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John Jennings

lines on the record: 67
first: 2023-05-21
most recent: 2023-05-21
sittings or episodes: 1
sources: podcast

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“Yeah, so I have a website that is john mjennins.com j-o-h-n-m is in michael jennings.com and it has a little bit about my book, but importantly in the menu, there's a tab that says if stands for interesting fact of the day, and that is my blog that about twice a week I write on things that have usually nothing to do with investing. They're just things that people might find interesting. So it's very, very wide-ranging. Some of my most popular ones have been what happens to a bullet shot straight up in the air? Why do females generally have neater handwriting than males? Why do competitors often put stores close to each other? Like, why do you see a CVS and Walgreens on the same block or a lowe's in Home Depot? You know, why does that happen? So yeah, it's just, you know, various interesting things like that would, you know, love always to have more subscribers to my blog.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“50 year time frames and just realize an important mental model is you're not going And people tend to think, oh, well, I know more than these other people do. When I'm selling a stock, woohoo, and look at those dumb buyers or vice versa. And have a little bit more humility and say there's all these other people and realize that they have a reason for what they're doing. And that's part of the thing that's setting the path of interest rates and it's setting what's happening in the stock market and realizing that maybe you don't know more than they do. And maybe even if you did, would that really help you? So I think it's just a big healthy dose of humility.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Client at 60 40, we would say the best investment behavior you can have is not outguess it and continue to rebalance back to 60-40. Yeah, it's been, you know, it was 2022 was brutal for a bond investor, but bonds are looking more attractive now. You know, they're going to look better and worse over time. So we're really about behavior. What gives you the best behavior? And we find for investors it's having more of a static asset allocation and trying not to outguess. And we've done a lot of paying attention to what other firms do in terms of their tactical allocations. And they're right sometimes, but they're wrong a lot. And, you know, a lot of times they don't work out. And I think an issue is investors feel like they should be doing something when most of the time the better thing to do is not to do anything. So, you know, I think, you know, people worried about inflation and interest rates and the allocation of their portfolio are better just to back up and think more in like 20 and 40 and”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Been overwhelmed by the rise of interest rates, and there wasn't a buffer. So it's tough to say exactly what you should be in as an inflation hedge. I'll tell you during all these time periods, if you look long term, the best performer relative to inflation has just been equities. So whether public equities are private equities. So we've pretty much have stuck to our original asset allocations with clients. We know that there are time periods is not going to look as good and others that it's going to look better. I'll tell you, like for the history of our firm, we've had an allocation to non-US stocks. And, you know, that was great in the aughts, but since the financial crisis until 2022 and so far this year, it's been a huge drag. Well, clients going, oh my gosh, like, you know, will the pain never end? We're like, you know, let's continue to rebalance and buy more international stocks and it'll cycle back. And that's really how we view these asset allocations. And for instance, if we had a”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Is not. So it's kind of tough. You can look back into the 70s where you really had this cost push inflation that a lot of it was driven by the oil crisis. And you had these high labor costs. You had a lot of labor unions in the 70s that a much higher percentage of workers were in labor unions. So it was really hard when there was low economic growth or declining profitability. You couldn't really cut wages and things. So that was like one situation. We've had different situations that have been more driven by monetary policy. So, you know, the Fed being too loose for too long. And then you have times like we have now that are probably a combination of a bunch of different things is partly driven by monetary policy, but definitely fiscal spending and the rescue that was done out of COVID, but then combined with all these supply chain issues. And, you know, in each era, you can't just say this is the investment asset that's going to work. I mean, you look at tips, treasury inflation protected securities, you know, and those haven't done well over this inflationary time period because it's inflation adjustment is.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so a little bit about our company. So we're a multifamily office. We oversee, help our clients with about $15 billion of wealth and about 63 client families we work with. So that's a bit about what we do. And we don't really have, you know, here's our exact model portfolio. We should do for clients. It's pretty custom and based on what they need in terms of cash flow and things. But that being said, we don't have many portfolios that are 60, 40. We tend to be the kind of eight, we're more like the 80-20 or 70, 30, sometimes 90 sometimes, sometimes 95-5. It just really depends on the client. But as we've dug into inflation, which we've done numerous times over our 21 year history, there's a few interesting things about inflation. First of all, economists still debate what causes inflation exactly and what to do about it. So it's pretty interesting. And what is the big driver of inflation also tells you what asset classes might