The Rational Reminder Podcast

Goal-setting has been a divisive subject of discussion for us here on the Rational Reminder Podcast, and today we dive a bit deeper into the topic with the help of the amazing Ayelet Fishbach, author of the recent book Get It Done. Ayelet is an expert in motivation and a Professor of Behavioral Science and Marketing at the Chicago Booth School of Business. Her focus in her work is researching social psychology, management and consumer behaviour, and having her on the show to share some of this amazing insight is a real honour! In our conversation, we cover many sides of the goal-setting process, exploring the vast array of research that Ayelet has done and has examined. We talk about the difference between intrinsic and extrinsic goals, the outcomes of tracking progress, what makes an effective goal, and what is meant by a 'goal-system'. Ayelet also shares how this research can inform tasks such as retirement planning, and the work of financial advisors. So for this and a whole lot more that is bound to be illuminating, fascinating, and potentially life-altering, be sure to join us on the show. Key Points From This Episode: Using goal-setting to address our inability to predict elements of the future. [0:03:50] Differentiating between intrinsic and extrinsic goals. [0:05:00] Ayelet lists some examples of effective goals and their qualities. [0:06:37] The dangers of avoidance and unhealthy goals and how to recognize these. [0:10:48] Exploring the parts of human psychology that push us to always want more. [0:14:46] How quantifiable, self-set targets for goals can aid the process of achieving them. [0:17:18] Weighing the benefits of creating incentives associated with the goals you set. [0:21:45] The roots of intrinsic motivation and how to foster more of these. [0:25:13] Making the pursuit of a goal enjoyable and why this is so important. [0:29:21] How these findings on goal-setting relate to long-term retirement planning. [0:32:10] Ways for financial advisors to make certain processes and tasks more enjoyable for their clients. [0:33:36] The impact of tracking and monitoring progress towards a goal. [0:35:03] Learning from failure and why this can be an unreliable strategy for achievement. [0:39:36] Ayelet describes a goal system and its most important components. [0:43:06] Writing out goal systems and an explanation of the chart that is included in Get It Done. [0:46:17] Prioritization and how to choose between conflicting goals. [0:48:02] Strategies for keeping on track with resolutions; the role of intrinsic motivation and the question of temptations. [0:50:14] How other people and our social environment influence our ability to reach our goals. [0:55:04] Ayelet responds to Ben and Cameron's tendency to avoid setting bigger goals. [0:56:41] How Ayelet goes about setting goals for herself, and how she applies her expertise to her role as a parent. [1:00:53] Learning as the marker of success; why Ayelet feels that she never left school. [1:03:42]

Identifying investment goals is a critical step in developing a sound financial plan that helps investors reach their objectives. Studies have shown that using a goals-based framework in financial planning can lead to an increase in wealth for investors and has the potential to strengthen planner-client relationships; but what goals should you be setting? And why is it often so difficult to make these kinds of decisions? In today's episode, Benjamin dives into some of the research he is conducting about goals-based financial planning for the paper he is writing on the topic, and we discuss why defining and prioritizing goals in the financial planning process is so important (and why it can be so challenging), as well as some practical guidelines to help you set effective goals. Additionally, you'll learn all about our 22 in 22 Reading Challenge, which we officially launch today with the help of Heather Reisman, book lover, entrepreneur, and CEO of Indigo, Canada's largest books, gift, and toy retailer. Heather is also the co-creator of the Kobo reading device, a former governor of the Toronto Stock Exchange, and the co-executive producer of the documentary, Fed Up. As you know, the objective of this podcast is to help improve listener's lives by communicating ideas about sensible investing and financial decision making; and reading is a big part of that. Make sure to tune in to find out where to sign up for the challenge, take note of our book recommendations, and more! Key Points From This Episode: Learn more about the 22 in 22 Reading Challenge and where to sign up for it. [0:00:35] Introducing today's special guest, Indigo CEO, Heather Reisman. [0:03:55] Some of the exciting guests you can expect to hear from on the show in future. [0:06:38] Our watchlist recommendations for you, including Ray Donovan: The Movie. [0:08:43] Cameron's book recommendation: The Culture Code by Daniel Coyle. [0:10:05] Benjamin shares his views on Facebook's one-day $232 billion drop in value. [0:17:16] Why a great company is not necessarily a great investment. [0:22:32] Reflecting on the Talking Cents cards we did with Andrew Hallam in Episode 186. [0:23:45] Onto today's main topics: how to make sound, goals-based financial decisions. [0:27:20] Why defining and prioritizing goals