Our focus for this episode is the real utility of financial advisors, and Ben shares a host of research and findings about the supposed and actual value that advisors can offer investors. This segment continues our exploration of investment basics, a fundamental theme for this show and our work at PWL Capital. One of the biggest and clearest lessons that becomes apparent through this discussion is the need for financial literacy independent of advice and so-called expertise from the outside. With that said, we do find time to share some of the positives investors can accrue from dealing with a trustworthy advisor and the conditions necessary for this. Later in the episode, our colleague Lukas Fleck joins us to share his review of The Obstacle Is the Way by Ryan Holiday and some of his own reading habits and tips. We finish the episode with lighter content about hot sauces, TV shows, and Ben's latest home improvement.

Key Points From This Episode:

•    Introducing today's question about the usefulness of financial advisors. (0:03:35)

•    Common financial mistakes made by households. (0:11:13)

•    Some of the research and findings grounding today's discussion. (0:18:13)

•    Investing and self-control; what we can learn from data about smokers. (0:22:49)

•    Looking at some of the potential benefits of hiring an advisor for investors. (0:28:40)

•    A quick review of Episode 43 with Dave Butler from 2019. (0:34:07)

•    Today's book review of The Obstacle Is the Way, with Lukas Fleck, and some of the biggest takeaways. (0:36:43)

•    A look at Lukas' reading habits, favourite recent books, and his increased focus on getting through books. (0:44:59)

•    Advice for starting a book club and Lukas' reading hacks. (0:50:49)

•    The after-show; Ben tells us about his basketball hoop, last week's episode of Succession, and the hot sauce debate. (0:54:44)

•    Upcoming events, audience reviews, and future guests on the podcast. (0:58:31)

Ad mentioned by Ben:

Video: https://www.reddit.com/user/AMF_Quebec/comments/11rzoc9/les_risques_de_fraude_avec_les_cryptos_sont_bien/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&utm_content=1&utm_term=15

Text: https://lautorite.qc.ca/en/general-public/investments/crypto?utm_campaign=crypto-phase2-1017340&utm_content=image-amf_crypto2023_1x1_6sec_02_fr-fr&utm_medium=social&utm_source=reddit

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-249-what-are-financial-advisors-measurably-useful-for-discussion-thread/23120

Books From Today’s Episode:

The Obstacle Is the Way: The Timeless Art of Turning Trials into Triumph — https://amzn.to/3MXh1dl

The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money — https://amzn.to/3UM8KLb

Deep Work: Rules for Focused Success in a Distracted World — https://amzn.to/3AuSXqZ

Making Numbers Count: The Art and Science of Communicating Numbers — https://amzn.to/41HXnWK

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.  Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Lukas Fleck — https://www.pwlcapital.com/profile/lukas-fleck/

'Restoring Rational Choice: The Challenge of Consumer Financial Regulation' — https://www.aeaweb.org/articles?id=10.1257/aer.p20161127

'Financial literacy and financial resilience: Evidence from around the world' — https://onlinelibrary.wiley.com/doi/abs/10.1111/fima.12283

'Strategic price complexity in retail financial markets' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X08002092

'Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets' — https://academic.oup.com/qje/article-abstract/121/2/505/1884013?redirectedFrom=fulltext

'The Role of Time Preferences and Exponential-Growth Bias in Retirement Savings' — https://www.nber.org/papers/w21482

'Contract Design and Self-Control: Theory and Evidence' — https://www.jstor.org/stable/25098689

'Restoring Rational Choice: The Challenge of Consumer Financial Regulation' — https://www.aeaweb.org/articles?id=10.1257/aer.p20161127

'Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds' — https://dash.harvard.edu/bitstream/handle/1/4686775/Laibson_OnePriceFail.pdf

'Failure to refinance' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X16301507

'Down or Out: Assessing the Welfare Costs of Household Investment Mistakes' — https://www.jstor.org/stable/10.1086/524204

'Financial literacy and stock market participation' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X11000717

'Attention Induced Trading and Returns: Evidence from Robinhood Users' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3715077

'Excessive Extrapolation and the Allocation of 401(k) Accounts to Company Stock' — https://www.jstor.org/stable/2697737

'$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans' — https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3158583/

'Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving' — https://www.journals.uchicago.edu/doi/10.1086/380085

'Annuitization Puzzles' — https://www.aeaweb.org/articles?id=10.1257/jep.25.4.143

'The Market for Financial Advice: An Audit Study' — https://www.nber.org/papers/w17929

'Understanding the Advice of Commissions-Motivated Agents: Evidence from the Indian Life Insurance Market' — e57f-4aea-9630-316aa4b772ce.pdf"> https://www.hbs.edu/ris/Publication%20Files/12-055_13c23c02-e57f-4aea-9630-316aa4b772ce.pdf

'Fiduciary Duty and the Market for Financial Advice' — https://www.nber.org/papers/w25861

'Conflicting Interests and the Effect of Fiduciary Duty: Evidence from Variable Annuities' — https://academic.oup.com/rfs/article-abstract/35/12/5334/6674521

'How (not) to pay for advice: A framework for consumer financial protection' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X12000074

'Financial Advice and Bank Profits' — https://academic.oup.com/rfs/article-abstract/31/11/4447/4985213?redirectedFrom=fulltext

'The Misguided Beliefs of Financial Advisors' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12995

'Retail Financial Advice: Does One Size Fit All?' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12514

'The Ulysses option: Smoking and delegation in individual investor decisions' — https://www.sciencedirect.com/science/article/abs/pii/S1544612321003962

'Smoking hot portfolios? Trading behavior, investment biases, and self-control failure' — https://www.sciencedirect.com/science/article/abs/pii/S0927539821000463

'Exponential Growth Bias and Household Finance' — https://www.jstor.org/stable/27735191

'Money Doctors' — https://scholar.harvard.edu/files/shleifer/files/moneydoctors_journaloffinance.pdf

'The Costs and Benefits of Financial Advice' — Linnainmaa-Melzer-Previtero.pdf"> https://www.hbs.edu/faculty/Shared%20Documents/conferences/2013-household-behavior-risky-asset-mkts/Costs-and-Benefits-of-Financial-Advice_Foerster-Linnainmaa-Melzer-Previtero.pdf

'Time is money: Rational life cycle inertia and the delegation of investment management' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X16300472

'Passing the buck: Delegating choices to others to avoid responsibility and blame' — https://www.sciencedirect.com/science/article/abs/pii/S0749597815300108#:~:text=One%20simple%20way%20to%20avoid,outcome%20on%20the%20other%20person.

'Expert financial advice neurobiologically "Offloads" financial decision-making under risk' — https://pubmed.ncbi.nlm.nih.gov/19308261/

'Impact of inflated perceptions of financial literacy on financial decision making' — https://www.sciencedirect.com/science/article/abs/pii/S0167487020300672

'Precautionary savings, retirement planning and misperceptions of financial literacy' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X17301551

'Behavioral and wealth considerations for seeking professional financial planning help' — services-reveiw-publication.pdf"> https://fpcanadaresearchfoundation.ca/media/khyfoso3/financial-services-reveiw-publication.pdf

'Financial literacy and the demand for financial advice' — https://www.sciencedirect.com/science/article/abs/pii/S037842661400096X

'Does financial literacy affect the value of financial advice? A contingent valuation approach' — https://www.researchgate.net/publication/338669648_Does_financial_literacy_affect_the_value_of_financial_advice_A_contingent_valuation_approach

'How financial literacy shapes the demand for financial advice at older ages' — https://www.sciencedirect.com/science/article/pii/S2212828X21000220

'Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?' — https://academic.oup.com/qje/article-abstract/126/1/373/1901343?redirectedFrom=fulltext

'(Over)insuring Modest Risks’ — https://www.jstor.org/stable/25760237

'The Mismatch Between Life Insurance Holdings and Financial Vulnerabilities: Evidence from the Health and Retirement Study' — https://www.aeaweb.org/articles?id=10.1257/000282803321455340

'Saving and Life Insurance Holdings at Boston University - A Unique Case Study' — https://www.jstor.org/stable/23877728

'Who is internationally diversified? Evidence from the 401(k) plans of 296 firms' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X16302483?via%3Dihub

'Is conflicted investment advice better than no advice?' —  https://www.sciencedirect.com/science/article/abs/pii/S0304405X20301537

'How Does Household Portfolio Diversification Vary with Financial Literacy and Financial Advice?' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12231

'Financial Advice and Individual Investor Portfolio Performance' — https://www.jstor.org/stable/41493871

'Financial advisors: A case of babysitters?' — https://www.sciencedirect.com/science/article/abs/pii/S0378426611002548

'Professional financial advice, self-control and saving behavior' — https://onlinelibrary.wiley.com/doi/10.1111/ijcs.12480

'Do contracts influence comprehensive financial advice?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1429807

'The Value of Financial Advice' — https://www.forbes.com/sites/wadepfau/2015/07/21/the-value-of-financial-advice/?sh=6b13feda1333

How the financial system works and how we interact with it has grown in complex ways and is a fascinating but nuanced topic. To guide us through the history of the economy is Professor William Goetzmann, who is an expert in finance, economics and art history, and whose research has been featured in top publications. As a highly respected scholar, he's authored numerous books on topics such as real estate and behavioural finance. It is fair to say Professor Goetzmann's work has left a significant impact on both academia and the world. In our conversation, we dive into financial market history and explore more than just broad market returns. We unpack the fascinating phenomenon of economic bubbles and booms, and how they have evolved and shaped the financial system. He also shares crucial insights from the past and advice for investors looking to leverage the market. And to wrap things up, Professor Goetzmann shares his views on money after digging deep into its historical roots. Tune in to unlock the secrets of the past and gain valuable insights for the future as we journey through the fascinating world of economic history. Tune in now!

Key Points From This Episode:

•    Why is it important to collect and examine long-term historical returns data, and how useful the findings can be for today’s market. (0:03:21)

•    The furthest back in time that Professor William Goetzmann has looked at equity returns and how much of an issue survivorship bias is in long-term historical data. (0:05:44)

•    Reasons for the United States market trends concerning equity risk premiums and his approach to forecasting long-term returns of both stocks and bonds. (0:11:02)

•    Whether current discount rates are better for estimating future returns than long-term historical returns. (0:17:08)

•    How the markets of today compare to the markets of the 1900s, and whether investor behaviour has changed. (0:18:42)

•    Learn how global finance changed after the First World War and how likely a global financial meltdown is. (0:23:35)

•    What to consider when investing internationally and whether Canadian investors should be biased towards their home country. (0:28:23)

•    Hear Professor Goetzmann’s definition of an asset price bubble and his approach to studying economic bubbles and booms. (0:32:44)

•    Overview of the economic bubble and boom trends and crucial advice he has for investors regarding a market run-up. (0:36:18)

•    An explanation for negative bubble behaviour and how well market crashes align with investor expectations. (0:41:46)

•    The role of media in influencing investor behaviour, and whether long-term investors should ignore news from the financial media. (0:47:35)

•    What Professor Goetzmann has learned from studying bubble dynamics, and his advice for investing in transformative technologies. (0:52:50)

•    Professor Goetzmann’s book Money Changes Everything, his definition of money, and if money pre-dates trusted authorities. (0:57:47)

•    The role of money in finance and a brief outline of how finance played a role in the development of modern civilization. (1:02:13)

•    Professor Goetzmann’s definition of success. (1:06:08)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-248-prof-william-goetzmann-learning-from-financial-market-history-discussion-thread/23010

Book From Today’s Episode:

Money Changes Everything: How Finance Made Civilization Possible — https://amzn.to/3KqOYzX

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.  Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. William Goetzmann on Twitter — https://twitter.com/wgoetzmann

Prof. William Goetzmann — https://som.yale.edu/faculty-research/faculty-directory/william-n-goetzmann

'History and the Equity Risk Premium' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=702341

'The present value relation over six centuries: The case of the Bazacle company' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X18302836?via%3Dihub

'A Century of Global Stock Markets' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=225683

'Will History Rhyme?' — research.com/content/30/5/34">https://jpm.pm-research.com/content/30/5/34

'New evidence on the first financial bubble' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X12002541

'Bubble Investing: Learning from History' — https://www.nber.org/papers/w21693#:~:text=History%20is%20important%20to%20the,sample%20size%20for%20inference%20small.

'Negative bubbles: What happens after a crash' — https://onlinelibrary.wiley.com/doi/abs/10.1111/eufm.12164

'Crash Beliefs From Investor Surveys — https://www.nber.org/papers/w22143

'Crash Narratives' — https://www.nber.org/papers/w30195

There’s been a lot of interest in the topic of bank runs lately, and in today’s episode, we take a look at the most relevant research to help us better understand why they happen and how they can be avoided. Our conversation unpacks the 2022 Nobel prize-winning work of Douglas Diamond and Philip Dybvig and examines the three primary risks that banks need to navigate to avoid a bank run related crisis. We discuss the immense value that banks provide and how they keep the economy moving, before reflecting on how their most valuable services are inexorably tied to the risk of bank runs. You’ll also learn about the role of the media in triggering a bank run, and how the problems that arise with bank runs can be addressed through a combination of deposit insurance, bank regulation, and a diverse customer base — all of which are designed to keep depositors from panicking simultaneously. We also revisit a past conversation with Jonathan Clements, before catching up with him in real time to discuss his new book My Money Journey: How 30 People Found Financial Freedom - and You Can Too. Tune in for an in-depth look at bank runs, the value of writing your money story, and a timely reminder that when you’re making a deposit, you’re actually lending money to the bank.

Key Points From This Episode:

•    An introduction to the topic of bank runs including an overview of the Nobel prize-winning work done on the subject in 2022. (0:02:12)

•    The three primary risks you need to manage as a bank in order to be a successful business. (0:07:28)

•    Why liquidity, illiquidity, and duration risk can pose a problem, even for healthy banks. (0:12:47)

•    How news stories can create unwarranted panic and cause a bank run, even if a bank isn’t experiencing problems. (0:16:02)

•    The multiple equilibria of banks as outlined in the Diamond and Dybvig paper. (0:16:31)

•    How deposit insurance can function as a solution, at least in part, to bank runs. (0:19:34)

•    What the Diamond and Dybvig paper teaches us about the Silicon Valley Bank (SVB) bank run. (0:21:35)

•    The difference between households and banks, and the lessons households can learn from the narrative around bank runs. (0:22:59)

•    A quick recap of our conversation with Jonathan Clements and a review of his new book My Money Journey: How 30 People Found Financial Freedom - and You Can Too. (0:27:16)

•    We welcome Jonathan Clements back onto the show to discuss his new book and why he wrote it. (0:32:00)

•    What readers can expect to learn from Jonathan’s book, like the impact parents have on your financial beliefs, and what inspires people to reassess their finances. (0:34:31)

•    The impact of early habits on our finances. (0:38:36)

•    Jonathan’s insights into the financial service industry, its complexity, and how our risk tolerance can shift over time. (0:40:19)

•    Why regret in financial decision-making is virtually unavoidable and the value of writing your money story. (0:44:22)

•    Past and upcoming meetups, feedback from our listeners, and a reminder of our 23 in 23 Reading Challenge. (0:47:42)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-247-bank-runs-plus-jonathan-clements-on-my-money-journey-episode-discussion/22878

Book From Today’s Episode:

My Money Journey: How 30 people found financial freedom - and you can too — https://amzn.to/439D5Hw

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.  Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Jonathan Clements on Twitter — https://twitter.com/clementsmoney

Jonathan Clements on LinkedIn —https://www.linkedin.com/in/jonathanclements

Jonathan Clements on Facebook — https://www.facebook.com/ClementsMoney

Jonathan Clements — http://HumbleDollar.com

Episode 55: Jonathan Clements — https://rationalreminder.ca/podcast/55

'Bank Runs, Deposit Insurance, and Liquidity' — https://www.journals.uchicago.edu/doi/10.1086/261155

'Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking' — https://www.jstor.org/stable/10.1086/319552

'Why didn't Canada have a banking crisis in 2008 (or in 1930, or 1907, or . . .)' — https://www.jstor.org/stable/43910017

'Long-Horizon Losses in Stocks, Bonds, and Bills: Evidence from a Broad Sample of Developed Markets' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3964908

Human beings are undeniably complex, and what motivates us can often be a mystery, even to ourselves. So, how do we go about gathering and analyzing the data that will help us answer the most fundamental questions about our lives and our purpose? The answers may lie in an unexpectedly rich source of knowledge, our regrets. While regret is likely to have a decidedly negative connotation for most of us, it is also extremely powerful and can teach us a great deal about ourselves and what we value. It is an emotion that is present in all of us, and social scientists (like anthropologists and sociologists) have been fascinated by the subject for decades. Today on the show, we are joined by one such expert, Daniel Pink, author of the book The Power of Regret: How Looking Backward Moves Us Forward. In our conversation, Daniel shares details about the research he conducted for his book, how he determined the four main categories of regret, and what we can learn from our regrets by confronting them head-on. We also discuss Daniel’s 2011 New York Times Bestselling title, Drive: The Surprising Truth About What Motivates Us, and what he thinks about working from home in light of the COVID-19 pandemic. Daniel is an exceptional storyteller and is highly knowledgeable on the subjects of regret, motivation, and the important role they play in our lives. To learn more about the many facets of regret and how it can help you thrive, be sure to tune in today!

Key Points From This Episode:

●      Understanding regret as an emotion, why it differs from disappointment, and how regret can help us make better decisions. (0:03:00)

●      The four main types of regret (foundation, boldness, moral, and connections) and the methodology Daniel used to determine them. (0:07:30)

●      The role that outcomes play when it comes to boldness regrets. (0:13:09)

●      Why Daniel believes connection regret is so common, and what regret reveals about our values. (0:14:13)

●      The World Regret Survey that Daniel conducted as a systematic survey of regret, and his findings that regrets of inaction tend to stay with us much longer. (0:17:14)

●      What people can learn from past financial decisions that they regret and the challenge of addressing foundation regrets. (0:20:42)

●      The surprising benefits of regrets and how to learn from them. (0:21:31)

●      How regret anticipation can be used to help people save for retirement. (0:22:46)

●      Daniel’s system for addressing feelings of regret, why it’s important to confront them rather than wallow in them, and the importance of being kind to yourself. (0:24:01)

●      The overwhelming amount of decisions we make in our lives, when to choose the best versus something that is good enough, and how to optimize future regret. (0:27:56)

●      An overview of the many complex factors that motivate people, intrinsic and external motivators, and how Daniel’s research on regret affected his perspective on motivation. (0:31:16)

●      Daniel’s thoughts on working from home when considering autonomy, mastery, purpose, and motivation. (0:37:17)

●      The motivational model that Daniel sets out in his book Drive and some of the common misconceptions he has observed in reporting on his book. (0:39:33)

●      Why people are purpose maximizers, not profit maximizers, and how this should impact the leadership of a company. (0:41:26)

●      Daniel’s response to the question “How do you define success in your life?” and why he doesn’t think about the word ‘success’ very much. (0:47:08)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-246-daniel-h-pink-how-to-use-regret-episode-discussion/22775

Books From Today’s Episode:

The Power of Regret — https://amzn.to/42HArID

Drive: The Surprising Truth About What Motivates Us — https://amzn.to/40jDpl7

To Sell Is Human — https://amzn.to/3K9M2ci

Free Agent Nation — https://amzn.to/40knovb

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.  Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Daniel H. Pink on Twitter — https://twitter.com/danielpink

Daniel H. Pink — https://www.danpink.com/

Goal-setting is essential for personal and professional growth, helping individuals clarify their priorities, stay focused, and achieve success. We are pleased to welcome guests Samantha Lamas and Danielle Labotka to help us unpack the topic of goal-setting and how it relates to finance. Samantha Lamas is a Senior Behavioural Researcher at Morningstar and a recipient of the Montgomery-Warschauer Award for her research in financial planning. Her work centres on investor engagement and the factors that influence an individual's decisions when it comes to investing and managing their finances. As a Behavioral Scientist at Morningstar, Danielle Labotka examines the impact of various cognitive and linguistic factors on investors’ financial decisions. Her research involves studying investors' behaviours, preferences, and attitudes in both everyday and financial planning situations. In our conversation with Samantha and Danielle, we gain insights into financial behaviour and decision-making, the biggest barriers to goal-setting, what deeper goals are, and how to focus on them. Then, we speak to Mark McGrath, who is licensed in insurance, holds several professional designations, including a Chartered Investment Manager and a Certified Financial Planner (CFP), and has more than a decade of experience in the industry. Mark tells us the emotional story about his dad, what motivated him to share his experience, and why you need to start thinking about retirement now. Finally, we review a past episode with Dennis Moseley Williams, a book from Will Storr, and go through feedback from the Rational Reminder community. Tune in now!

Content Warning: Some of the discussion in this episode is about suicide. If you or someone you know is struggling with thoughts about self-harm, help is available. In Canada: 1.833.456.4566 or at https://suicideprevention.ca/resources/

Key Points From This Episode:

•    How we became acquainted with the Morningstar team and background about our guests. (0:02:29)

•    An outline of the common obstacles faced in identifying the correct goals, and how it impacts financial advisors. (0:06:08)

•    Danielle explains the approach used to analyze qualitative data and how the results compared to the Rational Reminder findings. (0:09:07)

•    How the goals identified changed as respondents progressed through the survey, and insights gained from the process. (0:11:23)

•    The main takeaway from the analysis of how people should approach goal-setting and how financial advisors can leverage the research findings. (0:17:53)

•    Outline of current gaps and what is the next step for behavioural research. (0:20:59)

•    Find out what compelled Mark to share the tweet about his dad and he takes us through the story. (0:23:00)

•    How the experience regarding his dad has influenced his work as a financial advisor. (0:40:50)

•    Mark shares how the experience has impacted his approach to life. (0:42:25)

•    A final takeaway message that Mark has for listeners. (0:44:23)

•    Highlights and key takeaways from a past episode with Dennis Moseley Williams. (0:45:52)

•    This week's book review of The Status Game, and why it is a must-read. (0:48:44)

•    Research findings concerning macro socio-economic status and work ethic. (0:54:03)

•    We discuss interesting news and events, riskless assets, the advantages of Twitter, and the latest reviews for the show. (0:57:05)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-245-deeper-goals-and-retiring-with-purpose-discussion-thread/22660

Book From Today’s Episode:

The Status Game: On Human Life and How to Play It — https://amzn.to/40vVLix

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.  Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Samantha Lamas on Twitter — https://twitter.com/SamanthaLamas4

Mark McGrath on Twitter — https://twitter.com/MarkMcGrathCFP

Samantha Lamas on LinkedIn — https://www.linkedin.com/in/slamas/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/

'Mining for Goals' — 0bf5-4321-9a4a-e04a82a11597.pdf"> http://static.fmgsuite.com/media/documents/8b5abbe8-0bf5-4321-9a4a-e04a82a11597.pdf

When it comes to the world of investing, there are many options available to consumers. The range of financial products available can be overwhelming and confusing. Additionally, investing is not only about the rate of return but also about what you are investing for and why. To help us unpack this complicated subject is Charles Ellis, a highly respected investment consultant and founder of Greenwich Associates, a strategy firm focused on financial institutions. He is also a famous author and has written several books on the topic of finance and investment, such as Winning the Loser's Game which provides readers with insights into making the best financial decisions in an increasingly unpredictable market. In our conversation, we discuss why indexing is the better investment option, how the investment space has changed over time, tailoring your investment decisions to suit your needs and desires, and why looking at the bigger financial picture is essential. We also delve into why investors can be their own worst enemies, what advisors and investors should avoid, the theme of his book Inside Vanguard, various investment strategies, and much more. Tune in and hear insights on indexing, wise investing, and how to win the ultimate game from industry legend Charles Ellis!

Key Points From This Episode:

•    Charles explains what he means by ‘a loser's game’ and provides examples. (0:03:51)

•    How the perception of active management has changed since publishing Winning the Loser's Game. (0:08:00)

•    He unpacks how the market and market competition has changed since 1975. (0:10:33)

•    Whether the sentiment towards active management has become too negative. (0:17:24)

•    Discover why Charles thinks indexing is the best and preferred investment option. (0:19:22)

•    His opinion on low-cost systematic strategies that seek higher expected returns in the market by owning riskier stocks. (0:24:55)

•    Why investors and advisors should avoid trying to time or beat the market. (0:27:19)

•    The value and importance of a well-defined investment policy statement. (0:33:34)

•    Find out how investors can protect themselves from themselves. (0:34:58)

•    An underappreciated approach that investors can take to be more successful. (0:36:26)

•    Hear whether fee differentials between index and active strategies are understood well. (0:37:17)

•    Charles shares how his mindset has changed over the course of his career. (0:41:47)

•    Find out if institutions and endowments respect low-cost index investing. (0:42:42)

•    What he thinks about bringing exotic asset classes to retail investors. (0:44:45)

•    Reasons why investment management should be considered a full-time profession. (0:46:50)

•    The biggest opportunities he sees in future for investment management. (0:49:20)

•    Hear about the difference between price discovery and value discovery. (0:50:09)

•    Discover why Vanguard has been so successful as a company. (0:53:27)

•    The theme of his book, Inside Vanguard, and if it relates to other businesses. (0:58:17)

•    Lessons he has learned regarding personal motivation and productivity. (1:00:28)

•    Charles tells us his definition of success. (1:03:35)

•    An outtake from the episode: the role of luck. (1:05:21)

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

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Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-244-the-losers-game-episode-discussion/22558

Books From Today’s Episode:

Winning the Loser's Game: Timeless Strategies for Successful Investing — https://amzn.to/3FrNKmt

Inside Vanguard — https://amzn.to/3TlwrcG

What It Takes: Seven Secrets of Success from the World's Greatest Professional Firms — https://amzn.to/3Thgm7z

Capital: The Story of Long-Term Investment Excellence — https://amzn.to/3FpiHb5

Figuring It Out: Sixty Years of Answering Investors' Most Important Questions — https://amzn.to/3LknZZ8

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.  Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Debt can play an essential role in financial planning in several ways, such as financing large purchases, building credit, managing cash flow, and leveraging investments. However, it's important to remember that taking on too much debt can also have negative consequences that could impact your financial future. Therefore, it's vital to carefully consider your options and ensure that any debt you take on is manageable and aligns with your overall financial goals. In this episode, we talk about the essential aspects of debt and the role of debt in financial planning, and we unpack the two major forms of debt. Learn about debt in financial planning, consumption smoothing, the mindset and psychology behind debt, the risk that comes with debt, how credit cards impact how people interact with their money, integrated financial planning, and important aspects of mortgages. We also review a past episode with guest Dan Solin and the book, The Five Most Important Questions, which provides readers with a tool for self-assessment and transformation concerning productivity in the workplace.