do better versus”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“So, like, you would use that base rate to inform should I be buying a single individual stock or even five, knowing that the chances are that most, if not all, the stocks I will pick will underperform the market over the next 10 or 20 years. So it behooves us as investors to think of the base rate. But the problem we run into is because”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“To wait till she came home a few weeks later, which had a negative effect on the timeline. But really, another way of thinking about it is we could have researched what's the base rate, like how many FedEx envelopes go missing. And we could have weighed this one story that we heard of this person on social media that had something irreplaceable lost by FedEx. We could have weighed that against the 0.0001%. I haven't looked it up, so I don't know what it is. Chance it would have been lost. But neither of us did that. It was only later. you know, that I was actually thinking about, oh, we didn't apply the base rate. And other base rates are things like the vast majority of startup businesses fail. Like less than 30% of it make it to their 10th anniversary or the majority of stocks, publicly traded stocks, underperform the market. So over any given year, any given 10 or 20 year time period, two-thirds, three-fourths, either an 80% of stocks underperform the market.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Really, it comes down to statistics like what is the probability of something happen in a given situation? So for instance, we needed to send my daughter's passport to her. So my younger daughter's off at school and is applying to study abroad. And we were discussing, you know, should we wait till she came home for spring break or should we like UPS or FedEx it to her? And it was interesting. My wife made a good point. She said, you know, I read the story that popped up on social media of somebody that was FedExing something really important. I forget now what it was and how it got lost. And like it was something that was basically, you know, irreplaceable. And so I don't think we should FedEx the passport. If it got lost, this would be horrible. And, you know, I ended up agreeing with her. I said, yeah, the risk is too high. Like if the passport gets lost, like she may not be able to get a replacement in time and to get a visa and to study abroad. So we decided.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Identified as an Arthur Anderson employee, and there were certain stories about how we served clients and what we did or nations. There's certain narratives and stories around being an American or being a Brit, a Canadian, et cetera, et cetera. And religions as well. There's certain stories that different religions have about creation and what the religion stands for and et cetera, et cetera. So we can believe as a species all these things. And what that allows us to do is it allows us to work in bigger groups and to have shared myths and shared experiences. And so because of all this, we pay outsize attention to stories. And what this means from an investment perspective and just making decisions in everyday life is that we rarely stop to consider the base rate of what's happening. So, you know, I'll give you an example. Yeah, go ahead.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“The quality of stories that we tell. So if you go out and you meet a person or if you're somebody that's dating and you go on a date and then afterwards someone says, oh, you know, how intelligent was Carl, you won't realize it. But the way that you will evaluate Carl's intelligence is what quality of stories did Carl tell me, how well relevant were they to mine, et cetera. And the reason we evolved to be storytellers is because, again, it comes back to a survival advantage, everything else evolutionary. And there are other mammals or animals that work in small groups, but humans are the only species that works in a large scale group. So, you know, there's something called Dunbar's number that you can really only know 150 people or know them by name and by appearance and know something about them, right? But if you think about it, we have all these groups that are much bigger. You can work for a company. I used to work for Arthur Anderson. We had 88,000 employees.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“And the Turing test was something formulated by Alan Turing. So he was famous in the 40s as one of the big code breakers in Britain and the Enigma machine and is arguably the creator conceptually of modern-day computers. But he had created this test of will there be a time period someday? How can a computer trick a human to think that they're interacting with another human, right? So that's passing the Turing test. And there's like movies like X Machina, which is just a great movie about this sort of thing. So Roger Shank was writing, one of the big challenges or maybe the big challenge with AI passing the Turing test is that the way that humans interact is we tell each other's story. So I'll tell you a story of something that's happened. And you'll tell me one back. And your story back will typically be relevant to my story. And what that story will do will convey to me that you've heard me and you understand. And then I'll tell you one back and I'll go back and forth. And in fact, we judge each other's intelligence.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“So, this is something that isn't talked about a whole lot when it comes to investment behavioral biases, and it a bit falls under the what's more commonly known as base rate neglect. I just think calling it storytelling bias adds a different spin to it that is, first of all, sounds more interesting than base rate neglect. But it also flips it and highlights why we neglect base rates. And so storytelling bias, you know, it's interesting. I read this book called Tell Me A Story by this AI pioneer named Roger Schenck. And he wrote a book, this book, Tell Me A Story in 1995. So if you think back to 1995 and compared to what's going on with AI today, you know, like in 1995, we had had, you know, I think definitely the first, maybe the second Terminator movie in some science fiction, but really hadn't done much in the way of artificial intelligence. But what he says in this book, which is fascinating, is one of the big challenges with AI and AI passing what's known as the Turing.