in the financial planning process is important. [0:30:33] Find out what goals you should set and why it's difficult to make those decisions. [0:31:19] Practical guidelines to help you set goals from Bond, Carlson, and Keeney in 2010. [0:33:47] Hear some of the goals from the master list that Morningstar put together. [0:36:15] Learn what an effective goal looks like according to Ayelet Fishbach. [0:37:21] Whether you should use approach goals or avoidance goals. [0:39:42] How you can turn your goals into action by creating challenging, measurable, actionable, and self-set targets that don't feel like chores. [0:42:51] Creating more intrinsic motivation when setting long-term financial planning goals. [0:45:58] Why pursuing goals is more about the journey than it is about actually achieving it. [0:47:08] How top level abstract goals are served by multifinal, equifinal, and unifinal means. [0:48:48] Resolving goal conflicts by prioritizing some goals over others or compromising. [0:50:11] Kicking off the 22 in 22 Reading Challenge with special guest, Heather Reisman. [0:53:12] Why Heather believes reading is so important, starting with the pure joy it brings. [0:53:44] How she decides what to read, whether it's via recommendations or based on her specific interests at the time. [0:55:59] What her daily reading habits look like that enable her to read 75 books a year. [0:53:30] How reading helps with some mental health issues that stem from social media. [1:01:25] Why she advocates for long-form reading, regardless of whether or not it's digital. [1:03:38] Learn about the origins and the mission of the Indigo Love of Reading Foundation. [1:05:50] How a community like 22 in 22 might help someone who wants to read more. [1:10:25] Heather's parting words of advice for listeners: be deliberate about your habits! [1:12:37]

One of our favorite things to do on this show is talk with the amazing authors of new books related to sensible investing. Today we do just that, welcoming back Andrew Hallam to the podcast to talk about his new book, Balance. In it, Andrew tackles the relationship between our finances and happiness, looking at the areas of life that need the most attention, and how we sometimes overlook important aspects of our wellbeing. This is Andrew's third book, and we previously hosted him on the show in Episode 99, so make sure to go back and catch up on that if you have not already listened to it. We have a fascinating chat with Andrew again today, getting to grips with some of the main findings in the book, with our guest unpacking his arguments about material purchases, spending on experiences, gratitude, and financial literacy. We also get to hear from him about the importance of staying light-hearted, and how he defines success and failure. Balance is such an eye-opening and illuminating piece of work, which we highly recommend our listeners check out, so tune in today to get a taste of what it's all about. Key Points From This Episode: Andrew's explanation of his definition of a successful life. [0:02:53] The questions to ask when prioritizing aspects of one's life. [0:04:35] Worthwhile material purchases and when spending money can truly have a positive impact. [0:06:12] Confusion about real estate and investments; Andrew clarifies the idea of buying property. [0:08:59] Andrew's 'desert island litmus test' for evaluating purchases. [0:12:18] The relationship between social media and our spending habits [0:14:03] Times that more liberal spending might be a good decision; Andrew's emphasis on experiences. [0:17:39] Thoughts on reaching a level of maturity regarding material wealth and satisfaction. [0:24:05] Andrew's reflections on his experiences of cancer in 2009. [0:27:28] The role of gratitude in a good life and increasing its presence in our practices. [0:31:37] How our network and social circles support and enrich our lives. [0:36:39] Index funds and financial literacy; Andrew weighs in on what these allow you to do. [0:37:26] Questions to ask when hiring an advisor; recommended products, financial stories, and more. [0:40:55] Andrew speaks about whether it is smart to have 100% equity. [0:45:59] The ghost story that Andrew uses to illustrate a point about risk assessment. [0:47:48] Deciding between simplified and complicated portfolios. [0:50:11] How parents can approach educating their children on saving and spending. [0:51:39] Andrew weighs in on retirement, career, purpose, and the last phase of life. [0:52:38] Personal finance and good humour; why Andrew embraces the inner child. [0:55:57] Andrew's definition of failure and why it is so important to understand the finite nature of life on a behavioural level. [0:57:04] A round of Talking Cents cards with Andrew. [0:57:38]

Wes Gray, co-founder of Alpha Architect and a well-regarded figure in finance, joins the discussion on the evolving world of ETFs. He dives into the pitfalls of thematic ETFs, suggesting they often fail to deliver on their promising backtested returns, especially as popularity grows. The conversion of mutual funds to ETFs is explored, emphasizing tax benefits and efficiency. Wes also shares insights about Bitcoin ETFs’ potential, and the conversation wraps with a lively debate on financial literacy and the psychology behind investor decisions.