Key Points From This Episode:

•   The role of debt in financial planning and the distinction between good and bad debt. (0:08:16)

•   A brief overview of mortgages, credit cards, and their associated risks. (0:11:31)

•   Consequences of borrowing money at a high-interest rate, and how financial literacy impacts effective debt management. (0:13:20)

•   The psychological aspects related to debt and consumer spending. (0:16:10)

•   Outlining the psychological interactions of established debt on mental well-being. (0:18:15)

•   Credit cards, what they offer, and their psychological effect on paying. (0:22:10)

•   Costs associated with not using a credit card. (0:28:45)

•   Why mortgage debt is considered good debt for the borrower and the different facets of mortgages to consider. (0:32:48)

•   The difference between fixed and adjustable mortgage rates and which is better. (0:37:25)

•   Highlights and key takeaways from a past episode with Dan Solin. (0:46:06)

•   A review of the book, The Five Most Important Questions and why we recommend it. (0:47:47)

•   How the questions from the book relate to household decision-making. (0:51:18)

•   A testament to Dan Wheeler and his contribution to the field of finance. (0:52:55)

•   Recent interviews with Ben, upcoming guests, other interesting financial content, and our book recommendations. (0:56:33)

•   A 23 in 23 book challenge update, feedback on the show, and upcoming meetups. (01:01:35)

Participate in our 23 in 23 Reading Challenge:

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Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-243-the-role-of-debt-in-financial-planning-discussion-thread/22433

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Extra References:

The role of debt

'Life Cycle, Individual Thrift, and the Wealth of Nations' — https://www.jstor.org/stable/1813352

'Diversification Across Time' — research.com/content/39/2/73">https://jpm.pm-research.com/content/39/2/73

'Debt literacy, financial experiences, and over indebtedness' — https://www.researchgate.net/publication/282436829_Debt_Literacy_Financial_Experiences_and_Over_Indebtedness

'Restoring Rational Choice: The Challenge of Consumer Financial Regulation' — https://scholar.harvard.edu/files/campbell/files/elylecturejan182016.pdf

'Attitudes towards Debt and Debt Behavior' — https://onlinelibrary.wiley.com/doi/abs/10.1111/sjoe.12419

'Expenditure Cascades' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1690612

'Consumer debt and satisfaction in life' — https://www.researchgate.net/publication/341564180_Consumer_debt_and_satisfaction_in_life

'Good credit, bad credit: The differential role of the sources of debt in life satisfaction' — https://onlinelibrary.wiley.com/doi/full/10.1111/joca.12388

'Debt and Overindebtedness: Psychological Evidence and its Policy Implications' — https://spssi.onlinelibrary.wiley.com/doi/full/10.1111/sipr.12074

'Winning the Battle but Losing the War: The Psychology of Debt Management' — https://www.researchgate.net/publication/249644425_Winning_the_Battle_But_Losing_the_War_The_Psychology_of_Debt_Management

'Reducing debt improves psychological functioning and changes decision-making in the poor' —https://www.researchgate.net/publication/332472709_Reducing_debt_improves_psychological_functioning_and_changes_decision-making_in_the_poor

Credit cards

'The Effect of Payment Transparency on Consumption: Quasi-Experiments from the Field' — https://www.jstor.org/stable/40216497

'Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay' — https://www.researchgate.net/publication/233496571_Always_Leave_Home_Without_It_A_Further_Investigation_of_the_Credit-Card_Effect_on_Willingness_to_Pay

'Present-Biased Preferences and Credit Card Borrowing' — https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/3531/AEJ_Meier_Sprenger.pdf

'How Credit Card Payments Increase Unhealthy Food Purchases: Visceral Regulation of Vices' — https://www.jstor.org/stable/10.1086/657331

'Distributional Effects of Payment Card Pricing and Merchant Cost Pass-through in the United States and Canada' — https://www.bankofcanada.ca/2021/02/staff-working-paper-2021-8/

'Popular Personal Financial Advice versus the Professors' — https://www.nber.org/papers/w30395

'Buy Now, Pay Later Credit: User Characteristics and Effects on Spending Patterns' — https://www.nber.org/papers/w30508

Mortgages

'Report of the Household Finance Committee' — https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/HFCRA28D0415E2144A009112DD314ECF5C07.PDF

'Household Risk Management and Optimal Mortgage Choice' —https://www.jstor.org/stable/25053944

'Failure to refinance' — https://www.nber.org/papers/w20401

'A Model of Mortgage Default' — https://scholar.harvard.edu/files/campbell/files/mortdefault13022014.pdf

The intersection between economics and psychology makes the subject of personal finance complex. To help us elucidate this topic is personal finance reporter at the Globe and Mail and the author of the bestselling book "Money Like You Mean It, Personal Finance Tactics for the Real World.", Erica Alini. Her journey into finance journalism began when she started working for the Wall Street Journal immediately after the financial crisis of 2007/08. Since then, Erica has become an accomplished writer and journalist, having worked for many respected organizations. She is also the author of a best-selling book, Money Like You Mean It, which provides readers with a nuanced understanding of the economic forces that shape financial struggles and how to overcome them. In this conversation, we talk to Erica about the importance of knowing yourself and your debt, the money bucket system, and the definition of financial abuse. We also discuss the various types of debt traps people should avoid, the dangers of micropayments, and what to be aware of when looking for a mortgage, as well as advice for finding a reliable mortgage broker, the avalanche versus the snowball model, and much more. Tune in to discover how to take back control of your finances and avoid the burden of debt with personal finance expert, Erica Alini.

Key Points From This Episode:

•    Why Erica thinks Canadians have so much household debt. (0:02:24)

•    Strategies that people can implement to avoid the debt trap. (0:04:58)

•    Erica’s opinion on budgeting as a tool to manage spending. (0:08:34)

•    How the ‘bucketing model’ changes for a couple as opposed to an individual. (0:12:10)

•    How couples with different incomes should share expenses. (0:14:17)

•    Signs of an unhealthy financial relationship between partners. (0:17:06)

•    The amount of money an emergency fund should have. (0:21:17)

•    What consumers should know about the different debt products available. (0:24:08)

•    Discover the downside of taking a mortgage with the lowest interest rate. (0:33:55)

•    Whether or not an independent mortgage broker is better than a bank. (0:38:05)

•    Important insights about credit scores. (0:39:51)

•    Whether people should rent or buy property. (0:45:13)

•    How the traditional sense of a good job with sufficient income has changed. (0:50:34)

•    Erica’s approach to explaining the risk of investing in stocks. (0:56:46)

•    Insights about the math of a financial decision versus the psychology. (0:58:25)

•    How Erica defines success in her life. (1:00:29)

Extra: Questions to ask a mortgage broker:

1.     What kind of penalty will you have to pay for breaking your contract?

2.     Is the cap on your lump-sum payments 10 percent or 20 percent of your mortgage balance?

3.     Will you be able to make lump-sum payments any time or just once a year?

4.     Can you double your payments?

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-242-erica-alini-personal-finance-tactics-for-the-real-world-discussion-thread/22326

Book From Today’s Episode:

Money Like You Mean It — https://www.dundurn.com/books_/t22117/a9781459748675-money-like-you-mean-it

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Erica Alini on Twitter — https://twitter.com/ealini

Today we are spending most of the episode going further into the basic concepts that ground good financial practices and the personal finance topics that are often taken for granted. The three main areas we unpack in this episode are the cost of living, savings capacity, and emergency funds, and though these can be viewed as basic ideas, there are always areas of the simplest variety that deserve more attention. Listeners can also expect to hear a little more about what our role as financial advisors constitutes on a daily basis, as we respond to an audience member's question about how to conceptualize the profession. We welcome Dr. Wendall Mascarenhas back to the show for a brief cameo in which he shares his reading habits and approach with us, which contrasts with some of the opinions often expressed by other guests, so make sure to stay tuned in for that. We also find time for a quick recap of an old episode we had with Rick Ferri and a book review of Rethink Lead Generation by Tom Shapiro.

Key Points From This Episode:

•    Discussing the cost of living and why an accurate picture of your expenses is so important. (0:04:08)

•    Working out your saving capacity and when and how to save. (0:21:32)

•    General advice for emergency funds and further considerations for households. (0:32:51)

•    Recapping our episode with Rick Ferri on his index investing philosophy and the lasting impact of John Bogle. (0:40:21)

•    This week's book review of Rethink Lead Generation by Tom Shapiro. (0:42:26)

•    Dr. Wendall Mascarenhas talks about his reading habits and his prioritization of reading for pleasure. (0:49:23)

•    A few favourite book recommendations from Dr. Wendall Mascarenhas. (0:58:12)

•    Current debates around ChatGPT and the sources of its information. (1:06:18)

•    Information about upcoming meetups for the Rational Reminder community. (1:09:38)

•    Further explorations on our recent goals survey and the input we received from Morningstar. (1:11:00)

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Dr. Wendall Mascarenhas — https://www.fcos.ca/meet-dr-mascarenhas/

Teeth & Titanium Podcast — https://podcasts.apple.com/us/podcast/teeth-titanium/id1514989809

Extra References:

Savings capacity

'Popular Personal Financial Advice versus the Professors' — https://www.nber.org/papers/w30395

'The Life-Cycle Model Implies That Most Young People Should Not Save for Retirement' — https://www.aei.org/research-products/journal-publication/the-life-cycle-model-implies-that-most-young-people-should-not-save-for-retirement/

'Exponential-Growth Bias and Lifecycle Consumption' — https://www.jstor.org/stable/43965317

'Save More Tomorrow™: Using Behavioral Economics to Increase Employee Saving' — https://www.jstor.org/stable/10.1086/380085

Emergency fund

'What Matters to Individual Investors? Evidence from the Horse's Mouth' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12895

'Millionaires Speak: What Drives Their Personal Investment Decisions?' — https://www.nber.org/papers/w27969

'Emergency savings for low-income consumers' — https://www.irp.wisc.edu/publications/focus/pdfs/foc301c.pdf

'Emergency Saving and Household Hardship' — https://www.researchgate.net/publication/269468202_Emergency_Saving_and_Household_Hardship

'Savings Policy and Decisionmaking in Low-Income Households' — https://www.researchgate.net/publication/289069441_Savings_Policy_and_Decisionmaking_in_Low-Income_Households

'Insufficient Funds: Savings, Assets, Credit, and Banking Among Low-Income Households' — https://www.jstor.org/stable/10.7758/9781610445887

'Financially Fragile Households: Evidence and Implications' — https://www.nber.org/papers/w17072

'One in four Canadians are unable to cover an unexpected expense of $500' —eng.htm">https://www150.statcan.gc.ca/n1/daily-quotidien/230213/dq230213b-eng.htm

'Who Should Buy Long-Term Bonds?' — https://www.jstor.org/stable/2677900

‘Mental accounting matters' — 99.pdf">https://people.bath.ac.uk/mnsrf/Teaching%202011/Thaler-99.pdf

'The Bucket Approach for Retirement: A Suboptimal Behavioral Trick?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3274499

'Should Households Establish Emergency Funds' —https://www.proquest.com/openview/042e8ea8f8e3986ec6c93e5cfca265c0/1?pq-origsite=gscholar&cbl=38873

'Is an All Cash Emergency Fund Strategy Appropriate for All Investors?' — https://www.financialplanningassociation.org/article/all-cash-emergency-fund-strategy-appropriate-all-investors

'Building emergency savings through employer-sponsored rainy-day savings accounts' — https://www.journals.uchicago.edu/doi/full/10.1086/708170

'Double Mental Discounting: When a Single Price Promotion Feels Twice as Nice' — https://journals.sagepub.com/doi/10.1509/jmr.15.0559

'The Role of Mental Accounting in Household Spending and Investing Decisions'  — https://onlinelibrary.wiley.com/doi/10.1002/9781119440895.ch6

'Emergency Savings and Financial Security: Insights from the Making Ends Meet Survey and Consumer Credit Panel' — https://www.consumerfinance.gov/data-research/research-reports/emergency-savings-financial-security-insights-from-making-ends-meet-survey-and-consumer-credit-panel/

The decisions we make may be further out of our control than we’d like to imagine. Today we are joined by Professor Eric J. Johnson to discuss choice architecture and its role in financial decision-making. Eric is a decision science expert and the author of the book, The Elements of Choice: Why the Way We Decide Matters. In this episode, we learn about the various factors that impact not only decision-making but the effort required to make a decision. Eric shares his philosophy on free will and shares advice for making important decisions and guiding clients to find the right choice as a financial advisor. Tune in to discover how to minimize the influence of the choice architect and take charge of your decisions!

Key Points From This Episode:

•    Introducing Professor Eric J. Johnson and this week’s topic: financial decision-making. (0:00:26)

•    The hidden partner that accompanies us when we make decisions. (0:03:42)

•    How design choices impact our decisions. (0:04:54)

•    The plausible path: what it is and how we choose it. (0:06:00)

•    Advice for making important decisions. (0:08:21)

•    The impact of recent events on decision-making. (0:10:33)

•    How to be your own choice architect. (0:12:15)

•    Factors impacting the effort required to make a decision. (0:13:22)

•    The impact of default choices and what influences them. (0:16:09)

•    How choice architecture can help people find the right choice. (0:20:17)

•    The influence of sorting on what people choose. (0:25:18)

•    How the order of options being presented and the way they’re described impact decisions. (0:26:54)

•    How exponential growth bias influences long-term decisions and how financial advisors can help clients understand the impact. (0:31:45)

•    The effectiveness of Netflix as a choice engine, the role choice engines play in educating users, and the value of just-in-time education. (0:35:04)

•    The impact of social media on people’s attention and intentions. (0:40:08)

•    Eric shares his philosophy on free will and the factors impacting our choices. (0:42:55)

•    How to minimize the influence of the choice architect. (0:44:16)

•     What financial advisors can do to be most useful to their clients. (0:46:00)

•    How Eric defines success in his life. (0:50:12)

Participate in our 23 in 23 Reading Challenge:

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Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-240-prof-eric-j-johnson-choice-architecture-and-financial-decisions-discussion-thread/22037

Book From Today’s Episode:

The Elements of Choice — https://theelementsofchoice.com/

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. Eric J. Johnson on Twitter — https://twitter.com/profericjohnson

The concept of financial math is another foundational element of investing and good economic decision-making, and today we are carrying on the recent string of shows dealing with these kinds of fundamental aspects. First, we have a look at the central idea of the time value of money, and how this plays into many areas of our finances, such as retirement planning, spending, investing, and so on. From there, the conversation goes on to cover exponential functions, the tradeoffs between saving and spending, and regrets. Today's 60-second episode recap is of the great conversation we had with David Blitzer back on Episode 54, and we also do a quick book review of the potentially life-changing How to Live on 24 Hours a Day. We finish off this punchy episode with some news from the community and some thoughts on the ways in which competition and repetition can improve a skill.

Key Points From This Episode:

•    Introducing the time value of money, as well as the concepts of compounding and discounting. (0:03:07)

•    Applying financial math in different ways to varied questions. (0:11:34)

•    Lessons from Cameron's first business selling worms. (0:18:15)

•    The challenges and biases associated with exponential functions. (0:20:27)

•    Spending and saving; illuminating the reality of the tradeoffs. (0:27:26)

•    The biggest problems of foundational regrets. (0:35:40)

•    Looking back on the episode with David Blitzer on indexing. (0:42:33)

•    Reviewing the 1908 book, How to Live on 24 Hours a Day. (0:44:25)

•    TV shows, podcast reviews, updates from the community and more. (0:49:05)

•    Incentives and leaderboards; unpacking the impacts of practice and competition. (0:56:43)

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-239-the-math-of-financial-planning-discussion-thread/21899

Book From Today’s Episode:

How to Live on Twenty-Four Hours a Day — https://amzn.to/3JLyDaz

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

A large portion of what we talk about on this show boils down to decision-making, and today we have our focus squarely on the fundamentals of this process. Professor Ralph Keeney joins us to discuss some of the simplest and most profound elements of decisions, and why we so often miss these aspects. Ralph is a true expert on decision analysis, and his systematic process for decision-making, as laid out in his new book, Give Yourself a Nudge, has truly life-altering potential for anyone looking to improve their future. The book and this conversation are jam-packed with insightful and understandable ideas and examples, including clarifying objectives, the vital role of our values, generating alternatives, and a comparison between decision problems and decision opportunities. Ralph lays out a great way to get started on the path to better decisions, so make sure to join us to hear it all.  

Key Points From This Episode:

• The focus of Ralph's research and how he articulates the importance of our conscious decisions. (0:03:48)
• The shortcomings of the trial and error approach that many of us naturally employ. (0:10:46)
• First steps towards being a better decision-maker; using personal decisions for practice. (0:13:08)
• Ralph explains his conception and use of the idea of 'nudges'. (0:14:30)
• A better awareness of the often-neglected front end of decision-making. (0:17:38)
• An explanation of Ralph's value-focused decision-making process. (0:22:25)
• Mistakes made around retirement decisions. (0:30:30)
• Why clarifying your personal decision values can be so difficult. (0:32:15)
• The process of translating values into objectives. (0:36:11)
• Ralph's important question around the different possible situations in the future. (0:41:49)
• Simple processes and common pitfalls for generating alternatives. (0:43:19)
• Exploring decisions that require third-party permission or commitment. (0:47:59)
• Differentiating between decision problems and decision opportunities. (0:52:27)
• The most important concepts for embodying value-focussed decision-making. (0:57:44)
• The role of financial advisors in aiding their clients to make good decisions. (1:03:28)
• Application of these ideas toward living a good life. (1:07:46)
• Ralph's simple definition of success in his own life. (1:10:53)

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-238-prof-ralph-keeney-decision-analysis-and-value-focused-thinking-discussion-thread/21795

Books From Today’s Episode:

Give Yourself a Nudge — https://amzn.to/3WKMwZx

Smart Choices — https://amzn.to/3Ho0vP6

Value-Focused Thinking — https://amzn.to/3HgC7yH

Decisions with Multiple Objectives — https://amzn.to/3DywYRH

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. Ralph Keeney — https://ralphkeeney.com/

Identifying your personal values is the foundation for making future decisions. In this episode, we discuss the profound ways in which personal values impact financial decision-making and share concrete steps to identify both your strategic and means objectives. Ben candidly shares his own objectives and expands on the other considerations involved in making major decisions. We then jump to the less abstract topic of 2022 returns, providing a thorough overview of the tilts and their consequences, followed by a brief summary of an early episode with Shane Parrish. In the latter half of this episode, we are joined by Zoobean co-founder and CEO Felix Lloyd to talk about Beanstack, the tech platform for reading, and Readwise co-founder Daniel Doyon. We also tackle the slightly left-field topic of marketing from a behavioural science standpoint through the lens of Nancy Harhut’s tellingly-titled book, Using Behavioral Science in Marketing. Tune in for upcoming developments in the Rational Reminder community, and to discover how to make financial decisions that align with who you are and who you want to become!

Key Points From This Episode:

• How personal values impact financial decision-making. (0:00:25)
• How to identify your life’s values and objectives. (0:07:21)
• The significance of means objectives and strategic objectives, and how to identify them. (0:16:25)
• Ben’s strategic life objectives and means objectives. (0:18:27)
• Other considerations when making major decisions. (0:19:14)
• An overview of 2022 returns. (0:22:43)
• A summary of episode 19 with Shane Parrish. (0:28:59)
• A brief interview with Zoobean co-founder and CEO Felix Lloyd to talk about Beanstack, the tech platform for reading. (0:31:15)
• Cameron’s review of Using Behavioral Science in Marketing by Nancy Harhut. (0:43:09)
• What sells (from a behavioural science standpoint). (0:47:15)
• A brief interview with Readwise co-founder Daniel Doyon. (0:52:52)
• Summaries of recent Freakonomics, 10% Happier, and Capital Allocators (1:04:05)
• Developments in the Rational Reminder community. (1:05:30)
• Upcoming podcast guests and recent podcast reviews. (1:10:25)

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-237-who-are-you-and-who-do-you-want-to-be-discussion-thread/21665

Book From Today’s Episode:

Using Behavioral Science in Marketing — https://amzn.to/3wuDnJO

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Daniel Doyon on Twitter — https://twitter.com/deadly_onion

Felix Lloyd on Twitter — https://twitter.com/fblloyd

Felix Lloyd on LinkedIn —  https://www.linkedin.com/in/fblloyd/

Beanstack — https://www.beanstack.com/

Zoobean on Instagram — https://www.instagram.com/zoobean

Readwise — https://readwise.io/

Our guest today, Harold Gellar, is a lawyer who helps clients dealing with fraud and negligence perpetrated by financial advisors, and is a passionate advocate for investors and their rights. Tuning in you’ll hear details of some of the most common issues Harold has come across in his work, along with his practical advice for financial advisors and investors. We discuss the importance of clear communication between advisors and their clients, the concept of KYC (Know Your Client), and simple steps investors can take to ensure that their advice is properly understood by their clients. Harold goes on to provide an outline of factors that could make individuals vulnerable to negligent financial advice (such as marital problems or a sudden health crisis) and how to gain perspective in extreme situations. We also discuss the key differences between salespeople and financial advisors, the type of credentials investors should be looking for, and how regulation needs to be modernized in Canada for investors to be properly protected. Harold has been in this industry for a long time and is immensely knowledgeable on the subject of fraud and negligent investment advice.

Key Points From This Episode:

• An overview of Harold’s practice and how he helps clients get their money back. (0:03:22)
• The difference between salespeople and financial advisors and the vulnerability of investors. (0:05:40)
• Practical advice for investors to ensure their financial advisor is doing due diligence and the concept of KYP (Know Your Product). (0:10:46)
• The concept of KYC (Know Your Client) and how to be sure your financial advisor understands you as a client. (0:15:32)
• The type of individuals who are particularly vulnerable to negligent financial advice, and why we can all be vulnerable in certain situations. (0:18:33)
• The role of the trusted contact person in Canada specifically, and how to know when to take the advice of your financial advisor. (0:25:13)
• Harold’s thoughts on what is causing Canada’s slow adoption of low-cost index funds. (0:32:27)
• How financial advisors earn money and why we need an updated regulatory system. (0:34:21)
• Harold’s approach to crypto and why he classifies it as a speculative asset. (0:41:50)
• Examples of negligence when the investment made was too conservative and why clear communication between client and advisor is crucial. (0:44:20)
• The worst insurance products that Harold has come across. (0:46:10)
• What financial advisors should be doing to make sure that their advice is properly understood by their clients. (0:49:23)
• What investors can do to make sure that they understand what the advisor is saying to them. (0:51:16)
• Ontario’s recent implementation of title regulation for financial planners and advisors and some of its key flaws. (0:52:16)
• The credentials that investors should expect from their financial advisors. (0:55:34)
• The value of good advice when it comes to financial planning and investment, and what motivates Harold to be such a strong investor advocate. (0:56:56)

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-236-harold-geller-i-sue-financial-advisors-discussion-thread/21500

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Harold on Linkedin — https://www.linkedin.com/in/harold-geller-25094033/

Geller Law — http://gellerlaw.ca

'The Misguided Beliefs of Financial Advisors' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12995

'Retail Financial Advice: Does One Size Fit All?' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12514

As we kick off the new year, we wanted to look back at our biggest areas of learning from last year. So this episode serves as a great companion piece to our year-end recap from a couple of weeks ago, but the focus here is on the personal impact that specific guests, ideas, and topics had on each of our lives. We cover ICAPM thinking, the nature of money, financial literacy, setting financial goals, the history of index funds, and more. For the second half of the show, we are joined by the amazing Shaun Tomson, former world surfing champion, author, and renowned speaker. Shaun is here to talk a bit about his latest book, co-authored with Noah benShea, entitled The Surfer and the Sage. We get to hear about Shaun's belief in the power of words, the specific conditions that can enforce this power, the lessons he has taken from a life in the ocean, and how the tragedy of losing his son influenced his life's trajectory. Join us to catch it all.

Key Points From This Episode:

• Differentiating between the CAPM and ICAPM theories. (0:08:02)
• Long-run risks in stocks and bonds; demystifying safety claims.  (0:14:46)
• Further illumination on the concept of money and how to think about it. (0:24:27)
• Learnings around the empirical side of financial literacy. (0:31:00)
• Improved setting of financial goals and common mistakes that many of us make. (0:32:24)
• Filling in the gaps in an understanding of the history of index funds. (0:35:57)
• A one-minute recap of our episode with Allison Schrager from last year. (0:37:47)
• A quick review of Shaun Tomson's book, The Surfer and the Sage. (0:39:38)
• Shaun explains the significance of the wave as a metaphor. (0:43:28)
• The tragic passing of Shaun's son in 2006 and how this redirected his life's purpose. (0:45:10)
• Shaun explains his CODE method for transformation. (0:49:35)
• The significance of the structure of the book and the motivation behind it. (0:56:38)
• Unpacking the importance of purpose when making financial decisions. (0:59:40)
• Shaun's tactical recommendations; resilience, hope, optimism, and discipline. (1:05:44)
• Upcoming book recommendations for our 23 in 23 Reading Challenge. (1:19:22)

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-235-top-learnings-from-2022-plus-23-in-23-special-guest-shaun-tomson-discussion-thread/21332 

Books From Today’s Episode:

The Surfer and the Sage: A Guide to Survive and Ride Life's Waves — https://amzn.to/3GytVJV

The Code: The of Power of "I Will" — https://amzn.to/3ZEMUvg

Surfer's Code: 12 Simple Lessons for Riding Through Life — https://amzn.to/3VZIcFb

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Shaun Tomson on Twitter — https://twitter.com/shauntomson

Shaun Tomson on Instagram — https://www.instagram.com/shauntomson/

Shaun Tomson on Linkedin — https://www.linkedin.com/in/shaun-tomson-42a57213/

Shaun Tomson — https://shauntomson.com/

Shaun Tomson's I Will Form — https://buzzy.buzz/kiosk/3676e3c13ae389a80dd5774d

'The Code Method for Families' — METHOD-FOR-FAMILIES.pdf"> https://shauntomson.com/wp-content/uploads/2020/04/CODE-METHOD-FOR-FAMILIES.pdf

‘The Surfer and the Sage: Trailer' — https://www.dropbox.com/s/wn0q3r0gf006tl6/TrailerUSETHISONE.mp4?dl=0

'Generating Objectives: Can Decision Makers Articulate What They Want?' — https://pubsonline.informs.org/doi/abs/10.1287/mnsc.1070.0754?journalCode=mnsc

'Eyes on the Prize: The Preference to Invest Resources in Goals Over Means' — https://www.anderson.ucla.edu/documents/areas/fac/marketing/Shaddy/investing_goals.pdf

'Counteracting obstacles with optimistic predictions' — https://pubmed.ncbi.nlm.nih.gov/20121310/

'Immediate Rewards Predict Adherence to Long-Term Goals' — https://journals.sagepub.com/doi/full/10.1177/0146167216676480

'Stocks for the Long Run? Sometimes Yes. Sometimes No.' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3805927

Few people have impacted the way the world works, and today, we have the privilege of speaking to one of them. Professor Robert C. Merton is the Distinguished Professor of Finance at The Massachusetts Institute of Technology (MIT) Sloan School of Management and Professor Emeritus at Harvard University. He has a Ph.D. in Economics from MIT and is currently the Resident Scientist at Dimensional Fund Advisors. Professor Merton was awarded the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for his work establishing a new method to determine the value of derivatives. He also created the Intertemporal Capital Asset Pricing Model (ICAPM), a popular tool to help advisors make informed financial decisions and understand market trends. In our incredible conversation, we cover portfolio theory, moving from Capital Asset Pricing Model (CAPM) to the Intertemporal Capital Asset Pricing Model (ICAPM), and how financial models work. We also discuss the difference between the value of your capital and the value of the cash flow that can come from that capital, why size can't be a factor, what aspects to consider when calculating the worth of an account, and the definition of market efficiency. We also delve into retirement, how to safely invest for it, what pitfalls to avoid, and how retirement funds may change over time. He also shares his opinion about some popular financial advise and what the roles of financial advisors should be. For all this and more, tune in to hear from the man behind the model and Nobel laureate, Professor Robert C. Merton!

