Investment Philosophers: Financial Lessons from the Great Thinkers with Ethan A. Everett | S07 E30
Summary
Investment Philosophy: Ethan A. Everett discusses his book, "The Investment Philosophers," which explores the intersection of philosophy and investing, highlighting how philosophical ideas can inform investment strategies.
Historical Insights: The podcast delves into historical examples, such as Baruch Spinoza and the Dutch East India Company, illustrating how public securities markets have influenced philosophical thought and vice versa.
Emotional Control: Spinoza's ideas on managing irrational emotions are linked to modern behavioral finance, emphasizing the importance of introspection and rationality in investment decisions.
Philosophical Connections: The discussion connects Nietzsche's concept of eternal recurrence with Warren Buffett's moral approach to investing, suggesting that ethical considerations can be integral to long-term investment success.
Market Skepticism: Voltaire's skepticism and his success in bond lottery arbitrage are used to illustrate the importance of questioning market efficiency and the potential for finding opportunities in perceived inefficiencies.
Common Sense and Consensus: David Hume's philosophy is applied to investing, advocating for a balance between skepticism and common sense when evaluating market consensus and making investment decisions.
Abstraction in Finance: The podcast explores Jean Baudrillard's concept of abstraction, using the meme stock phenomenon as an example of how financial symbols can influence underlying realities.
Practical Application: Ethan discusses how philosophical frameworks can be applied in practical investment strategies, including idea screening and evaluating personal biases and emotions in decision-making.
Transcript
I think we're live. This is Value After Hours. I'm Tobias Carile, joined as always by my co-host Jake Taylor. Our special guest today is Ethan A. Everett. He is the author of a new book called The Investment Philosophers, uh, Financial Lessons from the Great Thinkers. He's an investment analyst with GGS. Ethan, welcome to the show. >> Tobias, thank you so much for having me. Jake, nice to speak with you as well. Um, big fan of the podcast and of your writing as well and really excited to have some interesting dialogue about both the book and you know wherever our conversation takes us. >> Well, well, let's start with the book. Let's start very high level. Give us uh an overview of what the book is about. So for me the book is a passion project because I have always loved connecting different fields with investing. I would say what first got me interested in investing when I was say 12 or 13 years old was when I learned about the stock market. It felt a lot like chess to me. Now it wasn't exactly like chess but I felt like there were a lot of connections and I was a huge chess player and that really really intrigued me. So throughout my life, I've really been looking around for different paradigms that could kind of help me know learn more about investing. And you know, there's a lot of great stuff out there on different mental models that can be used. But for whatever reason, one of my favorite disciplines, it felt like hadn't really been given its due when it came to investing connections. And I'm talking about philosophy specifically. Um you have a there listen there are some examples like George Soros for instance you have as being a philosophy student and talking about his theory of reflexivity and that's kind of philosophical but I just thought you know there's so many of these great thinkers who generally are really annoying to read but once you distill their knowledge or you say oh my god this is really genius but you know they usually take way too long to say it and you know at at the end of the day I wanted to make those connections to investing and see what that yielded and not only really inspire myself but inspire others to do the same. And you know I I I think I've done that. I did it with 13 different thinkers. And one thing I also tried to do was not just kind of use their philosophy you know kind of in a vacuum. I tried to say okay not only do I want to look at how we can learn about investing from their uh philosophical ideas but also how did investing form their philosophical ideas? Were there historical events that involved investing or public companies that actually shaped the lives of these thinkers? And that was a really exciting thing because I ended up finding out and I'm happy to talk about some examples. I ended up finding a lot of these philosophers lives were actually transformed by things involving public securities markets which really really fascin So so I should say I start with Spinosa in in Amsterdam um in the 1600s because the first modern public company is the Dutch East India Company is where I start and they actually started the first stock exchange change in order to facilitate the trading of their own shares. So it was Plato that that's a great question. Um I I don't have an answer for that. Um but you know listen at the end of the day I I I I think that I think I think he's value. I think he's value. I think he's value. >> Tell us a little bit about Baroo Spinosa and uh irrational emotions. how how they explain the stock market. >> Fantastic. Yes. So, so Brook Spinosza is is a really interesting uh thinker. He just to give a tiny bit of background, he's born into the Jewish community in Amsterdam. And this is in the mid early to mid600s. And he ends up saying some things that the Jewish community wasn't too happy about, like, you know, God equals nature and the Bible was written by people. Anyway, he ends up getting excommunicated. Um, so nobody really wants anything to do with him. So he starts writing stuff that nobody else really is willing to say. And one of the things he talks about is that fundamentally humans have certain things that they're not in control of these irrational emotions. But he believes that if you kind of recognize them and do this sort of introspection somewhat similar to what kind of the current mindfulness movement does that you can have a better life. He basically says the more that you see your own emotions, your irrational emotions, the more you can um be in control of them or not in control of them, but actually adjust to them. I think the Daniel Cannaman is really interesting because he's almost a modern version in some ways of what Spinosa is saying. Um you know, kind of this type one versus type two thinking. And I think what Spininoza is advocating and not to put words in his mouth because I and this this is the hard part, right? Because I don't get to ask Spinoza, oh is this what you were say? Is this is this what you meant when you when you wrote this in Latin? Um I don't get to ask that. My my thought is that, you know, kind of in a way that if you think of it from like a Daniel Cannon behavioral finance sort of uh perspective, you sometimes want to take your type one kind of natural thinking that just happens and move it towards type two, right? Use different processes that require you to reflect on things. Whether it be post-mortems after you do a certain investment, whether it be, you know, um having like a a dialogue with someone else to reflect upon your ideas. So, I think that Spinosa believes that we should be doing that with everything in our lives. Um he says that if we don't do that, we're we're we're in bondage to our emotions. He uses that term um bondage. So he thinks that we we're we're slaves to our emotions, but the most high pursuit that we can do is to use reason to transcend that. And I love that just in terms of life, it's first of all much easier said than done, right? Uh it's really easy to say, oh, be rational, you know, reflect on your irrational emotions, you know, easier said than done. But I think in finance I I I I I think it applies uh tremendously and you know uh Spinoza's life and I can talk about this later. His life was really shaped by this giant what you would call the largest public company ever. Um you know people think uh Nvidia's big uh on an inflationadjusted basis the Dutch East India company. I've seen different estimates I' some saying that that the market cap would be $10 trillion today. I think I had in the book which was written you know this was like a year or two ago I had 7.5 trillion estimates vary but he lived in a place where the impact of a public company was you know inescapable >> Toby how what have you done to try to control your emotions in and investing >> yeah I'm entirely systematic I couldn't agree more with the uh with the with the approach I spinosis uh right on the What do you think, JT? What do you What have you done? >> Uh, I still hold out a little bit of uh wiggle room for intuition. Uh, which I think, you know, might be classified as subconscious pattern matching. Um, but I think it just has to be done carefully and in in places like you you probably need to like catalog it and record it and then actually follow up to see like where and when can you trust that intuition and where shouldn't you? And that's where I think there's a little bit of a breakdown in that that that learning loop is that people don't do enough recording of these intuitions. they just have a gut feeling and then they go or they have a gut feeling and then they go uh try to backsolve with all the numbers and logic that they can to get to where they wanted to go to begin with from the gut feeling. Um so that kind of you know post talk rationalization >> there was a good article I think it was Malcolm Gladwell about TEB and TB used to ask his analysts or his research was probably Spitzel every day when he came into the office have you introspected today introspected >> really he was and he and I will say tell well I mean if somebody's written on the connections between philosophy and investing I got I do have to give him credit um he he's he's been quite philosophical uh in in in his books. So I I do have to I should have given credit there as well. That's a that's a good >> You've also covered one of my favorite philosophers uh nature and you connected him to Warren Buffett. So how does ne what common ground do they share? So, you know, so this is an exciting one for me because at the end of the day, listen, we're we're all Buffett fans here and everybody's, you know, there's so many things it just felt like were played out and I said, "Is there anything new I can do in terms of a Buffett connection?" And I looked, I said, "Has anyone ever taken Nietze?" Because for me, it wasn't just about Buffett's investing, it was about his morals. Um, I actually in college remember having on my dorm room I had a poster that said, and I'm gonna watch me misquote it, you know, it takes 20 years to build a reputation and five minutes to ruin it. And I I I always in the my the backdrop of my head, I always thought about Buffett's investing not just in terms of its financial success, but also in terms of he has this this morality that just seems to come naturally to him that he's he's doing the right thing. And one of the I I looked through his writing and what I found was the key kind of core base of that morality was this. If you see if you if you're uncomfortable seeing something in the front page of the New York Times or you're uncomfortable having an intelligent uh skeptical yet intelligent reporter asking you about it, then you probably don't want to do it. And that just felt very Nichian to me. And why? Specifically because of this idea of eternal recurrence. So Nietze just to say really quickly he didn't like the idea of oh you do you do good stuff you go to heaven forever you do bad stuff you go to hell forever he said that that wasn't going to lead to a a a an actually good morality because you're just self you're you're being selfish in a sense right you're just doing it so that you can you know have this you know great situation forever he kind of thought to himself is there a way that we can have this thought paradigm about our actions and what good and bad is without kind of being selfish. And his idea was this idea of eternal recurrence, which was basically this thought experiment where you say, "Okay, everything I do is going to be repeated again and again and again forever." And if you're not comfortable with your action repeating again and again and again, you know, echoing in eternity, then it's probably not something you should do because a lot of the times when people want to kind of cut corners from a moral standpoint, it's like, oh, I'll just do it this one time, you know? But Nichch's idea kind of transcends that. this idea that kind of our our actions echo in eternity. I thought, wait, that's somewhat similar to what Buffett is is is saying. He's trying to find a way to basically see how he's trying he's trying to create some sort of thought experiment to make people really really reflect on the morality of their actions. And so for Nichzche, it's it echoing in eternity. for Buffett, it's reading it on the front page of a newspaper. But that kind of reflection to kind of think of morality that way I thought was a really really interesting um connection. And then I make some more connections. They both talk a lot about what makes value in life. And clearly Buffett and Nichze as well do not see financial success as the all-encompassing measure. I think Buffett said in a Georgia Tech speech that if nobody loves you by the end of your life, you're probably not that good of a person. You're probably um he said there's people with hospital wings named after them, but nobody would actually want to say anything good about them. He says that's not what you want. And uh Nietze kind of talks talks about this as well that there's people that have financial success that are, you know, just just not of of a high quality um from a moral standpoint. Happy uh 95th birthday to the goat by