Episode 184: Robin Wigglesworth: Unpacking and Understanding Trillions Episode 184: Show Notes. We have often spoken about the book Trillions on the show, and in today's episode, we are lucky enough to interview the author, Robin Wigglesworth. We get to speak to Robin about his book and some of its central and most interesting ideas, while touching on other subjects too. Listeners will definitely come away with some enriched perspective, and hearing Robin's thoughtful and articulate answers was an absolute pleasure for us. Our guest is also the Global Financial Correspondent for the Financial Times, with his contributions to the publication being well worth keeping up with. After distilling some of the history of index investing, Mac McQuown, Jack Bogle, and the building blocks of what we do here at the Rational Reminder, Robin is generous enough to also comment on crypto, tech disruption, private equity, ESG investing, and more. This episode ties in so well with previous conversations we have had and Robin's dedication to his craft as a financial writer is truly inspiring, join us to hear it all. Key Points From This Episode: Simple reasons for why index funds are the best option for investors. [0:02:40.1] Tracing the roots of the culture of stock picking. [0:05:52.7] The initial intellectual push that the idea of index fund received from Wells Fargo. [0:10:44.4] Touching on some of the important yet lesser-known characters in the history. [0:15:05.8] Robin unpacks the evolution that Jack Bogle went through in the 1960s. [0:17:40.1] Jack Bogle's real superpower and getting to grips with the essence of his philosophy. [0:22:33.4] The important relationship between Dimension and Vanguard. [0:25:42.7] Differentiating between factor investing and total mark indexing. [0:29:24.5] Robin's thoughts on where we are currently with an imaginary alpha. [0:32:46.3] Reasons for Jack Bogle's decision to avoid embracing ETFs early on. [0:35:28.7] Why Robin stands by the idea that markets are not efficient. [0:37:31.8] The impact of bond ETFs on the future of the market. [0:42:48.1] Concerns around proxy votes at bigger asset managers. [0:48:34.4] Some thoughts from Robin about ESG investing and its value. [0:52:17.7] The skepticism that Robin still holds about cryptocurrency and its disruptive characteristics. [0:57:45.2] The example of Albania that Robin has used in his book to illustrate a point about crypto. [1:02:47.6] Looking at the trend towards private equity in the financial world. [1:09:23.4] Robin's own definition of success: the feeling of doing a good job. [1:17:46.6]

While there is certainly room for rigorous debate regarding market efficiency versus inefficiency, there are many who dismiss Eugene Fama's Efficient Market Hypothesis (EMH) as an incorrect model without understanding what the implications are or how to test it. In today's episode of the Rational Reminder Podcast, we tackle some common market efficiency myths and misconceptions using Fama's 1970 paper on EMH as well as supporting papers by Kenneth French, Lubos Pastor, José Scheinkman, and many others. You'll also hear about behavioural finance, quantitative investing, human bias, and momentum as they relate to market efficiency before debunking some anecdotal misconceptions about EMH involving Warren Buffet and Renaissance Technologies. In addition to our fascinating main topic for today, you'll get a glimpse into the four waves of a career in Cameron's review of The Long Game by Dorie Clark and Benjamin shares some notes and corrections regarding the user cost model from Episode 180: Is Canada Really in a Housing Bubble? We also discuss housing as a depreciating asset, innovation stocks in deep value territory, and the size of innovation platforms relative to global market cap and what that means for investors, plus a whole lot more. Make sure not to miss this jam-packed episode for everything you need to know (and forget) about market efficiency! Key Points From This Episode: Kicking off with a book review of The Long Game by Dorie Clark. [0:10:53] Four waves of a career as per Dorie Clark: learning, creation, connecting, reaping. [0:13:04] Benjamin readdresses the user cost model from Episode 180 on the Canadian housing bubble (or lack thereof). [0:16:06] Insights from the user cost model regarding price sensitivity and rate changes. [0:20:13] Addressing common confusion regarding housing as a depreciating asset. [0:22:53] Speaking of bubbles: innovation stocks in deep value territory as per Cathie Wood. [0:26:08] ARK's forecast for innovation platforms and the 30-40 percent compound annual