Speaker 1: Bloomberg Audio Studios, podcasts, radio news, Feeling good that guy.
Speaker 2: Said around the neighborhood.
Speaker 3: Everyone on Wall Street is looking for an edge. We
Speaker 3: deploy quant models, higher analysts, one various simulations, all to
Speaker 3: gain the slightest advantage that might be worth a few
Speaker 3: basis points.
Speaker 1: Over a year.
Speaker 4: But what if you were overlooking a giant source of alpha.
Speaker 4: I'm Barry rid Holtson on today's edition of At the Money.
Speaker 4: We're going to discuss how Wall Street has been using
Speaker 4: personal health to gain a competitive advantage. To help us
Speaker 4: understand all of this and its implications for your portfolio,
Speaker 4: spring in Phil Perlman. Previously he served as executive editor
Speaker 4: at stock Twitz and was chief behavioral Officer at the
Speaker 4: Bank of Jozarks. Today he runs the Pearl Institute, focusing
Speaker 4: on personal health and the process of making effective change. So, Phil,
Speaker 4: let's just start with a basic question. What is fitness? Alpha?
Speaker 1: Phinis alfa is a model of performance.
Speaker 5: And we can derive alpha in markets from so many
Speaker 5: different areas. And you know, just as a very brief
Speaker 5: primer for those who might not know, alpha is this
Speaker 5: idea of how much we outperform. So if our benchmark
Speaker 5: is the S and P five hundred. We're a money manager,
Speaker 5: and we make twenty five percent in a year when
Speaker 5: the market's up twenty percent, that's five percent of alpha,
Speaker 5: and so forth if we're if we're up fifteen percent,
Speaker 5: that's five percent of negative alpha if the market's up
Speaker 5: twenty percent. And so where do you get the alpha from?
Speaker 5: And you know, do you get it from information? Do
Speaker 5: you get it from having a certain model. There's different sources,
Speaker 5: and there's one source that is just a very simple
Speaker 5: source of alpha that nobody is talking about. Nobody has
Speaker 5: ever talked about it, and it's basically the outperformance we
Speaker 5: derive from our health. The healthier we get, the better
Speaker 5: we perform across multiple areas of function.
Speaker 4: So give us a few examples of some of those
Speaker 4: multiple functions that create an advantage in the financial marketplace.
Speaker 5: Well, markets are a competitive endeavor, and we know from
Speaker 5: years of research that health the better, the more healthy
Speaker 5: we get, the better we perform across multiple areas of function,
Speaker 5: included stress tolerance. Right, so the markets are stressful twenty
Speaker 5: twenty two. Anybody who's involved with markets for years, think
Speaker 5: of twenty twenty two for one moment, and you know
Speaker 5: it was a stressful time, and bear markets occur periodically,
Speaker 5: I don't know, every five or six years, And so
Speaker 5: when we have bear markets and we're able to tolerate
Speaker 5: stress more adaptively, our performance will improve, not only stress tolerance,
Speaker 5: but emotional regulation and emotional control. How we're able to
Speaker 5: control our emotions, how we're able to cope with our emotions.
Speaker 5: Do they affect us behaviorally? Do we go on tilt
Speaker 5: or do we remain rational during volatile periods?
Speaker 4: This sounds like you're referring to fitness. Alpha helps you
Speaker 4: make better decisions, especially in times of volatility.
Speaker 5: Absolutely, And there are so many different areas. For example,
Speaker 5: stamina and resilience, right, I mean, money managers have pressure
Speaker 5: even during bull markets because everybody's sort of chasing returns
Speaker 5: and that is a stressor. So it's not just during
Speaker 5: periods of volatility in bear markets. You get it in
Speaker 5: bull markets alike. And our ability to bounce back. So,
Speaker 5: just to go back to your other question, there's so
Speaker 5: many different areas, and that's why I'm harping on it.
Speaker 1: Resilience. We bounce back better.
Speaker 5: The healthier that we get, we recuperate faster, we're able
Speaker 5: to stay focused longer long days. We could put in
Speaker 5: long days after long days. Our charisma, our self confidence,
Speaker 5: and the way we are perceived by others.
Speaker 4: You and I have spoken about this previously, and you
Speaker 4: have mentioned that this has quietly become a thing on
Speaker 4: Wall Street. More trading desks, more funds are internally discussing fitness. Alpha.
Speaker 4: Explain a little bit about what's happening on the street.
Speaker 5: Well, you know, there was a moment, you know, and
Speaker 5: this goes back thirty some odd years, but there was
Speaker 5: a moment when Tiger Woods won the Masters.
Speaker 1: He changed the game of.
Speaker 5: Golf forever, because before Tiger Woods, none of the golfers
Speaker 5: really thought about their physical health. And all of a sudden,
Speaker 5: here comes a young golfer who's in better shape than
Speaker 5: anybody else out there, and he's crushing the ball and
Speaker 5: he is able to manage his emotional world, his stress,
Speaker 5: and stay ice cold even with the greatest pressure on him.