the way this weekend. >> Wow, that's a good knock. Yeah, I like the idea of eternal recurrence as a uh risk measure. Like if there's anything that you do with a downside that's big enough and you do it enough times, eventually that even though it's very remote, that downside catches up to you. And you can fit morality into that too. If you >> do something, it catches you. I didn't so I didn't even make this is why listen if people haven't had it too much of me already but you know if there's there's so many of these ideas I didn't even think of that right so and I talk about this in my preface I'm excited for other people to start making philosophical connections to investing because that's a great example eternal recurrence from a risk standoint because sometimes people think oh I can take this one-off risk and get away with it right but when you think about it from an eternal recurrence standpoint that's actually a really really interesting thought thought tool. >> Well, if you take a one-off risk, it becomes habitual, too. And eventually that collection of one-off risks, >> you'll start seeing the underlying probabilities play out in your own life. >> Absolutely. >> Uh let's talk Voltater. Uh this is this is the one I like. Uh how did his success in the bond lottery arbitrage shape his writing and his worldview? I so this was probably the most exciting for me because um first of all so I will say they got to make a movie a Hollywood movie on this guy. I don't know who's going to be the actor but this story is just like it it's in my opinion it's made for Hollywood. So if any if any any producers are listening but so for for Voltater >> they're not he >> yeah they're defin Oh they're not Yeah. Yeah. wishful thinking. But for Voltater, he grows up as not in a bad situation, but he's the son of a civil servant. I believe his dad's like like a scribe or something. And you know, he wants to be able to say things, but he can't necessarily say everything he wants to say. He has to be careful in what he writes because he can't piss off royalty. He can't piss off the Duke of blah blah blah. Anyway, he has trouble restraining himself and ends up writing some stuff that pisses a lot of people off. Um, the Duke I think he wrote something that um called out the Duke of Rohan's son and this led to him being exiled in to the UK well into into England for I believe it was two years. Um he was supposed to be in jail but somehow he was able to finagle getting exiled for 2 years into uh Britain and while he was there he got to read some really enlightening stuff he's talked Shakespeare um Isaac Newton I think there were some people who talked about he might have been at Isaac Newton's funeral I'm not I'm not sure about that but anyway he comes back to France and he's kind of in this position where he has to watch what he says he just got back from exile and he happens to meet this mathematician, this famous French mathematician who points out to him a flaw in the bond lottery of France. Um I want to try and give I'll give very quickly what do I mean by bond lottery? Okay. So, very quickly, and this was actually somewhat common in in Europe, but very quickly, there was a time um the government of France uh had what had borrowed um they actually borrowed through the the city of Paris as a conduit, but anyway, they ended up defaulting on their debt and the bonds were trading at like some tiny fraction of face value. and they wanted to be able to somehow push that price up so that other people would be willing to invest in a new issue of bonds. So they had this, you know, crazy idea that they were going to say, if you own these bonds, these ones that we defaulted on, you get a ticket to this lottery. And the prize of the lottery is that your entire bond gets paid off in face value. And again given which and and again given that these things let's say they're trading at 10 10 20 cents on the dollar I forget I I did some research on what it what it actually was it you know this is would be a big windfall but basically I I guess this was the mathematician figured out that if you bought up all of the lottery tickets you actually the the expected value was actually higher than the the cost of those gets and and and the and the math is interesting and I ended up going through it. But long story short, Voltaire makes a ton of money, enough money to build uh a a body of wealth that enables him to say what the heck he wants for the rest of his life. Um, and I mean, he really really gives it to to the establishment in terms of whether it's religion, government, you name it. But now he had the money to, you know, buy buy protection and and, you know, have the influence to say what he really wanted to say. So, um, yeah, talk about arbitrage leading to one of the most prolific writers, you know, of of, uh, you know, the past 500 years. Um, yeah, I I I think I think that definitely you could say bond we would we might not have had some of these great works had it not been for uh, bond arbitrage. So there'll be a summer blockbuster coming to you soon. John Cena as Volter. >> The Rock. >> That's That's >> The Rock as Volter. >> You You You think The Rock? Uh >> no. It's going to be like The Rock playing Isaac Newton. >> Timothy. That's That is spot. I I like that. That That's spot on. Unless you want a Jack Voltater, then that's not going to work. Let's uh talk a little bit about Voltater and uh his approach how that applies to investment. >> So he always had this sort of cynical attitude towards everything in life whether it was people, their motives, institutions. and he writes about stock exchanges as a way of basically no matter how good or bad different people are, it connects people and kind of aligns their incentives and leads to good results. He talks about how on a stock exchange, it doesn't matter if you're Jewish, Muslim, or Christian, the only person who gets called a heretic is the person who's bankrupt. Um and and I and I loved that quote. So I think that he sees um investing or ex financial exchanges as a really as a positive force in society more so how does it connect to investing? I think talking about his attitude towards investing when he came across this opportunity for bond arbitrage, he had such a skeptical kind of, you know, tint and cynical tint to him that he was very very willing to believe if the evidence was shown, yeah, the government could mess up. They could abs this could this is could absolutely be a possibility. The markets aren't necessarily efficient. um not that he was talking about it in terms of efficient market hypothesis back in those days but again I think the way it connects to investing is what is your outlook on the the efficiency of of markets and I think for people that are raised to be skeptics from a young age and not just kind of accept the status quo you're you're more likely to be comfortable with this idea of challenging the efficiency of markets and you know listen and I mean in something like arbit arbitrage where it's just clearcut inefficiency. Some people, you know, will say, "Oh, that's a that's anund the $100 bill on the ground can't be real because, you know, someone would have picked it up already." But, um, I think that for investing, I think while you need to question yourself and your capabilities, if you can't fathom that there's going to be large inefficiencies in the market, you're unlikely to find them in the first place. um you you got to have your eyes out and it's typically the skeptics, the cynics, the people with Voltaare who write stuff that pisses people off that are uh you know that are of of that type. I I I don't want to say I I don't want to compare Bill Aman and Voltater, but again that type of person who might write something that pisses people off, those are often the people that uh that that that are are there to find those inefficiencies. >> I mean, Voltaar's books are shorter than Aman's tweets. I actually I actually believe one of one of his tweets was about the length of his entire uh Candid novel. So I that's not that's not that's not true. But >> I I I liked I liked uh the approach you took to David Hume and uh when to follow consensus and when to reject consensus because really that's the that's the whole investment game. Absolutely. And in a really quick anecdote about Hume, he talked about how stupid stocks and bonds were. Um he wrote he said that if everybody in London's securities trading district were at the bottom of the sea, it wouldn't really matter. And but he then I think it was like 10 years later said he went and bought stocks himself. He invested some of his his you know the the money from his book in in in stocks. And I think why do I say that? He had that initial skeptical attitude, but he took common sense and kind of observed and said, "Wait, no, stocks and bonds, this capital markets actually have some sort of, you know, positive impact." I think what what he's saying is that you want to be skeptical, but you got to avoid just saying the opposite of everything. And we've all met those people that it's not even contrarian investing. It's just they say the opposite of what anybody else says. And the reality is a lot of the time the market consensus is right. Right. So that that's in investing that's not going to fly. You got to really pick and choose your battles. And the question is how do you do that? How do you pick and choose your battles? And for Hume, the way you refine that kind of skeptical spark is what he calls common sense. Um, now it's that that this is a really difficult thing to define, right? What is common sense? First of all, it's definitely not that common. I I I'll I'll say that. But it's this kind of taking our initial skeptical stance and using I don't know everyday experience and and and kind of other people's um thoughts. It it's it's basically saying, okay, how can we take this same skepticism that would lead someone to just question everything and kind of hone it into a way that is productive, that is going to actually do something. He says, basically, if you're the type of person that just says the opposite of everything, it it's like, what's the point? What are we doing here? If if we just say the opposite of everything, you know, okay, so we we don't exist. Nothing nothing exists. Let's what are we talking about? Um, but it's interesting because he's framed if there's one skeptic. If you say the word skeptic, and I'm I'm the type of person immediately the name when I was younger, the name David Hume came to mind. He's the most famous skeptic, but I think he might get shortchanged in so far as he wasn't an uncontrolled skeptic. He actually believed in common sense. So would that be then like Clarman's contrarian streak plus a calculator? >> Yeah. Again, this is why I'm so excited to be having these conversations. I I would have loved to have put that in the book. That's a great That's a great Yes. I I didn't Yes, exactly. Um and I talk about quickly I I I love this example. I talk about Michael Steinhard and he's somebody who kind of really um spoke to me in terms of investing because of his idea of variant perception which is now very well kind of known but I actually he talks about Steiner says okay not only do you have to be against consensus not only do you have to be right on top of that you have to do all of these practical things like setting yourself up in a position so that it actually means enough for your portfolio when you get proven right to benefit from it, but also not so much that it wipes you out. So again, um I I think that Hume's idea of okay, we have skepticism humored with common sense, but then we also have, you know, common sense isn't just enough. We need to have practical considerations about our portfolios and how we how we do things to set ourselves up for success. Um, so I think that's that's yeah the Clarman with the with with the we need to have the calculator but then we need to have all sorts of other tools maybe throw in Spinosa's you know introspection as you said what was it with Talib did you intros in introspect today but you know it's this this lattice board of of different lattice work of different models so >> so I got one uh Jean Bordard uh never really been able to to crack any of his work. Uh how does his concept of abstraction apply to modern financial markets? >> So just so you don't feel bad, oh my god, if there was one philosopher who was tough to get through and I'm talking about he has some genius ideas, but I mean you go through 400 pages and you say, "Oh my god, this was genius. Why didn't you say this in two pages?" Um so it's not just >> that's good. Tell me what he said. >> Yeah. So he ba so so basically he has this his the most interesting thing that he says and what he's known for is this idea that we live in a simulation and this was kind of what the creators of the movie The Matrix uh latched on to but I it's can be difficult to describe but let me give this example um imagine that we're living on let's say like there's imagine a map that's life-sized of the globe and that's what we're living on top of. We're he says we're living on top of layers of different meanings. So for instance um like he he he'll say language is what is language? It's an abstraction of meaning. We can let's use finance. What is a dollar? Dollar is an abstraction of what used to be backed by the gold standard. And what is gold? Gold's a store of value of something that was rare that people at some point gave some meaning to. He's basically saying that there's all these different levels of meaning. And sometimes even though we like to think that like okay let's say language reflects what's going on in reality, he's saying it's not just a passive reflection. He's saying that those symbols, those um abstractions can go on to like have their own interactions and make for all sorts of things. Um I think the meme stock craze made his stuff really really relevant