The Exchanges

Q Was that a conscious choice? You moved to business or?

A No, it was all serendipity. Like almost everything in my career, if you take the luck away, there's no plan. And in fact, if you take the luck away, there's probably nothing left. I think luck is, luck is just a massively powerful force in the lives of individuals and societies and markets. And, um, I benefited hugely from it. I've been fortunate that I've had good luck, not a lot of bad luck. Um, although I'm sure that time will come too. But in any case, uh, I, my first job in journalism was working at an Africa magazine. And, um, I did that for a couple years, even though I knew nothing about Africa when I started. And when I finished, I bumped into a friend of mine on the street who said, Time magazine is looking for some very junior people. And I said, well, I, I, they don't come any more junior than me, and Time Magazine ended up hiring me to be a fact checker in the business section, and then I got laid off from that after a year and a half, and, uh, Forbes Magazine hired me, and after about six weeks, I realized I liked it, and that's how I became a business journalist.

AI assessment note: “No, it was all serendipity. Like almost everything in my career”

Q So when you go home, are you, you said you read biology journals earlier. Are you situating yourself in that? Are you going back and reading another era? I know you're a big fan of Montaigne. Um, who else are you, you reading for that type of perspective that you bring to bear?

A Well, when I'm not in the office, uh, I, I do have a rule, which I try never to break. Um, I'm pretty resolute about it. I, I will not read anything related to investing or the financial markets or, or business, for that matter, when I'm not in the office. And I, every once in a while I break it, but it has to be a pretty, it has to be an exception that really proves the rule. Um, I mainly read, uh, I mainly read fiction, uh, historical biography, uh, Philosophy. I try to read anything that's beautifully written, and, um, has stood the test of time. I don't read a lot of contemporary fiction, although I do read some that comes to me highly recommended. But, um, you know, what's the best book I read over the past year? Um, I would say hands down, uh, Victor Hugo's Les Miserables, which I had never read, and a friend of mine taunted me and said, You know, what's the best book you've never read? And I named it, and he said, well, you have to, and it took me months, because I read it on my phone in the gym. And it was 6000 pages long, and I loved every second.

AI assessment note: “I mainly read fiction, uh, historical biography, uh, Philosophy.”

Q love. Uh, it's called Devil's Financial Dictionary. Do you want to talk a little bit about how this came about? This is an amazing project and a very cynical Uh, look at the financial markets, which resonates a lot with me, and I think resonates with a lot of, uh, a lot of people, because there's a lack of trust in the system in which we were a part of.

A Yeah, yeah. Well, yeah, what, what happened, Shane, is about two years ago, I, uh, I redesigned my personal website, which is, it's, it's non-commercial. I don't take advertising. It's, It's there mainly to archive my articles, and I suppose as some kind of weird, ah, ego trip. And, um, it was bothering me that as someone who ardently believes that people should not be constantly updating their portfolios or fixating on today's market news, I still needed new material on a pretty frequent basis. To justify people coming there in the first place, or coming there again. And I was sort of staring out the window one day at home on the weekend, and I realized that I, in 1999, I had started a, a glossary of financial terms, and I poked fun at a few things. I had an entry for portfolio manager, and, and, ah, I don't know, maybe I had about 10 entries, I think. And I, surprisingly, I found I'd kept them, and they were pretty bad. And, um, suddenly, sort of, as people say, the penny dropped, right? And I said, Ambrose Bierce, the devil's financial dictionary. And Ambrose Bierce, uh, is one of my favorite writers. He was one of the greatest men of letters in American history, although he's not well, he's not nearly well enough remembered today. And he's best known for his Civil War short stories, which are great, and for The Devil's Dictionary, which is far and away the most cynical, sar…

AI assessment note: “what happened, Shane, is about two years ago, I, uh, I redesigned my personal website”

Q How should people think about risk in a world like that? Where I might not have all the information, and I might not have the, the base rates, or the context, or the...

A I kind of like the definition of risk in the Devil's Financial Dictionary. I'll, I'll read it to you. Here it comes. Risk. Noun. The chance that you don't know what you are doing when you think you do. The prerequisite for losing more money in a shorter period of time than you could ever have imagined possible. Risk can be formally defined as the odds of an adverse or undesirable outcome. When the forecast is for an 80% chance of sunshine, for example, then the risk of rain is 20%. Or As the extent to which extreme outcomes differ from the average. It has been philosophically defined by professor, finance professor Elroy Dimson of London Business School this way. Risk means more things can happen than will happen. In the end, risk is the gap between what investors think they know and what they end up learning about their investments, about the financial markets, and about themselves. So, I mean, I think the best way to define risk Is exactly that. It's the difference between what I think I know and what in hindsight will have turned out to be true.

