Investing: The Greatest Show on Earth

This episode is brought to you by my friends at public.com, an investing platform where you can build a portfolio of stocks and bonds and more. AI isn't just a feature at public, it's woven into the entire experience from portfolio insights to earnings call recaps. Public gives you smarter context at every touch point. You can also access high yields on your cash with no fees or minimums. Plus right now you can earn up to $10,000 when you transfer your existing investment portfolio over to public. Just go to public.com/friends to fund your account in five minutes or less. Paid for by public investing full disclosures and podcast description. Welcome back. Nice to see you. Let me share with you a very quick story that I've loved for years. And I want to convince you of something that I think is so important and overlooked. Which is that investing is a much broader field than it looks. And there is so much you can learn about investing and money and finance outside of the narrow lens of finance. Let me show you what I mean. Back in 2013, got named Harold Varmus. Back then he was the director of the National Cancer Institute. He gave a speech describing how difficult the war on cancer had become. Because eradicating cancer, which had been the National Cancer Act's goal when it was signed into law in the 1970s, just seemed like it was never going to achieve its goal to actually wipe it out like we had originally envisioned. It just didn't seem like it was a possibility. And Harold Varmus said, "There's a paradox that we must now honestly confront. That is, despite the extraordinary progress that we've made in understanding the underlying defects in cancer cells, we have not succeeded in controlling cancer as a human disease to the extent that I believe is possible." And what he went on to say was that one of the missing pieces in the war on cancer is that we focus too much on cancer treatment and not enough on cancer prevention. And so he said, "If you want to make the next big leg up in the war on cancer, you had to make prevention the top priority." A eradicating it with some miracle treatment was looked like it was perpetually out of the question. So let's now double down on prevention. But he wanted to say something that was more important, which is why that has, by and large, not occurred. And that's because prevention is boring, especially compared to the science and the prestige of cancer treatments. Coming up with new therapies and cancer vaccines, whatever it might be. And so even if we know how important prevention is, it's hard for smart people to take it seriously. There's a cancer researcher at MIT, named Robert Weinberg. I think I've quoted him a couple times on the show. He's a really cool guy. He once described it like this. He said, "If you don't get cancer, you're not going to die from it. That is a simple truth that we sometimes overlook because it's not intellectually very stimulating and exciting." Persuading somebody to quit smoking is a psychological exercise. It has nothing to do with molecules and genes and cells. And so people like me are essentially uninterested in it. In spite of the fact that stopping people from smoking will have vastly more effect on cancer mortality than anything I could hope to do in my own lifetime. And so, again, a new breakthrough drug is amazing. And we should share that 1,000%. But few things are as effective in fighting lung cancer as a boring advice of telling people to quit smoking or helping them quit smoking. And that same irony that what works is just too boring to take seriously has such a big impact on investing too, doesn't it? This is what I mean when I say, "I want to show you what you can learn about investing from something outside of investing." The solution to 90% of financial problems is just save more money and be more patient. Nothing is more powerful or more capable of moving the needle than that advice. That advice is so boring. It makes you sound like you're a kindergartener. And smart people who have a high IQ and a college education don't want to devote their careers to that basic advice. They want to trade derivatives and high frequency trading and talk about offshore tax shelters. And that's where their attention goes to, something that is more intellectually stimulating. And so in both cancer and investing, the things that are boring but effective are discounted relative to things that are exciting but knowingly less effective. And now the point of that is not just to tell a neat story, although I think it is a neat story. It's again to show you that you can learn a lot about investing by reading things that have nothing to do with investing. Topics like greed and fear and risk and opportunity and scarcity, the most critical topics in investing reveal themselves all over the place, everywhere you look and every field imaginable. And more important I think is this. If you find something that is true in more than one field, you've probably uncovered something that is particularly important. And the more fields that it shows up in, the more likely it is to be something that is fundamental. In terms of how the world works that you should pay attention to. Which what I'm trying to say is restricting your investment knowledge and learning or your money knowledge, your money learning to the narrow lens of finance means that you are less likely to uncover the biggest and the most important parts of money and investing, which are the ways that people think about things like risk and reward that show up all over the place in so many different fields. You cannot appreciate how important a topic is until you see it play out with as much influence in say, evolutionary biology or cancer treatments as it