Building the Perfect Stock Portfolio
What Happens Next in 6 Minutes
The Importance of Expected Utility in Financial Decision Making
Expected utility tells us that you shouldn't expect the market to give you extra return without taking more risk. Long-term real spending power of our wealth matters and expected utility also agrees with the main idea that Myron contributed to the perfect portfolio book. size matters in the sense of how much risk is the right amount to take and sometimes size matters a lot Thanks Vic.
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Speaker 3
What are some of those stories that have touched you the
Speaker 1
most? Hmm.
Speaker 2
I have one related to two guarding the art actually, which I don't know if we want to get like super specific yet, but the Grace Hardigan painting that I ended up choosing, I wrote this wall text for it about selfhood and just kind of the, how everyone's, even if you're very close to someone, they can be very mysterious to you. And this person actually wrote me a letter. They wrote me a letter about they had lost a family member and had been thinking about that person, how well they knew them and that sort of thing. And they were just, they felt so connected to that wall text. It just like found them at the right time. And they took the time to like write almost like a thank you note. And I don't know, it was kind of one of those moments where art connects to people who I don't know who this person is and we never had a one on one interaction, but we actually did connect through that piece of art. That's the one that probably stands out to me the most.
Speaker 1
I mean, there's so many, but I
Speaker 2
could jump in and talk about you actually, because I see Derek, like he's almost as an ambassador for the city in some ways. And so if people have questions about, you know, the co-insisters and their apartment, they're the collectors who they kind of make, make up the bulk of what's on display at the BMA and they had apartments in the city. So people will ask about that and Derek will, if he's in the galleries, will be like very friendly and yeah, very charismatic person, I would say. So I think people, yeah, they've enjoyed that. I've seen people enjoy that. I've seen that happen in real time. And you're doing that while using the art on the walls to like talk about the city that you love, it's nice.
Speaker 1
Well, well, I don't know if I can talk that.
Speaker 3
I would love for you to describe guarding the art for people who are not able to see it.
Speaker 2
Sure, I mean, I will cite our wall text, our introductory wall text of one of the adjectives that was maybe like, for me, useful in describing what the experience of like walking through the exhibition would be. So the adjective we landed on was kaleidoscopic, just this, almost like this chorus of voices of perspectives. You were really highlighting like, or embracing this idea of variety. So I thought the idea that people would walk in the exhibition and see things from very different time periods, different styles, different mediums next to each other and perhaps see similarities that were, yeah, surprising or unexpected to them. That's what my read on the feedback that I got from visitors was that is actually a way that we were successful. And that's one of the ways that they describe the experience was it surprised them or yeah, they kind of made an unexpected connection.
Speaker 3
How many pieces of art were in the show?
Speaker 1
Well, I just had one, for example, I think of one of the few who had only one. Most of us had two or three things. So let's say the average was two times 17, upwards towards 40 pieces
Speaker 3
altogether. And the kind of art, was it all different kinds of art?
Speaker 1
Yeah, so that nature of the show is inherently subjective. I think that's different than a lot of exhibitions where the curators are trying to stay out of it in a way. So, you know, you don't want to see the editor's hand or the curator's hand so much, although you know they're there, but this is really much about the curators themselves. So it was all of our unique backgrounds and interests all coming together in different ways. I think in unexpected ways for a lot of us, some of us thought maybe I picked this piece because of whatever, but by the end of the process, they realized, oh, actually, I mean, that happened to me. I sort of picked a piece just because of a familiar landmark in the background and then the more I learned about it, the more I realized, oh, actually, this is totally my piece. It's all about the landscape and architecture. These are themes of mine or themes that interest me in my writing and my art. So, yeah, it was disparate in the best of
Speaker 3
ways. And what was your response when first learning of the idea?
Speaker 1
Well, it was a zoom that they didn't really explain to us what the zoom meeting was going to be about. This is early 2021, so February 21 or so. And so it was quite a surprise when they unveiled it or announced it and the project and in its broad form. And actually, I was ending up texting Jess, you know, like, while they were talking, I was like, are you going to do this? Is this real? Is this really happening here? This seems too good to be true. But yeah, we both agreed. Yeah, this seems like an worthwhile thing to do. So yeah, it was just through a zoom call and then we, they kept it open for a couple of weeks to see who would be interested. I think they're 40 or maybe 50 guards total, but 17 of us in the end, elected to participate.
