What impact does financial literacy have on decision-making and financial outcomes? How is financial literacy tested? In this episode, we help listeners understand why financial literacy is vital in terms of financial well-being. Learn the definition of financial literacy, how financial literacy relates to economic outcomes, the differences between people who are financially literate and those that are not, and the contribution of financial knowledge to human capital. We discuss the topic through the perspective of several papers that will challenge how you think about financial literacy and the questions to ask yourself to test your financial understanding. Then, we talk about this week's book review regarding the effects of technology on communication and the various distractions associated with a traditional work environment. We also go through the various reviews received about the show and what we have planned for the Rational Reminder community.

Key Points From This Episode:

• Breakdown of changes made to the format of current and future episodes. [0:01:49]

• Introduction to today’s topic: expected returns of financial literacy. [0:07:34]

• Learn the definition of financial literacy. [0:09:36]

• The predictive power of financial literacy concerning financial outcomes. [0:10:27]

• What financially literate people are better at and how it increases human capital. [0:11:34]

• The cost of financial ignorance to the individual. [0:13:06]

• Overview of an interesting paper concerning active investing. [0:14:43]

• A dangerous observation within the financial literacy research [0:16:34]

• Find out how financial literacy is measured. [0:20:10]

• Whether it is safer to put your money into one business or to invest. [0:21:23]

• An important aspect of financial literacy is discussed: inflation. [0:22:34]

• Why numeracy is also a fundamental aspect of financial literacy. [0:24:25]

• We go through the topic of compound interest in relation to financial literacy. [0:24:57]

• Hear what the global distribution of financial literacy is. [0:27:04]

• How to approach the financial literacy problem from a policy perspective. [0:27:59]

• We review the book, Reclaiming Conversation, and discuss communication problems technology causes. [0:35:08]

• Examples of the different distractions associated with office spaces. [0:41:55]

• Reasons why meetings should be thought out with clear objectives. [0:44:45]

• Ways in which your phone can distract you from deep work. [0:46:36]

• Steps that social media companies could take to reduce screen time. [0:51:12]

• We go through recent reviews and suggestions received about the show. [0:52:22]

Read the Transcript:

Ben Felix: This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making from two Canadians. We're hosted by me, Benjamin Felix, and Cameron Passmore, portfolio managers at PWL Capital.

Cameron Passmore: Welcome to episode 217. I noticed, Ben, we're both wearing black. That's because it's just after Labor Day.

Ben Felix: Well, mine's blue.

Cameron Passmore: It looks black in the video.

Ben Felix: Oh.

Cameron Passmore: But maybe it's dark to signal it's the end of summer. End of summer coming up. So want to share a financial decision that we made here at home, James and I did, that led to greater happiness. We made a financial decision and we got someone to help us do the housework. Absolute game-changer. I've never had that service in my life, dusting and just the basic stuff I just don't want to do anymore and started to stress me out not getting to it.

So this woman came. She's fantastic. She loves what she does and did a phenomenal job. So like when you used to have your food service. It freed up time and reduced stress. I had no idea that eliminating something that you dislike so much could bring so much relief and pleasure. It was great.

Ben Felix: That's awesome.

Cameron Passmore: Now I just need someone to do the gardening, because I can't stand weeding. But that's a different story.

Ben Felix: Yeah. I just don't do that stuff. You should see my front yard. Lots of weeds.

Cameron Passmore: Well, the problem is I wasn't doing it either because I just didn't like doing it. So it's just nice to get it done.

Ben Felix: We joke that we have a weed garden. It's crazy. Sometimes we just go down and chop down all these massive weeds and then they grow back. But, yeah, we don't do a lot of lawn maintenance. We live in a forest, though.

Cameron Passmore: Yeah. So it's the environment, right?

Ben Felix: Yeah.

Cameron Passmore: You can't really do that in suburbia and keep your neighbors happy with you.