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“That took action not to lose are the ones that were more likely to survive because back in the day we called like the caveman days. A mistake could easily lead to your death or at least your inability to reproduce and pass your genes down. And it was the ones that were more risk adverse and incredibly treacherous world that survived and passed on their genes and we are their descendants, right? So there's a very good reason for us to be loss adverse. But again, as an investor, for most people, it just doesn't make sense to give outsized focused and emotion to losses as compared to gains in this world of abundance that we live in.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Biases. And it's because having these biases helped in terms of our survival. So we've evolved to have them. But the situation we are in now is that we have these ancient brains that evolved to be in this time period of thousands or hundreds.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“15 books on behavioral biases and behavioral aspects of investing and the like. And every time I read about it, I think, oh, okay, I got this. I'm going to be better. And I'll tell you, I think I've gotten a bit better just because I've done so much study over the years. But this, I think this idea that you can read, you know, like one book or one paper or like my book, one chapter and like, okay, you've got this, you know, you're going to make this big improvement to realize that these are hardwired into us. And, you know, a thing I hit in my book is some of the reasons why that is. And I think behavioral economics or behavioral finance or whatever you want to call it tend to talk about these biases and then heuristics, which means, you know, this shortcut that you make, these shortcuts you make in decision making. They talk about them like in this way, like, aren't we flawed? Most of the books. But really, if you dig into like evolutionary psychology, you know, there's really good reasons why we have these.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Spencer Burke, who also my mentor, what he has said over the decades is you read these books about behavioral biases and a few things happens. First of all, it's human nature because we're overconfident that we think about like, oh, other people do these. Like, oh, these other silly people that are doing risk-seeking behavior when they're at a loss or these silly people that have hindsight bias or succumb to confirmation bias, et cetera, et cetera. So we first of all think that we're not as bad as everybody else. And so we need to be like, no, we're as bad. Like I'm human just like everybody else. But then the other thing that's sort of insidious is once you read about these biases, you think that now that you know them that you're going to be better at them. And what I've found is, so, you know, like I have those professional certificate where a lot of studying research, it wasn't actually, you know, like a multi-year sort of thing. So maybe it sounds more impressive than it is. But, you know, in prep for that, but also over the years, I've probably read, I don't know.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“There goes hand in hand because when you're down and you decide, okay, I'm going to double down or I'm going to engage in risk seeking behavior because I don't want to lock in a loss. It just shows right there that you're being overconfident in terms of your abilities. And really, you should step back and go, okay, this invest this investment that I have is down. It's at a loss. What should that teach me about my ability to make investment decisions? You know, if it's just the rest of the market's down, fine. But if it's down, you know, more, if it's an individual stock or other type of investment, maybe you should say to yourself, I don't really know what I'm doing. And I'm going to cut my losses instead of engage in risk-seeking behavior. But I do, to your point at the beginning of the question, I do think that these are two of the biggest behavioral biases to be aware of as investors. And I hit five of them in that chapter. And there's entire books and great ones written about behavioral biases. And I think a key takeaway is, and my business part”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I don't really think that they're actually at odds. I think there are things that each of us applies at different times. And I'll give you an example. So if you're overconfident, so it means that you think you know more than you do, you're better than you are, you're better looking than you really are, you're a better driver than you are, you know, better spouse on down the line. But in terms of investing, again, it means that we think that we know more than we do or that other people do, that we make better decisions. And then we have this loss aversion, which at its core states that losses feel more painful than gains feel good. And so there's these different things that we do when we're faced with decisions with loss aversion. You know, the first is we make decisions to avoid losses. But then importantly, once we're at a loss, we tend to double down. Like we don't want to keep, you know, we don't want to lock in the loss. And I think overconfidence.