Speaker 3
And what did they ask you to do and how did you prepare for the role?
Speaker 2
We were given sort of this, this timeline of what would have to be done and when, and obviously we had to be adjusted in some ways, but gave us a little bit of a snapshot of what an exhibition cycle, the planning and actually forming of it looked like. And we could sign up for areas that we were especially interested in. So in my case, I was like very interested in writing wall text and maybe interacting with like conservation people on site. And I was less interested in stuff like press engagement. So I took maybe a bit of a back step at that point. But you did have, because of your being able to sign up for your own interests, you kind of had an idea, I think of what your role was going to be. There
Speaker 1
were some limitations right off like works on paper. People couldn't pick any, because of the delicacy of works on paper. So photography, printmaking, drawing, collage, stuff like that was out right off the bat. And then other pieces I picked to say is on landscape, I think initially, and they said no, something to do with the estate. You know, there are legal reasons or other reasons, maybe a work was going to be on loan to another museum at that time. So there are several rounds of our selections before we settled on our final pieces.
Speaker 3
And were you selecting from items already in the museum or could you pick from anything in the world? Like what was your sort of universe that you were curating from?
Speaker 1
So I think the original concept and some of us took it in different ways, which I think is good, was to just pick a piece that you would have seen say on your daily rounds, you know, over the years or over the weeks or whatever. One or two of us, I think, started, we got the option to look into the database and find pieces that may not have been on view at all in the last few decades, you know, before our births, you know, before we were alive kind of thinking. So a couple of us picked pieces that hadn't seen the light of day and a couple decades. So that was a twist on it, I guess, they created a connection with a piece that they had known existed before. And so I think that that's a valid take on the whole project. So for me, I just saw this painting that I just alluded to before. It's like an antebellum cityscape of Baltimore, like in the 1830s and in the background, you can see the Washington Monument, like the first Washington Monument, I guess, in the nation. And it's where I happen to wait for the bus every morning. The buildings are gone, but the monument's still there. And so I just thought, okay, well, that's like a local, like iconic thing that I see. And so I had that on my short list and I actually picked some modernists and maybe some contemporary artists that would fit my wheelhouse more. But in the end, I let them go and I just stuck with this, like, no name or not. I mean, Thomas Ruckle is the artist, but he's not famous. He was like in our regional gallery. And so I picked this kind of off-kilter painting by this self-taught painter from the 18th century and just built up around that.
Speaker 2
Yeah, I was going to jump in and say, I liked that aspect too, but there were definitely some heavy, heavy hitters in there, like, you know, Mark Rothko or something really exciting for visitors. They would recognize the name, but then we had some underdogs in there and that was great to put them side by side.
Speaker 3
Jess, what did you pick and why? So
Speaker 2
I mentioned initially I started with a video piece because my area is film. One of my areas of interest is film, but we decided eventually
Speaker 3
that having time-based media,
Speaker 2
there was just too many space limitations. So my list got kind of whittled down to two, which is nice to be able to pick two. I picked a very big Grace Hardigan painting and then a bronze sculpture by Louise Bouschois. So something from Grace Hardigan, she has ties to Baltimore, which is nice. So definitely something that some visitors at least would recognize the name, but I know that that painting had been on view here and there. But to me, both of the pieces were mysterious in one way or the other. The Hardigan is a self-portrait, but it's abstract, which I liked that tension a lot. And then the Louise Bouschois sculptures, organic looking, but not really identifiable as like a human or an animal or almost looks like it could be a tree or a flower or something like that. I think we're mysterious enough that we'd leave a lot of room for a visitor to just have some time with it and feel challenged by it and develop their own interpretation rather than it being obvious, I guess.
Speaker 3
No, with 17 people curating, how did you make decisions?
