Speaker 1: This is Masters in Business with Barry Ridholds on Bloomberg Radio.
Speaker 1: This week on the podcast, I have an extra special guest.
Speaker 1: Her name is Helene Olin, and she is the author
Speaker 1: of Pound Foolish, exposing the dark side of the personal
Speaker 1: finance industry, as well as the co author of the
Speaker 1: Index Card Guide to Investing is the short version of
Speaker 1: it with Professor Harold Harold Pollock. UM. What I really
Speaker 1: love about Helene is she is a mold of cocktail thrower.
Speaker 1: She basically um looks at the world of financial uh,
Speaker 1: personal finance and financial advice UH with an oozy and
Speaker 1: is absolutely heartless about machine gunning down people who give
Speaker 1: bad advice. I think you'll find the entire podcast to
Speaker 1: be quite interesting if you read or follow some of
Speaker 1: the more popular financial gurus she has taken down were
Speaker 1: taken on nearly all of them, especially in the book
Speaker 1: Pound Foolish. But the slate column is pretty brutal as well.
Speaker 1: That's what That's what I find so refreshing and fascinating
Speaker 1: about it. So, without any further ado, my interview with
Speaker 1: Helene Olan. This is Masters in Business with Barry Ridholts
Speaker 1: on Bloomberg Radio. My special guest this week is Helene Olan.
Speaker 1: She is an author and columnist and really focuses on
Speaker 1: some of the issues in the personal finance area. She
Speaker 1: writes a column for Slate called The Bills. She's a
Speaker 1: regular columnist for inc. She has two really fascinating books.
Speaker 1: One is Pound Foolish, exposing the dark side of the
Speaker 1: personal finance industry. And some of you may remember Professor
Speaker 1: Harold Pollock's Index Card, How to invest with just a
Speaker 1: dozen bullet points on an index card, and and Helene
Speaker 1: co wrote, um, why the index Card, Why personal finance
Speaker 1: doesn't have to be so complicated? With Harold Pollock. She
Speaker 1: is a graduate of Smith College and was named by
Speaker 1: Business Insiders as one of the fifty women who are
Speaker 1: changing the World's hell and Olan, Welcome to Bloomberg. Thank
Speaker 1: you for having me on. So there's so much stuff, um,
Speaker 1: I wanted to go over with you. You and I
Speaker 1: really uh tread and we really fish in some of
Speaker 1: the same waters, so to speak. So so let's start
Speaker 1: out really broad. What's wrong with the personal finance industry today? Well,
Speaker 1: what's wrong with it? Well, there's a lot of things
Speaker 1: wrong with it, right, but the the overriding issue is
Speaker 1: that it's being sold to people under false pretenses. There's
Speaker 1: this idea that somehow, if you can just save up
Speaker 1: enough money and invest correctly, you're going to work your
Speaker 1: way out of what is a greater economic problem that
Speaker 1: we have right now, which is wage sagnation, the growth
Speaker 1: of the one percent, wealth inequality, and so on. That
Speaker 1: is just simply untrue. It doesn't work for most people.
Speaker 1: So so let's talk a little bit about um financial literacy,
Speaker 1: which some people said, if only we teach people how
Speaker 1: to invest, how to save everybody's in time, it will
Speaker 1: be fantastic. Financial literacy broke my heart. Um. I started
Speaker 1: looking at it several years ago as a solve. Um
Speaker 1: I now always feel like when I talk about it,
Speaker 1: I'm bad mouthing apple pie or thanksgiving people. Okay, so
Speaker 1: here's really what what could be bad about people being
Speaker 1: literate about their own find It doesn't work, and it
Speaker 1: doesn't work for a bunch of different reasons. First of all,
Speaker 1: people just don't remember stuff. Second, financial literacy doesn't work
Speaker 1: for another basic reason, Um, it's people literally don't remember.
Speaker 1: But more to the point, financial literacy is a movement
Speaker 1: brought to us by the financial services sector, and it
Speaker 1: was always set up to work around the fact that
Speaker 1: they are doing what they want to do. So instead
Speaker 1: of giving us financial um I hate using the word products,
Speaker 1: but that's the word use, right, Instead of saying, you know,
Speaker 1: a thirty year fixed mortgage, they're going to claim that
Speaker 1: they can teach you how to read a hundred single
Speaker 1: space pages with tiny little print, with more gotcha clauses
Speaker 1: than than gotchas exist. This is obviously false and when
Speaker 1: you look at the history of the movement, the modern
Speaker 1: movement actually begins in the in the n nineties with
Speaker 1: Ford Motor Credit. And Ford Motor Credit had something of
Speaker 1: a problem. They were getting involved in some prime auto loans,
Speaker 1: which of course all the automakers were, but Ford had
Speaker 1: a problem because a publicity problem, a pr problem, because
Speaker 1: Henry Ford was always against you credit like that. So
Speaker 1: they came up with this idea that they're going to
Speaker 1: teach people about financial literacy and they're going to teach
Speaker 1: them how to do how to manage these loans. So
Speaker 1: they hook up with some Washington people and some economists
Speaker 1: and is sure enough their first um. Their first effort
Speaker 1: is a p s A in late auto loans that
Speaker 1: absolutely nobody remembers except for the fact it is in
Speaker 1: the next database. And then they get this idea that
Speaker 1: they're going to hook up and do children's personal finance.
Speaker 1: And this is what takes off because it's the late nineties,
Speaker 1: zero to three. And now I have to interrupt you.
Speaker 1: What is children's personal finance? How? How to manage? Eliminate?
Speaker 1: Stands well, it's like teaching financial literacy and in elementary
Speaker 1: school and high school, and you know, and if we
Speaker 1: can just teach children how to manage their money, they'll
Speaker 1: remember it as adults. Now, of course this doesn't work. Again,
Speaker 1: this doesn't work because they test these kids a year
Speaker 1: in and year out. They kids who have taken these classes, no,
Speaker 1: no more than the kids who haven't taken these classes.
Speaker 1: But the other thing that's going on is the financial world, um,
Speaker 1: you know, moves at a fast fast pace. What you're
Speaker 1: teaching people in is not necessarily what they're going to
Speaker 1: need to learn in two thousand five. Um. But at
Speaker 1: the same time, of course they're not acknowledging that, right,
Speaker 1: So the whole thing is kind of misbegotten, but we
Speaker 1: all believe it because it just sounds so good. What
Speaker 1: could it like you said, what could be wrong with
Speaker 1: teaching personal finance? So what we're thick and so the
Speaker 1: final kick to this is is it then turns around
Speaker 1: and sets you up as the as the as the
Speaker 1: person to be blamed when it goes wrong. So when
Speaker 1: two thousand eight happened, the bags literally turned around and said, well,
Speaker 1: if people had just managed their money right, they never
Speaker 1: would have bought these houses they couldn't afford. Instead of saying, well,
Speaker 1: we shouldn't have given loans to people we knew were lying,
Speaker 1: or that our people you know, filled out the paperwork
Speaker 1: for them, or you know, we gave them these loads.
Speaker 1: We gotcha clauses. So in the last minute, we have
Speaker 1: in this segment, how did you find your way into
Speaker 1: this tiny niche? This is a really focused area. Oh
Speaker 1: this is great. Um, it was totally by accident. I
Speaker 1: was living out in l I with my husband and
Speaker 1: someone in late December calls me up from the big
Speaker 1: paper in town and says, we need someone to submit
Speaker 1: at the money makeover. Fe sure over Christmas? Of course,
Speaker 1: do you know anything about personal finance? And all I
Speaker 1: know about personal finance is the fact that it pays
Speaker 1: a heck of a lot better than anything else in
Speaker 1: journalism except for tech writing, and I don't do tech writing, right.
Speaker 1: So with this background in mind, I say, sure, I
Speaker 1: know all sorts of things about personal finance. And just
Speaker 1: to be clear, I didn't know a mutual fund from
Speaker 1: mutual of Omaha. I mean, I want to make this
Speaker 1: real clear. I didn't know anything. So I get I
Speaker 1: get this gig, and I run down to the Best
Speaker 1: Center I lived a couple of blocks from the Beverly Center,
Speaker 1: and I buy a copy of Personal Finance for Dummies
Speaker 1: and a couple of other personal finance books. And with
Speaker 1: this background, I go off to do my story and
Speaker 1: at some point I start asking the subject all about
Speaker 1: her money life. Um, you know, makeovers work like fashion makeovers, right,
Speaker 1: And I hadn't write this thing up, had the thing
Speaker 1: in wait for my screaming phone call. And instead of
Speaker 1: a screaming phone call, I get that was great. Can
Speaker 1: you do another one? I'm thinking, well, they just paid
Speaker 1: me double my usual fee. Sure, and I do another one,
Speaker 1: and the same thing happens, and another one it. At
Speaker 1: some point I realized I was something of an expert.
Speaker 1: I'm Barry rid Halts. You're listening to masters in Business
Speaker 1: on Bloomberg Radio. My special guest today is Helene Alan.