Key Points From This Episode:

• We start with Professor Merton describing the concept of market efficiency. (0:04:28)
• He explains the basics of his ICAPM asset pricing model. (0:09:10)
• How portfolio theory changes when moving from single-period to multi-period. (0:10:46)
• Hear a practical example of expected returns changing over time. (0:14:15)
• Why ICAPM is dependent on the sensitivities to risk of an individual investor. (0:22:52)
• Find out how to determine if the correct proxy has been identified for a risk. (0:25:34)
• Learn how home country bias fits into portfolio choice from an ICAPM hedging perspective. (0:31:54)
• The definition of a risk-free asset and how it changes with time. (0:33:24)
• What influence the time horizon should have on the mix between stocks and bonds in an investor’s portfolio. (0:35:33)
• His opinion about young investors using leverage to make investments. (0:41:50)
• What people should be doing to get more accessibility to leverage. (0:47:39)
• Professor Merton tells us who should focus on value stocks and growth stocks. (0:51:34)
• Discover what makes retirement income a difficult problem to solve and tips to ensure your retirement. (0:56:47)
• We discuss using Monte Carlo simulations to estimate how much people can spend in retirement. (1:09:04)
• He provides insight into how to get more from your retirement investment. (1:13:04)
• Whether nominal annuities are considered low-risk assets for retirees. (1:16:48)
• An overview of the impact mathematical models have had on the finance sector. (1:20:12)
• Areas of finance practice that are lagging behind the financial models. (1:27:35)
• Hear what popular financial advice Professor Merton thinks is misguided. (1:33:22)
• Ways his work on option pricing has impacted society. (1:41:26)
• The role he sees for financial advisors. (1:45:42)
• Why he decided to join Dimensional Fund Advisors. (1:48:54)
• Professor Merton unpacks the definition of product design. (1:52:14)
• Stay listening for the extended discussion. (1:57:24)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-234-prof-robert-c-merton-icapm-retirement-and-models-in-finance-discussion-thread/20748  

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. Robert C. Merton — https://robertcmerton.com/

It has been an amazing year for the podcast. We have had some incredible guests during 2022 who have provided us and listeners with insights and thought-provoking ideas about the world of finance. We covered a lot of ground and to wrap up the year we decided to recap some of our favourite moments for listeners. In this episode, we highlight the many themes covered during this year, such as the basics of investing, stocks and bonds, how to make wise investment decisions, gender inequality, asset management, index funds, market trends, and portfolio management. We also highlight some of the indirectly topics indirectly related to finance such as the value of happiness, enjoying the pursuit of happiness, the importance of goal setting, and much more. Join us as we reflect on some of our best moments from the year and provide an overview of the many vital lessons we have learned in this final episode of the year for the Rational Reminder podcast.

Key Points From This Episode:

• Mac McQuown explains how the data revolution changed the game of investing. (0:09:05)
• Robin Wigglesworth and tracking the performance of portfolios in the 60s. (0:12:56)
• Professor Fama shares what it is like to see the impact of his academic work on the practice of asset management. (0:16:02)
• Gus Sauter tells us about the role the University of Chicago played in the index fund revolution. (0:18:41)
• Professor Fama unpacks what it means for a market to be efficient. (0:20:52)
• Gerard O’Reilly and the differences in the types of market strategies available. (0:24:27)
• Professor Betermier shares his research from multiple papers concerning tendencies towards growth and value stocks. (0:28:50)
• Eduardo Repetto tells us whether having a portfolio consisting of 100% small-cap value stocks makes sense. (0:36:06)
• Professor Koijen explains whether index funds distort market prices and make markets less efficient. (0:40:30)
• Professors Berk and van Binsbergen discuss if it is possible to find skilled fund managers before they are absorbed by their fund. (0:43:44)
• Professor Cederburg explains how data sets can be upwardly biased and why you need to be aware of it when looking at data. (0:48:15)
• Bill Janeway describes the three-player game regarding investments. (0:50:51)
• Professor Phalippou compares the performance of private equity relative to public equities. (0:53:42)
• Antti Ilmanen tells us how investors can stick with an investment strategy during times of low performance. (0:59:10)
• Professor List tells us how often people should check their investment portfolios. (1:01:56)
• Leonard Mlodinow explains how the rational mind and the emotional mind are intertwined. (1:04:56)
• Professor Edmans’s Grow the Pie and making the world a better place. (1:07:27)
• Rebecca Walker outlines the effect learning about money has on people. (1:11:15)
• Colleen Ammerman describes the current state of women in the workplace. (1:13:21)
• Find out why the pursuit of a goal should be enjoyable with Professor Fishbach. (1:15:40)
• Andrew Hallam talks about life satisfaction after middle age and how to get there sooner. (1:20:28)
• Jay van Bavel details the effect of group identity on goal setting. (1:23:08)
• Professor Frank unpacks the relationship between the consumption of luxury goods and happiness. (1:26:55)
• Professor Bohns provides insight into why people are under-confident in their social lives. (1:31:01)
• Professor Fama reveals how many hours a day the brain can handle deep work. (1:34:24)
• Cassie Holmes and why happiness is a good thing from a scientific perspective. (1:35:30)
• Colonel Chris Hadfield shares the lesson he learned as an astronaut that he applies to his everyday life. (1:38:52)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-233-a-year-in-review-discussion-thread/20856

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Episode 182: John 'Mac' McQuown — https://rationalreminder.ca/podcast/182

Episode 184: Robin Wigglesworth — https://rationalreminder.ca/podcast/184

Episode 186: Andrew Hallam — https://rationalreminder.ca/podcast/186

Episode 188: Professor Fishbach — https://rationalreminder.ca/podcast/188

Episode 192: Professor Edmans — https://rationalreminder.ca/podcast/192

Episode 194: Bill Janeway — https://rationalreminder.ca/podcast/194

Episode 196: Professor Betermier — https://rationalreminder.ca/podcast/196

Episode 198: Gerard O’Reilly — https://rationalreminder.ca/podcast/198

Episode 200: Professor Eugene Fama — https://rationalreminder.ca/podcast/200

Episode 202: Antti Ilmanen — https://rationalreminder.ca/podcast/202

Episode 204: Professor List — https://rationalreminder.ca/podcast/204

Episode 206: Professor Bohns — https://rationalreminder.ca/podcast/206

Episode 208: Rebecca Walker — https://rationalreminder.ca/podcast/208

Episode 210: Professor Phalippou — https://rationalreminder.ca/podcast/210

Episode 212: Professor Koijen — https://rationalreminder.ca/podcast/212

Episode 214: Jay Van Bavel — https://rationalreminder.ca/podcast/214

Episode 216: Gus Sauter — https://rationalreminder.ca/podcast/216

Episode 218: Colleen Ammerman — https://rationalreminder.ca/podcast/218

Episode 220: Professors Berk and van Binsbergen — https://rationalreminder.ca/podcast/220

Episode 222: Cassie Holmes — https://rationalreminder.ca/podcast/222

Episode 224: Professor Cederburg — https://rationalreminder.ca/podcast/224

Episode 226: Colonel Chris Hadfield — https://rationalreminder.ca/podcast/226

Episode 228: Eduardo Repetto — https://rationalreminder.ca/podcast/228

Episode 230: Professor Frank — https://rationalreminder.ca/podcast/230

Gaining financial literacy is critical if you want to thrive in today’s society. And yet, only about a third of the global population can be described as being financially literate. Joining us today to unpack the concept of financial literacy and its impact is Dr. Annamaria Lusardi, Professor of Economics and Accountancy at George Washington University. Dr. Lusardi has taught Economics for over 20 years, and her passion for financial literacy is reflected in everything she does. Her career has been instrumental in furthering the cause of increased global financial literacy, from being the Founder and Academic Director of the Global Financial Literacy Excellence Center, to serving as the co-chair of the G53 Financial Literacy and Personal Finance Research Network. In our conversation, Dr. Lusardi breaks down the definition of financial literacy, how it’s measured by leading experts across the world, along with some of the key differences we see between people in richer and poorer countries. She explains why financial advice isn’t a replacement for financial literacy and provides guidance on what we should be doing to educate various population groups. We also discuss how global trends have created an increased need for financial literacy as an essential skill, especially for young people, and why greater global financial literacy is beneficial to everyone, including governments and wealthier individuals. Tune in as we delve into the many facets of financial literacy and the important role it plays in our collective health, happiness, and success!

Key Points From This Episode:

• Lusardi defines the concept of financial literacy and the importance of being able to apply it as a skill. (0:04:30)
• How experts measure financial literacy and some of the key challenges involved. (0:07:55)
• The global survey that was conducted on financial literacy in 2014 and its dismal findings. (0:11:44)
• The areas of financial literacy that people struggle with most and why the need for financial literacy has increased over time. (0:15:26)
• The costs and benefits of gaining financial literacy and the concept of optimal financial knowledge. (0:22:42)
• An overview of the type of person who should be investing in financial literacy and why. (0:27:46)
• How the strength of your government’s social safety net affects financial literacy rates. (0:30:15)
• The extent to which financial literacy affects stock market participation and wealth accumulation. (0:31:18)
• Some of the common mistakes that those with low levels of financial literacy tend to make. (0:35:10)
• Why financial literacy’s end goal should be geared towards happiness and living a good life. (0:39:24)
• The impact that financial advice and financial advisors have on economic outcomes. (0:43:18)
• How financial literacy varies across demographic groups and some of the factors that account for disparities in financial literacy. (0:45:42)
• How financial education programs can yield positive results and where this education should take place for it to be optimal. (0:52:13)
• What listeners can do to increase financial literacy for those around them and why there is no alternative to good financial knowledge. (0:58:55)

Participate in our Community Discussion about this Episode:

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Dr. Annamaria Lusardi — https://www.annamarialusardi.com/

'Financial literacy and financial resilience: Evidence from around the world' — https://onlinelibrary.wiley.com/doi/abs/10.1111/fima.12283

'The Economic Importance of Financial Literacy: Theory and Evidence' — importance-financial-literacy-theory-evidence.pdf"> https://gflec.org/wp-content/uploads/2014/12/economic-importance-financial-literacy-theory-evidence.pdf

'Optimal Financial Knowledge and Wealth Inequality' — https://www.journals.uchicago.edu/doi/10.1086/690950

'Financial literacy and stock market participation' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X11000717

'Employee Financial Literacy and Retirement Plan Behavior: A Case Study' — https://onlinelibrary.wiley.com/doi/abs/10.1111/ecin.12389

'Skating on thin ice: New evidence on financial fragility' — https://www.dnb.nl/media/uxldldkl/working-paper-no-670_tcm47.pdf

'Stereotypes in financial literacy: Evidence from PISA' — https://www.sciencedirect.com/science/article/abs/pii/S0929119920302753?via%3Dihub

'Fearless Woman: Financial Literacy and Stock Market Participation' — Woman-Research-Final.pdf?x53868"> https://gflec.org/wp-content/uploads/2021/03/Fearless-Woman-Research-Final.pdf?x53868

'How Financially Literate Are Women? An Overview and New Insights' — https://onlinelibrary.wiley.com/doi/abs/10.1111/joca.12121

'Factors Contributing to Financial Well-Being among Black and Hispanic Women' — research.com/content/9/1/71">https://jor.pm-research.com/content/9/1/71

'Financial Education Affects Financial Knowledge and Downstream Behaviors' — https://gflec.org/wp-content/uploads/2020/04/Working-Paper-Financial-education-affects-financial-knowledge-and-downstream-behaviors-April_2020.pdf

Today is our final episode featuring just the two of us before our annual wrap-up show, and we thought we would use this opportunity to cover some important foundational aspects of rational investing. Ben goes over some of the most fundamental concepts about market prices, risk, and actual returns before answering five common questions that relate to this level of information. From investing in an employer's stock to predicting the future and real estate comparisons, these five touch-points are always worth returning to, and should even interest the more experienced of our listeners. For the second half of the show, we offer a quick book review of The Culture Playbook by Daniel Coyle, and have a brief and illuminating conversation with Professor Amer Kaissi about his book, Humbitious, and some of his thoughts on the part that reading plays in rich and progressive life. Press play to catch all this and more on the Rational Reminder Podcast.

Key Points From This Episode:

• Picking up a thread from our discussion on the 2% Rule. (0:06:05)
• Getting to grips with investing basics. (0:10:45)
• How market prices work in response to traders' actions and risk. (0:17:59)
• The main determinants of actual returns and starting points for your portfolio. (0:23:15)
• Unknowable futures and the eternal doom and gloom predictions. (0:35:43)
• Assessing the value of owning an employer's stock. (0:38:21)
• Holding stock picks in Tax-Free Savings Accounts. (0:42:07)
• How to prepare a portfolio when a recession is predicted. (0:43:49)
• Comparing investments in real estate with the stock market. (0:45:14)
• Weighing the value of building and emergency fund. (0:47:11)
• A thirty-second recap of our episode with Cliff Asness. (0:50:06)
• Today's book review focussing on the lesson from The Culture Playbook by Daniel Coyle. (0:51:48)
• Professor Kaissi shares a quick summary of his book, Humbitious. (0:58:40)
• The potential to develop characteristics and the role that reading plays. (0:59:38)
• Professor Kaissi talks about his reading habits. (1:02:12)
• Application of ideas from books and how Professor Kaissi captures and organizes information in his own reading. (1:05:15)
• A few of Professor Kaissi's favourite book recommendations and how to increase your reading habit. (1:08:52)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-231-investing-basics-and-common-questions-plus-reading-habits-w-amer-kaissi-discussion-thread/20716

Books From Today’s Episode:

Humbitious: The Power of Low-Ego, High-Drive Leadership — https://amzn.to/3WjHjry

Mindset — https://amzn.to/3Wzl7Kr

Quiet — https://amzn.to/3htlN4X

The Five Dysfunctions of a Team — https://amzn.to/3YmKqRv

The SPEED of Trust — https://amzn.to/3UWCljq

Top Five Regrets of the Dying — https://amzn.to/3uQcUWf

The Assertiveness Workbook — https://amzn.to/3VVDVUf

How to Raise Your Self Esteem — https://amzn.to/3BDM33p

Ego Is the Enemy — https://amzn.to/3BAyCkZ

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Amer Kaissi on Twitter — https://twitter.com/amerkaissi10

Amer Kaissi on LinkedIn — https://www.linkedin.com/in/amer-kaissi-ph-d-38258919/

Amer Kaissi — http://www.amerkaissi.com

'The Value of Goals-Based Financial Planning' — https://www.financialplanningassociation.org/article/journal/JUN15-value-goals-based-financial-planning

'Excessive Extrapolation and the Allocation of 401(k) Accounts to Company Stock' — http://independent401kadvisors.com/library_articles/ExcessiveExtrapolation.pdf

'The Agony of Ecstasy: The risks and rewards of a concentrated stock position' — ecstasy-2021.pdf"> https://assets.jpmprivatebank.com/content/dam/jpm-wm-aem/global/pb/en/insights/eye-on-the-market/agony-ecstasy-2021.pdf

'The financial resilience and financial well-being of Canadians during the COVID-19 pandemic' — eng.htm"> https://www150.statcan.gc.ca/n1/pub/75f0002m/75f0002m2021008-eng.htm

The world is a highly competitive place, and becoming successful requires hard work, dedication, and luck. This is the view of today’s guest, Professor Robert Frank, who helps us unravel the nuance of conspicuous consumption trends and the role of luck in gaining financial success. Professor Frank is the emeritus Henrietta Johnson Louis Professor of Management at Cornell University and holds an MA in statistics and a Ph.D. in Economics from UC Berkeley. He is also a prolific author, having written 12 books, financial textbooks, and many peer-reviewed articles in journals such as the American Economic Review, Econometrica, and Journal of Political Economy. He is passionate about how policy can help drive positive consumer behaviour, reduce inequality, and increase individual happiness. His work has also focused on the role of luck in achieving financial success which he covers in his book Success and Luck. In this episode, we unpack how individuals can improve societal collective action, the role of policy in driving those changes, and how luck interplays with success. We discuss economic and financial relativism, the dangers of conspicuous consumption, how expenditure cascades occur, and what influences consumption trends in society. We also dive into the topic of luck, whether wealthy people are happier, what behavioural changes are needed to create a better society, and more.

Key Points From This Episode:

• Professor Frank describes the difference between departures from rational choice with regret and without regret. (0:04:34)
• Whether he classifies his work as behavioural economics. (0:07:38)
• An explanation of economic and financial relativism. (0:10:50)
• The role of economic and financial relativism in consumption trends. (0:12:44)
• Find out what constitutes a positional good. (0:16:56)
• How the consumption of positional goods affects psychological well-being. (0:19:32)
• Why people choose to engage in consumption arms races. (0:21:52)
• The relationship between the consumption of luxury goods and happiness. (0:24:45)
• What people can do to recognize and avoid negative consumption behaviours. (0:26:31)
• How the spending of the super-rich impacts the spending habits of the typical consumer. (0:27:38)
• Ways in which social media influencers have affected consumption. (0:30:32)
• We learn about the link between consumption and inequality. (0:32:40)
• How well differences in human capital explain differences in income. (0:35:04)
• Professor Frank explains how likely it is that the most skilled person gets the best outcome in a competitive market. (0:38:13)
• Professor Frank shares how they measure luck. (0:41:20)
• The influence luck has on achieving a successful outcome. (0:42:09)
• Find out if luck influences consumption trends and inequality. (0:44:03)
• A thought experiment concerning the wealthy and higher taxes. (0:46:56)
• We discuss whether winner-take-all markets are a good thing for society. (0:50:22)
• How people should behave differently to help drive positive change. (0:53:06)
• Advice for people to stay motivated and work hard. (0:57:19)
• What Professor Frank thinks about working a job you hate for more money. (0:58:59)
• He provides insight for people who work jobs they hate. (0:59:59)
• His approach on the subject of luck and meritocracy with young kids. (1:00:47)
• We discuss the idolization of financially successful people. (1:03:36)
• How successful individuals should behave differently in an economy where luck plays such an important role. (1:05:38)
• The response of successful people to Success and Luck. (1:08:15)
• Steps people can take to positively affect those around them. (1:09:29)
• Discover what Professor Frank’s position is on policy. (1:14:20)
• We hear how Professor Frank defines success in his life. (1:18:33)

Links From Today’s Episode:

Professsor Robert Frank on Twitter — https://twitter.com/econnaturalist

Cornell University — https://www.cornell.edu/

Success and Luck — https://www.amazon.com/Success-Luck-Good-Fortune/

Luxury Fever — https://www.amazon.com/Luxury-Fever/

Principles of Economics — https://www.amazon.com/Principles-Economics/

The Winner-Take-All Society — https://www.amazon.com/Winner-Take-All-Society/

American Economic Review — https://www.aeaweb.org/journals/aer

Econometrica — https://onlinelibrary.wiley.com/journal/14680262

Journal of Political Economy — https://www.jstor.org/journal/jpoliecon

Project Sunroof — https://sunroof.withgoogle.com/

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/?hl=en

Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Traditionally, people saving for retirement and financial advisors relied on the 4% rule when calculating how much to save for retirement and the associated income those savings would provide after retirement. What if you found out it does not work? Is there another option? Today, we offer you an alternative approach, which is the 2% rule for retirement spending. Before we delve into today’s main topic, we update listeners on the recent London meet-up, what to expect on upcoming shows, and who our special guest is to kick off the first episode of 2023. Then, we discuss today’s main topic and learn what the 2% rule is, how it compares to the 4% rule, and whether the safe percentage for retirement is actually higher. We unpack retirement spending through the lens of several empirical papers, historical data, and market comparisons. We also find out why the US market has always been able to bounce back from uncertainty and whether there is empirical data to support the 4% rule. We also talk about the many financial challenges and opportunities that young people face, the biggest mistake people make regarding retirement, the value of financial literacy, book reviews, and more!

Key Points From This Episode:

• An update on the 22 in 22 Reading Challenge. (0:05:21)
• Outline of today’s content and the main topic: the 2% rule for retirement spending. (0:06:27)
• An overview of the “2% rule”, the motivation behind it, and how it was formulated. (0:08:17)
• We discuss if the safe withdrawal rate for retirement savings is higher than 4%. (0:13:31)
• The inspiration for the higher average realized rate of return on investment theory. (0:19:59)
• Whether the past returns on US stocks will repeat in the future. (0:21:54)
• Why the US stock market has been historically exceptional and resilient, and how other markets compare. (0:23:44)
• The biggest limitation of the seminal work which helped established the 4% rule. (0:28:38)
• How data gaps were dealt with in the paper by Scott Rieckens and results are discussed. (0:33:16)
• Other aspects to consider regarding the research on retirement funds. (0:38:35)
• The challenges and opportunities that young people face today. (0:42:24)
• How financial literacy impacts investment opportunities, returns, and overall happiness. (0:46:59)
• What are the potential solutions and reasons to be optimistic regarding the current financial market. (0:47:48)
• Our usual episode review under a minute: episode 30 with Larry Swedroe. (0:52:31)
• This week’s book review and choice architecture. (0:54:35)
• We discuss the reviews and feedback received on a previous episode. (1:02:32)
• Hear an update about our idea regarding CE credits and reviews about the show. (1:06:01)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-229-the-2-rule-for-retirement-spending-discussion-thread/20473

Book From Today’s Episode:

The Elements of Choice: Why the Way We Decide Matters — https://amzn.to/3VvxZR8

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

'Determining Withdrawal Rates Using Historical Data' — https://retailinvestor.org/pdf/Bengen1.pdf

'Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable' — Savings-Choosing-a-Withdrawal-Rate-That-Is-Sustainable.pdf"> https://www.researchgate.net/profile/Carl-Hubbard/publication/265279441/

'Global stock markets in the twentieth century' — https://onlinelibrary.wiley.com/doi/abs/10.1111/

'Is The United States A Lucky Survivor: A Hierarchical Bayesian Approach' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3689958

'The Safe Withdrawal Rate' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227132

'The equity premium: A puzzle' — https://www.sciencedirect.com/science/article/abs/pii/0304393285900613

'Long-Horizon Losses in Stocks, Bonds, and Bills' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3964908

'Financial System Review 2022' — https://www.bankofcanada.ca/2022/06/financial-system-review-2022/#:~:text=The%20tightening%20of%20monetary%20policy,remain%20two%20key%20interconnected%20vulnerabilities.

'The financial resilience and financial well-being of Canadians during the COVID-19 pandemic' — eng.htm"> https://www150.statcan.gc.ca/n1/pub/75f0002m/75f0002m2021008-eng.htm

'Hopefulness is declining across Canada' — eng.htm"> https://www150.statcan.gc.ca/n1/daily-quotidien/220517/dq220517d-eng.htm

'Global Investor Experience Study: Fees and Expenses' — https://assets.contentstack.io/v3/assets/blt4eb669caa7dc65b2/blt60e320775385837a/62431900eed9f60f2de8ad55/GIE_2022.pdf

'Financial Literacy Around the World' — 5.11.16.pdf"> https://gflec.org/wp-content/uploads/2015/11/3313-Finlit_Report_FINAL-5.11.16.pdf

'Ontario Securities Commission Investor Knowledge Study' — https://www.osc.ca/sites/default/files/2022-09/inv_research_20220907_investor-knowledge-study_EN.pdf

'Measuring the Financial Sophistication of Household' — https://www.nber.org/system/files/working_papers/w14699/w14699.pdf

'Investment Literacy, Overconfidence and Cryptocurrency Investment' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3953242

'Financial Literacy and Attitudes to Cryptocurrencies' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3482083

'Bitcoin Awareness, Ownership and Use: 2016–20'— 10.pdf"> https://www.bankofcanada.ca/wp-content/uploads/2022/04/sdp2022-10.pdf

'Optimal Financial Knowledge and Wealth Inequality' — https://repository.upenn.edu/cgi/viewcontent.cgi?article=1093&context=bepp_papers

'Financial Literacy and Retirement Planning in the United States' — https://www.nber.org/system/files/working_papers/w17108/w17108.pdf

'Financial Well-Being of the Millennial Generation' — Well-Being-of-the-Millennial-Generation-Paper-20191122.pdf"> https://gflec.org/wp-content/uploads/2019/12/Financial-Well-Being-of-the-Millennial-Generation-Paper-20191122.pdf

In this episode, we are joined by the CIO of Avantis Investors, Eduardo Repetto, to have an in-depth conversation about his philosophy and approach to many of the central concepts that are important to our listeners. Eduardo weighs in on asset pricing factor investing, premiums, and also shares some of his perspectives on what makes Avantis different from its competitors. Eduardo's wealth of experience and technical know-how make this very practical exploration, complete with some inventive and demonstrative analogies. Despite the high-level concepts discussed, our guest's ability to communicate these in an accessible manner also helped maintain a level of approachability throughout. Toward the end of the episode, we get to hear a little about Eduardo's Ph.D. in aeronautics and some of the surprising overlaps he sees between his two fields of interest.

Key Points From This Episode:

• Eduardo's approach to communicating what Avantis can offer their clients. (0:02:57)
• Advantages of the ETF structure for managing portfolios. (0:05:07)
• Advice for investors for quantitatively assessing the expected return advantage of a factor-tilted portfolio. (0:10:26)
• Practical approaches for individual investors when assessing a factor tilt in portfolios. (0:13:54)
• Eduardo unpacks the idea of trust in relation to the premium. (0:20:45)
• When does a completely small-cap value portfolio make sense? (0:27:23)
• Avantis' method for targeting value and profitability. (0:31:03)
• The weighting of different metrics that Avantis uses when building portfolios. (0:34:43)
• Eduardo unpacks cash profitability versus operating profitability. (0:36:53)
• The approach at Avantis to sector weights. (0:39:56)
• Understanding adjusted book value when pricing a company. (0:43:53)
• Eduardo describes the premium for the Goodwill adjustment. (0:50:02)
• How Avantis views pursuing credit premium in fixed income investments. (0:51:32)
• Determining the size of factors tilts on particular products. (0:57:05)
• Reasons that there are no emerging market small cap value strategies. (0:59:48)
• Comparing the research behind inflation-focused equity strategy to a more general value profitability premium. (1:06:03)
• Avantis' strategy for staying on the cutting edge of the latest research. (1:10:34)
• Conversations between Avantis and American Century Investments about different investment philosophies. (1:18:22)
• Eduardo shares his opinion about Avantis' competitive advantage. (1:19:56)
• Where Avantis and Eduardo are aiming their energy in the near future, and the succession plan for the company. (1:23:11)
• Some surprising similarities between aeronautics and asset management. (1:27:21)
• Eduardo talks about his personal definition of success. (1:31:31)

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/

Eduardo Repetto — repetto.html"> https://www.avantisinvestors.com/content/avantis/en/about-us/our-team/eduardo-repetto.html

Avantis Investors — https://www.avantisinvestors.com/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/?hl=en

Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

In today’s episode, we pull relevant quotes from past guests (namely John Cochrane, Gene Fama, and Jonathan Berk) to extricate who should own market cap funds. We look at the variable risks of value stocks and factor investing and hear counter-views on owning the market. We also delve into the hot topic of tax loss selling, with an overview of a recent Financial Analyst Journal paper on loss harvesting outcomes, sorted by investor profiles. This episode will get you up to date on the biggest finance news of the week, from crypto collapses to Amazon’s catapulting gains and losses. Tune in to hear all of this and more, including a recap of our conversation with Dave Goetsch and our Financial Literacy Month book reviews. 