Speaker 1: And after Tiger Woods, now you go and you look
Speaker 1: at the tour.
Speaker 5: Almost everybody is in incredible conditioning, and so you're starting
Speaker 5: to really see something similar to that happen on Wall Street,
Speaker 5: especially at the highest tiers and in the hedge fund industry.
Speaker 5: I've had numerous clients who've come to me with metabolic
Speaker 5: health problems with alcohol and other substance problems, and they
Speaker 5: begin to get those under control, and then all of
Speaker 5: a sudden, they have more energy, They bounce back quicker,
Speaker 5: their resilience improves, and they're performing better and feeling like
Speaker 5: it's a more sustainable thing than being day to day
Speaker 5: and hour to hour.
Speaker 4: So let's talk about some of the areas of health
Speaker 4: that you focus on. You touched on drinking, you touched
Speaker 4: on metabolism, which I assume involves nutrition. What are the
Speaker 4: areas that you can derive fitness alpha from.
Speaker 5: Well, here's the thing about that, I'd like to keep
Speaker 5: things really, really simple. Okay, And if you go out there,
Speaker 5: there's a thousand books and there's ten thousand hours of
Speaker 5: podcasts focusing on health and well being these days, and
Speaker 5: they get very very granular, and there's a lot of
Speaker 5: debates and arguments, and you know, mitochondria and VO two max,
Speaker 5: and there's a thousand buzzwords.
Speaker 1: I like to keep it very, very simple.
Speaker 5: And from my point of view, there are four elements
Speaker 5: of health that we can focus on, and if we
Speaker 5: can just get a little bit better.
Speaker 1: We don't have to get one percent better every day.
Speaker 5: We could just get five percent better a year, and
Speaker 5: if we do that year after year. And those four areas,
Speaker 5: those four elements of good health are nutrition, what we
Speaker 5: put into the only body that we are ever issued.
Speaker 1: On this earth.
Speaker 5: Body, movement, which is exercise, which includes cardiovascular you know,
Speaker 5: aerobic exercise and also anaerobic exercise or resistance training.
Speaker 1: It also includes sleep.
Speaker 5: And rest and how we allow our bodies to heal
Speaker 5: over time, whether that's sleeping or whether that's taking a
Speaker 5: day off or two if we're injured. And social and
Speaker 5: family and love.
Speaker 1: And that's the fourth one.
Speaker 5: It's a very surprising one when I mentioned that, but
Speaker 5: huge alpha in a relationship and love.
Speaker 4: Focus, sleep, nutrition, exercise, social, all right, so those are
Speaker 4: the four big areas. So within those four areas, someone
Speaker 4: listening to this, whether they're a trade or a fund manager,
Speaker 4: or driving a truck or working in a retail store,
Speaker 4: what do they need to do to generate that performance boost,
Speaker 4: to generate that fitstness alpha in those four areas?
Speaker 5: Well, all you have to do is get a little
Speaker 5: bit better at a time. All you have to do
Speaker 5: is get incrementally better over time. You don't have to
Speaker 5: try to blow the lights out.
Speaker 1: Hey, I'm going to.
Speaker 5: Start exercises six times a day, I'm going to completely
Speaker 5: change my diet. I'm gonna do all these things. You
Speaker 5: don't have to get super duper god. And I would
Speaker 5: say that for each person there is a gateway drug
Speaker 5: in a good way, you know, not a gateway bad drug,
Speaker 5: but a gateway good drug. There's a place to start,
Speaker 5: and it really there's individual differences and it's dependent on
Speaker 5: the person.
Speaker 1: I'll give you a few examples.
Speaker 5: If you have somebody who really does not move their
Speaker 5: body and they're gaining weight over the years, begin to
Speaker 5: move your body, and that can be as simple as
Speaker 5: just walking. Walking is an incredible thing. You get outside,
Speaker 5: you get into the fresh air, maybe you turn notifications
Speaker 5: off on your phone, and you just begin to get
Speaker 5: the blood flowing and the body movement. For other people, hey,
Speaker 5: you might.
Speaker 1: Have people who love food, who are good cooks.
Speaker 5: Maybe their gateway drug is to say, hey, I'm going
Speaker 5: to really begin this by focusing on my nutrition. And
Speaker 5: you don't have to do anything fancy there. You could
Speaker 5: keep it stupid simple there too, and just start eating
Speaker 5: real foods with very few ingredients, and staying away from
Speaker 5: ultraprocessed foods, and staying away from foods that have a
Speaker 5: lot of added sugar. The one other thing that I
Speaker 5: thought of when you asked me that question was this
Speaker 5: that I find that substance abuse and alcohol abuse is
Speaker 5: very prominent in our culture, and extremely prominent among professional
Speaker 5: market participants. And we know, especially as we age, that
Speaker 5: alcohol and other substances affect our performance and affect our
Speaker 5: brains very very significantly. And so if you could get
Speaker 5: a handle on that, that would be another fantastic gateway.