Speaker 1: She is the author of, amongst other things, Pound Foolish,
Speaker 1: and I love this description of of the book. Pound
Speaker 1: Foolish looks at the gurus, pundits, self anointed experts, crackpots, cranks,
Speaker 1: and outright frauds who populate the backwaters and slip streams
Speaker 1: of American finance. Did you leave anybody out in that list?
Speaker 1: That's a pretty good list. That's a good question. Um,
Speaker 1: I probably left tons of people out. There's so many
Speaker 1: of these people, right, So so let's go right to
Speaker 1: the beginning, because you in the book, you wrote a
Speaker 1: couple of things that really surprised me. Um. First, personal
Speaker 1: finance industry started as a response to the Great Depression.
Speaker 1: I had no idea about that. That's an amazing piece
Speaker 1: of information. Give us the historical background of this, Okay,
Speaker 1: So there was always like little bits of of like
Speaker 1: budget guidance and papers, right, and there was also always
Speaker 1: investment advice, you know, prior to the Great Depression. What
Speaker 1: happens afterwards is a woman named Sylvia porter Um, who
Speaker 1: is a nineteen at the time, nineteen year old college
Speaker 1: student and hunter. When her mother loses the family fortune
Speaker 1: in a stock market scam after the nine market crash,
Speaker 1: and Sylvia Porter decides to make it her life'sbmission to
Speaker 1: make sure something that like the Great Depression can't happen again,
Speaker 1: and she begins she decides to go to journalism. Um,
Speaker 1: at least of the days when you can actually make
Speaker 1: a living in journalism, right, So anyway, she goes into journalism,
Speaker 1: and she starts writing for the New York Post, and
Speaker 1: she's got this sort of engaging voice, and over a
Speaker 1: period of a number of years, they give her a column.
Speaker 1: This turns into a regular feature and it's initially s F.
Speaker 1: Porter says, they don't even say she's a woman until
Speaker 1: the early nineteen forties. And over time, over a period
Speaker 1: of several years, I mean, this isn't disputatious. Yeah, she's
Speaker 1: sort of gates what we today call personal finance. And
Speaker 1: by nineteen sixty she's on the cover of Time magazine.
Speaker 1: She gives advice to jfk um Lyndon Johnson actually says
Speaker 1: something like, why can't my economic advisors talk and give
Speaker 1: advice more like Sylvia? She becomes this massive guru. And
Speaker 1: of course today she's all but forgotten. I mean, it's
Speaker 1: kind of wild to me. Nobody, almost no one under
Speaker 1: the age of fifty even remembers who she is anymore.
Speaker 1: What sort of advice did she give and was it
Speaker 1: any good? Well, you know, she started very political. She
Speaker 1: started off as an extremely political figure. She would get
Speaker 1: into arguments with the Roosevelt administration over bond issues. She
Speaker 1: um gave tax advice to JFK as I said. But
Speaker 1: then over time, like a lot of gurus, she starts
Speaker 1: becomes increasingly wealthy, increasingly prominent. She gets increasingly cut off.
Speaker 1: And what starts happening is by the nineteen seventies, she's
Speaker 1: giving inflation advice. She joins President Ford's Whip Inflation Now campaign,
Speaker 1: which was really absurd. Um, you just think buttons helped
Speaker 1: bring down inflation. I mean, a few years later inflation
Speaker 1: was almost gone. So there's a correlation there, to say
Speaker 1: the least, poor Sylvia, right, she never recovered from this.
Speaker 1: So so she starts giving advice to people like don't
Speaker 1: buy veal, which was then very expensive, buy chicken, and
Speaker 1: of course most of her people were never buying veal.
Speaker 1: And then what had to be my favorite and unfortunately
Speaker 1: I found this column after I wrote pound Foolish actually
Speaker 1: suggested to people they substitute, um, several teaspoons of peanut
Speaker 1: butter for lean meat if they couldn't get their social
Speaker 1: Security check to stretch far enough for meat. Um. Actually,
Speaker 1: the United States government at the time had a better idea.
Speaker 1: That's when we got the cost of living adjustment for
Speaker 1: Social Security because the elderly were increasing trouble as the
Speaker 1: inflation began to pick up in the nineteen sixties and
Speaker 1: was fairly rampant way back right, it was when we
Speaker 1: were children. Elder poverty was very still fairly significant. And um,
Speaker 1: so that's Sylvia Porter. And then so let me jump
Speaker 1: in right here be us the Silvia Porter. Those recommendations
Speaker 1: are one of my pet peeves. I've always despised the advice. Hey,
Speaker 1: you know, if you skip the latte and reinvest that
Speaker 1: money every day for the next thirty years, by the
Speaker 1: time you retire, you love millions of dollars. And my
Speaker 1: perspective has always been, no, five dollars a day isn't
Speaker 1: going to make a difference. And second, if five dollars
Speaker 1: is the difference between you retiring comfortably or bankruptcy, there's
Speaker 1: something wildly wrong with with your entire financial situation. You've
Speaker 1: written even more aggressively about this. I think it's absolutely
Speaker 1: us I mean, there's a couple of things wrong with it.
Speaker 1: Um On a mathematical level, it makes what's going on
Speaker 1: in our society it makes no sense. Right. Our problems
Speaker 1: are not and I particularly use you know, a Starbucks
Speaker 1: latte because it became so famous. Our problems are not
Speaker 1: that people are drinking too many Starbucks latte's, though I'm
Speaker 1: sure there are people who are spending too much money
Speaker 1: at Starbucks right, too much money anywhere? All right. My
Speaker 1: older son frankly be one of them. But that's neither
Speaker 1: here nor there at the moment. But the the issue
Speaker 1: is that what was going on is people salaries were
Speaker 1: stagnating and falling relative to inflation. But what was going
Speaker 1: up was healthcare, housing, education, childcare, stuff like that, and
Speaker 1: that was going up at rates over inflation, not for years,
Speaker 1: not for a decade, but for decades and continues to
Speaker 1: this day. So the idea that you're throwing your money
Speaker 1: away at Starbucks is absurd. What was really going on
Speaker 1: is your can't keep up with the cost of living.
Speaker 1: The other thing that really makes me crazy about this
Speaker 1: is that the idea that we're spending too much kind
Speaker 1: of falls into this sweet spot in the American you
Speaker 1: know canon right where on the left wing, spending is
Speaker 1: always seen as somehow morally wrong in some way. Right, Well,
Speaker 1: it's a hobby of the rich, and therefore it's tainted,
Speaker 1: right like, you shouldn't be wearing good clothes, you shouldn't
Speaker 1: help me enjoying good food. There's something not right about it,
Speaker 1: right And on the on the by the way, does
Speaker 1: that still exists anymore? Because that might have been true
Speaker 1: in the sixties and seventies, and you have this really
Speaker 1: nascent movement about live small or the dumpster divers and
Speaker 1: all that's a Mr money Mustache says, don't spend any money.
Speaker 1: Retired at thirty. But that's a you know, consumerism is
Speaker 1: a huge part of American culture. Well it is huge
Speaker 1: because most of us like like luxuries. It's that great
Speaker 1: experiences everything. It's that great line from three Petty Opera,
Speaker 1: Live Life and luxury. That's what it's for, right, We
Speaker 1: like luxury. There's nothing wrong with it as long as
Speaker 1: you can afford it. Right. So on the other side, though,
Speaker 1: on the right wing side. What you get is this
Speaker 1: idea that people are wasting their money and that they're
Speaker 1: somehow not deserving. And that's where you go out. You
Speaker 1: see people at CNBC, and I always love this. They're
Speaker 1: always dressed in like three hundred dollar suits and they're
Speaker 1: ranting about poor people and they're smartphones. Smartphones have kind
Speaker 1: of become the new latte factor now and smartphones of
Speaker 1: the new welfare queen in a catalyze. Remember that line
Speaker 1: of argument exactly. And you know, as I always say,
Speaker 1: you know, try getting a job anywhere without a smartphone.
Speaker 1: First of all, right, but second it's just absolutely again
Speaker 1: untrue of anything. People with less money actually have less
Speaker 1: smartphones than anybody else. They actually do surveys on this.
Speaker 1: But so this whole idea that we're just spending ourselves
Speaker 1: into oblivion is ridiculous. I'm Barry Rehults. You're listening to
Speaker 1: Masters in Business on Bloomberg Radio. My special guest today
Speaker 1: is Halleane Ollen. She is a personal finance author, most
Speaker 1: recently co author with Harold Pollock of The Index Card,
Speaker 1: the book which explains why personal finance does not have
Speaker 1: to be complicated and the genesis of this is really
Speaker 1: pretty simple. Professor Pollock wrote an index card with like
Speaker 1: a dozen bullet points. I actually have it right here,
Speaker 1: a dozen bullet points. It got tweeted and then became
Speaker 1: a column or one off column, and it went completely viral.
