129 - Optimizing for Happiness w/ Jared Dillian

All right, guys, on today's episode of The Trade Busters Podcast, we got something a little different today. I have with me here, Jared Dillian. He is the author of the new book, No worries, How to Live a Stress-Free Financial Life. He's also the writer behind the Daily Dirtnap and admittedly, Jared, I actually found out about you. I hadn't been following you, but found out about you because you certainly appeared on a bunch of the podcasts. I follow the Mad Favourite Show, Infinite Loops, Wall Street Coach, and I think it was around the time you're basically talking about a new book. And a lot of the ideas that you mentioned really resonate with what we do. For my podcast, it's more of an educational outreach related to retail trading, options trading, and I know some of these things. Admittedly, in the book, you kind of don't even focus that much on because you kind of want people to take a simpler approach. You know, we're getting to the awesome portfolio and all that. But again, your approach to teaching, which is about mindset, which I think makes a lot of difference and what something I always harp on. So a lot of ideas are kind of parallel, even though they may not necessarily 100% agree. But with that said, thank you for coming on The Trade Buster today to kind of talk about your ideas. Yeah, absolutely. Thanks for having me. Yeah, so why don't we start off, but why don't you talk a little bit first about your background, how you came to write this book. And I guess a little bit about your newsletter as well, because again, I don't follow that, but some of my audience might be interested to dig into that a bit. Sure. Went to the Coast Guard Academy, graduated from the Coast Guard Academy with a degree in math, went out into the fleet, spent five years in the Coast Guard. I was in the Coast Guard. I got an MBA part time from the University of San Francisco, worked on the P Coast Options Exchange for a couple of years. And then I went to Lehman Brothers, wasn't Lehman Brothers for seven years. I ran the ETF trading desk. And then at the bankruptcy, I left and started the daily dirt nap, which is my newsletter. And that was in 2008. So I've been doing that for 16 years. And along the way, I've written a bunch of books Street Freak came out in 2011, then I had a novel, all the evil of this world in 2016, then those bastards came out in 2023 and no worries in 2024. I was also a columnist for forms for a couple of years and for Bloomberg opinion for five and a half years. So this book, no worries. Can you tell a little bit about what kind of prompted you to write this, because how to live a stress-free financial life. And one thing you really point out in the book is sort of optimizing for happiness, right? You even send a book. It's not a book about getting rich. It's not necessarily about getting wealthy. Well, I guess it depends on what you think might as well, because sometimes happiness is wealth, but really the focus is on being stress-free and happy. So why did you see a need for this book? Well, around 2018, I was reading all the other classics and personal finance, like Rich Dad, Poor Dad, and the millionaire next door and stuff like that. And what I found is that they were really focused on how to make the most money, but they were causing people to do things, which would dramatically increase their stress level. So I also had a radio show for a couple of years, and I used to take callers, and I found that people had a lot of stress when it came to money. So that's really the genesis of it. I thought that this was a better approach. I mean, the goal is to be happy, and sometimes more money means more happiness, but that's not always the case, but the goal is to be happy with your financial situation. So, like I just said, you mentioned money can't lead to happiness. It doesn't always, but setting that aside, you know, in your book, you kind of have four main sections, and the first one is really about the attitude. And being that if you want to make money, you kind of take this approach that a lot of people, you kind of have to take the reins, right? People who don't make money sometimes, it's more about the mindset and the hunger. And you basically say, you can make as much as you want, right? Can you talk a little bit about that? What does that mean? And what do you say that? Well, that's, you know, the first part of the book is the most important part of the book, and I'm actually not a big fan of the word mindset. It's kind of a very fashionable word these days. You know, I look at it in terms of principles. But really, like a lot of people, if you're working in a job and you're making $60,000 a year, and you probably think that's the money that you make, and there's nothing else you can do. There's 24 hours in the day. You're asleep for eight of them, you're working for eight of them, but there's eight more hours, which you can use to make money. And, you know, people have time, you know, so there's a lot of things you can do, you can get a raise, you can work a second job, you can work longer hours, you can start a business, you can do passive income. There's all sorts of things that you can do to make more money. And the thing about making more money is that it's a lot more fun than cutting expenses, right? So, for somebody who's making $60,000 a year, and they say, gee, whiz, like, I've got a, I've got a cut expenses by $2,000 or $3,000 or $5,000, so they