AI Summary #
Here’s a summary of the podcast episode:
Main Takeaways:
- The host discusses how investing knowledge is cyclical, meaning that people are often repeating mistakes from past generations.
- He cites examples from history, such as the denial of germs and poor financial advice from the 19th century, to illustrate this point.
- The host argues that some fields have cumulative knowledge, while others are more subjective and nuanced.
Notable Quotes:
- “The anxieties of getting money only become torturing anxiety of how to keep it.” - William Dawson
- “We are likely to be as much ridiculed in the next century for our blind belief in the power of unseen germs as our forefathers were for their faith in the influence of spirits.” - Candace Milner
- “The man who can buy anything he covets values nothing that he buys.” - William Dawson
Actionable Advice:
- The host emphasizes the importance of accepting volatility and fragility in finance, as it’s not possible to fully learn from past experience.
- He encourages listeners to be mindful of their own biases and assumptions when making financial decisions.
Key Insights:
- Investing knowledge is cyclical, meaning that people often repeat mistakes from past generations.
- Some fields have cumulative knowledge, while others are more subjective and nuanced.
- Finance is an area where people’s behaviors and emotions play a significant role, making it harder to solve with formulas or math.
Overall, the host provides a thought-provoking discussion on the nature of investing knowledge and the challenges of navigating finance. He encourages listeners to be aware of their own biases and assumptions and to approach financial decision-making with a nuanced understanding of its subjectivity.
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.
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10 East is founded and led by Michael LaFell.
Forward deputy executive managing member at Davidson Keppner.
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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.
It’s been a while and a little note on that.
I still really don’t know what I’m doing with this podcast.
It’s been a lot of fun.
This is where nearing episode 50, I think, but doing this for quite a while.
But I still don’t really know what we’re doing with it.
And maybe that’s okay because I enjoy doing it and enough of you listen to it.
That I’m going to keep it going.
But I’ve never really figured out the cadence at which I do these episodes.
Is it once a week?
Is it once a month?
Is it twice a month?
I have no idea.
For a while, I was doing once a week, but I got tied up with a bunch of other things.
I actually just finished a book that will be out next year.
I’m sure we’ll be talking much more about that, but that took most of my time for the last six or nine months.
But it kind of made me feel guilty that for a while, I was doing these once a week and then I just stopped for a month.
So maybe going forward, this is going to be a little bit more sporadic.
I think it’ll be at least once a month, if not twice a month, probably not once a week though.
But that brings me to today’s episode.
I heard the saying from investor Jim Grant many years ago in a paraphrasing him, but he said, knowledge in some fields like medicine is cumulative.
Society gains knowledge over time and this generation is more knowledgeable than the last and what the last generation learned.
This generation gets to use as its starting point and then it runs from there.
And then there’s some fields where knowledge is cyclical.
Where we don’t really learn from the past and we all have to kind of be banged over the head with a hammer to learn on our own generation after generation after generation.
And Jim Grant said that’s what investing is.
It’s not cumulative knowledge.
We in many ways have to learn the same errors today that people learned the hard way a hundred years ago.
And it’ll be like that a hundred years from now, learning those same lessons about greed and risk and fear all over again.
I just love that idea of cumulative versus cyclical knowledge and understanding if what you’re doing is cumulative or cyclical because it’s so important to know the difference.
James Garfield, the former president of the United States, died because the best doctors in the country in the 1880s did not believe in germs.
So they probed Garfield’s bullet wound after an assassination attempt with dirty, un-gloved unwashed fingers that almost certainly contributed to his lethal infection.
And it sounds crazy because 1880 was not that long ago.
But the historian Candace Milar writes in her book Destiny of the Republic, how controversial germ theory was to 19th century doctors.
She wrote quote, they found the notion of invisible germs to be ridiculous and they’re refused to even consider the idea that they could be the cause of so much disease and death.
Even the editor of the highly respected medical record found more to fear than to admire an antiseptic pioneer Lister’s theory.
Judging the future by the past, he wrote, we are likely to be as much ridiculed in the next century for our blind belief in the power of unseen germs as our forefathers were for their faith in the influence of spirits.
Now that is wow keep in mind these were the best doctors in the country taking care of the president of the United States.
She went on to write quote, not only did many American doctors not believe in germs, but they took pride in the particular brand of filth that defined their profession.
They spoke fondly of the good old surgical stink that pervaded their hospitals and operating rooms and they resisted making too many concessions even to basic hygiene.
They believe that the thicker the layers of dried blood, black and crumbling as a bent over their patients, the greater the tribute to their years of experience.
Now, of course, even a child hearing those words today could recognize how insane that is that the best doctors in the country were that blind to the reality of biology.
And it’s hardly an isolated example, by the way, it was not that long ago that doctors used to give their patients chloroform for asthma and cigarettes to cure hay fever and go on and on of these things that were ridiculous.
And mercilessly we have moved on from those treatments and we believe new crazy stuff today, of course, but not that crazy stuff.