because I and I loved this example. Um, you have AMC about to go bankrupt in uh the uh a couple, you know, weeks or months after the COVID crisis. Um, and they have this meme stock following that has nothing to do with the state of their business. It's literally just people trading around symbols, the symbols of their stocks, tweeting about it and whatnot. But what ended up happening was they were able, they said, "Okay, well, great. You want to give us, you know, this valuation that makes no sense? let's raise let's raise equity and they did raise equity and it then caused S&P to upgrade their credit rating. So the reason I think that's such an incredible example is it shows this idea of a reflection actually not just being passive but coming around and actually shaping the underlying reality. And I I love that and that's really what what Bodriard is trying to say. He has it with all sorts of different things. Like I'll give you an example. We talked about language being, you know, an abstraction. Like maybe if what if there was a language that only had negative words, right? Or or had like a ton of words for saying bad and negative, but only one word for saying good and positive. Would that like influence the activity and and the actual lives of the people? Because I I think at the end of the day what he's saying is especially in finance, we can't just think that abstractions and symbols are passive. They're they're often shaping the underlying reality. And listen, I have to say George Soros absolutely is on this as well. This is this is very similar to the idea of reflexivity. That's cool. Toby, are you frozen? Okay. Well, we've lost our fearless leader. Uh maybe I will do the veggies at this point since uh Toby's frozen and um and actually, you know, I knew that we were having some philosophy on the show today. So, I've I've chosen a bit of a philosophical idea to explore. So, um I don't know if you've have you heard of this uh 511 Dvidita, which is a um it's an asteroid. >> I have not I have not, but this sounds very interesting. >> All right. Well, let's let's get into it. So, we're going to take a journey today, not just into space, but into the very foundations of how we think about wealth and value and these strange numbers that kind of shape our imagination of the future. So, at the center of the story is this giant rock basically that's drifting quietly in an asteroid belt that's called 511 Dvidita D- A V I D A. Uh, and at the surface of it, it it seems very unremarkable. It's about 185 miles across and it's about 319 million miles away from us. So, it's it's it's too far away and too small for us to see with the naked eye. And it looks like just another rock amongst millions. And yet there's these been these headlines that have called it one of the most valuable objects in the entire solar system. Now why is that? It's because if you take its estimated composition of nickel, iron, cobalt, gold, platinum, nitrogen, and pneumonia, uh, and then you multiply it by today's commodity prices, you arrive at this staggering number, 27 quintilion. That's not billions, not trillions, quintilians. Uh, and that's what the Black Rockck's managing a couple quintilion at this point. Uh, I somewhere around there. >> Yeah. So, this is a a figure that's larger than the entire global economy by orders of magnitude. Okay. Uh but but here's a paradox. On paper, Dvita is the richest treasure humanity has ever found. And in practice, it's worth practically nothing. And and in that contradiction, there's a lesson about value. And and it really ripples across philosophy, economics, finance. So, let's start with the abstraction. You know, I feel like numbers have this kind of strange magic to them. They they take something vast and incomprehensible and they they bring it into something that we can relate to, which is is dollars. And so the calculation is very simple on this. The mass of the metals times >> the spot price equals the value of this rock that's floating out in space. Suddenly this distant asteroid feels like it belongs on a spreadsheet next to market capitalization or GDP or cash on the balance sheet at Berkshire right uh and in this sense Dvita kind of feels liquid already the wealth is there it's just like waiting to be unlocked and this abstraction has really collapsed like huge distances and and incredible engineering difficulties into a single denominator uh but but it's a very brittle abstraction because you imagine for a moment that all of Dvita's platinum was somehow dumped into Earth's markets prices would not stay where they are today. Obviously, they'd collapse. The commodity might become nearly worthless. Like, >> that's a great point. >> And even worse than that, without massive infrastructure to transport it, refine it, distribute it, these metals, they're really unusable. Uh, and the calculation is formally correct, but it's void of any practicality. So, the the reality is is that you can't mine asteroids from a spreadsheet. So, and this isn't unique to space. Uh, you know, economists talk about stranded assets, whether it's oil or coal reserves that might be technically exist, but they can't be tapped because of regulations or environmental limits or prohibitive costs. Um, and so from one angle, they're worth, you know, trillions. From another, they're worth zero. And and intrinsic value really depends on not on the resource itself, but our ability to realize it and make use of it. So when Dvita was declared worth 27 quintilion, they're speaking in a language of objective wealth as though the medals themselves simply by existing hold this like definite universal value. But uh you know I think Austrian economists might laugh at this this interpretation. So for thinkers like you know Manger or Bombau or or Mises value is not in a physical property like a weight or a density and it doesn't reside in molecules of nickel or platinum. It it comes from hum like human judgment that the materials are useful for helping them achieve some goal. And this is really the the the is the essence of subjective value. So goods don't come with objective prices hidden inside them. Instead prices emerge from human needs from subjective choices from supply meeting demand. So through this lens Dvita's metals are worthless until humans decide to to get them. and and value doesn't really scale linearly with tonnage. It shifts with perception and context. So although increasingly like I unfortunately and you were getting at this Ethan like the actual job to be done of many of our of the things in our world today the real function of them is to serve as gambling instruments uh you know sports betting >> just ask Robin Hood >> right there's a lot of degenerate behavior much of crypto uh many stocks serve their one primary purpose and that is to be trading sardines really where where one human attempts to get over on another in in a decidedly zero sum game. >> And so the other thing that Austrian economists give us on this is that this theory, another lens to look through it is time preference. So people prefer something today over the same good in the future. So a loaf of bread today is worth more than a promise of a loaf a year from now. And if you apply that to Dvita and you see why it's this fortune collapses to near zero when viewed in the present because a ton of nickel here and now is valuable. It can be used in batteries. a ton of nickel on an asteroid hypothetically retrievable centuries away basically discounts back to zero. So at best it repvita represents an option value. Um that might be one way to think about it. There's this very faint possibility that future technologies might unlock it. Uh and if this all sounds kind of uh you know a little bit abstract uh we can bring it back down to earth like let's think about like startups with patents you know valued at a billion dollars. if no one ever buys or license or uses them, what is that billion dollars really worth? Or, you know, venture capital portfolios, maybe they're marked up by the last round prices, numbers that are often generated on thin markets with, you know, really relatively little real liquidity. On paper, the wealth looks enormous or private equity firms may be trading assets back and forth at increasingly higher marks. Uh, in reality, it's all notional until you get the actual liquidity event. Um, and so Dvita is a is kind of a cosmic version of this illusion. Spreadsheet optimism colliding with impractical reality. So we could just uh getting close to the end here so hang in there. Uh, so this brings us to a story from Ben Graham who you know obviously the father of value investing and he asked what would you pay for a corporation that never returned a scent to shareholders? Imagine this glass box that has a money printer inside of it and it's printing cash all the time but it never pays a dividend. You can't open the box, never buys back shares, never liquidates. What would you pay for this frozen corporation is what he called it? Well, Dvita is a a cosmic frozen corporation basically like probably literally too. Um, its balance sheet looks spectacular. Quintillions of dollars in metal, but without a mechanism distribute them, it's inert. And both Dvita and Graham's frozen firm kind of seduce us with their arithmetic. uh but the value is not in the things it's in the minds and the access in time in flow and wealth becomes real only when it moves into human hands and and serving human ends so is Dvita the richest object in the solar system or the poorest both answers are actually true uh depending on the framing and that's the paradox we live with every day in finance where numbers make us feel certain but that certainty is usually an illusion so like Dvita itself value drifts in orbit real only when pulled into the gravity of human use. >> That's good stuff, JT. I think I lost my internet connectivity as you were kicking off there, but but >> that's all right. We we plowed forward. >> Good job, >> man. I I It's so funny. Very quickly, I'll say first of all, I love bringing back Ben Graham. He was actually I started my book. He would start every class or supposedly every value investing class by quoting Spinosa. So, that was actually one of my first things. And I also I I love what you said about, you know, if you flood the market, you know, you kind of assume the steady state, oh well, the current market value is going to stand. I remember way back with the Sears thesis on their real estate and people were valuing this mall real estate. Oh my god. Well, if you take the going market rate for a vacant mall and I said, "Wait, but what if you throw hundreds of vacant mall anchor spots all at the same time? Isn't that going to affect the going price?" So it's again these second order effects which I think you described beautifully that it's very easy for numbers to seduce you into not thinking of those secondord effects when they actually mean a ton. >> You had a uh a good line in here about net skepticism and how uh investors can profit from that. But given that I love nets uh >> and I cannot lie. >> Let's go with the net net skepticism. >> So I think net net skepticism speaks to kind of what I was saying earlier with Hume that at the end of the day net net what what is your opinion on this thing? Like you can take a skeptical stance but then you have to make all sorts of considerations you know the whether the the liabilities or whatever it is. You have to account for all these things these offbalance sheet things so to say. What is the the net net value of your insight or of your investment thesis taking into account everything not just the you know just the the clear assets cash liabilities is there some legal you know liability hanging around there is there some offbalance sheet pension underfunded I I think that for me it's your skepticism in investing needs to be net of a lot of things just Like when you're actually looking for the cash value of, you know, a cigar butt, you got to net net. What are you actually getting, right? What's the cash burn? It's not always as simple as just looking at, all right, you know, current assets minus current liabilities and there it is. Um, there's often a lot more to to to be dealt with. >> That's like overcoming your skepticism to buy something. But what about the reverse situation where you've got what philosophical principles help you to not invest with somebody like maid off? Like how do you suspend >> the belief there? >> So I I I specifically talked about definitely common sense. It's funny because I actually saw so I had an example about Ken Langon the co-founder of Home Depot um basically had maid off and this is a true story came to him a month before the collapse and basically told Ken Langon I'm going to give you this incredible deal I'm not giving it to any of my other clients and Lone tells this story. He says he was just uncomfortable with the idea that wait if you're screwing your existing clients now what what are you going to do to me? That's not right. I don't feel comfortable with you, you know, not not giving them the deal. These people these people have been with you for years and you're just going to give this to me. And I >> there's a there's a saying that uh when a man marries his m mistress, a new position opens up. >> I love it. I love it. So, so but yeah, but ba basically he he he saw that and I actually compared that to there's a philosopher named Martin Booer who would seem to have nothing to do with markets but he had this philosophy of the way we interact with the world whether it be other people in the investment world whether it be uh friends family whatever we have two fundamental ways of uh relating. One is where the other person is a fundamentally worth worthy uh conscious being and the other where you treat somebody like an object and he basically said when you tr he didn't say this I'm I'm making this connection I'm basically saying that