Speaker 4: So let's say we all start moving a little more,
Speaker 4: we start eating better, we cut the cigarettes and that
Speaker 4: glass of wine with dinner. How does that show up
Speaker 4: in our portfolios? What sort of advance occrue to us?
Speaker 5: Well, it begins with executive functioning, and it begins with
Speaker 5: decision making. And this is a direct relationship to the
Speaker 5: ideas coming from behavioral economics, and this idea that we
Speaker 5: are not always rational decision makers. And the better you know,
Speaker 5: I always use I always. Whenever I hear the word rational,
Speaker 5: I substitute the word wise. Right, So we are not
Speaker 5: always wise decision makers and We know that the average
Speaker 5: human suffers from loss aversion, and we know that there's
Speaker 5: anxiety related to losses especially, and so when we are
Speaker 5: even incrementally improving our ability to make decisions, to make
Speaker 5: wise decisions, that's really where we experience alpha. Where we
Speaker 5: make better decisions that affect our portfolio, that prove our performance.
Speaker 4: And are there any fringe benefits to this besides just
Speaker 4: improving our portfolios?
Speaker 5: Well, that's actually a beautiful question because I'm actually flipping
Speaker 5: the primary use case. You know, when people talk about
Speaker 5: getting healthier, they're not talking about improving your portfolio, they're
Speaker 5: talking about extending your life and staying healthy for longer,
Speaker 5: and improving your mood and improving your relationships and improving
Speaker 5: your quality of life. And so really the fringe benefits
Speaker 5: are just incredibly central, and some would argue primary. I mean,
Speaker 5: let's say if you were not an investor or a
Speaker 5: market participant, and I was talking to you about this,
Speaker 5: I would be making the same exact case related to, hey, well,
Speaker 5: wouldn't you, like, you know, we're only here once, wouldn't
Speaker 5: you like to stay healthier longer and so that you
Speaker 5: can enjoy life for a longer period of time.
Speaker 4: So this sounds like this is not just for Wall
Speaker 4: Street cres and fund managers. Fitness Alpha sounds like it
Speaker 4: could apply to just about everybody.
Speaker 5: I built this model from my own experience, Barry. I
Speaker 5: was not a healthy person, and I was kind of
Speaker 5: faking it. Like I was performing well enough professionally that
Speaker 5: I was getting by and I was making some money,
Speaker 5: but I was not thriving. And I started to get
Speaker 5: myself healthy and I started to experience this, Wow, I
Speaker 5: have more energy.
Speaker 4: I want to interrupt you because I want people to
Speaker 4: realize back in the day, you were considerably heavier, You
Speaker 4: were a big drinker. You were not in any sort
Speaker 4: of shape other than round round as a shape, but
Speaker 4: you were, you know, you were struggling. Tell us a
Speaker 4: little bit about that aha moment, and tell us what
Speaker 4: you accomplished.
Speaker 5: You know, I'm like hair Club for men, remember that commercial,
Speaker 5: the Hairclub for Men guy. I used the product myself,
Speaker 5: so I bought the company. You know, I mean, I
Speaker 5: got myself healthy, and I was kind of you know,
Speaker 5: I was kind of faking it. I was an executive
Speaker 5: within the financial services space, and I was miserable, traveling
Speaker 5: too much, drinking too much not moving my body. When
Speaker 5: I was twelve years old, fifteen years old, I was
Speaker 5: an athlete, but I had gotten so far away from
Speaker 5: who I was. You know, there's this idea in Buddhism
Speaker 5: of enlightenment. This one great author once said that enlightenment
Speaker 5: is nothing mysterious, It's really just rediscovering who you always were.
Speaker 5: And so I felt like as I started really getting healthy,
Speaker 5: getting my mind and body in shape, and that I
Speaker 5: started really rediscovering who I was, getting back to me,
Speaker 5: and lo and behold, I started performing better across all
Speaker 5: aspects of my life.
Speaker 4: So, to wrap up, fitness, alpha is how Wall Street
Speaker 4: finds yet another edge to enhance their performance. But it's
Speaker 4: not just for Wall Street professionals. We sleep better, we
Speaker 4: eat better, we move, we have better social relationships. Not
Speaker 4: only does that show up in our portfolios, but it
Speaker 4: also shows up in extended lifespans and healthier for longer
Speaker 4: as part of your alpha. I'm Barry Retolts and you're
Speaker 4: listening to Bloomberg's at the Money.
Speaker 1: Hey feeling good?
Speaker 2: Like I said, Ben in the Blue are around the
Speaker 2: neighborhood feeling blessed? Nevers on Sunday be