Pods & Recs: No. 91

Today we have an episode on why passive investing is flawed, a great listen on financial history, an episode on the importance of thinking with your gut, and a conversation with Adam Grant.

If you missed the last few editions of Pods & Recs, feel free to view them here: 90, 89, and 88.

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Business

• ***Must Listen*** Superinvestors: #31 — Rob Arnott on Engineering A Better Index. Arnott is the chairman of Research Affiliates, which advises on over $195 billion in investment assets. He begins with his background and then gets into his methodology and problems with passive investing at the 22:25 mark. Arnott argues that the market-cap weighting of most passive portfolios hurts long-term returns and investors would be better served by having an equal weight portfolio. A must-listen for both individual and institutional investors. [December 4, 2019–1 hour, 5 minutes] iTunes Podcast | Overcast | Breaker | Website Link
• Cautionary Tales: Buried by the Wall Street Crash. This fun episode addresses the fact that even the most intelligent minds aren’t always correct in predicting future market performance. Both Irving Fisher and John Maynard Keynes, two of the greatest economists who have ever lived, were caught off guard by the Wall Street crash in the early 1900’s and lost a significant amount of money. But what separated the two was Keynes’ ability to change his mind and embrace a different style of investing (similar to Warren Buffett), while Fisher became stubborn, doubled down, and lost everything. The episode brings in Phil Tetlock, author of the book Superforecasting: The Art and Science of Prediction, to address what we can all do to become better forecasters: become actively open minded thinkers who embrace disagreements with others as an opportunity to learn. [December 6, 2019–39 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link
• Wall Street Unplugged: How to find the best value stocks for massive, short-term returns. The first 9:15 is a brief market update, and then Meb Faber, CEO and Chief Investment Officer of Cambria Investment Management, joins the episode until the 43 minute mark. Meb stresses two points: 1) investors should have a globally diversified portfolio (especially important given the high valuations of the U.S. market) with a tilt towards value, shareholder yield and momentum, and 2) the last way for an individual investor to get alpha is by having a long-term time horizon. [December 4, 2019–1 hour, 2 minutes] iTunes Podcast | Overcast | Breaker | Website Link

The Rest

• ***Must Listen*** EconTalk: Gerd Gigerenzer on Gut Feelings. Gigerenzer is a psychologist and author of Gut Feelings: The Intelligence of the Unconscious, who joins the episode to argue for heuristics over complex models when making real world predictions. This episode was a great listen to help with decision making and addresses situations when we should trust our gut over a model. He argues that more information isn’t always better and we need to be have a more thoughtful approach to what variables are used in our models. [December 2, 2019–1 hour, 8 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link
• The Tim Ferriss Show: #399: Adam Grant — The Man Who Does Everything. Grant is an organizational psychologist at UPENN, where he has been the top-rated professor for seven straight years, and author of multiple best-selling books, including Originals: How Non-Conformists Move the World. The episode has a wide range of tips and tricks to become a more productive employee, colleague, and leader. Grant talks about how he has grown to embrace feedback and become more open to criticism, how he structures his work day, his process of becoming a better professor, and much more. One interesting fact was that of all the personality traits that predict performance, regardless of title, conscientiousness is the most important.[December 5, 2019–2 hours, 3 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link

RECOMMENDATIONS

Books

Adam Grant (Organizational Psychology Professor, UPENN):

1. Switch: How to Change Things When Change Is Hard by Chip & Dan Heath
2. The Culture Code: The Secrets of Highly Successful Groups by Daniel Coyle
3. Quiet: The Power of Introverts in a World That Can’t Stop Talking by Susan Cain
4. Mistakes Were Made (But Not by Me) by Elliot Aronson Carol Tavris
5. Insight: Why We’re Not as Self-Aware as We Think, and How Seeing Ourselves Clearly Helps Us Succeed at Work and in Life by Tasha Eurich

Gerd Gigerenzer (Psychologist & Author):

1. Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler

Ben Horowitz (Co-founder of VC Firm a16z):

1. Lenin: The Man, the Dictator, and the Master of Terror by Victor Sebestyen — Good read on the perils of communism.