if you treat other people in the market like for instance the other side of the trade as worthy beings not just people to be dismissed like oh these are the idiots this is the the dumb money on the other side of trade, you're you're going to be uh in a lot better position. And I think that, you know, kind of that understanding that there actually is somebody a real person on the other side, that was something that really helped Ken Langon specifically not invest in maid off. Now, I'm not going to say I I would doubt Ken Langon's ever heard of Martin Booer, but again, I think that that sort of idea that in combined with skepticism can be very potent for not getting scammed. >> Apparently, there's a saying in the MLB, the pros, that uh you know, the other guy lives in a big house too, >> right? Um I like this idea of the limits of abstraction. uh what should how should investors apply that concept? >> So um listen, I I I think that for me there's so many different types of uh abstractions in finance and sometimes when you even go to derivatives, they take on ridiculous levels of abstraction, right? So I talk about the example in there that you know leading up to the housing crisis in 2008, right? We had okay you have a mortgage you have a let's say someone borrows to buy a house okay you symbolize that with a mortgage note right then some Wall Street bank bundles those together and you have a mortgage back security and then they bundled those together and then you had a co and then they bundled those together and they had a co squared and they actually this actually did happen there were only a couple of them there were some co cubes um I I did verify that >> and I think you could buy insurance on the co squared at least Exactly. And at at at that point, you know, I'm just I you just imagine you're so detached from what's underlying. You know, you I I always imagine I not to be crude, but I imagine, you know, you have like a box inside a box inside of a box and every single one of them is is labeled gold, but then you open it up and it's just a pile of crap, you know, but it but you know, you're so far removed. So I think that at the end of the day the limits of abstraction we need to come from both ends. I think that for me coming as a really um you know kind of gram inspired deep value investor I was always inclined to go straight bottom up all the time but even that can have its drawbacks. I think you need to go from top down and bottom up to kind of triangulate the reality of something because nothing exists as Jake was kind of saying earlier inside of a vacuum. the top down dynamics do matter but at the same time if you're forgetting the fundamental you know you you don't know what's inside that box at the end of the day so um I think there's so there's abstraction is great but and it's used a lot in finance um but it's not the beall endall we need to balance our abstraction with what James would call the cash value of something and I think we were talking kind of about this earlier when he says cash value he means kind of what is the ultim end use what what does it all come down to net net what is it all what does it all mean is it is there actually any use cuz it's it's kind of in opposite to what we Jake was talking about with like this kind of this theoretical value of something that has nothing to do with the pragmatic aspects of the reality um so I think yeah limits of abstraction is it can be really helpful and I even gave the example listen all of computing besides quantum computing which is you evolving all computing is based on zeros and ones abstracted to one language abstracted to another level of of you know computer language so abstraction is great I'm not I'm not an abstraction hater I just think that they need to you know we need to respect the limits of abstraction h >> how do you apply these concepts in uh in a practical context in in a sort of day-to-day investment strategy >> it you And I I think it's it's the the hardest part. I think that one way that it really um shows itself is first of all in my idea screening and the ways I go about screening for uh ideas. I think that um one another way it shows up is when I'm questioning my own investment thesis um like you know how much h how do I go about um cleansing myself so to say of my irrational views uh or my irrational emotions like spinosa how do I go about finding whether I'm being too skeptical or like you know listen there have been ideas where I could have hit home runs, but I I was too skeptical of my own ideas, right? You know, there's that Bruce Burkowitz saying about like how he tried to kill his own ideas and once he found one he couldn't kill, that was something that had merit to it. But I'm sure we've all had those examples. I certainly have where I had a good investment idea that I was too I too aggressive on. I, you know, I I killed it when it shouldn't have been killed, right? So there's kind of that that balance constantly thinking of these things. I think again in how I'm screening and and like the things that I'm skeptical of from a market standpoint and determining where I want to fish, I use a lot of these philosophical frameworks. And I think also I use those philosophical frameworks when I'm inspecting my own ideas. Frankly, I think that they could be used all over the place in all sorts of contexts, but those are two specific ways on a daily basis that I see them kind of rearing their head. Ethan, what do you think about that um that bell curve meme, you know, where you've got the dunce on one side and the Jedi on the other and then the the sweaty guy in the middle who's so you know Amazon's like the dunce is like Amazon Prime is great and then the uh the bell curve guys like well there's you know 10 Amazon or AWS is baked into the price of today's Amazon price and then the uh the Jedi is like Amazon Prime is great. It's it's I I I think that's that's such an accurate reflection of of of reality. Um you can sometimes overthinking doesn't pay. Um, and I think especially when you look at the kind of stuff like listen look at something like Nvidia like I there are people who I would listen not that I have such a nuanced understanding of Nvidia but I I would bet there are people that have made tons of money on Nvidia that have do not have that deep of an understanding of of what they do and why why what they're doing why they're able to earn the gross margins that they do. Um it it's tough and I think again from it's something to that's worth philosophically reflecting on right what level of depth and skepticism pays. I think I'm trying to remember if it was Clarman who talks about like there's this 80% that you have to know but beyond that it you know there's diminishing returns in terms of like gaining I I one of the problems I had coming up as an investor was I would hyperfocus on things like say oh my god I have I have a legal background so I'm going to study this this um potential tort liability lawsuit that they have and it only ended up affecting like 1% of the company's enterprise value, but I was so excited to be able to dig deeper than anyone else that I'd kind of jump into it, but it didn't really move the needle. Um, so I I I think we need to be kind of cognizant of of when we get in in depth, is it actually moving the needle? Um, that's that's something that I I would say is an application. I I've wondered the thought experiment of if you took everyone who's ever owned Berkshire over the last 60 years and you lined them up in order of understanding of accounting, I think you might end up with like a reverse order as far as returns go. >> It's it's an it's a it's a really it's a really good thought experiment. It it I I mean I don't want to break it down to something so as is ignorance bliss, right? or like you know >> well it's like I trust Warren and I you know I like him and seems like he's doing things the right way like do I don't need accounting to trick myself into selling at the you know >> well you know in the in these the book Hundred Baggers which is a really interesting book and you just look at the time it took for these people to reach those hundred times returns and you almost have to think every single time they had a doubt they stayed with it for for whatever reason and why that is. You know, is it potentially a detriment to be too skeptical at certain standpoints? Maybe we maybe Hume's kind of knowledge comes in there say, "Okay, well, you got to use the common sense that Warren Buffett has the incentives in line and and is an ethical person, has shown the ability to make, you know, uh above average investments." But, um, yeah, it's it's it's tough. Um, I'm I'm a I'm a skeptical type of person and just holding on blindly has never been my uh never been my strong suit. >> Um, what is the anxiety of having money and and how can philosophy help with it? >> Oh, I stay poor, buddy. >> Yeah. So, I I must say I'm a a big fan of um the the philosopher that this is to do with and I wish he was talked about more. name is Michelle Deontaine and he's actually credited as being some people say he originated the essay format um which we kind of take for granted but anyway a awesome guy um he talked about basically the fact that he went through not that he grew up poorer or anything but he had money and then he towards the end of his life had more money enough to kind just, you know, kind of go into his tower and write all day. The way he actually made his final bit of money was he sold his judgeship. This is, I'm not making this up. In back in France, there was an investment. There was an asset class of judgeships where basically you bought the ability to be a judge for a certain place and you would basically charge fees on the people that came and you know had cases in your court. Anyway, he was a judge. We just we just rent that out in the US. We don't sell it whole. >> Yeah. Can you imagine? But but I would love to see what the returns were on on that. I somebody should do a study. But so anyway, he sold it. He went away to his castle and he started writing. And one of the things that he wrote about was the fact that having all this money did not necessarily make him not just not happier, but even feel so much more secure. He felt like the more he had, the more things oftenimes he had to worry about. He talks about how when he's traveling, >> problems. >> Yeah. Mo money. This was the original mo money mo problems guy. Um, and he talks about he talks about how not only is wealth not something that can make us feel fully good about ourselves, but he also even talks about how like we can't rely on it for relationships with other people as well. You know, he talks about how gives the example of a father who tries to use his wealth to have a good relationship with his kids and he talks about how that's bound to fail. And um I think that that he basically says at the end of the day, this is a weird way to say it. What's the cash value of cash, right? Like at the end of the day, money can only go so far. Now listen, to get you to a certain again, if someone's below the poverty line or something like that, I totally understand that's that's different. There's a certain level of wealth I'm talking about where you reach where beyond that the there's diminishing returns on the happiness it returns. And sometimes it can even you know get in the way of relationships and create it can create all sorts of anxiety within yourself within regard to your relationships with other people. You're worried about who's robbing you here, you know, who's trying to screw me there. Um so that's something that Matt Montaine talked about and I thought it was interesting because I it's just it's not intuitive, right? listen and and I am not saying listen I would say it's a great problem to have you know give me that problem then I'll deal with that anxiety right you know you be philanthropic and and you know give give it away there it's not that wealth is a is a bad thing in and of itself but I think he was trying to say okay most people are anxious because they their rel relationship with money is that they don't have it I have a lot of it I still have a lot of angst and and he wrote about that and I thought that was a really really fascinating thing that I wanted to talk about because listen frankly I've interacted with a few very few but a few you know billionaire investors and I have I have seen all sorts of different um let's just say a effects or or dispositions or views on life and what I mean by that is happy golucky thankful ful versus why am I wasting my time on on you? Um so um I I I just I I I think I think it's really interesting, you know, to see how how money affects people and it it's not a you know, it's not a cure all. It doesn't it doesn't necessarily make you a happier, better person. >> Hey, uh Ethan, we're coming up on time here. Uh if folks want to buy the book or get in touch with you, what are the best ways of doing that? Yeah. So, um it's available for pre-order on Amazon. Um it should be also on Columbia Business School Publishing's website. Um to get in touch with me, I LinkedIn is definitely the best way. I am not the social media maven, but I've been building up my uh LinkedIn presence. So, please feel free to get in touch with me um through LinkedIn and that would be fantastic. I really really appreciate you guys having me on. and Jake and Tobias. This has really been just it's been a privilege for me. >> Uh we've enjoyed having you on to the the book is called The Investment Philosophers: Financial Lessons from the Great Thinkers by Ethan A. Everett through Columbia Business School. It's available for pre-order on Amazon. I just checked it out today. Congratulations. It's a really great book, Ethan. I had a lot of fun uh reading through it. Um JT, any final words? >> Be good to each other. >> All right, folks. We'll see you next week. Sbat time. Sbat channel. Peace.
