Speaker 1: Masters in Business is brought to you by ex On
Speaker 1: Mobile Energy Lives here. This is Masters in Business with
Speaker 1: Barry Ridholds on Bloomberg Radio. So this week on Masters
Speaker 1: in Business, you guys make fun of me for saying
Speaker 1: this every week, but I have a very special guest,
Speaker 1: Ken Fisher. God, we barely scratch the surface of this.
Speaker 1: I really really wish we had another two hours to
Speaker 1: keep talking. Ken Fisher, founder and chairman of Fisher Investments.
Speaker 1: They run sixty eight billion dollars as an r A,
Speaker 1: by by some measures, of the biggest r A in
Speaker 1: the country. Absolutely fascinating guy, really really intriguing. We barely
Speaker 1: touched the surface of his process for looking at stocks,
Speaker 1: thinking about investors, looking at the universe, how he runs
Speaker 1: a giant practice. Really just just amazing, amazing stuff. And
Speaker 1: after we finished our our interview, he actually had to
Speaker 1: go to another interview. I think he was on Pim
Speaker 1: Fox's show. But we were sitting in the green room chatting.
Speaker 1: We spoke for another forty five minutes. It literally could
Speaker 1: have been another episode of Masters Masters in Business. It
Speaker 1: was that um it was that it was that fascinating.
Speaker 1: He was really intriguing. I don't think a lot of
Speaker 1: people in the industry appreciate what he's been, he's built,
Speaker 1: and I don't think a lot of people outside of
Speaker 1: the financial services industry really know who he is. He
Speaker 1: is a fascinating guy. The digression we have during the
Speaker 1: podcast portion about redwood forests and and you really just
Speaker 1: have to hear it. Uh. I can't wait for the
Speaker 1: next time he's in New York because I have another
Speaker 1: list of questions that will keep us busy for another
Speaker 1: ninety minutes at least, just an intriguing, fascinating, UH discussion. So,
Speaker 1: without any further ado, my conversation with Ken Fisher. This
Speaker 1: is Masters in Business with Barry Ridholds on Bloomberg Radio.
Speaker 1: This week on Masters in Business, I have a very
Speaker 1: special guest. His name is Ken Fisher, and he runs
Speaker 1: Fisher Investments, managing over sixty eight billion dollars. He's the
Speaker 1: second largest R in America. I don't know if i'd
Speaker 1: buy that. Um. Financial Engines at a hundred billion is
Speaker 1: the first. I don't know who's between you two, but
Speaker 1: I think do anything other than a U M. We're
Speaker 1: way bigger than financial engines. I'm just doings are bigger.
Speaker 1: We've got more employees, we operated more places, we do
Speaker 1: more things. We think of them as they're half our size.
Speaker 1: They just have They just have more low beat grade
Speaker 1: A U M. That's for sure. We'll get to that um.
Speaker 1: In case you don't know who can fish your is.
Speaker 1: He is the third longest running columnist for Forbes and
Speaker 1: and soon to be the all time longest running columnist,
Speaker 1: the longest active, continually published columnist for Forbes. He was
Speaker 1: ranked in the top twenty five most influential figures in
Speaker 1: the financial industry by Investment Advisor magazine. Author of ten books,
Speaker 1: four of them New York Times bestseller uh number two
Speaker 1: eleven on the two thousand fourteen Forbes four hundred list.
Speaker 1: Ken Fisher, Welcome to Bloomberg. Thank you for having me.
Speaker 1: You know that that that two hundred eleven on the
Speaker 1: Forbes four hundred is like, you know, I still can't
Speaker 1: get above median ever in anything. That's a good list
Speaker 1: to be median on if you're if you're stuck at
Speaker 1: two hundred on the Forbes four hundred, they're a worse
Speaker 1: list to be You know. I've spent my life adoring
Speaker 1: wealthy people and trying to help them and The fact
Speaker 1: of the matter is wealthy people need more help, and
Speaker 1: they have more, more money and more problems. There's a
Speaker 1: huge world of people trying to help poor people and
Speaker 1: not enough people trying to help early people. So so
Speaker 1: let's get into some of the stuff. I want to
Speaker 1: talk a little bit about your background and how you
Speaker 1: found your way towards helping wealthy people. Your dad was
Speaker 1: a legendary investor. His name was Philip Fisher. Uh you
Speaker 1: briefly worked with him. What was it like working with
Speaker 1: a father who was a legendary investor. You know, my
Speaker 1: father was a very weird person, and you have to
Speaker 1: really understand it's fairly simple. My father, in a world
Speaker 1: before it was known as such, had Asperger's and so
Speaker 1: he was all of the standard things at Asperger's where
Speaker 1: he and I got along pretty well. I was the
Speaker 1: youngest kid in the family, and so I watched him
Speaker 1: with my elders, and I just thought of him as him.
Speaker 1: But the fact is he wasn't an easy person to
Speaker 1: be with because of the things that people with Aspergers
Speaker 1: normally are in half. And on the other hand, he
Speaker 1: was brilliant and he had a quality that because he
Speaker 1: taught he taught the graduate He taught the graduate investment
Speaker 1: course at the Center Business School for a while, one
Speaker 1: of the only three people that have ever done that.
Speaker 1: And uh, he had this quality that I would hear
Speaker 1: from his students where he had an ability for people
Speaker 1: to see themselves through things that he interacted with them on.
Speaker 1: And people would say to me, gee, your father told
Speaker 1: me blah blah blah, and I'd say, no, my father
Speaker 1: didn't tell you that. My father never thought that in
Speaker 1: his whole wide life. But he had an ability to
Speaker 1: get people to see it in themselves and pull it
Speaker 1: out of themselves. And he did that with me, and
Speaker 1: he did that with lots of people. And Philip Fisher
Speaker 1: wrote the classic book Common Stocks on common profits. I
Speaker 1: assume you've read it. I have read it. I've read
Speaker 1: it numbers of times. And you've also wrote on the
Speaker 1: most recent edition, wrote the introduction to it. I did
Speaker 1: write the introduction to it. And the first time that
Speaker 1: I read it, I was about ten. I didn't understand
Speaker 1: any of it. Ten years old. You're reading a book, Well,
Speaker 1: it was my dad's books, so I felt like I
Speaker 1: had to read it, but I didn't understand it. You know,
Speaker 1: it's like my dad's books. So I gotta read it right,
Speaker 1: and I don't understand it. But you know, not exactly.
Speaker 1: Most of my life I've done things I didn't understand. Well,
Speaker 1: we'll get to some of that. Um. Speaking of your dad,
Speaker 1: you obviously inherited your father's writing skills. Not true, Not true?
Speaker 1: Why do you say that? Because if I inherited them,
Speaker 1: they would have come to me naturally. I worked very
Speaker 1: hard to learn how to write. Well, you inherited a
Speaker 1: certain range of writing skills, and you worked your way up. No, no, no, no,
Speaker 1: I was I was alousy writer. So I hired somebody
Speaker 1: to teach me how to write. When was that? And
Speaker 1: if you say Tuesday? No no, no, no, no, no
Speaker 1: no two. Okay, So before most of your books were written,
Speaker 1: before any of my books, before most of your columns
Speaker 1: were written, So conquer. I believe you your genetics or clay,
Speaker 1: and you could mold that clay in different directions. So clearly,
Speaker 1: having a dad who was a skillful and articulate and
Speaker 1: insightful writer, there's a worst set of genes to start.
Speaker 1: Oh no, no, no, no, My father was great and
Speaker 1: I my father had more marvels callities. My father was
Speaker 1: the very best, among other things, bedtime storyteller of her.
Speaker 1: This man told the most marvelous stories every night when
Speaker 1: it was time to go to bed. And what I
Speaker 1: didn't realize he was doing when he was telling me
Speaker 1: these stories, most of which he made up himself, was
Speaker 1: he was telling me who he wanted me to be
Speaker 1: when I grew up. So there were parables with Yeah,
Speaker 1: the guy he was, he was, he was, he was marvelous.
Speaker 1: But uh, you know, I got parts of me that
Speaker 1: are my father, and then there's parts of me that
Speaker 1: are just me. And again, I no problem with my
Speaker 1: father in any regard. But we're all ourselves and we
Speaker 1: have to make up for our deficiencies, and we have
Speaker 1: to play on our strengths. And you know, he had
Speaker 1: his eye of mine, and that's just the way life is.
Speaker 1: So let's let's talk about some of those strengths, and
Speaker 1: we'll talk about you're writing. How important is writing to
Speaker 1: your entire process of thinking about markets, thinking about stocks?
Speaker 1: How significant is that regular monthly column and and everything
Speaker 1: else you write? Well, you know, I think I read
Speaker 1: from some guy named Rid Holts or something that uh,
Speaker 1: you know, it helps you clarify your thinking when you're right.
Speaker 1: I've stolen that from Daniel Boston Library to Congress. I
Speaker 1: right to figure out what I think that's That's where
Speaker 1: I took that from. And the fact of the matter
Speaker 1: is that I'm not as prolific as you are. But
Speaker 1: the writing forces me to think about what is it
Speaker 1: that I want a million people to be able to
Speaker 1: read that they will be able to come back and
Speaker 1: shove back at me three years later if they won't.
Speaker 1: And uh, Forbes has been a perfect podium for that.
Speaker 1: Writing books is good for that as well, because you
Speaker 1: really have to commit yourself and say this is what
Speaker 1: I'm ready to have you come back and attack me
Speaker 1: for You're listening to Masters in Business on Bloomberg Radio.
Speaker 1: My guest this week is Ken Fisher. He is the
Speaker 1: founder and chief investment officer of Fisher Investments, a sixty
Speaker 1: eight billion dollar asset management shop out in the Pacific Northwest.
Speaker 1: And you you basically you are national, correct, You have
Speaker 1: offices pretty much all over We're global. We global. We
Speaker 1: operate about four billion in high net worth in Europe
Speaker 1: and we do institutional across to where we have clients
Speaker 1: in six continents. Half of our thousand two thousand employees
Speaker 1: are in Campus Washington, just twenty minutes from the Portland,
Speaker 1: Oregon Airport, and then there's about five California, and then
Speaker 1: the rest are scouted around Europe. So I want to
Speaker 1: give you a quote because I of yours that I
Speaker 1: really like, and I want to have you discuss it.
