AI Summary #
Here’s a summary of the podcast episode “Different Kinds of BS” by the host:
The host discusses the concept of “BS” (bullshit) in various forms, emphasizing that it’s present everywhere in every field and industry. He highlights three key facts about BS:
- It’s ubiquitous and influential, as people often love to hear what they want to hear.
- It’s dangerous because it can lead to making bad decisions, especially when information is abundant but not necessarily accurate or reliable.
The host then dives into specific examples of BS in different areas:
- Predicting impossible-to-know things: The stock market is a prime example, where predicting precise returns is often impossible due to the multitude of factors influencing market fluctuations.
- Presenting upside rewards with no regard for costs: This is a common form of BS that ignores the associated costs and volatility involved in achieving success.
- Ignorance of one’s own luck or others’ misfortune: People often attribute their successes to hard work rather than acknowledging the role of luck, chance, or circumstance.
The host concludes by emphasizing that true success rarely involves just one side of a story. Instead, it requires acknowledging and understanding both the rewards and costs involved. He encourages listeners to recognize and challenge BS in all its forms, fostering a more informed and nuanced approach to life and decision-making.
AI Transcription #
We talk so much about investing on this podcast and the different ways to do it.
So before we get going, I want to let you know that this episode is brought to you by my friends at 10 East.
10 East is an investing platform for sophisticated investors to access private markets.
It brings the benefits of having your own family office without the cost and the headaches of doing so.
10 East is founded and led by Michael LaFell.
Forward deputy executive managing member at Davidson Keppner.
10 East core strategy is to apply institutional grade due diligence to more niche exposures across private markets in equity and credit and real estate.
The principles and partners at 10 East invested their own money in these deals to align interests.
To learn more, please check out 10 East.co.
That’s the number 10 East dot C O.
Welcome back.
I took a couple weeks off, but it’s good to be back and nice to see you again.
This episode is called different kinds of bullshit.
And I know there are some young people who listen to this podcast.
So that will be the only time that I say that word in full in this podcast.
I might say BS or nonsense, but you know what I’m talking about.
And I would define BS as things that get breathlessly said or implied in the world that are clearly wrong, but people just go along with it and keep saying it or keep believing it, even if it’s just clearly wrong.
And there are three important facts about BS.
Number one is it is everywhere in every field, in every sector of the economy, in every industry.
Number two is it is very influential.
People love to hear it.
They love the sound of their own BS.
Other people’s BS that backs up what they believe and what they want to hear.
And number three, it is dangerous because it’s wrong.
The amount of publicly accessible information today would have seemed unfathomable just 10 or 20 years ago.
So what used to be hidden is now free and abundant.
That’s true for financial information, global news, even insight into how millions of strangers live on social media.
But you have to ask in that world where we have so much more information.
Are we actually better informed?
Are we making better decisions?
Are we less susceptible to making bad decisions?
Sometimes the answer might be yes.
It’s not black and white.
But it’s obvious to anyone who spends time online that’s so often the answer is no.
Or even that we’ve gone backwards.
In cases like politics, say.
And part of the reason is that information turns into BS as easily as ice turns into water.
BS can go unnoticed because people are more concerned with lies.
People don’t like lies.
And lies once you spot them are unmistakable for their damage.
But BS stops just short of a lie.
It mixes the integrity of the truth with the deceit of a lie in a way that leaves both the BS’er and their recipient feeling satisfied.
So look, if a company tells its investors that it has 20 million dollars in the bank, would it actually has 10 million dollars in the bank that’s a lie?
But if a company tells investors that it’s profitable, if you ignore half of its expenses and assume that it didn’t pay for this or pay for that, that is BS.
And that kind of thing is everywhere in every industry, in every corner of society.
Jeff Bezos once said that there are different kinds of smart in the world, different kinds of intelligent.
And distinguishing the various flavors is very important.
Because if you think smart comes in just one form, you’ll miss the dozens of other nuanced varieties of intelligence.
And BS, I think, is exactly the same.
It comes in countless different forms.
Some of them are harder to spot than others.
False modesty is one.
Double standards is another.
Being hypocritical, tugging at the heartstrings, those aren’t lies.
They’re just subtle forms of BS, which is why they are so prevalent in the world.
And this episode, I want to talk about a few other forms of BS that are everywhere.
All right, number one, predicting things that are impossible to know.
The book, the beginning of infinity, writes that quote, beware the difference between prediction and prophecy.
Prophecy purports to know things which cannot be known.
That is so good and so powerful.
The most egregious examples of the latter is predicting stock prices within a precise period of time.
Every stock, or really every investment in the world, is valued by taking a number from today and multiplying it by a story about tomorrow.
You take today’s earnings per share, whatever it might be, and then you multiply it by a story of what tomorrow might be, might be good, might be bad.
That’s how the stock market works.
The number from today is easy to find.
You can take revenue or earnings or dividends, whatever.
That’s easy enough.
But then you have to multiply those figures by a story, a story about optimism or pessimism or how angry investors are with politicians or how smart everybody feels or how persuasive their stock advisor has been.
That’s the multiple on how much investors are willing to pay for the numbers from today.
And that multiple is impossible to know, to predict in the future, because it’s a reflection of people’s moods at a moment in time.
How could anyone know what kind of mood a bunch of strangers will be in one year from now?