Ben Felix: Oh, yeah, yeah. No, my house in suburbia wouldn't fit in for lots of reasons. Anyway, we're switching the format up a little bit based on someone was complaining about the intro being too long and they had to skip it or something. But, anyway, that's not why we're making the change, but that prompted us to go and look at the YouTube retention data.

YouTube has pretty rich analytics on what portions of the video people are watching and what portion they're skipping. What we learned from that is that some topics, the main topic that we have in every episode, has by far the highest retention. Other segments have lower retention. We've also had some feedback in the past that it's hard to share the episodes because if somebody wants to share the main topic, there's a lot before that to get through. If somebody's not familiar with the podcast, and maybe they don't want to hear us chatting with each other because they don't know us ... And I get that. When I listen to other podcasts, I totally understand.

Anyway, so we're going to move the reviews and recent contacts to the end of the show, because I think it's still interesting and worthwhile to mention those things. But maybe not right at the beginning.

We're also eliminating upcoming guests. The idea behind that initially was that it would give people a chance to review the research and stuff of the upcoming ... But no nobody's doing that. If you are, I'm sorry, but I don't think anyone's really going and researching the guests before the episodes, unless maybe there's a specific case where we think that it's important to have some pre-reading. But I mean I don't know under what circumstances that would happen.

Cameron Passmore: Yeah, I agree.

Ben Felix: So we'll lead with the main topic right after the introduction, for the reason I said before, to make it easier to share and it also reduces the amount of content that people need to skip if they don't want to hear the intro and all of the other preamble stuff.

The other thing that we found in analytics is that on Apple Podcasts, which is where most of the audio downloads come from, people are not skipping. So there's this weird disconnect between the YouTube data and the Apple Podcast data. But we're taking the position that because it's easier to skip around on YouTube and people are probably sitting down at their computer, or at least they have their device available because they're watching, it's easier to skip.

So we're inferring that on Apple Podcast, even if people aren't skipping, because it's more of a hassle because you're in the car or you're going for a run or whatever, we're assuming that based on the YouTube data, those other segments are generally less interesting to listeners. So we're not eliminating them, because the retention is not zero for a lot of those segments. We're just going to shift things around a little bit.

Cameron Passmore: It does make it easier. I do it on a number of other podcasts where you get to know how long the ads are. So, as I said to you, the Tim Ferriss podcast is, whatever, 10 advanced taps. So you just skip through the ads. So I think many people are doing that. So make it easier to get to the main part.

Ben Felix: Yup.

Cameron Passmore: Any updates on the crypto podcast?

Ben Felix: Well, nothing big. I think our episode this week, when this episode comes out, is with John ... Or John Cohrane will be the last week when this episode comes out.

Cameron Passmore: That's right.

Ben Felix: That was a fantastic conversation this week, so tomorrow, is Vili Lehdonvirta, which was ... I mean these are ... We had a lot of really good conversations in the crypto series, but these two are ... It's probably recency bias, but they're some of my favorites.

Cameron Passmore: Yeah, for sure.

Ben Felix: So hopefully people enjoy this.

Cameron Passmore: So speaking of other podcasts, I listened to one from Patrick O'Shaughnessy this .. It'd be last week now, on his podcast Invest Like the Best. He had David Senra on, who was an incredible, high-energy guest. So he's the host of the Founders podcast, and he studied hundreds of founders, people like Estee Lauder, Rockefeller, Phil Knight, Enzo Ferrari, and he studies their biographies and autobiographies. I think he's read like a thousand or some crazy number of books about founders. Patrick argues he's probably the most knowledgeable person about founders on the planet.

It was a really cool interview. So I reached out to him because he talked in the podcast about how he captures all this information about people and collates it to be able to add value in the podcast. It was a really interesting process. I reached out to him and he's going to join us for our 22 in 22 Reading Challenge in a few weeks. I thought that was pretty cool.

Ben Felix: Cool.