Everybody learned and those learnings were by and large universally accepted and passed down to the generations who are now better off because of it.
And so reading about medicine a hundred years ago makes you feel utterly disconnected from today’s world.
It’s like you’re reading about a completely different topic altogether.
But now let me talk about something like money.
These lines were written a hundred thirty years ago by author William Dawson who wrote quote, it would seem that the anxieties of getting money only be get the more torturing anxiety of how to keep it.
The thing that is least perceived about wealth is that all pleasure and money ends at the point where economy becomes unnecessary.
The man who can buy anything he covet values nothing that he buys.
That you could write those words today and they would fit right in or take these lines written by Ernest Hemingway in nineteen thirty six he wrote quote.
He remembered poor Scott Fitzgerald and his romantic awe of the rich.
He thought they were a special glamorous race and when he found out that they weren’t it wrecked him as much as any other thing that is wrecked him.
That too you could that describes the world in like twenty twenty one hasn’t changed whatsoever.
Or take this written by a lawyer in nineteen thirty four taking account of the bubble that preceded the Great Depression.
He wrote quote, in normal times the average professional man makes just a living and lives up to the limit of his income because he must dress well.
In times of depression he don’t really fails to make a living but has no surplus of capital to buy bargain stocks and real estate.
I see now how very important it is for the professional man to build up a surplus in normal times without it he is at the mercy of economic wins.
That written ninety years ago could not be more spot on describing what happens today.
I have two more of these for you I think they’re so good take this description of the nineteen twenties Florida real estate bubble quote.
From nineteen nineteen to nineteen twenty nine both forms of personal debt mortgages and installment credit sword.
The volume of home mortgages more than tripled and the amount of outstanding installment debt more than doubled.
Again that was that’s from the nineteen twenties exactly what happened in you know two thousand five two thousand six.
All right last one of these I can’t get enough of them take this account from Seneca who lived more than two thousand years ago.
This is a historian talking about Seneca who wrote quote.
His enemies described him as praying on affluent elderly people in the hope of being remembered in their wills and of sucking the provinces dry by lending money at a steep rate of interest to those in the distant parts of the empire.
It’s like it could have been anyone today right it’s all all these quotes are so relatable.
It’s like nothing has changed and you compare that to medicine where we have learned so much and when you read about medicine a hundred years ago you’re like what that would get how could you possibly believe that with money nothing ever changes.
We’ve always been asking the same questions and dealing with the same problems and falling for the same false solutions and we probably always will.
And of course there are things that we knew about medicine two hundred years ago that were true and there are things that we believed about money a hundred years ago that were false.
But in the degree of how much we’ve learned in what we’ve learned what’s been passed on there’s no comparison.
That you know there’s no financial equivalent of everyone denying something like germs only to have everyone eventually agree that it’s so obviously true that it’s not even worth debating.
The completely different topics and we learn in very different ways.
So in some fields our knowledge and our discoveries are seamlessly passed on across generations and in others that knowledge is bleeding.
Now there are some periods once in a while when society learns that debt can be dangerous or that greed backfires and that more money won’t solve all of your problem.
But then we all quickly forget and society moves on again and again generation after generation.
And so I think there are a few reasons why this happens and what it means that we have to accept.
The first is that some fields have quantifiable truths while others are guided by vague beliefs and individual circumstances.
Physicist Richard Feynman famously said quote, imagine how much harder physics would be if electrons had feelings.
Well in any field that is studying the behaviors of people they do have feelings and it makes it very very difficult way harder than physics I would say.
So any topic that is guided by behavior like money or philosophy or relationships cannot be solved with a formula like physics and math can’t.
Neil deGrasse Tyson says the good thing about science is that it is true whether or not you believe in it.
Now you can disagree and say that science is actually the practice of continuous exploration and change your mind but in general he’s right.
Germ theory is true and we know it’s true.
But what about the proper level of savings and spending to live a good life or how much risk you should take when investing.
Or the right investing strategy given today’s economy those kind of questions do not lend themselves to scientific answers.
They’re all very subjective.
They’re all very nuanced and they are impacted by how the economy changes over time and how society changes over time how cultures change over time.
So often there simply is not relevant information to pass down to the next generation.
What my grandparents wanted might not be best for me and what I want might not be best for my kids or my grandchildren.
And so even when firm financial rules do exist some truth just a half to be experienced firsthand before you can understand them.
The other point that’s important here is that cyclical knowledge and the inability to fully learn from other people’s past experience means that you have to accept a level of volatility.
And fragility that is not found in other fields.
I can imagine a world in 50 years where things like cancer and heart disease are either non-existent or very effectively controlled let’s say.
But I cannot ever imagine a world where economic volatility is tamed and people stop making bad financial decisions that they will come to regret.
You can just never imagine that world no matter how much data we have no matter how smart people are by then or how that data is shared you can never imagine that world happening because information and learning in finance is not cumulative.
It always has been and always will be cyclical.
That’s it for this episode.
We’ll see you again next time whenever it might be.