Talking Shop with Ashby Daniels (EP.237)

0:28We all need to make smart decisions with our money. I wanted to give you a feeling like you're sitting in a Zoom room with me and one of my friends. You have the mute button on and the camera off, and you're really just listening to two people bouncing around big investing ideas. And I invited my friend Ashby Daniels back to the show. He started as a financial advisor in 2008, spent 16 years advising, and then exited his practice in late 2024 to focus full-time on creating content for other financial advisors to use with their clients and email lists. But I thought Ashby would be a great person to try this out with.

1:03We're sharing some of the stories that shape our beliefs and some of the behavioral tripwires that cause most investors to make avoidable mistakes. I'm gonna try this a couple times, see what everybody thinks. Please do leave comments in your podcast app. Please do respond to me via email. Let me know how you like these Talking Shop episodes. And as always, if you want detailed show notes, you can visit thelongterminvestor.com. And now here's my conversation with Ashby Daniels. Welcome back to The Long-Term Investor. Today, I'm welcoming back my friend, Ashby Daniels. Ashby, thanks so much for joining me here on the show.

1:44Love being here with you, Peter. You and I get the opportunity to talk frequently, maybe not as frequently as I would like, but enough where I know that when we get on the phone, we could be talking about anything. And I mentioned this in the intro, but this is a different format that we're trying out where I'm hoping that if you're watching us on Cheddar, if you're watching us on YouTube, or if you're listening to us in the traditional podcast form, that maybe this is like you're with the mute button on and the camera off in our Zoom meeting, listening to us chat about a number of things. In case people don't know who you are, Ashby, maybe just give us a little background.

2:20how you got to where you are today and what the type of work you're doing today is. Sure. So I started as a financial advisor at the ripe old age of 25 years old. This was back in 2008. So for those doing the math, I'm 42. And I was a financial advisor for 16 years, actually exited my practice in late 2024. So I have nothing to sell here, which is great. So I was an advisor for 16 years, switched firms in 2008. I started writing a lot, which actually led to where I am today, which is writing content for financial advisors, or at least help in that regard with a lot of advisors. So that's what I love doing.

2:58And then I'm in the process of writing a couple of books. A couple of books? Yes, more than one. Yeah, you don't even know that yet. But yes. Wow. I'm just trying to finish one book. You're writing a couple of books. Very impressive. And normally, this would be the point in time where I would point people to your business, but there's a giant waitlist. And like you said, you have nothing to sell. There's no room even on the wait list at this point. So if you go to the longterminvestor.com, all you're going to do is find notes from our conversation. I'll link to your socials because Ashby's got good stuff to say.

3:27And you will want to know when these multiple books are coming out. Before we get into the books, because I do want to ask you about that. One thing that frequently comes up in our conversations is a gentleman named Nick Murray. And I don't know if you actually model yourself after him, but a lot of the work that you do reminds me of him. And Nick, for me, is somebody who acted as like a messaging coach on so many things that are important for us advisors to be able to communicate towards our clients. How is my assessment of Nick in terms of how you think about him? And how would you view Nick in his role in your life and the role of other people's lives?

4:01Mr. Murray is unequivocally the most impactful person in my life and my views of how I look at the markets and investing. There's nobody that's had a bigger impact on my life professionally than Mr. Murray. I've never met the man, but I think he's what they would call the goat in terms of writing about the markets and helping people make sense of what's happening. So complete and utter admiration is what I would say for Mr. Murray. I don't want to be too awkward on camera as I look back at the books. And I buy most things on Kindle, but if somebody gifts me a book, I'll put it up on the bookshelf.

4:35Or if I really like it on Kindle, then I go ahead and buy the hard copy because I want to be able to gift it to somebody. And I have, I think, three Nick Murray books back there. I have every book Nick Murray ever read is right there. It's really good stuff. And it's not that complicated. In fact, it's the opposite. He's often simplifying things down to first principle levels and readjusting some of our corrupted thinking, for lack of a better word, our corrupted reasoning, dampening the noise that corrupts our thinking and into something that's pretty simple and actionable and rational. It's what makes me excited that you are writing a book because your writing has done this for so long.