Investment Philosophers: Financial Lessons from the Great Thinkers with Ethan A. Everett | S07 E30
Summary
Transcript
I think we're live. This is Value After Hours. I'm Tobias Carile, joined as always by my co-host Jake Taylor. Our special guest today is Ethan A. Everett. He is the author of a new book called The Investment Philosophers, uh, Financial Lessons from the Great Thinkers. He's an investment analyst with GGS. Ethan, welcome to the show. >> Tobias, thank you so much for having me. Jake, nice to speak with you as well. Um, big fan of the podcast and of your writing as well and really excited to have some interesting dialogue about both the book and you know wherever our conversation takes us. >> Well, well, let's start with the book. Let's start very high level. Give us uh an overview of what the book is about. So for me the book is a passion project because I have always loved connecting different fields with investing. I would say what first got me interested in investing when I was say 12 or 13 years old was when I learned about the stock market. It felt a lot like chess to me. Now it wasn't exactly like chess but I felt like there were a lot of connections and I was a huge chess player and that really really intrigued me. So throughout my life, I've really been looking around for different paradigms that could kind of help me know learn more about investing. And you know, there's a lot of great stuff out there on different mental models that can be used. But for whatever reason, one of my favorite disciplines, it felt like hadn't really been given its due when it came to investing connections. And I'm talking about philosophy specifically. Um you have a there listen there are some examples like George Soros for instance you have as being a philosophy student and talking about his theory of reflexivity and that's kind of philosophical but I just thought you know there's so many of these great thinkers who generally are really annoying to read but once you distill their knowledge or you say oh my god this is really genius but you know they usually take way too long to say it and you know at at the end of the day I wanted to make those connections to investing and see what that yielded and not only really inspire myself but inspire others to do the same. And you know I I I think I've done that. I did it with 13 different thinkers. And one thing I also tried to do was not just kind of use their philosophy you know kind of in a vacuum. I tried to say okay not only do I want to look at how we can learn about investing from their uh philosophical ideas but also how did investing form their philosophical ideas? Were there historical events that involved investing or public companies that actually shaped the lives of these thinkers? And that was a really exciting thing because I ended up finding out and I'm happy to talk about some examples. I ended up finding a lot of these philosophers lives were actually transformed by things involving public securities markets which really really fascin So so I should say I start with Spinosa in in Amsterdam um in the 1600s because the first modern public company is the Dutch East India Company is where I start and they actually started the first stock exchange change in order to facilitate the trading of their own shares. So it was Plato that that's a great question. Um I I don't have an answer for that. Um but you know listen at the end of the day I I I I think that I think I think he's value. I think he's value. I think he's value. >> Tell us a little bit about Baroo Spinosa and uh irrational emotions. how how they explain the stock market. >> Fantastic. Yes. So, so Brook Spinosza is is a really interesting uh thinker. He just to give a tiny bit of background, he's born into the Jewish community in Amsterdam. And this is in the mid early to mid600s. And he ends up saying some things that the Jewish community wasn't too happy about, like, you know, God equals nature and the Bible was written by people. Anyway, he ends up getting excommunicated. Um, so nobody really wants anything to do with him. So he starts writing stuff that nobody else really is willing to say. And one of the things he talks about is that fundamentally humans have certain things that they're not in control of these irrational emotions. But he believes that if you kind of recognize them and do this sort of introspection somewhat similar to what kind of the current mindfulness movement does that you can have a better life. He basically says the more that you see your own emotions, your irrational emotions, the more you can um be in control of them or not in control of them, but actually adjust to them. I think the Daniel Cannaman is really interesting because he's almost a modern version in some ways of what Spinosa is saying. Um you know, kind of this type one versus type two thinking. And I think what Spininoza is advocating and not to put words in his mouth because I and this this is the hard part, right? Because I don't get to ask Spinoza, oh is this what you were say? Is this is this what you meant when you when you wrote this in Latin? Um I don't get to ask that. My my thought is that, you know, kind of in a way that if you think of it from like a Daniel Cannon behavioral finance sort of uh perspective, you sometimes want to take your type one kind of natural thinking that just happens and move it towards type two, right? Use different processes that require you to reflect on things. Whether it be post-mortems after you do a certain investment, whether it be, you know, um having like a a dialogue with someone else to reflect upon your ideas. So, I think that Spinosa believes that we should be doing that with everything in our lives. Um he says that if we don't do that, we're we're we're in bondage to our emotions. He uses that term um bondage. So he thinks that we we're we're slaves to our emotions, but the most high pursuit that we can do is to use reason to transcend that. And I love that just in terms of life, it's first of all much easier said than done, right? Uh it's really easy to say, oh, be rational, you know, reflect on your irrational emotions, you know, easier said than done. But I think in finance I I I I I think it applies uh tremendously and you know uh Spinoza's life and I can talk about this later. His life was really shaped by this giant what you would call the largest public company ever. Um you know people think uh Nvidia's big uh on an inflationadjusted basis the Dutch East India company. I've seen different estimates I' some saying that that the market cap would be $10 trillion today. I think I had in the book which was written you know this was like a year or two ago I had 7.5 trillion estimates vary but he lived in a place where the impact of a public company was you know inescapable >> Toby how what have you done to try to control your emotions in and investing >> yeah I'm entirely systematic I couldn't agree more with the uh with the with the approach I spinosis uh right on the What do you think, JT? What do you What have you done? >> Uh, I still hold out a little bit of uh wiggle room for intuition. Uh, which I think, you know, might be classified as subconscious pattern matching. Um, but I think it just has to be done carefully and in in places like you you probably need to like catalog it and record it and then actually follow up to see like where and when can you trust that intuition and where shouldn't you? And that's where I think there's a little bit of a breakdown in that that that learning loop is that people don't do enough recording of these intuitions. they just have a gut feeling and then they go or they have a gut feeling and then they go uh try to backsolve with all the numbers and logic that they can to get to where they wanted to go to begin with from the gut feeling. Um so that kind of you know post talk rationalization >> there was a good article I think it was Malcolm Gladwell about TEB and TB used to ask his analysts or his research was probably Spitzel every day when he came into the office have you introspected today introspected >> really he was and he and I will say tell well I mean if somebody's written on the connections between philosophy and investing I got I do have to give him credit um he he's he's been quite philosophical uh in in in his books. So I I do have to I should have given credit there as well. That's a that's a good >> You've also covered one of my favorite philosophers uh nature and you connected him to Warren Buffett. So how does ne what common ground do they share? So, you know, so this is an exciting one for me because at the end of the day, listen, we're we're all Buffett fans here and everybody's, you know, there's so many things it just felt like were played out and I said, "Is there anything new I can do in terms of a Buffett connection?" And I looked, I said, "Has anyone ever taken Nietze?" Because for me, it wasn't just about Buffett's investing, it was about his morals. Um, I actually in college remember having on my dorm room I had a poster that said, and I'm gonna watch me misquote it, you know, it takes 20 years to build a reputation and five minutes to ruin it. And I I I always in the my the backdrop of my head, I always thought about Buffett's investing not just in terms of its financial success, but also in terms of he has this this morality that just seems to come naturally to him that he's he's doing the right thing. And one of the I I looked through his writing and what I found was the key kind of core base of that morality was this. If you see if you if you're uncomfortable seeing something in the front page of the New York Times or you're uncomfortable having an intelligent uh skeptical yet intelligent reporter asking you about it, then you probably don't want to do it. And that just felt very Nichian to me. And why? Specifically because of this idea of eternal recurrence. So Nietze just to say really quickly he didn't like the idea of oh you do you do good stuff you go to heaven forever you do bad stuff you go to hell forever he said that that wasn't going to lead to a a a an actually good morality because you're just self you're you're being selfish in a sense right you're just doing it so that you can you know have this you know great situation forever he kind of thought to himself is there a way that we can have this thought paradigm about our actions and what good and bad is without kind of being selfish. And his idea was this idea of eternal recurrence, which was basically this thought experiment where you say, "Okay, everything I do is going to be repeated again and again and again forever." And if you're not comfortable with your action repeating again and again and again, you know, echoing in eternity, then it's probably not something you should do because a lot of the times when people want to kind of cut corners from a moral standpoint, it's like, oh, I'll just do it this one time, you know? But Nichch's idea kind of transcends that. this idea that kind of our our actions echo in eternity. I thought, wait, that's somewhat similar to what Buffett is is is saying. He's trying to find a way to basically see how he's trying he's trying to create some sort of thought experiment to make people really really reflect on the morality of their actions. And so for Nichzche, it's it echoing in eternity. for Buffett, it's reading it on the front page of a newspaper. But that kind of reflection to kind of think of morality that way I thought was a really really interesting um connection. And then I make some more connections. They both talk a lot about what makes value in life. And clearly Buffett and Nichze as well do not see financial success as the all-encompassing measure. I think Buffett said in a Georgia Tech speech that if nobody loves you by the end of your life, you're probably not that good of a person. You're probably um he said there's people with hospital wings named after them, but nobody would actually want to say anything good about them. He says that's not what you want. And uh Nietze kind of talks talks about this as well that there's people that have financial success that are, you know, just just not of of a high quality um from a moral standpoint. Happy uh 95th birthday to the goat by the way this weekend. >> Wow, that's a good knock. Yeah, I like the idea of eternal recurrence as a uh risk measure. Like if there's anything that you do with a downside that's big enough and you do it enough times, eventually that even though it's very remote, that downside catches up to you. And you can fit morality into that too. If you >> do something, it catches you. I didn't so I didn't even make this is why listen if people haven't had it too much of me already but you know if there's there's so many of these ideas I didn't even think of that right so and I talk about this in my preface I'm excited for other people to start making philosophical connections to investing because that's a great example eternal recurrence from a risk standoint because sometimes people think oh I can take this one-off risk and get away with it right but when you think about it from an eternal recurrence standpoint that's actually a really really interesting thought thought tool. >> Well, if you take a one-off risk, it becomes habitual, too. And eventually that collection of one-off risks, >> you'll start seeing the underlying probabilities play out in your own life. >> Absolutely. >> Uh let's talk Voltater. Uh this is this is the one I like. Uh how did his success in the