I don’t know what kind of mood I’m going to be in tonight.
Let alone a group of millions of strangers one year from now.
But that’s what’s happening when you say here’s what Apple stock is going to trade out one year from now.
That’s what you are doing.
Whether you know it or not.
And that is why a lot of people trading on insider information still lose money, which is an incredible statistic in itself.
There’s all these studies that show that even people who are trading on inside information don’t make that much money.
Because even if you know what data is about to come out, you often have no idea how people are going to react to it.
What their mood is going to be.
In the same sense, if I were to say, the stock market is forecast to return 16% over the next 12 months, that sounds reasonable.
People say that kind of thing all the time.
But if I said, I think people will be in a 10% better mood next July.
That sounds like BS.
And it is.
But those two lines are practically saying the exact same thing.
All right, number two.
Presenting an upside reward with no regard to the associated cost.
And by cost of something, I don’t necessarily mean the price tag what you pay at the register.
Everything worth pursuing in life has a cost.
But most of those costs, you pay in the form of stress and anxiety and uncertainty and self-doubt.
The whole history of investing is very simple.
Long-term returns can be extraordinary, but to achieve them, you must put up with an endless parade of volatility and mania and panic.
It’s two sides of the equation.
And when anyone presents only one side, like the potential upside return, without the other, the volatility or the chaos, they are BS-ing about the entire arrangement of how the stock market works.
It’s almost as if somebody would say, fruaries are really nice without any mention or even knowledge of the fact that they are nice because they cost a third of a million dollars, right?
So many things fall into this category, and it is a key source of unhappiness in people’s lives.
Only looking at the upside with no appreciation of the associated cost.
The assumption that you will be happier if you had more money often leads to disappointment because we overemphasize the reward, like having money or a bigger house, with no regard to the cost, which in many cases is working longer hours, or having a lot of student debt, or the risk of entrepreneurship, and wondering if your business is going to fail on and on and on.
It is a packaged deal, and you cannot pick or choose the reward while ignoring the cost.
Several years ago, Naval Ravacant wrote, quote, One day, I realized with all these people that I was jealous of, I couldn’t just choose little aspects of their life.
I couldn’t say I want his body, I want her money, I want his personality, you have to be that whole person.
Do you actually want to be that person with all of their reactions, their desires, their family, their happiness level, their outlook on life, their self-image?
If you’re not willing to do a whole sale, 24-7, 100% swap with who that person is, then there is no point in being jealous.
What a great quote.
Kanye West put this in a similar way.
He once responded to criticism that despite his skills, he can often be a bit of a jerk.
And he said, quote, if you want these crazy ideas, and these crazy stages, this crazy music, and this crazy way of thinking, there’s a chance that it might come from a crazy person.
Another classic, Paul Graham, the investor, put it this way, he said, half of the distinguishing qualities of the eminent are actually disadvantages.
I think what he means by that is that if you look at Steve Jobs, you know, he was an incredible person, outrageous level of success, also had all these attributes that were disadvantages.
A lot of his personality, his meanness, how he managed people were probably disadvantages.
My favorite Andrew Wilkinson says, quote, most successful people are just walking anxiety disorders, harnessed for productivity.
And that’s another great way of putting it.
So the saying never meets your heroes is true, because the way that we imagine people that we admire, or the success that we desire tends to be a BS construction that emphasizes the advantages while discounting or ignoring the associated costs.
All right, number three, a very short one, unnecessary complexity.
Stephen King, the author, explains in his book on writing, he writes, quote, this is a short book, because most books about writing are filled with BS.
I figured the short of the book, the less BS.
That is like poetry.
Perfect.
Nothing else needs to be said there.
Number four, ignorance of your own luck or others misfortune.
Not all success in life is due to hard work and not all failure is due to laziness.
And even if you agree with that statement, it is astounding how easy it is to just jump to conclusions.
In most cases of extreme success or extreme failure, the ones that catch our attention that we see and we know about, the line between being very bold and reckless was thin.
So what separates the billionaires from the bankruptcies can often be just the slimmest movement, the slimmest decision that nobody thought about.
It was one customer’s choice.
It was a judge’s decision or it was a fluke where fate went one way when it easily could have gone the other, right?
And then there’s the luck of all of it.
People’s lives are a reflection of the experiences that they’ve had and the people who they met.
So much of which is out of your control and driven by accident and chance.
So many people like to say when you talk about luck, they’ll say something like, oh, the harder I work, the luckier I get, I always disagree with that because by definition, if you can work harder and get better at something, it is not luck.
It’s skill.
Luck in my mind, the three biggest ones are where, when, and to whom you were born.
What country you were born into?
What generation you were born in and who your parents were.
You have no control over those things and they provide such a massive influence on how you’re going to do in life.
That is what luck is.
And so a form of BS occurs when that goes overlooked.
When successful people feel superior relative to less successful people.
The truth is so often that less successful people may actually be just as smart and informed as they’re more successful peers, but they ended up on the unfortunate side of risk.
And so my rule of thumb to avoid that form of BS is to recognize that the luckier you are, the nicer you should be.
That’s it for this episode.
If you’re interested in more in this kind of stuff, check out my two books.
The psychology of money and same as ever.
Thanks again for listening and we’ll see you next time.