5:10I'm a big fan of your work. Since you're writing multiple books, tell me about the multiple books. Last time you were on the show, we were workshopping ideas of your book where you were challenging conventional wisdom. Again, I'll link to that episode in the show notes at thelongterminvestor.com. But tell us what you're working on and some of the concepts and inspiration behind it. I'm impressed you remember that. There was a whole lot of career turbulence, if you will, in a good way, not turbulence in a bad way. Yeah, definitely good career turbulence. Yeah. From our last conversation to this conversation took me away from writing that book.

5:42I had basically laid it out, but I didn't actually get to the physical writing of it. And so now I'm about halfway through, but my book is going to be quite a bit different than a traditional book, the very more difficult books that you like to publish. So my hope and intent for the book is to write a book on investing that is say under a hundred pages. What is 98 % of what you need to know? can I learn everything I need to know about investing and say, let one or two hours. And that's really what that book and all of my future books, I hope will fall in line with that idea. Because I think a lot of times we get so wrapped up in the minutia or the very specific minute details of whether it's investing or otherwise, financial planning generally.

6:24And so my goal is just to simplify these topics, simplify these ideas in a way that somebody can actually take it and then do something with it immediately as opposed to, okay, well, now I have a great overview and now I need to put it into practice. So my goal is to bridge the gap, if you will. In the world of investing, I have tens of thousands of hours of experience, but in other areas, maybe it's I take a thousand hours of learning and condense it down into one hour. That's my intent. Well, you're a voracious reader. And so I've no doubt that you will have a lot to draw from. And I like that concept.

6:57One of my most gifted books of all time is a book that's co-authored by Burton Malkiel and Charlie Ellis. It's called The Elements of Investing, and it's under 100 pages. And it's just those real core, simple principles. And one of the things I've always enjoyed about it is even though I spend almost all day of every day of my work life thinking about investment issues, or there's some things that steer out of the investment realm, but generally speaking, investment issues. But even when you go back and read the basics, it can be enlightening to somebody who is more than a novice investor. And so I think it'll be really exciting when you have those out.

7:34Is challenging conventional wisdom still the core focus of book number one? Absolutely. I can't think of anything else I would be doing. If you think about it, most wisdom is the challenge of conventional wisdom. If conventional wisdom is what is widely accepted or paid attention to in the news, how often do we hear that we need to be paying attention to profit margin contractions or what happened with the Fed or whatever. And yet Charlie Munger will say that the great money is not in the buying or the selling, but in the waiting. I think it was Munger. I attribute most wisdom to Munger. So whether he said it or not, I don't know.

8:07It's a good default, sure. But the point is it's still the same, which is the money's not in the buying or the selling, but in the waiting. We put all this emphasis on the here and now and what's happening and it must be so important. But in the grand scheme of things, it is time that makes people wealthy, not anything else. not the day-to-day, but years and years. Yeah, I'm with you. Time, as long as you don't interrupt compound interest, you get out of its way, let it do its thing. Time's your best friend. I think the problem is everybody keeps interrupting compound interest with their actions, with their behaviors based on what they hear.

8:40And it's so interesting. I feel like teeing up a concept like that because it's so simple must be difficult because there's a lot of angles. I'm mentioning this as I think through writing my own books. I'll have the perfect portfolio come out next year. I really wanted the title to be Your Perfect Portfolio, but somebody is publishing with that in January. So I went to The Perfect Portfolio, but I don't think there is such a thing as one single perfect portfolio. And as a result, I'll admit I'm struggling with the introduction. I loved the introduction of Making Money Simple. It's a personal story.

9:11This one is also a personal story, but it just feels a little more forced. Maybe you can tease us a little and we can test if you're really writing this book right now. What are you doing for the introduction to introduce those ideas? So the introduction for my book is somewhat interesting. We're going to go off the rails here. I guess this is the benefit of talking with friends. I love it. Let's do it. It actually is about a story where I went to Dave & Buster's. Full disclosure, this is the only time I've ever been to Dave & Buster's. I've never went before this and I've never been since, but I had one of the most legendary nights of my life in Dave & Buster's.