is in investing. And then you know something like that. If it's very simple, it's too boring to take seriously, you know how important it is. Investor Patrick O'Shaughnessy has a book club. Had a book club many years ago, I should say. And in an email he sent out many years ago of this investing book club. He had a line that I just love. It just stopped me my tracks. It said, "Consistent with my growing belief that it is more productive to read around one's field, rather than in one's field, there are no investing books on this list." And I always love that because I felt like in my own investing career and my own career is a writer. I have learned more about money by reading things that have nothing to do with money than I did in the previous life when I was exclusively reading business and finance and investing books. And I've come to view that five fields I think more than anything can teach you more about investing than most finance textbooks can. And those just run through them are health and medicine, which is how people make short-term trade-offs that have long-term consequences. Like that's a lot of what health is and that's a lot of what money is too. Sociology, which is mostly people's desire to belong to a tribe and to signal their success to other people. That has a big influence in money, enormous, military history, in how people underestimate complex systems, how they become overconfident in their abilities, how they react in stressful situations in ways that they hadn't imagined and how they underestimate risks that hadn't been considered. Evolution, which shows how competitive advantages across different species are gained and then squandered and lost, that has a huge impact in money in business and investing. And as a broad topic in nature, anything from geology, forestry, whatever it might be, which has the best examples of compounding because incredible things, big things, magnificent things happen over very, very, very long periods of time. And now I think there's a flip side to this too, which is that if we can learn about in money and investing through the lens of other fields, we can also learn about other fields through the lens of investing. In my first book, The Psychology of Money, I called the introduction of the book is called The Greatest Show on Earth. And the reason I call it that is because I think money is everywhere, it affects everybody and it confuses most of us. Everybody thinks about money a little bit differently and it offers lessons on things that apply to so many areas of life, like risk and confidence and happiness and contentment. Those are things that even if you don't think you have any interest in money or investing, you probably have an interest in those topics and you can learn so much about those topics through the lens of money. And I think a few topics offer a more powerful, just like magnifying glass into how people think that helps explain why people behave the way they do then money. How people manage their money is a window into what they value, who they want to impress, what they think they're good at, what they're very clearly bad at, what they're insecure about and where they see the world going, like their optimism or their pessimism. It shows how people can go crazy in groups, how people obsess over what they want to be true and ignore what they don't want to be true. Money can reveal what people have experienced in life is in like show me a pessimist and I'll show you somebody whose economic well-being had not turned out the way that they imagined. But show me an optimist and I'll show you somebody whose career has exceeded their expectations. There are so few exceptions to that. Money reveals who people trust and who they don't. It reveals who they find compelling and who they will never take seriously. Like whose advice you're willing to listen to and who you are willing to ignore. It shows what society values and it highlights why so many couples don't get along with so many marriages breakdown and how much power some politicians have. It shows better than anything else I think the advantage of being born lucky versus having the odd stacked against you in terms of the trajectory of your life. It shows what makes people happy and it shows what clearly does not make people happy. So look of course I'm talking my own book here but few things are better I think than money at revealing our capacity to adapt to circumstances and few things are better at revealing how grown people are to jealousy and envy and regret than viewing how they have handled money throughout their life. And of course all of those have takeaways outside the field of money and investing. But investing I think exposes them in very vivid ways. Sometimes I think and I look back at my career I'm like do I actually have that much of an interest in money and investing? Or do I just think it is such an incredible window into a far more fascinating topic which is just how people think about the world what they're trying to achieve, who they're trying to impress, where they see their life going, how they judge other people. Sometimes I think yes I am interested in money and investing but I think maybe more that I'm interested in money investing, I'm interested in that. Just the much broader window that it reveals which I think is the greatest show on earth. The point is I think you should go out of your way to learn about money and all kinds of different topics by the way by looking at things that have nothing to do with money or investing. We should learn about things that have nothing to do with investing by looking at investing. I think not only is it more fun but it gets you closer to the truth. That's it for this episode. Thanks again for listening and we'll see you next time.