rate of return their strategies could deliver in five years. [0:32:01] What deep value looks like according to ARK; prices to book, sale, and earnings. [0:33:30] Thoughts on the size of innovation platforms relative to global market cap. [0:34:47] Why growth in earnings per share, not market cap, results in growth in returns. [0:36:14] The impetus for today's topic: Market Efficiency Myths and Misconceptions. [0:40:03] Eugene Fama' himself on why the market isn't expected to be perfectly efficient. [0:41:44] Testing market efficiency categorized by weak, semi-strong, and strong forms. [0:42:29] Why applied micro-economist and market design specialist Eric Budish believes the market is objectively inefficient at the millisecond horizon. [0:43:35] What EMH has to say about information markets, competition, and actual prices. [0:45:11] Some ways to test market efficiency taking different models into consideration. [0:47:22] Understanding what EMH does not say, including that prices are right at all times. [0:50:43] Alternative models to EMH; behavioural finance as explained by Professor Hersh Shefrin in Episode 167. [0:53:18] What Wes Gray says about quantitative investing and human bias in Episode 69. [0:59:09] Market efficiency and given anomaly: seasonality, momentum, and more. [1:02:12] Ken French on how momentum relates to market efficiency in Episode 100. [1:03:40] Anecdotal misconceptions involving Warren Buffet and Renaissance Technologies. [1:08:54] Whether or not people with specialized knowledge earn excess returns. [1:13:13] Overconfidence as per Ben-David, Graham, Harvey, Scheinkman, and Xiong. [1:17:18] Talking Cents: we share our comfortable and uncomfortable responsibilities. [1:23:53]

One of the pillars of our approach at The Rational Reminder Podcast and PWL Capital is the idea of index investing, a concept that is both fundamental and deeply embedded. Today we are very lucky to have John 'Mac' McQuown on the show, who was behind the creation of the first equity index fund. It is hard for us to overstate just how important this contribution has been to the world of finance and any fund managers and investors that share our philosophy. Mac's work back in the 1960s, his position at Wells Fargo, and his contribution to the founding of Dimensional Fund Advisors all speak for themselves, and we are extremely grateful to get some perspectives from this titan of the world of rational and data-driven investing. In our chat, we get to hear about some of the key points in Mac's career and the general arc of the rise of indexing and diversified investing, the key figures that he worked alongside, his thoughts on the future, and the importance of environmentalism in today's world. So, to hear it all from a hero and giant in the space, be sure to listen in with us today. Key Points From This Episode: Looking back at the role of data at the beginning of Mac's career. [0:03:00.2] Wall Street in the 1960s, and the amusing experiences Mac had early on. [0:04:20.6] Mac's initial findings when he started analyzing institutional portfolios. [0:07:44.5] Joining Wells Fargo and the team that Mac found himself on. [0:08:28.1] The strong support that Mac and the quantitative approach were given at Wells Fargo. [0:13:36.7] Early tracking of index funds and Mac's memories of the first index they tracked. [0:18:21.3] The initial institutional responses that Mac received to his work with data. [0:20:46.5] How Wells Fargo contributed to the first commercially available index fund. [0:22:24.6] Mac's connection to Jack Bogle and the results of their relationship. [0:27:18.2] The seeds of iShares; Mac traces the beginnings at Wells Fargo. [0:29:57.7] Perspectives on why people still have belief in active investing. [0:33:19.4] Mac's memories of working with David Booth during the founding of Dimensional. [0:34:41.8] Differentiating between Dimensional funds and index funds. [0:36:44.3] Weighing concerns about the growth of indexing and how this may affect pricing and governance. [0:39:52.5] Mac's environmentalist philosophy and his thoughts on practical steps against climate change. [0:42:10.6] How Mac defines success in his life and its relationship to increased curiosity. [0:45:00.2]