Key Points From This Episode:

• A neat way to keep track of the value of your purchases over time. (0:00:33)
• The results of the Rational Reminder financial literacy survey. (0:02:44)
• An overview of this episode’s topics. (0:05:45)
• Who should invest in market cap-weighted index funds. (0:07:28)
• How to determine whether you’re different from the average investor. (0:16:13)
• Gene Fama’s take on the possibility of identifying state factors. (0:22:13)
• The variable risks of value stocks. (0:23:25)
• What drives people to increase their value tilts over time. (0:25:11)
• The risks of factor investing, and trading in general. (0:28:26)
• Jonathan Berk’s take on owning the market. (0:31:53)
• A summary of who should invest in total market index funds. (0:33:20)
• The big crypto news of the week! (0:38:21)
• Other significant market news. (0:42:17)
• An overview of a recent Financial Analyst Journal paper on loss harvesting outcomes, sorted by investor profiles. (0:44:59)
• Our book reviews for Financial Literacy Month. (0:55:15)
• A recap of our conversation with Dave Goetsch. (1:01:47)
• A few of our listeners’ reviews. (1:02:50)

Participate in our RR CE Credits Survey:

https://forms.office.com/Pages/ResponsePage.aspx?id=xVA-B3TS3UeuUte5Yx-hRi0Vpj3fzvhNpOTm6eRMYJ5UN0tOM1A5MFdPQzJFT1hZOTJLN1pHRVFYSS4u

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-227-who-should-invest-in-cap-weighted-index-funds-discussion-thread/20230

Books From Today’s Episode:

The Geometry of Wealth: How to shape a life of money and meaning — https://amzn.to/3Od9J3N

Retirement Income for Life: Getting More without Saving More — https://amzn.to/3GpkHRN

We're Talking Millions!: 12 Simple Ways to Supercharge Your Retirement — https://amzn.to/3UI3uaE

Common Sense on Mutual Funds — https://amzn.to/3AjUsIM

The Investment Answer: Learn to Manage Your Money and Protect Your Financial Future — https://amzn.to/3UWeSPM

Money Like You Mean It: Personal Finance Tactics for the Real World — https://amzn.to/3g9bT7Q

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

'An Intertemporal Capital Asset Pricing Model' — https://www.jstor.org/stable/1913811

'Risk and Return of Value Stocks' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=112553

'The Value Premium' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=351060

'A Consumption-Based Explanation of Expected Stock Returns' — https://repository.upenn.edu/cgi/viewcontent.cgi?article=1146&context=fnce_papers

'Who Are the Value and Growth Investors?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2426823

'Is There a Replication Crisis in Finance?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3774514

'Amazon Becomes World’s First Public Company to Lose $1 Trillion in Market Value' — https://www.bloomberg.com/news/articles/2022-11-09/amazon-hits-unwelcome-milestone-with-1-trillion-in-value-lost?leadSource=uverify%20wall

In this episode, we speak to renowned Canadian figure Colonel Chris Hadfield. For those who don't know, Chris is a heavily decorated astronaut, engineer, and pilot, and has received many awards, such as the Order of Canada, the Meritorious Service Cross and the NASA Exceptional Service Medal. Colonel Hadfield became a worldwide sensation with his video of David Bowie's "Space Oddity" which was viewed by over 75 million people. He aims to make space more accessible and continues to share the wonders of outer space and science with as many people as possible. Besides his phenomenal professional background, he is also known for his music which he writes and plays on earth and in space! He is also the author of several books, namely An Astronaut's Guide to Life on Earth, You Are Here, and a children's book, The Darkest Dark. Although Colonel Hadfield has a very different background from previous guests, his 35-year career has afforded him many lessons that apply to life, which he shares in our conversation with him. We learn the importance of goals and why reaching your goals should not define your happiness. Hear ways to overcome fear when facing uncertainty, the value of competence, and why enjoying the road to success is more important than success itself. Find out why sweating the small is essential to success, whether Colonel Hadfield suffers from imposter syndrome, and where true happiness comes from. Tune in and discover the secret to success and happiness in this one-of-a-kind conversation with special guest, Colonel Chris Hadfield!

Key Points From This Episode:

• What motivated Commander Hadfield to take pictures onboard the International Space Station. (0:04:10)
• He briefly explains the amount of effort that went into taking pictures for his book You Are Here. (0:05:14)
• What lessons Commander Hadfield learned as an astronaut that he applies to life. (0:06:34)
• How to keep motivated to achieve your goals with the knowledge that you probably won’t achieve them. (0:08:41)
• Why his goal was becoming an astronaut and not to be an astronaut. (0:11:05)
• Whether there is a time to reconsider or quit a goal that you have set for yourself. (0:12:46)
• The best way to prepare for situations with uncertain outcomes. (0:14:51)
• How to prepare for situations that you cannot prepare or practice for. (0:18:18)
• Ways to mitigate fear when dealing with risk and uncertainty. (0:20:55)
• Learn if building competence is different for different people. (0:23:48)
• Hear the benefits of negative thinking and sweating the small stuff. (0:25:33)
• Commander Hadfield explains how to prepare for novel situations. (0:29:07)
• He shares where he thinks life satisfaction comes from. (0:31:49)
• Find out if Commander Hadfield ever suffers from imposter syndrome. (0:34:14)
• What life lessons he hopes to impart to his grandchildren. (0:36:09)
• How Commander Hadfield defines success in his life. (0:38:04)
• We highlight the main takeaways from our conversation with Commander Hadfield. (0:41:14)

Links From Today’s Episode:

Commander Chris Hadfield — https://chrishadfield.ca/

Commander Chris Hadfield on Twitter — https://twitter.com/Cmdr_Hadfield/

Commander Chris Hadfield on Instagram — https://www.instagram.com/colchrishadfield/

Commander Chris Hadfield on Facebook — https://www.facebook.com/AstronautChrisHadfield

Commander Chris Hadfield on LinkedIn — https://www.linkedin.com/in/chris-hadfield/

Commander Chris Hadfield on YouTube — https://www.youtube.com/c/ChrisHadfieldAstronaut/featured

A Space Oddity — https://www.youtube.com/watch?v=KaOC9danxNo

You Are Here — https://www.amazon.com/You-Are-Here-Photographs-International/dp/0316379646

An Astronaut's Guide to Life on Earth — https://www.amazon.com/Astronauts-Guide-Life-Earth-Determination/

The Darkest Dark — https://www.amazon.com/The-Darkest-Dark/

Are index funds a menace to the market? Are pension funds still a wise way to secure your financial future? In this episode, we discuss index funds, the state-sponsored pension plan in Canada, and much more. First, we unpack the nuances of index funds and take a look at the impact that active and passive investors have on the market. We discuss current index fund trends, when to switch from a passive to an active investor, and the dreaded index fund tipping point. To help us understand pension funds, we also chat with Jordan Tarasoff, a financial planner at PWL Capital, about the recent controversy regarding state pension schemes in Canada, and he provides us with some valuable insights into the government’s upcoming plan. We switch up our usual book review to celebrate Financial Literacy Month and share five recommended books that will help you improve your understanding of finance. We also try something new by giving listeners a condensed overview of a previous episode with one of our favourite guests, Scott Rieckens. Finally, we go through some of the feedback and comments we’ve received from the growing Rational Reminder community about the show and our recent financial goals survey.

Key Points From This Episode:

• What to look forward to in next week’s episode. (0:05:08)
• Hear about a special promotion to celebrate Financial Literacy Month. (0:05:43)
• Introducing today’s topic and what to expect in the episode. (0:05:56)
• Worries and biggest critiques of index funds. (0:08:23)
• Current trends regarding index funds in relation to the market. (0:09:40)
• When investors should switch from passive to active. (0:12:45)
• Some good news about the index fund tipping point. (0:15:46)
• What investors should be aware of when actively investing. (0:16:32)
• How informed and misinformed managers contribute to the index fund tipping point. (0:19:38)
• Who the investors and managers are that change to passive investment. (0:20:52)
• How switching from active to passive investing affects the value of the market. (0:25:38)
• Unpacking the concept of markets being ‘inelastic’ as a result of index funds. (0:28:52)
• Whether passive investing undermines price efficiency concerning index funds. (0:30:03)
• What would cause the index tipping point to occur. (0:31:40)
• A brief background on today’s guest, Jordan Tarasoff. (0:35:00)
• Details about the Canada Pension Plan (CPP) and how it works. (0:35:28)
• Jordan outlines the benefits of deferring a pension plan claim. (0:36:28)
• Recent changes that make deferring your pension plan non-beneficial. (0:38:20)
• What age group the recent pension plan changes impact the most. (0:42:14)
• Why the Consumer Price Index (CPI) can’t be used to predict wage growth. (0:43:53)
• How Jordan is approaching his clients’ pensions regarding the new changes. (0:45:10)
• Review of our top five books for increasing financial literacy. (0:48:57)
• Our new segment: summarizing a past episode in sixty seconds. (0:56:57)
• We ‘talk cents’ about financial values and spending. (0:58:49)
• Recent reviews and feedback received about the podcast and goals survey. (1:02:40)

Links From Today’s Episode:

Jordan Tarasoff — https://www.pwlcapital.com/profile/jordan-tarasoff/

Scott Rieckens — http://www.scottrieckens.com/

Efficient Frontier — http://efficientfrontier.com/ef/0adhoc/2books.htm

Episode 95: Scott Rieckens (Playing with FIRE): Finding Financial Education, Perspective, and Freedom — https://rationalreminder.ca/podcast/95

Episode 99: Andrew Hallam (Millionaire Teacher): How to be Wealthy (and Happy) — https://rationalreminder.ca/podcast/99

Episode 108: Dr. William Bernstein: Praying for a Bear Market — https://rationalreminder.ca/podcast/108

Episode 128: Morgan Housel: The Psychology of Money — https://rationalreminder.ca/podcast/128

Episode 159: Bill Schultheis: Build Wealth and Get on With Your Life — https://rationalreminder.ca/podcast/159

Episode 186: Andrew Hallam: Balancing Money, Relationships, Health, and Purpose — https://rationalreminder.ca/podcast/186

Episode 191: Emerging Markets: Diversifying Asset or a Reverse Lottery? (plus Reading Habits w/ Morgan Housel) — https://rationalreminder.ca/podcast/191

Episode 212: Prof. Ralph Koijen: Demand System Asset Pricing & Inelastic Markets — https://rationalreminder.ca/podcast/212

Episode 124: Prof. Lubos Pastor: Equilibrium Models vs. Intuition — https://rationalreminder.ca/podcast/124

Episode 220: Jonathan Berk and Jules van Binsbergen: The Arithmetic of Active Management, Revisited — https://rationalreminder.ca/podcast/220

‘On the Size of the Active Management Industry’ — https://www.jstor.org/stable/10.1086/667987

‘Disagreement, tastes, and asset prices’ — https://www.sciencedirect.com/science/article/abs/pii/S0304405X06001954

‘Measuring skill in the mutual fund industry’ — https://www.sciencedirect.com/science/article/abs/pii/S0304405X15000628

‘Which Investors Matter for Equity Valuations and Expected Returns?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3378340

Balance: How to Invest and Spend for Happiness, Health, and Wealth — https://www.amazon.com/Balance-Invest-Happiness-Health-Wealth/dp/1774580756

If You Can: How Millennials Can Get Rich Slowly — https://www.amazon.com/If-You-Can-Millennials-Slowly/dp/098878033X

The Coffeehouse Investor's Ground Rules — https://www.amazon.com/Coffeehouse-Investors-Ground-Rules-Happiness/dp/1119717086

The Psychology of Money — https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681

Think, Act, and Invest Like Warren Buffett — https://www.amazon.com/Think-Invest-Like-Warren-Buffett/

The November Meet-up Email — info@rationalreminder.ca

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/?hl=en

Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Are stocks and bonds good in the long game? What are the best long-term investment options? In this episode, we speak to Professor Scott Cederburg about the nuance surrounding the stock market, bonds, and other investment types in the long term. He has a Ph.D. in Finance from the University of Iowa and is currently the Associate Professor of Finance at Eller College of Management at the University of Arizona. His research focuses on the long-horizon performance of a range of asset classes and investment types and has published in high-ranking academic journals, making him the perfect person to speak to about the subject. We discuss the topic through the lens of several papers he has written on stocks, bonds, retirement savings, and return predictability. In our conversation, we unravel the nuance of the returns on long-term stocks and bonds, hear details about his research design, and learn how unanticipated events can affect the market. He also provides insight into the different biases surrounding long-term investments, the block bootstrap approach, reasons why the block bootstrap approach is needed, and why bonds and bills may not be the long-term investment you were hoping for. We also discuss the best options for investors regarding pre-tax and post-tax accounts and the differences between high-beta and low-beta portfolios. He also shares some basic steps for investors to help them protect their investments. Join us as we dig into the past to uncover the financial future with Professor Scott Cederburg.

Key Points From This Episode:

• We begin with Professor Cederburg describing his research design for his work investigating long-term returns on stocks and bonds. (0:04:20)
• Hear examples of how unanticipated events lead to impacts on stocks and bonds. (0:08:08)
• What the overall trend in the data was from his research on stocks and bonds. (0:11:05)
• Why considering different biases is essential for financial decision-making. (0:11:45)
• How the historical experience in the US stock and bond markets compare to other developed markets. (0:12:45)
• Details about the data he collected regarding domestic stocks and investors. (0:13:55)
• Learn how probable it is that domestic stocks will deliver losses in the long term. (0:16:41)
• Outline of the factors which tend to cause long-term stock losses. (0:17:36)
• What potential losses are in the long-term for international stocks. (0:18:58)
• How likely stocks will deliver catastrophic losses as opposed to traditional forms of loss. (0:22:15)
• Find out how much the probability of loss decreases with longer horizons. (0:23:59)
• The contribution of currency and domestic inflation to the trends in the data. (0:24:52)
• We compare how well international stocks hedge against long-term real losses in domestic stocks. (0:25:25)
• He shares how he thinks investors should approach the home country bias. (0:26:34)
• A rundown of the expropriations that exist in Professor Cederburg’s data. (0:27:34)
• We talk about long-term stocks and their implications on asset allocations. (0:28:48)
• How wide the distribution of long-run stock payoffs are. (0:29:28)
• Discover how likely bonds and bills are to real losses over a long period. (0:30:16)
• Breakdown of what the distribution looks like for bond returns. (0:31:52)
• Whether bonds act as a hedge against poor stock returns. (0:33:24)
• Common economic conditions that explain the poor long-term returns for stocks and bonds. (0:34:58)
• Ways in which the results can be used to make predictions for the economic future. (0:38:36)
• Professor Cederburg tells us if stocks are safe or risky in the long term. (0:40:23)
• He unpacks mean reversion in the full-time series compared to the block bootstrap approach. (0:41:27)
• Why emerging markets were not considered in the study. (0:43:55)
• Advice for investors given the findings of his study. (0:45:00)
• We discuss the applicability of the findings within a contemporary market setting. (0:47:04)
• Which variables need to be considered when deciding between a pre-tax or post-tax savings account. (0:49:19)
• Factors that make a pre-tax and post-tax account valuable. (0:50:41)
• Hear the investment type most exposed to future tax schedule uncertainty. (0:54:50)
• Whether using a post-tax account can build resilience to tax uncertainty. (0:56:29)
• Simple rules for listeners to help them optimize the location of their savings. (0:59:08)
• How the simple rules compare to the optimization analysis performed for the research paper. (1:01:40)
• Risk-adjusted performance for high beta and low beta portfolios. (1:03:02)
• We learn what the implications are for someone investing in low-beta assets. (1:05:58)
• Professor Cederburg shares his definition of success. (1:09:17)

Links From Today’s Episode:

Global Financial Data — https://globalfinancialdata.com/

‘Stocks for the long run? Evidence from a broad sample of developed markets’ — https://www.sciencedirect.com/science/article/

‘Tax Uncertainty and Retirement Savings Diversification’ — https://www.sciencedirect.com/science/article/

‘Does it pay to bet against beta? On the conditional performance of the beta anomaly’ — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12383

We recently created and conducted a very interesting survey based on financial goals, and today, we get to share some of the data we collected and the answers that were given to the questions. Although there are some definite limitations to our expertise as surveyors and data collectors, the findings are most definitely illuminating, surprising, and useful. Listeners will get to hear a bit about the process of building the survey as well as some of the raw numbers and data before we get into the list of goals that were submitted, collated, and ranked. We also share some of the ways that these were split across demographics such as age and gender. Apart from this focus on the survey, we share some thoughts on Eat the Rich, Coin, and The Next Millionaire Next Door, and finish off the show with some very impactful letters from listeners that we have received recently.

Key Points From This Episode:

• Thoughts on the new Netflix show, Eat the Rich, and the story of GameStop. (0:01:58)
• What to expect on the podcast in November during Canadian Financial Literacy Month. (0:05:17)
• Reflections on the new film, Coin, and the founding of Coinbase. (0:08:08)
• Introducing the results from our recent survey on goals. (0:11:23)
• The process of building the survey and the questions we included. (0:18:22)
• A look over the basic data of the survey. (0:22:27)
• Popular objectives from the survey and how these were split across different demographics. (0:23:17)
• The answers that were given in relation to each specific question. (0:28:02)
• Developing best practices for goal setting for an advisor environment. (0:30:17)
• Limitations to our expertise in designing this survey and analyzing the data. (0:32:43)
• Running through the complete list of goals in order. (0:34:29)
• Introducing this week's book discussion on The Next Millionaire Next Door. (0:39:46)
• Standout findings from the research that was conducted for the book. (0:44:00)
• Utilization of an 'expected net worth test' in the book. (0:49:50)
• A look at some of the listener messages we have received lately. (0:52:29)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-223-a-financial-goals-master-list-n-310-discussion-thread/19742

Books From Today’s Episode:

The Next Millionaire Next Door — https://www.amazon.com/Next-Millionaire-Door-Enduring-Strategies/dp/1493035355

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Financial Goals Summary - https://www.pwlcapital.com/resources/goals-survey-summary/

'Generating Objectives' — https://repository.library.georgetown.edu/handle/10822/707941

Tom McHugh YouTube Video — https://www.youtube.com/watch?v=MbaAkJHvCIw

'Generating Objectives' — https://repository.library.georgetown.edu/handle/10822/707941

Tom McHugh YouTube Video —https://www.youtube.com/watch?v=MbaAkJHvCIw

There is more and more research on the determinants and results of happiness in human life, and on the show today we get to do an amazing deep dive on this subject with social psychologist, and author of Happier Hour, Cassie Holmes. Cassie is currently running a course at UCLA Anderson School of Management called 'Applying the Science of Happiness to Life Design', and her book draws directly from the content of this course. In our chat, Cassie shares some definitive data on what actually influences our happiness in significant ways, how to invest and allocate your available time, approaches to offsetting hedonic adaptation, and the vital importance of relationships and exercise. Our guest also talks about popular misconceptions and cultural perceptions about success, and why assessing your values and purpose can make achieving more happiness much more realistic. It is here that we find Cassie's main thesis; that through reflection and tracking we can determine more accurately how to use our time in the different parts of our lives and increase our day-to-day happiness, so make sure to join us for this episode of the Rational Reminder.

Key Points From This Episode:

• The science behind the important benefits of happiness. (0:02:17)
• Current research into the measurement of happiness. (0:04:27)
• Cassie talks about the roots of the course she teaches on happiness. (0:07:02)
• Misconceptions about what makes us happy and the lasting power of notions of success. (0:10:25)
• The cultural roots of our perceptions of happiness. (0:14:58)
• Determinants of happiness; Cassie shares the biggest factors in our emotional landscape. (0:20:16)
• Working towards a goal, time tracking, and entering flow states. (0:25:28)
• Happiness as a decision and as a disposition; how much control do we have? (0:30:26)
• How comparison undermines and robs us of happiness. (0:37:01)
• Cassie unpacks how to understand the role of relationships in our lives. (0:38:30)
• A story from Cassie illustrating the links between discretionary time and happiness. (0:43:35)
• Amounts of discretionary time to allocate to yourself each day. (0:49:39)
• The worst ways to use time and the activities that enhance feelings of loneliness. (0:52:02)
• Cassie's advice on how to avoid time poverty and what to refuse. (0:55:53)
• The dangers of an over-emphasis on productivity and urgency. (0:58:21)
• Aligning your values and purpose in the professional sphere of your life. (1:01:38)
• How the remote landscape and work-from-home model has impacted happiness. (1:03:03)
• Going over the exercises and assignments that Cassie finds to be most impactful for her students. (1:06:36)
• Cassie's definition of success and its relation to her clearly defined purpose. (1:11:33)

Of course, you want to protect your family and your savings from unforeseen consequences, but is life insurance the best option? Can life insurance be an investment rather than a cost? In today's episode of the Rational Reminder Podcast, we take a look at everything life insurance and dig into some hard-hitting research on the subject. We break down the various insurance products available and unravel the nuances regarding returns, dividends, and the associated fees. We discuss why there is so much confusion regarding returns and associated risk, how your contribution can affect your returns, and why you may not get the payout you expected. We also delve into what makes each insurance product different from the next, whether predictions on insurance policy returns are possible, and how insurance compares to other asset classes. If you’re looking for insight into the potential tax benefits of life insurance and a breakdown of the different scenarios where life insurance is needed, this is the episode for you!

Key Points From This Episode:

• The main topic of the episode: permanent life insurance. (0:04:29)
• Defining insurance and how it is typically structured. (0:04:44)
• ‘Term life insurance’ and how it works. (0:05:41)
• A brief outline of the differences between term insurance and permanent insurance. (0:07:37)
• Details about term life insurance and the benefits to the policyholder. (0:09:37)
• Another type of life insurance: universal life insurance. (0:11:05)
• How investments within a life insurance policy are designed. (0:13:20)
• An interesting insight Ben came across while researching insurance. (0:14:38)
• Non-participating whole life insurance and the associated cash value. (0:16:00)
• A breakdown of participating life insurance and what makes it different. (0:18:42)
• The basis for performance and premiums on participating insurance. (0:21:43)
• Whether or not it’s possible to predict returns from insurance products. (0:25:25)
• Reasons for the obscurity surrounding insurance products and expected returns. (0:25:49)
• The policy illustration software that many insurance companies use. (0:29:35)
• Insight into post-tax returns of permanent insurance on death. (0:35:23)
• An overview of when you would need life insurance. (0:40:58)
• The long-term expected death benefits compared to other assets. (0:43:03)
• Insight into the commission incentive associated with insurance policies. (0:45:47)
• Highlights of a recent presentation that Ben gave at an IAFP conference. (0:46:53)
• Feedback received about the Jonathan Berk and Jules van Binsbergen episode. (0:49:01)
• A summary of recent news about rate changes and developments at Vanguard. (0:56:23)
• This week’s review of The Art of Gathering, about meeting more effectively. (01:00:55)
• An honourable mention of another book, Your Investment Philosophy. (1:06:22)

Do you feel like you have a good grasp of financial markets? Think again! In this episode, we take a plunge into the world of financial markets with experts Jules van Binsbergen and Jonathan Berk. Jules is a Professor of Finance at the Wharton School of the University of Pennsylvania and Jonathan is a Professor of Finance at Stanford Graduate School of Business. They also host a popular podcast called Else Equal, which explores the science and strategy of making better financial decisions, and have written several academic papers that challenge the status quo. In our conversation, we discuss their research on the relationship between manager skill and fund performance, the best ways to measure performance, and reasons why benefits are in favour of the managers. We also explore the dogma surrounding mutual funds, the differences between active and passive management, and how to measure efficient capital markets. Listeners will also hear perspectives that challenge their understanding of capital markets and viewpoints that completely disagree with previous guests. Although we have covered this topic before in previous episodes, this conversation will fundamentally change the way you view financial markets and how to think about them.

Key Points From This Episode:

• What information fund performance contains about manager skill. (0:04:04)
• Reasons why manager skill and performance are unrelated. (0:04:59)
• We learn how manager skills should be measured. (0:06:57)
• How to choose the appropriate benchmark to measure value added. (0:09:26)
• Find out if you can use factor-mimicking portfolios to measure risk-adjusted returns. (0:12:05)
• Whether funds that directly target risk factors can be used as an investable benchmark. (0:16:35)
• What the skill of active managers are when skill is measured as value-added. (0:20:52)
• The proportion of value-added between security selection and market timing. (0:23:20)
• Discussion about how persistence manifests when it is measured by value-added. (0:25:43)
• Find out if investors should analyze mutual fund companies as opposed to managers. (0:32:36)
• Discover why research has focused on individual security pricing and not on evaluating manager skill. (0:34:25)
• We unpack the reasons why it's a zero net alpha as opposed to a negative net alpha in equilibrium. (0:38:19)
• We delve into why the research took so long to apply rational expectations to fund investors as with the stock market. (0:42:46)
• An explanation of how equilibrium zero net alpha fits into Bill Sharpe's arithmetic of active management. (0:48:16)
• Who benefits from the high amount of skill available within the sector. (0:51:11)
• Whether the increase in millionaires around the world drives inequality. (0:56:12)
• Hear if it is possible to identify skilled fund managers before the benefits of their skills are absorbed by fund size. (01:01:41)
• The implications on efficient market hypothesis for the stock market. (01:05:36)
• Advice for investors, considering that the benefits of skill are in favour of managers. (01:08:37)
• Details about their research on how multi-factor asset pricing models are not representative of risk. (01:12:45)
• We end the show by learning how our guests define success in their lives. (01:19:08)

Links From Today’s Episode:

Jules van Binsbergen — https://sites.google.com/view/jules-van-binsbergen/

Jules van Binsbergen on LinkedIn — https://www.linkedin.com/in/jules-van-binsbergen-a7b21a2/

Jules van Binsbergen on Google Scholar — https://scholar.google.com/citations/

Wharton School of the University of Pennsylvania — https://www.wharton.upenn.edu/

Jonathan Berk — https://www.gsb.stanford.edu/faculty-research/faculty/jonathan-b-berk

Jonathan Berk on LinkedIn — https://www.linkedin.com/in/jonathan-berk-07874a3b/

Jonathan Berk on Google Scholar — https://scholar.google.com/citations/

Stanford Graduate School of Business — https://www.gsb.stanford.edu/

Else Equal: Making Better Decisions — https://www.gsb.stanford.edu/business-podcasts/all-else-equal-making-better-decisions

Passive in Name Only — https://heinonline.org/HOL/LandingPage/

The Emperor of All Maladies — https://www.amazon.com/Emperor-All-Maladies-Biography-Cancer/dp/1439170916

Unsettled — https://www.amazon.com/Unsettled-Climate-Science-Doesnt-Matters/dp/1950665798

‘Episode 200 with Prof. Eugene Fama’ — https://podcasts.google.com/feed/aHR0cHM6Ly9yYXRpb25hbHJlbWluZGVyLmxpYnN5bi5jb20vcnNz/episode/MzA2MjM2OTctOTc5Yy00MDU4LWE3YzMtYTdmMGU4NGQ0Y2Jj?sa=X&ved=0CAIQuIEEahgKEwjI27ng_rH6AhUAAAAAHQAAAAAQsQQ

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/?hl=en

Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Critics of blockchain often say that it is nothing more than a database, but today’s guest, Ari Juels, has a different opinion. His technical expertise (he is a Professor of Computer Science at Cornell Tech), combined with his ability to understand both sides of a divisive topic like this one, make for a very insightful conversation about Bitcoin, NFTs, and smart contracts. We talk about the reasons for the valid skepticism that surrounds blockchain technology, the various reasons that Ari believes that it is a powerful, useful tool, despite its downfalls, pyramid schemes, decentralized exchanges and more!