Speaker 1: When you give up control, you give up quality control,
Speaker 1: and that is deadly in the financial services business. Explain
Speaker 1: what that means? Well, you know most of our realm
Speaker 1: of endeavor. I don't really like the work industry, for
Speaker 1: what goes on in finance is a world where the
Speaker 1: people in markets like to have free reign. And when
Speaker 1: you let people have free reign to do what ever
Speaker 1: the dickens they want, and and you have a lot
Speaker 1: of them, some of them will get you in trouble,
Speaker 1: and a little bit of trouble in the world of
Speaker 1: intangibles sinks you. The fact of the matter is integrities everything,
Speaker 1: and you only get integrity through control and not letting
Speaker 1: the blow ups occur that happen. You get a lot
Speaker 1: of great people that are great, and that's all fine,
Speaker 1: and they deserve free rain. But you can't really give
Speaker 1: people free rein You need to build around people that
Speaker 1: don't want so much free rein, because if you have
Speaker 1: two thousand employees and you give hundred of them free rein,
Speaker 1: there's going to be a hundred of them that at
Speaker 1: some point in time will be the ones that will
Speaker 1: cause you to have the sec on your back. This
Speaker 1: on your back, that on your back, and at that
Speaker 1: point in time and intangible that kills you. Control is
Speaker 1: about quality control, which is about in a world of
Speaker 1: dealing with the public in a world that's regulated and intangible.
Speaker 1: We're not selling coca cola in in a world of
Speaker 1: what's a service business where integrity ends up being crucial
Speaker 1: to your outcome. The greatest investors in the world have
Speaker 1: bad years, and bad years are just normal, But that's
Speaker 1: not what I'm talking about. I'm talking about having control
Speaker 1: of the process while you're having the bad year, so
Speaker 1: that you actually are delivering what you say you're delivering,
Speaker 1: and that there's no lack of control that goes haywire,
Speaker 1: because once that happened, you know, in my life, I've
Speaker 1: seen so many firms that went bankrupt. So there's a
Speaker 1: huge difference between having a bad year and having a
Speaker 1: bad process that can run amuck and allow certain people
Speaker 1: or processes or vendors or employees to damage your own reputation.
Speaker 1: The reality and this business is you need control so
Speaker 1: that you deliver consistently with what you promised you would deliver,
Speaker 1: which is not a return number. Here's what we do,
Speaker 1: Here's how we do it. Here's what we're gonna be
Speaker 1: trying to do for you. Here's where our bets are
Speaker 1: going to be. If they screw up, they screw up.
Speaker 1: But they are what they are. So it's about a
Speaker 1: process and sticking to that process. I'm not promising an
Speaker 1: outcome and also not letting a whole bunch of employees
Speaker 1: go do whatever they want to do in the realm
Speaker 1: of endeavor that is investing. Too many people think of
Speaker 1: it like it's a doctor's office, rather so that you
Speaker 1: let the doctor go do whatever he wants, not the
Speaker 1: doctor actually operates under a set of processes. Your card
Speaker 1: to by law. Uh and and have hypocrite hypocritic hypocritic oath.
Speaker 1: But the fact of the matter is, uh, it's not
Speaker 1: a doctor's office. In our realm of endeavor. You can't
Speaker 1: let these people do whatever they want to do. You
Speaker 1: need to build a machine that delivers something that's consistent
Speaker 1: with what you promised the customers you do. So let's
Speaker 1: talk about that machine and the team you put together.
Speaker 1: So how did you start finding people to help you
Speaker 1: build this machine? Well, I was incompetent, and I didn't
Speaker 1: know anything, and I was young. So all I could
Speaker 1: do was hire people who were younger than I, who
Speaker 1: had never done anything, and whose older people don't want
Speaker 1: to work for me. And so I hired kids out
Speaker 1: of college. And I've hired kids out of college forever.
Speaker 1: And then in the world that I came from a
Speaker 1: long long time ago, kids would come out of college
Speaker 1: and then they would go to work for some company
Speaker 1: like dal Chemical or IBM, and then they, if they
Speaker 1: were successful, they go to a tenure training program and
Speaker 1: they become a career tal chemical person or IBM person
Speaker 1: or something like that. And that world blew apart when
Speaker 1: I was a young man and they weren't doing that anymore,
Speaker 1: and instead of people were looking for MBAs, and then
Speaker 1: they hired the m b A. I mean when I
Speaker 1: graduated from college. You know, we we we create more
Speaker 1: NBA's every year now than we're created in all of history.
Speaker 1: Before I graduated from college and nowadays, I want to
Speaker 1: hire an MBA, you know. And then two years later
Speaker 1: the NBA changed his jobs, and two years later they
Speaker 1: changed jobs again, and two years later the CHAN And
Speaker 1: they think that's what they're supposed to do, and there's
Speaker 1: no particular loyalty between the firm and the employee and
Speaker 1: vice versa. What I wanted to do when I saw
Speaker 1: that blowing up the old model blowing apart, is I
Speaker 1: wanted to hire kids, train them, keep them forever, and
Speaker 1: have them never leave. So if you look at our firm,
Speaker 1: most of the people, all pretty much all the people
Speaker 1: the top firm never worked anywhere else. I get them
Speaker 1: out of school. Half of them turn over in the
Speaker 1: first year. Uh. If they succeed and stay, they might
Speaker 1: be here. They might be higher up, they might be
Speaker 1: higher up. But all of the top people in the firm, uh,
Speaker 1: with a very couple of exceptions, have been with the
Speaker 1: firm all their lives, all their adult careers, and and
Speaker 1: and they they're kind of have the firm built into them.
Speaker 1: So let's talk a little bit about that is very
Speaker 1: little education. They've got no training, they've got no background,
Speaker 1: they've got no experience except they've been with the firm forever,
Speaker 1: so you've educated them, You've given them experience, and you've
Speaker 1: trained them so they know they can fisher way. Except
Speaker 1: I didn't know anything either, so we kind of had
Speaker 1: to learn it together. Sometimes it's uh, that's the only
Speaker 1: way you can. You can do things. You you created
Speaker 1: the sort of firm that didn't necessary only exist. What
Speaker 1: what did you have as a comparison when you first started?
Speaker 1: How many years ago? Thirty years? Right? Yeah, I've been
Speaker 1: at this a long time. Uh, and so what was
Speaker 1: the model for you to to think about when you
Speaker 1: were building this? On the one hand, uh, Intel and
Speaker 1: on the other hand, Charles Swap Uh, what I wanted
Speaker 1: to technology on one side and discount brokerage on the
Speaker 1: other and in both cases doing things that people otherwise
Speaker 1: hadn't done yet. My father, my father had a great
Speaker 1: line that always stuck in my head. Uh. It was
Speaker 1: just one of his most marvelous lines, which is, what
Speaker 1: are you doing your competitors aren't doing yet? Implying that
Speaker 1: you do it and they're gonna follow. Maybe maybe they'll
Speaker 1: catch up, maybe they won't, but they're not doing it yet,
Speaker 1: and you're leading. And that concept as a phrase is
Speaker 1: one that just kind of had in my head forever.
Speaker 1: And you know, if you look at somebody like in Hill,
Speaker 1: they always believed they had to be moving steps ahead.
Speaker 1: If you look at somebody like Schwab in the early days,
Speaker 1: they're doing things nobody's ever done before. Uh. And they
Speaker 1: did successive waves of that under under Chuck Schwab personally.
Speaker 1: And uh. You know, I'm talking about the Intel of
Speaker 1: Old and the Charles Schwap Bold and uh so those
Speaker 1: are those are two firms in my mind, neither one
Speaker 1: of which are conventional Wall Street firms. That's fascinating. I'm
Speaker 1: Barry Ridhults. You're listening to Masters in Business on Bloomberg Radio.
Speaker 1: My guests this week is Ken Fisher. He is the
Speaker 1: founder and chairman of Fisher Investments. He is one of
Speaker 1: the longest running columnists at the Forbes magazine. He is
Speaker 1: well known and well regarded within the financial industry and
Speaker 1: and is also in the back half of the Forbes
Speaker 1: four hundred list. Uh. We were talking previously about uh
Speaker 1: writing and how it's impacted the thinking process. I want
Speaker 1: to talk a little bit about some of your books,
Speaker 1: but probably my favorite book of yours is the only
Speaker 1: three questions that count. Let's let's talk about that and
Speaker 1: talk about how did you develop those three questions? What
Speaker 1: led you to that holy trinity? Well, fundamentally, after a
Speaker 1: long lifetime of kind of messing up on things, I've
Speaker 1: kind of introspectively tried to learn about what I screw
Speaker 1: up on, what I don't screw up on, and and
Speaker 1: learn from it and get better over time. And so
Speaker 1: one of the fundamental questions in our world is there's
Speaker 1: so much conventional wisdom that ends up not working in
Speaker 1: market places because market's discount all uh widely known information,
Speaker 1: and conventional wisdom, by definition is widely known information and
Speaker 1: therefore priced that uh, simple question like what do you
Speaker 1: believe it's actually false? Is such an obvious one to
Speaker 1: think of, and yet it took me forever in my
Speaker 1: life to get to the point where I realized that
Speaker 1: I had to be thinking all the time about what
Speaker 1: do I believe it's false? Uh? And then the next part,
Speaker 1: in the futuristic sense, is what can I fathom that
Speaker 1: other people aren't fathoming work, which allows me to then
Speaker 1: be ahead of the pack. Let's let's talk about both
Speaker 1: of those, because they're sort of two sides of the
Speaker 1: same coin. What do I What do I know? What
Speaker 1: can I fathom that other people haven't is really a
Speaker 1: way of saying, what can I see that the crowd
Speaker 1: hasn't picked up on? I want to get ahead of
Speaker 1: the crowd, right, But the first question is really fascinating,
Speaker 1: which is which one of my fundamental beliefs is actually false?
Speaker 1: How can an investors only have one I'm doing really good?
Speaker 1: Or which one of the many? But the question I
Speaker 1: wanted to ask is how can an investor, through their
Speaker 1: own introspection figure out how many of their beliefs are false? Nor?
Speaker 1: You know, the old famous uh Galberth quote is when
Speaker 1: when presented between a choice of changing their minds or
Speaker 1: or I'm messing up the full quote, everybody gets busy on.
Speaker 1: The proof is that people would rather spend a lot
Speaker 1: of time and effort dancing around the fact that they're
Speaker 1: wrong and looking for ways to rationalize those bad choices, thoughts, decisions.
Speaker 1: How can an individual man that was a mouthful, How
Speaker 1: can an individual identify thoughts of their own that are incorrect?
Speaker 1: And so? Look, look a there's multiple ways, but let
Speaker 1: me just go with the easiest. The first is, of course,
Speaker 1: identifying what do you believe. If you can't do that,
Speaker 1: you're in real trouble and you probably shouldn't be in
Speaker 1: markets at all. Secondarily, by the way, that's a key point,
Speaker 1: and I think a lot of people gloss over that
Speaker 1: if you don't really understand what you believe, the markets
Speaker 1: are absolutely absolutely no, no, no. You know. The age
Speaker 1: all saying is if you don't know who you are,
Speaker 1: the markets are an expensive place to find out. And
Speaker 1: the fact of the matter is that once you say, okay,
Speaker 1: I believe this, now you kind of list those things
Speaker 1: and then you say, this is a really simple one.