We have reached the end of another year, our third while doing this podcast. We are spending this episode on our customary year-end review, and we will be pulling segments from some of the great interviews we hosted over the course of 2021. In doing so, we hope to create a bit of summary of the year and the biggest lessons we all learned together. The podcast has continued to grow beyond our wildest expectations and we are so grateful to be on this journey with our ever-increasing community and audience. We touch on many themes in this recap, moving from general ideas about life, goals, happiness, abundance, and purpose, to more financial subjects of money values, retirement, and crypto, and then into the deeper technical aspects of investment such as value premiums, factors, bonds, and much more. We have tried our best to focus on the segments that we found most enlightening and that changed our perspective, and have highlighted them with reflections and commentary. So to hear it all, join us today, and we'll see you next year, for more of the Rational Reminder Podcast. Key Points From This Episode: Looking at some of the amazing numbers around the growth of our community. [0:02:37.2] A few shoutouts to the wonderful people who make this podcast possible. [0:04:27.8] Bill Schultheis on how to find and fund a good life. [0:08:34.5] Hal Hershfield's thoughts on making better decisions with your future wellbeing in mind. [0:10:44.3] Ashley Whillans on the relationship between time-poverty and wellbeing, and increased leisure time. [0:13:39.7] Jennifer Risher weighs in on the importance of performing meaningful work. [0:17:24.5] Robin Taub's family money value's from her book, The Wisest Investment: [0:20:04.1] Jennifer Risher's approach to managing money values at home. [0:22:27.7] Katy Milkman applies the central idea from How to Change to saving money. [0:23:22.7] Johanna Peetz on how to use the idea of a future self to reach a goal. [0:26:38.6] Paul Merriman shares his experiences of the relationship between money and a good life. [0:28:27.7] Adriana Robertson's legal perspective on the rise of index funds. [0:33:48.4] Jay Ritter on the question of market efficiency. [0:36:41.8] Hersh Shefrin's emphatic and nuanced advice about how to act in relation to the market. [0:38:20.3] John Cochrane on the shifting relative value of stocks. [0:39:43.3] Rob Arnott shares his thoughts on the drawbacks of cap-weighted indexing. [0:42:31.5] Antonio Picca on the drawbacks of a factor-based investment strategy. [0:47:01.6] John Cochrane on making decisions around owning value stocks. [0:48:10.7] Campbell Harvey talks about conditions for concentrated portfolios. [0:52:20.2] Bill Schultheis on tilting for factors versus sticking with market cap indices. [0:54:02.6] Adriana Robertson shares what the research tells us about the basis for investment decisions. [0:54:46.1] Hersh Shefrin on what really matters with regards to portfolio construction. [0:57:33.0] Antonio Picca on more active approaches and capturing premiums through rebalancing. [0:41:26.0] Brad Cornell explains the differences between a factor and a characteristic. [1:01:52.2] Rob Arnott, David Booth, and Antonio Picca weigh in on the question of value stocks at present. [1:04:22.6] Robert Novy-Marx's approach to cheap stocks and high profitability. [1:11:54.1] Dave Plecha on owning bonds today, in light of historically low interest rates. [1:15:12.0] Anna Lembke on how our daily and long-term decisions are influenced by dopamine. [1:18:20.0] Cullen Roche shares his thoughts on the future of market inflation. [1:22:57.2] Don Ezra's lessons for retirement and better preparation. [1:24:57.6] Anna Lembke on the results of increases in leisure time. [1:27:37.1] David Blanchett's thoughts on the evolving role of the financial advisor. [1:30:50.0] Don Ezra 'seven asset classes of life's abundance portfolio'. [1:33:42.9]

There is no doubt that housing in Canada is expensive, but are we really in a bubble? Today on the show we explore the user cost equation and how it can help us answer this question. Before the main topic, we get warmed up with a behind-the-scenes look at Dell's growth path in Cameron's review of Play Nice But Win. From there we address Peter Lynch's recent warning against passive investing as well as reiterate our position on the performance of small-cap value versus large-cap growth. Heading into our discussion on housing in Canada, we provide a working definition of a housing bubble and present the model used to work out user cost, addressing each factor in some detail. We discuss the risk premium for owning versus renting and highlight an interesting point on high price sensitivity during low-interest rates. The major takeaway after looking at Canada from within this framework is that user costs are in line with what they should be historically, and that saying we are in a housing bubble would be a little drastic! Key Points From This Episode: The effects of the plot of Sex and The City 2021on Peloton stocks. [0:00:20.1] A book review on Play Nice But Win which tells the story of Dell. [0:08:01.1] Mixed responses to the paper, 'Want to Be Happy? Hire a Financial Advisor'. [0:13:01.1] Active fund performance and thoughts on Peter Lynch's recent warning against passive investing. [0:17:14.1] Responding to listener disagreement with our research on the high returns of small-cap value ETFs. [0:22:46.1] The huge delta between the performance of ARC versus AVUV. [0:30:27.1] Using the concept of user cost to assess whether there is a housing bubble in Canada.