9:42And I'm just going to tell the story. I'm going to take over your podcast here for a minute. Right after this commercial break from Dave & Buster's. Exactly, exactly. Exactly. So I had a college buddy in town. I lived in Pittsburgh. We were Virginia Tech football game versus Pittsburgh. I'm a Tech grad. So we didn't have anything to do one night. So we went to Dave and Buster's. And while we were there, we bought what was effectively way too much in terms of access to games, not knowing any better. We didn't know how long we'd be there. We didn't know anything. we ended up making our way to this football game and i will yeah i don't know if you remember you know the football game that you have these little holes and you throw the ball through the holes sure yeah yeah and i will say just candidly i'm a pretty good athlete i can throw a football as well as most people and i was sitting there throwing the football through the holes yet not doing very well and this guy comes up saddles up next to my buddy and i and this buddy is a college buddy.

10:37So we've known each other for 20 years at this point. And this guy saddles up next to us. He's got khaki pants on that are slightly too short, a button down Oxford. It looks like he could have gotten it out of his glove box and glasses. I'm not going to lie. I judged the book by its cover. So he's just standing there awkwardly for a couple of minutes. And next thing you know, after my buddy and I played the game quite a few times, again, unsuccessfully in the grand scheme of things. He says to us, do you guys want me to show you how to beat this game? And we're like, yeah, sure. Show me how to throw a football.

11:13And next thing you know, this guy, he steps up and he starts shuffle passing them. Now, if you know what a shuffle pass is, it's you kind of underhand it through the holes. Well, within 45 seconds, I don't know how long the round is. Let's say it's a minute and a half. Within like 45 seconds, he's reached the new all-time high and he just stops. The machine is just spitting tickets out. You can't even believe how many tickets are coming out of this thing. And he says, do you want me to show you how to do it again? And we're like, absolutely. Please show us how to do this again. So he immediately, you know, the machine starts back up.

11:46He starts shuffle passing through and he beats the high score again in another 45 seconds and he stops. And we're like, why do you keep stopping? He says, because every time I set a new all-time high, I get all these tickets. So if I just keep barely setting another all-time high, I'll get more tickets. And we're like, okay, that's interesting. Then came one of the great questions I've ever been asked. He says, do you guys want to learn how to beat a lot of other games? Absolutely. Let's go. So, all right, here's the deal. After we said yes, he says, you pay for the games. We'll split the tickets 50-50.

12:20We're like, done. We couldn't have cared less about the tickets. We could not have cared less. It's all junk anyways, right? Yeah, yeah, yeah. He proceeds to take us from one game to another game to another game, and he just shows us how to beat the games. Well, the reason that this is the opening story of my book and how it applies to investing is most investors try to beat the game through brute force, through picking the best funds, through doing the most research, through picking the best stocks, through timing the market, through all these things. Just like I was sitting there throwing a football like I'm throwing it to Jefferson and 40 yards down the field.

12:55you don't have to do it that way. If you know how to beat the game, that's the critical factor. It's not how hard do you work? It's you have to know how to beat the games. Once this guy showed us how to beat the games, it was incredibly easy to beat the games. Investing works the same exact way. To put a cap on the story, we ended up getting thousands and thousands of tickets was our share. And my buddy and I ended up giving all these tickets to a handicapped child that was rolling around Dave and Buster's in his wheelchair. It looked like it was the best part of his life when we handed him literally these thousands and thousands of tickets, but it was so much more meaningful to us because it was a legendary night and we made this kid's day like he's never been made before.

13:39It was a great night. That is a killer story. My kids are obsessed with Dave and Busters and I travel a lot for work. And so if I'm about to be gone for a while, or if I'm coming back after having been there for a while, give the wife a break, take the kids to Dave and Busters. We are only recently at the, Hey guys, we're just going to play the games and not buy stuff with the tickets because it is all junk. However, I keep saving the cards. So I think we're racking up a scary number of tickets. All that said, I love the introduction. You make me feel even worse about the introduction I'm working on.

14:10It makes me like, man, I really do need to have a better connection, but it resonates. I mean, it's not even about the highest score, like investing. It's not about the highest returns. You said to do good enough and do something that you can do over and over and over again, let time do its thing. Pretty compelling. If you're going to have such a short book, are you organizing it into just challenging one conventional wisdom in short essay style as opposed to long form chapters? And if so, like, what are some of the things that you are most excited to have written about or be writing about? I hope that they flow from one to the next.

