How even facts can mislead you with money

27:34You've done a few deals. Bill, Bill. What would your compliance team say about you? They would say that I am always nagging them and that essentially I just have beef with compliance. I love the team. Compliance slows down all my deals because every time I get to the finish line, They've got to check documents, KYC, GDPR, and it's just a nightmare. It slows the deal down by like two, three weeks. It's always on both sides as well, isn't it? Sometimes it can be blocked on the other side. Well, that's where today's sponsor can help. Indeed. Vanta helps companies of all sizes get secure and compliant fast.

28:08And they stay that way. They do it by automating compliance with over 35 security and privacy frameworks like SOC2, ISO 27001, and HIPAA. Yeah, all of them. And this saves businesses so much time and money. According to a recent IDC study, Vanta customers save over half a million dollars a year in costs. Not bad. And they also help you complete security questionnaires up to five times faster, which is great because everybody hates filling out forms. If you're a business that needs to prove security and compliance, visit Vanta.com forward slash making money to sign up for a completely free demo today.

28:41That's Vanta.com forward slash making money. There's a link in the description though, so you can just click that.

28:50and this is this prevalence of seeking out information that you want it's in your in your book you show the story your own personal you're very honest i think it was probably my favorite story of a fund manager who got in touch who then said i want you to help me find an angle and what they meant was research all areas of sustainability and find an aspect that we can kind of build a fund around yeah female managers um black leaders within businesses something and you found nothing right you told them that and you openly admit that if you found something it would have changed your life so you wanted to find something yes and then a few months later they'd set up a phone with someone else that did find them something even though there wasn't anything yeah so let's tell that story and I'm really glad that you liked it that's one that was personally costly to me but I think the hopefully the findings are instructive so I'd written a paper previously showing that the 100 best companies to work for in America companies that treat their employees really well outperform over a 28-year period.

29:45And treating your employees well leads to better performance. And so there's this famous fund manager. So let me call her Xinyi. She wanted to launch a fund on gender diversity. So clearly as an ethnic minority, diversity is something I care a lot about. And I was just really flattered that this is one of the leading fund managers in the world wanted to work with me. So she said, well, can you do a similar study, not looking at employee satisfaction in general, but diversity in particular? And so I said, yeah, let me rerun this. And actually there were 24 different measures of gender diversity available.

30:15You can look at the percentage of women in the boardroom, the percentage of women in the wider workforce, the gender pay gap, so many of those other things. And so ran that data 24 times. And then I was disappointed that 22 of them were negatively related to performance. But there were two that were positively related. One of them was weak, but the other one of them was strong. It's statistically significant. And what that means is it's strong enough to be most likely not due to just luck or chance. So it's clear what I should do if I wanted to work with Xinyu. I should just only report that one significant result or maybe I'd report the two, one significant and one insignificant and say, oh, look, I'm being honest.

30:54I'm going to show you the insignificant one as well. But that wouldn't be honest because I had run 24 different tests. So I showed her all 24, two positive, 22 negative. She was disappointed, but she graciously thanked me and said, okay, you've tried, but the evidence is not there. And so I just put this in the final cabinet. I'd done research before. And I know that as a researcher, sometimes you try to find something and it's just not there. So I moved back to another project. And then six months later, as you say, Damien, I was shocked to find on my LinkedIn feed that Shinye had launched this gender diversity fund based on the idea that there's a proven relationship between gender diversity and financial performance.

31:33I thought, well, how could this be? Because I'd done the relation, the data and I found nothing. and she'd found some study by some other company which measured diversity and performance in really weird ways, thrown away half of the data and found some positive result. So this is the problem of data mining. If there is a view that you want to be true, you can almost always search for evidence to support that. So how would you measure gender diversity? It could be three or more women, or it could be two or more women, or over half the board could be women. How do you measure financial performance?

