, if the weather’s that it’s gonna be 60, if the weather, this, you can do all those things and ultimately, at the end of the day, you can’t solve the l farro problem.

As I said, there’s no mathematics yet that has been invented. There’s no pascal, no firm that can predict the behavior of complex adaptive systems. But as Chris points out, people are still gonna try, they’re still gonna, they’re still gonna put effort towards it. But there is, i I, I want to assure everybody.

I’m not sure it matters, but there is no mathematics that has been yet discovered by Nobel Prize winning people at O Island Lamos National Laboratory at the Santa Fe Institute that can predict the behavior of a complex adaptive system over the short term. Mm-hmm. Absolutely not. Mm-hmm. It’s nothing but guess what?

But CNBC will throw everybody and the mother at them that will tell you, they can tell you what’s gonna happen to this complex adaptive system over the next month or two or three. Or even next year, which is even worse. And so then the question is, why do actually people believe this? There’s a question, right?

Mm-hmm. If you know you can’t predict the stock market, why do people then hover around people that profess to predict the stock market? Little me that?

Matt: Mm-hmm. Clearly you haven’t seen the butter production numbers.

Chris: I don’t know. It’s an age old problem. People like Oracles, people always gravitated towards, yeah. Hmm. You know,

Robert: there is a, there’s a psychologist named Michael Sherman who wrote a book called Why We Believe Wonderful book. Yeah. Great book. And, and he basically points out just the idea that you don’t know what’s gonna happen tomorrow is just so uncomfortable to you.

Yeah. That psychologically you’ll, you’ll sign on anybody. That can tell you what’s gonna happen next week, because not knowing what’s gonna happen next week worse is so uncomfortable, so stressful. You’ll go, well, if this person says it’s gonna happen next week, I feel better because now I know what’s gonna happen next week, regardless that they don’t know what’s gonna happen next week.

So it’s, it’s this need to believe or at least have someone tell you what’s gonna happen is so important psychologically. But people that make a lot of money, long-term investors, really don’t spend a lot of time. So once again. Yeah, it’s not necessary for you to know what the market will do in the next six months or a year for you to make money in the stock market.

You’ll be fine,

Chris: and you all know this, but I mean, we can think of all these different profits of in the stock market in different times that have been celebrated for making some call. And then that’s the only call, they just happen to get it. Right. It’s gone. Gone. I mean, anybody remember Elaine Garelli, I think was her name.

No. Sure. So there’s all kinds of, you know.

Robert: Well, it’s, it’s randomness. You know, if you get enough people forecasting, somebody’s gonna be right, but not because they have the science. It’s just random that you know, it was your turn to be right. Although you have no idea what you’re doing, you were right this time for random purposes, not because you have the science.

Matt: Yeah. Well, Robert, and I’m thinking of you and the Bill Miller story on this, that. His outperformance was a happy calendar accident. Yeah. Like that’s, tell that story, that’s, that’s intellectual humility in finest. Well, bill told

Robert: it, bill told it on himself. Mm-hmm. And he was right. I mean, we did the math and, he, he would out, he outperformed 15 years in a row, okay.

Mm-hmm. But if he did it November to November, he only outperformed I think nine out of 15 years. So if the, so if the calendar ended on November 30th. As opposed to December 31st, he would’ve only outperformed nine outta 15 years. And so he said, I, I got lucky, just the stock prices closed at December 31st.

And, I, that’s the way that we did calendar returns and therefore I won. But had we done ‘em on November 30th, you wouldn’t even know who Bill Miller was, so, right. You know.

Chris: It’s just a random list

Robert: of markets. You know,

Chris: as Robert says, he put that in his own in a letter, and it was one of his shareholder letters.

Yeah. So I mean, he, and then the other interesting thing about that, of course, is there are a number of mutual funds that had better returns than Bill Miller over that period of time. But yeah, they didn’t beat the mark on anything, anything like that, you know? So

Robert: yeah,

Chris: would’ve called into question the whole record keeping thing that people were doing.