Speaker 1
Yeah, that's a good question. I am not a group project person, generally. I remember group projects as an undergrad and I always felt like it's one charismatic person takes over the whole thing and the other people just sort of go along with it. But this was not like that, thankfully. We all got a chance. I think we're all, it sounds almost impossible, but naturally democratic about the whole process. I don't think anyone ever was, no one was leading or pushing things in the sort of, people bring things up, of course, and something's got shut down or changed or put on pause and we'll see. But ultimately, I think everyone contributed as much as they wanted to, which is perfect.
Speaker 2
Yeah, I agree. It was kind of, I hope it's not an anomaly, but I was surprised. The group that we worked with was amazing. That's part of why I was so eager to do the project because I was kind of looking around at my colleagues and realizing like this, they're a very easy group to work with. Passionate, but the types of people who, yeah, I don't think that anyone was trying to bulldoze over anybody else. And then I will say like the guest curators steered us. Occasionally, at like pretty decisive moments, like she hung back, listened, but then would occasionally step in and those moments, I think, did help us kind of find the shape of the exhibition.
Speaker 3
Was that Dr. Laurie Stokesims? Yeah, how did she guide you? What was she trying to accomplish with her feedback?
Speaker 1
Well, like Jess was saying, she didn't, nor did any guard or guest curators steer things too much. She was more like, she would ask us to ponder things or to consider things, reconsider things that we maybe thought were all set. It was just sort of her presence alone. I know that sounds kind of cheesy or something, but she really is like a very wise and honest person that she didn't have to dictate anything or tell us how things should be or whatever, but just kept things open. And like Jess was saying, sometimes after the fact, would ask us to reconsider certain choices or to just think up new things. No, she was very beneficial throughout the process.
Speaker 2
How did you feel an opening night walking through the show?
Speaker 1
Yeah, I felt proud and excited and maybe a little nervous. It was a good night. I mean, that was the first, that was at the beginning of the show. So I feel like in some ways that's like the ancient path of the show. The show later garnered all this media attention. And towards the end, I felt like, well, for those of us who signed up for the media spots, and actually you did some media as well in the end. Yes, right. So there was just a lot. I mean, it almost sounds like humble bragging like, oh, I can't be, I can't be interviewed by the media anymore. But like, really, I can understand how like famous artists or writers or whoever, like it starts to get annoying. You know, there's so many questions and so many media outlets that want to get there, you know, their take or their scoop. And it was fun, but it was also a lot of work, especially towards the end. I feel like June was, there was just like something in the media, something to do every single day or every single week anyway. And, you know, and then before you knew it, it was over. It all seems like a memory, an old memory.
Speaker 3
Were you surprised by the media attention?
Speaker 1
I think the museum was the leadership were surprised more than any of us. I'm not entirely, I wasn't entirely surprised by it because it is a good concept, you know, like it says it in the name, even though one of the things that we didn't get was to change the name, although yeah, I guess we couldn't decide on anything. But in the art was a space holder at first, but in the end it became the final title. Anyway, but it explains exactly that, like these people who are paid to stand around the collection all day long and protect it, probably have a thing or two to say about it. And so I think the media and the public in general really responded to that concept. They really enjoyed coming to check out the show to see what all the guards
Speaker 3
picked. How did the experience change you?
Speaker 2
I think for me it just confirms what I already knew, which was that I was working amongst people who are just very deep and thoughtful and for me that was a very meaningful takeaway. To just, you know, I have the little catalog now, which is this time capsule of the exhibition. But for me it's also this catalog of people that I respect and I've learned a lot from and because we spend a lot of time together in the galleries. But so in that way the idea that other people could have
Speaker 3
that, you know,
Speaker 2
at Phoenix Art Museum and beyond just this opportunity to look to their colleagues and say, we're doing this together and I respect you and I think that your words are worthy of being on the walls. That was, yeah, probably the most meaningful thing. And yeah, I won't forget that for sure.