bond lottery arbitrage shape his writing and his worldview? I so this was probably the most exciting for me because um first of all so I will say they got to make a movie a Hollywood movie on this guy. I don't know who's going to be the actor but this story is just like it it's in my opinion it's made for Hollywood. So if any if any any producers are listening but so for for Voltater >> they're not he >> yeah they're defin Oh they're not Yeah. Yeah. wishful thinking. But for Voltater, he grows up as not in a bad situation, but he's the son of a civil servant. I believe his dad's like like a scribe or something. And you know, he wants to be able to say things, but he can't necessarily say everything he wants to say. He has to be careful in what he writes because he can't piss off royalty. He can't piss off the Duke of blah blah blah. Anyway, he has trouble restraining himself and ends up writing some stuff that pisses a lot of people off. Um, the Duke I think he wrote something that um called out the Duke of Rohan's son and this led to him being exiled in to the UK well into into England for I believe it was two years. Um he was supposed to be in jail but somehow he was able to finagle getting exiled for 2 years into uh Britain and while he was there he got to read some really enlightening stuff he's talked Shakespeare um Isaac Newton I think there were some people who talked about he might have been at Isaac Newton's funeral I'm not I'm not sure about that but anyway he comes back to France and he's kind of in this position where he has to watch what he says he just got back from exile and he happens to meet this mathematician, this famous French mathematician who points out to him a flaw in the bond lottery of France. Um I want to try and give I'll give very quickly what do I mean by bond lottery? Okay. So, very quickly, and this was actually somewhat common in in Europe, but very quickly, there was a time um the government of France uh had what had borrowed um they actually borrowed through the the city of Paris as a conduit, but anyway, they ended up defaulting on their debt and the bonds were trading at like some tiny fraction of face value. and they wanted to be able to somehow push that price up so that other people would be willing to invest in a new issue of bonds. So they had this, you know, crazy idea that they were going to say, if you own these bonds, these ones that we defaulted on, you get a ticket to this lottery. And the prize of the lottery is that your entire bond gets paid off in face value. And again given which and and again given that these things let's say they're trading at 10 10 20 cents on the dollar I forget I I did some research on what it what it actually was it you know this is would be a big windfall but basically I I guess this was the mathematician figured out that if you bought up all of the lottery tickets you actually the the expected value was actually higher than the the cost of those gets and and and the and the math is interesting and I ended up going through it. But long story short, Voltaire makes a ton of money, enough money to build uh a a body of wealth that enables him to say what the heck he wants for the rest of his life. Um, and I mean, he really really gives it to to the establishment in terms of whether it's religion, government, you name it. But now he had the money to, you know, buy buy protection and and, you know, have the influence to say what he really wanted to say. So, um, yeah, talk about arbitrage leading to one of the most prolific writers, you know, of of, uh, you know, the past 500 years. Um, yeah, I I I think I think that definitely you could say bond we would we might not have had some of these great works had it not been for uh, bond arbitrage. So there'll be a summer blockbuster coming to you soon. John Cena as Volter. >> The Rock. >> That's That's >> The Rock as Volter. >> You You You think The Rock? Uh >> no. It's going to be like The Rock playing Isaac Newton. >> Timothy. That's That is spot. I I like that. That That's spot on. Unless you want a Jack Voltater, then that's not going to work. Let's uh talk a little bit about Voltater and uh his approach how that applies to investment. >> So he always had this sort of cynical attitude towards everything in life whether it was people, their motives, institutions. and he writes about stock exchanges as a way of basically no matter how good or bad different people are, it connects people and kind of aligns their incentives and leads to good results. He talks about how on a stock exchange, it doesn't matter if you're Jewish, Muslim, or Christian, the only person who gets called a heretic is the person who's bankrupt. Um and and I and I loved that quote. So I think that he sees um investing or ex financial exchanges as a really as a positive force in society more so how does it connect to investing? I think talking about his attitude towards investing when he came across this opportunity for bond arbitrage, he had such a skeptical kind of, you know, tint and cynical tint to him that he was very very willing to believe if the evidence was shown, yeah, the government could mess up. They could abs this could this is could absolutely be a possibility. The markets aren't necessarily efficient. um not that he was talking about it in terms of efficient market hypothesis back in those days but again I think the way it connects to investing is what is your outlook on the the efficiency of of markets and I think for people that are raised to be skeptics from a young age and not just kind of accept the status quo you're you're more likely to be comfortable with this idea of challenging the efficiency of markets and you know listen and I mean in something like arbit arbitrage where it's just clearcut inefficiency. Some people, you know, will say, "Oh, that's a that's anund the $100 bill on the ground can't be real because, you know, someone would have picked it up already." But, um, I think that for investing, I think while you need to question yourself and your capabilities, if you can't fathom that there's going to be large inefficiencies in the market, you're unlikely to find them in the first place. um you you got to have your eyes out and it's typically the skeptics, the cynics, the people with Voltaare who write stuff that pisses people off that are uh you know that are of of that type. I I I don't want to say I I don't want to compare Bill Aman and Voltater, but again that type of person who might write something that pisses people off, those are often the people that uh that that that are are there to find those inefficiencies. >> I mean, Voltaar's books are shorter than Aman's tweets. I actually I actually believe one of one of his tweets was about the length of his entire uh Candid novel. So I that's not that's not that's not true. But >> I I I liked I liked uh the approach you took to David Hume and uh when to follow consensus and when to reject consensus because really that's the that's the whole investment game. Absolutely. And in a really quick anecdote about Hume, he talked about how stupid stocks and bonds were. Um he wrote he said that if everybody in London's securities trading district were at the bottom of the sea, it wouldn't really matter. And but he then I think it was like 10 years later said he went and bought stocks himself. He invested some of his his you know the the money from his book in in in stocks. And I think why do I say that? He had that initial skeptical attitude, but he took common sense and kind of observed and said, "Wait, no, stocks and bonds, this capital markets actually have some sort of, you know, positive impact." I think what what he's saying is that you want to be skeptical, but you got to avoid just saying the opposite of everything. And we've all met those people that it's not even contrarian investing. It's just they say the opposite of what anybody else says. And the reality is a lot of the time the market consensus is right. Right. So that that's in investing that's not going to fly. You got to really pick and choose your battles. And the question is how do you do that? How do you pick and choose your battles? And for Hume, the way you refine that kind of skeptical spark is what he calls common sense. Um, now it's that that this is a really difficult thing to define, right? What is common sense? First of all, it's definitely not that common. I I I'll I'll say that. But it's this kind of taking our initial skeptical stance and using I don't know everyday experience and and and kind of other people's um thoughts. It it's it's basically saying, okay, how can we take this same skepticism that would lead someone to just question everything and kind of hone it into a way that is productive, that is going to actually do something. He says, basically, if you're the type of person that just says the opposite of everything, it it's like, what's the point? What are we doing here? If if we just say the opposite of everything, you know, okay, so we we don't exist. Nothing nothing exists. Let's what are we talking about? Um, but it's interesting because he's framed if there's one skeptic. If you say the word skeptic, and I'm I'm the type of person immediately the name when I was younger, the name David Hume came to mind. He's the most famous skeptic, but I think he might get shortchanged in so far as he wasn't an uncontrolled skeptic. He actually believed in common sense. So would that be then like Clarman's contrarian streak plus a calculator? >> Yeah. Again, this is why I'm so excited to be having these conversations. I I would have loved to have put that in the book. That's a great That's a great Yes. I I didn't Yes, exactly. Um and I talk about quickly I I I love this example. I talk about Michael Steinhard and he's somebody who kind of really um spoke to me in terms of investing because of his idea of variant perception which is now very well kind of known but I actually he talks about Steiner says okay not only do you have to be against consensus not only do you have to be right on top of that you have to do all of these practical things like setting yourself up in a position so that it actually means enough for your portfolio when you get proven right to benefit from it, but also not so much that it wipes you out. So again, um I I think that Hume's idea of okay, we have skepticism humored with common sense, but then we also have, you know, common sense isn't just enough. We need to have practical considerations about our portfolios and how we how we do things to set ourselves up for success. Um, so I think that's that's yeah the Clarman with the with with the we need to have the calculator but then we need to have all sorts of other tools maybe throw in Spinosa's you know introspection as you said what was it with Talib did you intros in introspect today but you know it's this this lattice board of of different lattice work of different models so >> so I got one uh Jean Bordard uh never really been able to to crack any of his work. Uh how does his concept of abstraction apply to modern financial markets? >> So just so you don't feel bad, oh my god, if there was one philosopher who was tough to get through and I'm talking about he has some genius ideas, but I mean you go through 400 pages and you say, "Oh my god, this was genius. Why didn't you say this in two pages?" Um so it's not just >> that's good. Tell me what he said. >> Yeah. So he ba so so basically he has this his the most interesting thing that he says and what he's known for is this idea that we live in a simulation and this was kind of what the creators of the movie The Matrix uh latched on to but I it's can be difficult to describe but let me give this example um imagine that we're living on let's say like there's imagine a map that's life-sized of the globe and that's what we're living on top of. We're he says we're living on top of layers of different meanings. So for instance um like he he he'll say language is what is language? It's an abstraction of meaning. We can let's use finance. What is a dollar? Dollar is an abstraction of what used to be backed by the gold standard. And what is gold? Gold's a store of value of something that was rare that people at some point gave some meaning to. He's basically saying that there's all these different levels of meaning. And sometimes even though we like to think that like okay let's say language reflects what's going on in reality, he's saying it's not just a passive reflection. He's saying that those symbols, those um abstractions can go on to like have their own interactions and make for all sorts of things. Um I think the meme stock craze made his stuff really really relevant because I and I loved this example. Um, you have AMC about to go bankrupt in uh the uh a couple, you know, weeks or months after the COVID crisis. Um, and they have this meme stock following that has nothing to do with the state of their business. It's literally just people trading around symbols, the symbols of their stocks, tweeting about it and whatnot. But what ended up happening was they were able, they said, "Okay, well, great. You want to give us, you know, this valuation that makes no sense? let's raise let's raise equity and they did raise equity and it then caused S&P to upgrade their credit rating. So the reason I think that's such an incredible example is it shows this idea of a reflection actually not just being passive but coming around and actually shaping the underlying reality. And I I love that and that's really what