YouSaid · the spoken record

Meir Statman

lines on the record: 92
first: 2017-04-27
most recent: 2017-04-27
sittings or episodes: 1
sources: podcast

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“Well, the hard to beat market hypothesis says that Gaming, consistent advantage in the market, gaining consistent above average return is very hard to do very hard does not mean impossible. Hedge fund managers do that many active mutual fund managers do that. And so on. Insiders definitely do that. The question really is who can do that? We talked about them. Who cannot do that? The typical amateur individual investors cannot do that. In fact, the reason those professionals are able to beat the market is because they take money out of the pockets of the idiot individual investors who try to compete against them. And so it's not the question of whether the market is efficient and if it's not efficient, then anything goes and it's very easy to beat the market. You have to ask yourself, what edge do you have?”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And you should not even have it as a matching thing. You should just have it as a straight contribution. That is, matching helps people like me and like you, that there's people who have enough money to actually save and then they get the bonus. But the people who really need to save are the people who find it hardest. And many times they just forego the match because they don't have the money to make their own contribution.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's why they went that way. But the nature of it as being voluntary, that was something that could have been... Made one way or the other. It could have been made mandatory.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“To do that, I mean, think about pensions. People did not have a choice. It was mandatory, in fact. People did not have a choice. Do you want a pension or do you want to get the money right now up front? It was done in a paternalistic way without nudging people and so on. How is it that we got ourselves into the nudging thing? We just moved. Really, by accident almost, from pensions to find contributions, and nobody asked, should it be voluntary or should it be mandatory?”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I well, I think that we differ in some way. The issue really is the politics of it. It is very hard to have mandatory contributions given the political situation. But I think that there's a need to have a system that is structured kind of like Social Security, not extending social security, but mandatory like social security. And there's really a need for employers to step up and contribute a whole lot more. Employees retirement accounts.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, that is the way it should be. And that is a point that is not made. Instead, we are pushing it to the employees and call them irresponsible and talk about how to nudge them. I say enough of that. First of all, you don't need to nudge people. You need to shove them into.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That is, and ask for a match, and it tops out. That is the problem. The problem is not with the 401k. The problem is with a miserly corporations that contribute so little to it. Because employees in the early stages need the money, you know, for diapers and rent and so on. It's very hard to say when you are young.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The other has to do with how much the employer contributes. Employers used to contribute to pension plans the equivalent of about 8% or perhaps even 10%.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It is it is pretext. Here's the thing there are two aspects to the move from pension plans to defined contribution. One has to do with who bears the risk. And so now it is the individual employee.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Contributed, I think, either 12 or 15% to my measly salary at the time. I added to it same at Rutgers College and at Santa Clara University today, and that is common, the university contributes 10% on top of my salary, no matching, no anything. I can add to that and I do and I do.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The fine contribution. So I've never had defined benefit. I've never had a pension plan. And I can tell you without bragging that I have a lot of money now. Now, let me”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It is not the behavioral side. It is how programs are structured. I, for example, like fellow academics, have been on a defined contribution plan for 3B plan. Since I first was teaching at the City University of New York in 1975. Now,”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I was asked to join as an advisor to Wealth Front because of my work in behavior finance. And of course, if you're going to do a platform, whether it is with flesh and blood advisors or it is with an automated system, you need to understand people. You need to understand what it is that they want, the kind of mistakes they make and help them identify their ones, balance them, and avoid mistakes.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, they can find both books on Amazon, the second book. Finance for normal people will appear on May 1st, but you can pre-order it. They can also look up my name and get to my website and see papers that I have written.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Before 9 11 or before the election, and you see that it's different. And so the first thing is to recognize the kinds of mistakes people make, whether it is hindsight or framing and try to hold yourself to ways that will correct them. The same thing applies to emotions. We can step back from our fears, from our anger, count to 10 before you speak when you're angry, they say. And so we can help ourselves do better in life.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“We can. The first thing is to stop and think. Now, you don't have to do it which each and every and every decision. You are at a restaurant and there is fish and there is beef and there is chicken. What will you choose? Well, I don't know. I feel like fish today. That is fine. But if you're going to buy a house or if you're going to invest, you better pause and ask yourself whether you should not engage what we call system two, the thinking system, to consider your choices. So, for example, for me, whenever somebody tells me about something that was absolutely clear in the past, you know, 9-11 or the results of the recent election, I say, you know, my mind kind of rings and says hindsight, check to see what people... Actually, said”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But people signal how much money they have in all kinds of ways, you know, dropping hands about their extra house in upstate New York or whatever or through the cars they drive or the vacations they take or the stories they tell. And again, you know, if you do it in a way that is within reason and you don't waste too much money doing so, fine. Be reasonable.