Speaker 1: And how did you end up meeting him? And how
Speaker 1: did you guys decide to turn this into a book? Well,
Speaker 1: he The way the index card came about is he
Speaker 1: was interviewing me for a blog cast. Remember when people
Speaker 1: used to do video blog casts all that way back
Speaker 1: in two thousand, right, and he um interviewed me about
Speaker 1: pound Foolish, and at some point in the interview he said, well,
Speaker 1: this is just ridiculous. Everything you need to know about
Speaker 1: personal finance can be put on an index card. Meeting,
Speaker 1: of course, the industry is selling bs, right, And we
Speaker 1: laughed about it, and we go on with the interview,
Speaker 1: and neither of us thinks about it for the next
Speaker 1: half hour or whatever we're doing, right, And then people
Speaker 1: begin to write him and say that index card, that
Speaker 1: sounds great, where is it, thinking like he had done
Speaker 1: it index card. Of course, he had done no such thing.
Speaker 1: So he decides to do it index card, which you
Speaker 1: have right here. In front of I mean, really, this
Speaker 1: is this is an index card MAXU four oh one
Speaker 1: K buy an expensive diversified funds. You know, a whole
Speaker 1: run of things that are basically just straightforward common sense advice, right,
Speaker 1: And so he puts it online on the on the
Speaker 1: same blog that he interviewed me with, and the next
Speaker 1: thing I know is on Google alerts. I'm starting to
Speaker 1: get you know, my name with index card, and I'm like,
Speaker 1: what the heck index card? And then of course we
Speaker 1: ended up you know, I knew what happened pretty fast,
Speaker 1: and we ended up deciding to do a book together
Speaker 1: that that's fantastic. And I saw this on Twitter with
Speaker 1: like forty likes or some insane number it had. It
Speaker 1: had just gone absolutely um absolutely viral. So of the
Speaker 1: dozen or so bullet points he uses, what do you
Speaker 1: think are the most important that people should be aware of? Well,
Speaker 1: I think for people who are investing, and this is
Speaker 1: a big you know, what if, right, because I'm not
Speaker 1: what if, but you know big that's a subsett right
Speaker 1: because but don't buy individual stocks, don't buy manage going
Speaker 1: to manage mutual funds. I mean, the thing is is
Speaker 1: people are being ripped off blind. Here people are. They're
Speaker 1: being sold on this idea that there's a secret out
Speaker 1: there and that you know, they're going to find the
Speaker 1: person who's going to give them the secret, and they're
Speaker 1: going to do better than the markets. Right. Couple of things. First,
Speaker 1: this is a really expensive way to invest, so Wall
Speaker 1: Street is making a killing. That's why you're being sold
Speaker 1: on this idea. Second, every study we know shows that
Speaker 1: the vast majority of people, by which I mean about
Speaker 1: more than um have no ability to outguess the markets
Speaker 1: you're in and you're out, especially after costs are taken
Speaker 1: into account. And third, you then have to ask a
Speaker 1: certain amount of common sense. If you have found that
Speaker 1: rare person who actually has that ability, right, or you
Speaker 1: think you are that person, why on earth would anybody
Speaker 1: tell you this, Right, you and your ten thousand or
Speaker 1: hundred thousand, or even million or two million dollars, Right,
Speaker 1: Surely they're going to go find somebody with a couple
Speaker 1: of billion to invest, or even better, set themselves up
Speaker 1: on a yacht outside the Caymans or some other really
Speaker 1: nice place in the Caribbean and trade for themselves and
Speaker 1: make a lot of money. Why are they selling you
Speaker 1: the secret makes no sense whatsoever. So let me let
Speaker 1: me go to one of the last bullet points here,
Speaker 1: which is something I've always found to be fascinating. Make
Speaker 1: financial advisors admit to a fiduciary standard. So let's let's
Speaker 1: just briefly explain what is the fiduciary standard, what are
Speaker 1: the alternative and why uh, why should people adhere to
Speaker 1: one over the other. Okay, we all think, or most
Speaker 1: of us think that when we go off to seek
Speaker 1: financial advice, we're gonna go off and see somebody and
Speaker 1: they're the equivalent of a doctor. Right, they've got some
Speaker 1: hippocratic account. Yeah, they've got some hippocratic oath to our finances.
Speaker 1: This is absolute bus. They worked to something called the
Speaker 1: most most of them, not all of them, work to
Speaker 1: something called the suitability standard, which is sort of this
Speaker 1: idea that as long as the financial advice they're giving
Speaker 1: you as sort of okay, it could lie yeah, suitable,
Speaker 1: it can line their pockets, you know, as much as yours.
Speaker 1: And to to get a little technical, the broker dealer
Speaker 1: side of the world, the commission based side of the
Speaker 1: world UM, which is governed by an s r OH
Speaker 1: called FINRA. They're the ones who regulate and manage the
Speaker 1: suitability standard, which I'm fond of saying, don't sell some
Speaker 1: high tech I pot to Grandma, that's my definition of suitability.
Speaker 1: I think they would say that that's perfectly okay, and
Speaker 1: you can even go further than that, right. So anyway,
Speaker 1: so most people don't realize this though, because the kick
Speaker 1: is of course they don't even have to tell you this.
Speaker 1: So what the fiduciary standard is is what the registered
Speaker 1: investment advisors and certified financial planners mostly work too, which
Speaker 1: is this idea that they do have to act your
Speaker 1: best interest and they have to put their your best
Speaker 1: interest ahead of their own. The Department of about they
Speaker 1: used to be under the suitability standard in the last minute,
Speaker 1: tell us what's about to happen with the Department of
Speaker 1: Labor change. Okay, So the Department of Labor is decides
Speaker 1: a few years ago that they're going to bring individual
Speaker 1: retirement accounts under the under the fiduciary standard as well. Okay,
Speaker 1: And you have to understand something. Regular accounts are managed
Speaker 1: by under the rule of the sec and retirement accounts
Speaker 1: are under the Department of Labor. So that's a whole
Speaker 1: other craziness. So the Department of Labor says, we're going
Speaker 1: to deal with this, this with the with iris because
Speaker 1: but for most people, they're investing their retirement money, right,
Speaker 1: and the financial industry goes insane bonkers. This starts in
Speaker 1: two thousand eight, it is going on to this day,
Speaker 1: and essentially they are claiming people won't be able to
Speaker 1: give get good advice, middle class people because they won't
Speaker 1: be able to afford to give them advice, which when
Speaker 1: you think about it, if you believe them, which I don't,
Speaker 1: but will come to that in a minute. They are
Speaker 1: essentially saying, if we have to act in our client's
Speaker 1: best interest, we don't have a business model. Okay, this
Speaker 1: is a logical follow through, but they don't admit that, right. So,
Speaker 1: in fact, what we know is because the Center for
Speaker 1: Retirement Research at Boston College studied this a couple of
Speaker 1: years ago, it will cut into their profits. But they
Speaker 1: can still make a profit giving financial advice. They just
Speaker 1: can't make as much of a profit as before, and
Speaker 1: they're really unhappy about that. So there's there's a fascinating
Speaker 1: little history that correlates with this, because I've I've written
Speaker 1: about it, and I just did another column about this.
Speaker 1: What people don't realize about this whole debate and how
Speaker 1: it came about is within So the financial crisis comes along,
Speaker 1: and while there are many many causes of it, one
Speaker 1: of them is something just called misaligned incentives, where you're
Speaker 1: creating an incentive for people to do stuff that turns
Speaker 1: out to be both really really stupid and personally lucrative.
Speaker 1: Turns out that's not a great thing to have in finance,
Speaker 1: really really dangerous, damaging stupid stuff and highly lucrative, bad combination. So,
Speaker 1: as part of the Dodd Frank regulations, there is a
Speaker 1: research report that the SEC has to do looking at
Speaker 1: the various standards of incentives and compensation and conduct that
Speaker 1: of which there's this patchwork, this dual um, this dual
Speaker 1: system that doesn't seem to make any sense. The SEC
Speaker 1: zoned owned staff releases this giant report in two thousand
Speaker 1: eleven and recommendation is get rid of suitability, make it
Speaker 1: fiduciary across the board, and the SEC, politically deadlocked, doesn't
Speaker 1: vote on that, doesn't doesn't pass that, so that then
Speaker 1: sits in lingers for the next five years. The Council
Speaker 1: of Economic Advisors does some research into this, and the
Speaker 1: White House put out I think it was last year
Speaker 1: or earlier this year, they put out a report that
Speaker 1: says the lack of fiduciary standard in just in retirement
Speaker 1: accounts alone, just in four oh one case iras, what
Speaker 1: have you costs investors seventeen billion dollars a year. And
Speaker 1: someone comes up with the bright idea of saying, well,
Speaker 1: since we can't get the SEC off the dime to
Speaker 1: to vote on this and approve it, the industry really
Speaker 1: doesn't want to see suitability. What doesn't want to see
Speaker 1: fiduciary across the board? Hey, these retirement accounts are essentially
Speaker 1: compensation four oh one K four oh three B. That's
Speaker 1: why they're governed by Department of Labor and ARISSA. It's
Speaker 1: a form of compensation, so they get to have reign
Speaker 1: over that where the SEC doesn't. So really, because four
Speaker 1: oh one k s are a form of compensation, the
Speaker 1: White House gets the back door. The SEC go to
Speaker 1: the d o L. And the thinking is that once
Speaker 1: the fiduciary standard is on four oh one ks and
Speaker 1: other retirement um accounts, that'll take us up to thirty
Speaker 1: five and that's like a tipping point and eventually, look
Speaker 1: when we look at Morgan Stanley and Merrill Lynch, they're
Speaker 1: a hybrid. They're both the broker and an r I A.