start cutting out any luxury they have in their life and they're miserable. You know, the elegant solution to the problem of not having enough money is to make more money and making more money is a lot more fun than cutting expenses. Well, they're on the note of making money. All right, there's, of course, it sounds nice. Go make more money, but then the question is like, how, right, and you have a section, what is your, what is your approach or kind of ideas behind a scalable business? What is that and why try to take the approach of going into a scalable business? Well, I mean, I think scalable businesses are the best in a financial newsletter is the most scalable business in the world, right? It takes the same amount of effort to write one copy is 5,000 copies. So there's not much in the way of overhead. You have super high margins. I'm a big fan of high margin businesses. Those tend to be the best. You know, even a, even a business like Facebook, like Facebook is a very scalable business. The program works the same with one user as it does with three billion users, you know? So yeah, and interestingly, and I know you made a hundred percent agree with this, but just because of the difficulty, but trading, right, kind of is a skill of business. Oh, absolutely. Yeah, but the big challenge is, you know, like the cliche 99% of people basically fail at trying to trade for living, but, but that's an idea. And I think there's kind of why that dream or people always chased out of like, hey, they trading where I can go, you know, take my laptop somewhere and make money. And finally scale might income just through trading. Yeah, but yeah, the idea of scalability definitely kind of resonates. So, you know, what I liked about your book, first of all, it's very approachable, very readable, but also I find it very actionable, kind of in the simplicity of the recommendations and suggestions. And so you kind of break down, like you mentioned the source of stress, right? You break it into big things, debt and risk. So why don't you talk about why why you see those two as the main two factors that people have stress? Yeah, those those are the two sources of and stress and a lot of people think that not having enough money is a source of financial stress, but it really isn't. You know, I know a lot of people who don't have a lot of money, but they have no debt, they have no risk in the financial markets. All their basic needs are met. They may be living paycheck to paycheck, but if they have an emergency fund, there's nothing to worry about. And they're totally happy. And on the other end, you have billionaires who use a lot of leverage and find themselves in situations where they're out over their skis. And even somebody who's a billionaire can experience a lot of financial stress. So it's not related to how much money you have at all. Yeah, yeah, definitely. So again, I know you don't use the word mindset, but it's more about kind of, I don't know, the attitude you take towards it, or maybe perspective, or maybe kind of sort of reframing the problem. It's not always about when you can kind of simplify and identify the two main things that are kind of causing grief, then you can kind of focus on that. And sort of related, one thing you mentioned is to focus on the revenue side. Can you tell about that and why that's a little different than how most people learn approach that in risk? Yeah, I mean, there's a whole chapter in the book called the revenue side. What the revenue side talks about is you can make a lot more progress financially. If you focus on the revenue side rather than the expense side, and one of the examples I used in the book was when I was 25, 26 years old. And I was making $45,000 a year, and you know, I wanted some more money. So I said, look, like I can cut maybe $2,000 in expenses, which is going to be miserable. I can do that. Or I can go get a job that makes more money. So I went to work on Wall Street, and I, you know, my income basically went 20x. And that turned out to be the smart thing to do, you know. So the revenue side is always more powerful than the expense side. This kind of reminds me a bit. And again, being a trader and dealing with probabilities. The idea of asymmetric payouts, right? And you kind of want to position yourself or do something with opportunities where you have more. You know, more opportunity on the upside and the downside, kind of like you said, you can always go make more money. You can only get so far cutting expenses, right? At the end of the day, like, you can't cut expenses to zero. But at the same time, I think you use the example of like, how much can you save by like not buying that Starbucks, right? Versus going out and like I said, doing a scalable business or earning extra income. Is that is that related to the concept of asymmetry? Did you kind of inform on that based on, you know, because you were involved in the markets and looking at, you know, probably looking stuff. Was that kind of related or was that. Oh, absolutely. Yeah, I mean, you know, I'm, you know, I'm a trader, you know, I've been a trader for 25 years. And it's in my DNA. And it's how I think. So I always think about asymmetric payouts and that totally inform my decision to write about that in the book. Yeah. Yeah. So there's asymmetry in the bet or the job or whatever. But there's also the attitude to try and get asymmetry and upset in your life. And you talk about, you talk a little bit about what your attitude