Speaker 1: It's really one that people have a hard time with.
Speaker 1: Is there a history that associates with that thing? And
Speaker 1: can I run correlation coefficiens to see if it's actually
Speaker 1: true or not? Because if it's true, it will have
Speaker 1: a high end positive correlation coefficient. If there's no correlation there,
Speaker 1: it's not true. And so you know, not everything can
Speaker 1: you run a correlation coefficient for, But a lot of
Speaker 1: things you can, particularly X causes why functions where there's data,
Speaker 1: and so wherever you do that, you look for here's
Speaker 1: the things I believe, here's the things where there's history
Speaker 1: and data, let me run the correlation coefficiency if it's
Speaker 1: actually true, and if it's not true, let me stop
Speaker 1: believing it. So you want investors to actually use numbers
Speaker 1: and think about what's true and what's not true. Yeah,
Speaker 1: it's really simple that that's going to take a lot
Speaker 1: of a lot of easy money out of the market
Speaker 1: off people actually think about. I can't tell you how
Speaker 1: often I hear people or read people saying stuff that
Speaker 1: I have a familiarity with, and I'm wait, that's not true.
Speaker 1: And not only is that correct, but additionally, in my
Speaker 1: forty plas yers, in this realm of endeavor, I've seen,
Speaker 1: particularly in the last fifteen that it is more true
Speaker 1: than ever that people have these ideas, hold these ideas,
Speaker 1: and never ever stopped to say, and I'll give you
Speaker 1: an example one in a minute, never ever stopped to say,
Speaker 1: I wonder if history could be a guide here where
Speaker 1: I would use data to check myself to see if
Speaker 1: this is even possibly true, not to say that there
Speaker 1: can't be first ever, and there can. But you remember
Speaker 1: John Templeton's famous line that the foremost dangerous words in
Speaker 1: English language exactly, and the fact of the matter is
Speaker 1: you take something like all of the fear about an
Speaker 1: initial interest rate hike, but gee, an a logical question
Speaker 1: would be, g has there ever been an initial interest
Speaker 1: rate hike before in a cycle? Can I find those times?
Speaker 1: Can I count them? And then can I measure on
Speaker 1: a one week, one month, three months, one year, and
Speaker 1: five year basis? What's happened to the market after that?
Speaker 1: And the answer is a you can and be If
Speaker 1: any of your listeners do that, they're gonna be startled
Speaker 1: to find out that the market outcome doesn't have anything
Speaker 1: to do with any discussion that goes on right now
Speaker 1: in the public. You're listening to Masters in Business on
Speaker 1: Bloomberg Radio. My guest today is Ken Fisher. He is
Speaker 1: a money manager, author and rock on tour. Uh. And
Speaker 1: we were discussing previously, uh the only three questions that
Speaker 1: count a book? He wrote, God, that's gonna be about
Speaker 1: a decade ago, is it right? Um? Almost? Let's talk.
Speaker 1: But you're known your your reputation is that of a
Speaker 1: stock picker. Not too long ago, Forbes published an accounting
Speaker 1: of all your stock picks as made in your columns
Speaker 1: and over the previous decade and a half, they found
Speaker 1: that on average, the stock picks had beaten the SMP
Speaker 1: five hundred and you had beaten the index eleven of
Speaker 1: the previous fourteen years. That's a heck of a great,
Speaker 1: great run. So let's talk a little bit about about
Speaker 1: stock selection. Um, what's the first thing you look at
Speaker 1: when you're picking stocks? I don't look at stocks. You
Speaker 1: don't look at stocks. I mean, eventually you've got to
Speaker 1: own stocks, but looking at stocks is kind of the
Speaker 1: last thing I do. So where do you start where
Speaker 1: I'm in the process. People don't understand this about me
Speaker 1: because they always are looking for what they want to see.
Speaker 1: But in reality, I'm very simple, top down macro manager,
Speaker 1: and I've long, long, long, not always, but long, long,
Speaker 1: long been a top down macro manager. And I didn't
Speaker 1: start out that way, but I evolved to become that
Speaker 1: a long time ago. And so the first thing that
Speaker 1: I look at is the whole world, countries, sectors, subsectors,
Speaker 1: and I figure out where I want to be because
Speaker 1: one of the things that I've come to believe heavily
Speaker 1: is that it's the kind of stocks that are moving
Speaker 1: that are more important than the specific ones you want
Speaker 1: to be fishing in. The right ponds, not the wrong ponds.
Speaker 1: If you're fishing in a pond that doesn't have the
Speaker 1: kind of fish and it's the wrong time, you're not
Speaker 1: going to get fish. And so my first thing I
Speaker 1: look at is countries than sectors. Uh. Then I break
Speaker 1: that down. I look at factors then, which would be big, small, growth, value?
Speaker 1: There's times for each of them. People tend to be
Speaker 1: a value guy or a growth guy, or a big
Speaker 1: stock guy or a small stock guy. I'm not in
Speaker 1: any of those things. I'm let me figure out what
Speaker 1: kind of stock should be working, where is the value
Speaker 1: that will be perceived in a few years, and where
Speaker 1: does it fit into the cycle. And then that gets
Speaker 1: me down to a very small universe of stocks to
Speaker 1: pick from. It's the picking of the last thing I do.
Speaker 1: So this is very much along the lines of what
Speaker 1: can I fathom that others can't or or think. The
Speaker 1: actual picking for me is much more simple than most
Speaker 1: people would think, because I've weeded out everything but the
Speaker 1: kinds that I want. And then even if I picked
Speaker 1: the long ones out of the kind, if I picked
Speaker 1: the kind's right, I'm ahead of the games. Makes a
Speaker 1: lot of sense. You You if you don't get the
Speaker 1: best house in a good neighborhood, you get the second
Speaker 1: best or third best. It doesn't matter. It's still a
Speaker 1: good neighborhood. Location, location, location in that regard. And this
Speaker 1: is a kind of a parallel analogy. So if you're
Speaker 1: not starting by looking at individual stocks, when you're looking
Speaker 1: at different regions and different sectors, what drives that selection process?
Speaker 1: So you know, uh, this is not to uh take
Speaker 1: anything away from the perception of Warren Buffett's business interests.
Speaker 1: But one of the things I don't think that people
Speaker 1: think of him as is he's just one of the
Speaker 1: best words smiths ever. I mean, he just creates. You know,
Speaker 1: it's one thing you write, I write. It's one thing
Speaker 1: to write things that people like to read. It's another
Speaker 1: thing to write short phrases that people quote over and
Speaker 1: over and over again and like to And that's what
Speaker 1: I mean. You gotta be Yoggie Bearer to do that successful.
Speaker 1: And the fact of the matter is that one of
Speaker 1: his great lines is the in the long term, it's
Speaker 1: a weighing machine, and the short term it's a voting machine.
Speaker 1: And the the weighing and the voting have to both
Speaker 1: be counted. So the weighing is about the true valuation
Speaker 1: of the quality of earnings, growth, etcetera, the correct valuation
Speaker 1: for that. And then the voting part is really a
Speaker 1: matter of analyzing sentiment and where sentiment is swinging and
Speaker 1: how you measure sentiment correctly, which is something that I
Speaker 1: don't think most people think about much. And Uh, so
Speaker 1: you're looking at features that on that break into fundamental
Speaker 1: economic drivers. One of the biggest ones that I always
Speaker 1: pay attention to his shifts in the Yelk curve globally,
Speaker 1: which most people don't think of. People underestimate the power
Speaker 1: of the Yeld curve. Uh. The functioning Uh simply of
Speaker 1: where we are in the length and duration of the cycle,
Speaker 1: because different kinds of stocks performed differently at different parts
Speaker 1: of the cycle. That's part of the voting machine. Uh.
Speaker 1: And then what is it that And you know, I've
Speaker 1: written a lot about this. People never really ever believe
Speaker 1: me professional forecasters as a group can be analyzed. And
Speaker 1: if you can figure out what they believe will occur,
Speaker 1: you know exactly what won't happen. You don't know what
Speaker 1: will happen, but you if you think about it like
Speaker 1: a clock you can take about three hours of the
Speaker 1: clock out, which stacks the odds more in your favor,
Speaker 1: because what they collectively believe is what has already been
Speaker 1: priced into the marketplace makes a lot of sense. And
Speaker 1: and since it's been priced, it can't occur. It's already
Speaker 1: been done. So now you're looking for what else there is.
Speaker 1: And so one of the things that we always do
Speaker 1: is spend a lot of time collecting professional investor sentiment
Speaker 1: about sectors, about countries, about the market as a whole,
Speaker 1: and arraying that into bell curves, and knowing that twelve
Speaker 1: months out the middle of the bell curve doesn't happen.
Speaker 1: We don't know which side of the bell curve happens.
Speaker 1: Could be the left, could be the right. We got
Speaker 1: to try to figure that out. Might be wrong, wrong
Speaker 1: a lot, I mean, I'm wrong a lot. I'm basically,
Speaker 1: you know, kind of the forest gump of the world.
Speaker 1: It gets there by running backwards with blindfolds on. But
Speaker 1: the fact of the matter is beforest gump of the
Speaker 1: finance world. But I mean, you know, I went to
Speaker 1: Humboldt State University. I didn't I didn't go to Wharton, right, um,
Speaker 1: But but when when you say that, I'm gonna push
Speaker 1: back a little bit. People don't realize in this industry,
Speaker 1: if you're right three out of ten times, it's like
Speaker 1: batting three hundred. Hey, you're you're up for the All
Speaker 1: Star team. It's not how often you're right, it's what
Speaker 1: you do when you're wrong. You could have been wrong
Speaker 1: frequently as long as you're controlling the downside. But when
Speaker 1: you're right and they're towering home runs and you're batting
Speaker 1: three hundred. To carry out the baseball analogy, that's a
Speaker 1: great on base percentage. That's a great scoring percent Let
Speaker 1: me let me take that and push it to the
Speaker 1: other extreme of the same story. Uh. It's long been
Speaker 1: proven that investors are, on balance more wrong than right,
Speaker 1: for sure. So if you can be more right than wrong,
Speaker 1: you're doing really good. Uh. Some investors are not many. Uh.
Speaker 1: The more right you're expected to be, the fewer you get.