32:07You could look at stock returns or profitability or sales. You can measure these things in so many different ways. And you will almost always be able to find one result that works. You parade that one particular result and you hide all the others. And if it's a result that people want to be true, they won't question how many other tests did you do and they didn't work. And do you know how the fund's doing? Yeah, so this fund is underperformed. And actually, in general, what people have found is that gender funds underperform. and so this is not something that people want to be true because most of us are real diversity advocates but I think it makes sense why because what matters for a company it's not just demographic diversity but general cognitive diversity diverse teams make better decisions but the idea of reducing a person's humanity to just their gender and ethnicity that suggests as a white male you can never add diversity to an organization when it could be you're from a different socioeconomic background.

33:03Maybe your background is humanities. Everybody else there is scientists. And also what matters is not just diversity, but also equity and inclusion. It's not enough just to bring in a mix of people and just to let them do their thing. What is the company doing to ensure that people are willing to speak up, speak out about things like, say, Silicon Valley Bank or the financial crisis, highlight problems in the strategy and be heard rather than dismissed? It goes beyond just the box ticking measures that are often used in these simple studies. The research company that found this thesis that it was based on, have they raised their profile at all?

33:37Has it done good for them to do that? Absolutely. So this company, I just anonymise in the book. But actually since then, and I can say this because I've written publicly about this organisation, McKinsey, they've released four studies. McKinsey? No, McKinsey is a different one to which was used in the book. So separately from the studies that Shinny was using, McKinsey themselves have released four different reports claiming that diversity improves financial performance. So the errors have been pointed out to these people, yet they keep doubling down and releasing more reports which have the same errors.

34:13And they say, we're going to use the exact same methodology as in the past for consistency. When diversity is the idea of changing what you're doing. If you learn that there's a mistake in it, then rather than burying our head in the sand, let's try to improve on this. And McKinsey's reputation has been hugely enhanced. Why? Because they're being seen as a beacon for diverse thinking when there's scandals such as Purdue Pharma and the opioid epidemic. Then if you're saying, well, we're pro-diversity, this is great. The lead author of this is now made a dame. And so she's been given a damehood for services to diversity.

34:47You could have been a dame. That would have been good. But had I worked with Shinye, then this would be have been launching a fund with one of the leading investors in the world. Is that frustrating for you? Because basically they misrepresent the data and then they get the outcome still. Well, it is frustrating, but I just have to be realistic that this is just life. It's that in many life decisions that there's what is right and there's what's going to be successful. And if you look at this, it's not just Shin Ye and her fund, right? There's lots of books out there right now, which will over extrapolate from a couple of ideas.

35:20I mentioned a few in my book. So Start With Why by Simon Sinek has been hugely successful. Some of these Malcolm Gladwell books, a lot of them will over, will better upset the data. And like in their defense, I don't think that they're bad people. So they're not necessarily misrepresenting staff. If they have a strong viewpoint, they might think, well, I passionately believe that diversity works. And maybe these data points were just unlucky. Here's the one true data point. And just like you might have that with Simon Sinek, he thinks, oh, I really believe that starting with Y leads to success.

35:52So let me handpick a few organisations that started with Y and became successful. Can we be too obsessed with data though? In the sense of like, it prevents us from starting. It prevents us from just getting going and getting the outcomes that we want. Yeah, because there's lots of decisions in life that we don't make based on data, right? How do you choose who to marry? You don't just look at your future partner's earnings potential. There's hopefully other things which enter into that decision. How do you choose whether to take your son to football or rugby? You don't look at the evidence for whether football or rugby is better for future physical fitness or networking and job opportunities.

36:31Your son may just love to play rugby. So where I think we should be discerning about data are decisions taken on the basis of data. So if people say, let's invest in diverse companies because we're going to magically improve financial performance because of these McKinsey studies. I will say, take a step back. Do the McKinsey studies actually show there's a strong evidence here, or is it just correlation without causation? But if you were to support a diversity initiative on something else, which is to say, I just think diversity is the right thing to do. I'm not doing this to make more money.