is towards. Position yourself in and putting yourself out there to get opportunities to have an upside to have the scalable, you know, businesses that come up. Well, you know, I do a lot of things like that. Like for me, I write, you know, and I write books, I write newsletters, I have a sub-stack blog, you know, anything I write is going to has the potential to give me an opportunity. I make it an opportunity out of it, whether it's a speaking engagement, whether it's a business opportunity or whatever, you know, writing gives you a whole bunch of opportunities. So yeah, that's how I live my life. Yeah, there's the writing and then kind of just putting yourself out there. I won't spoil it, but you mentioned some anecdote in the book about how you were, you know, in one of the offices on Wall Street and just having to be in the right place at the right time. I think the idea is, you know, for instance, for for me, with this podcast, the reason I did the podcast is because I kind of come from that retail background. And I learned a lot and just, you know, these online groups, putting myself out there, got a lot got a lot of knowledge from other, you know, peers. So I felt kind of I was compelled to like put the podcast out there and provide and kind of give back. But throughout that time, like just people listening to you, you know, you'll come across all kinds of people, different backgrounds, you know, different perspectives and just I've heard this phrase. You might have heard it, but the fact that your network is your network, I don't know if you come across that or not, but that idea kind of reminds me of what you said about. Yeah, absolutely true. Yeah. Yeah. Yeah. And putting yourself out there and just the more people you know, the more people we talk to you. So those are kind of all related, you know, the more you talk, the more you put yourself out there, the more opportunities, the more upside you expose yourself to basically. So I want to talk a little bit about. So this idea is the main sources, you know, of stress, that and risk. So I won't focus too much on the debt side. But you do talk about there's only kind of a few decisions. That affect sort of your debt and how that provides stress for you. And you really see the house you pay, you know, basically your decision on where and how when to buy a house. Why do you focus on that as such a big aspect on the debt side. Yeah, buying a house is the riskiest financial decision that most people will ever make for sure. It's, it's a huge amount of leverage. It's an asset with some volatility. It's, it's very risky. And you know, it's funny. It's been 16 years from the sense of financial crisis and people have forgotten that housing prices can't go down. You know, it's possible. So if you're buying something with four or five times leverage, like it's very, very dangerous. And what I say in the book is that your hand should be shaking when you're signing the loan documents. And if they're not, you do not understand the gravity of this situation. So I think you also mentioned at one point that you don't really see it as an investment like a house is not an investment. So how do you think people should evaluate or what things should go through remind kind of decision between renting and buying, especially since you're going to take on this large amount of debt when you buy. Well, I mean, it's really that's a very complicated question. And I never really got to the bottom of it in the book. First of all, you know, renting is not the worst thing in the world. First of all, 90% of the time, it's cheaper than buying. And you get to, you know, if you clog a toilet, somebody comes and fixes it, if you get a leak in the roof, somebody comes and fixes it, it's, it's much more convenient. But if you're renting, you're not getting exposure to real estate as an asset class. And a lot of people have done very well simply by paying the mortgage on their house. Ever put any money in the bank, they never bought any mutual funds. They simply paid a mortgage, built equity in the house. And then 30 years later sold the house and had a big pile of cash, which is really powerful. You know, so the 30 year fixed rate mortgage is probably the number one financial innovation of the 20th century. Yeah, basically like a force saving, right? Because some people there's so many things that do in life and lose track and trying to do a budget. But if you're forced to kind of make that payment. Every single month, then that gives you basically that's the vehicle for for accumulating savings, wealth, et cetera. Now, for me, and so this is the thing that, you know, interested me most. So again, the simplicity and sort of the actionableness of the things you talk about. So there's the debt side, but risk. So the other major factor. Can you talk a little bit about what you see, what kinds of risk do ordinary people come across and that sort of caused them concern in their everyday life? Well, I would say a lot of ordinary people really don't know how to invest. They buy things like GameStop and Dogecoin and stuff like that. And they sort of equates investing with gambling and what they're doing is they're massively increasing their financial stress. And most people, the vast majority of people have no idea of how to build a portfolio with minimum volatility, you know, like basically the advice that people get is that they should have the S&P 500 index fund and write out the ups and downs. And at the end