what Bodriard is trying to say. He has it with all sorts of different things. Like I'll give you an example. We talked about language being, you know, an abstraction. Like maybe if what if there was a language that only had negative words, right? Or or had like a ton of words for saying bad and negative, but only one word for saying good and positive. Would that like influence the activity and and the actual lives of the people? Because I I think at the end of the day what he's saying is especially in finance, we can't just think that abstractions and symbols are passive. They're they're often shaping the underlying reality. And listen, I have to say George Soros absolutely is on this as well. This is this is very similar to the idea of reflexivity. That's cool. Toby, are you frozen? Okay. Well, we've lost our fearless leader. Uh maybe I will do the veggies at this point since uh Toby's frozen and um and actually, you know, I knew that we were having some philosophy on the show today. So, I've I've chosen a bit of a philosophical idea to explore. So, um I don't know if you've have you heard of this uh 511 Dvidita, which is a um it's an asteroid. >> I have not I have not, but this sounds very interesting. >> All right. Well, let's let's get into it. So, we're going to take a journey today, not just into space, but into the very foundations of how we think about wealth and value and these strange numbers that kind of shape our imagination of the future. So, at the center of the story is this giant rock basically that's drifting quietly in an asteroid belt that's called 511 Dvidita D- A V I D A. Uh, and at the surface of it, it it seems very unremarkable. It's about 185 miles across and it's about 319 million miles away from us. So, it's it's it's too far away and too small for us to see with the naked eye. And it looks like just another rock amongst millions. And yet there's these been these headlines that have called it one of the most valuable objects in the entire solar system. Now why is that? It's because if you take its estimated composition of nickel, iron, cobalt, gold, platinum, nitrogen, and pneumonia, uh, and then you multiply it by today's commodity prices, you arrive at this staggering number, 27 quintilion. That's not billions, not trillions, quintilians. Uh, and that's what the Black Rockck's managing a couple quintilion at this point. Uh, I somewhere around there. >> Yeah. So, this is a a figure that's larger than the entire global economy by orders of magnitude. Okay. Uh but but here's a paradox. On paper, Dvita is the richest treasure humanity has ever found. And in practice, it's worth practically nothing. And and in that contradiction, there's a lesson about value. And and it really ripples across philosophy, economics, finance. So, let's start with the abstraction. You know, I feel like numbers have this kind of strange magic to them. They they take something vast and incomprehensible and they they bring it into something that we can relate to, which is is dollars. And so the calculation is very simple on this. The mass of the metals times >> the spot price equals the value of this rock that's floating out in space. Suddenly this distant asteroid feels like it belongs on a spreadsheet next to market capitalization or GDP or cash on the balance sheet at Berkshire right uh and in this sense Dvita kind of feels liquid already the wealth is there it's just like waiting to be unlocked and this abstraction has really collapsed like huge distances and and incredible engineering difficulties into a single denominator uh but but it's a very brittle abstraction because you imagine for a moment that all of Dvita's platinum was somehow dumped into Earth's markets prices would not stay where they are today. Obviously, they'd collapse. The commodity might become nearly worthless. Like, >> that's a great point. >> And even worse than that, without massive infrastructure to transport it, refine it, distribute it, these metals, they're really unusable. Uh, and the calculation is formally correct, but it's void of any practicality. So, the the reality is is that you can't mine asteroids from a spreadsheet. So, and this isn't unique to space. Uh, you know, economists talk about stranded assets, whether it's oil or coal reserves that might be technically exist, but they can't be tapped because of regulations or environmental limits or prohibitive costs. Um, and so from one angle, they're worth, you know, trillions. From another, they're worth zero. And and intrinsic value really depends on not on the resource itself, but our ability to realize it and make use of it. So when Dvita was declared worth 27 quintilion, they're speaking in a language of objective wealth as though the medals themselves simply by existing hold this like definite universal value. But uh you know I think Austrian economists might laugh at this this interpretation. So for thinkers like you know Manger or Bombau or or Mises value is not in a physical property like a weight or a density and it doesn't reside in molecules of nickel or platinum. It it comes from hum like human judgment that the materials are useful for helping them achieve some goal. And this is really the the the is the essence of subjective value. So goods don't come with objective prices hidden inside them. Instead prices emerge from human needs from subjective choices from supply meeting demand. So through this lens Dvita's metals are worthless until humans decide to to get them. and and value doesn't really scale linearly with tonnage. It shifts with perception and context. So although increasingly like I unfortunately and you were getting at this Ethan like the actual job to be done of many of our of the things in our world today the real function of them is to serve as gambling instruments uh you know sports betting >> just ask Robin Hood >> right there's a lot of degenerate behavior much of crypto uh many stocks serve their one primary purpose and that is to be trading sardines really where where one human attempts to get over on another in in a decidedly zero sum game. >> And so the other thing that Austrian economists give us on this is that this theory, another lens to look through it is time preference. So people prefer something today over the same good in the future. So a loaf of bread today is worth more than a promise of a loaf a year from now. And if you apply that to Dvita and you see why it's this fortune collapses to near zero when viewed in the present because a ton of nickel here and now is valuable. It can be used in batteries. a ton of nickel on an asteroid hypothetically retrievable centuries away basically discounts back to zero. So at best it repvita represents an option value. Um that might be one way to think about it. There's this very faint possibility that future technologies might unlock it. Uh and if this all sounds kind of uh you know a little bit abstract uh we can bring it back down to earth like let's think about like startups with patents you know valued at a billion dollars. if no one ever buys or license or uses them, what is that billion dollars really worth? Or, you know, venture capital portfolios, maybe they're marked up by the last round prices, numbers that are often generated on thin markets with, you know, really relatively little real liquidity. On paper, the wealth looks enormous or private equity firms may be trading assets back and forth at increasingly higher marks. Uh, in reality, it's all notional until you get the actual liquidity event. Um, and so Dvita is a is kind of a cosmic version of this illusion. Spreadsheet optimism colliding with impractical reality. So we could just uh getting close to the end here so hang in there. Uh, so this brings us to a story from Ben Graham who you know obviously the father of value investing and he asked what would you pay for a corporation that never returned a scent to shareholders? Imagine this glass box that has a money printer inside of it and it's printing cash all the time but it never pays a dividend. You can't open the box, never buys back shares, never liquidates. What would you pay for this frozen corporation is what he called it? Well, Dvita is a a cosmic frozen corporation basically like probably literally too. Um, its balance sheet looks spectacular. Quintillions of dollars in metal, but without a mechanism distribute them, it's inert. And both Dvita and Graham's frozen firm kind of seduce us with their arithmetic. uh but the value is not in the things it's in the minds and the access in time in flow and wealth becomes real only when it moves into human hands and and serving human ends so is Dvita the richest object in the solar system or the poorest both answers are actually true uh depending on the framing and that's the paradox we live with every day in finance where numbers make us feel certain but that certainty is usually an illusion so like Dvita itself value drifts in orbit real only when pulled into the gravity of human use. >> That's good stuff, JT. I think I lost my internet connectivity as you were kicking off there, but but >> that's all right. We we plowed forward. >> Good job, >> man. I I It's so funny. Very quickly, I'll say first of all, I love bringing back Ben Graham. He was actually I started my book. He would start every class or supposedly every value investing class by quoting Spinosa. So, that was actually one of my first things. And I also I I love what you said about, you know, if you flood the market, you know, you kind of assume the steady state, oh well, the current market value is going to stand. I remember way back with the Sears thesis on their real estate and people were valuing this mall real estate. Oh my god. Well, if you take the going market rate for a vacant mall and I said, "Wait, but what if you throw hundreds of vacant mall anchor spots all at the same time? Isn't that going to affect the going price?" So it's again these second order effects which I think you described beautifully that it's very easy for numbers to seduce you into not thinking of those secondord effects when they actually mean a ton. >> You had a uh a good line in here about net skepticism and how uh investors can profit from that. But given that I love nets uh >> and I cannot lie. >> Let's go with the net net skepticism. >> So I think net net skepticism speaks to kind of what I was saying earlier with Hume that at the end of the day net net what what is your opinion on this thing? Like you can take a skeptical stance but then you have to make all sorts of considerations you know the whether the the liabilities or whatever it is. You have to account for all these things these offbalance sheet things so to say. What is the the net net value of your insight or of your investment thesis taking into account everything not just the you know just the the clear assets cash liabilities is there some legal you know liability hanging around there is there some offbalance sheet pension underfunded I I think that for me it's your skepticism in investing needs to be net of a lot of things just Like when you're actually looking for the cash value of, you know, a cigar butt, you got to net net. What are you actually getting, right? What's the cash burn? It's not always as simple as just looking at, all right, you know, current assets minus current liabilities and there it is. Um, there's often a lot more to to to be dealt with. >> That's like overcoming your skepticism to buy something. But what about the reverse situation where you've got what philosophical principles help you to not invest with somebody like maid off? Like how do you suspend >> the belief there? >> So I I I specifically talked about definitely common sense. It's funny because I actually saw so I had an example about Ken Langon the co-founder of Home Depot um basically had maid off and this is a true story came to him a month before the collapse and basically told Ken Langon I'm going to give you this incredible deal I'm not giving it to any of my other clients and Lone tells this story. He says he was just uncomfortable with the idea that wait if you're screwing your existing clients now what what are you going to do to me? That's not right. I don't feel comfortable with you, you know, not not giving them the deal. These people these people have been with you for years and you're just going to give this to me. And I >> there's a there's a saying that uh when a man marries his m mistress, a new position opens up. >> I love it. I love it. So, so but yeah, but ba basically he he he saw that and I actually compared that to there's a philosopher named Martin Booer who would seem to have nothing to do with markets but he had this philosophy of the way we interact with the world whether it be other people in the investment world whether it be uh friends family whatever we have two fundamental ways of uh relating. One is where the other person is a fundamentally worth worthy uh conscious being and the other where you treat somebody like an object and he basically said when you tr he didn't say this I'm I'm making this connection I'm basically saying that if you treat other people in the market like for instance the other side of the trade as worthy beings not just people to be dismissed like oh these are the idiots this is the the dumb money on the other side of trade, you're you're going to be uh in a lot better position. And I think that, you know, kind of that understanding that there actually is somebody a real person on the other side, that was something that really