Speaker 1: They used to have like single digit percentage of fee
Speaker 1: based are A stuff. It's now over two thirds of
Speaker 1: their at least their retail business. It's all gravitated to that. So,
Speaker 1: in a bizarre way, the financial crisis lead to to
Speaker 1: this new fiduciary rule, which, by the way, the UK has,
Speaker 1: it's a standard rule. The sec Zone staff wreck amended it.
Speaker 1: It's amazing that we just haven't adopted it in the US.
Speaker 1: It works in the UK is a bit different. They
Speaker 1: they've banned commission sales, which we're not looking to do here.
Speaker 1: Um and that scene, and you know, under the same
Speaker 1: theory of course, because if you can't do a commission
Speaker 1: and in the capital about fifty basis points and so
Speaker 1: the idea is, of course you can't have a conflict
Speaker 1: of interest if you are on commission. Because one of
Speaker 1: the things that's going on right now is people are
Speaker 1: um financial advisor types. UM by the way, and financial
Speaker 1: advisor I have to say it's just an absolute junk
Speaker 1: term that means absolutely nothing um and either a broker
Speaker 1: in a CFP, there's got to be some real title there.
Speaker 1: So you know the ideas. If there's no conflict, there's
Speaker 1: no commission, you know, discrepancy, you won't be able to
Speaker 1: have this conflict of interest. Over here, it looks like
Speaker 1: the Department of Labor is not gonna do the do
Speaker 1: the commission issue. They're going to allow commissions, but they
Speaker 1: are going to insist that it can't affect your thinking.
Speaker 1: I don't know how you do that, because you've so
Speaker 1: here is the problem with the suitability standard for these
Speaker 1: sort of accounts. When you have a incentive set up.
Speaker 1: In the first rule of economics, incentives matter. So if
Speaker 1: you're incentivizing someone to every transaction generates a commission, well,
Speaker 1: essentially you are subconsciously, at the very least encouraging transactions
Speaker 1: that will generate commission, which means you're generating costs, you're
Speaker 1: generating taxes, generating turnover. All three of those things are
Speaker 1: not good for long term performance. So someone had had
Speaker 1: there's a really fascinating hashtag on Twitter, hashtag fiduciary, and
Speaker 1: you'll see all the arguments pro and con. And I've
Speaker 1: been looking for the arguments against the fiduciary standard that
Speaker 1: carry water, and it's really hard to find them. The
Speaker 1: best one of the best arguments I've seen, which is
Speaker 1: still pretty weak, is well, it's much cheaper to set
Speaker 1: this up with a one time commission you set up
Speaker 1: the portfolio as opposed to an ongoing fee. But if
Speaker 1: that's the case, aren't you better off just paying someone
Speaker 1: in our rate? There are thousands of people who will
Speaker 1: do that sort of financial work for you on a
Speaker 1: per hour basis, charge you once and you never have
Speaker 1: to pay them again. That's probably the cheapest, least conflicted
Speaker 1: way to do it without is this mutual fund company
Speaker 1: paying them without any of the obvious conflicts that are right. Well,
Speaker 1: the turnaround claim is that people won't pay for it,
Speaker 1: and of course they might be right, but one of
Speaker 1: the reasons is because of the industry has basically told
Speaker 1: people that they're getting the service for free, which is
Speaker 1: not true but of course not but people don't see
Speaker 1: it that way because again they don't have to tell them,
Speaker 1: so people think that they're getting a free service when
Speaker 1: in fact they're paying commissions. I'm Barry, what helps you're
Speaker 1: listening to masters in business on Bloomberg Radio. My guest
Speaker 1: today is Helene Olin. She is a personal finance author.
Speaker 1: She's written the book Pound Foolish, as well as UH
Speaker 1: Index Card Investing. Let's talk a little bit about some
Speaker 1: of the columns you've done for Slate and elsewhere. You
Speaker 1: You have some really really fascinating headlines and fascinating columns
Speaker 1: that I've personally found very amusing. UM. So I understand
Speaker 1: the Obama administration's new fiduciary rule is going to stop
Speaker 1: people from discussing personal finance on the radio. Right, Well,
Speaker 1: that's absolute falsehood. That's one of the things being put
Speaker 1: out there by the opponents to expanding the fiduciary standard. Um.
Speaker 1: It got linked to by the Drudge Report recently got
Speaker 1: hundreds of thousands of hits, hundreds of I think last
Speaker 1: time I checked about five thousand, and I of course
Speaker 1: went and checked this out and I was like, really,
Speaker 1: we should only be so lucky, right, And and the
Speaker 1: answer is, of course, this is absolute falsehood. The fiduciary
Speaker 1: standard only applies if you have a relationship with the person.
Speaker 1: If you call a financial radio program or UM or
Speaker 1: a TV show and you discuss you ask for advice,
Speaker 1: let me explain something. You might think you're getting legal advice.
Speaker 1: You are entertainment people. Nobody thinks if you give a
Speaker 1: thirty second overview of your financial situation and somebody just
Speaker 1: rants for a few minutes allah Dave Ramsey or Jim Kramer,
Speaker 1: that you're in an advisory situation. In fact, Jim Cramer
Speaker 1: doesn't even take personal finance clients. How could you be
Speaker 1: an advisory situation within that makes perfect sense. So here's
Speaker 1: another one that I think is fascinating. Why is financial
Speaker 1: advice quote just for women a bad idea? Oh, it's ridiculous. Um.
Speaker 1: The idea is that women have special financial needs. Um,
Speaker 1: we do have special financial needs. Let me explain we. Um,
Speaker 1: we earn less than men at all stages at our careers.
Speaker 1: We have more responsibilities, we have more um, scattered careers
Speaker 1: thanks to caregiving. And by caregiving I mean everything from
Speaker 1: children to parents, to elderly relatives and friends. Um, we
Speaker 1: will lose more money for that caretaking than a man
Speaker 1: will if he takes it on. And of course the
Speaker 1: final kick is we live longer, so we need more money.
Speaker 1: Services industry says, oh, then you should save more money,
Speaker 1: and we have special advice for you. Now understand if
Speaker 1: you're underpaid, aren't working as steadily and living longer. I mean,
Speaker 1: this is like asking This is like the old line
Speaker 1: about ginger rogers that I think and Richards once said
Speaker 1: she had to do everything fred Astaire did but backwards
Speaker 1: in high heeled shoes. This is not going to work.
Speaker 1: So there is no special financial advice for women. What
Speaker 1: women have as a social and economic problem that needs
Speaker 1: to be addressed. So you don't think that could be
Speaker 1: solved by being condescended to that won't That won't resolve
Speaker 1: that issue now and then the kicker is right, it
Speaker 1: is condescending, thank you. And then so this women's financial
Speaker 1: advice has this weird combination of sounding empowering and infantilizing
Speaker 1: at the same time. It's kind of like, God, you're
Speaker 1: multitasking so much, you have so many burdens. Here, we'll
Speaker 1: take this one burden from you so that you don't
Speaker 1: have to bother your little head about it. Right, So
Speaker 1: let's let's talk about one of my favorite things. Tell
Speaker 1: us about wealth therapy. Oh, I love wealth therapy. Right.
Speaker 1: The the idea is is that people need um psychological
Speaker 1: help managing the emotions around money. Right now, somehow this
Speaker 1: mostly applies strangely enough to people who have the money
Speaker 1: to pay the bills for therapy, because I understand financial
Speaker 1: therapy is not cheap. It's two HUR and up. Yeah,
Speaker 1: it's more right, it's more like four D. And understand
Speaker 1: it's not in the D s M, so there's no
Speaker 1: code for it diagnostic manual for for um, you know,
Speaker 1: for medical reimbursements. Right. So, weirdly enough, financial therapy just
Speaker 1: sort of presumes that, like, you know, wealthy people need help,
Speaker 1: and it's like stuff like affluenzauh and like do you
Speaker 1: feel bad about having to pay your housekeeper? And what
Speaker 1: do you do if your friends are really jealous of
Speaker 1: the money you have? I mean, this is absolutely ass right.
Speaker 1: I mean, I'm sure people have issues if they have
Speaker 1: a lot of money. Don't get me wrong. I have
Speaker 1: met people over the years they do. But this is
Speaker 1: not They do not have money problems in the way
Speaker 1: somebody who can't get on their paycheck has money problems.
Speaker 1: These are these are good money problems to have, as
Speaker 1: opposed to can afford healthcare? How am I going to
Speaker 1: pay for medicine? That's a horrific money problems. And when
Speaker 1: I looked at financial therapy, what I found was a
Speaker 1: lot of the financial therapists, and I don't say with
Speaker 1: all of them, by the way, a lot of them
Speaker 1: were former eating specialists. And there's a couple of reasons.