37:02I think it's morally and ethically right to have a diverse company. That is something which is quite different. And so there's many decisions that we can make not based on data. But the concern that I have here is that we are often justifying many things, investment decisions personal choice decisions based on data and if we're doing that we need to make sure that that data is accurate rather than feeding into our confirmation bias one way to do that is to seek out the other side do you have any tips on how people can do that because i find that difficult to find to dig into the realms of the people that disagree with me say well absolutely and why you find it difficult again it's not you're a bad person you're a human right so going back to the brain i mentioned that you release dopamine when you see something you like, if you see something you don't like, this activates the amygdala.

37:45So that's the part of the brain that induces a fight or flight response. So seeing a different viewpoint is a bit like being attacked by a tiger. We don't like it. This is why it's uncomfortable. And again, this is something that I suffered for myself and I had to really try to overcome my biases. So when there was the Brexit referendum, I was a very strong remainer. I like to believe that anybody who is a Brexiter was just racist or xenophobic or uninformed. All my circle of friends that I grew up with and were now on my social media feeds, they were all Remainers as well. So I deliberately went to a Brexit at all.

38:17And I was just shocked that this was really logical. There's lots of logical arguments that he was using. Even if I did not agree with his conclusion that he reached, I could still see the logic behind this. And today, this is still the most eye-opening talk that I've ever seen. And so even now, I will try to, I subscribe to both The Telegraph and The Guardian. So arguably the most left-wing and right-wing mainstream newspapers within the UK to make sure that I try to see the both sides of every issue. And how can people do that within content and stuff that's where the algorithm's pushing them a narrative you know do you have any ways of doing that online?

38:56Yeah so it's just try to you have to actively search for stuff because if you're going to be passive and just to scroll through social media they will just give you what you like so I have to actively choose to sign up for The Guardian and also for The Telegraph And also not just do this to tick a box and to say in podcast interviews, hey, I'm signed up to both, but actually try to read them. And sometimes if there are articles where I just don't like the sound of, I will read this. And it's not so much being open minded, but being selfish, because I often talk about the value of sustainability.

39:23I've just come back from Oslo and Frankfurt where they've talked on the power of sustainability. But I want to know what the sustainability detractors have to say about it. Why? Because I'll get Q &A at the end and people will ask me questions. hey, have you thought about this potential hole in your argument? So if I've seen the other side, that now means that I'm able to give a stronger argument and a stronger talk myself. So this is something just in my own self-interest to make sure that I'm trying to learn about the counter arguments. What do you think about the sustainability counter arguments?

39:53So it depends on what the idea of what's behind the counter argument. So if the counter argument is based on this idea that I think climate change is a hoax, that is something where my understanding of the scientific evidence is this is pretty much one-sided and pretty much conclusive. So when I say the importance of seeing both sides, it doesn't mean that in every single issue there are both sides, right? So something like smoking, something like climate change, those things I see as pretty one-sided. But what I see as being more two-sided is what to do about climate change. So some people think, well, the best thing to do is as an investor to sell all of our fossil fuel stocks.

40:30But that might not be the most effective because you can only sell if somebody else buys. Might it be better for you to hold those fossil fuel stocks and engage with the company to make sure that they're decarbonising and developing renewable energy rather than dumping it? It's just a bit like if I was to try to clean up the trash in my garden by throwing it over the neighbour's fence, that doesn't make anything better. This just passes the problem to something else. And also when I look at the other side is what might be the consequences of too rapid action on climate change. So if you're to close all coal-fired power stations, there might be a 55-year-old coal worker who can't retrain.

41:09Now I, because I live in my nice bubble, I don't know any 55-year-old coal workers. And so that's not something that I'm going to be taking into account. A few months ago, I was at the World Economic Forum in Dubai. and this is not just shameless sort of name dropping, but why I mentioned this is we were discussing climate change and a just transition and a woman got up and she said, I'm from Africa. In Africa, 600 million people do not have access to electricity. So if we are to just to cut all of these energy sources, you're going to deny us electrification, which is one huge reason for why the West has improved in terms of economic development.

