19 episodes

We solve the mathematical problem of causing an enormous increase in one's bank account balance through human effort.

The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour.

The Behavioral Investor Wilfred Waters

    • Investing

We solve the mathematical problem of causing an enormous increase in one's bank account balance through human effort.

The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour.

    S2E8 💲 Grit Perpetuates Wealth: Jagdeep Mavi

    S2E8 💲 Grit Perpetuates Wealth: Jagdeep Mavi

    In this second part of our interview with Jag, he turned the tables and interviewed us. Here he showed his wealth of experience in finance by prodding us to find something deeper than merely aspirational purchases like Lamborghinis. He warned us that inspiration is more durable as a motivator. Have a listen for the path he directed us down with his line of questioning.



    As always, here are some links to topics discussed during the session so you don't have to Google them yourselves:




    Family Fortunes: How to Build Family Wealth and Hold on to It for 100 Years - https://www.amazon.com/Family-Fortunes-Build-Wealth-Years/dp/1118171411
    Is it True that 40% of Americans Can’t Handle a $400 Emergency Expense? - https://www.cato.org/blog/it-true-40-americans-cant-handle-400-emergency-expense-0
    Canadians and their Money: Key Findings from the 2019 Canadian Financial Capability Survey - https://www.canada.ca/en/financial-consumer-agency/programs/research/canadian-financial-capability-survey-2019.html
    Square Kilometre Array - https://www.skatelescope.org/
    Earliest Record of Accounting - https://fremont.edu/history-of-accounting/
    France CAC 40 Stock Market Index - https://tradingeconomics.com/france/stock-market
    Black Walnut Trees, grow black walnut wood for profit - https://treeplantation.com/black-walnut.html
    How Beeple Crashed the Art World - https://www.newyorker.com/tech/annals-of-technology/how-beeple-crashed-the-art-world
    Stashing Your Art in a Tax Haven Can Be Dicey - https://www.barrons.com/articles/stashing-your-art-in-a-tax-haven-can-be-dicey-1445663281
    Behind Closed Doors: A Look At Freeports - https://itsartlaw.org/2020/11/03/behind-closed-doors-a-look-at-freeports/
    The Compound - https://docs.google.com/spreadsheets/d/1k0IDctrpzyLjFFjYqTiPXZuSTwYFJdK-QZQ3AG859Dw/edit#gid=485472545
    The Average Canadian Salary in 2020 - https://www.jobillico.com/blog/en/the-average-canadian-salary-in-2020/
    Personal Income in Australia - https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/personal-income-australia/latest-release
    The Selfish Gene - https://en.wikipedia.org/wiki/The_Selfish_Gene
    Memes - https://en.wikipedia.org/wiki/Meme#Dawkins
    Positive Psychology and Familial Factors as Predictors of Latina/o Students’ Psychological Grit - https://journals.sagepub.com/doi/abs/10.1177/0739986315588917


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    • 47 min
    S2E7 💸 13 Uncorrelated Assets: Jagdeep Mavi

    S2E7 💸 13 Uncorrelated Assets: Jagdeep Mavi

    DISCLAIMER:



    This is not financial advice. We are not financial advisors.



    AD:



    One way to manage behavior when investing is to use http://passiv.com/behave. This can be used to rebalance your portfolio, with one click, in accordance with allocation rules you have set.



    INTERVIEWEE: JAGDEEP MAVI



    Jagdeep Mavi (https://twitter.com/jagmavi) has a hedge fund and ETF sales background. His focus is on maintaining a portfolio of uncorrelated assets to minimize turbulence. His extensive experience gives us great insight about managing behavior as well. This is the first part, in part 2 he turns the tables and interviews us, so keep an ear out for the next episode.