[0:33:52.1] The different inputs into the model used to work out user cost. [0:38:22.1] The definition of a housing bubble and how the facts hold up. [0:39:36.1] The risk premium for owning instead of renting; why owning could be risky. [0:43:39.1] Perspectives on the chance that high prices could be driven by real estate investors.[0:47:03.1] An offsetting factor in the form of a reason for why owning is not risky. [0:49:06.1] If owning a home in Ontario is expensive from a user cost perspective.[0:52:45.1] Whether homeowners are willing to pay inflated prices for housing because they expect unrealistically high housing appreciation in the future. [0:53:54.1] Prices are sensitive to interest rates when interest rates are already low. [0:55:59.1] Tradeoffs, insurance, and taxes in this week's iteration of Talking Sense. [0:59:27.1]

Of all of the possible disruptive uses of cryptocurrency and blockchain, decentralised finance (or DeFi) might be the one most likely to bring this technology to a wider audience; and challenge the established finance industry in the process. For this week's episode on crypto-based decentralised finance, we welcome economist and faculty member in the Finance Unit at Harvard Business School, Professor Marco Di Maggio. Tuning in, you'll learn everything you need to know about DeFi and cryptocurrency, from the most basic definitions to the potential macroeconomic and geopolitical implications of a decentralised reserve currency and the effects of decentralisation on monetary policy transmission. Tuning in, you'll learn the definitions for DAOs, DEX, NFTs and more, and Marco elaborates on some of the reasons that decentralisation is seen as an improvement over central systems as well as some of the issues that it represents. Make sure not to miss this enlightening conversation with Professor Marco Di Maggio as he shares his powerful contrasting perspectives on this inherently libertarian technology. Key Points From This Episode: Marco defines cryptocurrency; simply put, it's digital currency. [0:02:59] Find out what a DAO is; a community-led entity with no central authority. [0:03:58] How a DAO is different from a corporation in the way it values decentralisation. [0:05:56] Stablecoins as cryptocurrency pegged to fiat currency and backed by collateral. [0:07:07] Learn about decentralised exchanges or DEX, the bonding curve, and Uniswap. [0:09:28] Why decentralisation is seen as an improvement over centralisation; greater transparency and access requiring no counterparty. [0:12:32] When decentralisation is not a good solution given the lack of accountability. [0:14:40] Marco expands on some other issues with the technology, including its environmental impact, volatility, and regulatory uncertainty. [0:16:07] Understanding counterparty risk, returns, and interest rates in the DeFi space. [0:18:39] Why Marco considers blockchain and crypto DeFi a technological revolution. [0:21:41] How someone who owns a total stock market index fund, for example, can benefit from the potential economic gains of this revolution. [0:23:45] Bitcoin versus Ethereum and how Ethereum is used to develop DeFi apps. [0:26:06] Whether Marco predicts a winner-take-all outcome for blockchain technology. [0:28:23] Why rubber stamp regulation and clarity are important for the success of DeFi. [0:29:37] How to approach investing in the DeFi space, looking at risk, exposure, and value. [0:31:30] Marco explains why the Chinese central bank has launched the digital yuan and how the US is lagging behind this innovation [0:34:21] Find out how DeFi 'super apps' provide better solutions than online banks. [0:38:33] Distinguishing crypto from fiat currency and the macroeconomic and geopolitical implications of a decentralised reserve currency. [0:40:17] Marco on the potential effect of crypto-based DeFi on monetary policy transmission. [0:42:44] What NFTs are, why they sell for such high prices, and how they can be useful. [0:46:22] How Marco defines success: through the lens of others in his life. [0:49:30]