Speaker 1
Yeah, I would agree that while there's a lot of, a lot of new things we learned, some of it was confirming, like I already knew as a guard at all these different art museums and just as a person in the world or someone who studied art, that every show takes a lot more than what you might think when you see an exhibition, it certainly seems, and this is the point, it seems effortless, it seems, you know, it seems like it's just there, right? I think a lot of visitors don't quite understand that either though how much goes into even a small show. And so again, with, I would call this a medium-sized show, but with 17 different voices, you know, working together, yeah, the lessons learned were confirming the notion that Alachos into these exhibitions. And yeah, maybe for me working with a larger group and realizing it can work was definitely worth learning.
Speaker 3
What did you learn about the art of curation from this process?
Speaker 1
Yeah, well, like I said before, it's a tricky show because it's inherently subjective and whereas usually most shows you want the curators almost not seen.
Speaker 2
This kind of, I think, connects to the point you just made about this having 17 people create a show and it actually working. For me, I learned that relinquishing control actually was a very useful tool to have and being flexible because I think we have, or at least I did, had this idea of what a curator is or does and to me it seemed very, you know, detail-oriented and someone very much in control, but actually some of our best moments kind of came from taking a step back and being a little bit more like moldable or even messy. I wish the show could have been messier, honestly, but I did
Speaker 1
look at that. Yeah, I agree with that. Yeah.
Speaker 2
But I like how the process was. Our process was a little bit messy and I think that was great. I think that was wonderful.
Speaker 3
Can you talk more about that desire for messiness and like what about being out of control helped the curatorial process be better?
Speaker 1
I was going to say to the just the point about wishing it was a little bit messier. I don't know if you met like the final product and I sort of wish the final product was a little bit more expressionistic or idiosyncratic or punk or whatever you want to call it. Something a little bit more rough around the edges, DIY. Some of this stuff got smoothed over and I can see why they would want to keep it similar to other shows going on at the same time. You don't want something to stand out too much. But if anything, there was a slight missed opportunity to be more radical with it, whatever that might mean. I think we could have been a little bit more expressionistic, I think.
Speaker 2
Yeah, I think being the first to do
Speaker 1
something. Right.
Speaker 2
One of the priorities and I totally understood it was to aim towards legitimacy. We can do this and we can do it well. I kind of looked around and realized that some of our colleagues that meant so much of them and that was really moving. So ultimately, that was so moving that I kind of was okay with maybe curtailing some of the messiness. But in the future, since these institutions are not going to have that pressure of being first, who knows what they could do? They could actually do something disruptive potentially. I don't know. Like you said, Derek, kind of radical. I'm very curious to see what happens.
Speaker 3
So the show ends and you go back to guarding the art. How has your approach changed if at all to guarding the art since your curatorial roles
Speaker 2
in the exhibition? I know I look at things even more closely than before. If they put up a new show, I'm reading through the wall text and thinking back to what that was like because that's such a specific balance. It's such a specific art to write good wall text. Like I've always read it before, but maybe not with the same eyes now. Now I'm looking for specific things. And I also want to direct visitors to those things as well to share knowledge a little bit if people are curious. And I think they are. People are a little more curious now about how things work within institutions. There's maybe an appetite for that. I can sense that at least a
Speaker 1
little bit. For me, yeah, I mean, as far as security goes, we still have to do the job the same way. But yeah, I got a few, I don't want to call them groupies, but people who like recognized me from the media spots during guarding the art who still come into the museum. I don't know them from outside of the museum, but we have this kind of rapport now. There's a teacher, he teaches grade school, Mr. Fletcher. That's all I know about him. I don't even know his first name, but he's like a huge fan of mine. Like he asks me sometimes if he brings in his class, can they like sit down? And just the other day they came in to the contemporary wing. I asked my manager if this was okay, of course. I still have to pay attention while doing this. But just for like 10 or 20 minutes, talk to this guy's class about guarding the yard and what it's like to be a guard in general. So yeah, it's how it's affected the job in a positive
Speaker 3
way. Where do you get inspiration from?
Speaker 2
I think working in our museum actually does inspire pretty regularly. Like for example, I had been noting in the contemporary wing right now a material that was popping up. I saw it was oil stick and I was really feeling drawn to these pieces and kind of wondered maybe it's that material. I should seek it out. And as a result, yeah, spent too much money at the art supply store. But so that happens every now and then. And I totally blame it on working at an art museum.