helped Ken Langon specifically not invest in maid off. Now, I'm not going to say I I would doubt Ken Langon's ever heard of Martin Booer, but again, I think that that sort of idea that in combined with skepticism can be very potent for not getting scammed. >> Apparently, there's a saying in the MLB, the pros, that uh you know, the other guy lives in a big house too, >> right? Um I like this idea of the limits of abstraction. uh what should how should investors apply that concept? >> So um listen, I I I think that for me there's so many different types of uh abstractions in finance and sometimes when you even go to derivatives, they take on ridiculous levels of abstraction, right? So I talk about the example in there that you know leading up to the housing crisis in 2008, right? We had okay you have a mortgage you have a let's say someone borrows to buy a house okay you symbolize that with a mortgage note right then some Wall Street bank bundles those together and you have a mortgage back security and then they bundled those together and then you had a co and then they bundled those together and they had a co squared and they actually this actually did happen there were only a couple of them there were some co cubes um I I did verify that >> and I think you could buy insurance on the co squared at least Exactly. And at at at that point, you know, I'm just I you just imagine you're so detached from what's underlying. You know, you I I always imagine I not to be crude, but I imagine, you know, you have like a box inside a box inside of a box and every single one of them is is labeled gold, but then you open it up and it's just a pile of crap, you know, but it but you know, you're so far removed. So I think that at the end of the day the limits of abstraction we need to come from both ends. I think that for me coming as a really um you know kind of gram inspired deep value investor I was always inclined to go straight bottom up all the time but even that can have its drawbacks. I think you need to go from top down and bottom up to kind of triangulate the reality of something because nothing exists as Jake was kind of saying earlier inside of a vacuum. the top down dynamics do matter but at the same time if you're forgetting the fundamental you know you you don't know what's inside that box at the end of the day so um I think there's so there's abstraction is great but and it's used a lot in finance um but it's not the beall endall we need to balance our abstraction with what James would call the cash value of something and I think we were talking kind of about this earlier when he says cash value he means kind of what is the ultim end use what what does it all come down to net net what is it all what does it all mean is it is there actually any use cuz it's it's kind of in opposite to what we Jake was talking about with like this kind of this theoretical value of something that has nothing to do with the pragmatic aspects of the reality um so I think yeah limits of abstraction is it can be really helpful and I even gave the example listen all of computing besides quantum computing which is you evolving all computing is based on zeros and ones abstracted to one language abstracted to another level of of you know computer language so abstraction is great I'm not I'm not an abstraction hater I just think that they need to you know we need to respect the limits of abstraction h >> how do you apply these concepts in uh in a practical context in in a sort of day-to-day investment strategy >> it you And I I think it's it's the the hardest part. I think that one way that it really um shows itself is first of all in my idea screening and the ways I go about screening for uh ideas. I think that um one another way it shows up is when I'm questioning my own investment thesis um like you know how much h how do I go about um cleansing myself so to say of my irrational views uh or my irrational emotions like spinosa how do I go about finding whether I'm being too skeptical or like you know listen there have been ideas where I could have hit home runs, but I I was too skeptical of my own ideas, right? You know, there's that Bruce Burkowitz saying about like how he tried to kill his own ideas and once he found one he couldn't kill, that was something that had merit to it. But I'm sure we've all had those examples. I certainly have where I had a good investment idea that I was too I too aggressive on. I, you know, I I killed it when it shouldn't have been killed, right? So there's kind of that that balance constantly thinking of these things. I think again in how I'm screening and and like the things that I'm skeptical of from a market standpoint and determining where I want to fish, I use a lot of these philosophical frameworks. And I think also I use those philosophical frameworks when I'm inspecting my own ideas. Frankly, I think that they could be used all over the place in all sorts of contexts, but those are two specific ways on a daily basis that I see them kind of rearing their head. Ethan, what do you think about that um that bell curve meme, you know, where you've got the dunce on one side and the Jedi on the other and then the the sweaty guy in the middle who's so you know Amazon's like the dunce is like Amazon Prime is great and then the uh the bell curve guys like well there's you know 10 Amazon or AWS is baked into the price of today's Amazon price and then the uh the Jedi is like Amazon Prime is great. It's it's I I I think that's that's such an accurate reflection of of of reality. Um you can sometimes overthinking doesn't pay. Um, and I think especially when you look at the kind of stuff like listen look at something like Nvidia like I there are people who I would listen not that I have such a nuanced understanding of Nvidia but I I would bet there are people that have made tons of money on Nvidia that have do not have that deep of an understanding of of what they do and why why what they're doing why they're able to earn the gross margins that they do. Um it it's tough and I think again from it's something to that's worth philosophically reflecting on right what level of depth and skepticism pays. I think I'm trying to remember if it was Clarman who talks about like there's this 80% that you have to know but beyond that it you know there's diminishing returns in terms of like gaining I I one of the problems I had coming up as an investor was I would hyperfocus on things like say oh my god I have I have a legal background so I'm going to study this this um potential tort liability lawsuit that they have and it only ended up affecting like 1% of the company's enterprise value, but I was so excited to be able to dig deeper than anyone else that I'd kind of jump into it, but it didn't really move the needle. Um, so I I I think we need to be kind of cognizant of of when we get in in depth, is it actually moving the needle? Um, that's that's something that I I would say is an application. I I've wondered the thought experiment of if you took everyone who's ever owned Berkshire over the last 60 years and you lined them up in order of understanding of accounting, I think you might end up with like a reverse order as far as returns go. >> It's it's an it's a it's a really it's a really good thought experiment. It it I I mean I don't want to break it down to something so as is ignorance bliss, right? or like you know >> well it's like I trust Warren and I you know I like him and seems like he's doing things the right way like do I don't need accounting to trick myself into selling at the you know >> well you know in the in these the book Hundred Baggers which is a really interesting book and you just look at the time it took for these people to reach those hundred times returns and you almost have to think every single time they had a doubt they stayed with it for for whatever reason and why that is. You know, is it potentially a detriment to be too skeptical at certain standpoints? Maybe we maybe Hume's kind of knowledge comes in there say, "Okay, well, you got to use the common sense that Warren Buffett has the incentives in line and and is an ethical person, has shown the ability to make, you know, uh above average investments." But, um, yeah, it's it's it's tough. Um, I'm I'm a I'm a skeptical type of person and just holding on blindly has never been my uh never been my strong suit. >> Um, what is the anxiety of having money and and how can philosophy help with it? >> Oh, I stay poor, buddy. >> Yeah. So, I I must say I'm a a big fan of um the the philosopher that this is to do with and I wish he was talked about more. name is Michelle Deontaine and he's actually credited as being some people say he originated the essay format um which we kind of take for granted but anyway a awesome guy um he talked about basically the fact that he went through not that he grew up poorer or anything but he had money and then he towards the end of his life had more money enough to kind just, you know, kind of go into his tower and write all day. The way he actually made his final bit of money was he sold his judgeship. This is, I'm not making this up. In back in France, there was an investment. There was an asset class of judgeships where basically you bought the ability to be a judge for a certain place and you would basically charge fees on the people that came and you know had cases in your court. Anyway, he was a judge. We just we just rent that out in the US. We don't sell it whole. >> Yeah. Can you imagine? But but I would love to see what the returns were on on that. I somebody should do a study. But so anyway, he sold it. He went away to his castle and he started writing. And one of the things that he wrote about was the fact that having all this money did not necessarily make him not just not happier, but even feel so much more secure. He felt like the more he had, the more things oftenimes he had to worry about. He talks about how when he's traveling, >> problems. >> Yeah. Mo money. This was the original mo money mo problems guy. Um, and he talks about he talks about how not only is wealth not something that can make us feel fully good about ourselves, but he also even talks about how like we can't rely on it for relationships with other people as well. You know, he talks about how gives the example of a father who tries to use his wealth to have a good relationship with his kids and he talks about how that's bound to fail. And um I think that that he basically says at the end of the day, this is a weird way to say it. What's the cash value of cash, right? Like at the end of the day, money can only go so far. Now listen, to get you to a certain again, if someone's below the poverty line or something like that, I totally understand that's that's different. There's a certain level of wealth I'm talking about where you reach where beyond that the there's diminishing returns on the happiness it returns. And sometimes it can even you know get in the way of relationships and create it can create all sorts of anxiety within yourself within regard to your relationships with other people. You're worried about who's robbing you here, you know, who's trying to screw me there. Um so that's something that Matt Montaine talked about and I thought it was interesting because I it's just it's not intuitive, right? listen and and I am not saying listen I would say it's a great problem to have you know give me that problem then I'll deal with that anxiety right you know you be philanthropic and and you know give give it away there it's not that wealth is a is a bad thing in and of itself but I think he was trying to say okay most people are anxious because they their rel relationship with money is that they don't have it I have a lot of it I still have a lot of angst and and he wrote about that and I thought that was a really really fascinating thing that I wanted to talk about because listen frankly I've interacted with a few very few but a few you know billionaire investors and I have I have seen all sorts of different um let's just say a effects or or dispositions or views on life and what I mean by that is happy golucky thankful ful versus why am I wasting my time on on you? Um so um I I I just I I I think I think it's really interesting, you know, to see how how money affects people and it it's not a you know, it's not a cure all. It doesn't it doesn't necessarily make you a happier, better person. >> Hey, uh Ethan, we're coming up on time here. Uh if folks want to buy the book or get in touch with you, what are the best ways of doing that? Yeah. So, um it's available for pre-order on Amazon. Um it should be also on Columbia Business School Publishing's website. Um to get in touch with me, I LinkedIn is definitely the best way. I am not the social media maven, but I've been building up my uh LinkedIn presence. So, please feel free to get in touch with me um through LinkedIn and that would be fantastic. I really really appreciate you guys having me on. and Jake and Tobias. This has really been just it's been a privilege for me. >> Uh we've enjoyed having you on to the the book is called The Investment Philosophers: Financial Lessons from the Great Thinkers by Ethan A. Everett through Columbia Business School. It's available for pre-order on Amazon. I just checked it out today. Congratulations. It's a really great book, Ethan. I had a lot of fun uh reading through it. Um JT, any final words? >> Be good to each other. >> All right, folks. We'll see you next week. Sbat time. Sbat channel. Peace.