41:44And for me, I've never known anybody without any electricity. So for me, the other side is not necessarily the other side of the science and climate change, because my reading is this is pretty conclusive, but the other side in terms of the trade-offs, the coal workers, the people without electricity who might lose if we have too one-sided a decarbonisation strategy. And what do you think in terms of the argument that the things that people think are green are not, that it's just about money? You wrote an article called The End of ESG, I think. I've been critical of ESG and the greenwashing within that.

42:19Yes. you know like where do you sit with that kind of side of things yeah so that's to highlight that it's actually really difficult to have a black and white or brown and green view as to what is truly sustainable because some things which on the face of it might be seeming as extremely sustainable might not be so let's think of biofuels so biomass there if you're just cutting down um some some forests and just replace it by one particular culture that will reduce biodiversity so in order to grow something like bio biomass that can have negative alternative of environmental effects. And sometimes there are some companies on the flip side, which might be seen as polluting, but they're not.

42:56So I've been working with Royal London Asset Management for eight years. I'm one of the members of their Responsible Investment Committee. And we took our portfolio and we ran this through a tool which tells you which are the worst offenders in terms of climate change. And they said, your worst stock is a semiconductor company. Why? Well, when you manufacture semiconductors, the manufacturing process releases per fluorocarbon to the atmosphere this is really bad in terms of trapping and heat this is even worse than carbon dioxide yet semiconductors could be the solution to global warming because they could be used in solar panels so if you just look at just the production process how polluting is that without looking at what the good is used for then you only are looking at one part of the picture and unfortunately some of these taxonomies some of these classifications they will only look at one aspect and not the others and that's why it's really difficult to have this view as to what is truly green.

43:48So I think why you have this pushback for EHG, again, it's healthy. They are sometimes quite evangelical and quite restrictive as to what counts as green or brown. They're not looking at the bigger picture. What about things like electric cars? There's a huge push in the world to make cars electric, but a lot of them are running on coal or fossil fuels, or in America, they've got these big diesel generators that run the charging stations for the electric cars. How is it that it's gone through so many governments that electric cars are good when like lithium batteries like are really hard to dispose of and like there's a lot of fossil fuels being used that's a i guess an unconscious bias but the people in government should know that we're not producing clean energy to run these electric cars so how does something like that get into such a big scale you're absolutely right but why something like that gets to such a large scale and become so popular is we like to look at one single explanation so this is a bias in the book i call black and white thinking we like to see something as being unequivocally good or unequivocally bad.

44:45So it might be like clean eating is always good or practice is always good, even though you're focusing on quantity, not quality. And similarly here, we want to see electric cars are always good. That leads to a very simple strategy if you're the government, which is let's try to produce as many electric cars as possible. You've got some key performance indicators and you can say to your electorate, look, we've increased electric vehicle uptake by this amount. We've subsidised electric cars, all of these tax subsidies. Well, actually, not all electric cars are the same so there might be some which are better than others in terms of their efficiency it may well be that where is the lithium coming from is this coming from mining and that's something which is hugely destructive to the environment uh it may well be that if the batteries are very heavy and the braking leads to particulates leaking into the atmosphere and causing local pollution that's a negative as well so i'm an electric car owner i bought my first ever car it's a fourth at hand electric car so it's truly sustainable what type is it it's a renault zoe i just bought it off some friends who were moving back to france and so um rather than them scrapping or reselling it we thought we should just buy it so i'm somebody who wants us to be true so i'm not an anti-electric car person but there's also a big difference between buying a new electric car where you're adding cars to the circulation so there's evidence suggesting that every one new car bought adds to the total stock of cars by about 0.75 so it's not one for one but it's one for 0.75 whereas for me buying an existing electric car that's something why i'm not adding to the stock of cars and so that's why that's something i thought was a battery so it's well we just live in wimbledon and most of the commuting is around there but we're going to make our first trip to legoland actually this weekend so what i want to i want to bring this back to finance i want to bring it back to people because you have already touched on this and you said, you know, most people are not statisticians.