Cameron Passmore: But I highly recommend, if you're interested in founders, go check out the interview with Patrick as well as his podcast. They're really, really good. The last point I wanted to mention, it's funny how sales in the merch store slow down when we stopped mentioning it. So I thought we'd mention the fact we do have the merch store. Stuff is available. It's good quality. Super cheap. We don't take any spread on it. In fact, we give you free pair of socks and a free beverage cozy every order. So check it out in the Rational Reminder website. Anything else, Ben, you wanted to mention?

Ben Felix: It's worth mentioning there's a similar effect for the Rational Reminder community, where if we don't mention it, the new signups slow down.

Cameron Passmore: It's funny.

Ben Felix: We have no incentive to grow the community. But I've said it before in the podcast, it's one of the nicest places on the internet to have real good discussions about financial decision-making and portfolio management and all that kind of stuff, because it's got very high quality self-policing and very high quality moderation from a team of non-PWL-related moderators. They're just people from the community that live all over the world that are in there. But it's a great place.

So if people want to join those discussions, new applicants are always welcome. There is an application process. It's not crazy. You have to write a paragraph about why you want to join the community. It's reviewed by moderators. That helps to keep the content quality high.

Cameron Passmore: There's how many people in there now?

Ben Felix: It's getting up toward 8,000. I think it's about 7,600 now. So we figure by the end of the year, easily we'll be at over 8,000 users in there, which is neat.

Cameron Passmore: Agree. All right, let's go to episode 217. All right, welcome to episode 217. So since Ben's kicking it off, I did the intro.

Ben Felix: All right. So our main topic today is the expected returns of financial literacy. The reason that I wanted to cover this topic is that when a while ago we were looking at gender differences in financial literacy, there was an author, a paper author, an academic paper author, that had written just a tremendous amount on this topic. Her name is Annamaria Lusardi.

So I started reading her research and she's like, in that field of financial literacy, she's either authored or co-authored, it seems like, a majority of the papers on the topic. It's incredible. So I started reading her papers and then I realized there's a really interesting body of literature on this topic of why financial literacy is important and empirically what the effects are of financial literacy on people's ability to make decisions. Of course, intuitively you would expect some effect, but it's pretty interesting to see empirically what the effects are. But it's also interesting to see how financial literacy is measured and, again, empirically how financially illiterate most of the world is.

So I wanted to cover all of that, the empirical side, what impact does financial literacy have on decision-making and financial outcomes, but then also how is financial literacy tested. I figured we could go through the questions that are asked in a financial literacy test to make sure everybody that is listening would pass, can be financially literate. Of course this podcast is at a, I don't know, intermediate to advanced level. So you would think that many of the listeners are financially literate, but I think it's still worth going through the topic.

So my argument is that financial literacy is probably one of the best investments that anybody can make. That's, again, based on the evidence. Of course, like I just mentioned, if you're listening to this podcast, we're probably preaching to the choir about the importance of financial literacy. But when you look empirically, globally, about two thirds of adults worldwide are financially illiterate. Two-thirds. In Canada, which is one of the most financially literate countries globally, still about a third of the population is financially illiterate.

Cameron Passmore: Unbelievable.

Ben Felix: Yeah. Yeah. We'll talk about how that's tested in a bit. But, in general, financial literacy is broadly defined as people's ability to process economic information and make informed decisions about financial planning, wealth accumulation, debt, and pensions.

Now the ability to process that type of information is economically important. Today households are increasingly responsible for saving, investing, decumulating their wealth. Whereas in the past, defined benefit pensions were more prevalent. Estimates derived from a stochastic life cycle model with endogenous financial knowledge accumulation. So that was a cool paper by the way, which we can link in the show notes. But this paper estimates from their model that about 30% to 40% of retirement wealth inequality may be accounted for by differences in financial knowledge.

Cameron Passmore: Come on.

Ben Felix: Yeah.

