A weekly reality check on sensible investing and financial decision-making, from two Canadians. Hosted by Benjamin Felix and Cameron Passmore, Portfolio Managers at PWL Capital.
Understanding Crypto 5: Stephen Diehl: The Case Against Crypto
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]
What is Money? (plus Reading Habits w/ Dan Solin)
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]
Understanding Crypto 4: Prof. Tobin Hanspal: The Characteristics of Crypto Investors
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]
Prof. Vanessa Bohns: You Have More Influence Than You Think
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]
Understanding Crypto 3: Eswar Prasad: Bitcoin, Banking, and the Future of Money
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]
Tech vs. Value, and Private Equity vs. Public Equity
Welcome to another episode of the Rational Reminder Podcast, a show helping people to make educated financial decisions and investments. We usually interview an expert on each show however, in this episode, we take a beat and try something different. 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]
Must listen as an investor or advisor
Incredible depth of information. They unpack complex topics in a data driven and elegant fashion. It’s useful to arm both personal and professional investors against much of the noise or false narratives the world has to offer. It’s my first recommendation to other advisors who have yet to hear about it as a podcast to up their knowledge game.
My favorite weekly show
Since I discovered this podcast it has become my favorite show of the week.
Ben and Cameron have helped me with so many things - saving money, investing what I save, understanding how stock markets work, choosing books to read, find my master’s thesis topic and much more!
This podcast completely changed the way I listen to stock market news. Definitely recommend it to anyone interested in finance!
Move aside legacy media… Benjamin and Cameron outdo you!
Rational Reminder is a highbrow podcast about (financial) economics and investing. In many ways, the breadth of ideas and the critical questions to which you will be exposed on this podcast is far superior to anything you will hear on the topic in Canadian mainstream media. I was practically raised on programs like Ideas and The House and As it happens in the Michael Enright days, but today’s versions of these programs often leave me disappointed because of their obvious political biases and inability to think outside of the very parochial “progressive” urban Canadian bubble. Rational Reminder is much more refreshing, because the authors aren’t bound by the same ideological straightjackets.