Key Points From This Episode:

• The significance of the Bitcoin innovation to Ari’s field of study. (0:03:40)
• What piqued Ari’s initial interest in digital currency. (0:04:46)
• Ari explains the difference between permission and permissionless blockchains. (0:06:27)
• Comparing a permission blockchain with a distributed-append-only database with authorized contributors. (0:08:34)
• A number of reasons why permissionless blockchains have been so widely embraced (despite Ari’s initial prediction to the contrary). (0:12:24)
• Fraud in the cryptocurrency space; Ari shares his thoughts. (0:14:28)
• The benefits of the cultural phenomenon of NFTs. (0:19:25)
• Examples of NFT-related issues that still need to be addressed. (0:26:04)
• How smart contracts can be used by criminals to their advantage. (0:30:09)
• Why smart contracts are well suited for compliance. (0:32:02)
• An example of a smart contract pyramid scheme. (0:35:48)
• Some of the pros and cons of the inflexibility of smart contracts. (0:41:09)
• What flash loans are and what they can be used for. (0:46:11)
• Understanding the value of oracle systems. (0:50:04)
• How the Candid system that Ari’s group developed helps to mitigate the problem of lost Bitcoin keys. (0:57:04)
• Ari explains the advantages and disadvantages of a decentralized exchange. (01:01:19)
• How the blockchain has improved code writing. (01:07:57)
• The importance of balancing privacy and accountability in DeFi systems. (01:09:38)
• Ari’s thoughts about the future potential of blockchain technology. (01:14:03)
• The biggest concerns that Ari has about the blockchain space. (01:15:24)
• Why skepticism about blockchain technology is valid. (01:17:31)
• The facet of the blockchain space that Ari is most excited about. (01:19:51)

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Ari Juels on Twitter — https://twitter.com/AriJuels

Ari Juels — https://www.arijuels.com/

The Ring of Gyges: Using Smart Contracts for Crime — http://www.arijuels.com/wp-content/uploads/2013/09/Gyges.pdf

NFTs for Art and Collectables: Primer and Outlook — https://www.arijuels.com/wp-content/uploads/2022/04/NFTs__Primer_and_Outlook.pdf

‘Huge mess of theft and fraud:’ artists sound alarm as NFT crime proliferates — https://www.theguardian.com/global/2022/jan/29/huge-mess-of-theft-artists-sound-alarm-theft-nfts-proliferates

Incomplete Contracts and Control — lecture.pdf">https://www.nobelprize.org/uploads/2018/06/hart-lecture.pdf

Chainlink 2.0: Next Steps in the Evolution of Decentralized Oracle Networks — v2.pdf?_ga=2.99068702.124468793.1661870135-1990502175.1661870135"> https://research.chain.link/whitepaper-v2.pdf?_ga=2.99068702.124468793.1661870135-1990502175.1661870135

Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges — https://arxiv.org/pdf/1904.05234.pdf

Themis: Fast, Strong Order-Fairness in Byzantine Consensus — https://eprint.iacr.org/2021/1465.pdf

Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains — https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Witness%20Testimony_Juels_OI_2022.01.20.pdf

The Seven Grand Challenges — https://www.initc3.org/projects.html

The type of assets which usually come to mind when considering investments are stocks, bonds, or cash, but what are the alternatives? And what kind of returns do alternative asset classes offer? In today’s episode, we delve into the returns which can be expected from alternative asset classes such as private equity, venture capital, angel investing, private credit, hedge funds, direct real estate, and cryptocurrencies. Hear an in-depth analysis based on empirical studies and the expertise of your hosts, Ben and Cameron, to discover whether there is any merit to alternative asset classes as investments. We unpack the extra layer of complexity associated with predicting returns on alternative assets, how to approach calculating returns, and why the associated fees are an essential consideration. We also hear details about an interesting conference Cameron recently attended and briefly recap cryptocurrencies as an investment. You’ll also hear our conversation with our 22 in 22 reading challenge guest David Senra about his reading habits, the books that most inspire him, and his advice for people who want to read more.

Key Points From This Episode:

• Outline of today’s main topic: expected returns for alternative asset classes. (0:01:51)
• Why predicting returns of alternative asset classes has an extra layer of complexity. (0:03:18)
• How to approach estimating the returns of private equity, specifically buyouts. (0:05:04)
• We unpack historical data regarding the returns of private equity. (0:07:35)
• Calculating the returns on venture capital and reasons to be cautious about it as an asset class. (0:16:35)
• The distribution of returns from venture capital based on the market numbers. (0:20:09)
• Learn what angel investing is and its associated returns. (0:20:54)
• What returns on angel investing are most dependent on and why. (0:22:21)
• The different types and the associated returns. (0:25:23)
• Hear about the fees associated with private credit. (0:27:42)
• We unravel the concept of hedge funds, the associated fees, and expected returns. (0:29:29)
• A limiting factor on hedge funds: capacity constraints. (0:33:38)
• The takeaway regarding private real estate investments. (0:36:25)
• How private real estate is valued as an asset class. (0:37:48)
• Cryptocurrencies and the returns to be expected. (0:39:34)
• We discuss some of the key takeaways from today’s main topic. (0:43:30)
• We follow up on a previous topic we covered: financial literacy. (0:45:10)
• Find out about an interesting conference that Cameron recently attended. (0:48:46)
• Hear about the recent reviews we have received about the podcast. (0:57:58)
• We introduce our 22 and 22 reading challenge guest, David Senra. (01:00:15)
• Where David’s passion for reading about founders originates from. (01:02:25)
• David shares details about his reading habits. (01:05:57)
• His approach to finding founders that he wants to read about. (01:08:49)
• David’s approach to note taking while reading a book. (01:11:07)
• We learn about the stories that have impacted David the most. (01:13:53)
• He explains the benefits of reading a book for a second time. (01:17:11)
• Books about founders that he thinks everyone should read. (01:19:20)
• David’s observation of the role of luck in a founder’s success story. (01:23:19)
• Advice he has for people who want to read more. (01:29:33)

Links From Today’s Episode:

AQR Capital Management — https://www.aqr.com/

BlackRock Asset Management — https://www.blackrock.com

Bank of America — https://www.bankofamerica.com/

‘The risk and return of venture capital’ — https://www.sciencedirect.com/science/article/pii/S0304405X04001564

‘Performance of Private Credit Funds: A First Look' — research.com/content/21/2/31.short">https://jai.pm-research.com/content/21/2/31.short

‘Do Hedge Funds Hedge?’ — research.com/content/28/1/6.short">https://jpm.pm-research.com/content/28/1/6.short

‘The Performance of Hedge Fund Performance Fees’ — https://www.nber.org/papers/w27454

‘Higher risk, lower returns: What hedge fund investors really earn’ — https://www.sciencedirect.com/science/article/abs/pii/S0304405X1100016X

‘Another Look at Private Real Estate Returns by Strategy’ — research.com/content/45/7/95/tab-pdf-trialist">https://jpm.pm-research.com/content/45/7/95/tab-pdf-trialist

'The Characteristics and Portfolio Behavior of Bitcoin Investors: Evidence from Indirect Cryptocurrency Investments' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3501549

‘Beliefs and the Disposition Effect’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3516567

‘Once Bitten, Twice Shy: The Power of Personal Experiences in Risk Taking’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2506627

S&P Global FinLit Survey — https://gflec.org/initiatives/sp-global-finlit-survey/

Future Proof Conference — https://futureproof.advisorcircle.com/

Invest Like the Best Podcast — https://investlikethebest.libsyn.com/

David Senra on LinkedIn — https://www.linkedin.com/in/david-senra-278843236/

David Senra on Twitter — https://twitter.com/FoundersPodcast?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor

David Senra on Facebook — https://www.facebook.com/david.senra.1

The Founders Podcast — https://founders.simplecast.com/

A Triumph of Genius — https://www.amazon.com/Triumph-Genius-Edwin-Polaroid-Patent/dp/1627227695

Cable Cowboy — https://www.amazon.com/Cable-Cowboy-Malone-Modern-Business/

Titan — https://www.amazon.com/Rare-Chernow-Titan-Life-Rockefeller/

A Man for All Markets — https://www.amazon.com/Man-All-Markets-Street-Dealer/

Against the Odds — https://www.amazon.com/Against-Odds/

Estee: A Success Story — https://www.amazon.com/Estee-Success-Story-Lauder/

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/?hl=en

Rational Reminder on YouTube — https://www.youtube.com/channel/ Ben Felix — https://www.pwlcapital.com/author/benjamin-felix/

Ben on Twitter — https://twitter.com/benjaminwfelix

Ben on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

In this episode, we speak to Chris DeRose, software developer and former co-host of the Bitcoin Uncensored podcast, about both the downsides and upsides of cryptocurrencies and the associated technologies. We took the time to dive deep into the subject with Chris and learned about some of the common misconceptions about blockchain technology, the value of cryptocurrencies to society, ways in which the crypto space has evolved, using economic theories to understand financial systems, the definition of money, what he thinks about the associated technologies, the role blockchain technology can have in society and why cryptocurrencies will not replace the dollar.

Key Points From This Episode:

• The motivation behind Chris’s decision to get involved with Bitcoin in 2010. (0:00:48)
• How the Bitcoin community has evolved since Chris got involved in 2010. (0:03:00)
• Some of the common misconceptions associated with blockchain technology. (0:06:03)
• Whether new technologies pushing back against regulations is common. (0:08:08)
• Ways in which Chris’s perception of crypto has changed since he discovered it. (0:09:53)
• Chris explains what his definition of money is. (0:11:19)
• Find out what Bitcoin actually is, if it is not money. (0:14:39)
• Aspects of the current financial system that Bitcoin improves on. (0:16:42)
• A discussion around the recent controversy regarding Canadian trucker convoys. (0:17:54)
• Some of the problems anonymity associated with cryptocurrencies causes. (0:20:33)
• Why not being able to verify transactions is a problem for privacy coins. (0:21:18)
• A discussion about the US monetary system and the US dollar. (0:24:12)
• Chris discusses the reliance on economic theories to understand the economy. (0:30:59)
• What he thinks about crypto markets through the lens of market efficiency. (0:32:26)
• Whether crypto markets can be manipulated or not. (0:33:49)
• Why Chris thinks Bitcoin will not make traditional regulations around payments obsolete. (0:35:32)
• Another discussion regarding the economy through a theoretical lens. (0:39:15)
• Reasons why Chris thinks cryptocurrencies have value. (0:40:32)
• Chris explains what fungible value is. (0:45:49)
• Why Bitcoin is regarded as digital gold. (0:49:25)
• How possible it is for Bitcoin to replace the dollar. (0:50:46)
• Chris tells us if he thinks Bitcoin and Ethereum are (0:53:39)
• Why Chris thinks there is a mythical aspect to the economy. (1:00:49)
• We find out if Chris thinks blockchains are immutable. (1:02:29)
• Immutability: find out if this is a good aspect of cryptocurrencies. (1:03:37)
• An explanation of consensus and if proof of work alternatives offer solutions. (1:04:33)
• Reasons why he thinks Vitalik Buterin is a charlatan. (1:09:22)
• Chris tells us if Vitalik’s claims are living-up to the expectations. (1:12:41)
• The role that blockchains can play regarding international money transfers. (1:15:22)
• Outline of how ransomware could be beneficial to society. (1:16:20)
• How possible is it to see nation-states existing only on the blockchain. (1:17:43)
• Learn what value private blockchains offer. (1:18:37)
• What are the most promising crypto products/technologies in Chris’s opinion. (1:19:49)
• The technical aspects of NFTs are explained. (1:21:23)
• Find out what his opinion on DAOs is. (1:24:20)
• Examples of the best application of smart contracts that Chris has seen. (1:25:13)
• Whether cryptocurrencies and public blockchains are revolutionary technology. (1:27:38)
• What role cryptocurrencies can play in reducing wealth inequality. (1:28:35)

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Chris DeRose — http://www.chrisderose.com

The gender pay gap is still a persistent problem in today's society, reflecting the overall state of gender inequality. It is full of complexity and comprises different facets, making it hard to understand the overall situation. We have covered the topic before, but in this episode, we go into a whole new level of detail. To help us unpack the nuance of this essential topic is Colleen Ammerman, Director of the Gender Initiative at Harvard Business School. She is also the author of Glass Half-Broken, providing readers with hard evidence and detailed analysis of the different drivers of gender inequality in the workplace. We cover the basics of gender inequality, such as how it currently exists, how it manifests in the workplace, and the subtle and less obvious ways it occurs. We also find out whether men are generally aware of the problem, the obstacles that prevent men from taking action, and the power men have to initiate positive change within organizations. Colleen also untangles the intricacies of the topic, explaining why gender equality is still a pervasive problem, how gender inequality extends to promotions, how management explains away the issue, how gender equality is also beneficial for men, and the influence of perceived gender roles in career decisions. Tune in and learn about the intricacies of gender inequality, as well as the possible solutions, with Colleen Ammerman!

Key Points From This Episode:

• We start by finding out what the current situation is for women in the workplace. (0:03:22)
• How to quantify gender inequality symptoms in the workplace. (0:04:12)
• Whether there are similar effects of gender inequality for men of colour. (0:05:03)
• Why people might still deny that there is a problem concerning gender inequality. (0:05:35)
• An outline of the career obstacles that uniquely affect women. (0:07:18)
• Find out if men are aware that women have additional barriers to overcome. (0:12:03)
• Reasons why women may leave the workplace before retaining a leadership role. (0:14:05)
• Colleen explains how we know from the data that women have less interest in higher-paying technical jobs. (0:16:14)
• Learn if the adjusted gender pay gap data diminish the findings of using unadjusted gender pay gap data. (0:18:47)
• Ways in which the gender pay gap extends to promotions and compensation. (0:20:34)
• Colleen tells us why it is important for society to strive for more women in leadership positions. (0:21:26)
• The general response from men to workplace diversity initiatives. (0:22:07)
• What men should be doing in the workplace to help reduce inequalities that exist. (0:26:25)
• The ways corporate directors explain the underrepresentation of women and people of colour on boards. (0:29:15)
• Why we don't see more men taking action to combat gender inequality issues. (0:31:05)
• She explains what homophily is and its role in workplace diversity. (0:33:13)
• How the language in job descriptions determines who applies for the position. (0:37:04)
• Whether there is evidence to support the notion that women prefer a growth-mindset environment to a fixed-mindset environment. (0:40:00)
• What men, who are not in leadership positions, can do to overcome gender inequality problems in the workplace. (0:43:02)
• What companies need to be aware of regarding hybrid and remote-work models. (0:47:14)
• The steps men can take to overcome gender inequality outside of the workplace. (0:50:29)
• We learn what managers can do to attract more diverse candidates. (0:52:52)
• Whether there is data on the effect that gender has on hiring decisions. (0:54:22)
• How gender norms or biases affect employee evaluation. (0:56:01)
• Actions that women can take to advance their careers in an unequal environment. (0:59:53)
• Colleen explains the issues of negotiations for men and women. (01:04:03)
• The role parents can play to combat the issues of gender parity. (01:05:13)
• We end the episode by learning how Colleen defines success in her life. (01:06:03)

Book From Today’s Episode:

Glass Half-Broken: Shattering the Barriers That Still Hold Women Back at Work — https://amzn.to/3xbp2CG

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Colleen Ammerman on Twitter — https://twitter.com/colleenammerman

Colleen Ammerman on LinkedIn — https://www.linkedin.com/in/colleenammerman/

Today, we speak to Vili Lehdonvirta, Professor of Economics, Sociology, and Digital Social Research at the Oxford Internet Institute at the University of Oxford. Professor Lehdonvirta is a social scientist whose research focuses on ways digital technologies are reshaping the organization of economies, including their associated social effects. He is also the author of two books, Cloud Empires and Virtual Economies, which provide readers with an in-depth look into the power that crypto platforms hold and a well-rounded characterization of digital markets. In this episode, we talk about the ideological underpinnings of crypto and the role of governance in making cryptocurrencies possible. We discuss the role of states in scaling markets, how states and platform companies differ, the impacts of smart contracts on governance issues, and how control and power are centralized within crypto markets, as well as the social implications of blockchain technology. Listeners will also learn about past controversies within the crypto space, why people are still needed within crypto, and the blockchain paradox, plus more!

Key Points From This Episode:

• We start by learning about John Perry Barlow’s vision for cyberspace. [0:05:06]
• Find out about the role that states play in markets. [0:07:03]
• How markets function at scale if the state is not involved. [0:07:55]
• Professor Lehdonvirta’s view on whether governance may precede markets. [0:08:59]
• The role massive platform companies play in today’s economy. [0:09:44]
• Ways in which states and platform companies differ. [0:10:42]
• Why he thinks public blockchain technology has garnered so much attention. [0:11:27]
• An explanation of the influence John Perry Barlow’s vision had on cryptocurrencies. [0:13:04]
• Learn what a Kleroterion is and the role it played in Athenian democracy. [0:14:01]
• Professor Lehdonvirta shares what it means to ‘trust in the code.’ [0:17:05]
• An outline of the new properties smart contracts created. [0:18:59]
• Social and economic implications of unstoppable censorship-resistant contracts. [0:21:08]
• A brief rundown of how impactful smart contracts have been. [0:22:27]
• How the trustless and unstoppable claims of cryptocurrencies and DAOs were affected by the DAO story. [0:24:20]
• Whether the Bitcoin block-size conflict affected the perception of crypto as a trustless system. [0:28:17]
• We find out the current size of the Bitcoin development team. [0:31:05]
• Other examples of human discretion affecting the direction of Bitcoin. [0:31:46]
• Professor Lehdonvirta explains the strategies used to preserve trustlessness after the human interventions took place. [0:35:16]
• Details about an important strategy: the appeal to technical expertise. [0:38:53]
• Find out if the ability to fork blockchain networks restores trustless claims of crypto. [0:39:42]
• Whether users of a blockchain network, who are not miners, can influence crypto markets. [0:45:02]
• Professor Lehdonvirta’s opinion on who has the most control over cryptocurrency networks. [0:49:35]
• Hear what aspect of Athenian democracy Nakamoto failed to replicate. [0:54:26]
• We learn what the blockchain paradox is (also known as the governance paradox). [0:56:50]
• Find out if Professor Lehdonvirta thinks technology changes the fundamental aspects which shape how societies are organized. [01:00:11]
• Find out if blockchain has eliminated the need for nation-states. [01:02:11]
• What cryptocurrencies have accomplished since their inception. [01:03:40]

What impact does financial literacy have on decision-making and financial outcomes? How is financial literacy tested? In this episode, we help listeners understand why financial literacy is vital in terms of financial well-being. Learn the definition of financial literacy, how financial literacy relates to economic outcomes, the differences between people who are financially literate and those that are not, and the contribution of financial knowledge to human capital. We discuss the topic through the perspective of several papers that will challenge how you think about financial literacy and the questions to ask yourself to test your financial understanding. Then, we talk about this week's book review regarding the effects of technology on communication and the various distractions associated with a traditional work environment. We also go through the various reviews received about the show and what we have planned for the Rational Reminder community.

Key Points From This Episode:

• Breakdown of changes made to the format of current and future episodes. [0:01:49]
• Introduction to today’s topic: expected returns of financial literacy. [0:07:34]
• Learn the definition of financial literacy. [0:09:36]
• The predictive power of financial literacy concerning financial outcomes. [0:10:27]
• What financially literate people are better at and how it increases human capital. [0:11:34]
• The cost of financial ignorance to the individual. [0:13:06]
• Overview of an interesting paper concerning active investing. [0:14:43]
• A dangerous observation within the financial literacy research [0:16:34]
• Find out how financial literacy is measured. [0:20:10]
• Whether it is safer to put your money into one business or to invest. [0:21:23]
• An important aspect of financial literacy is discussed: inflation. [0:22:34]
• Why numeracy is also a fundamental aspect of financial literacy. [0:24:25]
• We go through the topic of compound interest in relation to financial literacy. [0:24:57]
• Hear what the global distribution of financial literacy is. [0:27:04]
• How to approach the financial literacy problem from a policy perspective. [0:27:59]
• We review the book, Reclaiming Conversation, and discuss communication problems technology causes. [0:35:08]
• Examples of the different distractions associated with office spaces. [0:41:55]
• Reasons why meetings should be thought out with clear objectives. [0:44:45]
• Ways in which your phone can distract you from deep work. [0:46:36]
• Steps that social media companies could take to reduce screen time. [0:51:12]
• We go through recent reviews and suggestions received about the show. [0:52:22]

Welcome to our limited edition crypto series. In this episode, we welcome back Professor John Cochrane, who was a guest on the Rational Reminder series, to talk everything money. Professor Cochrane has immense experience on the topic and is a Senior Fellow at the Hoover Institution at Stanford, as well as Stanford Institute for Economic Policy Research. He is also a Research Associate of the National Bureau of Economic Research, an adjunct scholar at the Cato Institute, and was a professor of finance at the University of Chicago Booth School of Business. He is also the author of several books and writes a popular blog called The Grumpy Economist. In this episode, we take a deep dive into the concept of money. We learn what numeraire is, how a numeraire is defined, and explore some of the intricacies of money. We also discuss and unpack the differences between fiscal theory and monetary theory, along with other ideas regarding the value of money. We then delve into how all this relates to cryptocurrencies, what future he sees for crypto, and much more. Tuning into this episode, listeners will challenge their thinking about the economy and how economic relations work.

Key Points From This Episode:

• Professor John Cochrane explains to us the short version of fiscal theory. [0:04:35]
• Find out the definition of numeraire and how it is determined within an economy. [0:05:21]
• Learn whether government backing is required to define a numeraire. [0:07:05]
• What Professor John Cochrane thinks is the primary function of money. [0:08:55]
• Whether money needs to be a medium of exchange that stores value. [0:09:45]
• He explains why money is valuable according to fiscal theory. [0:11:22]
• The role of taxes in adding to the value of money according to fiscal theory. [0:12:59]
• How fiscal theory’s explanation for why money is valuable differs from the monetarist explanation. [0:13:33]
• Find out whether the term ‘fiat’ is still a good adjective to describe money in a fiscal world. [0:17:24]
• We learn if ‘fiat’ is an appropriate term to describe money according to the monetarist view. [0:19:10]
• What the government debt valuation equations suggest about the stability of the price level. [0:20:21]
• An outline of what happens when discount rates become volatile. [0:23:29]
• Ways in which sticky prices affect the stability of the price level. [0:27:24]
• Whether the supply of money is still a useful perspective today. [0:31:01]
• Why monetarism theory has gained so much traction. [0:33:51]
• He unpacks the purpose of monetarism theory. [0:35:21]
• How fiscal and monetary actions set expected and unexpected inflation regarding fiscal theory. [0:37:10]
• The level of fiscal and monetary coordination required for price stability. [0:39:58]
• Whether the level of coordination needed is realistic considering the independence of the central bank. [0:42:10]
• Ways in which monetary policy debt sales and fiscal policy debt sales differ. [0:45:02]
• What effect the size of the central bank's balance sheet has on the price level. [0:49:52]
• Repercussions of inside money issued by private banks on the price level. [0:53:06]
• Statistical tests available that can be used to prove fiscal theory. [0:58:55]
• Find out why COVID-related effects on the economy lead to inflation. [1:04:17]
• Breakdown of the fiscal explanation for the US inflation of the 1970s. [1:11:24]
• Reasons why inflation targets have been successful in some countries and not in others. [1:16:14]
• A discussion about whether we have always lived in a fiscal-based economy. [1:19:24]
• Whether citizens should behave differently living in a fiscal world. [1:27:51]
• How the value of the dollar will be affected if more people buy cryptocurrencies. [1:28:49]
• Professor John Cochrane shares if he thinks anonymous digital cash is a good thing. [1:30:51]
• We discuss what the future has in store with regard to fiscal theory. [1:39:31]

The indexing revolution is something that underpins all of our work here at the Rational Reminder and is a subject we reference in different ways in almost all of our episodes. Today we have a special exploration of this history, as we welcome Gus Sauter, the former long-time CIO of Vanguard, to talk about his incredible history at the firm, the role he played in the rise of the company, and its huge role in reforming the investing landscape. We also hear from our guest about his experience of working on numerous investing committees since he retired about a decade ago. One of the most notable things about this conversation is Gus' ability to weigh both sides of the arguments about active management, and he does a great job of balancing what he sees as the potential positives of this way of doing things. This is all strengthen by the way he presents these ideas as a powerful mix of stories, evidence, and the research he himself has conducted. To all our listeners, be sure to listen right to the end of the episode, as after the official conversation ends, Gus shared a few more thoughts on Jack Bogle and ETFs as a bonus.

Key Points From This Episode:

(0:03:49) Looking back at the part that indexing played at Vanguard when Gus started at the company.

(0:04:20) The rise of indexing in the subsequent years and the pivotal moments in this process.

(0:06:28) Initial ways that indexing was denigrated by Vanguard's competition.

(0:08:36) How the narrative changed around indexing when its utility became undeniable.

(0:09:10) The role of the University of Chicago in the growth of indexing early on.

(0:11:11) Changes in the active management space over the last few decades.

(0:12:04) Considering the role of an active manager in today's climate.

(0:14:43) Gus' opinion on balancing the strengths of indexing and active management.

(0:20:48) Differences between traditional active management and factor investing, and Gus' preferences.

(0:29:09) A look at Vanguard's recent forays into factor-based funds.

(0:31:00) Recounting Jack Bogle's thoughts on active management at different points.

(0:32:27) Evaluating active managers; weighing the processes and their maintenance.

(0:35:09) Vanguard's relative low fees and how this impacted their success.

(0:36:35) How Vanguard went about selecting investment managers.

(0:38:44) Gus talks about the structure of Vanguard; what it meant to be a truly mutual company.

(0:41:19) Thoughts on home country bias and global diversification in light of countries like Canada.

(0:45:07) Approaches to private equity; Gus' recommendations for the average investor.

(0:48:30) Access to private markets and the prohibitive effect of high fees.

(0:51:25) Accounting for the recent large flows towards private equity and the current institutional philosophy around it.

(0:54:10) Gus talks about the important questions he asks when joining a new investment committee.

(0:56:30) Comments on hedge funds and liquid assets, and their decreased returns.

(0:59:50) The psychological benefits of holding a single fund.

(1:02:44) Gus comments on how direct indexing might figure into the future.

(1:09:20) The education of investors; Gus talks about where he believes Vanguard's biggest success lies.