Cameron Passmore: There's a show-stopper right there.

Ben Felix: Yeah, I know. Very interesting. Financial literacy has been shown to have significant predictive power for future financial outcomes, even after controlling for baseline outcomes, and a wide set of demographic and individual characteristics that influence financial decision-making.

So two otherwise similar people, when you take financial literacy as the only difference, has big predictive power over financial outcomes. Pretty interesting. Based on that, of course, low levels of financial literacy are a big problem. People have to make important individual financial decisions all the time. Of course, that's important to living a good life. So the generally low levels of financial literacy are a pretty obvious problem, I think. People have to be able to make ... If you think about a daily, like every day people are making decisions about saving, investing, borrowing, and spending. There's no way around that. That is how we exist everywhere, unless you're maybe on a kibbutz in Israel or something like that.

Cameron Passmore: So many of those decisions are related to people you're having relationships with too, which causes so much stress. It's just such an interwoven, complicated matrix.

Ben Felix: Yeah, absolutely. Now, empirically, financially literate people are better at planning and saving for retirement, which makes sense, I guess. They're more likely to participate in the stock market, which is another big one, among a bunch of other important financial behaviors, which we'll get to in a second. Another important note here is that financial literacy, when it's studied in literature, is distinct from education more generally. So when you control for educational attainment in empirical models of stock holding, wealth accumulation, and high-cost borrowing, educational attainment does not reduce the statistical significance of the effects of financial literacy.

Cameron Passmore: Wow.

Ben Felix: So, again, you take two people who are otherwise similar and both highly educated. If one has higher financial literacy than the other, their financial outcomes are still going to be significantly better. The significance of that doesn't change even if we are taking two educated people versus two less educated people.

Cameron Passmore: Fascinating.

Ben Felix: But it's interesting because more educated people do tend to have better financial outcomes, but the effects of financial literacy are still statistically significant on top of that.

Cameron Passmore: Exactly.

Ben Felix: So financial knowledge seems to be a distinct form of human capital that contributes to financial outcomes beyond getting more advanced schooling. I thought that was pretty neat, because of course you build human capital by getting education, increasing the value of your skills. But in excess of that financial literacy creates a unique source of human capital.

Cameron Passmore: Financial knowledge increases human capital.

Ben Felix: Yeah. Well, it absolutely does. Empirically, that is a fact. Now the costs of financial ignorance are substantial, and there's some really interesting data here. So empirically people with low financial literacy have lower financial wealth, even after controlling for other determinants of wealth like income, age, education, family composition, risk tolerance, patients, and attitudes towards saving. Financial knowledge increases the likelihood of investing in the stock market. So financial illiteracy decreases the likelihood of investing in the stock market, which of course allows people to benefit from the equity risk premium, if they do invest in stocks.

When people do participate in the stock market, less financially sophisticated households tend to exhibit stronger behavioral biases, hold a lower share of their portfolio in risky assets, hold under-diversified portfolios. They tend to tilt their portfolios toward volatile stocks with high-share turnover and low institutional ownership, which are like the lottery stocks that we talk about sometimes. They also tend to have a greater bias toward home country stocks and the stock of their employers. Crazy.

I already mentioned that 30% to 40% of wealth inequality can be attributed, in a model at least, to financial knowledge. The way that that model arrives at that is based on expected net of fee returns. So people with lower financial literacy, because they're less likely to invest in stocks, they're going to have lower expected returns on average, which can explain a huge portion of wealth inequality, specifically that that estimate in the model is obtained by comparing wealth to income ratios across education groups in models with and without financial literacy, where financial literacy allows individuals to earn higher returns on their savings. Now I mentioned net of fees. That's a very important qualifier here. Ken French had a 2008 paper, The Cost of Active Investing, where he basically details how much investors spend on active management. So he found in this paper, based on US data, that investors spend 0.67% of the aggregate value of the market each year, which is about $100 billion back in 2006, which is the data he was working with, searching for superior returns, which of course, as we know, most investors do not receive and the average investor definitely doesn't receive.