of it, they'll have a big pile of money. But if you invest in an index, not only do you get the return of the index, which is very good, but you also get the volatility of the index and the S&P 500 is pretty volatile. And over the course of an investing career, you're going to have 20% drawdowns, 30% drawdowns, probably even a 50% drawdown. And that is going to cause you a lot of stress. You know, even beyond just the normal volatility towards beginning that section on on risk, right? Because there's risk in the market, but there's kind of risk everywhere, and you made a big point about insurance. Now insurance can be related to your house, your life, your car. Or insurance or portfolio, right? People come, you know, buy some kind of options or whatever the hedge of portfolio. But you basically had this really strong emphasis on avoiding the zero. Why is that why is that such a strong point that you want to get across? I mean, you basically just said it, you know, you definitely want to avoid the zero. I buy personally, I buy every kind of insurance available. The only insurance I don't buy is disability insurance, which I probably should buy. But yeah, like insurance is not a zero sum gain. It is possible for you to win and for the insurance company to win. So always, always buy insurance. I think, I think what it relates to is, you know, because we talked about asymmetry on the upside, which is good, right? But there's these things in life and aspects of rich with our asymmetric asymmetric to the downside, right? And then the whole point about long term compounding and the idea that, you know, when you compound negatively, right, a drawdown of X percent is going to take a larger gain to just get back to even. Yeah. And so it's kind of about mitigating risk. I mean, again, you're going to have volatility day to day, but sort of blacks want events or these large asymmetric events that will wipe you out, because you only get one chance, well, usually only one chance, right? Because once you go to zero and like game over, right? So it's really about the idea of if you can eliminate that risk of zero, that allows you to stay in a game and kind of have longevity. Is that kind of the, I guess, is that the idea behind it? Absolutely. Yep. Absolutely. And I think reminds me of this interview with the Simpa Leblanc, where he basically says, if there's a chance of blowing up, you have no alpha. And that really resonated with me. So I think as you said, it's not zero sum. Like, yes, you're paying for insurance, right? Life insurance, home insurance, whatever it is. And there's a cost, but I think the other side of it is not paying for it, you know, you might get some marginal gain. But if you run across that, that zero event, then basically the gigs over. So that's. Yeah. And, you know, people, people buy homeowners insurance and auto insurance and stuff and life insurance, but they typically don't buy portfolio insurance, like most people's stock portfolios are uninsured. So in the book, I talk about the awesome portfolio, which is not really portfolio insurance per say, but it's about being diversified across asset classes in a bunch of different things so that it's very unlikely that all of them are going to go to zero at the same time. Yeah. So it's interesting because, you know, like you said, unfortunately, sort of the typical retail, not even retail, but just like financial education in general is still heavily geared towards. Just index investing and buy and hold. And as you mentioned, you're going to get the return of the index, but you also get the volatility. And so sort of your innovation with the awesome portfolio want to talk a little bit about what that is, you know, what are the asset classes? Why is that better than just fine hold S&P? Well, it's, I mean, it's a lot better. So basically what the awesome portfolio is, it's 20% stocks, 20% bonds, 20% gold, 20% cash and 20% real estate. And this combination of asset classes gives you some risk return characteristics that you will not find anywhere else in the investment world. Right. So the awesome portfolio. Over the last 53 years has returned 8.1% a year with half the volatility of an 80 20 portfolio. And the worst drawdown in the history of the awesome portfolio was 12% in 2022 during the financial crisis. It was down 9% while stocks were down 38% so basically you're getting 1% less than stocks with half the volatility. And teeny tiny drawdowns it is the best innovation in the world. So what were your certain things you were, you know, when coming up with this and the asset classes. Was there anything particular you're looking for or just that these were sort of five well known asset classes that are accessible, you mentioned some ETFs you can do or real estate. There's ETFs there or you can consider your own home. Or was it really just looking at the correlation or what was kind of the focus behind these particular basket. I was just tinkering. I was just literally this was back in 2018. I was just tinkering with different combinations of stuff. That's how I came across it. And you kind of recommend people, you know, it's funny. This is basically a permanent portfolio. And I think you can you mentioned can rebalance record or even annually maybe quarterly is a little better. But the idea is that it's kind of like buying hold in a sense, but buying hold just having more diversification. Right. If there was one product that could have this mix, right. That'd be kind of