Speaker 1: Wait a second. First of all, how do you find
Speaker 1: that out? You just do research on people offering wealth
Speaker 1: therapy and it turns out they're also obesity specialists or
Speaker 1: or um. Right. Well, I would get disorder special pound
Speaker 1: foolish like, talked to a whole bunch of them, and
Speaker 1: a lot of them would tell me that they had
Speaker 1: done time in food disorders, and they would make the link, right,
Speaker 1: and they would say, well, you know, people binge when
Speaker 1: they're unhappy, and they spend money when they're unhappy. Right,
Speaker 1: And it actually is an interesting link because actually a
Speaker 1: lot of people have weight issues not just because of
Speaker 1: because they binge eat right, because the food supply has
Speaker 1: changed and you know, they have put cord oil and everything,
Speaker 1: which puts more weight on seria bright thank you. They
Speaker 1: You know, people who have less money can't buy fresh
Speaker 1: food because they're afraid it will go bad or so
Speaker 1: they have to buy packaged, processed food, which puts weight
Speaker 1: on as well, and you can go on. Right, So
Speaker 1: there actually is a link, but that's not the link
Speaker 1: they see. The link that's really going on here, of course,
Speaker 1: is a god. You know, the insurance companies have cut
Speaker 1: back on reimbursements um to a huge extent to people
Speaker 1: have had to move on um. So in other words,
Speaker 1: they weren't getting reimbursed. They couldn't. People coming in for
Speaker 1: eating disorders were no longer being reimbursed. Well, they are reimbursed,
Speaker 1: but like for instance, it's much harder to get there,
Speaker 1: you know, get in patient therapy now than it used
Speaker 1: to be. Right, remember back in the nineties, anybody could
Speaker 1: get in patient therapy. Now of course, you know, the
Speaker 1: insurance companies put you through gazillions of hoops. So you
Speaker 1: set up instead and and you know an on site
Speaker 1: you know, facility for money disorders, and people are just
Speaker 1: paying cash out, cash out. It's like a doctor who
Speaker 1: doesn't take insurance. I was gonna say, insurers aren't paying
Speaker 1: for this, are they. If you're wealthy enough to have
Speaker 1: to require wealth therapy, I think you have to pay
Speaker 1: for that out of pocket, right exactly. So it's a great,
Speaker 1: great business to get into and hey, you probably are
Speaker 1: helping some wealthy people who need some handholding. But my
Speaker 1: favorite was one of the Judd sisters, and I'm forgetting
Speaker 1: which one it's in Pound Foolish did Um wealth therapy
Speaker 1: and she becomes like the poster girl for it, and
Speaker 1: she gives us interview in the New York Times in
Speaker 1: two thousand eight the Fall of two thousand eight, mind you,
Speaker 1: and she says, you know, yes, I went down from
Speaker 1: five cars to one car, and if I could do
Speaker 1: it anyone cat. That's true when you think about it,
Speaker 1: it's very easy to just let those leases expire and
Speaker 1: just stick with one or two regular vehicles. How many
Speaker 1: of us really need five or six vehicles exactly? How
Speaker 1: many of us have that problem? That's that's really good
Speaker 1: advice for our listeners is to just cut it down
Speaker 1: to one or two cars. And I find the same
Speaker 1: with boats. Just keep it to one or two boats.
Speaker 1: Your your budget will be much vacation houses to skiing vacations.
Speaker 1: Is there really that much I know I'm being sarcastic
Speaker 1: for those of you who may have missed that, but
Speaker 1: is there really that much of a lack of self
Speaker 1: awareness amongst that sort of cult of celebrity who just
Speaker 1: as wholly unaware of how the average person lives. It's
Speaker 1: more than the cult of celebrity. What it is else,
Speaker 1: get very serious for a moment. It's really about the
Speaker 1: one percent society because one of the many things that
Speaker 1: our society has done is as as we have become
Speaker 1: more economically stratified, we tend to only interact with people
Speaker 1: who are like us. People. The society you and I
Speaker 1: grew up in was more ethnically segregated, but it was
Speaker 1: more economically open. Right, all the Jews lived in the
Speaker 1: same neighborhood. Kind of you may need to meet people more,
Speaker 1: and now it's kind of a little not so much
Speaker 1: like that. And what happens is is you just interact
Speaker 1: with people like yourself over and over and over again,
Speaker 1: and so you kind of lose perspective. I mean, this
Speaker 1: is a very common problem for people and so for
Speaker 1: and that's why, by the way, you see people renting
Speaker 1: on TVs about poor people in smartphones too, they think
Speaker 1: that's really the problem because hey, probably for their kids.
Speaker 1: It might be right, Well, nobody has landlines anymore. Everybody
Speaker 1: who's under thirty has a smartphone, and if you need
Speaker 1: to get a hold of them. What's your home number?
Speaker 1: This is my only number. Half the time it's a
Speaker 1: Google Voice number. Anyway, it's not even It goes with
Speaker 1: whatever phone they happen to be near. Is that a
Speaker 1: legitimate issue amongst amongst the public that poor people have smartphones?
Speaker 1: Because I've read the argument that why are the poors complaining?
Speaker 1: They have air conditioning and satellite TV. The argument is
Speaker 1: that people shouldn't be complaining because hey, compared to poor
Speaker 1: people a hundred years ago or two hundred years ago,
Speaker 1: we've got air conditioning, we have refrigerators, and so I
Speaker 1: wanted so forth. This is ridiculous. We live in the
Speaker 1: here and now right and people are, you know, living
Speaker 1: paycheck to paycheck. They they really are strapped. We live
Speaker 1: in a society where if one thing goes wrong for you,
Speaker 1: you can end up in bankruptcy corps. Medical not very
Speaker 1: good still for a lot of people. The deductibles are absurd.
Speaker 1: A lot of stuff is not covered. Um, you know,
Speaker 1: people can't afford childcare. Um My last I do an
Speaker 1: advice column over It's slate um called ask the Bills
Speaker 1: every two weeks, and the last one I did is
Speaker 1: somebody wrote it and you know, just laying out their situation.
Speaker 1: It said, I don't think I can afford to have children?
Speaker 1: What do I do? And I don't know what to
Speaker 1: say to that, except for the fact that obviously, if
Speaker 1: one wants to have children, they should not be able
Speaker 1: to have children and figure it out as they go along.
Speaker 1: But the fact is we live in a society with
Speaker 1: no supports whatsoever. If people want to find more of
Speaker 1: your writings, what's the best way for them to track
Speaker 1: you down? UM? I write for Slate several times a week.
Speaker 1: I have the column the Bills I contribute to money Box. UM.
Speaker 1: You can also buy Pound Foolish or the index card
Speaker 1: there on all sorts of sites, including Amazon and Powell's,
Speaker 1: at the independent bookstore and the Strand. UM. I love
Speaker 1: the Strand. I have to get that in UM and
Speaker 1: UM all over the place. Oh and also I write
Speaker 1: a column every couple of months rank. So if you've
Speaker 1: enjoyed this conversation, be sure and check out our podcast extras,
Speaker 1: where we keep the tape rolling and continuing chatting. You
Speaker 1: can check out my daily column on Bloomberg View dot com.
Speaker 1: Follow me on Twitter at rid Halts. I'm Barry rit Halts.
Speaker 1: You're listening to Masters in Business on Bloomberg Radio. Welcome
Speaker 1: to the podcast. Helloine, thank you so much for for
Speaker 1: doing this. Thank you for having me and being so
Speaker 1: generous with your time. So there's so many questions I
Speaker 1: didn't get to. Before I get to my standard questions,
Speaker 1: I have to go through some of the things that
Speaker 1: that we missed, and we really plowed through a lot.
Speaker 1: A lot of the stuff we missed had to do
Speaker 1: with Pound Foolish, which I'm gonna have you signed for
Speaker 1: me later. So so let's talk about I love this line.
Speaker 1: You described a distinctly American tribe, the spiritual Savior posing
Speaker 1: as financial expert. Well, I love that phrase. What does
Speaker 1: that mean? Personal finance originates in the self help industry? Right,
Speaker 1: People don't really understand this. The almost like it's some
Speaker 1: form of business writing, and it kind of is, right,
Speaker 1: But it's really an offshoot of the self help industry,
Speaker 1: and the self help industry dates to, you know, the
Speaker 1: nineteen thirties when, as with selfia porter, you know, people
Speaker 1: were looking for answers and at the same time it
Speaker 1: kind of met mass culture. So you know, during the nineties.
Speaker 1: You have a lot of stuff going on. I mean
Speaker 1: you could you know, you have communism, you have fascism.
Speaker 1: People are looking for answers. The self help industry is
Speaker 1: one of the isms of the nineteen thirties. So you
Speaker 1: began to see things like Napoleon Hill, Think and Grow Rich.
Speaker 1: Sure that when that came out, people are living in
Speaker 1: Hooverville's And this book is a best seller. Right when
Speaker 1: did the Dale Carnegie books calls the nineties and a
Speaker 1: little bit before as well, but during the nineteen thirties
Speaker 1: and thinking, um, you know how to win friends and
Speaker 1: influence people. So but the thing is with all of
Speaker 1: this stuff is you need the story, right and the
Speaker 1: story is the story, and you have to somehow for
Speaker 1: the people who become the big financial gurus, they have
Speaker 1: the story of how they were lost and they were found.