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Based on, it's really based on the investor. It's really the investors. And there's this idea that if you could invest maybe with a manager that has a lockup. So imagine if you invested with an investment manager that said, I'm going to buy publicly traded stocks, but you can't get out for 10 years. Or you could invest in a publicly traded manager that you could get out every day. I'll tell you that the one that you can't get out of for 10 years likely with a high degree of likelihood will beat the one that you can get out of every day because the one that's investing for 10 years is going to invest with a long-term view and not be worried about whether their investors are going to pull out and they won't change their strategy and they'll stay with something that has been shown to likely over long periods of time beat the market.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“So, five years out of 15 years, if I do my math correctly, is one third. And a lot of them had six, seven, eight years of underperformance. And also the majority of them had at least three years of consecutive underperformance. And so what that means in the real world is if you're an investment manager and you're like, okay, I'm going to outperform. But I know that I'm going to look like crap like a lot of the time. The problem is your investors likely won't be sticky and that after three years of consecutive underperformance or four or five even or I'm underperforming five or six or seven out of 15 years, you know, you'll have people fire you and you will go out of business. So what the investment managers do is they change their strategy so they don't get fired or they invest in a way that is very similar to what the market is and they just tweak it a bit so they don't look too different. And it's really a business decision and it's really”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, that is so true. It's really hard. And what happens is an investment manager, there's ways to invest that you have a high likelihood that you're going to beat the market. But the problem with them is that it takes a lot of time for you to be correct. And there'll be a lot of time where you look horrible. In fact, Vanguard did a study of investment managers that had over a 15-year period that both survived and then beat the market. And of the over 1,500 funds they looked at, only 18% actually beat the market over the 15-year period. And that's pretty consistent with other studies by S&P and others that have looked at the success of active managers. But what was fascinating of the 18%, two.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“To read too much into their performance, or if they do really poorly, we can't read too much in their performance. I mean, if picking a star investment manager that was going to outperform in the future was merely as simple as how they performed in the past, and let's pile into the ones that have done well, that would be easy. But what studies of public stock managers have shown is there's basically no persistence from year to year to year and very few investment managers over long periods of time show that they have skill and they deliver outperformance beyond their fees. So there's a lot that have skill, but just not in excess of their fees or especially, you know, the taxes that might be generated. So what it means is picking a manager, someone that's going to buy stocks for you that's going to outperform, you know, picking a manager like that is really hard because there's so much luck involved and it's so hard to tease out skill.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Lose, right? And the same things in investing true of stocks. Like, can you lose on purpose? And, you know, when I ask this question of people that they often say, oh, well, yeah. The answer is no, not really. Because if you could pick stocks in advance that weren't going to do well, you could make a ton of money as a short biased stockbreaker. You could short stocks. And there are basically, you know, like no famous short managers because it is so hard to do that in general stocks go up to, so pick the ones that go down or even to pick the ones that are relatively don't do as well as others is incredibly hard to do because long short hedge funds, their history and their performance hasn't been great. So it just really shows you that investing skill does matter, but there's a huge component of luck. And what this means is when you see an investment manager or a middle schooler that does really, really well, you know, it behooves us not.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“I think she had like thousand bucks for her grandparents. And she picked like Netflix and Tesla. It was like some of the highest performing stocks of 2020. So it was like three or four stocks. And we went back and looked at like, you know, what can we learn about the high versus low performing portfolios? And yeah, so this middle score was the top performing. And so it just shows you that an amateur can beat a pro and investing. And it happens all the time, especially over shorter periods. And then on the other question he asked, which is so good, is can you lose on purpose? So if the outcome is mainly based on skill, you can lose on purpose. So like I could, you know, my nephew in chess could choose to lose to me on purpose. He could intentionally make poor moves. Or if I was swimming against somebody that was a better swimmer, they could choose to swim slower than I would win. Or I race my now six-year-old nephew. And like I'm still faster than he is. So I could choose as I usually do to lose. Every once in a while, I choose to win. But mostly I choose to lose.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“The answer on skill based things is no. Like, I don't play chess. So if I played my nephew, who is this incredible chess player, like I'd have zero chance of beating him? And I swim. And if I swam against Michael Phelps, like it would be laughable. Like ran a running race against a college, you know, or even high school track person. They would just, they would cream me and, you know, same thing. If I played one-on-one basketball or horse against like a college basketball player, like all those things, like an amateur cannot be the pro. Whereas if you think about roulette, like can an amateur roulette player beat a pro roulette player? Yeah, of course. Like it's random, right? Or slot machine. Like, can an amateur slot machine player win? And if you think about investing, an amateur can beat a pro all the time. And I tell the story in my book of in 2020, our highest performing portfolio in 2020 was that of a middle schooler. You know, we had helped her set up an account at Schwab and educating her on stocks and like, oh, what stocks would you like to buy?”