Now on financial literacy, this is important because the least financially literate people are also the least likely to be sensitive to fees. They're more likely to bear the high costs of active management. It's crazy, right? Gus Sauter talked about this in our recent episode with him, that index investors have to be a little bit sophisticated, because the arguments for active management are very casually appealing, but it takes a certain level of knowledge and sophistication to realize what the evidence says and that index funds make sense. So I mean just intuitively, based on Gus's argument, I think that's interesting.

The least financially savvy tend to incur high transaction costs, pay higher fees in general, and use high-cost borrowing. In one study on credit cards, the least financially knowledgeable individuals in the sample made up 29% of the credit card holder population, but accounted for 42% of fees and charges related to late payment, exceeding their credit limit, using cash advances, and making minimum payments. People with less education and lower income, which are ... This is not a direct measurement of financial literacy, but those are both highly related to low financial literacy. So people with less education and lower income are characteristics strongly related to financial illiteracy, and those people have been found to be less likely to refinance their mortgages after interest rates decline.

Now this is also very interesting. So financial illiteracy and overconfidence go hand-in-hand. I think this is one of the most dangerous observations in the financial literacy research is that there is this mismatch. Like in many other areas of knowledge, there's a mismatch between people's self-assessed financial knowledge and their actual knowledge. So even when financial literacy levels are low, respondents who test on financial literacy are generally confident of their financial knowledge and tend to overestimate how much they know.

Cameron Passmore: No surprise.

Ben Felix: Yeah, that's just normal, I think, in any study.

Cameron Passmore: Yeah.

Ben Felix: Individuals who are overconfident about their financial literacy were found in one study to be more likely to believe that abnormally higher returns, a classic attribute of scams, are attainable in investments. Overconfident people have been found to be more susceptible to financial bullshit. I'm sorry, Cameron, but that is an academic term. It is. There's a published paper with that title.

Cameron Passmore: Yeah. You're just accurately reporting.

Ben Felix: That's exactly it. Maybe not surprisingly, overconfidence in one's financial knowledge is associated with fraud victimization. People with low financial literacy are also less likely to detect fraud. Now, interestingly, people with low measured financial literacy who self-assess their financial literacy as high, so overconfident people with low financial literacy, were found in a US sample to be much more likely to own cryptocurrencies.

Another study spanning 15 countries found that the financially illiterate are much more likely to own cryptocurrencies. A study of Canadians found that Bitcoin ownership from 2016 through 2020 was concentrated among young educated men with high household income and low financial literacy. Those attributes together are shared by investors who are overconfident in general and are susceptible to financial bullshit.

Cameron Passmore: Absolutely fascinating.

Ben Felix: Yeah. Men are generally more overconfident than women. Again, that's been found in many other studies in other disciplines.

Cameron Passmore: Oh, no.

Ben Felix: Possibly related to this overconfidence, men are also more likely to overtrade in their brokerage accounts, which is something we've talked about in the past.

Cameron Passmore: Uh-oh. Yeah.

Ben Felix: Overconfident investors who believe that the precision of their knowledge about the value of a security is greater than it actually is trade more than rational investors would, and doing so negatively affects their outcomes. Women are typically found to be less financially literate than men globally, but about one-third of that gap seems to likely be explained by a lack of confidence rather than a lack of knowledge, which is interesting.

Now investing aside, financially literate people are more likely to engage in retirement planning. Empirically, those who engage in planning accumulate more retirement wealth. So that may also be related to that financial literacy-related wealth gap that's related to expected returns, but also to just planning, which results in saving. People with a low financial literacy tend to have low financial wellbeing, which is measured on a scale based on control over day-to-day finances, financial freedom to make choices to enjoy life, capacity to absorb a financial shock, and being on track to meet financial goals.

