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