Speaker 1: It's like St. Augustine, except for personal finance. So like
Speaker 1: Susie Ormond, for instance, So wait before you go into that.
Speaker 1: You have a beef with a number of gurus in
Speaker 1: Pound Foolish. You basically just caught her off at the knee.
Speaker 1: Susie Orman. What's your beef with Susie Orman? Susie ormand
Speaker 1: as all over the place she has given rampantly in
Speaker 1: consistent advice. Um, she can be very judgmental, which was
Speaker 1: not how she started. By the way, Susie Ormond comes
Speaker 1: out of the nineteen seventies and nineteen eighties Bay Area
Speaker 1: self actualization seed. Um you know, Um, I don't think
Speaker 1: she ever did asked, but somebody would have to ask
Speaker 1: her that she follows u or followed. I'm not sure
Speaker 1: what the correct answer to this is. Now a big
Speaker 1: yoga guru out there, and um, there's a lot of
Speaker 1: this sort of emotional money stuff, right. She sort of
Speaker 1: combines the personal finance of Sylvia Porter with the self
Speaker 1: actualization of the nineteen sixties and nineteen seventies, And which
Speaker 1: is why she's Susie Orman and everybody else is that
Speaker 1: nobody else ever thought to do this, And so it
Speaker 1: becomes this emotional money sort of how do you feel
Speaker 1: about it? Combined with tough love, and as you can imagine,
Speaker 1: since that doesn't sound very yeah, it becomes very inconsistent
Speaker 1: over time, basically, and but it reinvented personal finance. For
Speaker 1: the nineteen nineties. She started out doing an infomercial and
Speaker 1: financial television and Eventually the infomercial got so popular they
Speaker 1: offered her a show. Right she well, she you know,
Speaker 1: did a number of books. She I mean, to her credit,
Speaker 1: she hustled like crazy. I mean, it's not like she
Speaker 1: was found overnight. And she became a big star in
Speaker 1: part because women really liked this sort of you know,
Speaker 1: more emotional approach, less about you know, here's the five
Speaker 1: stocks you need, right, it was more about how you
Speaker 1: feel about your money, which was perfect in the nineteen nineties.
Speaker 1: So you're not a big fan of her as you
Speaker 1: think that herd if I'm I'm paraphrasing from the book.
Speaker 1: Some of the advice she gives is conflicted, some of
Speaker 1: its inconsistent. What's really your biggest beef with her? Before
Speaker 1: we go to the next two people? That's it, And
Speaker 1: there's a judgmental thing that has crept in over the years.
Speaker 1: So let's talk. Let's talk about Dave Ramsey because you
Speaker 1: haven't had kind things to say about Dave. Well, Dave
Speaker 1: is you know a guy, He's another one. He's got
Speaker 1: the story right, you know that Dave Ramsey's story is
Speaker 1: that he was a real estate wheeler and dealer in
Speaker 1: his early twenties, he gets it over his head and
Speaker 1: he has to declare bankruptcy. And then he decides to
Speaker 1: reinvent his personal financial life and he never takes credit again,
Speaker 1: which is apparently quite true, never uses credit at all. Right,
Speaker 1: he boys his house outright everything. By the way, there's
Speaker 1: not I have to say, there's nothing in the world
Speaker 1: wrong with a thirty year fixed mortgage, assuming you can
Speaker 1: afford it and the house. Yes, it's called leveraged money.
Speaker 1: It's a really great thing. And I would urge anybody
Speaker 1: who can come up with down payment to do it right,
Speaker 1: so as long as they think they're going to stay put.
Speaker 1: But that's a digression, right. So anyway, though, he gets
Speaker 1: on the air and he starts with a radio show
Speaker 1: as well, with the story, right, you know, I'm a
Speaker 1: former bankrupt I've been saved. Well, my other things is
Speaker 1: he says, nobody should be declaring bankruptcy, or almost no
Speaker 1: one should be declaring bankruptcy. But he declared, right, I mean,
Speaker 1: which is just utterly absurd. By the way, he is
Speaker 1: rapidly against the fdician. Well, he has the whole empire, right,
Speaker 1: he does. He has an advisory network that works to
Speaker 1: the to the suitability standard. He does load funds of
Speaker 1: more than five The last I might checked, I would
Speaker 1: have to double chees do insurance. He only does term insurance.
Speaker 1: Here's good things mean. I don't want to say he's
Speaker 1: totally awful, but more to the point, I think the
Speaker 1: thing that concerns me the most is people think of
Speaker 1: him as a simple personal finance scurrew. He's not. This
Speaker 1: is very political. Stuffy's conglomerate, and more than conglomerate, this
Speaker 1: is real political stuff. He gets on the air five
Speaker 1: days a week, five hundred plus stations, I believe, really
Speaker 1: five fifty right now. He says social Security is a debacle,
Speaker 1: he cannot stand um, the Affordable Care Act. He bashes Obama.
Speaker 1: I mean, I can go on about this. This is
Speaker 1: this is a lot of political stuff going on here.
Speaker 1: The very first column I wrote for the Washington Post
Speaker 1: was called was titled why investing in politics don't mix,
Speaker 1: Because once you're bringing in the emotions of politics, you're
Speaker 1: investing portfolio is just skewed. You lose the ability to
Speaker 1: be objective. And we saw it with people when Bush
Speaker 1: was in oh He's going to destroy the budget market
Speaker 1: doubled from OH three to o seven we saw with Obama,
Speaker 1: Oh nine famous wolfs Regeneral OpEd. Obama is going to
Speaker 1: destroy the DOAO and and then the S and P
Speaker 1: triples over the next seven years. It's a terrible way
Speaker 1: to think about money. Well, I would say there's another
Speaker 1: thing going on too, and I would agree with you.
Speaker 1: But there's another thing going on to right, which is
Speaker 1: again it's a lot of personal finance is kind of
Speaker 1: very subtly political. And it's political because it accepts the
Speaker 1: system as it is. It doesn't say, Allah of the
Speaker 1: early nineteen seventies, we really need to do a cost
Speaker 1: of living adjustment for social security. It puts the blame
Speaker 1: on the individual. Now, in many cases, this is like
Speaker 1: bailing out the Titanic with a bucket. I mean, it's
Speaker 1: not going to work, um, But it accepts the world
Speaker 1: as it is, and it then blames you, the individual
Speaker 1: who might be suffering from unemployment, who might be suffering
Speaker 1: from ill health, who might be forced to retire early
Speaker 1: and be suffering from age discrimination and not be able
Speaker 1: to get a job, who might be living in an
Speaker 1: area where housing still has not recovered in two thousand sixteen,
Speaker 1: It says the fault is yours. That you made the
Speaker 1: mistake and that there's nothing government can do. There is
Speaker 1: nothing to be done, and you're at fault and you
Speaker 1: should suffer. And that's my main beef with us. So
Speaker 1: so let's talk about one more guru. Robert Kayosaki. You've
Speaker 1: you've thrown him under the bus as well. I think
Speaker 1: a lot of people have thrown him under the bus,
Speaker 1: including Susie Ormond to her credit. Oh really, you know
Speaker 1: that there's some interesting Well you've written about some of
Speaker 1: the crazy bankruptcy litigation that happened. He's been wildly successful
Speaker 1: as a person who writes books and give seminars. Right. Well,
Speaker 1: he came up with this idea, this book called Rich Dad,
Speaker 1: Poor Dad, where he claimed he was mentored by a
Speaker 1: rich dad who, by the way, nobody has been able
Speaker 1: to prove existed, Um, you know, and rich Dad told
Speaker 1: him he should take leveraged money. So it's the opposite
Speaker 1: of Dave Ramsey, right, and you know, and by multiple
Speaker 1: homes and multiple investments and you know, be really wealthy.
Speaker 1: This is a sort of wealth grew thing. It's kind
Speaker 1: of the opposite. You know, people like Dave Ramsey and
Speaker 1: David Back came up with the latte factor are telling
Speaker 1: you to send factor. Was that a book? It was
Speaker 1: in the I don't think he ever wrote a book
Speaker 1: named that. Um it was. I'll come back to it
Speaker 1: in a minute. So anyway, but they're telling you to sacrifice, sacrifice, sacrifice,
Speaker 1: and you know, if you save your five dollars a day,
Speaker 1: you'll you'll retire with with millions of dollars. Kiyosaki is
Speaker 1: coming in it from the opposite perspective. He's basically saying,
Speaker 1: do what I'm telling you, you know, buy multiple properties
Speaker 1: or investments with borrowed money, and you could buy the
Speaker 1: you know, the coffee, the ground underneath the coffee shop,
Speaker 1: and have as many lattes as you desire, which and
Speaker 1: enough itself is you know, not unreasonable, like in terms
Speaker 1: of well, yeah, people deserve their latte, right, But at
Speaker 1: the same time, of course, this is wildly irresponsible. I mean,
Speaker 1: my favorite Kiyosaki of all time was and Chuck Jaffee
Speaker 1: caught this out at market Watch. I love his work,
Speaker 1: as I have to give credit for us. He caught
Speaker 1: him out once. Asked once telling people they could trade
Speaker 1: on margin at a brokerage where they didn't have money
Speaker 1: I'm that's absurd. Of course, you can't do that treade
Speaker 1: on margin and and and for people who may not
Speaker 1: be aware of the rules, margin is two to one
Speaker 1: of whatever dollars you have, So if you have zero
Speaker 1: two times zero is still zero. You can't really do that.