Speaker 1: If you can be right seventy of the time, you
Speaker 1: become a living legend in the long term. And so
Speaker 1: therefore you better get darn used to being wrong at
Speaker 1: least thirty percent of the time. And if you can't
Speaker 1: take being wrong and figure out what to do when
Speaker 1: you're wrong you. I mean, if if you think you're
Speaker 1: going to be right all at darn time, you are
Speaker 1: the wrongest person in the whole world. And the reality
Speaker 1: is that so many people are so hung up on
Speaker 1: not being able to accept their wrongness. And you know,
Speaker 1: I've embrace my wrongness because fundamentally, I know that if
Speaker 1: I was the greatest investor ever, which I know I'm not,
Speaker 1: I'd still be wrong a huge amount of the time.
Speaker 1: You know, I learned early in the career it's a
Speaker 1: it's okay to to be wrong, it's not okay to
Speaker 1: stay wrong. And I think a lot of people have
Speaker 1: a hard time with accepting an error, fixing what has
Speaker 1: to be fixed, and moving on. If you don't do
Speaker 1: that with your your golf swing or your your tennis swing,
Speaker 1: it affects your game if you That's why I don't
Speaker 1: play golf or tennis. But if you make the same
Speaker 1: mistake in finance and investing, it's usually expansive, and that's
Speaker 1: that's the that's a huge, huge difference. Let's um, let's
Speaker 1: keep plowing through this. I want to talk about UM.
Speaker 1: Something you had said back in oh six, eight percent
Speaker 1: of clients need an all equity benchmark. Is that still
Speaker 1: true today? Uh, it's more true nowt and what's done
Speaker 1: more true now than ever. So, so how does that
Speaker 1: express itself in in portfolios? Are you carrying very little
Speaker 1: in the way of fixed income or reads or other
Speaker 1: non equity positions. Let's just back up from that. The
Speaker 1: benchmark is about what it is, because that's the way
Speaker 1: you phrased it appropriately. The benchmark is about what it
Speaker 1: is you're trying to accomplish against. It's kind of like
Speaker 1: the track in which you're going to run around. Are
Speaker 1: you running, uh, long distance, you're running short distance, intermediate?
Speaker 1: What's the benchmark you're running. We can come back and
Speaker 1: talk about why that statement that you referenced is true.
Speaker 1: But then there's a reason to vary what's in the
Speaker 1: portfolio from the benchmark, because you're hoping to do well
Speaker 1: compared to the benchmark. And so in a simple case
Speaker 1: of somebody who would be in all like by benchmark,
Speaker 1: the time to vary from the benchmark is if you
Speaker 1: think you're gonna have a big bed bear market, and
Speaker 1: then you might vary from Then you've gotta have good
Speaker 1: reasons to do that, because if you're wrong, you're gonna
Speaker 1: get left in the dust. But you can vary from
Speaker 1: the benchmark all you want. I am and have been
Speaker 1: now for years, you know. I mean, I've been only
Speaker 1: seriously Barris three times ever in my career, and I'm
Speaker 1: not bearished now. And I've thought of often as a permeable.
Speaker 1: I'm not a permeable. That's your reputation. But I know
Speaker 1: you've I know I've nailed three bear markets, and I've
Speaker 1: missed bear markets too, and I missed the last one.
Speaker 1: I got O O nine. But you were pretty cautious
Speaker 1: heading into two thousands. Oh, I nailed two thousand. I
Speaker 1: nailed two thousand really really well. I'm and and was
Speaker 1: not non equity in that period. What are the bear markets?
Speaker 1: Did you catch just right? I got eighty seven pretty well.
Speaker 1: I was fifty percent equity in eight seven, and I
Speaker 1: was pretty good about seventy equity in UH to sixty
Speaker 1: equity in the small bearer market. But but you know,
Speaker 1: you don't have to get all the bearer markets because
Speaker 1: in the long term there's lots of bearer markets. If
Speaker 1: you carve out a few bearer markets and otherwise are
Speaker 1: equitized UH, you end up doing better than the market,
Speaker 1: because fundamentally, if you can carve a few out and
Speaker 1: you sta equitize the rest of the time, since stocks,
Speaker 1: you pretty well in the long term. It's not a
Speaker 1: bed function. But the reason to vary from the benchmark,
Speaker 1: whatever the benchmark is, is I think the benchmark is
Speaker 1: going to do really badly. That doesn't make the benchmark
Speaker 1: inappropriate for the client. The fact is the reason people need.
Speaker 1: You know, in this day and age, we've got a
Speaker 1: phrase it didn't used to exist, called longevity risk. And
Speaker 1: longevity risk is about the fact that the guy, I
Speaker 1: mean a long time ago when people first did pension plans,
Speaker 1: you know, you're retired at sixty five, you died at seventy,
Speaker 1: and you've got five years worth of your pension payouts.
Speaker 1: And and nowadays you know the sixty five year olds
Speaker 1: likely to live to be ninety five. And if you've
Speaker 1: got a thirty year time horizon and the primary person
Speaker 1: of your money is take care of you the rest
Speaker 1: of your life, you still probably need a heckuple lot
Speaker 1: of equity exposure, subject to other factors, because you've got
Speaker 1: a long time horizon and equities you know, as soon
Speaker 1: as you say long time arise and that's where equities
Speaker 1: fit in. So you talk to a standard client, you say, so,
Speaker 1: what's the primary purpose of your money? And then they
Speaker 1: tell you And the most common answer you ever here
Speaker 1: is well, it's to take care of me and my
Speaker 1: spouse the rest of our lives. That's you got anything else?
Speaker 1: May I want to leave some money to my kids,
Speaker 1: anything else? Them? I want to leave some money to charity.
Speaker 1: These are standard thing here them all the time that
Speaker 1: I want to take care of me and my wife
Speaker 1: the rest of our lives. The next question is, so
Speaker 1: how long you're gonna live? And it's not a matter
Speaker 1: of your age. It's a matter of things like, so,
Speaker 1: how long did your parents live and how long did
Speaker 1: your grandparents live? And what's your lifestyle in terms of
Speaker 1: health issues compared to theirs, And then you try to
Speaker 1: figure out how long they're likely to live. And then
Speaker 1: from that you go to these subordinate features like leaving
Speaker 1: money to the kids or what have you, which actually
Speaker 1: extends your time horizon, it doesn't shorten it. You now
Speaker 1: you're not thinking even longer. And and once you figure
Speaker 1: out that time horizon, if it's a very long time,
Speaker 1: and of course you commonly run into this thing where well,
Speaker 1: you know, I'm sixty five, okay, Grace, and how else
Speaker 1: your spouse, because take care of you and your special
Speaker 1: My spouse, she's only sixty. Uh, and how long you're
Speaker 1: gonna live? Oh? Well, you know, my parents died when
Speaker 1: they were seventy three, and you know, blah blah blah
Speaker 1: blah blah. And I smoke a lot, and I'm overweight,
Speaker 1: you know, and and you know, I try to drink
Speaker 1: a lot of poisons. But my spouse, she's sixty and
Speaker 1: her parents lived into their nineties and their grandparents lived
Speaker 1: into their late eighties, and she's in great health. Is
Speaker 1: I'll probably live to be ninety five. And you had
Speaker 1: a thirty five year time horizon, and let's take care
Speaker 1: of the both of you. It's the second to survive
Speaker 1: that counts in its longevity risk for the second to survive.
Speaker 1: And what do they need? They need an equity benchmark. Fascinating.
Speaker 1: We've been speaking with Ken Fisher of Fisher Investments. If
Speaker 1: people want to find your writing, they could either go
Speaker 1: to Forbes or fish fi dot com. There's a slew
Speaker 1: of your writing available. There is that correct, absolutely plus
Speaker 1: Amazon or Barnes and Noble. You have books eleven. We
Speaker 1: should really get one more out, making an even dozen
Speaker 1: eleven books. You know, hopefully I'll live that long. Eleven
Speaker 1: books for New York Times Bestsellers, thirty one years of
Speaker 1: Forbes columns. There's actually a book about my first twenty
Speaker 1: five years of Forbes columns. I don't remember I was
Speaker 1: reading it, and I can't read. I don't remember, you know,
Speaker 1: But the fact of the matter is I don't have
Speaker 1: very good memory. I'm you know. I told you I'm
Speaker 1: basically kind of the forest Gump of finance. Right. It's
Speaker 1: a miracle that I'm even here. Check out my daily
Speaker 1: column on Bloomberg View dot com. Follow me on Twitter
Speaker 1: at Ridolts. I'm Barry Ridholts. You've been listening to Masters
Speaker 1: in Business on Bloomberg Radio Masters in Bisines. This is
Speaker 1: brought to you by ex On Mobile Energy Lives here.
Speaker 1: Welcome back. This is the podcast portion of our show,
Speaker 1: and I've actually been really enjoying my conversation with Ken Fisher.
Speaker 1: There are so many questions I skipped for time purposes.
Speaker 1: We're gonna come back to this um, but let's let's
Speaker 1: talk about Let's start out with some of the books. Um,
Speaker 1: you just mentioned the book. Quiet, Let's talk about other
Speaker 1: books that you've read, either finance related or holy unrelated
Speaker 1: that you found to be helpful, insightful, worthwhile what what
Speaker 1: what are some of your favorite books? Um, Hunting with
Speaker 1: Bow and Arrow by Saxton T. Pope Hunting with Bow
Speaker 1: and Arrow? Interesting? What what was that about? Exactly what
Speaker 1: it says or something? Well, Saxton Pope was the kind
Speaker 1: of the father of modern not modern American bow hunting.
Speaker 1: And when issued the last Native America was brought into
Speaker 1: uc med in San Francisco. Uh, and I recalled nineteen eleven. Uh.
Speaker 1: Saxton Pope became his doctor and if she taught Saxton
Speaker 1: Pope how to make a bow and how to hunt
Speaker 1: all on, and then he went on to become this
Speaker 1: famous bow hunter. And he wrote this book that includes
Speaker 1: all that. But if you think about hunting, and I'm
Speaker 1: not a hunter, but if you when I was a kid,
Speaker 1: I wanted to be a hunter, but I was just
Speaker 1: a kid. When I was a kid, I want to
Speaker 1: be a professional baseball player too, And that was ridiculous.
Speaker 1: But every kid in the fifties want to be a
Speaker 1: professional baseball player. The fact of the matter is that
Speaker 1: hunting is a lot like investing. Let's expand them that
Speaker 1: why why So if you go back to things that
Speaker 1: I said in the prayer segment about you want to
Speaker 1: fish in the right pond, you gotta figure out where
Speaker 1: the animals are gonna be that you're gonna hunt. You
Speaker 1: gotta make sure you're going after the right kind at
Speaker 1: the right time. Uh. And then you gotta have the
Speaker 1: tactics for how to do the final part, which is
Speaker 1: actually the last part of the hunt, which is what
Speaker 1: happens when you actually get close to it. And so
Speaker 1: it's really kind of a parallel. Another one of my
Speaker 1: favorite books, again that that book was written in the
Speaker 1: nineteen twenties. Another one of my favorite books, which is
Speaker 1: written in the forties was called Hunting the American Lion,
Speaker 1: which is a book about mountain lion hunting. I've never
Speaker 1: handed a mountain lion. I'm not going to hunt a
Speaker 1: mountain lion. But but it's a great book because it's
Speaker 1: about the long, arduous pursuit because hunting mountain lions, you know,
Speaker 1: which is always done with dogs, and the terrible to
Speaker 1: rain because the cats want to lose you and they're
Speaker 1: very smart and are very mean. You know, these are
Speaker 1: critters that can jump twenty feet straight up in the air. Um.