Just that point alone is huge. Studies that identify specific components of financial literacy tend to find that advanced financial knowledge, like an understanding of risk diversification and the capacity to do calculations, are most impactful to financial outcomes.

Cameron Passmore: You sure poured it on there.

Ben Felix: Yeah. I mean so all that just shows the multitude of reasons for why financial literacy is important in the data. When you look at people who are financially illiterate, the decisions that they're making, or not making, are very meaningful to their economic outcomes.

Now how is this measured? So we talked about a lot of attributes of people who are financially illiterate. How do we know they're financially illiterate in the research? The instrument used to gauge financial literacy in a lot of studies that I reviewed is a short set of three or five questions. It's called the big three and the big five. Then they cover four topics. Well, the five questions cover four topics: risk diversification, inflation, numeracy, which is just like the ability to do calculations, and compound interest. There was a massive study, the S&P Global FinLit Survey, which covered more than 150,000 people in more than 140 countries. People are considered financially literate in this study if they demonstrate knowledge in three of those four topics that I just mentioned.

 So for the rest of this topic, what I want to do is go through and make sure that listeners can answer the questions and talk a bit about why it's important to be able to answer them. If listeners ... Because, again, this is not a podcast for beginners. So if people listening find these questions easy and obvious, then I hope it gives you an appreciation for the generally low levels of financial literacy in the population.

Cameron Passmore: These are the actual questions from that survey.

Ben Felix: Yup. So the first question is suppose you have some money, is it safer to put your money into one business or investment or to put your money into multiple businesses or investments? So, of course, diversification is often referred to as the only free lunch in investing. When you add more imperfectly correlated assets to a portfolio, you decrease portfolio risk measured by volatility at least without reducing expected returns. Typically in investing, decreasing risk also means decreasing expected returns, but diversification is the exception, which is why it gets to be called a free lunch.

In general investing, there are two types of risk: compensated risk, where you do earn an expected return for taking the risk, and uncompensated risk, which is really just a random risk that is not associated with a positive expected return. When you diversify across lots of stocks, you dramatically reduce uncompensated risk, I think arguably even down to zero, when you own a total market index fund.

You don't want that kind of risk. So that's a good thing. But with diversification, you maintain your exposure to compensated risks, which is what you do want. So that's why that one is important, but it's important to understand that a lot of people don't know the answer to that question. The next one covers inflation. So the question is suppose over the next 10 years, the prices of the things you buy double, if your income also doubles, will you be able to buy less than you can buy today, the same that you can buy today, or more than you can buy today?

So, of course, in this case, with inflation and income changing at the same rate, you can buy the same amount that you can buy today relative to your income, which is also doubled. The cost of goods has not changed. Understanding inflation is super important, because decreasing purchasing power of cash over time can be significantly financially damaging. There's often this perception that investing is risky, but I think that not investing ... And this is shown by the empirical data on financial outcomes sorted by financial literacy. Not investing can be even riskier than not investing when inflation is considered. Now that can be a somewhat controversial statement because over any time period, stocks are going to be more volatile.

I just saw a brand new paper that is actually written by an upcoming Rational Reminder guest. They looked at stock, bond, and bill returns going back to 1890, I believe, maybe a bit earlier. Using that historical data for 38 countries, they created bootstrap simulations and found ... I'm not going to remember the exact numbers, but the probability of losing to inflation over 30 years was materially lower for stocks than it was for bonds, and even much more so for bills. So I think it just speaks to that risk of not achieving your financial goals or risk of not accumulating wealth over the long term is arguably greater for what we would generally consider less risky assets, when inflation is considered anyway.

Cameron Passmore: For sure. Yes.