the turnkey solution for you, I guess. But there isn't. So you're almost kind of buying holding this mix of these different asset classes. That's and I guess really, like you said, you've done research and has shown that the correlation is low and by virtual that you're kind of getting these uncorrelated bets where each asset has some positive return expectancy, but beyond that is probably just the interplay between the ups and downs of each asset class. And then you kind of reducing the volatility of overall portfolio, in which gives you the ability to speak a bit about like why it's important to have low volatility. You know, if you're going to buy and hold anyways or supposedly why is it so important to kind of lower the volatility of report. Well, volatility equals stress and the purpose of volatility is to make I mean, look, if you could have a portfolio that returned 25% a year with zero volatility, I think you would want that portfolio, you know, volatility is the enemy. Right. And I think at the end of the day, stress, you know, people don't like it. So they want to avoid it. And what they do, you know, if you buy hold and your portfolios down, you know, 20, 30%. People, people panic, right. And then get out the worst time. I think there's a lot of the kind of the behavior aspect to that like individuals will tend to basically make the worst decision at the wrong time. And so you're trying to give them something where by virtue of reducing the stress, reducing kind of that fear aspect, you're reducing the chance to make that bad decision at the bad time. And therefore, again, kind of going to the longevity side of it. Do you think I did have a question. I was curious because the idea behind the awesome portfolios to have these kind of uncoordinated asset classes. Have you considered, because I think you said cash was one of the assets. Have you looked into alternative asset classes? I mean, you would know about these yourself, kind of like these ETFs were trend following or managed futures, but there's kind of ETF exposure. Now, on the one hand, you as a practitioner and you understand a space, what's your opinion on that? Now, whether or not that may be suitable for an individual that's unsophisticated as different, but have you considered kind of alternative asset classes that are also uncoordinated to to equities, for instance. Yeah, I mean, there's a guy named Jason Bucket Mutiny Fund who does something similar, you know, as part of the commodities, he has a minute futures allocation in his basket. So you can definitely do stuff like that. I mean, for the purpose, this is a mass market book average people need to be reading. You got to keep it as simple as possible. And honestly, I think the simple solution is actually the better solution. So I see. So I think because you mentioned like, at some point, like the goal of this book is it's a mass audience. And, you know, they're, you know, for education and spaces, it's all kind of all over the place. And it's people like they ran to, for instance, who basically just say, like, no, that, you know, no credit cards, like, you know, even simpler, but at the same time, it's almost like kind of to dumb down. And sometimes there's some opportunity cost there. So is your goal to really, like you said, have something simple and actionable that most people who don't want to spend that much time thinking about it can kind of just put this in place and move on with their life. Is that sort of that? Yeah, yeah, basically. Yeah. I mean, you know, basically you want to get to a point where you're not even thinking about money. You don't want to think about money. So what, why is that? Why, why do you feel so strong about that? Because it's a complete waste of time to think about money. It's, it's, it's counterproductive. It takes you away from more important things in life. You know, I really don't spend a lot. I mean, look, like it's part of my job, like running a financial newsletter. I kind of have to think about it. But in terms of my own personal finance life, like I don't think about it at all. Yeah, I guess for you or maybe not for you, but just like you see money is sort of a means or it's a tool, right, you can use it to buy the things you want or the things you need, get your needs met, but you'd rather. Think about the things that interest you, right, your, your passions or your jobs or things or your family, and I think the moral is less time thinking about money is less stress and kind of just overall more happiness is that is that kind of the message, basically, yeah, exactly. And I guess one one last thing about the, the wrist side and awesome portfolio. I think a lot of it is, if you don't think about it, then you can kind of stay invested, right, because at the end of the day, if you have something with reasonable chance of positive expectancy, long term, the goal is just to not think about it and just be in the game, stay in the game, let compounding, you know, take its toll and basically build your worth over time without you having to tinker too much. Is that sort of your kind of what you want to get across? Yeah, it is, it is not that important. What you invest in, it's more important that you stay invested. That's the most important thing. To stay in the market. Like that's what you know, back to our discussion about volatility. Like when volatility gets high and the market goes down 20 or 30% and you panic and you sell, you stop compounding and that is the