Speaker 1: Pursuing inquires endurance and investing is an endurance game. Another
Speaker 1: one of my all time favorite books. Of course, I
Speaker 1: love these parallels. These are fascinating today. Uh. And then
Speaker 1: you know there's investment books that I love a lot. Um.
Speaker 1: You know Fred Twins where the customer shots literally sitting
Speaker 1: on my night table. Book I started and and and
Speaker 1: it's available now is a wily classic. And before I forget,
Speaker 1: if anybody ever wants to go to our website, uh,
Speaker 1: you know, it's to a Google search officier investments. Uh.
Speaker 1: You know on the website there's uh access to and
Speaker 1: I don't remember exactly where you find it, but you
Speaker 1: find it on the first front page, access to resources.
Speaker 1: And on the under the resources there's a list of
Speaker 1: my all time favorite books. And so you know, I
Speaker 1: can't rattle them all off in three and a half
Speaker 1: hours we have ahead of us here. But um, but
Speaker 1: but the fact of the matter is they're they're all
Speaker 1: listed there. But you know, in other one's how to
Speaker 1: Lie with Statistics by Darryl Huffing Table, no one would
Speaker 1: believe me. That is literally it's a great book. I've
Speaker 1: been I've been rereading and I read it a long
Speaker 1: time ago. It's charming and if you didn't know it
Speaker 1: was written forty years ago, you would have thought it
Speaker 1: was written last week. And you can read it really
Speaker 1: really quickly, very quickly, and it's a delight. Uh. And
Speaker 1: then of course How to Succeed uh excuse me, uh,
Speaker 1: Think and Grow Rich by Napoleon Hill, which is a
Speaker 1: classic book about learning, among other things, how to use
Speaker 1: his mastermind principle to guide yourself. Uh. And then there's
Speaker 1: a course of classic investment books by the classic people
Speaker 1: that we all know. And you know you could rattle
Speaker 1: those off for me as well, but you know, this
Speaker 1: would be Graham, this would be I mean I adored uh. Oh.
Speaker 1: When let me point out another one that you can
Speaker 1: find you can find used online, which is John Templeton's
Speaker 1: book that's not about investing but about spirituality. It's a
Speaker 1: great freaking book. What's the what's the name of the
Speaker 1: Humble Approach? Humble Approach by John Templeton. I adored John Templeton.
Speaker 1: I knew John Templeton a little bit, and I just
Speaker 1: thought he was the coolest guy. I mean, this guy
Speaker 1: was calm and steady and gentle and thoughtful and everything
Speaker 1: that I'm not. And he was. I mean, you seem
Speaker 1: fairly kind and you've been Do I look calm, look
Speaker 1: at me, Look at me, Barry, Do I look calm.
Speaker 1: You're you're sitting You're sitting motionless, your hands are folded
Speaker 1: in your lap. I've got your voices over control. But
Speaker 1: I have to do self control. I don't think John
Speaker 1: Templeton had to do self control. I think he had
Speaker 1: it spiritually. That he was much more zen than you.
Speaker 1: Is that what you're gonna say? Uh? What back zen?
Speaker 1: Back zens? That was true? So um so that's that's
Speaker 1: really interesting. The John Templeton I visited I've never read.
Speaker 1: I visited him in the Bahamas this one time, and
Speaker 1: he lived he has little office over this it was
Speaker 1: lime green colored over the police station. And uh, he's
Speaker 1: the most humble guy. And this is one of the
Speaker 1: most successful guys ever, and and and and he doesn't
Speaker 1: have the prolific quality of phrases that everyone knows that
Speaker 1: Barren Buffett has. But he had some great lines, you know,
Speaker 1: including the one that we used earlier in the segment
Speaker 1: about the fore most dangerous words. But the other, you know,
Speaker 1: another one that of his that I use over and
Speaker 1: over and over again is bullmarkets are born on pessimism,
Speaker 1: growing skepticism, ature an optimism, and diet you forhor you.
Speaker 1: And while that's not always true, it's true pretty often.
Speaker 1: I was gonna say it's pretty for a general statement,
Speaker 1: it's a prett pretty good one, and it really sums
Speaker 1: up there's a huge amount of contrarian thought in fact,
Speaker 1: that goes back to um, that goes back to what
Speaker 1: do I believe that's wrong? What do I know or
Speaker 1: what can I fathom that others can recognizing that bullmarkets
Speaker 1: are born on pessimism and Diane euphoria, that's a huge
Speaker 1: juge insight that I think a lot of people can
Speaker 1: glibly say, but you have to kind of live through
Speaker 1: it to really understand how true it is and be
Speaker 1: able to step back and take a look at it.
Speaker 1: I can't tell you how often I've had people give
Speaker 1: me these aphorisms and you know, I'm I'm making the
Speaker 1: yapping gesture with my hand, but then when you watch
Speaker 1: their behavior, they're just completely oblivious. Being able to truly
Speaker 1: understand that internalize it is is harder, easier said than done,
Speaker 1: So let me offer a clue for that. Behavioralism teaches
Speaker 1: us that we're prone to activity, and in fact, behavioralism
Speaker 1: in finance teaches us that the less decisions we make,
Speaker 1: the better we tend to do, absolutely, and that the
Speaker 1: more decisions we tend to make, the more bad decisions
Speaker 1: we tend to make. And most people don't have that
Speaker 1: part that says I'm making a decision now, the odds
Speaker 1: are I'm probably wrong, let me slow myself down. The
Speaker 1: fact is most people want to do it, get it over, move,
Speaker 1: let me make the bat and uh. The reality is
Speaker 1: that those kinds of features like the gut instinct, they
Speaker 1: want to fly in the face of these simple concepts
Speaker 1: like born on pessimism, growing skepticism, mature and opt to
Speaker 1: die of euphoria. Before you go and make the decision,
Speaker 1: you want to stop and say to yourself, so are
Speaker 1: we in a euphoric world or not? And how would
Speaker 1: I measure that? And am I really sure I'm right
Speaker 1: about that? And let me think about that a little
Speaker 1: more before I go do something. And that's hard for
Speaker 1: most people to do because they just want to jump
Speaker 1: to the conclusion and then they want to be right,
Speaker 1: and again, most of the time we're all wrong. I
Speaker 1: love the expression don't just do something. Sit there. It's
Speaker 1: an inversion of what what people typically expect, even lie down.
Speaker 1: So let's go back to the three only three questions.
Speaker 1: That the problem is when I lie down, I always
Speaker 1: fall asleep. That that's that's a potential issue. This this
Speaker 1: is a nice carpet to stretch out on um on
Speaker 1: the three only three questions account we didn't get to
Speaker 1: the last question. We kind of did. Just now, well,
Speaker 1: that's what made me think of coming back to it.
Speaker 1: What is my brain doing to mislead me? So so
Speaker 1: let's talk a little bit about the various things your
Speaker 1: brain does to mislead. So, every part about us, and
Speaker 1: this is really hard for the human to accept, but
Speaker 1: every part about us is stone age. That is, our
Speaker 1: brains are still stuck evolution wise in a world that
Speaker 1: what we were set up to function in very well,
Speaker 1: and we did function in very well. I mean, if you,
Speaker 1: I mean the human is created to dominate nature, and
Speaker 1: we pretty much completely have and no other species lives
Speaker 1: in every square corner of the earth completely dominates this environment.
Speaker 1: And has the ability to utterly change it to its liking.
Speaker 1: We are the only species on the planet. So I'm
Speaker 1: going off in a different direction here. But and your
Speaker 1: listeners wouldn't know this about me, But I have more
Speaker 1: scientific and technical background about things that relate to wilderness
Speaker 1: than most people in the world by a wide shot.
Speaker 1: We're going to get the redwood trees, and not just
Speaker 1: redwood trees, tall conifers wilderness. There is no more area
Speaker 1: anymore that hasn't been touched by the interplay of humans
Speaker 1: with biotics. That is, if you go into the most
Speaker 1: primitive wildernesses, there is evidence of things that have gone
Speaker 1: all around the world and are now in those Nature
Speaker 1: is no more truly primitive. It's now been touched and
Speaker 1: affected in some ways, not not not necessarily intentionally or actively.
Speaker 1: Not necessarily. For example, with the chainsaw, it's just stuff
Speaker 1: that blows in the wind, it's just stuff that birds drop,
Speaker 1: it's just stuff that happens, but it's there. We're gonna
Speaker 1: come back to that. Let's stick with the the human brain. Um,
Speaker 1: I'm fond of saying saying something similar to what you
Speaker 1: just said, which is, you know, we use the human
Speaker 1: brain for off label purposes. Most people don't realize. Um,
Speaker 1: there was an angina and hypertension medication that had the
Speaker 1: side effect of causing significant erections in their users, and
Speaker 1: it turned out, Hey, this hypertension drug, we have a
Speaker 1: different purpose for it, and it became VIAGRAA was originally
Speaker 1: designed for something completely different. They call that off label use,
Speaker 1: but the human brain is similar. So perhaps a less uh,
Speaker 1: a less racy version is bena. Drill is the allergy medication,
Speaker 1: and it's used in essentially the key chemical, and that
Speaker 1: isn't used in all the sleep medications because allergy medicine
Speaker 1: makes people drowsy. Hey, here's an idea. Let's take the
Speaker 1: allergy medicine put it in sleep over the countersleep aids.
Speaker 1: So our brains are being used to make risk reward
Speaker 1: decisions in the capital markets when really their purpose, as
Speaker 1: you described it, is keeping us alive in a changing,
Speaker 1: challenging environment. Let me give you an ancient analogy and
Speaker 1: translate that into modern finance story. So modern finance theory
Speaker 1: would say that markets are discounters of all known information,
Speaker 1: and what everybody's working about talking about focusing on is
Speaker 1: very quickly priced into markets and then loses its subsequent
Speaker 1: pricing power. There's nothing novel about what I just said.