(1:11:48) Reflection on the impact of introducing the implementation of ETFs at Vanguard.

(1:12:56) Areas that still excite Gus about investing; the good and bad sides of increased opportunity.

(1:14:48) Gus' definition of success and his gratitude for finding a home at Vanguard.

(1:17:07) Bonus content: Gus talks about Jack Bogle's relationships with ETFs.

We start the show with a brief highlight of recent episodes, upcoming guests, and feedback we have received about the show. We then review the book Running Remote, which provides evidence for the benefits of working remotely and asynchronous management. We also outline the three essential principles of an asynchronous mindset. We discuss the positives and benefits of remote work, why hybrid work is a flawed approach, and how to recreate face-to-face meetings in a remote world. We also give listeners a breakdown of an interesting journal article about inferring stock duration and equity trades, including key takeaways from the papers. We then welcome our special guest, Harley Finkelstein, to talk about the role that reading plays in his life. Harley is a lawyer, entrepreneur, and the President of Shopify and uses what he reads to push him further in his professional life. In our conversation, we learn the role reading has played in Shopify’s culture, what his favourite books are, and inner details about his reading habit. Tune in for another jam-packed episode!

Key Points From This Episode:

• We start the show with a recap of previous episodes and upcoming guests. [0:00:00]
• A brief highlight of some of the reviews we have received about the show. [0:03:41]
• An update on the Rational Reminder 22 and 22 reading challenge. [0:06:35]
• This week’s review of the book, Running Remote. [0:09:24]
• The three fundamental principles of the asynchronous mindset. [0:16:58]
• Hear what the seven deadly sins are regarding remote team transitions. [0:24:35]
• Cameron shares a compelling paragraph from the book, Running Remote. [0:28:04]
• Learn a mind-blowing statistic Cameron read in a Bloomberg article. [0:32:31]
• Ben breaks down a journal article about inferring stock duration. [0:33:47]
• Another interesting paper regarding the retail price of equity trades. [0:44:10]
• Introduction to our guest Harley Finkelstein to talk about our 22 and 22 challenge. [0:47:20]
• Harley shares details about his reading habit. [0:47:50]
• How he incorporates what he has learned from reading into his professional life. [0:49:57]
• Ways in which Harley finds interesting books to read. [0:51:58]
• The role reading has played in Shopify’s culture and work ethic. [0:53:57]
• What books have had the biggest impact on him. [0:58:12]
• Find out whether his daughters have embraced his love for books. [1:02:29]
• Advice that Harley has for people who want to read more. [1:04:32]

What is the real value of cryptocurrencies? Can crypto technology be applied to traditional financial markets? In this episode, we welcome David Gerard, a technologist and author of the books Libra Shrugged and Attack of the 50 Foot Blockchain.  He uses his skills as a journalist to investigate the uses and hype around cryptocurrencies and is an outspoken skeptic of the technology. Although not originally from the technology sector, he has become an authority on the topic and has briefed the UK House of Commons Science and Technology Committee on the technology. He also runs a blog covering important aspects of the cryptocurrency space. In today’s conversation, we learn some harsh realities about the benefits of cryptocurrencies and why they will not last in the long term. We learn what the real value of crypto-markets is, why he considers it to be a Ponzi scheme, what needs to change about cryptocurrencies, whether there are any benefits to the technology and the role of financial journalism in the crypto space. Listen as we unravel the political ideology which underpins crypto and whether it can be separated from the technology. We also discuss the outcome of El Salvador’s bitcoin experiment and why it did not work. We also learn the reasons behind the recent crash in some crypto markets and find out which book David thinks everyone should read.

Key Points From This Episode:

• We start the show by finding out the real dollar value of crypto markets. [0:03:45]
• The role financial journalism played in getting crypto to where it is today. [0:06:02]
• Reasons why he does not trust the value of cryptocurrencies. [0:11:04]
• Why he thinks cryptocurrency journalism is not credible. [0:12:00]
• He explains Bitcoin’s underlying political ideology and the associated problems. [0:13:25]
• The classic debate of who should have control over financial markets. [0:16:41]
• Whether it is possible to remove the political ideology from crypto-technology. [0:17:34]
• What the most important aspect of cryptocurrency technology is. [0:18:24]
• The reasoning behind the argument, ‘You just don’t understand the technology.’ [0:21:52]
• How to make cryptocurrency work in traditional financial markets. [0:23:50]
• Why the recent crash in the cryptocurrency markets occurred. [0:28:03]
• Find out if cryptocurrencies can be beneficial for the ‘bankless’. [0:30:25]
• We discuss the outcome of El Salvador’s bitcoin experiment. [0:32:20]
• He outlines why Salvadorans did not like the proposed bitcoin market. [0:38:11]
• Learn what the UK House of Commons Science and Technology Committee wanted to understand about cryptocurrency. [0:41:23]
• How his views on cryptocurrency were received by the commission. [0:43:46]
• An example of a crypto-based business that was operating illegally. [0:45:01]
• Whether NFTs will allow artists and musicians to keep more financial gains from their work. [0:46:13]
• We discuss whether crypto-based technologies will improve over time. [0:47:57]
• Examples of good uses for crypto and blockchain technology. [0:49:22]
• What would need to happen for David to change his opinion on crypto. [0:52:25]

Identity helps shape our perception and thinking about the world around us. What is identity? How does it influence our perspective? These are some of the questions we answer in this episode of the Rational Reminder Podcast. In this episode, we talk with Jay Van Bavel, an Associate Professor of Psychology and Neuroscience at the University of New York, an affiliate at the Stern School of Business in Management and Organizations, and Director of the Social Identity and Morality Lab. He is also co-author of the book The Power of Us, which provides readers with cutting-edge research in psychology and neuroscience to explain how identity really works and how we can harness it for the better. His research focuses on how group identities, moral values, and political beliefs shape the mind, brain, and behaviour. He has published over 100 academic publications on the topic and has won various awards for his research achievements. In our conversation, we unpack the complexity of identity and its influence on our perspective and decision-making abilities. We cover aspects such as the differences between self-identity and group identity, how to be aware of your biases, the role that leaders play in influencing identity, and how identity plays out in social relationships. We also talk about how group identity interacts with democracy and the role of social media in shaping our identity, as well as learn some practical advice to help broaden your perspective.

Key Points From This Episode:

• We start the show by learning the basics of group identity. [0:03:29]
• How group identity differs from self-identity. [0:04:04]
• He explains how impactful group identity is to individual identity. [0:05:06]
• Whether there is good data on how many groups people typically identify with. [0:06:08]
• How aware people are of the groups they identify with. [0:07:27]
• Ways in which group identity affects decision-making. [0:08:12]
• The effect group identity has on setting and achieving goals. [0:09:35]
• General ways group identity affects social relationships. [0:15:21]
• A deeper explanation about groups, memberships, and physical presence. [0:17:28]
• Differences between introverts and extroverts. [0:19:18]
• How group identity affects our thinking and perspective. [0:20:43]
• Associate Professor Van Bavel explains how to foster social cohesion, using America as an example. [0:25:41]
• Find out if people have a default identity that determines their perspective. [0:28:41]
• What people can do to be aware of which identity is affecting their thinking. [0:30:10]
• Find out if group identity affects how people learn new information. [0:31:58]
• Whether people can change or broaden their identity to improve decision-making. [0:34:18]
• Practical advice to help broaden someone’s perspective. [0:37:25]
• The challenges of changing your group identity entirely. [0:39:34]
• Steps that one can take to view the world more objectively. [0:42:04]
• A rundown of how leaders influence the thinking and decision-making of individuals. [0:45:47]
• An outline of what qualities to look out for in groups. [0:48:49]
• The influence of social media on which groups people identify with. [0:52:21]
• We learn if following people on social media with opposing views helps break down group barriers. [0:55:57]
• An explanation of how group identities interact with democracy. [0:58:48]
• The differences between current political divisions and past political divisions. [1:03:59]
• How well studies on the topic can be replicated. [1:05:43]
• We end the show by learning how Associate Professor Van Bavel defines success. [1:09:18]

In this episode, we speak to Quinn DuPont, a self-described technology historian and researcher of everything crypto. He is fascinated by what humans do and how technology affects what humans do. Quinn focuses his research on the history, meaning, use, and socio-technical development of cryptography. He has published many academic papers on the subject, including the book Cryptocurrencies and Blockchains, and is currently an adjunct professor at the UBC School of Information. He approaches investigating the world of crypto as a scientist making him neither a skeptic nor a proponent of the technology, offering listeners an objective perspective. In this episode, we unpack the basics of crypto and take a deep dive into the theoretical and technological concepts. We learn about the ideological foundations of crypto, how crypto technology will impact governance, what the definition of money is, the potential of the technology to society, and the social components associated with cryptocurrencies. We also find out the real value of crypto and learn about the ethical challenges Quinn faces as a researcher in the space.

Key Points From This Episode:

• [0:05:16] The ideological worldview that resulted in cryptocurrencies. 
• [0:10:51] Quinn explains his standard criticism of the critics. 
• [0:13:43] Why the ideological origins of crypto are irrelevant today. 
• [0:15:50] The nuance surrounding the immutability of crypto technology is discussed. 
• [0:17:04] What the benefits of the cryptosystem are for governance. 
• [0:19:48] How well he thinks crypto fits within a democratic society. 
• [0:25:41] Reasons why political ideology needs to be taken into account. 
• [0:28:19] Quinn tells us his definition of money. 
• [0:31:18] What impact decentralized censorship-resistant monies have on society. 
• [0:38:52] How valuable a cryptocurrency in the real world is. 
• [0:40:48] Why paying your taxes gives money value. 
• [0:44:25] Whether Quinn considers Bitcoin to be money. 
• [0:46:09] He walks us through the benefits of DeFi to societies. 
• [0:49:30] We learn what the downsides of DeFi to societies are. 
• [0:50:22] Learn if blockchain solves any of the problems that exist in traditional finance. 
• [0:57:57] The advantages of bitcoin-based technology for business logistics. 
• [01:03:00] Why some blockchain business technology is marketing hype. 
• [01:04:32] How a DAO is different from a traditional corporation. 
• [01:10:24] Find out what would happen if we turned our podcast into a DAO. 
• [01:15:35] Whether smart contracts replicate the role of traditional contractual relations. 
• [01:19:51] Quinn outlines the ethical challenges to researching cryptocurrencies and blockchain. 
• [01:27:32] Hear what he thinks the greatest disappointments and successes of crypto are. 
• [01:31:32] We end the show by finding out if Quinn considers crypto and blockchain to be a technological revolution. 

In today’s episode, we beg the question: is factor investing worth it? Factor-tilted portfolios tend to perform independently of the market and today, we break down a few of the characteristics associated with higher expected returns, as well as the challenges of factor investing. We give a brief history of pricing models and walk step-by-step through a hypothetical factor investment; taking the Fama and French five-factor model into account. Additionally, we discuss liability duration and bond returns and speculate whether pooling finances results in greater relationship satisfaction. Tune in to hear our take on everything from book clubs and the impact of inflation on consumption liability assumptions to our final verdict on whether factor investing is, in fact, worth your while.

Key Points From This Episode:

• The latest phenomenon of people paying to go on popular podcasts. [0:01:58]
• Interesting feedback we’ve received for our Crypto series. [0:03:49]
• Why not to make an investment decision based on one person's opinion. [0:04:53]
• The evaluation skills our Crypto series equips listeners with. [0:06:05]
• Upcoming guests on the Rational Reminder Podcast! [0:07:31]
• Some interesting LinkedIn connections we’ve made in the past few weeks. [0:16:06]
• Recommended book for kids: Way of the Warrior Kid 3. [0:18:11]
• Recommended book for adults: The Psychology of Money. [0:21:08]
• The model of our firm’s book club and our experience of it so far. [0:22:02]
• Does pooling finances result in greater relationship satisfaction? [0:24:35]
• Liability duration and bond returns according to the current change in bond yields. [0:26:22]
• How inflation impacts consumption liability assumptions. [0:29:11]
• The positive effect the changes in the bond market have had on pension funds, relative to their liabilities. [0:30:20]
• The main topic of the day: is factor investing worth it? [0:32:30]
• The long-term volatility for factor-tilted portfolios. [0:33:56]
• What factor investing is and the added risk it entails. [0:34:51]
• A brief history of pricing models. [0:35:53]
• A few characteristics associated with higher expected returns. [0:39:25]
• The challenges of factor investing. [0:39:47]
• How to determine the mix of factors that captures all relevant state variable sensitivities. [0:42:56]
• The significance of size premium. [0:46:07]
• Speculating whether factors deliver premiums. [0:47:57]
• The steps involved in a hypothetical factor investment. [0:48:57]
• A few important facts about factors. [0:53:23]
• The benefits of having more independent risk premiums in a portfolio. [0:54:56]
• Our verdict as to whether or not factor investing is worth it. [0:57:02]
• Why it’s important to take tracking error into account. [0:57:38]
• The tendency of factor-tilted portfolios to perform differently from the market. [0:57:48]

There is a lot of hype surrounding cryptocurrencies and DeFi technology, with excitement around the potential innovations they offer financial systems. Often lacking in the discussion is an objective and critically informed viewpoint, leading to confusion and misunderstanding. In today’s conversation, we get the balanced perspective that we need with Professor Hilary Allen, who has a wealth of experience in banking, law, financial regulation, corporate finance, and business administration. She is a law professor at the American University of Washington College of Law and her research focuses on the impact of new financial technologies on the stability of the current finance system. She has written many academic papers on the subject, including the book Driverless Finance, which provides readers with a balanced perspective on the opportunities and threats of fintech innovations. In our candid and fascinating conversation with Professor Allen, we learn about the threats and opportunities DeFi technologies pose to the financial system. We hear what shadow banking is, the similarities that decentralized finance has with shadow banking, the risks of cryptocurrencies, if innovation in finance is always positive, why regulation is essential, whether DeFi is actually decentralized, the basics of stablecoins, how you can help affect change in the financial system, if you should invest in cryptocurrencies, and much more. Tune in to get the clarity you need about the world of crypto with expert Professor Hilary Allen!

Key Points From This Episode:

• We start the show by learning what shadow banking is and how it is associated with the financial crisis in 2008. [0:04:05]
• Professor Allen explains what DeFi is and gives us some examples. [0:07:16]
• Learn about some of the innovations that DeFi technology proposes. [0:09:21]
• Similarities between shadow banking activities and DeFi technology. [0:11:06]
• Other risks that Professor Allen sees with the DeFi system. [0:12:12]
• What effect replacing intermediaries with algorithms have on financial systems. [0:16:03]
• The effect complexity has on a financial system. [0:17:19]
• She explains what financial stability is and the objective of financial regulation. [0:19:27]
• How the financial stability of the existing system compares to the DeFi system. [0:21:01]
• Whether stability of the existing financial system is exposed to problems within DeFi. [0:22:14]
• Which DeFi innovations pose the biggest risk to the current financial system. [0:23:23]
• Find out if stablecoins could affect monetary policy. [0:25:23]
• The regulatory lessons from the 2008 financial crisis that are relevant to DeFi. [0:26:28]
• Outline of the problems that the existing financial system has. [0:30:44]
• How successful DeFi has been at being decentralized. [0:33:14]
• If Professor Allen has any concerns that regulation might stifle innovation in DeFi. [0:36:06]
• Find out if financial innovation is always a good thing. [0:37:41]
• What the best possible regulatory outcomes are regarding crypto and DeFi. [0:39:30]
• Whether it is too late to regulate cryptocurrencies. [0:42:48]
• Why Professor Allen thinks some politicians are pushing crypto-friendly agendas. [0:43:52]
• How people can affect change in the right direction regarding the financial system. [0:46:08]

If you’re ready for a serious education on market elasticity, demand system pricing, and stock market flows, you’ve come to the right place (disclaimer: don’t expect light entertainment). Today’s guest is Ralph Koijen, AQR Capital Management Professor of Finance and Fama Faculty Fellow at the University of Chicago, Booth School of Business. Tune in for a fascinating conversation about some of the most fundamental characteristics of our economy. To say we learned a lot from this conversation is an understatement, and we’re sure you’ll walk away with just as many lightbulb moments and impactful lessons as we did.

Key Points From This Episode:

• Ralph provides an in-depth explanation of demand system pricing. [0:02:48]
• An example of how valuations can be affected while the connection between fundamentals and valuations remain relatively unaffected. [0:08:18]
• How Ralph’s model for demand system asset pricing differs from other models. [0:41:26]
• The two components that investor demand is made up of. [0:14:54]
• Exploring the concept of latent demand and how to estimate it. [0:17:57]
• How the price impact from institutions and elasticity of markets has changed over time. [0:20:34]
• Understanding the surprising impact of households on stock market volatility in 2008. [0:20:34]
• How latent demand can be used to predict differences in expected returns. [0:25:46]
• Examples of factors that drive latent demand. [0:30:42]
• The most impactful group of investors (and why this is the case). [0:33:17]
• An overview of what would likely happen if the most influential investors switched to market cap indexing. [0:35:22]
• How huge firms influence the setting of prices. [0:36:25]
• Ralph shares his thoughts on the idea that index funds are distorting market prices as they continue to grow in magnitude. [0:35:22]
• What demand system pricing tells us about the effect of socially responsible investing on prices. [0:43:01]
• How US asset prices would be affected if foreign demand for US assets decreases. [0:35:22]
• Inelastic versus elastic markets. [0:47:23]
• Why prices are so much more volatile than fundamentals. [0:51:11]
• Comparing micro-elasticity and macro-elasticity. [0:52:18]
• Ways to estimate micro-elasticity and macro-elasticity, and the limitations of these approaches. [0:54:00]
• Ralph’s estimate of what the macro-elasticity is. [01:01:00]
• Risk factors that impact elasticity. [01:02:07]
• An example which shows how flows work. [01:03:32]
• Factors that impact how long the price impact of flows lasts. [01:05:24]
• Dividend irrelevance in inelastic markets. [01:10:30]
• The role of the increasing market share of cap weighted indices on market elasticity. [01:12:28]
• How investors should behave when markets are inelastic. [01:15:11]
• Ralph’s definition of success. [01:18:47]

For this week’s episode, we are revisiting a portion of our conversation with the legendary Professor Campbell R. Harvey and and his more optimistic viewpoint on the crypto space.  Campbell is the Professor of International Business at Duke University and is also a Research Associate at the National Bureau of Economic Research. In 2016 he served as the President of the American Finance Association, and from 2006 to 2012 he occupied the incredibly demanding role of Editor for the Journal of Finance. We hear about Campbell’s latest book DeFi and the Future of Finance along with his most recent research. Discover how Campbell first became interested in the topic several years ago and decided to put together a course for his students. We also delve into the rise of decentralized finance (DeFi) and how we can expect it to shape global finance, trading, and the future of the internet. 

Welcome to another episode of the Rational Reminder Podcast! We start by reviewing The Fearless Organization, and learn some important concepts such as psychological safety in the workplace, allowing people to voice their concerns, and the value of continuously learning. We also discuss a paper on index investing followed by a quick discussion on gender equality in finance.  We then take a deep dive into today’s main topic, ‘Stocks for the Long Run…?’, by unpacking research to see if stocks are still a valuable long-term investment. Finally, we end the show with a conversation about our 22 and 22 book challenge with Mark Sutcliffe, and find out about his reading habits and the books that have had the biggest impact on him.

Key Points From This Episode:

• An update about the podcast and feedback received about the crypto series. [0:03:55]
• A rundown of the guests we have planned for future episodes. [0:07:43]
• Outline of the ‘mixed-bag’ reviews received about the show. [0:08:28]
• News and updates regarding the Rational Reminder reading challenge. [0:13:07]
• This week’s book review of The Fearless Organization by Amy C. Edmondson. [0:14:45]
• We talk about an interesting paper ‘On Index Investing’ [0:24:42]
• Follow-up on and discussion concerning gender equality in finance from previous episodes. [0:28:34]
• We dig into today’s main topic, ‘Stocks for the Long Run.’ [0:33:38]
• Issues surrounding using Stocks for the Long Run data to draw insights. [0:35:22]
• What has been achieved to solve issues regarding a lack of data on stock returns. [0:41:45]
• An important insight from research on the value of stocks and bonds in the long term. [0:47:17]
• A breakdown of some interesting findings from the paper, ‘Global factor premiums’. [0:48:00]
• Overview of the research discussed and whether stocks are still valuable long-term investments. [0:53:54]
• The Rational Reminder 22 and 22 book challenge conversation with Mark Sutcliffe. [0:55:09]
• What Mark has discovered about the world of social media while working remotely. [0:56:58]
• Mark shares details about his reading habit and his favourite books growing up. [0:57:53]
• Whether he has a favourite genre of book. [01:00:11]
• How Mark sources books to read and how he captures interesting information. [01:00:44]
• The books that Mark commonly recommends to family and friends. [01:03:05]
• Find out if Mark thinks being an author changes how you read books. [01:05:12]
• Advice that he has for people who want to read more. [01:06:33]

Welcome back to another comprehensive and informative episode in this limited series of the Rational Reminder Podcast, a weekly reality check about the world of cryptocurrencies. We are lucky to have another respected figure in the crypto world on our show, technology veteran Tim O’Reilly. Tim is a well-known educator and publisher in the crypto community and the Founder, CEO, and Chairman of O'Reilly Media. He has been involved in the technology industry since the inception and rise of Silicon Valley and, with over 35 years of industry experience, he is known for popularizing the terms ‘open-source software’ and ‘Web 2.0’ and is a respected commentator on the space. In today’s show, we do a lot of looking backwards with Tim and draw insight from his vast experience in the industry to discuss what the future of cryptocurrencies holds. We also talk about what separates companies that survive from those that do not, problems in society that blockchain technology can be used for, and changes that have taken place in the technology industry during Tim’s career, as well as what the definition of true innovation is, and much more.

Key Points From This Episode:

• What Tim’s definition of a technology unicorn is. [0:03:07]
• The problems that Web3 could solve and what makes a product innovative. [0:04:39]
• Differences between companies that survived the .com bust and those that did not. [0:11:05]
• Whether Tim thinks there are promising projects in the crypto or Web3 space. [0:18:36]
• How society would change if Web3 became the new normal. [0:22:19]
• Examples of the applications blockchain technology could have for record-keeping. [0:24:36]
• Tim shares his thought son whether or not we need blockchain technology for aspects where the state is involved. [0:27:24]
• Ways in which the evolution of crypto has changed Tim’s mental map of the future. [0:31:37]
• The role public blockchains could play in breaking the recentralization trend in decentralized technologies. [0:35:02]
• Tim tells us if he thinks centralization is a bad thing. [0:37:15]
• Past mistakes and innovation within the tech industry. [0:41:39]
• Tim’s opinion on the support of Web3 from venture capitalists. [0:44:02]
• Whether or not building technology outside of the government's reach is the right way to improve society. [0:46:46]
• Advice Tim has for those who are looking to get rich from cryptocurrencies. [0:50:35]

If you have any interest in private equity or have thought about it as an asset class, then this episode is for you! What is private equity? This might seem a simple question but the answer is more complex than you think. Private equity is a nuanced subject that requires a deep understanding to make successful investments. To help unpack this non-trivial subject is expert Ludovic Phalippou, a Professor of Financial Economics at the University of Oxford Saïd Business School. Although he studied economics in general, his research mainly focuses on unravelling the complexities of private equity. He has written many papers on the topic, including a book called Private Equity Laid Bare. He has a Masters in Economics and a Masters in Mathematical Finance from the University of Southern California and a Ph.D. in Finance from INSEAD, making him well versed in the subject. Besides his impressive qualifications and experience, his insight and ability to speak to the data make him stand out from other experts. In our conversation, we get into the basics of private equity and what makes it attractive to investors. During our conversation we discuss the challenges for measuring performance, how to best measure the performance of private equity funds, the different facets associated with private equity, how to tell if certain private equities are a good investment, and the differences between private and public equity. We also hear how it is applied as he walks us through some real-world scenarios and gives us some insider knowledge on the best private equity options. As you will hear from our conversation, there is no easy answer!

Key Points From This Episode:

• We learn what asset classes are included in the broad term of private equity. [0:03:39]
• The end-to-end process for investing in a typical private equity fund. [0:06:49]
• The challenges with measuring the performance of private equity managers. [0:09:48]
• How investments that have not yet been sold are treated when a manager is reporting on their performance. [0:12:48]
• Professor Phalippou explains how well the IRR captures the economic results delivered by a fund. [0:14:04]
• Whether there are alternative approaches to evaluating performance. [0:17:52]
• A discussion about the typical characteristics of a buyout fund. [0:19:35]
• The best approach for evaluating your private equity. [0:21:24]
• Find out if a public equity benchmark has to be adjusted for leverage, regarding buyouts. [0:24:26]
• We learn about the fees that private equity limited partners typically pay. [0:26:34]
• Outline of the less obvious fees that limited partners might be paying. [0:28:11]
• Whether an investor paying carry is a sign that the investment has done well. [0:31:07]
• Comparison of private equity performance relative to public equities. [0:32:31]
• What number Professor Phalippou would assign on an expected return to private equity, as an asset class. [0:38:46]
• How successful investing in private equity has been for institutional investors. [0:39:32]
• The performance of Blackstone and KKR is discussed relative to an average private equity fund. [0:42:11]
• We get details about the Yale situation and how it manifested. [0:44:24]
• Reasons why private equity is regarded as the best performing asset class for institutions. [0:45:32]
• Professor Phalippou tells us if he thinks private equity offers diversification benefits to a public equity portfolio. [0:46:01]
• He discusses a recent case study regarding Hilton. [0:47:11]
• Why he thinks sophisticated investors are allocating funds to private equity. [0:48:14]
• Professor Phalippou shares how to be successful when investing in private equity. [0:50:00]
• Whether the returns of private equity can be replicated in public equity. [0:53:09]
• How Professor Phalippou defines success. [0:55:18]
• We end the show by finding out if the value premium is risk-based or behaviour-based. [0:55:35]

Dr. Nicholas Weaver’s well-known lectures on cryptocurrencies explain why he believes it needs to be “burned with fire.” Today, we speak to Dr. Weaver, an expert in computer science and a long-time observer of the cryptocurrency space. He holds a BA in Astrophysics and Computer Science and a Ph.D. in Computer Science from UC Berkeley, where he was also a lecturer until recently. His primary research focus has been network security, among other topics. His interest and search for comedy “godl” have also resulted in published papers on cryptocurrency. In our conversation, Dr. Weaver untangles the complexities of the perceptions of cryptocurrencies with the actual technology. We talk about decentralization, if cryptocurrencies are achieving it, and the underlying concept of blockchain technology, as well as whether or not blockchains are secure and what the potential benefits of cryptocurrencies are to developing countries. We then go into detail about why Dr. Weaver thinks the crypto space is not beneficial, why prestigious academic institutions are teaching about it, and why he thinks it will never work in the log-run. Please tune in for a truly eye-opening, no-holds-barred episode as we learn the harsh truth about cryptocurrencies with expert, Dr. Nicholas Weaver!