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Much luck is involved. I love hockey and all the time you'll watch your team and your team will hit the goalpost a few times and you'll lose or vice versa happens. Or you're watching football and the game-winning field goal hit doinks off the uprights. There's all sorts of things that happen that you can see where luck comes into play. But really, he did all this study and research and analysis. What he found is investing falls way down towards the luck into the continuum. you know, skill matters, but it's way, you know, it's definitely much more towards gambling. And some gambling like poker, you know, has a lot of skill, but it's much more down towards, you know, the roulette than it is up towards, you know, chess or swim races. And he asked a few great questions that we all can ask to tell where an activity falls in the continuum. And the first is, can an amateur beat a pro?”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and of his books, the success equation. And it's really my favorite investment book because it's had this outsized, maybe the biggest impact on how I in view the investment world and really opened my eyes to a lot of things. And yeah, his skill luck continuum is pretty fun because it's not just investing. On one end of the pure luck is, you know, like roulette and slot machines. You can put the lottery there, you know, just complete luck. And at the other end, things that are 100% skill, like chess is 100% skill and things that are pretty close to full skill, which are like races. So like a running race, like the 100 meter race running race or, you know, in swimming. So if you think about it, like Michael Phelps, you know, he's going to be a less skilled competitor pretty much every time. There's very little luck involved. I guess he could like, you know, slip a little bit coming off the block or have something happen. But really, I guess, you know, even that falls within skill. But then you look at a lot of sports and, you know, they vary in how.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“But didn't. So I look back not just to be like, you know, and I say something that's funny in my book. Like whenever I look, you know, think back on the story, I think about Tom sitting in a cellar in New Jersey, you know, like with a shotgun across his lap, you know, eating a can of peaches, right? Or something, you know, which I thought was kind of funny. But I really have more sympathy for this, you know, and if you're a hedge fund manager, you know, maybe you're all about making big calls. And he could have been correct. But I use this as a mental model to remember that, you know, even if you have all the possible information you can have, your, you know, this highly pedigreed, you know, hedge fund manager with all this staff and this analyst analysis and research, it doesn't mean that you're going to be any better than anybody else from calling what's going to happen in the stock market. And about a month later is when the market bottomed and his hedge fund, and I haven't gone back and checked it out, but they may well have gone out of business.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Movie. By the way, which was filmed in St. Louis. Go figure. But the old movie Escape from New York, he was just like, I'm going to be able to get bypassage out of New York City and maybe gold has always been a store of value for most of civilization. And he had guns and generators and seeds and everything. And he was going to live off the land in rural New Jersey. And I was like, oh my gosh, like I am so upset. And I remember talking to a few of my co-workers. And fortunately, you know, they kind of talked me off the ledge, you know, and I did like breathing exercises and meditated and they're just like, okay, it's just one opinion. I'm like, yeah, but there's a lot of people with similar opinions. But I think cooler heads prevail because it really, really freaked me out, you know, and, but I look back on that. And in addition to being an entertaining story in retrospect, and by the way, what he predicted could have happened. Like it could have happened. It just didn't. And, you know, later in my book, I talk about something called invisible histories, which are things that could have happened.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Meal of misery that we're going to have. And he says they'd move their hedge fund mostly to cash and gold. And it's like a $3 billion hedge fund. They moved it almost out. And they were pretty sure that the stock market, which was at this point down, nearly 50% in February of 2009, was going to be down another 50%, the way that math would work. I guess that'd be like over 75% down from the high. And he was at the time just so incredibly dour. And he had all these great reasons. And there were things that I'd read before, but to read someone that had actually said, okay, we're, you know, really selling our clients out. And he said he had even bought farmland in New Jersey because he lived in New York City and he had like this stockpile of gold coins to buy passage out of New York City if, which he thought was a decent chance, if the economy collapsed, he was like, it's going to be like, you know, escape from New York stuff. If you know the old.