Speaker 1: You can put stock and you can put other things in,
Speaker 1: but there has to be some legitimate asset there. Right,
Speaker 1: I have a standing offer in my slate column. If
Speaker 1: anybody does this and it's successful, they should write me
Speaker 1: immediately and I will write a column about them. Um.
Speaker 1: At the same time, I will also write a column
Speaker 1: if you seriously call up your your brokerage and just
Speaker 1: ask and if you can tell me what the brokerage
Speaker 1: says to you, I'd like to put that the column too.
Speaker 1: So so Kaya, So we've talked just loosely about him,
Speaker 1: but you've written about this thing that took place with
Speaker 1: him and the people who were sponsoring him. There was
Speaker 1: a break and and what happened, Well, there's been a
Speaker 1: massive falling out between him and learning and learning. Do
Speaker 1: you guys remember the learning add extra, this big thing
Speaker 1: like you know, and fifteen twenty years ago we right,
Speaker 1: and um, they would like bring people in and they
Speaker 1: do lectures and whatnot, and so Kiyosaki actually they helped
Speaker 1: Kyosaki get his start as a big time guru. And
Speaker 1: then they were talking about doing these wealth seminars with him.
Speaker 1: Allah Trump University now right where you know, you bring
Speaker 1: people in and you say, you know, hey, spend thousand
Speaker 1: dollars this weekend in Kyosaki will tell you the secrets. Right,
Speaker 1: they they have these self appointed teachers. Well, Kiyosaki decided
Speaker 1: this was such a great idea. He ultimately found another
Speaker 1: partner to do it with, and not surprisingly, the Learning
Speaker 1: Addics got a little annoyed because they felt they brought
Speaker 1: the idea to him, and they sued him, and the
Speaker 1: courts eventually, after several years, ruled in the Learning Addics.
Speaker 1: Is between the two of them, Yes, it was, you know,
Speaker 1: ongoing conversations and anyway, So the next thing is that
Speaker 1: Kyosaki's business outfit that was negotiating with the Learning Addics
Speaker 1: declare his bankruptcy. So there's now a whole thing in
Speaker 1: Wyoming where there seems to be a case that is closed. Well,
Speaker 1: there is a case that is closed to the public
Speaker 1: that seems to be about where Kyosaki's money is. We
Speaker 1: don't really know for sure that that's what it's like
Speaker 1: twenty something. By the way, I don't know if if
Speaker 1: there was a contract, I don't know how much it is.
Speaker 1: I'm doing this off the top of my head. Memories
Speaker 1: implies it was about four million dollars. I think it
Speaker 1: might have been. But it's a big chunk of money.
Speaker 1: It's a huge chunk of money, and every there's some
Speaker 1: underlying I don't remember it was a contract relationship, but
Speaker 1: some basis that the learning annex actually rings the court
Speaker 1: case right, which leads to the bank corporate. I don't
Speaker 1: believe there was a contract. I believe there was conversations
Speaker 1: and emails and such. That's interesting, um, but I would
Speaker 1: have to double check that actually, And yeah, so this
Speaker 1: is what's going on now, and there's movements in this
Speaker 1: Wyom case. Um learning Um is it the learning addicts
Speaker 1: People have sued to get the case opened up basically
Speaker 1: learning addics once the case opened up to the public,
Speaker 1: so that they can see what on earth is going
Speaker 1: on here, if indeed that is what's going on. Nobody
Speaker 1: really was the basis of closing this is in a
Speaker 1: child case with a child or anything. Why would this
Speaker 1: be sealed? We don't know because it's sealed. That's fascinating.
Speaker 1: So but I don't want people to think we're just
Speaker 1: trashing Dave Ramsey, Susie Orman, Robert Kayasaki. There are people
Speaker 1: who genuinely like what they say, who've benefited and learned
Speaker 1: from them. But you raise some very credible issues as
Speaker 1: to some problems with the advice they offer or some
Speaker 1: of the conflicts conflicts they have. I only have you
Speaker 1: for another ten minutes, and we could talk about these
Speaker 1: guys and others for hours. So I want to get
Speaker 1: to some of my favorite questions with you that I
Speaker 1: asked all my guests, and I'm gonna do the abbreviated
Speaker 1: version before they throw us out of here. Um. So,
Speaker 1: who are your early mentors? How did you who helped
Speaker 1: shape your worldview? Oh? Goodness, UM, I was always a reader, right, Um,
Speaker 1: But that's my next question. I was. I was research
Speaker 1: assistant for walt BYG. Danitch, who's now at The New
Speaker 1: York Times and is either on his third or fourth Pulitzer.
Speaker 1: I'm forgetting which he has so many Pulitzer He was amazing, um.
Speaker 1: And one of the things he taught me, of course,
Speaker 1: was the idea of don't be afraid of silence. Right
Speaker 1: when you're interviewing someone, just let them talk like if
Speaker 1: they The natural inclination of people is to fill the
Speaker 1: silence and that's how they bill their guts. So he
Speaker 1: was a huge mentor to mate. Um and then I
Speaker 1: UM in personal finance. I mean I was at the
Speaker 1: l A Times, which you know, really had had Kathy
Speaker 1: Christoph who took over Sylvia Porter's column real died. I
Speaker 1: had Liz Weston who now writes for Nerd Wallet. Um,
Speaker 1: I had amazing people. To this day, the LA Times
Speaker 1: has amazing people. Um. Lazarus is there and Mike Kiltzic
Speaker 1: his work is They're both fantastic. Um. Lazarus. By the way,
Speaker 1: I just have to say this wrote the great great
Speaker 1: piece on Trump University in two thousand and seven. Really,
Speaker 1: you have eight years ago, nine years ago, and it
Speaker 1: is still an amazing place for this sort of writing. Um.
Speaker 1: So let's go to let's go fast forward to books.
Speaker 1: What are some of your favorite books, be it fiction
Speaker 1: or nonfiction, finance related or not. Um. Oh god, I
Speaker 1: was just thinking about this the other night because I
Speaker 1: was like he's going to ask me about books and money, right,
Speaker 1: doesn't have to be money. It could be it could
Speaker 1: be the Bronte system, whatever you like. I love a
Speaker 1: Tree Grose in Brooklyn. That was one of my favorite
Speaker 1: books when I was growing up way back, which is
Speaker 1: about money. Um. I think everybody should read it. Um.
Speaker 1: One of the many things I at least reference it
Speaker 1: at least once a year in a column. Um. It's
Speaker 1: a poor girl growing up in Williamsburg. And it basically
Speaker 1: shows how this isn't why I love it, mind you.
Speaker 1: I love it for lots of reasons, but basically shows
Speaker 1: a lot of the lie of personal finance in it
Speaker 1: because one of the things that's going on in the
Speaker 1: book is the fact that the mom is trying to
Speaker 1: save money to buy land and they have a little
Speaker 1: bank because of course in those days, uh, poor people
Speaker 1: didn't have bank accounts. They have a can in the
Speaker 1: closet that they put money in, and they're always having
Speaker 1: to rate it. I mean, it's just ridiculous. And they
Speaker 1: finally end it when they're dead broke, after the father
Speaker 1: dies and they have to pay to have him buried
Speaker 1: and the mother and the mother looks at them ironically
Speaker 1: and says, well, we have our bit of land. Now.
Speaker 1: I never thought of that as a personal finance parable.
Speaker 1: But now that you say that, it reveals itself in
Speaker 1: a small way that in that in that direction. What
Speaker 1: other book, um, would you like to mention? What other books?
Speaker 1: I love books about New York or l A. Um.
Speaker 1: I lived in l A for a long time, so
Speaker 1: aside from Chinatown about New York that you like New York?
Speaker 1: Let the Great World Spin, which is about the trade
Speaker 1: center building being built in the seventies. Claire suits that
Speaker 1: I pronounced her name right. The Emperor's Children, which is
Speaker 1: about New York, also on the verge of of the
Speaker 1: Tree of what Happened at nine eleven, But it's really
Speaker 1: about how the money class took over from the literary
Speaker 1: class in New York. It's a really brilliant book about that.