Speaker 1: If you think of where we come from, our stone
Speaker 1: age bodies are easy to understand. If we think of
Speaker 1: ourselves around an ancient campfire, uh, and at our campground
Speaker 1: with the rest of the people that we've known very well,
Speaker 1: and it's night and it's dark, and outside that campfire,
Speaker 1: in the dark, we hear a loud noise. What do
Speaker 1: we do. We turn and look towards the noise to
Speaker 1: make our ears hear it better, and we focus on
Speaker 1: it because we can't see so well on the dark,
Speaker 1: and our biggest risk at that moment in time is
Speaker 1: what's behind us, not what's in front of us. And
Speaker 1: if truly we were being attacked by an enemy force,
Speaker 1: they'd want to make that noise and attack us from
Speaker 1: the rear, or maybe attack us from the side, but
Speaker 1: not attack us from the front, and they'd create that diversion. Now,
Speaker 1: in markets, what people want to do is figure out
Speaker 1: what everyone else is worrying about, and then not worry
Speaker 1: about it because they're already doing it for you as
Speaker 1: a free service. Send them a little Christmas card and
Speaker 1: thank them for it. You've worried about this stuff for
Speaker 1: me all year long, and therefore I don't have to
Speaker 1: do it, thank you all, and it's already priced, and
Speaker 1: instead you worry about something else that's a such a
Speaker 1: time saver, so consistent with finance theory, and so hostile
Speaker 1: to the way we normally think. Look at all of
Speaker 1: the noise and attention that you can see today in
Speaker 1: the media right now about everything about the French terrorist attack,
Speaker 1: which is a tragedy about it a borrn in always.
Speaker 1: But as soon as you see that attention, and of
Speaker 1: course we have a long history of terrorist attacks, we
Speaker 1: know they really don't move markets, and you see the
Speaker 1: market since then launch it off. Why because everybody else
Speaker 1: is worrying about it. You don't have to worry about
Speaker 1: something more important to worry about what they're not worrying about.
Speaker 1: And that's the part where you want to worry about it.
Speaker 1: That's your brain blindsighting you now, because listen, these big
Speaker 1: emotional events naturally draw people's attention, even though you know
Speaker 1: that I'm again I'm fond of saying what you think,
Speaker 1: what we worry about are rarely the things that do
Speaker 1: damage to us or our portfolios. I can't tell you
Speaker 1: how often I read people making forecasts about here comes
Speaker 1: seven like crash. Well, you know you get crashes or
Speaker 1: certainly bear markets on a regular basis, But that's not
Speaker 1: really what seems to her most people. What hurts most
Speaker 1: people are the access trading, the high fees, the turnover,
Speaker 1: the mistakes we talked about. You mentioned earlier that people
Speaker 1: make time and again and they don't really seem to
Speaker 1: pay attention to their focused on the noise outside the campfire.
Speaker 1: Let me let me give you a different parallel to that. Please,
Speaker 1: there's a famous set of studies that people don't seem
Speaker 1: to pay attention to, put out by an organization. You're
Speaker 1: probably know these very dal Bar and the dal Bar
Speaker 1: studies show that people actually do worse than the funds
Speaker 1: they invest in by a lot, and that in fact,
Speaker 1: in some of the studies, they show that people invest
Speaker 1: in load funds do better than people invest in no
Speaker 1: load funds, not because the funds do better, but because
Speaker 1: they feel imprisoned by their load fees and they hold
Speaker 1: them so much longer, whereas the people in the no
Speaker 1: load funds trade them in and out at all the
Speaker 1: wrong times. And while the no load funds do better
Speaker 1: than the load funds. The flow of funds actually favors
Speaker 1: the people that don't flow the funds. They just sit
Speaker 1: And that's that part about you know, stop doing something,
Speaker 1: just sit there, and and that reality is the same thing.
Speaker 1: It's this part where people in and out do themselves
Speaker 1: in and it's regardless of cause, reason, this thing, that thing.
Speaker 1: But as soon as you see everybody else where, you
Speaker 1: can take so many examples. I spent a fair amount
Speaker 1: of time in front of large groups of our customers
Speaker 1: because we do large client only seminars all around the country, uh,
Speaker 1: client only seminars where they get to ask questions endlessly.
Speaker 1: The questions are almost not always, but almost always it's
Speaker 1: almost exclusively about what's been in the news the last
Speaker 1: forty five days. And there often the ones that are evergreen,
Speaker 1: ones like but isn't the debt a big problem? And
Speaker 1: then you say, so, how many people haven't heard we
Speaker 1: have a debt problem? And you know, you get you
Speaker 1: know their reaction, and then so therefore you know it's
Speaker 1: priced and therefore you know in terms of markets. Now,
Speaker 1: so let me just give you one more real quick please,
Speaker 1: long term problems way down the road markets don't care
Speaker 1: one darn about those because markets don't believe it. Markets
Speaker 1: don't discount things fifteen years from now. They're not they're
Speaker 1: not gonna, you know. They worry about more or less,
Speaker 1: more or less the next three to thirty months. And
Speaker 1: you know, the French terrorist packets over, you know, but
Speaker 1: we have more terrorism, climate, climate change down the road
Speaker 1: that's not the next three thirty months. The bankruptcy, have
Speaker 1: social security, that's not the next three to thirty months.
Speaker 1: The darn millennials that are no darn good. Well, you
Speaker 1: know again, I don't know about climate change, and I
Speaker 1: don't know about millennials, and I don't know about the
Speaker 1: bankruptcy so security. What I do know about all of
Speaker 1: them is they're not going to impact things in a
Speaker 1: hugely terrible way in the next three to thirty months.
Speaker 1: And everybody else is worrying about them, so I don't
Speaker 1: have to because it's priced in and with much more
Speaker 1: concerned with what's not priced All right, So let me
Speaker 1: come back to some of the questions, um that I missed, uh,
Speaker 1: and you mentioned these client events. How often are you
Speaker 1: speaking to clients? Is that a regular we we we
Speaker 1: have people don't notice that. I mean, I got a
Speaker 1: lot of people are pretty critical in my firm, but
Speaker 1: they don't know my firm. We do more client service
Speaker 1: offerings than any other asset management firm. And you have
Speaker 1: you have last I checked, sixteen thousands something like that
Speaker 1: clients or is it five thousand I'm looking at old data.
Speaker 1: So you have thirty five thousand clients sixty eight billion dollars.
Speaker 1: So you have to be doing these events. You're not
Speaker 1: taking phone calls. You're doing big events pretty regularly. We
Speaker 1: have a whole variety of different types of events for clients,
Speaker 1: but one of them is where they'll be two to
Speaker 1: four people in a room for a lunch or a dinner.
Speaker 1: There's a presentation and then a Q and A. We
Speaker 1: do uh, seventy of those around the country a year,
Speaker 1: seventy seven. Oh, but I don't do seventy. I do
Speaker 1: about twenty uh. And then we've got other people in
Speaker 1: the firm that senior people in the firm that do
Speaker 1: them as well. Uh. And I believe that interacting with
Speaker 1: the clients is important for every CEO in the world,
Speaker 1: because if you forget who the customer is, you lose
Speaker 1: the bus. No, I'm I'm amazed at how many ceo
Speaker 1: spend no time with customers and that that's a serious
Speaker 1: mistake in my opinion. And let's talk a little bit
Speaker 1: about that, because I'm I'm intrigued by the idea not
Speaker 1: only of getting out in front of clients, but what
Speaker 1: competitors are doing wrong. You've said some interesting, interesting things
Speaker 1: about competition and staying uh, And I'm looking for my
Speaker 1: specific question that I had on on competition. You how
Speaker 1: closely do you pay attention to what your competition is doing? Some?
Speaker 1: Not much, a little? And who? So who is your
Speaker 1: competition really? Uh? You know, it depends where you're talking about.
Speaker 1: In the United States, it's almost everything in the world,
Speaker 1: because the United States has such a diverse and diffuse
Speaker 1: financial services world of offerings. Uh. In Europe it's just
Speaker 1: the banks, Uh, in the continent of Europe. In Britain
Speaker 1: it's in between. And because I'm truly in so many things,
Speaker 1: you can say America's here, the continents there in Britain's
Speaker 1: kind of halfway in between. But Uh, in reality, the
Speaker 1: industry is very diffuse. Very little of it thinks like
Speaker 1: it's really a business. It thinks like it's a practice
Speaker 1: and too much of the world wants to focus I'm
Speaker 1: not suggesting that investing and investment returns shouldn't be very
Speaker 1: importantly treated, and they should, but you want to do
Speaker 1: all of the business disciplines in a very excellent way,
Speaker 1: because in the end, it's about returns, it's about service,
Speaker 1: it's about convenience, it's about all the same things that
Speaker 1: are in every other part of consumer services. And people
Speaker 1: forget that, and they forget that. I mean, I learned
Speaker 1: this as a kid when I was you know, before
Speaker 1: I ever got to this part of my life, when
Speaker 1: I would be analyzing companies, and one of the ones
Speaker 1: that I was very close to in its early days
Speaker 1: was new Core, which is, you know, today's largest U steelmaker,
Speaker 1: and kenn Iverson was determined that New Core would be
Speaker 1: excellent at everything. Now I don't mean necessarily the best
Speaker 1: at everything. You can't be the best at everything, but
Speaker 1: excellent across the disciplines. And also, you know, I mean
Speaker 1: all of the great firms in the world are excellent
Speaker 1: across the disciplines, and in the realm of finance, people
Speaker 1: mostly kind of forget that. That's how you want great service,
Speaker 1: you want great pricing, You want great investment stuff, which
Speaker 1: includes great research, But you want you want great hr,
Speaker 1: you want great internal finance. You can't you know, investment
Speaker 1: firm isn't going to try to be the best have
Speaker 1: the best control, financial controller and treasurer in the world.
Speaker 1: But you better have a you better really make a
Speaker 1: point to be across the board excellent because that ripples
Speaker 1: into the culture that you create in the firm. And
Speaker 1: when you ripple it into the culture that you create
Speaker 1: in the firm, it takes a life of its own
Speaker 1: that comes and and in my realm, nobody's really ever
Speaker 1: had market share until black Rock came along, and still
Speaker 1: nobody has dominant market share. It's a very diverse industry.
Speaker 1: And in that diverse industry, it's a little bit like
Speaker 1: the analogy of the two guys with the bear in
Speaker 1: the woods, the guys putting on his tennis shoes, like,
Speaker 1: I don't have to beat the bear is to beat you.
Speaker 1: And the fact is you can be in parts of
Speaker 1: the investment world that are shrinking, and if you're gaining
Speaker 1: market share, you can still grow at a pretty good rate.
Speaker 1: And what you have to do is outrun the other guys.