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Global financial system almost collapsed. And I don't even know what that means. I just know it's really bad. And I was reading all these economists and investment managers that were just saying, you know, there's no way out and everything's going to get worse. And so I'd gone to a conference the prior year where I had met this hedge fund manager that had given a talk and he was so impressive and their returns were great. And kind of back in the aughts, you know, hedge funds were kind of the darling investment and money was flowing into them. This guy was so impressive and had all these pedigree and everything. And I ended up having an adult beverage with him in the cocktail hour of the investment conference. We had to exchange cards. So I'll call him Tom as I do in the book. It's not his real name. But, you know, I ended up emailing him and setting up a time to talk. And again, it was on the phone back in 09. We didn't zoom and Skype. And I asked him, I was like, you know, what do you see happening? What's our way out of this? And he said, oh, what we've experienced so far is just an appetizer to like this much bigger.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“So, first of all, let me say that the great financial crisis, the great recession, wow, it's one of the really similar things, experiences I've had in my life that was so stressful. Like I felt all this responsibility for our clients' assets. And I really, you know, I hadn't developed all these mental models and I didn't know what to do. I was this big consumer of financial information. My amount of knowledge about what's going on in the economy and the markets was greater than it is now. But what I was lacking is kind of the Charlie Munger wisdom and mental models to make good decisions. And so it was really the great financial crisis that was the impetus for me writing this book is all that I've learned because I realized after that experience that I wanted to find what did great investors do? What do they know that I could learn? That really spurred me on the financial crisis. And what I was doing is trying to find more information about like I couldn't see how we were going to get out of this. And I know that the”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Was no underlying sound fundamental economic reason why GameStop would do well. Really, it was this chat group on Reddit that started driving it up. And so people bought shares of GameStop because they thought other people would buy shares of GameStop. And it was AMC as well. And Bed Bath and Beyond, which just declared bankruptcy, unfortunately. But then what this did is this caused real world effects. So like what AMC did, which was brilliant, is they said, hey, like if these Reddit people are going to push up the value of our”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“To complex social interactions. So, this is true of politics, it's true of the economy, it's true of the stock market. And the idea here is that in the economy and in the stock market, you have actors that are intelligent called agents. So these are all the people and all the companies that buy and sell stocks. So they're intelligent. So they don't operate on rules of physics, you know, like Newtonian physics or even the theory of relativity, right? It's everybody watching each other watch everybody, watch everybody else. So we're all trying to decide what everybody's doing. And if you think about investing, the true value of a company is what the market says it is, which means everybody else. And we learn from patterns. So we have these feedback loops. We have external information. So you can use like, for example, let's use like GameStop. So going back to the meme stock, you know, from early 2021 and really there.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Money out of the market. But if you use the stock market, it is not the economy, you know that you can't use what's going on, or even if you knew what was going on in the economy, you can't use that to inform what's going on in the stock market. In fact, I wrote an article in Forbes on March 26, three days after the bottom, that said, even with a recession looming, that doesn't mean you should sell the stock market. And I went through a lot of these things. And I had people say, wow, how did you know? How did you call the bottom? And they're missing the point. Like I didn't call the bottom. I had no idea. The point of the article is we have no idea. Could it have gotten worse? Absolutely. Why was that the bottom? Don't know exactly. So I think that's what's important to know about this middle model, the stock market's not the economy. And if we move to like, why is that the case? And that's where we get into this concept of complex adaptive systems. And this really comes from engineering, but it is applicable.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Very steep, and this great rebound. And I think people that looked at all the bad news missed it. They didn't invest their money or they pulled money out. And, you know, the bottom was March 23rd of March. And on that day, or like three days later, they announced the thousandth COVID death in America. Imagine like if somebody, you know, think about this clay, if somebody said, hey, guess what? I have a crystal ball. And here's what I'm going to tell you. Okay, we just hit a thousand deaths. We're going to have nearly, you know, 350,000 in the US by the end of the year. It's going to hit a million or two million worldwide. International travel is going to shut down and pro sports leagues are going to stop and all these restaurants are going to fail. Entire industries are going to be decimated. GDB growth this quarter is going to be a negative 14 something percent. Unemployment is going to spike to nearly 15% here in a week or two. We're going to have 3 million weekly unemployment claims. Like if we knew all that and oh, by the way, this is going to go on for years. Like if we knew all that, like we would be like, okay, we're taking.