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, one of the things that I discovered very soon after I came to the United States is that people in the United States, like in Israel, are very interested in money and very interested in their own income but incomes of other people. Sure. But Americans are very secretive about that. The last question you would ask somebody here is how much money do you make?”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Precisely. And so think about socially responsible investing. If you invest in a way that's socially responsible, you may say lose one percentage point of your return. Will give you expressive and emotional benefits. You have to ask yourself whether that 1% loss in utilitarian benefit is not too large relative to the benefits that you derive from it. And so all of those things have to be done In proportion, in a good sense, the same applies to things like hedge funds. Hedge funds are prestigious because not everyone is allowed to buy a hedge fund. So you can signal your wealth. By doing so, but buy hedge funds for prestige and ending up losing money, that is not really a very good way of achieving prestige.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“You buy a lottery ticket. Exactly. And so the question really is not about mistakes. You have to begin with what it is that people want and then ask yourself. How should you go towards what you want without making mistakes? And so buying one lottery ticket a week, that's fine. Spending half your pay on lottery ticket, that's an error.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and if you do it with a measure, just a little, you'll be fine. Think about buying a lottery ticket. People who buy lottery tickets are derided as people who don't know math. But, you know, a lottery ticket costs a dollar or five and it gives us hope for the entire week before we find out that we lost again and hope Now think about movies. You know, movies are fiction. And yet we pay real money for them”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Trading has been attributed to a cognitive era. Why is it that people trade so much? Because they're overconfident in their abilities. Yes, that is true. But as we mentioned, it is also a matter of entertainment. Why is it that people play video games? For some people, trading is the equivalent of video games, but with money.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where does this go? I'm still in the second generation. Okay. In the first generation, yeah, people are irrational. People are idiots.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think that finally people are getting the point that if you are a typical individual investor, markets are difficult to beat. They are hard to beat. Yes, hedge fund managers do beat them, but you do not. And so people are moving towards index funds. In an odd way, they are getting the same kind of satisfaction of feeling clever, feeling smart by buying index funds. This is what I do. That is, I look at people who try to play the market and I think about them as idiots. And I take pleasure in being smart enough not to waste my money on attempts to beat the market.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It is a self satisfaction. It is an image of myself as a competent person and a demonstration to other people that I'm a competent person. And so I invest sometime in individual stocks, which I don't. That typical person you're talking about most likely tells others only of those stocks that went up, not those that went down, because he's trying to demonstrate competence to himself, but also to other people.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well what is the value of solving puzzles? You know, if you solve puzzles, fun entertainment. Exactly. And so for lots of people, it is fun entertainment. It's also demonstration of their ability, of their smarts. And so I can pick stocks that are going to beat the market.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. And so think about donations to charity when you donate to a charity, you give up utilitarian benefits of money that you just donated. But hopefully you get a sense that you are true to your value, that you have done good for people who don't have as much as you do, and that is sufficient compensation in expressive and emotional benefits for the utilitarian benefits that you lose.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That is right. We do look for utilitarian benefits. We do look to increase our wealth at the level of risk that is right for us. But we also look for expressive and emotional benefits. You know, I like to tell the story of a man who was considering whether to give his beloved a red rose or $10, which is the price of that rose. Well, a rational man would say, Why not give her $10 this way she can choose what she wants?”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly if you can afford it and your kids are taken care of and so on, what will you do with that money? So you have to figure out what matters to you. This is one example. In another example, we decided to buy a regular car and donate a savings relative to a prestige car to charity because it gives us more pleasure and we are going to feel awkward in one of those luxury cars.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we were not upgraded. So we decided that we are old enough and well off enough to buy regular business class tickets, even though I feel a bit like a fall because it costs four or four times.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think that people need to be reflective and people need to be helped in becoming reflectives. An advisor can help them do that. I mean, here's a personal story. My wife and I flew to Israel a few months ago. We bought coach tickets and we were on the wait list for upgrade that would have cost us $600 apiece each way.