14:42But if I'm honest, there are a lot of just short essays about major tripping points that I think that people have. And if we want to tie it back to the story, Jeremy Siegel, you probably know, I know you've interviewed him, opens his book, Stocks for the Long Run, with a few words. The few words are, everybody ought to be rich. Now, there's history behind that opening title. But I think it's an amazing truth that's massively glossed over because everybody is trying to use that brute force. So just as an example of what I mean, it couldn't be a better starting point for Mr. Siegel's book because his whole book is the value of stocks for the long run.

15:18But this is the factoid that I come back to over and over and over again. The market, in my case, in this moment as the S &P 500 opened in 1960 at 60. Very easy way to remember. It opened 1960 at 60. Today we're at, what, 6 ,800? So if you'd have invested$10 ,000 in the S &P in 1960, you'd have over a million today. Pretty easy math. That alone is incredible. But then when you say, okay, well, that doesn't include dividends because obviously the price return is just the price. But if you include dividends, 10 ,000 would have become 6.8 million. What had to have been done in order to turn 10 ,000 to 6.8 million?

15:59And the answer is not much. You had to buy it in 1960 and you had to hold it all the way until now. Incredibly simple. That doesn't make it easy, but it is incredibly simple. That's the part that I think so many people miss, just how simple it is because we want to make it complicated. Morgan Housel talked about how you would never assume that a regular everyday investor could have better results than a Harvard-trained doctor in doing a heart transplant. But in the world of investing, we can outperform 98 % of our peers simply by buying the index and holding the index. It's mind-bogglingly simple, but it's so hard to do.

16:36I appreciate that greatly. And the S &P 500, there's actually a gentleman who I've been working with since I've been at PlainCorp just a little over 10 years. And I've been involved with this family for nearly the whole time. They were a client of the firm before I was there. Very successful executive. They've had a globally diversified portfolio. It's been almost all stocks, maybe something you and I can talk about at some point. But he's in his 80s now, and he's looking back the last 20 years at the S &P 500 beat everything. And he's disappointed. He's honestly a little angry. We talk about the market, and we learn so much about the market.

17:12As a result, we have to represent the S &P 500 as the market. And look, U.S. stocks make up over a third of global market. I actually just recorded a podcast. It turned out way too long. So for those of you watching us listening, this is airing on December 31st. So happy new year, everybody. But if you want an episode that was maybe a little too long of me talking, it was 17 minutes long. It's episode 233. And it's looking at a Goldman Sachs paper on the market portfolio and how it's evolved over time. And I sat there thinking, OK, the S &P 500 is just such a small piece. It is simple, but it's not easy.

17:47So I always tell this gentleman, yes, if you invested in the S &P 500, not just the last 20 years, but in the 30 plus years they've been clients, there was a 12 year period in there where the S &P 500 lost to cash. And before that, there was a 15 year period where that was true. And then I think that was leading up to 1982. And then there was some period from, I'm going to get it wrong, but somewhere between the 50s and 60s, where you had a 17 year period where the S &P 500 trailed cash. And so, yes, I'm riffing now. This is where a book could get too long because you're going to do the short hit essay thing.

18:20But I'm really leaning into that. It's simple, but it's not easy. Your behavior is important. You need to know what else is out there. And there are things these days that act as distractors. I personally don't feel like international stocks is a distraction, but Warren Buffett once said that they were and Jack Bogle once said that they were. And I hate that they said that because I think they're wrong. And most people do. I mean, I think you agree that they're wrong. Is that fair? Well, I would never say Warren Buffett or Jack Bogle are wrong, but I think as an everyday investor, you would be prudent to be diversified across the entire global equity market because I'm going to bet on human progress across the entire globe more than I am in any one country.

18:58Well, and what's so interesting, though, about what the market portfolio is, I'm just going to read off some stats instead of it being a 17-minute podcast by myself. So 86 % of the market portfolio is still public stocks and bonds. But for as much airwaves as things like gold, private markets, crypto makeup, looking across the gold, across the globe, gold makes up 6 % of the market portfolio. Private markets makes up only 5 % and crypto 1%. Now, if you think about how much news and shiny object get put in front of people, if we're trying to start with the market portfolio, and when I say, hey, own the market portfolio, I'm usually just talking about a total stock market index, maybe a core bond fund.