Robert: Once again, frequency versus magnitude, right? Yeah. You know, bill was being celebrated because he frequently beat the market, which he did for 15 years. But magnitude is how much money you made when you beat the market. And as Chris points out, there were other people that made a lot more money than Bill, but frequency, was selling a lot of newspapers back then, you were on TV if you beat the market 15 years in a row.

Mm-hmm. the guys that made more money that didn’t beat the market 15 years in a row didn’t get as much publicity. Mm-hmm.

Bogumil: Pretty, pretty incredible. And people were still surprised when it happened, and he underperformed after that. But that’s a separate story. I’m, I’m curious. Yeah. Yeah. We still, he, he set it up.

Robert: Our therapists are still working on this

Bogumil: expectations and conviction. I’m very curious, Chris. You know, Munger has this code that I’m sure you both remember. The first rule of a happy life is low expectation. So you go into investing with high conviction, you want to hold a handful of stocks, that makes sense, but then you wanna maintain healthy expectations.

How do you balance the two? Chris: Yes. I mean, this is why often people talk about, you have to allow your businesses to. They, they will perform in a range of expectations. So they’re not machines that are just always going to, every year is gonna ladder step, perfectly higher than the next.

And so you have to. You have to give your, give that room on, on the business side. And, again, this is one of those, I mean, this is one of those things that’s just very difficult to do, because sometimes it’s hard to know if a business, has an off year. Whether that is a, a permanent like downshift in performance or whether it’s just a, a one off because of a variety of other things that were going on.

And you can look at some great businesses where they’re surprisingly. You know, where the performance from year to year is surprisingly variable. Like I I, mm-hmm. I have Copart for example. I mean, you look at that, it’s had years where it’s up, revenue’s up 20%, 30%, 15%. Then it can have a year where it’s up 4% and.

You know, as an investor during that time, stock prices going down, you’re think uhoh, it’s downshifting, it’s two years in a row, and then next year it pops back up, back to 20%. So, some of these, some of these, it’s just very hard to know. But, so I, again, I give the wide expect if, if, if the business is really a great business and you’ve done all this work.

Mm-hmm. To your point, bog mill about building up your conviction, you don’t want to then just. Let that go if, just because the company has an off year or so. So you have to allow for that. I think part of that is going in with those expectations and the expectations that it’s really hard, deliver very high returns for a long period of time. so yeah, your expectations not, if you start off with really high expectations, you’re not really, probably not gonna get met, to be realistic. Hmm.

Robert: I that’s, but I want to ask Chris a question. When do you finally throw in the towel and know you’re wrong?

Chris: Yeah, I mean, these are, those are great.These are like the great, great questions in there. It’s hard to know. It’s hard to know. I think there are a couple things why I think it’s. Pretty reliable. Like if you lose faith in the management team, I think it’s probably a good, good time to go. There’s sometimes when it’s pretty obvious that someone else has come up with a better mousetrap or you’re losing competitively, and that can be a pretty good time to go often.

Robert: Yeah.

Chris: You know, again, there’s always exceptions, right? There’s always businesses that figure it out and then they turn it around. Um. Okay. So, yeah. Some meaningful changes in the business itself. I think like if some kind of competitive position is compromised ethically, something happens, things like that.

Otherwise it’s very difficult and you’re more li more likely, I think, better to just sit because a lot of times you’re selling, you’re taking a tax hit and then you’ve got risk of what you know, where are you gonna redeploy the capital. And if you sit down and really work out the math of that. It’s a challenge, which is, which is another reason to stay put.

If you’re forcing yourself to make a lot of decisions, you have to have a pretty high bar of being correct mm-hmm. To make those trades worth it. And, even the greatest investors are still, are not that right. That often as a batting percentage, but you know, to Robert’s point, magnitude when they’re right, they’re, they’re often right in a big way.

Robert: I would say I spend the majority of my time. I’m trying to figure out, I might have said this earlier than if I did po you know, if you ask Buffett of all the mistakes that you made in your career, which one, jumps at you, and, and, and there’s a tenant in there called favorable long-term prospects, which is nothing more than the competitive advantage period.