Key Points From This Episode:

• What public blockchain technology can achieve that was not previously possible. [0:02:51]
• How well the original concept, introduced by Satoshi Nakamoto, is living up to its theoretical promise. [0:04:06]
• Weaver explains and outlines the general appeal of decentralization. [0:04:57]
• He elaborates on his perspective on trusted and honest authorities. [0:09:39]
• An explanation of how Lightning Network attempts to solve throughput limitation. [0:10:36]
• We find out if major blockchains like Bitcoin and Ethereum are decentralized. [0:13:08]
• Differences between how nodes and miners influence the network. [0:16:23]
• How secure public blockchains really are. [0:17:45]
• Whether a facility for censorship-resistant transactions, like Bitcoin, is a good thing for society. [0:20:30]
• Potential benefits of cryptocurrencies for people in countries with limited access to banking and a good legal system. [0:24:35]
• Steps governments can take to regulate and control cryptocurrencies. [0:26:47]
• Weaver’s opinion on why the regulation of cryptocurrencies has been so slow. [0:29:17]
• Outline of how Dr. Weaver sees cryptocurrencies developing in future. [0:31:38]
• How to incentivize miners not to attack the system to retain the value of Bitcoin. [0:38:24]
• Weaver on how stablecoins fit into the crypto ecosystem and if they’re decentralized. [0:39:18]
• A rundown of the new properties the blockchain data structure provides. [0:45:59]
• Find out if Walmart using a private blockchain is just marketing hype. [0:51:20]
• Why the popularity of cryptocurrencies amongst venture capitalists is rising. [0:53:12]
• Why prominent schools like MIT and Cornell are emphasizing blockchain programs. [0:55:23]
• Weaver explains what the smartest way to invest is, in his opinion. [0:58:34]
• Who the technologists in the crypto-space are that he respects professionally. [0:59:51]
• He tells us whether he has heard any compelling arguments for cryptocurrencies. [1:00:31]
• A discussion about Dunning-Kruger economics in relation to cryptocurrencies. [1:04:38]
• What the general opinion of other technologists is on crypto and blockchain. [1:06:23]
• We end the show with a final takeaway from Dr. Weaver. [1:07:31]

Welcome to another episode of the Rational Reminder Podcast! In today’s jam-packed episode, we start by going through the feedback received on our limited crypto series and outline upcoming guests. We also give a breakdown of Cal Newport’s book, Deep Work, and the importance and long-term benefits of engaging in deep work. We then follow-up on our recent episode with Rebecca Walker by discussing gender equality in financial planning. Lastly, tune in to also have a rundown of the housing market and its investment potential, price risks associated with home ownership, the effects homeowner’s occupation has on their household investment and more!

Key Points From This Episode:

• We go through feedback received on the limited edition crypto series. [0:01:40]
• An outline of the upcoming guests we are going to have on the show. [0:05:51]
• This week’s book review, Deep Work written by Cal Newport. [0:09:01]
• Some of the common workplace problems highlighted in the book. [0:14:30]
• How work can be more enjoyable than free time and reasons why. [0:15:56]
• Ways to overcome common workplace problems and engage with ‘deep work.’ [0:16:47]
• The long-term benefits of engaging with deep work and why it is needed. [0:20:21]
• A follow-up on our recent episode with Rebecca Walker and the feedback received. [0:20:49]
• Discussion about the data that is related to Rebecca’s points from the episode. [0:22:10]
• We unravel the nuance concerning the gender pay gap and financial planning. [0:26:10]
• An important takeaway concerning our discussion on the gender pay gap. [0:33:19]
• Rundown of the housing market and its investment potential. [0:33:58]
• Find out how an owned home can act like an investment. [0:37:42]
• Learn more about ‘Portfolio Theory’ concerning property investment. [0:40:50]
• An interesting aspect regarding peoples’ occupation and property investments. [0:46:18]
• How people reduce the risk associated with property investments. [0:47:45]

Welcome back to another episode of our limited addition Crypto Series on the Rational Reminder Podcast, a weekly reality check about sensible investing and financial decision-making. Are cryptocurrencies and the associated technologies beneficial? Could they change the world for the better? There is a lot of controversy surrounding the use and application of cryptocurrencies and the associated technologies. Some say the innovation is ultimately useless while others think it is the answer to society’s problems. To help us unpack this complicated and hot-button topic is Bruce Schneier, an internationally-renowned security technologist, author, and educator. The focus of his work is the intersection of security, technology and people. Bruce also has an immense passion for educating people about cryptocurrencies. Examples of his well-known books include Liars and Outliers and Data and Goliath, which provide much-needed insight to readers about DeFi technologies and big monopolies. He also lectures in public policy at the Harvard Kennedy School and is a fellow at the Berkman Klein Center for Internet and Society. In our conversation, we discuss the debate surrounding cryptocurrencies such as privacy concerns of digital cash, what makes Bitcoin different from earlier digital currencies, aspects of public blockchain technology, the misapplications of crypto technology, the different forms and approaches to cryptocurrencies, and whether DeFi technologies can be beneficial to society, and what the biggest concerns are regarding cryptocurrencies. Join us today as we take a detailed look into the value and drawbacks of crypto and DeFi technology with Bruce Schneier!

Key Points From This Episode:

• What the objective was of early digital cash projects, like DigiCash. [0:03:27]
• The privacy concerns associated with digital cash. [0:04:45]
• Whether financial surveillance should be a concern for people. [0:05:45]
• Differences between Bitcoin and earlier forms of digital cash. [0:08:35]
• How good technology is at solving economic and political problems. [0:09:30]
• Details about the pieces that come together to make public blockchains work. [0:10:29]
• Why Bruce considers proof of work to be an idiotic way to form consensus. [0:13:43]
• Whether alternatives to proof of work resolve wasteful energy practices. [0:16:01]
• The new properties that public blockchains offer. [0:17:04]
• We find out if public blockchains do what their proponents say they do. [0:17:37]
• The claims that crypto proponents make regarding blockchain are discussed. [0:19:29]
• We discuss the misapplications of crypto and DeFi technologies. [0:20:23]
• Outline of the systems of trust that humans use to incentivize good behaviour. [0:23:26]
• Whether cryptocurrency technologies will become secure and trusted. [0:27:49]
• Reasons for the perspective ‘code is law’ from crypto technologists. [0:30:02]
• Whether ‘one CPU, one vote’ is how blockchains are working in practice. [0:31:35]
• We discuss other ideas and emerging technologies in the crypto space. [0:33:24]
• If government intervention is needed for crypto technologies and currencies. [0:36:21]
• How cryptocurrencies can be included in the mainstream financial system. [0:39:06]
• Bruce shares his opinion on the future of NFTs for artists to be able to capitalize on their creativity. [0:40:08]
• What the potential impacts of crypto technologies on younger generations are. [0:43:48]
• How blockchain erodes moral and reputational incentives to act responsibly. [0:45:26]
• Ways in which cryptocurrencies can help people who are ‘bankless’ and avoid high bank fees. [0:46:13]
• Break down of a real-world scenario where blockchain is being used in an alternative way. [0:49:00]
• Bruce tells us whether Bitcoin is suitable as a global currency. [0:50:55]
• The message that Bruce hopes his students will take away after his class. [0:51:59]
• If the government is beginning to take regulation of cryptocurrencies seriously. [0:52:43]
• What aspects, if any, excites Bruce about cryptocurrencies. [0:53:04]
• What Bruce’s biggest concerns about cryptocurrencies are. [00:53:43]

There’s no doubt about it; money is a taboo topic in our society. But not talking about money only serves to uphold inequalities and injustices. Rebecca Walker is an advocate for transparency and, during this episode of the Rational Reminder Podcast, she shares the importance of exploring the factors that have influenced our relationship with money so that we can begin to understand how we can use money as a tool to effect the kind of changes we want to see in the world. This is the intention behind her latest collection, Women Talk Money. No matter your gender, race, or financial standing, this episode will provide you with a new perspective on how to approach money. Rebecca is a well-known speaker, author, consultant and was named by Time Magazine as one of the most influential leaders of her generation. Tune in today.

Key Points From This Episode:

• What money represents and why it is so important that we understand it better. [0:02:21]
• The intention behind Rebecca’s latest collection, Women Talk Money. [0:03:05]
• A brief overview of some of the stories Rebecca shares in her book about our relationship with money and how it impacts our lives and society as a whole. [0:05:13]
• How race, class, and gender impact how knowledge about money is transferred. [0:08:50]
• Problems that arise when we aren’t transparent about our finances. [0:11:22]
• How the way we approach money ties into many broader societal issues. [0:15:45]
• Examples of how not talking about money renders people powerless. [0:17:45]
• Rebecca explains how she has taught her son about money from a young age. [0:20:58]
• Rebecca’s approach to talking to other people about money. [0:22:30]
• Issues that may stem from an obsession with money. [0:24:32]
• How Rebecca defines “enough.” [0:27:09]
• The role that men can play in empowering women in relation to money. [0:29:24]
• Advice for women who are struggling to form a healthy relationship with money. [0:33:33]
• How Rebecca defines success in her own life. [0:36:04]

Welcome back to another limited series of Rational Reminder Podcast, focused on learning about cryptocurrencies. Our journey about cryptocurrencies has led us to speak to various experts on the subject, all of whom see some benefits to cryptocurrencies and the underlying blockchain technology. However, what does a skeptic think about cryptocurrencies and the benefits to the current financial system? In today’s episode, we speak to Stephen Diehl, a software engineer who works with financial technology within the finance sector and is an outspoken cryptocurrency skeptic. His engineering background, coupled with his experience working with financial technology, provides a unique perspective on the future of cryptocurrencies. We move through the episode learning about public blockchain technology, different consensus mechanisms, what potential problems blockchain technology can solve, whether crypto can improve the current financial system, if Bitcoin really is decentralized, what drives crypto prices, reasons why crypto will not work, what makes it similar to gambling, and more. Tune in today to hear a unique opposing view of cryptocurrencies and DeFi technology with expert and skeptic, Stephen Diehl!

Key Points From This Episode:

• A brief breakdown of public blockchain technology. [0:03:28]
• The current problems that public blockchain technology is trying to solve. [0:04:16]
• Proof of work consensus and how it tries to eliminate the need for a trusted third party. [0:05:44]
• Some of the downsides associated with the proof of work concept. [0:07:41]
• How other consensus mechanisms have improved the proof of work concept. [0:09:21]
• What the costs associated with proof of stake relative to proof of work are. [0:11:09]
• Problems that both consensus methods have regarding recentralization. [0:12:07]
• What other problems blockchain technologies can be used to solve. [0:12:50]
• The problems in the financial technological system that public blockchains solve. [0:14:29]
• Why finality of payments associated with cryptocurrencies is not a good thing. [0:15:42]
• What limitations can blockchain technology remove regarding international money transfers. [0:17:06]
• How to prevent double-spending under the current financial system. [0:20:34]
• What Stephen thinks drives the value of cryptocurrencies. [0:21:15]
• Whether Bitcoin is decentralized in Stephen’s opinion. [0:23:19]
• Reasons why concentrated mining power does not cultivate decentralization. [0:24:46]
• How permissioned blockchains can improve on the pitfalls of public blockchains. [0:25:40]
• A discussion about the potential benefits of private blockchains. [0:27:15]
• We learn what a smart contract is. [0:29:49]
• Outline of other useful applications for smart contracts. [0:31:25]
• Examples of illicit activities associated with cryptocurrencies. [0:32:08]
• Code is law: deferring to code for implementing law. [0:33:17]
• What Stephen thinks is the value of the underlying blockchain technology. [0:34:32]
• Stephen explains what Web3 is and if it improves the financial system [0:37:05]
• We find out if there is anything about crypto technologies that excite him. [0:41:06]
• The most compelling argument for crypto that Stephen has heard. [0:43:08]
• He explains what he means by suffering stemming from cryptocurrencies. [0:44:40]
• Stephen shares his experiences as an outspoken crypto skeptic. [0:45:26]
• How he began working with researchers from the London School of Economics. [0:47:03]
• Discussion about the narrative of cryptocurrencies and why Stephen is outspoken on the subject. [0:50:33]

In today's episode, we share some updates from our Financial Goals Survey, respond to a listener who says we are wrong about dividends, and talk about Scout Mindset by Julia Galef. We then respond to a listener question about whether our comments in Episode 205 on private equity extend to private real estate. In our main topic, we unravel what money is by looking back at its origin story and the two competing theories about what it is. We discuss the ideological underpinnings of money and how these ideologies can make choosing a definition of money highly political. We end the episode talking to Dan Solin about his reading habits. Dan Solin joined us almost four years ago for an episode on evidence-based investing. Tuning in, you’ll hear how Dan finds the books he reads, what his favourite types of books are, and whether he recommends books to people, plus he shares why he believes reading is so essential, and much more. Don’t miss out on another well-rounded and informative episode of the Rational Reminder Podcast.

Key Points From This Episode:

• An update on the progress of our Financial Goals Survey. [0:03:32]
• Your monthly update on the reading challenge and how to get involved. [0:04:52]
• An update from our limited crypto series and some of the feedback we’ve received. [0:08:00]
• This week’s book review: The Scout Mindset. [0:16:29]
• Simple set of tools to help you assess biases when receiving new information. [0:19:18]
• Following up on private investments concerning real estate. [0:24:32]
• Onto the main topic of the show with Dan Solin: money and what it is. [0:29:09]
• Where the perception and definition of money originated from. [0:31:00]
• Unpacking an alternative definition of money by Adam Smith. [0:37:32]
• The quantity theory of money and its application in the economy. [0:40:14]
• An interesting political aspect to forming John Locke’s theory of money. [0:46:49]
• Outlining of the history of opposing views on the theory of money. [0:47:25]
• A break down of the findings of an anthropological review investigating money. [0:49:47]
• How money is neither commodity nor quantity but rather a measure of credit. [0:51:32]
• The state theory of money and how it is different from other theories. [0:53:39]
• What sets the price level of money based on credit theory. [0:55:06]
• A discussion around money based on the several theories of what it is. [0:57:22]
• Why fiat money is not a derogatory term for currencies. [0:59:30]
• Some of the nuances regarding the definitions of money in a modern context. [1:00:07]
• Dan shares his reading habits as an author. [1:01:05]
• Whether Dan reads hard copies, audiobooks, or Kindle. [1:01:32]
• The difference between reading and streaming in Dan’s opinion. [1:02:08]
• Insight into some of Dan’s favourite types of book. [1:03:11]
• How he finds new books to read and what inspires his reading interests. [1:05:40]
• Ways in which Dan organizes what he reads and learns. [1:08:47]
• Whether or not he recommends books to other people. [1:09:33]
• Reasons why Dan believes it is important to read books similar to his latest book. [1:12:21]
• Dan’s advice for people that want to read more. [1:14:10]

Welcome to another special episode of Rational Reminder Podcast, a show to help us learn about cryptocurrencies and their role in our current and future financial systems. In today's show, we speak to Tobin Hanspal, an Assistant Professor of Finance at the Vienna University of Economics and Business who has written several papers focused on household finances. Tobin's research area offers insights into the behaviours of retail investors in the crypto space and how this may affect household finances. In this episode, we take a deep dive into some of the papers that Tobin has authored and how his findings relate to the behaviours and biases of crypto adopters. We discuss the investment behaviours of early crypto adopters, the role of EFTs in reducing risk, the different types of investor groups, how past experience negatively affects investor confidence, how behaviours change after an initial crypto investment, the disposition effect, how cryptocurrencies are an extension of existing behaviours, and much more! Be sure not to miss out on this informative episode with expert, Tobin Hanspal!

Key Points From This Episode:

• How Tobin investigated the investment behaviour of early crypto adopters. [0:04:24]
• Whether indirect crypto investments are a good proxy for crypto investors. [0:08:10]
• Why it is important to consider the different types of investor groups. [0:10:23]
• The differences between individual characteristics of crypto adopters and non-adopters. [0:10:55]
• Comparison of eventual crypto adopters and non-adopters [0:12:37]
• What kind of sector ETFs do crypto adopters choose to invest in. [0:13:48]
• Differences between the crypto and non-crypto investors, in terms of typical investor behaviour biases. [0:15:01]
• How cryptocurrencies are an extension of traditional high-risk investing. [0:16:39]
• Whether the behaviour of investors changes after their first crypto investment. [0:17:37]
• The differences in behaviour between early and late adopters. [0:19:15]
• What insights Tobin has regarding the geographical location of crypto adopters. [0:20:36]
• What percentage of their portfolios’ do adopters allocate to crypto. [0:21:11]
• Find out if crypto investors buy lower-risk assets to make up for cryptocurrencies. [0:21:36]
• What differences exist between crypto and non-crypto investors regarding efficiency. [0:22:51]
• Description of the typical crypto investor characterized in their study. [0:23:39]
• Tobin explains the disposition effect and how belief systems play a role. [0:25:56]
• How risk appetite is related to the disposition effect. [0:28:05]
• People’s beliefs: are expected returns affected by past experience in expected realized returns. [0:29:20]
• Whether positive or negative realized past return experiences have the same effect on beliefs. [0:31:19]
• How peoples’ beliefs affect investing in riskier assets. [0:32:07]
• Changes in behaviour on a household level from past negative investment experiences. [0:33:23]
• The role experiences of peers and/or relatives have on investment belief. [0:38:16]
• Reasons for people reducing risk in their portfolios. [0:38:50]
• Tobin shares if he thinks cryptocurrencies will have similar effects on peoples’ behaviours. [0:39:42]
• How applicable the findings are from Tobin’s study to other parts of the world. [0:41:54]
• What the ideal theoretical response is to losing money on an investment. [0:42:47]
• Important takeaways that Tobin has for crypto investors. [0:43:23]

Welcome back to another exciting and informative episode of the Rational Reminder Podcast, a show all about finances and how to get the most of your money responsibly. To make the right decisions regarding your investments, besides the knowledge and understanding of financial systems, you also need to understand the psychology behind your decisions. To help us unpack this complicated and interesting subject is Professor Vanessa Bohns, a Social Psychologist and Professor of Organizational Behaviour at Cornell University. Professor Bohns has a Ph.D. in Psychology from Columbia and is the author of You Have More Influence Than You Think: How We Underestimate Our Power of Persuasion, and Why It Matters. The topic of the book is exactly what today’s show is about, as we delve into the intricacies of human behaviour and decision-making. In today’s episode, we learn about the influence that people have on one another, how people perceive one another, the human behaviours that scammers take advantage of, why people worry about saying the wrong thing, what the default behaviour of people is, why people struggle to say no to a request, and so much more! Don’t miss out on this fascinating episode with special guest and expert, Professor Vanessa Bohns!

Key Points From This Episode:

• How much impact and influence people have on one another. [0:03:09]
• What people tend to notice about other people. [0:04:50]
• Why people don’t realize what other people are paying attention to. [0:08:58]
• How being in the presence of other people affects experiences. [0:10:31]
• Whether communicating with someone about a shared experience amplifies it. [0:12:41]
• Reasons why some people are underconfident in their social lives. [0:13:20]
• Problems that stem from underconfidence. [0:15:52]
• The consequences of underestimating how much people like us. [0:18:02]
• Why people worry about saying the wrong thing. [0:20:53]
• Whether it is default to believe or disbelieve when assessing information. [0:22:55]
• The impact of people interacting with people anonymously. [0:26:01]
• How the default to believe people impacts receiving advice from experts. [0:27:22]
• The authority on a subject can switch between domains of expertise. [0:31:19]
• Ways in which scammers take advantage of behavioural biases. [0:32:22]
• Problems caused by people being dishonest or spreading false information. [0:34:47]
• Approaches to ensure that you are not spreading misinformation unintentionally. [0:36:04]
• Why asking for what you want is so effective. [0:38:21]
• Whether asking for what you want becomes easier over time. [0:40:33]
• The effect that money has when asking for something. [0:42:24]
• Differences in response to small or large requests. [0:43:48]
• How responses differ between direct and indirect requests. [0:45:23]
• What effect asking in person as opposed to over email or text have on responses. [0:47:20]
• Reasons behind the hesitancy for people to ask for what they want. [0:49:04]
• Why people find it difficult to reject a request from someone. [0:50:36]
• Whether saying no in person is the same as saying no over email. [0:52:12]
• Feeling guilty and whether you should feel bad asking for things. [0:53:52]
• How people generally respond to unethical requests. [0:56:21]
• Find out if people with authority realize how much influence they have. [0:59:01]
• Approaches to help people be more aware of their influence. [1:00:58]
• A rundown of the impacts of not being aware of other people has. [1:05:12]
• We end the show with Professor Bohns sharing her definition of success. [1:07:41]

Welcome back to another episode of our series focusing on cryptocurrencies. In this episode, we dive into conceptual complexities surrounding cryptocurrencies and how this might affect the financial system in future. To help us unravel this nuanced subject is Professor Eswar Prasad, a senior professor of trade policy and Professor of Economics at Cornell University, and a senior fellow at Brookings Institution. He is also a research associate at the National Bureau of Economic Research and was a former head of the IMF China Division. Besides his wealth of experience regarding traditional economies, he is also an authority on cryptocurrencies, which he explains in detail in his book The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance. In today’s conversation, we discuss broad conceptual ideas surrounding money and finance, such as the basic functions of money, the difference between outside and inside money, the limitations on creating wealth, how cryptocurrencies work, how cryptocurrencies may disrupt financial systems, why cryptocurrencies need trust to work, the future of cryptocurrencies, and much more. Tune in today to get insider information on cryptocurrencies with our special guest, Professor Eswar Prasad.

Key Points From This Episode:

• A brief outline of Professor Eswar Prasad’s professional background. [0:01:14]
• Professor Prasad explains what the basic functions of money are. [0:01:59]
• We learn if money is a commodity or a social contract. [0:02:33]
• The problems associated with fiat currencies. [0:03:00]
• What the concepts of inside and outside money are. [0:04:12]
• Factors that constrain the creation of outside money. [0:05:34]
• Whether mechanically constrained money is good for economies. [0:07:07]
• Learn whether commercial banks need deposits to make loans. [0:08:46]
• What the definition of fungibility is. [0:10:24]
• How and why reserves are usually maintained by a central bank. [0:11:19]
• What the differences are between physical cash and electronic money. [0:12:25]
• The anonymity associated with each of the payment methods available. [0:13:28]
• What the main functions of the financial system are. [0:15:14]
• Find out what the definition of shadow banking is. [0:17:01]
• How trust in the financial system is facilitated. [0:18:29]
• We find out if modern financial systems can be disintermediated by technology. [0:20:33]
• The potential effects that intermediaries can have on economies. [0:22:59]
• What Satoshi Nakamoto’s 2008 innovation was. [0:25:51]
• The resilience of the underlying system for Bitcoin is explained. [0:28:12]
• Learn about the three elements that make Bitcoin decentralized. [0:30:12]
• How the decentralization of Bitcoin can be overcome. [0:31:39]
• Learn about the value of blockchain and emerging validation technology. [0:34:07]
• The key reasons why cryptocurrencies have value. [0:36:14]
• Ways in which a decentralized system would be beneficial. [0:38:32]
• Outline of the downsides to decentralized finance. [0:41:01]
• Why trust is also essential to the long-term viability of cryptocurrencies. [0:43:03]
• What role unofficial digital currencies will play regarding monetary policy. [0:44:05]
• The influence that Satoshi’s innovation had on the development of a central bank digital currency. [0:45:49]

Welcome to another episode of the Rational Reminder Podcast. In today’s jam-packed episode, hear updates regarding our goals survey, the schedule for upcoming guests on the show, the latest news and highlights from the financial world, and some of the feedback we have received about the show. We also highlight interesting articles and papers regarding tech valuations, expected stock returns, the performance of venture capital funds, and a book recommendation that will help you understand the finance game. Tune in to learn about the results of the recent social survey in Canada, the basics of private equity funds, the challenges of calculating the Internal Rate of Returns for investors, some of the misconceptions surrounding private equity, and much more! Don’t miss out on this informative and well-rounded episode of the Rational Reminder Podcast with your two favourite Canadians!

Key Points From This Episode:

• We start the show with an exciting announcement for our listeners. [0:02:07]
• An update regarding the Goals Survey Project and what needs to be done. [0:03:30]
• A rundown of the upcoming guests for the show. [0:04:44]
• Outline of the reviews and criticisms received about the show. [0:05:55]
• A breakdown of the book for today’s review, Finite and Infinite Games. [0:10:07]
• Background about the author of the book, James P. Carse. [0:10:57]
• The main point of the book: the differences between finite and infinite games. [0:11:16]
• An interesting quote from the book regarding culture. [0:14:42]
• Highlights of the recent news and updates in the financial world. [0:17:02]
• Insights from an interesting article about tech valuations by Cliff Asness. [0:19:47]
• Another interesting paper by David Blitz about expected stock returns. [0:23:09]
• A discussion regarding the recent social survey implemented in Canada. [0:26:07]
• We discuss the basics of private equity as an investment strategy. [0:30:06]
• Why the math used is problematic for calculating the Internal Rate of Return. [0:32:35]
• The results of a paper which investigated the performance of venture capital funds. [0:39:01]
• More insights from follow-up papers about private equity. [0:42:24]
• Examples of the type of risk exposures that private equity provides. [0:49:36]
• The impacts associated with the preference for illiquid assets. [0:52:00]
• Some of the misconceptions surrounding diversity in private equity funds. [0:52:44]
• What are the best metrics to use to measure returns on private equity. [0:56:00]

Understanding the complexity surrounding cryptocurrencies is essential in making the correct decisions regarding investing in DeFi technology. To help us understand the basics, we talked to Dr. Igor Makarov who is an expert on cryptocurrency and Bitcoin, particularly Bitcoin and the associated mining processes. He is based at the London School of Economics, where he serves as an Associate Professor of Finance. Dr. Makarov is also the author of several papers focusing on DeFi and crypto markets in general and has provided new insights surrounding governance and mining processes. In today’s show, we learn about the basics of cryptocurrencies, mining and the future of DeFi. In particular, we talk about the role of intermediaries, what drives the prices of Bitcoin, how concentrated mining processes are, the role DeFi in increasing governance, the upsides and downsides of cryptocurrencies, and much more. Tune in to make sure you don’t miss out on advice from a respected figure in the industry, Dr. Igor Makarov!