worst thing in the world. And you know, it's funny like, well, maybe it's not funny, but I don't know where I heard this is on the podcast where I read it somewhere and it's like 50% of, you know, people, you know, maybe it was America. At like some point in their life, you know, they basically don't have enough for retirement. Do you think, what do you think there's a cause for that? It's just because of like the way the education is now or is it more of the incentives right now aren't aligned or people are too focused on short term. And what is it about that? I know that's what you're trying to change with this book, but why do you think is a cause of sort of the state of the financial situation in America right now? Well, I think it's a couple of things. I mean, one, you know, getting back to the principles that we talked about earlier. I think people have the ability to make a lot more money and they don't. I think that's part of it. But also like, you know, if you go your entire life without accumulating any assets, whether it's real assets or financial assets, then yeah, you're going to have a tough time retiring. You know, unless you have a period of time where interest rates are high and can put your money in a bank account, like even now, like if you put your money to savings account and get five, five and a half percent, like that's pretty good. But if you're not accumulating any assets, you're not going to do well in retirement. So. Yeah. So I think for me, the main thing I want to emphasize, you know, for my audience, again, like, because this is a little different than the kind of guess I usually have on because we kind of focus on that day trading, but being more engaged and involved in our finances in our accounts. And and being able to combine return streams from, you know, trading and on top of portfolios, kind of awesome portfolio, right, the idea of a permanent portfolios, but the approach that kind of less is more and the more you can. Kind of distance yourself and not focus or for us is the term over trading, right, because a lot of times when you make too many decisions, a lot of times you make the wrong ones and kind of hurt yourself more, but idea is really to simplify and using that as a way I had this kind of phrase return on time, right, the doing simple things focusing on large actions that make more impact. Can you talk a little bit about I think you had a basically you said your, your financial future is going to be a product of a few large decisions rather than a million little ones. Yeah, it's the house, the car and the student loans and one thing I didn't talk about in the book is getting a job where you're getting equity or options. That's also another big one. But those four decisions are going to determine whether you have money. It's not whether you buy coffee at Starbucks in the morning. It's not whether you buy the generic can soup. That's not going to determine whether you have money. It's just a couple of big decisions. Yeah, because again, if you, if you like I said, how much can you really affect your bottom line trying to save a dollar on that kind of soup or or skipping that that couple coffee, but I think you also mentioned like it's much harder to sort of implement so many little things because you'll feel those differences right. Oh, every day I got to give my coffee right psychologically, you know, versus knowing that a couple. Well done large decisions will have long term kind of compounding effects that make a much bigger difference for you in the long term. Yeah, absolutely 100% agree. Okay, great. No, again, I think once again, the reason I want you to have on is just to give a different aspect and show that some of the ideas that we typically or I get into on my show. You know, about focusing on upside, the mindset, being able to focus on, you know, managing risk. It really translates not just to trading, but sort of everyday aspects of life and just kind of holistically, you know, things in your life would lead to more happiness by not kind of focusing on on the little things and really understanding. I have another phrase where I said like sort of define your own goals right and that's kind of jives with what you said about, you know, you can make as much as you want or set your mind to and it's more about having the, I don't know, the attitude to go out and kind of give yourself those opportunities. So Jared, where can people, I guess, can you talk a little bit about your, what kind of stuff you write about and the daily dirt nap in case people are interested to go follow that. Sure, the newsletter is called the daily dirt nap. You can go to daily dirt nap calm comes out every day. It is a macro newsletter that focuses on sentiment, been doing it for 16 years. It's also very entertaining, very well written, highly recommended, gave it a shot. If you come in through the website, basically there's there's a link where you send me an email, just mention the podcast and I'll give you a discount on the newsletter. You can also find me at Jared Gillian money.com where all my personal finance stuff is and of course, Twitter at daily dirt nap and you can go to Amazon for all my books. Yeah, and once again, the book that we mostly talk about today and I definitely recommend no worries how to live a stress free financial life. So go out and check it out. And once again, Jared, thank you for taking the time to come on today. It was a real pleasure. Thank you very much. It was great.