Speaker 1: People don't realize that. About help. What's the name of
Speaker 1: that again? The Emperor's Children? The Emperor's Children? UM, give
Speaker 1: me one more, give me one more. I've got to
Speaker 1: think about this. UM. I love history. UM, what's the
Speaker 1: best biography you've read recently? I wouldn't say biography. What
Speaker 1: I would say one of the great historical works of
Speaker 1: all time is um John Demos is The Unredeemed Captive,
Speaker 1: about a girl who is kidnapped by the Indians in
Speaker 1: the early seventeen hundreds in New England and refuses to
Speaker 1: come home. Huh, The Unredeemed Captive. And it's a great,
Speaker 1: great book about American life. So let me ask you
Speaker 1: a question about personal finance, Uh, journalism. What do you
Speaker 1: see as changing in that space since you began covering
Speaker 1: that lo these twenty years ago. I don't think it
Speaker 1: much has changed. I think there's some great, great stuff
Speaker 1: that's done at the l A Times, at the New
Speaker 1: York Times, the Wall Street Journal, Um, but I think
Speaker 1: most of it has remained not particularly very good. Um.
Speaker 1: I think there's a lot of judgment. There's a lot
Speaker 1: of scolding. If anything, the Internet has made that worse
Speaker 1: because there's just this reflexive instinct now to just throw
Speaker 1: everything up there. So these scolding things get put up constantly.
Speaker 1: Americans aren't saving enough for retirement, you know, Americans, you
Speaker 1: need to save more money. Not this thoughtful. Well, why
Speaker 1: aren't people saving more money for Retire's a bigger and
Speaker 1: it's just totally neglected and I guess the last thing
Speaker 1: I'll say is this is in keeping with the history
Speaker 1: of personal finance reporting the if you study this, and
Speaker 1: I want to credit Trudy Lieberman at c JR, who's
Speaker 1: really written about this extensively. Personal finance writing became very
Speaker 1: big in the sixties and seventies as an offshoot of
Speaker 1: the consumer movement, and it was initially seen by newspapers
Speaker 1: as a way around some of the problems of the
Speaker 1: consumer movement had given them advertising objections, right with cars
Speaker 1: in particular, car dealers were very angry, so they thought, oh, well,
Speaker 1: write about this personal finance stuff and it'll be a
Speaker 1: way of giving people some hard hitting consumer coverage and
Speaker 1: their money and still get advertising dollars, right, and still
Speaker 1: get advertising dollars. But they didn't realize because they just
Speaker 1: thought they were still thinking car dealerships and department stores.
Speaker 1: But they didn't realize was how big the financial services
Speaker 1: sector would be common advertising and what a conflict of
Speaker 1: interest that would ultimately cause on the consumer side. And
Speaker 1: I think some of what he writes is of value.
Speaker 1: There's a guy called Mr money Mustache, and his whole
Speaker 1: stick is if you save up enough money when you're early,
Speaker 1: you could retire at filling the blank and enjoy your life.
Speaker 1: And where I agree with him, it's not so much
Speaker 1: on these self deprivation, no lats, no this, no. That
Speaker 1: is that we have this blind fealty to consumerism. And look,
Speaker 1: I'm a consumer, but it's not what drives me. And
Speaker 1: I think people are somewhat just stumbling into spending money
Speaker 1: without thinking about it. And he raises that issue in
Speaker 1: a way that I think is very but again, that's
Speaker 1: not most people's problem. Most people's problems they can't keep
Speaker 1: up in the society because their incomes are stagnating while
Speaker 1: costs are going up. What I would say is, we're
Speaker 1: not talking about iPhones and iPads. We're talking about healthcare
Speaker 1: in college, right, And what I would say is, I
Speaker 1: think Mr money Mustache makes a very valuable argument about
Speaker 1: how you can be tied to jobs that you hate,
Speaker 1: and that you need to think about this because I
Speaker 1: think that is a huge problem in our society, right,
Speaker 1: that people really feel trapped. But I think his answer
Speaker 1: it just simply blaming the consumerism, is completely and utterly wrong.
Speaker 1: What you really need to say is why don't we
Speaker 1: have single pay or healthcare? Why don't we, you know,
Speaker 1: help people have some sort of base income if that's
Speaker 1: what you believe in, UM, Why or why don't we
Speaker 1: support people having children? Why do we only revere children
Speaker 1: as long as they're in the womb and then the
Speaker 1: day they come out. No, there's no support whatsoever. Only
Speaker 1: industrialized country with no paid maternity leave. That's us, right,
Speaker 1: I mean it's and to me, I would take what
Speaker 1: he's saying a lot more seriously if he would start
Speaker 1: pounding on those topics. All right, So, now a millennial
Speaker 1: comes to you when they say, I'm thinking about going
Speaker 1: into journalism, personal finance, what have you? What sort of
Speaker 1: advice do you give them? There's no operating business model
Speaker 1: in journalism. Don't go into it. Of course I tell
Speaker 1: them not to do it. Really, Yeah, there's no operating
Speaker 1: business model here. No, the business model is simple, have
Speaker 1: an expensive terminal adjacent to your your journalism, and there's
Speaker 1: plenty money for everybody. The amount of jobs in journalism
Speaker 1: has fallen by a huge percentage since I got into
Speaker 1: it in the late eighties. Early it has fallen even
Speaker 1: more significantly. You know, since two thousand, UM, nobody has
Speaker 1: worked out a sustainable model that I am aware of
Speaker 1: accept online um and I basically aside from basically a
Speaker 1: business in but I just got sold. They're not making money.
Speaker 1: Did you see their losses? Yeah, well my point right,
Speaker 1: as far as I could tell that the main model
Speaker 1: that's going on here is one of two things is
Speaker 1: what I call either rich guy with hobby and that
Speaker 1: means somebody who wants to support journalism for whatever. The
Speaker 1: Guardian has a huge, huge and then the same thing
Speaker 1: with the Pro Publica right, that's rich guy with hobby, right.
Speaker 1: And then the other, of course Washington Post, right, is
Speaker 1: you know, selling some service with it um like Bloomberg
Speaker 1: or third I'm sorry, there's one other and that is
Speaker 1: venture money like BuzzFeed or Fox. And we really have
Speaker 1: no idea what's going on at those diseases right now.
Speaker 1: Aren't making money, but we don't know so so really,
Speaker 1: you have the Wall Street Journal in the New York Times.
Speaker 1: I believe both of those are fairly profitable there massive
Speaker 1: both of them are under severe constraints. They took on
Speaker 1: too much debt. See it's their own fault. No, they're
Speaker 1: dealing with the fact that the print is still bringing
Speaker 1: in most of the profits. But in fact, the move
Speaker 1: is towards digital and nobody seems to know how to
Speaker 1: deal with this. There is no one has come up
Speaker 1: with an answer to this yet. So your advice is don't.
Speaker 1: My advice is don't. And then the less less you
Speaker 1: have an independent source of income. If you have an
Speaker 1: independent source of income, my advice is, it's a great job.
Speaker 1: I love it. Do it. And then the last question
Speaker 1: I have for you, what is it that you know
Speaker 1: about the personal finance journalism industry today that you wish
Speaker 1: you knew when you started out twenty years ago? Oh?
Speaker 1: Just how in the pocket of the financial services sector
Speaker 1: so much of it is. It didn't even occur to
Speaker 1: me when I first got into it at all. How
Speaker 1: long did it take before that, actually you came to
Speaker 1: that realism. It's a gradual realization over a number of years.
Speaker 1: I don't think I had a moment where I woke
Speaker 1: up and said, oh my god, this is awful. But
Speaker 1: what I do remember is even when I was doing
Speaker 1: money makeover, I remember the thought would creep into my hat,
Speaker 1: like the stock market, this is really for rich people
Speaker 1: like this, Like it wasn't just that, like ten dollars
Speaker 1: really can't turn into a million dollars. It was worth
Speaker 1: this idea. Yeah, that I understood instinctively that this was
Speaker 1: going to be careening all over the place, and that
Speaker 1: you know this idea that well, what if it doesn't
Speaker 1: go up. At the time, they were claiming ten percent
Speaker 1: after janual returned, as you might remember with dividends reinvestor, right,
Speaker 1: and I was like, well, what if it doesn't go
Speaker 1: up like that? And one of the issues that has
Speaker 1: actually crept in is one of the reasons the number
Speaker 1: is going down now is because dividends have been cutting
Speaker 1: more than in cut in half since the early nineteen eighties.
Speaker 1: You've seen much more buybacks increases than you've seen dividends.
Speaker 1: When dividends or something that are far more valuable to
Speaker 1: an investor, especially a long term investor, than a stock
Speaker 1: by well, that's part of the issue, right, The dividends
Speaker 1: are a huge value to long term investors or people
Speaker 1: who need money for it. From this Hello, this has
Speaker 1: been fantastic. Thank you for being so generous with your time.
Speaker 1: I want to thank Michael bat Nick, my head of research,
Speaker 1: for helping me do the deep dive here. Taylor Riggs
Speaker 1: is our producer Slash booker along with Charlie Vollmer, my
Speaker 1: recording engineer Mark. If you've enjoyed this conversation, be sure
Speaker 1: and looked up an Inch or down an inch on
Speaker 1: iTunes and you could see the other eighties six or
Speaker 1: so such conversations we've had over the past two years.
Speaker 1: I'm Barry Ridhults. You're listening to Masters in Business on
Speaker 1: Bloomberg Radio.