19:39Sometimes I'm offhand referencing it as the S &P 500. Reading your writing, I get the sense that that's what you mean too. Is that fair? I use the phrase market-like portfolio on a regular basis. When I quote market data, I tend to quote S &P just because it's by far the most accessible piece of information. But the same truths hold true on a total global market equity portfolio. I don't really personally advocate for gold or crypto or private equity is a whole different animal, but that's a fun discussion point in and of itself. So I don't know if you want to dive in there. We can't. Otherwise, we can go somewhere else.

20:15This is a challenge with this format. And I've invited you. And after this episode, I'll have another friend on. And I know that we could talk for two hours. But let me finish this line of questioning is I don't actually myself really recommend crypto or gold. People do it. And I can say, like, if you're doing it, here are some frameworks and goalposts. but in general, the simple stuff ends up always working anyways. But the fact that the S &P 500 has just flat out won for 20 years, it's almost too easy. It looks too easy and it makes me worried. This is what I really want to ask you though. As I'm listening to you talk and I'm thinking about my own book, are there any points that you are going to try to make in the book where you're like, boy, I hope this doesn't happen in the market until my book comes out?

20:58I can give you an example of mine. I have a chapter on the history of markets and I go into bubbles. I actually separated in speculative bubbles and routine losses. And I clarify routine losses are the 10, the 20, even the 30 % drops, just part of investing. But there are lots of parallels when you study the historical bubbles between things we've seen. And it does make you wonder, and I'm not trying to call bubble, but it would be really nice if AI doesn't blow up in our face before my book comes out, not because I call a bubble, but I feel like there's a really nice parallel and a learning moment.

21:31But anything for you where you're hoping that something specific doesn't come out in the market or is it too timeless to matter? I would like to think it's too timeless to matter in the sense that as an example, let's just say that this is a bubble, that there is a correction or let's just say that there's a bear market that comes. Yeah, a correction doesn't matter. But I mean, full out deflating of an asset class. I don't know how I mean, bubble. I like the Asness definition of you can't realistically model any possible future outcome to justify the price. The problem is you never really know what that is in advance.

22:02So it's tricky. I think Howard Marks says trees don't go to the sky. I think he was referencing Nifty 50 back in the day, whether you're talking about tech stocks in the late 90s, real estate in mid 2000s, AI today. The point still is the same, which is if you own a diversified equity market portfolio, you are still fine. And so whether this is a bubble or whether this isn't a bubble, dollar cost averaging, if you're an accumulator, you should hope that the market does fall because it's going to give you an opportunity to buy at lower prices. Buffett again says, if we're talking about socks or stocks, I like to buy quality merchandise at low prices.

22:38It's the same thing. So if you're an accumulator, you should want stock prices to fall. Thinking that you just want them to rise without ever stopping would be foolish. And if you're on the other side, let's just say that you're in retirement, what you should do is create the conditions for patients to exist. The way in which you create conditions for patients to exist is to create a sliver of your portfolio, sliver being dependent on your personal financial situation, that isn't market dependent, that isn't exposed to the ebbs and flows of the market. So I know this isn't where we were going with this, but no, there's nothing really in my book that I think is overly dependent on anything that's happening in the market.

23:18I hope it's a book that I can publish. And then the only updating I do from then on is just where the market's at and what my multiplication factors are over time. I would like to think that everything I publish is going to be completely and utterly timeless for the most part. You know, I've generally had that goal ever since I got to Plaincorp because before I was at Plaincorp, I wrote something weekly that was very timely and always closed out with something timeless to be like, hey, this is what's going on, but none of this is going to matter in 10 years. And I like that you mentioned for people who are on the other side of the accumulation, if they're in decumulation or nearly there, downturn doesn't have to be a big scary thing.

23:56If you're 100 % stocks, hopefully you're 100 % stocks because your liquidity needs are so small relative to the size of your portfolio that what you're effectively saying is a 20 % or 30 % downturn or a 40 or a 50, that's temporary. It's not going to change your life. You, I think, like me, are 100 % stocks. I'm 41. I'll turn 41 in 17 days. At the time of this recording, I will be 41. So I'll only be a year behind you. The range of outcomes for 30-year stock returns is very narrow. And it hovers, you mentioned Siegel. Siegel and Schwartz, they show you that the real return, the after inflation return hovers around 7 % across all sorts of environments for over 200 years worth of data.