46:33Are there other tips that you've got for avoiding common biases that people fall over with their finances? Any others that you think we've not explored? So I think I've explored the main one, which is just to question everything. So what is really interesting is that people are already able to have discernment when they see something that they don't like. So if I was to publish a study on LinkedIn saying sustainability reduces returns or diversity reduces returns, you will see no shortage of comments as to, well, how did they measure diversity? How did they measure returns? This is just one study, or maybe the study was only in this one particular time period.

47:08So this is why the tool I mentioned earlier of imagining the opposite is so useful, because by imagining the opposite and giving the result that people don't want, then they are able then to come up with a lot of the potential concerns that they might have. So what I'm trying to highlight is the solution to misinformation is already within you, Again, you don't need to suddenly get a PhD in statistics. You don't suddenly need to read an entire paper and look through all the footnotes, which again, people just don't have the time for. Again, people are already with their natural discernment able to come up with some concerns when they see a headline that they don't like.

47:43So just like try to flip the headline to seeing something you don't like and that will give you, that will trigger your amygdala, that will trigger the flight or flight response and give you some sort of impetus to come up with some reasons to try to strike it down. When people have those responses, that's kind of when they should be leaning in then, really. Yes. When you have that natural, oh, this makes me feel great, this headline, that's when you should be questioning it. And when you're pushing away from something because you disagree with it, you should maybe spend some time researching it, is what you're saying.

48:11Exactly. So this for me was the Brexit talk, is that, oh, should I go to this? And let me not give myself too much credit. So the reason why I went to that Brexit talk wasn't I actively, deliberately wanted to see Brexiters. It was a reunion for my university. And so that reunion would have some free canapes and champagne. I'd see some of my friends and I saw this was a Brexit talk. And I thought, okay, should I really be going to this? And I thought, okay, maybe I should. I want to become a bit more informed about the issue. But it was that plus the fact that it was a reunion event for university.

48:41And that combination just encouraged me to go along. And I tried to go along open-mindedly. So yes, I'm here. Yes, I'm going to enjoy the champagne afterwards. But now that here, let me be open-minded for that particular talk. I think that's something I had to force myself to do. that's such a powerful like example because i mean obviously i was i was a remainer i hope no one cancels me but um i saw the same thing all my friends in london were like yeah remain remain and then the only thing i heard from brexit side was oh the nhs is going to get loads of money and i was like oh that didn't turn out to be true oh they don't know what they're talking about but i probably should have gone to a brexit talk just like in america people who don't like trump are never going to go to a trump rally but you're saying that you should probably look at both sides so you can get all the information and have like a more logical, grounded argument.

49:24And then to know how then best to win the votes from the other side. Because one of the phrases which I think is associated with Hillary Clinton was she called Trump supporters a basket of deplorables. So if you believe that these supporters are sort of lesser people, that you're not even going to try to understand what their concerns are, then it's less likely that you're going to be appealing to them as voters. I mean, politics is an interesting example because I think people get quite tribal and they really struggle to look at the other side and they think that the people on the other side must be idiots or evil.

49:56You know, it's very extreme, isn't it? How do people counter that? It's hard to look at someone else who you disagree with. And what's interesting is the phrase that we use, the other side, and it's not just a phrase that you're using, Damien. Everybody uses it. I use that phrase. And so we think that if they're on the other side for us, they have different objectives for us. When actually Brexiters, like Remainers, wanted the best for Britain, right? They wanted Britain to be a great country. They just thought there's a different way to achieve that. So it's not like a football match where you literally have the other side, you're going for different goals.