AI assessment note: “risk is the gap between what investors think they know and what they end up learning”

Q That's amazing. There's a lot going on in journalism these days. What, how do you see it playing out with reporting and free versus online versus delivery? What's changing from your perspective?

A Well, I think the biggest challenge that journalism and the information businesses face, ah, over the coming decade is actually the same one that the information consuming public faces, which is how to sort out the wheat from the chaff, how to deliver high quality, accurate, reliable information in a way that the audience can tell it's reliable. You know, 10 or 20 years ago, if you didn't read something in the Wall Street Journal or the New York Times or a handful of other newspapers or magazines, you, maybe your good local newspaper or TV channel, um, if you live in the right city, um, if you didn't get it from those handful of sources, you didn't trust it, and you knew why you didn't trust it, because it hadn't been filtered through a skeptical, professional, Person delivering and checking the news, the significance of it, the validity of it, and the real challenge in the internet-based world of information. Is it's almost impossible to tell from looking at most material how reliable it is. And I'm hoping that we're moving toward a period in which both the organizations that deliver the news and the consumers of it will be able to tell from looking at it whether it's reliable. Because there's so much garbage and, and misleading, tendentious, wrong, Um, untrustworthy material being disseminated now, and it's very hard for a consumer to tell the difference. So I'm hoping we'll …

AI assessment note: “the biggest challenge that journalism and the information businesses face... is how to sort out the wheat”

Q the average investor to do? Um, it's like you can't trust the people on TV. Uh, everybody has an incentive, not everybody, but a lot of people have an incentive that go, uh, if it's hidden, it goes against you. And even if it's overt, sometimes it goes against you. Uh, And you're not necessarily aligned. What's, what's the average Joe at home to do in a world like this?

A Well, I think you have to recognize a couple of things. One is that it's very difficult to separate good advice from bad, and ultimately, you do have to take your own counsel, but you want to make sure that whatever you do is evidence-based. You know, there's, uh, you talked with Michael Movison about this. There's, there's a huge tendency in American culture to trust intuition, probably more than we should, And so many investors will go with their gut without asking whether their gut knows what it's talking about. So while you should be skeptical of professional advice you're hearing or receiving, maybe sometimes for a fee, you also should be skeptical of yourself. And the default position for any investor should always be to do nothing. Because it doesn't cost anything to do nothing.

AI assessment note: “the default position for any investor should always be to do nothing.”

Q Do you have any advice for me as a reader of blogs and newspapers and how, how to go about filtering that and how to go about thinking of it? Is it just bringing a skeptical attitude towards what you're reading or is it more than that?

A Well, I think, I think if, if you're not a skeptical reader, you're, you're not reading. I think that's the first point to make. The second is, I think as a consumer of information, you can steer the media toward a better world for communication. And what I've tried to do in the past couple of years, although I don't always succeed, is whenever I, whenever I write my column, I try to tell people not only what I know and what I've learned, but I try to tell them how I've learned it, and I do that through links, and it's very disconcerting for me now to read, ah, news articles in mainstream, from mainstream news organizations or blog posts from just about anybody where the wrong things are linked or the right things are not linked. I, I really want material Judgments that are at least purporting to be objective.

AI assessment note: “if you're not a skeptical reader, you're, you're not reading.”

Q have about what would we do, and what should people even be thinking about? Like, should it be, you know, capital gains for stocks that you own under 30 days are taxed at 90%? Is it, how would you go about Fostering a financial system that encourages, uh, longer term thinking, encourages less manipulation and less management, uh, insulation. I mean, these are my perspectives. I'd love to hear yours.

A Well, I don't think I would, I don't think there's a lot that I would change in regulation. I, I don't think the government is particularly good at imposing rules and structures that Will help the situation. A lot of the measures that have come out of the nudge movement that was pioneered by Dick Thaler at the University of Chicago, and of course has Danny Kahneman and Amos Tversky's work behind it, among many others. Those, those have been effective in a couple areas, particularly in retirement savings, where, you know, people, um, you know, where we've, we've structured the defaults, And, um, we've enabled people to, um, automatically escalate the amount they save every year. And by harnessing people's inertia instead of letting it hurt them, uh, which was the product of government action, I think that has helped a lot. But it's hard to think of a lot more that can be done by government fiat. What I think we need is a much stronger sense of loyalty and trust In the markets between the people who provide advice and other financial services and the people who consume them, and it's very rarely talked about, but I think one of the most powerful psychological paradigms of the past, I don't know, 50 years is something called belief in a just world theory. If you, if you know about it, Shane, you're one of the few people who do. Um, And I see you sort of shaking your head. So I'm g…

AI assessment note: “I don't think there's a lot that I would change in regulation.”