Speaker 1: You're not worrying about the bear and the This is
Speaker 1: the part where they forget that. It's one part of
Speaker 1: it is you're up against the market, and another part
Speaker 1: of it is you're up against the fact that you're somehow,
Speaker 1: some way supposed to be helping a client. And if
Speaker 1: you can't actually effectuate the helping of the client beyond
Speaker 1: the returns, the client's going to fire you before they
Speaker 1: get the returns. It's a little bit like trying to
Speaker 1: get them to take unpleasant, bad tasting medicine. They got
Speaker 1: to take the medicine the full course or the thing's
Speaker 1: going to come back and get them worse than ever.
Speaker 1: And if they stop because it's unpleasant, which is the
Speaker 1: natural human tendency to hurt themselves. I think people are
Speaker 1: gonna be rewinding that five minutes segment right there and
Speaker 1: listening to it over and over again, because there's a
Speaker 1: lot of really really juicy stuff in that. Before I
Speaker 1: get to some of my favorite questions, I have to ask,
Speaker 1: what is really an insane question? You're deeply committed to
Speaker 1: advancing the world's understanding of redwood forest ecology and are
Speaker 1: known and this comes right out of your bio. I'm
Speaker 1: not making this up as one of the world's foremost
Speaker 1: experts on nineteen century logging. I know you're from the
Speaker 1: Pacific or now in the Pacific Northwest. How did you
Speaker 1: ever develop an expertise in that area of interest? That's
Speaker 1: quite unusual and fascinating to me. You know, again, I'm
Speaker 1: kind of a forest gump kind of person. So when
Speaker 1: I was a kid, I could walk out my parents
Speaker 1: house hitchhike for twenty minutes in a world where hitchhiking
Speaker 1: was common, and say and be in uh, second growth
Speaker 1: redwoods that have been cut over in the nineteenth century,
Speaker 1: and I would see all this stuff and I wouldn't
Speaker 1: have a clue what it was, but it fascinated me,
Speaker 1: you know, reminisc of shacks and old pieces of equipment,
Speaker 1: and you know, it hadn't all been hauled away, and
Speaker 1: I was just I thought it was cool. And so
Speaker 1: I love the forest, and I decided I wanted to
Speaker 1: go into forestry. So I went to forestry school. And
Speaker 1: that's why I went to Humboldt State University, because for forestry. Yeah,
Speaker 1: because it was okay forestry school. And in the days
Speaker 1: that I was young, it was in nineteen sixties and
Speaker 1: the world was in turmoil, and I didn't think I was.
Speaker 1: I went to school young, and I didn't think I
Speaker 1: was old enough and mature enough to handle UC Berkeley,
Speaker 1: which was a better forestry school. But I'm pretty sure
Speaker 1: I couldn't handle UC Berkeley. I was mature enough. So
Speaker 1: I went to Humboldton. It was a nice, quiet place.
Speaker 1: It was good school, and the teachers treated me while
Speaker 1: I was, you know, pretty pretty good student in the
Speaker 1: world of not very good students, said they paid more
Speaker 1: attention to me. And I liked forestry, and I liked
Speaker 1: but but I decided to be a lousy career. I
Speaker 1: took a summer job for the Forest Service and said
Speaker 1: I'm never going to work for the government again, under
Speaker 1: any circumstances, no matter whatever, which also precluded me from
Speaker 1: ever thinking about a potential world in politics. All of
Speaker 1: that then led to me having a career in the
Speaker 1: realm of endeavor, in which I engage by keeping everything
Speaker 1: about trees and forests as my life long other interests.
Speaker 1: And so I came back, and then I started building
Speaker 1: up the interest living in that same region where those
Speaker 1: mills were. That's where I moved to, twenty minutes from
Speaker 1: where I was raised. Will were you raised? San Mateo, California?
Speaker 1: And I started my firm in Woodside, California, in the Redwoods.
Speaker 1: And so then I stood side is where a relative
Speaker 1: to San Francisco, north of It's just northwest of Stanford University. Okay,
Speaker 1: so your woods not that farther, a little bit further
Speaker 1: north on the other side of the bay. But but
Speaker 1: Humbolt Courses in the Redwoods, Humble State University, where I
Speaker 1: went to schools in the redwoods. Uh, and so I was,
Speaker 1: you know, I'm kind of a redwood addict. And uh.
Speaker 1: But then I started collecting catalogs to figure out what
Speaker 1: these things were in the woods. And then I get
Speaker 1: old books, and you know, I started building. I got
Speaker 1: three thousand volumes of nineteenth century for which I believe
Speaker 1: it's the largest private collection and force history stuff in
Speaker 1: the world. Uh. And then I right on the topic
Speaker 1: and you know I can. I dug up thirty five
Speaker 1: mill sites and catalog the artifacts and you know, gave
Speaker 1: stuff to museums, built my own museum and which is
Speaker 1: now dismantled, and uh, you know, I've always loved that.
Speaker 1: But then but then I got into going back and
Speaker 1: tree science got to a point where suddenly it could
Speaker 1: be pushed. And it was partly because of technology and
Speaker 1: partly because one person. And so I started pushing tree science,
Speaker 1: uh through this one guy financing it because I had
Speaker 1: the money and he had the ideas. And we've pushed
Speaker 1: tree science quite a lot of weeks, and and he
Speaker 1: and others we keep pushing tree science. I've got major
Speaker 1: project going on in conjunction with the University of Washington
Speaker 1: now on uh Pacific Northwest non redwood conifer, and we're
Speaker 1: learning things about trees that nobody ever knew before. So
Speaker 1: you endowed a chair at the Humboldt State University, the
Speaker 1: Kenneth al Fisher Chair in Redwood forest Ecology. It is
Speaker 1: the only known chair in the world focused on a
Speaker 1: single species of tree, because redwood's the coolest tree in
Speaker 1: the world. It's there, it's the weirdest tree in the world. There.
Speaker 1: They do so many things that no other tree does.
Speaker 1: Or that's give me it. For instance, Well, you know
Speaker 1: what I said was wrong. Lots of trees will do
Speaker 1: one of the things that redwoods do. There's no other
Speaker 1: tree that does all of the things that redwoods do.
Speaker 1: You know, it's the tallest tree species in the world.
Speaker 1: Be you cut them down, they don't die right. The
Speaker 1: roots brown, But it's called compass growth. There's a lot
Speaker 1: of hardwoods that will do that, but not the conifers. Uh.
Speaker 1: They You take a take a second growth redwood that's
Speaker 1: you know, forty fifty years old, take a thirty ft
Speaker 1: action out of the middle of it, PLoP it in
Speaker 1: good soil, and it'll root, sprout, it'll grow tree off
Speaker 1: of that. There's again it's got all these You put
Speaker 1: a put a fire m hm in more mature trees,
Speaker 1: it will not hurt the tree because the bark doesn't
Speaker 1: have anything in it that's flammable. The bark has no
Speaker 1: what you otherwise think of his pitch in it. The
Speaker 1: function is that why there's no there's less insect damage
Speaker 1: and that yeah, it naturally produces a complex carbohydrate tannic
Speaker 1: acid UH. And the tannic acid is bitter to a bug,
Speaker 1: and so the bugs don't want it. But it's also
Speaker 1: it's it plays the function that pitch plays in a
Speaker 1: pitchy like sticky tree and and in that function UH,
Speaker 1: the fire then stimulates its desire to cone and it
Speaker 1: increases to conage rate the next year hugely because it
Speaker 1: knows that the subordinate trees get burned out in the fire,
Speaker 1: and it doesn't. It's a space more. Really, it's really
Speaker 1: fascinating it. It's a weird it's a weird critter. It
Speaker 1: almost it seems like it thinks. It doesn't think, of course,
Speaker 1: but it almost seems like it thinks, and it does
Speaker 1: so many of these things that know where the tree
Speaker 1: species does. Let me just say that we recently completed
Speaker 1: uh studies on its relationship to climate change. It loves
Speaker 1: brutal climate because just like with the fire, it knows
Speaker 1: the brutal climate hurts lesser species and let's it then
Speaker 1: become aggressive. And it's really a very well evolved tree.
Speaker 1: You know, it's amazing tree. Yeah. That and what I
Speaker 1: find fascinating when you're in a place like Murr Woods
Speaker 1: or any of the other redwood places, photos simply do
Speaker 1: not do it justice. The only photos that I've ever
Speaker 1: seen that begin to do with justice are the photos
Speaker 1: that are people take from the tops of the trees
Speaker 1: looking down. Because it's a it's a it's a visual
Speaker 1: it's impossible for a human to get otherwise, it's it's astonishing.
Speaker 1: And I every time I'm there, I just you walk
Speaker 1: out of those sort of woods and mind blown. It's
Speaker 1: it's and you look at on the phone what you
Speaker 1: look on the camera. But but if photos are just
Speaker 1: don't work. If you go to the National Geographic Channel
Speaker 1: and you see the stuff from Steve Sillett climbing the Redwoods,
Speaker 1: so Steve's got the kennethal Fisher uh chair and the
Speaker 1: forcedechnology and uh at humblet and that stuff get you know,
Speaker 1: anybody on the can you wait long enough and they'll
Speaker 1: that stuff will roll around and you can get a
Speaker 1: pretty good visual at Redwoods in somebody's TV. Al Right,
Speaker 1: that sounds fastering. Let's let's go to some of my
Speaker 1: favorite questions in the last twenty minutes that we have. Um,
Speaker 1: your dad obviously a significant influence, mentor whatever word we
Speaker 1: want to use. Who else we were mentors to you
Speaker 1: in your career? In my career, I didn't really have
Speaker 1: a lot of career mentors per se. There's a guy
Speaker 1: named Tony Spear who's now deceased, who was the head
Speaker 1: of investments at an operation called the Bank at California
Speaker 1: that doesn't exist anymore. Uh. And he was a student
Speaker 1: of my father's at Stanford and then. Uh. He was
Speaker 1: a pretty good mentor to me for a long time.
Speaker 1: Very nice guy. Also a little bit of an unusual guy.
Speaker 1: But I didn't have a lot of professional mentors. I
Speaker 1: have a lot of people that impacted me in life,
Speaker 1: but not so many professional mentors. Give us an example, Um,
Speaker 1: you know when I was I mean, my grandfather was
Speaker 1: very important to me when I was a child. Uh.
Speaker 1: My grandfather actually was friends with Saxon Pope. Um. Coming
Speaker 1: back to our prior discussion, and your grandfather was not
Speaker 1: Irving Fisher and old. A number of people have said, oh,
Speaker 1: you're speaking to no, no, no, no, that is this.
Speaker 1: That was not As my grandfather was a doctor, and
Speaker 1: he was actually an amazing doctor at UH private practice
Speaker 1: and UC MED in San Francisco. Again, I'm a fourth
Speaker 1: generation San Francisco who moved away from San Francisco. Uh.