50:27Here, it might be that you're going for the same goal, but you have different tactics. It might be just having a discussion in the locker room. Should we play a more direct style or more passing style? There, we can have a reasonable discussion rather than counselling somebody else on the other side. And so if we were to discuss something like climate change and then another investor is saying well hey i don't necessarily think it's best for me to dump all my fossil fuel stocks i think it's better for me to then buy these companies and engage with those firms often that person might be called a climate change denier or they might be accused of greenwashing and not being truly sustainable but let's sort of hold back the accusations and see well is this person after the same objective as us which is a greener planet but they're thinking about different ways to achieve this so we often can play conflate two things which is the goal with the approach if somebody suggests something we don't like we think they have a different goal from us they want to have a warmer planet or they're anti-dei and maybe they actually have a different approach to achieve that same goal so ask the question of what outcome do they want and often you'll find it's the same as you they're just approaching it from a slightly different angle absolutely and to try to highlight any commonality before you start having the disagreement so one of the most influential books that i've read is seven habits of highly effective people by stephen covey and he often highlights how we argue against people and often we're talking at cross purposes there's often far less misalignment than you think so try to highlight what are the things that you agree with start with that common ground and then you can go to your disagreements and often those disagreements will be disagreements to achieve a shared goal rather than to achieve different goals and that's leads to a much more cohesive and constructive conversation.

52:06What about in arenas where they try to polarise, like politics? It seems that they come with agendas, the politicians. They present data in a way that tries to rip people apart. Yes. And they will do that deliberately because I think the more polarising you are, the more you can say it's us against them. You can get some voters then to be sceptical about the other side. So this goes back to the article, the end of ESG that you mentioned earlier, Damien. So why do I write an article called the end of ESG when I am an ESG advocate and a sustainability advocate? Well, here, the article is called the end of ESG as a tour, not as a practice.

52:47So I'm absolutely about investors thinking long term when they invest, companies making long term investments in their corporate culture, in decarbonisation. But if you call it ESG, unfortunately, this leads to some just provocative reaction. So people think, OK, if I'm a Republican, I should be against this, when creating long-term profits should be a completely Republican value. So I thought, well, let's move away from this ESG term, which rightly or wrongly, probably wrongly, has become politicised, and instead think about how do we create long-term value, which is something that everybody, Democrats and Republicans, should be embracing.

53:24Call it sustainable value instead of ESG. Absolutely. And sustainable value. What does sustainable mean? Long-term value. Shouldn't any Republican want to be long-term greedy and make long-term profits? Yes. Shouldn't any Democrat want to create long-term value? Absolutely. And also this means within an organization, it's not just for somebody whose job is ESG specialist or ESG manager. Even if your job is chief financial officer or chief executive officer, you should be embracing these sustainability issues. Why? Because this improves long-term company performance. Again, one of the problems with ESG is not just the political polarization, but it's often seen as niche within a company i could just farm this out to the esg department and then the real business people can deal with real business issues but that's not the way it should be ingrained in the company it should be part of the business absolutely so so to me the esg movement has won when esg is no longer standard yeah yeah just how you do business you find that though so speaking to vanguard in the past they have these sustainability departments within every fund and they're pressurizing businesses because a lot of the businesses that are in the ESG funds are in the main index.

54:33They might strip out guns. But I find that a lot of it is just so that they can charge a few extra basis points. Vegan burgers, right? It's like KFC go, oh, they don't start offering vegan burgers because they want to sell less chickens. They just think we can charge a nice high price for the vegan burgers. So can we apply a similar framework then to someone who goes, I want to be an ethical investor. Oh, there's an ESG fund. that makes them feel good inside but how do they actually go about this process of going is this what i want is this actually ethical well i think one thing you'd want to look at is what are the top holdings in that portfolio so one of the concerns of greenwashing is that you can have some some funds which claim to be esg but if you were to look at the particular holdings within this doesn't necessarily suggest actually this doesn't look like a fund which is investing companies that create value for wider society.