Speaker 1
Yeah, I would agree. I mean, it seems sort of obvious, but an art museum is an endless source of inspiration. And sometimes you see a show come in, you don't think much of it. But one of the cool things about being a guard is you're there so long. And after a while things start to grow on you, like, Oh, wait a minute. Actually, this picture is a lot more profound than I thought or the show has more going on with it than I first noticed. So yeah, I've had those experiences throughout my life. Like even when I go back home and I might go to the Harvard art museums, I bump into a painting that I didn't think much of when I was working there, but then all of a sudden it means something to me. I think that's important that people don't, I mean, visual art is so tricky because it's not like you press a button and you get to see, you have to go there to see it. You have to go there to know there. You can't just walk into CVS like can hear pop music, you know, like there's, there's all sorts of recorded music and reproduce, reproduced images flying at us all over the place. Everyone's streaming things on their phones, but to see good art, you really have to like be in front of it. Obviously. And then I think then you have to have a relationship with it. You have to see it again and again. And sometimes it takes years. And it sounds funny to say that like, why would you look at a painting over years and years? Well, but that's that for me anyway, that's, that's how it has worked. Other times I see a piece and I love it right away. It's tricky.
Speaker 2
What is being in front of it physically adds to the experience?
Speaker 1
Well, I mean, it depends on the medium, but like obviously paintings are, you know, one off unique objects. I guess you could stand in front of a reproduced photo, you know, like a second photo and, but to be in front of, yeah, a unique work of art is, it's a unique experience. Like literally you're, you're not going to, I mean, everyone knows what the Mona Lisa looks like, even if they haven't seen it, but to be in front of it, to actually then see it. Like for years, so when I worked at the Garden Museum, visitors would often tell me, you got to go to the barns in Philadelphia. It's a very similar institution. It was like a rich guy who collected all this art and like, okay, sure sure, I saw photos online. I got a sense of what the barns was about, but I didn't go there in person until a couple, it was like 2019. And I was, I literally went. I mean, I wrote about this too, because I do think the power of art to make one move to tears and it doesn't have to be tears of sadness. It was, it was just like, it's just an overwhelming experience, you know, that makes me like kind of get worked up now. But yeah, you have to see it.
Speaker 2
I love that. That's, I don't know, it's, it's beautiful to see people moved in that way. And I'd say that's one of the perks of our job too. So I've seen people feel very deep emotions when they see something in person.
Today’s podcast was recorded previously at Stanford at an event to honor my old boss and close friend Myron Scholes who won the Nobel Prize in Economics.
Our first speaker will be Andy Lo who is a Finance Professor at MIT, and he will discuss his book In Pursuit of the Perfect Portfolio. Andy interviewed a dozen leaders in academic finance and top practitioners about how to design a portfolio balancing risk and reward by maximizing diversification.
Our second speaker will be Jonathan Levin who is the Dean of Stanford’s Graduate Business School. Jon will explain how Myron Scholes’ ideas have shaped academic research in finance and how his models have been applied by investment professionals.
Our third speaker is Victor Haghani. Vic and I worked together at Salomon Brothers before he left to be one of the founding partners at Long-Term Capital Management. Vic will answer the question, how much should you gamble when you have an excellent investment. Vic’s ideas are very important, because most of us focus on what to invest in and spend little time wondering how big to bet? And whether to increase or decrease the wager when uncertainty and volatility increases or decreases over time.
Our fourth speaker is my good friend Bruce Tuckman who teaches at NYU’s Stern Business School and is the former Chief Economist of the CFTC. Bruce will discuss the benefits that derivatives like interest rate swaps and commodity futures provide hedgers and investors.
Our final speaker today will be Myron Scholes who will discuss the best ways to adjust your portfolio if you are concerned about ESG. Some market participants who are concerned about carbon emissions are selling shares in their polluters, but Myron thinks that investment managers should first optimize the portfolio and then buy carbon credits to maximize returns while minimizing carbon in the environment.
Get full access to What Happens Next in 6 Minutes with Larry Bernstein at www.whathappensnextin6minutes.com/subscribe
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