Ben Felix: Anyway, that's why understanding how inflation works is very important. I guess I just related it back to thinking about different types of risk. The next one is numeracy. So the question is suppose you need to borrow $100, which is the lower amount to pay back: $105 or $100 plus 3%? That seems pretty basic, but again, empirically, a lot of people can't answer that question. So, of course, the answer is $100 plus 3% since 3% of $100 is $3. Not being able to do those types of calculations, maybe that's why we see higher instances of high-cost borrowing, for example, with people with lower financial literacy. The last two questions are on compound interest. Now the creators of this survey determined that this is one of the hardest topics. So they give two questions and you'll only have to answer one of the questions correctly to get the point for the compound interest topic.

Suppose you put your money in the bank for two years and the bank agrees to add 15% per year to your account. Will the bank add more money to your account the second year than it did the first year, or will it add the same amount of money in both years? So of course the bank will add more money in the second year since they'll be paying interest on your initial investment and on the interest that you earned in the first year. That topic of compounding, again, for long-term decision-making is absolutely critical, because the sooner you start compounding, the better. Not understanding that, you can see why somebody who does not understand how compounding works would have less motivation to plan and save for retirement.

The second one of this topic is suppose you had $100 in the savings account and the bank adds 10% per year to the account. How much money would you have in the account after five years if you did not remove any money from the account? The answer options are more than $150, exactly $150, less than $150? The answer, of course, is more than $150 since 10% of $100 is $10. We know that we'll get more than the simple interest of $50 in total due to the compounding effect.

Yeah, so I mean compounding is the magic of investing. That's what gives us exponential rather than linear growth over time, but it requires starting early and sticking to a long-term plan. Of course, if you have debt, compounding works in the other direction. So I mentioned why people with low financial literacy may use high-cost debt more frequently. Maybe this is another reason if you don't understand compounding.

Cameron Passmore: It really makes you sympathetic, though, that these questions can cause that many problems for so many people.

Ben Felix: Yeah.

Cameron Passmore: It's a real issue.

Ben Felix: It's a real issue. A third of people in Canada fail this test.

Cameron Passmore: So fail is deemed to be if you miss how many of the questions?

Ben Felix: People are considered financially literate if they demonstrate knowledge in three of the four topics.

Cameron Passmore: Okay, fascinating.

Ben Felix: Yeah. So I'll just briefly touch on the distribution of financial literacy globally. Countries with the highest financial literacy rates are Australia, Canada, Denmark, Finland, Germany, Israel, The Netherlands, Norway, Sweden, and the United Kingdom, where about 65% or more of the adults are financially literate.

South Asia is home to countries with some of the lowest financial literacy scores, where only a quarter or fewer of adults are financially literate. In advanced economies like the G7 countries, 55% of adults are financially literate on average, with Italy and Japan having the lowest literacy levels. In major emerging countries, 28% of adults are financially literate across literacy topics, I think I mentioned this already earlier, risk diversification. Oh, I didn't mention this. Risk diversification is the most poorly understood. Just think about that. That's the most poorly understood topic out of all of these, risk diversification.

Cameron Passmore: Explains so much.

Ben Felix: Again, it makes you sympathetic to why many people hold individual stocks or pick stocks or whatever. So improving this is a huge task. It's a really interesting policy question. A lot of this literature, which you would expect, I guess, based on the topic, does discuss policy, but it's not obvious how to approach the problem, because there's a theoretically optimal level of financial literacy knowledge for each individual.

Financial literacy above that level is actually not a good investment. So if policymakers are forcing financial literacy education down people's throats, that comes at a cost to the person who is being forced to consume that information. It comes at a cost to the government or other institution that is delivering that education. But the optimal level of financial literacy varies from person-to-person and household-to-household. So as an example, someone with a full pension and low non-pension wealth has much lower financial literacy needs than someone with no pension and high financial wealth, or another way to think about that is countries with a larger social safety net, the financial literacy needs are lower than countries with no social safety net.

So it's not an obvious thing to like, well, let's put financial literacy education in schools. Maybe that is a good thing to a point, but there's also a point where it becomes excessive and starts pushing a cost onto people for having to consume that information.