55:22I would also still look at the general thing that a fund needs to deliver, which is long-term financial performance. So why am I investing? It might be for my future or for my son's future. So therefore, financial returns are going to be absolutely paramount. And if there's a fund which has made lots of financial returns, it should not be embarrassed about that. Those financial returns are not at the expense of ESG. Those financial returns are because they've invested in companies that have done really well and grown and created a lot of value for wider society. So I would rather than just looking at just the traditional ESG label, whether your fund has ESG or sustainable in your name, what are the actual holdings that you have, what is your long-term financial performance, you could then, if you wanted to, look at some specific ESG actions, which are sometimes funds list the companies they engaged in and what they try to get that company to do.

56:12So is it to phase out plastic packaging or is this to treat employees better and invest more in human capital and look at those but i think you what matters much more is actions rather than claims and labels okay thank you t how are you going to approach this now with crypto i'm interested because you're pretty bullish i was very bullish on crypto i'm still very i mean we're at odd record heights now so i'm pretty pretty happy i'm still pretty bullish i think we still got room to go but i mean i've since we started this podcast, I've consolidated my, my crypto portfolio, diversified into things a bit more stable.

56:48But now I think I'm just gonna, I think just looking at data and like doing research and then asking the question, what like flipping it around and then like kind of looking into the source of data. It's not always easy to look into the source of the report or the data or the survey, whatever, but I think a bit more due diligence. Yeah. Like in my own research that I do, I'll often have a topic in mind and I want to talk about it and I want there to be something interesting and when i stumble across that i get i get a rush i'm like yes there it is there's the here's the bit of the content that's uh interesting a recent example was i looked at was it possible to build retirement portfolios in later life so a common thing is people thinking oh god i've started too late right so i looked at data from i think it was the ons or and they just basically tracked the savings amounts of individuals and obviously if you have a steady savings amount from the age of 20 to 50 that's optimal but a lot of people have kids and stuff and they plotted what a savings rate could look like for someone who had kids who had a retirement break and they showed that in terms of spending over a lifetime it might actually be optimal to load all your savings at the end this is interesting because people who are in their 40s it might actually be the best thing to not save in their 30s from lifetime spending this made me exciting excited i make the video thinking now i should probably go and look at other arguments against that you know rather than thinking oh that supports the that's going to make my viewers happy that one that's that's good evidence make the video off i go yes and i think this is really interesting because like even though somebody who believes in the power of data and evidence that's my day job data and evidence is only something you get from looking at the average person right so you look at thousands of people and see on average how should you be saving but something which might be true for one particular circumstance might not be true for other circumstances so different people might have kids at different times in their life it might be that their careers are on different trajectories so my career as a finance professor you get pretty much paid the same um from when you're say 30 to 70 where it's another career let's say investment banking you get paid less at the start and it goes up a lot at the end so what matters is not only who are the people surveyed or who the people in the study but how similar are they not in terms of having the same name or the same birthday but in terms of relevant stuff in terms of similar financial and life situation to you and the curve like what are the extreme ends and there might be one person on there that's saved 10 million quid at the age of 60 in one year and they've like just dragged the average on like the mean or whatever yeah and they're not representative which again why we don't want to look at single anecdotes of this person did this but what does the large scale data do show but this is large scale data which might be relevant for your particular situation I think the thing I want people to take away from this conversation, the real actionable step is if you want something to be true and it makes you feel good, you should probably stop at that moment and go, okay, I need to look at the other side of this.

59:38I need to go and find someone who disagrees with this point. And if we look at the examples of people getting rich quick from crypto trading or FX trading, you need to then go look at all of the people that are putting 15 hours a day in and losing all their money. But they're normally a lot quieter. You don't see them on Instagram being like, I just lost 50 grand in crypto. Well, that's because they're there. You can find that content. Yeah, it's there. Of course it is. It's just not being shown to me. Well, in the same way with the comments that I've raised before, the comments that disagree with my point in a video will be downvoted by the audience that are loyal to me.