Key Points From This Episode:

• A brief outline of Dr. Makarov’s professional background and experience. [0:00:39]
• What role do intermediaries play in the traditional financial system. [0:02:36]
• Find out if economic rents that intermediaries collect are unwarranted. [0:03:36]
• Makarov explains the complexities of cryptocurrencies and the elimination of fees. [0:06:06]
• How rents are different on cryptocurrency exchanges. [0:09:44]
• Systemic risks associated with the traditional banking system. [0:11:24]
• Whether Bitcoin and DeFi can improve banking by reducing systemic risk. [0:13:22]
• Learn if blockchain or DeFi ecosystems can exist without human intervention. [0:15:06]
• Why it is unlikely decentralized autonomous organizations will improve governance. [0:17:06]
• Breakdown of the potential problems that concentration of ownership could have on governance. [0:19:53]
• Opportunities where cryptocurrencies and DeFi can improve the traditional financial system. [0:21:44]
• Some of the potential benefits of a permissioned distributed ledger system. [0:24:39]
• Why is it important to understand the Bitcoin ecosystem. [0:26:22]
• What are the limitations of understanding the Bitcoin ecosystem. [0:27:12]
• How Bitcoin addresses are associated with with real-world entities. [0:29:36]
• Ways to differentiate between addresses belonging to individual investors and those belonging to intermediaries. [0:31:42]
• What happens when you send Bitcoins to an exchange. [0:32:49]
• Details on how Dr. Makarov calculated the concentration of Bitcoins. [0:33:25]
• How did Dr. Makarov gain an understanding of what Bitcoin is used for. [0:37:14]
• The role exchanges play in influencing the total volume of Bitcoin transactions. [0:39:00]
• Why exchanges are essential to the overall network. [0:41:06]
• The challenges in enforcing KYC and AML rules for the crypto ecosystem. [0:41:56]
• How fungibility could effect the use of cryptocurrencies in the marketplace. [0:45:19]
• Whether most important cryptocurrency exchanges are generally decentralized. [0:46:36]
• What portion of Bitcoin transactions does Dr. Makarov consider to be economically meaningful. [0:47:06]
• Why most Bitcoin transactions comprise of irrelevant transactions. [0:48:08]
• What the meaningful Bitcoin transactions are being used for. [0:50:06]
• Why the estimates of illegal activities by Dr. Makarov differs from other studies. [0:52:56]
• A more in-depth explanation of what is driving the price of Bitcoin. [0:55:54]
• How Dr. Makarov was able to identify individual Bitcoin miners for his paper. [01:01:57]
• Makarov explains why the original vision of DeFi has not been realized. [01:05:52]
• Reasons for the concentration of miners in the Bitcoin space. [01:06:42]
• What are the risks are for the Bitcoin ecosystem when mining concentration is high. [01:08:24]
• How Dr. Makarov determined the geographic locations of mining operations. [01:10:52]
• What the function of a mining pool is. [01:13:36]
• How the concentration in mining power affects the security of smaller proof of work blockchains [01:16:20]
• How concentrated the ownership of Bitcoin in the hands of individual investors is. [01:22:40]
• We find out if cryptocurrencies are democratizing financial services. [01:25:03]

John List is the recently appointed Chief Economist at Walmart, and is also a Professor of Economics at the University of Chicago, having worked as the Chief Economist at Uber and Lyft. He has published a huge array of important papers in the field of economics and is also the author of the recent book The Voltage Effect, which deals with the question of how to scale ideas successfully. We are very excited to bring you this episode, which is a particularly illuminating one, in which we draw on John's treasure trove of insight and experience, to answer a long list of questions related to personal finance decision-making. A large portion of our chat focuses on the central ideas of critical thinking and fieldwork, practices that our guest views as indispensable in making the world a better place. Along the way we get John's thoughts on retirement planning, public policy, charitable donations, and much more, so make sure to press play on this fantastic episode of the Rational Reminder Podcast.

Key Points From This Episode:

• John explains the importance of fieldwork in the study of economics. [0:03:51]
• Examples of field experiments that overturned a supposed economic truth. [0:05:15]
• Finding ways to test theories that previously proved difficult. [0:08:30]
• The question of generalizing findings from an experiment to a wider rule. [0:13:30]
• Replication in academic studies; John unpacks its central importance. [0:20:46]
• Why positive results tend to garner a publication bias. [0:23:38]
• John's perspective on checking in on investment portfolios. [0:24:40]
• What the data shows us about investment behaviours of men and women. [0:28:38]
• Accounting for the drive to give to charity. [0:35:20]
• Advice for how to make the most of your donations. [0:39:42]
• John unpacks his findings on scaling, its importance, and what he calls 'the voltage effect'. [0:44:41]
• The impact of technological advancement on our ability to scale certain solutions. [0:48:27]
• How field experiments can influence the process of scaling big ideas. [0:54:47]
• Hindrances to healthy scaling; confirmation biases, and herding. [0:56:17]
• Impacts of loss aversion and marginal thinking when scaling ideas. [1:05:28]
• Reasons for the difficulty of tackling globally important issues; multidimensionality and politics. [1:15:10]
• Weighing the utility of incentives when trying to encourage retirement savings. [1:19:16]
• Thoughts on bringing more reliable science into the policy-making process. [1:21:26]
• How parents can approach the promotion of critical thinking in their children. [1:25:45]
• John's approach to the questions he pursues; how he evaluates potential ideas and questions. [1:31:10]
• A little bit about John's new post as Chief Economist at Walmart and what the job entails. [1:33:53]
• How John defines success at this point in his life and his focus on inputs. [1:33:53]

Fundamentals of the Blockchain with Daniel Mescheder

Episode 1: Show Notes

Welcome to the first episode of our limited series focusing on cryptocurrencies and everything you need to know about them. Our first guest is Daniel Mescheder, who joins us to appropriately break down some of the basic concepts and engineering of the blockchain, using his expertise as a software engineer as the lens for this discussion. We felt this chat was the best way to launch the series and prepare listeners for the following episodes on the subject, and you can expect to hear Daniel share very helpful insight and explanations of fundamental terms and concepts such as distributed systems, consensus, hashing, digital signatures, and more. We also have time for our guest to weigh in on the subjects of smart contracts and NFTs, both of which are regular points of intrigue for the uninitiated. Importantly, we do hear from Daniel about the limitations of the technology at present, and which types of technological problems that he believes the blockchain is well-suited to address. So for all this and more, and to start this journey with us into such an important and hot topic, make sure to listen in.

Key Points From This Episode:

• The reasons for Daniel's interest and involvement with the blockchain and cryptocurrencies. [0:03:33]
• Daniel compares the hype around AI in the 1980s and the current atmosphere for crypto. [0:04:50]
• Getting to grips with Daniel's specific perspective on the blockchain and explaining distributed systems. [0:06:34]
• How the concept of consensus fits into the subject of distributed systems. [0:11:17]
• Looking at Byzantine consensus problems and how these occur on the blockchain. [0:13:51]
• Daniel gives an overview of the elements that make the blockchain functional; hashing and digital signatures. [0:19:17]
• How Satoshi Nakamoto introduced an economic incentive to comply with the protocol. [0:24:09]
• Differentiating between the public and permissioned blockchains, and databases. [0:27:33]
• How Bitcoin achieves consensus and some of the downsides of proof of work. [0:33:31]
• An assessment of the decentralized status of the Bitcoin and Ethereum blockchains. [0:41:16]
• The amount of control that is held by miners in relation to transactions. [0:45:27]
• Understanding interactions between the blockchain and other external systems. [0:49:16]
• Immutability and the blockchain; what the rules allow and the questions that still need to be answered. [0:52:47]
• Basic engineering downsides to the blockchain. [0:54:40]
• Vulnerabilities on the blockchain and how these have been exploited by hackers. [0:58:23]
• NFTs, DAOs, and smart contracts; weighing how neatly these fit into the current blockchain ecosystem. [0:59:27]
• The abundance of rhetoric surrounding discussion about the future and validity of the blockchain. [1:06:09]
• Which problems would be well-suited to a solution found within the blockchain? [1:08:10]

We have a jam-packed episode for all of our listeners today, with two guests, a lot of news, and many great resource recommendations. We start off by rounding up some recent updates from the world of finance and the Rational Reminder community, and spend some time talking about Ben's recent paper, titled 'Finding and Funding Good Life'. We are then joined by Robb Engen, for his third appearance on the show, to talk about how he helps his clients move on from unhealthy advisory relationships. Robb shares some of the surprising, disturbing, and ridiculous rebuttals that he has come into contact with over the years, and we reflect on the recent Twitter storm that occurred as a result of Robb sharing some of these. After this great chat with Robb, we are very happy to welcome back author of How to Change, Katy Milkman, who was recently a guest on the show, to discuss her reading habits, tips for memory, and how she balances producing and consuming both podcasts and books. To take part in this bounty of great information and inspiring ideas from these two guests, please make sure to join us today.

Key Points From This Episode:

• Reflecting on and investigating Ben's paper, 'Finding and Funding Good Life'. [0:10:59]
• How this podcast has increased our interest in learning about and sharing non-financial ideas. [0:15:30]
• The part that hindsight and regret play in our estimations of happiness. [0:20:08]
• Looking forward to our podcast miniseries in which we explore cryptocurrencies. [0:22:41]
• The basics of the blockchain and digital cash in light of new technology. [0:29:02]
• The context that sparked today's conversation with Robb. [0:35:49]
• Robb explains his typical client, their portfolio, and why they contact him. [0:38:30]
• How Robb approaches assessing a portfolio and communicating possible drawbacks. [0:40:43]
• Ways in which active managers are practicing bad investment habits themselves. [0:44:02]
• Tracking the progress from active to passive for those that Robb works with. [0:47:09]
• Advice from Robb for managing the end of a relationship with an active manager. [0:48:15]
• Robb shares some examples of how advisors have responded to 'break-up notices'. [0:52:07]
• A round of Talking Cents cards with Rob; addressing social issues in a new business, quitting a job, saving versus spending, and more. [1:02:26]
• Katy describes her reading habits and her use of audiobooks. [1:08:15]
• Tips and tricks from Katy for information retention and idea compilation. [1:09:20]
• Thoughts on the connected nature of the behavioural science community and the benefits that Katy sees in this. [1:13:39]
• Some of the classic behavioural science books that Katy recommends. [1:15:07]
• How Katy approaches podcasting, writing, and consuming the different mediums. [1:17:05]
• Advice from Katy for anyone wanting to increase the amount that they read. [1:21:00]

To carry on the trend of amazing guests on the show, today we welcome Antti Ilmanen. Antti is the co-head of the Portfolio Solutions Group at AQR, and the author of a couple of really impactful books that we highly recommend. His most recent is Investing Amid Low Expected Returns, and in today's chat, we get to hear all about the ideas contained in its pages, and the most important moments in his career that have shaped his philosophy. Antti received his PhD in Finance from the University of Chicago and has had a long career of working with high profile names that you might recognize from past episodes of this podcast. Our guest talks about the need for cultivating your patience in relation to your investment portfolio and shares many other great pieces of practical advice that you can implement today. We delve into some bad investment habits that Antti noted in his book and also touch on the usefulness of bonds, illiquid assets, trend following, and much more. Be sure to tune in today to hear all that this great mind has to offer.

Key Points From This Episode:

• The power and limitations of using historical data for calculating expected returns. [0:04:17]
• Balancing historical data with market-implied expected returns. [0:07:47]
• Antti comments on shifting into higher expected return equity markets. [0:11:37]
• The role of bonds in revenue generation and why to not give up on them completely. [0:13:00]
• Locating the roots of the positive premium that Antti associates with bonds. [0:16:35]
• The effect of illiquid assets on expected returns. [0:19:44]
• Why recent historical returns in real estate are not indicative of future expected returns. [0:23:40]
• The response from institutional investors to lower expected returns. [0:26:09]
• Situating value's current dip in a broader historical picture. [0:29:57]
• Some comments on the recent performance of rates, growth, and value. [0:33:39]
• Today's expected value returns in comparison with other points in history. [0:37:19]
• Antti unpacks the idea of trend following and its performance during the most recent crash. [0:39:53]
• Defining the defensive style premium and its relation to quality. [0:41:26]
• Antti differentiates carry and value strategies from each other. [0:45:55]
• An explanation of the importance of being 'long-short' to capturing the premium. [0:51:24]
• Locating the difference between alternative risk premia and alpha. [0:55:31]
• Practical tips for investors to wait out periods of poor performance. [0:57:45]
• The need for investors to be more fee-conscious in today's, low-return world. [1:01:35]
• Antti shares about what he calls the investor's 'premier bad habit'. [1:02:33]
• The impact of Ken French on Antti's career and philosophy. [1:05:29]
• How Antti defines success at this point in his life and the priority he gives to balance. [1:07:33]

Today, on the Rational Reminder Podcast, we are tackling a few interesting topics that tie into recent and forthcoming conversations with our amazing guests. In this 'us only' episode, we are focusing on thematic ETFs and the truth about dividend investing. After a quick look at The Quick Fix by Jesse Singal, some reflections on the past six months at ARK Invest, and the lessons we can still learn from the dot-com crash, we get into the meat of today's episode by way of Ben's recent experiences on a discussion panel about the utility of thematic investing. From there, we transition into the 'relevance of dividend irrelevance' and share some of the most illuminating and pertinent findings. In the end, our argument is simply that dividends are not the way to go and are an inefficient policy on many fronts. This has not deterred many investors, however, and we get to grips with the kinds of behaviours associated with dividends before espousing what this can mean for you and your objectives. To catch all of this and links to some of the best research available, be sure to listen in with us today.

Key Points From This Episode:

• Today's book review of The Quick Fix by Jesse Singal and its critique of popular psychology. [0:12:30]
• Inflows at ARK Invest; the startling commitment that we are currently seeing. [0:21:48]
• Reflections and information that we dug up on the dot-com crash in the '90s. [0:22:30]
• Notes on thematic ETFs garnered from the recent panel Ben was on. [0:25:09]
• Disentangling the relevance of dividend irrelevance. [0:35:45]
• The performance of a dividend portfolio and a better idea of expected returns. [0:40:28]
• Empirical findings about dividend investors and their actions in relation to yields, diversification, and more. [0:42:01]
• The tax inefficiency of dividends and what this means for capital gains. [0:49:01]
• Underlining the importance of dividend investor's consumption and its sensitivity to dividends. [0:51:31]
• How the problem with dividends is compounded outside of the US. [0:57:11]

We are so happy to bring you all our 200th episode, and who better to have on the podcast on this auspicious occasion than the legendary, Professor Gene Fama? This is one of the most jam-packed episodes we have ever recorded, with Gene providing concise and thought-provoking answers to our many, many questions. After delving into the foundations of Gene's work and philosophy, covering market efficiency, and its competing theories, Gene entertains our queries about a wide range of ideas and models, and generously shares the decades worth of wisdom that he is so widely known for. We also find time to talk about retirement plans, inflation, cryptocurrencies, and the influence of machine learning. Towards the end of our conversation, our guest touches on some more personal ideas about productivity, his career, his partnership with Ken French, and what success means to him at this point. For a landmark episode, with a true hero of the evidence-based approach to investing, make sure not to miss this.

Key Points From This Episode:

• The basics of market efficiency and its main implications for investors. [0:04:49]
• Limitations of the efficient markets model for explaining specific cases. [0:08:02]
• Gene's perspective on the inelastic markets hypothesis and his interest in it for the future. [0:09:36]
• The anomalies that brought down the capital asset pricing model. [0:10:26]
• Unpacking the three-factor and five-factor asset pricing models that Fama and French created. [0:11:43]
• Thoughts on the Q-factor model, factor premiums, and data dredging. [0:15:43]
• Gene's reflections on building data sets dating back to the 1920s. [0:17:13]
• The best way to estimate expected returns and expected factor premiums according to Gene. [0:19:52]
• Structuring portfolios and how different investors should approach this. [0:24:10]
• Considering international diversification for investors in Canada. [0:29:05]
• Further thoughts on asset pricing models. [0:32:47]
• The assets that are hedged against expected and unexpected inflation. [0:33:31]
• Gene illuminates the role of the Fed in relation to inflation. [0:36:43]
• Advice for typical retirees from Gene. [0:38:22]
• The challenges that Gene has experienced translating theory into practice. [0:40:16]
• Lesson from Gene's work with Dimension Fund Advisors. [0:43:47]
• Gene's reflections on his impact and having his theories implemented in practice. [0:45:32]
• Weighing the value and impact of behavioral finance. [0:47:53]
• Technology and active managers; is it any different for those aiming to achieve alpha in the current context? [0:50:46]
• Gene weighs in on cryptocurrencies and how his perspective might have shifted. [0:53:08]
• A look at the people who have had the biggest influence on Gene's career. [1:03:05]
• Thoughts on productivity and making the most of periods of clear thinking. [1:03:39]
• Our guest's personal definition of a successful life. [1:06:17]

Key Points From This Episode:

• Today's book review, looking at Setting the Table by Danny Meyers. [0:08:47]
• Christopher Bloomstran's thought-provoking critique of Ark Invest. [0:18:06]
• A follow-up on our ongoing discussion about bonds and look at their recovery time. [0:20:04]
• Comparing real returns across the different decades. [0:27:30]
• Research into a more complete view of the historical returns of stocks versus bonds. [0:39:31]
• How correlations come into the conversation about stocks and bonds. [0:42:54]
• Aydin describes his reading habits; audiobooks on a commute, hacks, and more.
• The different purposes of books and how Aydin uses business content to generate ideas. [0:49:40]
• Books as leverage and some thoughts from Aydin on his favourite genres. [0:52:27]
• Where Aydin sources his books and what it takes for him to decide to recommend books to others. [0:56:12]
• The role that podcasts play in Aydin's reading habits. [0:58:30]
• Aydin's advice for how to read more and his approach to encouraging his children. [0:59:12]
• Considering different ways to increase information retention. [1:02:11]
• A round of Talking Cents cards with Aydin! [1:03:34]

You don’t need to be a rocket scientist to work at Dimensional Fund Advisors, but Gerard O’Reilly sees it as an asset, particularly when it comes to problem-solving. Now the Co-CEO and Chief Investment Officer of one of the fastest-growing US investment businesses, Gerard received a Ph.D. in aeronautics before entering fund management, attracted to Dimensional because of the opportunity it afforded him to learn from the world-leading economists at the company; including Eugene Fama, Myron Scholes, Merton Miller, Robert Merton, and Ken French. We recently sat down with Gerard to discuss the firm’s research-based culture and rules-based approach to investing. In this episode, we get into the nitty-gritty regarding Dimensional’s distinctive portfolio management decisions and the data sources they draw from and Gerard answers some technical questions regarding risk assessment, factor tilted portfolios, operating profitability, goodwill, and more. We also touch on the value of combining multiple metrics, why small-cap stocks deserve a place in your portfolio, and some of the biggest changes that Gerard has witnessed in Dimensional portfolios over the past decade, as well as how he applies his scientific learnings to make unique portfolio adjustments and some of the various benefits of Dimensional’s integrated approach. Make sure not to miss this informative, insightful, and in-depth conversation with Dimensional CIO and Co-CEO, Gerard O’Reilly!

Key Points From This Episode:

• Market-cap-weighted passive strategies versus Dimensional’s rules-based higher expected return strategy. [0:03:45]
• Assessing risk based on the Intertemporal Capital Asset Pricing Model (ICAPM). [0:07:07]
• Diversification in a factor tilted portfolio versus a cap-weighted market portfolio. [0:10:57]
• What criteria the variables that Dimensional uses need to meet before they’re considered dimensions of expected returns. [0:13:00]
• Sources Dimensional draws from regarding portfolio decisions and implementation. [0:16:09]
• How Gerard decides between underweighting or excluding securities in portfolios. [0:19:59]
• Why Dimensional uses operating profitability rather than cash-based profitability. [0:22:38]
• Gerard’s view on intangible assets, goodwill, and Dimensional’s investment strategy. [0:29:31]
• The value of including internally developed intangibles in value and profitability metrics. [0:37:49]
• Gerard reflects on the opinion that Fama and French’s findings are no longer valid. [0:42:58]
• Whether or not it’s better to combine multiple metrics to measure relative price. [0:46:41]
• How Dimensional targets value and profitability together (for large and small caps). [0:50:39]
• How Gerard thinks about capacity for investment strategies in small and micro-cap stocks as Dimensional continues to grow. [0:54:03]
• Understanding how entering into the ETF market has impacted his thinking. [0:57:24]
• Expected premiums for owning smaller stocks over larger ones. [0:58:50]
• The importance of security lending revenue for expected returns on Dimensional funds; improving the investor experience. [1:00:12]
• How Dimensional deals with sector weights and the role that diversification plays. [1:04:12]
• Why they decided to implement credit, despite research to suggest that it doesn’t add an independent source of expected returns. [1:06:08]
• Some of the biggest changes in Dimensional portfolios over the past 10 years. [1:10:23]
• How Gerard applies his scientific learnings to make unique portfolio adjustments. [1:12:52]
• Comparing Dimensional’s core and vector strategies with a combined cap-weighted portfolio; from fees to the benefits of hindsight and more. [1:15:15]
• Papers that seemed compelling but were deemed ineffective by their research team. [1:19:11]
• Insight into Dimensional’s decision to make their internal research public. [1:21:42]
• Why their rules-based approach is the hardest part of Dimensional to replicate. [1:25:55]
• What to be aware of when comparing backtests: how data can be manipulated. [1:30:06]
• Valuable lessons and perspectives Gerard has learned from their competitors. [1:32:22]
• Commonalities between aeronautics and asset management, like problem-solving. [1:35:20]
• Why Gerard believes that having his own financial advisor is invaluable. [1:36:55]
• Gerard explains why we might expect factor premiums to persist in equilibrium. [1:38:28]

Many people have been contemplating the death of bonds, which is why for the main topic of today’s episode we’re going to be talking about their immortality. After a vicarious trip to The Masters, an overview of The Art of Insubordination, and an explanation of why we’re concerned about the changes that WealthSimple has made to their business model, we get into the world of bonds. Bond returns have not been good this year, and bond index funds are down all round, but that doesn’t mean that bonds are necessarily the riskier choice of investment in the long term, or that you should be feeling disheartened about them. Tune into our conversation today to hear why!

Key Points From This Episode:

• The incredible experience of attending The Masters, and how you can win a ticket. [0:02:21]
• Three business-focused TV series that we highly recommend. [0:02:27]
• Upcoming guests, and some very positive listener reviews. [0:03:34]
• An overview of The Art of Insubordination. [0:09:16]
• Why change is challenging for most people, and the value of creating environments that encourage dissent. [0:11:12]
• How dissenters can make their actions more impactful, and what leaders can do to encourage dissent. [0:13:16]
• Key takeaways from The Art of Insubordination. [0:16:39]
• Why we are disappointed with the changes that Wealthsimple has made to their business. [0:18:47]
• Nuances that Wealthsimple has left out of their venture capital analysis. [0:23:51]
• Today’s main topic: the immortality of bonds. [0:33:38]
• Statistics which highlight the fact that bond returns have not been good this year. [0:33:51]
• Why volatility is not the only risk that matters. [0:35:06]
• How Ken French defines risk. [0:37:51]
• Some of the pros and cons of bonds and stocks. [0:38:56]
• Calculations which show that stocks are not necessarily less volatile than bonds in the long run. [0:40:48]
• The five components of long-run predictive variance. [0:43:23]
• An explanation of a model we created for the dispersion of outcomes. [0:45:10]
• Why now is the time to get excited about bonds. [0:49:27]
• Today’s first misconception: high growth sectors/regions/companies are good investments. [0:53:52]
• Today’s second misconception: you can lose all of your money in stocks. [0:55:57]

Welcome back to the show all about sensible investing in Canada! Today we have yet another masterclass with a wonderful guest, Sebastien Betermier. Sebastian is an Associate Professor of Finance at Desautels Faculty of Management at McGill University, where he teaches investment management, applied investments, and pension funds retirement systems. We have a deep, thoughtful, and precise conversation with him about his recent research and papers, much of which stands in contrast to our usual fare on the show. In our chat, we dive into the nuts and bolts of asset allocation, hedging risk, and his research into what demographics can teach us about investment behaviours and returns. We also hear from our guest about interesting topics of expected persistence and tilting towards value stocks, before shifting the conversation towards homeownership and property investment. Sebastien provides some sound advice around when it might be a good idea to purchase property over other asset classes, and we evaluate this position from a number of different investing perspectives. Lastly, we spend some time looking at pension plans, and what we can learn from those available in Canada right now.

Key Points From This Episode:

• Sebastien explains the theoretical relationship between labor income and financial asset allocation. [0:04:30]
• Findings on hedging labour income risks and the paper that Sebastien published on the subject. [0:06:47]
• The relationships between risk and age, gender, wealth, and heterogeneity across households. [0:10:05]
• Unpacking Sebastien's investigation into value and growth investors. [0:12:07]
• The effect that the characteristics of labor income have on the rate of progression on the value ladder. [0:18:43]
• What we can learn about expected persistence in the value premium. [0:22:39]
• Weighing the possibility of predictive demographics for future value premiums. [0:24:29]
• Advice for young investors looking to tilt towards value stocks. [0:27:50]
• Explaining differing returns according to the characteristics of people. [0:29:41]
• Sebastien explains the factors of markets, wealth, and age, in the pricing model. [0:31:24]
• Understanding how investors tilt to age and wealth factors, and what these portfolios look like. [0:38:19]
• The impact of age and wealth factors on wealth inequality, and how younger investors can combat this. [0:42:19]
• Possible rationales for homeownership and the storage of wealth in housing. [0:44:26]
• The household characteristics that are predictive of larger allocations to housing. [0:48:49]
• Economic importance of risk-free benefits of homeownership. [0:52:15]
• The decade-long rule of thumb for purchasing property; Sebastien weighs in. [0:55:31]
• Why asset-only performance is not the only correct way to measure the success of the Canadian pension fund model. [0:58:50]
• Differentiating asset-only performance and liability-hedging performance measurement. [1:02:29]
• A list and explanation of the assets that Canadian pension funds use for hedging real liabilities. [1:04:03]
• Lessons from the Canadian Pension Plan for individual investors and firms. [1:12:54]
• Sebastien's personal definition of success: making the most of opportunities and a balanced life. [1:16:07]

The world of personal finance is full of axioms, and new investors can get caught up in investing myths and ‘rules of thumb’ that are limiting at best and lead to underperformance and unnecessary losses at worst. In this week’s episode, we outline some of the common misconceptions that new investors have, the evidence (or lack thereof) surrounding them, and how to think more like a seasoned investor. Is value investing really a safer strategy with lower expected returns? Do you need to employ a Buffett-Lynch stock picking approach when value investing? Are all index funds good investments? Tune in to find out the answers to these questions and gain some insight into the relationship between risk and return, dividend investing versus total risk investing, and whether or not exclusively investing in US stocks is a good idea, plus so much more!

Key Points From This Episode:

• Upcoming guests, including Professor Eugene Fama in Episode 200. [0:01:27]
• An update on our 22 in 22 Reading Challenge, with over 1,000 books read. [0:05:30]
• A review of The Great Depression: A Diary by Benjamin Roth and lessons learned. [0:07:18]
• A quick overview of The Bond King, the story of Bill Gross by Mary Childs. [0:17:10]
• This week’s news stories: 24/7 investing from Robinhood, stock splits, Wealthsimple portfolio changes, and more. [0:20:02]
• Our main topic: some of the common misconceptions that new investors have. [0:28:50]
• Whether or not value investing is a safer strategy with lower expected returns. [0:30:42]
• Some examples of where the myth that value stocks are safer comes from. [0:33:25]
• The fallacy that value investing requires discounted cash flow (DCF) analysis. [0:40:52]
• Why Warren Buffett’s outcome could be a challenge to systematic value investing. [0:43:41]
• Debunking the misconception at all index funds are good investments. [0:46:48]
• Conversely, Ben shares why not all actively managed funds are bad investments. [0:47:34]
• Why all exchange-traded funds (ETFs) tracking an asset class are not the same. [0:48:12]
• The myth that risk and return are always related and the cases when this isn’t true. [0:51:02]
• Ben shares his reflections on the misconception that dividend investing is less risky than total return investing. [0:53:14]
• Analysis that demonstrates whether or not dividends are actually safer. [0:56:09]
• Our last misconception for today: you should only invest in US stocks because they perform best. [0:59:40]