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“What they're missing out there, and I'll talk to some of them, and I'll say do you do realize that all those things you just listed out don't tell you what's going to happen with stock market returns. And some of them are surprised by this. The more Erudite ones go, well, we know. And I'm like, well, then why did you spend half hour talking about them? But it means that all these economic indicators don't tell you what the stock market's going to do, which is, again, it may seem like depressing and like, oh, well, that's telling us there's no Santa Claus. But knowing that is so important. So like during COVID, when things were getting really bad, you know, we didn't go to our clients and say, you know, let's take some risk off the table and move out of the market. In fact, if anything, we rebalanced into stocks, not thinking that we knew when the bottom was. We just knew that all the bad news in the real world and in the economy wasn't going to tell us when the stock market was going to bottom or what the stock market was going to do. So, you know, it was, you know, kind of this incredibly short bear market that”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“And then you could take that and say now I'm going to use that to kind of time my investments, that would be amazing, right? But that's not how it works. So the stock market moves in advance of the economy, typically up and down, and tells you what the economy is going to do, which is some usefulness, but as an investor, it's just not very useful. And so what that means is pretty much every economic indicator out there doesn't tell you what's going to happen in the stock market. And I've been on a number of like charitable investment committees over the years and even chair of some endowments. And we'll have these investment managers or these consultants come in and they'll give us their economic update. And they'll talk about all these things going on in the economy, their views of the path of interest rates and inflation and unemployment claims and GDP growth and corporate earnings and all these things. And then based on that, they'll talk about how they would tweak the portfolio.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“A contracting economy and a stock market that's up. But what's fascinating, and this came out of a research I read that came from Credit Suisse, and I'll just say that name because that name is going away, as we all know, as they're being subsumed by UBS, I think, here in the next few months. But really, if you look at the prior your stock market returns and the current year GDP, then the correlation jumps to kind of a 0.6 and above, meaning that the stock market predicts what the economy is going to do, not perfectly, kind of an ish, right? But the economy doesn't predict what the stock market's going to do. And as an investor, you'd love to have it reversed. You'd love to say, because it's easier to kind of figure out, I mean, not, you know, ish what's going on in the economy and say, okay, I'm going to use that to inform my investing. So you could say, oh, you know, I think inflation is a problem and interest rates, Fed raising interest rates going to slow the economy and therefore, you know, we may not tip into recession, but we're definitely going to have slower growth here for a while.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I think this is probably from a pure straight up investment standpoint, the most important mental model in the book. And let me just touch a bit deeper on the stock markets, not the economy, and then we can maybe hit why that is. But really what this says is that what's going on in the economy and what's going on in the stock market are uncorrelated. So if you look at current year GDP growth and current year stock market returns, going back to World War II, the correlations 0.03, so basically zero. And what this means is there's years where the economy is roaring and the stock market is not doing well or even down. And there's years where there's recessions and the stock market is up. So in fact, looking back to the 1930s of the 19 years where there's actually been negative GDP growth in a year, in other words, during a calendar year, 12 of those 19 years, the stock market was up. And most of the time, more than 18%. And so you can look at that and go, well, that's bonkers. Like, how is it that you have”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, improbable scenarios happen all the time, and yet we, as humans and it's human nature, we seem surprised almost every time it happens. If it's something like being seated next to somebody at a dinner at a foreign city, yeah, that's just kind of fun. But to your point, sometimes these improbable things really can have an extreme effect on our actual lives. And yet we end up being surprised by them.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“AEW 357 isn't that amazing, right? And his point is there's nothing special about that license plate. It's just one of the 30,000 things that we see a day. But if it had somehow been my initials and my year of birth or something, it would have been just like this extraordinary, like, oh my gosh, the universe is talking to me occurrence. So really the mental model here is that the highly improbable happens all the time because there's this just huge tens of thousands of things that happen every month. And if that's the case, we need to train ourselves not to read too much into patterns that we see that really aren't grounded in anything other than randomness and chance.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“A day. And he came up with about 1,000, I guess 30,000 things that you observe and see during a day. And so if you do that and you multiply it by the number days in a month, you come up with, you're going to hit one of these one in the million things about once a month. And even if you say, well, 30,000 a day is too high. Maybe it's 20,000 or 10,000 or 5,000 a day. You still come up with the fact that many times a year, you're going to have just absolutely extraordinary coincidences that are just amazing. And, you know, Richard Feynman, who is a Nobel Prize-winning physicist and just an all-around entertaining guy, you know, unfortunately, he's not alive anymore, but he has this book that he wrote, this kind of memoirs called Surely You're Joking, Mr. Feynman, which is I highly recommend. Incredibly entertaining. But one thing that he's known to say is, you know, here on the, you know, I'm going to paraphrase, you know, on the way to dinner tonight, I saw something extraordinary, a car with the license.