    Links to some of the topics discussed: 




    The Lost Decade (https://www.pattonfunds.com/remembering-a-lost-decade.html)
    ETFs (https://www.investopedia.com/terms/e/etf.asp)
    Non recourse finance (https://www.investopedia.com/terms/n/non-recoursefinance.asp)
    Non recourse leverage (https://www.investment-and-finance.net/finance/n/non-recourse-leverage.html)
    Out of the money call options (https://www.investopedia.com/terms/o/outofthemoney.asp)
    Wallstreetbets (https://www.reddit.com/r/wallstreetbets/)
    Volatility and tail risk investing (https://thehedgefundjournal.com/volatility-and-tail-risk-investing/)
    Tail risk hedging (https://verdadcap.com/archive/tail-risk-hedging)
    Mutiny Fund (https://mutinyfund.com/)
    World Tree: Impact Investing for Everyone – Future for Farmers (https://www.worldtree.eco/)


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    • 2 hrs 29 min
    S2E6 🐢 What 25% Geometric Return Sounds Like: Alistair Cowley

    S2E6 🐢 What 25% Geometric Return Sounds Like: Alistair Cowley

    Alistair Cowley is a value investor who runs a website: growthwithvalue.com and podcast by the same name (https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8xZjJjYzQ5MC9wb2RjYXN0L3Jzcw?sa=X&ved=0CAMQ4aUDahcKEwjwy9yy_azvAhUAAAAAHQAAAAAQAg&hl=en-QA). His heroes include Warren Buffett and Tony Hansen (https://www.youtube.com/watch?v=FD7dF2QrnTw), particularly with regard to having skin in the game and only taking a performance fee. As an aspiring fund manager, Alistair has written an owner's manual for his portfolio (https://growthwithvalue.com/wp-content/uploads/2020/11/Owners-Manual-1.pdf). 



    An example of his analysis skills is this report on Flight Centre: https://growthwithvalue.com/wp-content/uploads/2020/12/Flight-Centre-Company-Analysis.pdf. As shown in this report, he uses a checklist. This has been distilled from a number of books by expert investors, such as found in: 


    The book Financial Shenanigans (https://www.amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071), and the 
    Credit Suisse whitepaper Measuring the Moat (https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=em&document_id=1066439791&serialid=RojFyPPuyB52GjdsfOiNhlbEB2L63HISLZqSTpL1p48%3d)* 
    And Tao of Charlie Munger (https://www.amazon.com/Tao-Charlie-Munger-Compilation-Commentary/dp/150115334X) In one of our standard final questions he mentioned the mental handwashing equivalent of ignoring market volatility. 



    This is a point emphasised by the great Australian investment advisor Peter Thornhill: https://www.youtube.com/channel/UCwH2W3eN7WoWWTC7KiUVR6A/videos. Some useful episodes from the Growth With Value Podcast are: 




    Filtering the market: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8xZjJjYzQ5MC9wb2RjYXN0L3Jzcw/episode/ZTQwM2JkMGQtN2VmNy00MDQ5LTg1YjgtN2JjNDIyODQ0OWY4?sa=X&ved=0CAUQkfYCahcKEwjwy9yy_azvAhUAAAAAHQAAAAAQAw&hl=en-QA
    Discount Cashflow Analysis: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8xZjJjYzQ5MC9wb2RjYXN0L3Jzcw/episode/NTk5MjE4N2QtMzI2NS00OWQxLWIyNjgtM2JlYzQ5YjlkN2E1?sa=X&ved=0CAUQkfYCahcKEwjwy9yy_azvAhUAAAAAHQAAAAAQAw&hl=en-QA 



    Alistair's watchlist can be found here: https://growthwithvalue.com/watchlist/. It is a good place to start to see which businesses he likes based on his framework.



    *Mauboussin is a great resource: https://themokaya.com/2020/12/28/michael-mauboussin-resources/


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    • 58 min
    S2E5 Dr. Joy Lere Talks about Freud ➕ Finance

    S2E5 Dr. Joy Lere Talks about Freud ➕ Finance

    Today we talked with licensed clinical psychologist and behavioral finance consultant Dr. Joy Lere. We covered the paralysing effect of shame and how it's a mistake to think of emotions as bad. The conversation then turned to relationship damaging, smartphone-driven habit loops and the consequences for our capacity to focus. We concluded with a discussion about possibilities for elevating, rather than obscuring, humanity's wealth accumulation abilities.

    Dr. Lere was introduced to us via Twitter by none other than Dr. Daniel Crosby, author of The Behavioral Investor. She can be reached on Twitter and Instagram with the same handle, @joylerepsyd. She's also on LinkedIn and Substack, with the wonderful newsletter name of Freud + Finance.


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    • 25 min
    S2E4 😎 Behavioral Investing from Peru and a Quick Tour of the Lima Stock Exchange

    S2E4 😎 Behavioral Investing from Peru and a Quick Tour of the Lima Stock Exchange

    A note to our listeners: Wil interrupted Sebastian too much in this episode. He will improve in this regard in future interviews, sorry about this - we're both total newbies to podcasting! This is in strong contrast to today's guest who has been a TV anchor!