How long does this last? And Buffett said, of all the mistakes I’ve made, probably 90 some odd percent of ‘em are that, which is, I thought this was gonna last a lot longer. And its ability to generate a return above the cost of capital and compound it. I thought that was gonna last much longer than it actually did.

Chris is right. I mean, if you have management do something stupid, they make a bad acquisition, they’re, they’re honesty questions, whatever the case may be, you can sell, you’re, you’re moving on. You know, I, I just, there’s too many great companies and great managers to be with shadowy figures. It’s when everybody’s doing a great, people are nice, they’re good, smart managers.

Everything’s in the, in the, and the, in the business. And that’s why I asked Chris earlier, the business had a rough quarter or two, or maybe it’s been a bad year. Well, is it just I need another year? Or you know, have we been around the punch bowl too long? It’s not gonna last much longer. That’s where, that’s where I struggle and I spend most of my time trying to figure out how long does this stuff last?

Chris: I will, I will add a footnote to that is that, when you think about the cost of being wrong, the cost of being wrong, of letting something, letting a great company go. And then, subsequently it turned, it continues and you’ve let it go. The cost of that error is huge. So, oh, versus just holding on a little longer then okay, so then you have to eventually, you’re, you’re out of it 20 or 30% lower.

That’s a small mistake in the big realm of things. And I know there’s a story in Colossus that came out recently about, Henry Ellenbogen and he, how he took over the t Rowe Prices Horizon fund and, there was, his predecessor had sold. Walmart or something. And this, this guy ran it for 22 years. Jack LaPorte, I think his name, great manager, beat the s and p by like an average of four percentage points a year.

So it was, his returns were outstanding, but he inherited a Walmart stake that if he had just left it alone, would’ve been worth more than the $8 billion that Ellen Bogan inherited. Mm-hmm. And think about that. So that was one, all the other decisions he made to produce those great returns. Was offset by one mistake of just letting that, if he just held Walmart that whole time.

So that’s what I mean, so like. I totally appreciate Robert saying, ‘cause I think about that myself too. Like all my company’s going through bad stretches and I think a lot about, well, is this the, is this the end? And I’m always more inclined to just wait a little longer because the mistake there is, okay, I lose some money, but if I’m wrong and I get rid of it and it continues to become a great business, that’s a very costly and painful mistake to make.

Robert: No, that I, I, I, I’m, I’m on Chris’s side with this, which is if, if I’m beginning to get the instinct that something’s wrong. Yeah, I’ll try to hang in there a little bit longer. You know, the first instinct is, well, maybe I’m wrong. Right? Right. Maybe every, like Chris says, maybe everything’s gonna be fine. So when, when somebody hits my radar that I go, I’m, I’m suspicious, I’m nervous, or something like that, I will purposely try to lock myself into hanging in there a little bit longer to see how this works out.

Now that’s not for an over bet. I mean, if I’ve got a 10 to 15% bet.

Chris: Yeah.

Robert: You know, we might right size that bet. Again, maybe if I’m suspicious, maybe it’s not a 15% bet, maybe it’s more like a 5% bet and we can right size the bet. But to Chris’s point, we try to hang in there with the position longer than what the first inkling is that there’s a problem here.Matt: Okay, so say someone, Robert, you go first on this. Say somebody has only done. The business school thing, they’ve only read the books. They’ve only talked to the professors. They’ve only watched CNVC. Yeah. How would somebody start this interdisciplinary approach, and I, I’m gonna caveat this. The reason I have your book is because as a non-finance person who bumbled his way into this business, yeah.

Slightly less gloriously than you did with a sales sheet in your hand selling ads, but not dissimilar. It was just somebody going all that other crap, you know?

Robert: Yeah, you

Matt: can actually start applying it here. Just not in the way that anybody else is probably gonna understand what’s the first step.

Robert: Yeah. We get that question quite a lot.