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“That fate's seen something, but really to step back, the way to analyze this is to say, what are the chances that in all my travels that I would be see somebody, you know, whether, you know, in a movie theater or on a bus in a museum seated next to dinner that I knew from the thousands of people that I've known during my life. And, you know, it's still a coincidence and it's still fun, but it's not one in a hundred million. It's more like, okay, over the course of decades, it's almost certain that this sort of thing will happen. And there's something, you know, way to think about this. There's something called Littlewood's Law of Miracles. And what this mathematician did is he said, okay, how often do we experience what you would consider a miracle, like me being seated next to a fraternity brother, you know, in a restaurant in Paris? And he said, you know, let's define a miracle as a one in a million occurrence. And then he calculated how many occurrences do we have.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and it's kind of like this topic is in some respects kind of a bummer, right? Because we all love a good coincidence. And, you know, it's great to look at a coincidence and think, okay, this shows that there's like this, that there's more meaning to the world, right? Like there's this underlying ebb and flow that maybe we don't understand as humans and life does have meaning or what have you. So when I have given talks on this topic, people have been like, wow, that was really a buzzkill. But yeah, so we were in Paris and we get seated at our table and one table over is this like fraternity brother of mine. I hadn't seen him in years. And his name's Dave. And Dave was like, oh my gosh, this is crazy. Like how improbable is this? And one way to look at it is, and I first thought, oh, yeah, like what are the chances like one in a hundred million? Like this is insane. But really the way to look at it is not the way that I initially looked at or Dave looked at it, which is like, wow, the universe is telling us something. You know, maybe we should reconnect and become friends again, right?”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“A big fan of female leadership and female-led firms. But the jury is out. And I had kind of jumped to this causation explanation. And my client's point was a great one. Maybe it's a symptom instead of a cause. And, you know, I go through a lot of those things in this like that in the chapter, which is really teasing apart how to look at things and to say, is this just merely correlated”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“That when you have a company that's doing really well, highly successful company, that they have more resources to spend on things like diversity. And, you know, there was the psychologist that had dug into this that said, you know, it's almost like a cynical measure by companies saying we're going to recycle our annual reports or we're going to buy carbon credits as almost PR that may be high performing firms are more likely to hire female leaders and female board members. And there isn't, you know, the jury's still out. What hasn't been done so far, at least as of about two years ago when I last researched this, there haven't been longitudinal studies between companies to really tease this out. So I'm not saying that strong female leadership isn't a cause of high performance. In fact, our company, I'm president of our company, but our CEO is a woman who's incredible and we have 70% female employees here.”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Female led companies have stronger leaders because they've had to run this gauntlet. It's like, this is amazing. So not long after this conference and looking into this research, I was meeting with a client of mine who's one of the smartest people I know and he led this fortune 100 company as CEO. And I was telling him about this investment firm. I was like, it's pretty interesting. We're looking into it as an investment. And he's like, yeah, but is there really a causal link? Like where is that causal link? Are you sure that there's not like a common cause or like is this a symptom? So I was like, oh my gosh, maybe he's right. Like my first reaction was to dig in and defend. But like I have so much respect for him. Like I think if most other people would have questioned me, I'm like, no, no, no. I've researched this. This is good. But I decided to do something that's really hard and battling something is known as confirmation bias is I was like, now I'm going to go try to find studies that disprove this. And I found ones that took the other side. And really to summarize those, it basically”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT
“Have strong female leadership, either female CEO or president or females on the board, and it's because female-led companies outperform male-dominated ones. And it's like, wow, that is amazing. So I instantly was thinking like, that makes total sense, right? And I dug into the research when I got back to work. And, you know, there was all this research that supported the fact that female-led companies outperform. And it's things like women are more risk-adverse. So, you know, their companies won't maybe have the same propensity to blow up. Women, consumers make 70% of the buying choices. So maybe either more in tune with their fellow females, you know, more diverse teams outperform their female leadership style, stereotypically is more nurturing. And then if you've made it to president or CEO or the board of directors of a company and you're a female because of the glass ceiling, you're probably totally a rock star. So maybe the”
2023-05-21 · We Study Billionaires · TIP554: Mental Models for Successful Investing w/ John Jennings · IDENTIFIED FROM THE TRANSCRIPT