    Sebastian Salazar Nunez:



    https://t.co/YNRm7o9zMB?amp=1,

    https://twitter.com/Naanull



    ...is an economist and investment analyst at Coril Group in Peru (https://www.grupocoril.com/about.html). He has also been a news anchor for Canal Channel N:



    https://www.youtube.com/watch?v=L7JCyKMuHOw&feature=youtu.be.



    Join us as he takes us on a tour of investing in Peru, with commentary on everything from software patent company Network 1 Technologies:



    https://simplywall.st/stocks/us/tech/nysemkt-ntip/network-1-technologies#:~:text=Price%20to%20Book%20Ratio&text=PB%20vs%20Industry%3A%20NTIP%20is,industry%20average%20(2.5x).



    ...to news companies like Empresa Editora El Comercio SA:



    https://www.marketwatch.com/investing/stock/elcomei1?countrycode=pe 



    ...to food companies like Alicorp:



    https://www.alicorp.com.pe/pe/es/



    ...and also a large bank, Credicorp:



    https://credicorp.gcs-web.com/investor-overview



    All of these are traded on the Lima Stock Exchange (https://www.bvl.com.pe/). Sebastian also covers behavioral investing advice, The Investment Checklist (https://amzn.to/3puzMpc), and the challenges managing client behavior from the perspective of a broker. 



    The episode also contains some commentary on the Advanced Value Investing Workshop (http://www.advancedvalueinvestingworkshop.com) run by Professor Kenneth Jeffrey Marshall, which we discovered we are both currently participating in!


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    • 48 min
    S2E3 Breaking The Market to Mend Our Lives

    S2E3 Breaking The Market to Mend Our Lives

    Matt runs Breaking the Market: https://breakingthemarket.com/welcome, introduced to us by Taylor: https://taylorpearson.me/ergodicity. Topics:


    Fortune's Formula (https://amzn.to/3rU8sSV)
    Invesco S&P 500® Equal Weight ETF (https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&ticker=RSP). Input RSP and compare it against the S&P 500 here: https://www.theonlineinvestor.com/cagr-calculator.
    A similar fund for Australia is VanEck Vectors Australian Equal Weight ETF (https://www.vaneck.com.au/etf/equity/mvw/performance). It does not perform as highly as $RSP though.
    The first post of Matt's we talked about was Repetition Economics: The Story of the Hunter, the Mammoth, and The Wolves (https://breakingthemarket.com/repetition-economics-the-story-of-the-hunter-the-mammoth-and-the-wolves/). This was in the context of the environment of evolutionary adaptedness described by evolutioary psychologists Tooby and Cosmides: https://www.cep.ucsb.edu/primer.html. Both of these items are ESSENTIAL READING for the behavioral investor.
    The Undoing Project (https://en.wikipedia.org/wiki/The_Undoing_Project)
    Farmer's Fable - a Tale of Cooperation (https://www.youtube.com/watch?v=sR2JxfiH7gk and https://www.farmersfable.org).
    This video and site is based on work by the London Mathematical Laboratory and you should really become familiar with them as a source of first principles: An evolutionary advantage of cooperation (https://researchers.one/articles/19.03.00004, https://lml.org.uk/research/economics)
    Matt mentioned how geometric returns, under 15% volatility, are 1% less than arithmetic returns, see Vol: https://docs.google.com/spreadsheets/d/1k0IDctrpzyLjFFjYqTiPXZuSTwYFJdK-QZQ3AG859Dw/edit?usp=sharing
    On cooperation: https://breakingthemarket.com/an-ode-to-cooperation
    The Most Misunderstood Force in the Universe: https://breakingthemarket.com/the-most-misunderstood-force-in-the-universe
    Stocks, Treasuries, and Gold: https://breakingthemarket.com/stocks-treasuries-and-gold
    Why Market Index Investing Works: https://breakingthemarket.com/why-market-index-investing-works
    Milestones: https://breakingthemarket.com/reflecting-at-the-milestones-implementing-the-partial-kelly-strategy
    The Ultimate 401k Strategy: https://breakingthemarket.com/the-ultimate-401k-strategy


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    • 46 min

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