As you can imagine, college kids, first, the college kids are like so swamped, like mm-hmm. I have no time to read another book, so you know, I gotta pass the exam. So, you know. Right. There’s an old saying, liberal arts education for the middle age. ‘cause it’s not actually until you’re middle age that you can get around of figuring it out.

Mm-hmm. And you understand how valuable it is. Bill said there’s an intellectual promiscuity to. Achieving the art of Warbly wisdom. You gotta cast the net wide and you gotta go and, and, and, and read things. I, if I, if I were today, I’d go to Charlie’s Almanac. Poor Charlie’s Almanac has 23 books in the back.

Matt: Mm-hmm.

Robert: That he says is a recommended reading list. And if you go through it, I think a third are biographies, A third are science, ecology, biology and stuff like that. And a third is philosophy. And stuff like that. I mean, that’ll get you, I mean, there’s 20 books that can get you, if you read Charlie’s recommended list, there’s some books there that can get you going.

But the idea is to cast the net wide read fiction. Bill reads a lot of fiction, Russian literature, and you know. Brothers Kasra and all this stuff, and I keep going Now, bill, what the hell is going on here? What is it about a story that makes you think what’s going? But I mean, he’s off, he goes way, a far afield, so you’ve just gotta allocate some time each week, each month, you know?

Mm-hmm. An hour here, whatever. Just reading something that isn’t, finance isn’t. The Wall Street Journal, like Chris said, isn’t another finance textbook. Just read stuff and, and it, it, it will happen. It’ll occur that a bulb will go on. A light bulb will go on and you go, ah, I’ve seen that before.

Mm-hmm.

Ah, this makes sense.

Mm-hmm. But you gotta, you gotta get through it. You gotta, you’ve gotta go through the drudgery of, I don’t wanna say drudgery, you’ve gotta go through the time of, of, of reading things that are not connect. I, I, I wish I could tell people that if you read 10 more finance books, it’s not gonna improve your investment performance.

You read 10 more philosophy, history, biography, books, it probably will include Improve Your Investment For,

Chris: well, Robert won’t say it, but you know, I, I’d recommend his book, lettuce Work Investing is a way to just kind of get into that way of thinking and, and, and maybe one subject will grab your curiosity.

Well, you’ll go deeper because that’s how you start really. You start with adding one and, and then maybe you would add another and then you add another. Yeah. And then, I’ll, I’ll be shameless enough to say, my book. How do is a good entree to that sort of thing? Well, it’s an easy percent.

Mm-hmm. And I don’t get anything for it anyway. It’s published by the institute. I’ve already, I’ve donated all my royalties go to them. So it’s not like a financial motivation thing, but just to get the ideas out there. you know, both those I think are just sort of, yeah, easy, fun reads to kind of get you in that mode of thinking outside of finance and the usual things.

People expect you to read, read Buffett’s letters, read, Graham, read, read all this stuff, this, there’s other things, other aspects and of knowledge that are very applicable.

Matt: Yeah. Chris, people wanna check out the new book in particular along with the rest of your writing, or should we send them today?

Chris: Yeah, I mean, you can check out, the Institute of General Semantics. They’re, they have my books there. The ones on general semantics. How do you can get there? yeah. And then if you search Woodlock house, you get to my, website and I have a blog there, you can read a whole blog post and things.

So those are two ways to find me.

Matt: What about you, Robert? Same thing where people find you. you

Robert: know, we’re, we’re all mainstream. Amazon, it’s, it’s always Amazon, Wiley Wally is the shepherd of many of the Buffet books. the Lattice work came outta Columbia Business School. so, Amazon is probably my best, best turf.

Matt: Well, fantastic. Robert, Chris Bog Mill, I wanna thank you all for joining me. Like, comment, subscribe, all the things you know, where to find the buttons. Below. This is Excess Returns. This is our special show, the a hundred Year Thinkers for doing this monthly. Guys, thanks for coming out and doing this with us today.

Chris: Thank you so much, much fun. Good to be with you guys.