Speaker 1: And so he, going back to our prior discussion in
Speaker 1: the earlier segment, he knew Saxon Poe because they were
Speaker 1: using med together. Um. And uh, that's part of how
Speaker 1: I got interested in that. My grandfather had a big
Speaker 1: impact on me. Uh. He was a marvelous man in
Speaker 1: his own way. So I had after he died, I
Speaker 1: had a kind of a substitute grandfather who was a
Speaker 1: tree guy, and he had a big impact on me.
Speaker 1: And I've been impacted by it. I mean at these
Speaker 1: serendipitous moments with people like I. I spent a bunch
Speaker 1: of time with Richard Nixon and just a serendipitous thing.
Speaker 1: And he just taught me so much and not not
Speaker 1: very long, and he was such a marvelous guy that
Speaker 1: almost no one wants to believe was marvelous because by
Speaker 1: that point in time, he's older and he doesn't really
Speaker 1: care about politics anymore, and he's got all the rough
Speaker 1: edges worn off of him. And this was in California,
Speaker 1: and uh, and you know, again, I've been blessed to
Speaker 1: be able to meet people. So you know, I didn't
Speaker 1: know John Templeton well, but I met John Templeton a
Speaker 1: number of times, and you know, he had such a
Speaker 1: huge impact on me. Um And so then I read everything,
Speaker 1: you know that I could get my hands on it
Speaker 1: with John Templeton, and but I didn't actually have the
Speaker 1: active mentor function because I'm pretty much of an extreme introvert,
Speaker 1: and I'm not much of a people guy, and so
Speaker 1: you know that mentor thing didn't work really well for me.
Speaker 1: So let me ask a different question, a related question.
Speaker 1: What investors influenced your approach to invest in Templeton? Templeton
Speaker 1: of course, my father, of course, Graham, of course, Buffet,
Speaker 1: of course, Dean LeBaron, Uh, Dreaming, Um, you know, I
Speaker 1: you know, Dreaming wrote for Forbes and still occasionally gets
Speaker 1: a column in Uh. And Dreaming wrote for a long
Speaker 1: time huge value guy, huge low pe guy in particular. Uh.
Speaker 1: And of course, you know le Baron was really kind
Speaker 1: of the original quant guy. I'm not a quant guy
Speaker 1: per se, but I appreciate the power of quantification and mathematics.
Speaker 1: And I mean there's a place for numbers and there's
Speaker 1: a place for non numbers, and um, that's pretty much it.
Speaker 1: I mean, that's that's a good list, to say the least.
Speaker 1: And we went over your books. Um, let's talk about
Speaker 1: the industry itself. What's changed that you think is significant
Speaker 1: for the better or worse since you joined the finance industry?
Speaker 1: Complexity has changed a lot, meaning it's gotten more complex,
Speaker 1: much more complex. I mean, you know when when I
Speaker 1: was a kid. You become an investment advisor, and it
Speaker 1: was extreme generalist. Again, that's the world, as I said
Speaker 1: in an earlier segment, where you know, we are now
Speaker 1: creating more MBA's per year than all the NBA's that
Speaker 1: have been created cumulaily up to that point in time.
Speaker 1: Technology has become a level playing field for people. So
Speaker 1: once upon a time, big firms had made frame computers
Speaker 1: and little firms had pens and pencils. Today everybody's got
Speaker 1: technology and and it's leveled a lot of playing field
Speaker 1: for good and for bad. I mean a lot of
Speaker 1: these things are dual ate swords. Uh, so many more securities.
Speaker 1: If you go back to the original Forbes Mutual fund
Speaker 1: survey once upon a time, Uh, it was thought of
Speaker 1: as a leading edge thing then, and it had a
Speaker 1: few hundred mutual funds because a few hundred because that's
Speaker 1: all you needed in those days. I mean, that's when
Speaker 1: you say needed, that's what there was. You covered pretty
Speaker 1: much the whole universe, and that was a leading edge thing. Then. Uh.
Speaker 1: If you look at the complexity of things like uh,
Speaker 1: I mean, Nathan most creates the first et F the spider,
Speaker 1: and you know if I remember, right, that's the early
Speaker 1: nineteen nineties. Then you know, then you get the Triple Q,
Speaker 1: and then now we've got E. T. F. Settle, you know,
Speaker 1: hundreds almost exactly, and so the complexities increased. The other
Speaker 1: part that's changed hugely has been journalism. And you know,
Speaker 1: journalism when I was young was a few TV channels,
Speaker 1: a few important magazines, a morning and evening newspaper at
Speaker 1: your home in the Wall Street Journal, and that's what
Speaker 1: it was. Uh. You know, there were specialty rags for
Speaker 1: industries that came out once a month, and you know
Speaker 1: that that was what it was. Today, everything's moving over
Speaker 1: the night lightning speed. Uh. Journalists heads turn very fast.
Speaker 1: That turnover in the industry is much faster. There's so
Speaker 1: much noise. I think that's a dual edge short it
Speaker 1: works for good and for bad. For good, you can
Speaker 1: use it because you can see what people are focused
Speaker 1: on and focused on something else. For bad, it's easily
Speaker 1: easy to be overtaken by the noise. And so you know,
Speaker 1: you take both of these features and it's just a
Speaker 1: matter of learning to how to cope with it successfully.
Speaker 1: And if you can do that right, it actually is
Speaker 1: to your advantage. Things that I mentioned earlier, like quantifying sentiment,
Speaker 1: can be done today in ways that once upon a
Speaker 1: time they couldn't be done, because the technology allows you to.
Speaker 1: I remember when I was young and was first working
Speaker 1: on the price sales ratio, which, by the way, Jim O.
Speaker 1: Shaughnessy gives you credit for essentially creating that ratio. No
Speaker 1: one else had had done that previously. You will find
Speaker 1: no literature on the price sales ratio. Until I started
Speaker 1: writing on the price sales ratio. You will find none. Uh.
Speaker 1: That is Graham made a reference uh in The Intelligent
Speaker 1: Investor to the fact that it might be interesting. And
Speaker 1: other than that, nobody else really there's there's there's nobody
Speaker 1: ever worked on it until I started writing about it.
Speaker 1: And I, you know, I think it's a it's a
Speaker 1: one useful tool. It's not, you know, kind of be
Speaker 1: all in end all. I don't believe in be all
Speaker 1: be all in end alls, but be that as it may.
Speaker 1: Um And now I lost my train of thought as
Speaker 1: to how I got into the price sales race. But
Speaker 1: it doesn't matter. It's fascinating that, you know, until I
Speaker 1: started researching background on you for this conversation, I had
Speaker 1: no idea that that was a can fisher. Now I
Speaker 1: remember why I was because in the in the seventies
Speaker 1: when I was working on that, I paid Goldman Sacks
Speaker 1: dollars to do a one time screen of the New
Speaker 1: York Stock Exchange for me because they had mainframe computer. Uh.
Speaker 1: That's back was real money, low price sales ratio stocks.
Speaker 1: And in that point in time, low price sales ratio
Speaker 1: by itself, because you couldn't get it was something that
Speaker 1: provided value added by itself because you could look do that,
Speaker 1: find companies that had very low price sales ratios which
Speaker 1: you knew fundamental issued to have their earnings come back,
Speaker 1: and they were just flat on their face, and you
Speaker 1: could figure out that the market was too afraid of
Speaker 1: this stock. And and that was a useful tool in today.
Speaker 1: So you think it's less useful. It's got value, but
Speaker 1: not as much, not as much as it had in
Speaker 1: those days because because what you're trying to get as
Speaker 1: information other people don't have. But my point is the
Speaker 1: world was more primitive then, and so what's gotten what's
Speaker 1: happened is we got more complexity, we got more tools,
Speaker 1: we got more noise. Uh. And then of course the
Speaker 1: other thing that we have with that we have more
Speaker 1: We have more global custodial reach than we ever had before,
Speaker 1: and so we have more global nous. And if you
Speaker 1: go back to the world, Templeton's the only guy that
Speaker 1: was doing any kind of global nous in those days,
Speaker 1: and he's going way out of his way because it's
Speaker 1: hard to do. Today, it's easy to be global. And
Speaker 1: our last question that telling me we have to wrap
Speaker 1: you apparently have other places to go and be, is
Speaker 1: what do you know today about investing that you wish
Speaker 1: you knew forty years ago when you began. I wish
Speaker 1: I understood then that we were going to go through
Speaker 1: a process some of the pieces of which we've been
Speaker 1: talking about that takes the Warren Buffet line that in
Speaker 1: the long term, the market's a weighing machine and in
Speaker 1: the short term it's a voting machine, and stalls off
Speaker 1: the weighing and makes the voting process longer. Sentiment has become,
Speaker 1: in my opinion, more important and more enduring, not permanently enduring.
Speaker 1: Weighing still is the ultimate outcome finally, but it takes
Speaker 1: longer to get there because I believe views of our
Speaker 1: society can be maintained wronger, longer, longer, longer before they
Speaker 1: get to the point where they get overturned by the weighing.
Speaker 1: I mean, the weighing is about fundamental valuation relative to
Speaker 1: real quality and real growth, and the voting is about sentiment.
Speaker 1: And here's what we think is true. And we now
Speaker 1: can think things that are just total nonsense for a long, long,
Speaker 1: long time and fail to actually see them. And I
Speaker 1: wish that. And I think that comes from technology, which
Speaker 1: ripples over into all parts of our lives. And I
Speaker 1: wish i'd seen that impact between Twitter and the blog
Speaker 1: is fhere and everything else. Would it would have made
Speaker 1: me better at seeing markets? And I've been if I
Speaker 1: could have figured that. I wish I knew that. You
Speaker 1: asked a question, what one big thing? Would? I wish
Speaker 1: I would have known earlier. That's it, Ken, this has
Speaker 1: been absolutely fascinating. Thank you so much for being so
Speaker 1: generous with your time. We'll have to have you back
Speaker 1: and do another three hour stints. I'd love to okay
Speaker 1: your next trip to New York. Put sign me up.
Speaker 1: Uh So, if people want to find any of his
Speaker 1: Ken Fisher's writings, you can go to Fisher Investments dot
Speaker 1: Com Forbes on the Fisher side. I'll put up a
Speaker 1: link to all his favorite books. Um, if you just
Speaker 1: google me, you don't find they'll find more nonsense than
Speaker 1: they ever wanted. Okay, be sure and check out all
Speaker 1: our other interviews. Just look up an inch er down
Speaker 1: an inch on Apple iTunes and you'll see our other
Speaker 1: seven or so interviews. I want to thank Mike Batnick,
Speaker 1: he is my head of research, and Charlie Vollmer, who
Speaker 1: is both my producer and engineer. I'm Barry Ridholts. You've
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