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, investors, we cannot get everything we want. We have, of course, trade-offs. We can give money to charity, and that is going to feel good and that is going to be consistent with our values, but it might if we give too much imperil our financial security. And that is one thing that we want as well. And so you can see that there are many competing ones and one of the things that we do in life, of course, is balance them and ask ourselves what is most important. And that really matters also to people who are older, people who ask themselves now, what am I going to do with that money? We have used, become used. To saving, we are good at saving if we already have saved a good amount. But now we find it difficult to spend. So what are you going to spend the money on? And some people...”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“My audience. Precisely. Precisely. The question is what is the money for? And people don't stop and ask this question. You know, I kind of joke about an investor who comes to his advisor in early 2009. And the advisor all shaking, of course, and the advisor says, what are you complaining about? I put you on the efficient frontier. Well, of course, we know exactly what he is complaining about. He's complaining because he is no longer sure that he will be able to retire. He is not sure that he'll be able to help his grandkids as he promised himself to do. So we have to begin with what it is that people want, what it is that normal people want. And this is why I call the book Finance for Normal People.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“This tells you what is the money for, you know, we talk about how you make the most money, but what is the money for? It is for the financial security of the grandfather. It is for the ability of that grandfather to help his grandchild and so on. So one of the things that people care about is financial security. Another thing they care about is family. And once you begin with what people want, then you can ask yourself, what kind of mistakes do people make on the way to what they want? And this is really where cognitive and emotional errors come in.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“People who are immune to cognitive errors, people who look only for risk and return when they choose products, financial products, financial services. Then we move to the first generation of behavioral finance, where we declared people irrational, subject to all kinds of cognitive errors, they are overconfident, they are suffering from hindsight bias, and so on. Almost people are stupid. What I say is that I'm not stupid. You're not stupid. Your listeners are not stupid. We are normal. Sometimes we behave in foolish ways. But normal people have normal wants. And you can see that in ads of financial services companies. You see a grandfather and a grandchild. They are fishing together.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I've been speaking for a long time about people as normal, people like me, people like you, people like your listeners. The history of the field is that we start with the standard rational people.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there is great confusion about this issue of market efficiency. There's a claim that behavioral finesse, great contribution is to show that markets are not efficient. That, I think, is not so. There are two concepts, two notions of market efficiency that are regularly confused. One is the notion that efficient markets and markets where price equals value. And the other is the notion that markets are hard to beat. Now, price equal value markets, for example, do not allow for bubbles because bubbles imply divergence of price from value. But knowing that you will have bubbles does not mean that you know when they occur, when it is time to actually take advantage of them.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“and people were cut and quartered to fit into the models rather than the model's expanding to fit what people really are.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, that too is a very interesting question because I wrote a paper that led me to go back to old issues of the General Finance and the Financial Analyst Journal. And if you look at stuff that was written in 1945, it's very clear that people in Finesse knew about human behavior. For example, I saw an article that wrote about the reluctance of people to realize losses and how they just hope against hope that it will come back and that author tried to persuade them that tax considerations should drive them to realize their losses. Well, that was really lost once we got to Miller and Modigliani and the rationale view of finance that fit in simple mathematical models. And then it became the The models became sort of the jail of people”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I've always been interested in human behavior, any time when I think about my childhood. And then I thought that learning about economic behavior would tell me a whole lot and it did. And I always felt that there was something missing in those models, but I could not identify precisely what. And it was only kind of in hindsight that I can see how things come together. And it was, of course, the work of Kahn Manversky that created structure. And I could see the connection between what they were doing and what it is that I had in mind.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Death is right. Yeah, I became aware of their work really at the very beginning of 1980 when I came to Santa Clarion University. And I met her Chefrin, and her chefrin knew of his work, of their work through Dick Thaylor when they were both at Rochester. And from that, that was after the races.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is a very interesting question. Yeah, it is the Hebrew University of Jerusalem and the economics building where I studied is right next to the psychology building. And during my studies, I earned pocket money by walking over to the psychology department and serving as a guinea pig for experiments. It turns out that these were not by Kahn Man and Fresky themselves when I talked to them and identified them. It was others. But I had no idea of who they are. And I had no idea of their work. And it can tell you that while there were just feet separating the two buildings The world that separated psychology and economics and finance was really very, very tall, like some other wall I will not mention.”
2017-04-27 · Masters in Business · Interview With Meir Statman: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source