1:00:10So they'll be right at the bottom of everything. It's kind of like the dragnet with search content. They get forced to the bottom. So if you go onto a YouTube video and you want to see the counter arguments or the people that disagree, go scroll to the bottom of the comments and they're all there because they're downvoted by the people who agree with the person. Yeah, so you have to be active about it. Again, passively, you won't see it because of how the algorithms work. So it might be that you'd have to search for something like why crypto is a bubble right now or 10 reasons to try to look for something like that and so actively search for some counter arguments.

1:00:44And it might be after reading those counter arguments, you still think actually crypto is the right thing to do. And that's fine. So you've then reached the decision after looking at both sides It's just like a jury could still choose to convict after hearing the case for the defence, but the jury still has to hear that case before they're making the decision. The most common one that I hear touted, especially around the FIRE community, is the 4 % rule from the Trinity study and how this thing of, if you get a portfolio, you can draw 4 % of it a year and it'll last forever. That isn't what the study said.

1:01:13And it measured retirement savings beyond 65 for a period of, say, 10 to 20 years when retirements were that. Not this idea that you could retire at 30 with a million quid and draw 40 grand a year. Actually, dependent on results, it could be 5%, it could be 3%. It's very nuanced, but these things take hold. And I see people all the time on finance channels going, oh, you know, 4%, whatever you earn, times up by 25 and that's what you need for retirement. Kind of doesn't, isn't the case. Yeah, so you said your biggest takeaway was to try and imagine the other side and look for counter arguments.

1:01:47I think so then the second biggest takeaway is if you see something, think, well, does this actually apply to me? because we love to have these one size fits all rules, right? 10 ,000 hours for everybody when actually you might not need that if you're naturally talented at something. This idea of having a four hour work week or four hour body and now this 4 % rule, well, that will depend on whether you're going to retire at 30 or retire at 70. It will depend on your planned income and your habits and your lifestyle at retirement. So something which sounds one size fits all, well, look, does that apply to my particular situation?

1:02:18And it may well be that this data, this rule was devised on other people that's not applicable to you. It's always the case I think that fixed rules tend to not work for everyone. You know, the four percent rule, the two hour rule or whatever, they always tend to not really fly. What is it about humans that we want a rule for everything? We just want like an easy fix it like summary and now we do this we'll be all right. Yeah well because it's just easy and just looking on the bright side we do want to do things to better our lives. So if our goal is to reach 10 ,000 steps every day or to spend 10 ,000 hours, we think we're moving towards something and achieving something.

1:02:53And it's much easier to hit one particular target if that target is quantifiable and it's a singular target than if it was something which we're looking at the quality of practice, not just the quantity. So I'm doing tennis. Am I really practicing sort of my backhand, which is my difficult stroke or practicing serving, which I don't like practicing as much? Am I playing more competitive games and trying to keep score. So we want to look at this, the, these target. And then once we have this numerical target, try to find maybe the simplest way to achieve that target. Well, thank you so much for coming on and talking about this.

1:03:24I think it's really useful. And I think in the modern era of us all being told we can get rich quick, it's really useful to have this kind of framework and scepticism that people can apply to that. Well, thanks so much for inviting me. And I, what I would learn about investing is you can get rich, but get rich slowly. So that's, that's the goal is to get rich and get very rich but you can get very rich if you take it a slow and informed approach yeah and i really mean it about the book the storytelling is excellent um i think we can see that in the way you speak that you you speak in stories so we'll we'll link it in the show notes and stuff as well so people can grab a copy great thank you so much for inviting me hey guys did you know that we summarize all of our episodes in the newsletter you can find a link in description and please remember this is not financial advice like we say a lot on the podcast investments can fall and rise in fact it's pretty much a guarantee past performance is no guarantee of future results so your money is at risk with investing and other fees may apply as with everything financial please do your own research we really encourage that because no one cares more about your money than you I'm Damo Banti this was an episode of making money from our company most it was film and edited by the team at flow Spire Jack and Ben it was produced by Ruth Edwards and brought together by Will Stollerman what about Ruth and Tiki Thrist a dog.

1:04:36Yeah, shout out them too.