Cameron Passmore: How much of it's one's own responsibility? How much is it the responsibility of the financial industry to act like fiduciaries and look out for someone's best interest, even though they may have low financial knowledge? It's a really complicated problem.

Ben Felix: It is a complicated problem, which is probably why we haven't seen big sweeping solutions that solve it. So my hope with this topic was to give people an appreciation of the situation for financial literacy, help people see what topics people struggle with. We tried to give some color as to why those are very important for making financial decisions. I don't expect to solve financial literacy. We just talked about how messy of a problem it is. But I figured that if we provide that information, that our listeners who are probably already financially literate, but if our listeners understand the scale of the problem and the scope of the problem, maybe everybody ... And now that we understand what those main topics that are important for financial literacy are, if everybody takes that away and makes sure someone in their life is able to answer those financial literacy questions ... And we will link the S&P FinLit Survey because the questions are in there.

So I figure if everybody takes from this episode as a takeaway, takes this information and goes to their ... I don't know if it's a spouse or a parent or a sibling or whatever, or somebody else that's close to them, and makes sure that they can answer the questions and understand why each of the topics is important, then maybe we can move the needle a little bit, just to err in the right direction.

Cameron Passmore: Great topic. Absolutely fascinating.

Ben Felix: I think it's pretty cool.

Cameron Passmore: All right. You want to talk about this article FAANGs Gone Value?

Ben Felix: Yeah. So we covered this a while ago, because it was in the Financial Times, I think. There was an article about Facebook becoming a value stock based in the Russell Index reconstitution, which was just neat to see. Dimensional recently did an article on their blog about this called FAANGs Gone Value. So FAANGs, of course, are Facebook/Meta, Apple, Amazon, Netflix, and Google or Alphabet, as they've called themselves. So we hear this argument against value investing, which is that there's a new normal, where innovation and technology have changed the investment world. Then the old guard companies like energy and banks are not where returns are going to come from in the future.

We've been hammering on this for, what, three years. We've been talking with the same topic that the biggest companies don't stay big forever. Once the company becomes the largest company, it doesn't tend to have good returns, and this time is different every time. We've made all these same arguments. We got interesting pushback in the past when we've talked about this, especially when the prices for the FAANG stocks were just going through the roof. We were like, "This time's not different," and some people were like, "No, no, it is different because of this, this, and this. The companies are different. The network effects are different. The scale is different," whatever. Anyway, so this article from Dimensional highlights that two of the FAANG stocks, both Meta and Netflix, are now considered value stocks. They were switched from growth to value in the Russell reconstitution.

Cameron Passmore: The reconstitution happens I think it's every June each year. I forget the actual date.

Ben Felix: I think so, yeah.

Cameron Passmore: Yeah, they reshuffle it based on the new economic information of the companies.

Ben Felix: So it's just funny. In that article, the author shows that two fifths of the stocks that were often used as illustration for the dominance of growth are now in the value camp. Then they also had some very interesting data on the performance. We've spoken to similar data in the past, but it's still super interesting to see this one. So they show the performance of stocks, of the largest stocks, in the US after a company has become one of the largest 10 stocks in the US. They show its performance leading up to that point and its performance afterwards.

So in the 10 years before becoming one of the largest stocks in the US market, companies on average return 10% per year for the 10 years prior. Five years before, they returned 19.3% per year on average and three years before, they returned 24.3% per year on average. So you could see, yes, if you could pick the largest companies before they become the largest companies, you would have excellent investment returns.

Cameron Passmore: That's how they became large.

Ben Felix: That's why they became large. But that also means, well, they may have peaked. Maybe their valuations are high. I don't know, there's probably lots of effects like that. So then after joining those 10 largest companies, for the three years after on average ... This is so crazy. Correction: these are stated as absolute returns, but they should have been stated as returns relative to the US market. The three years after becoming one of the largest 10 companies in the US market, companies returned 0.7% per year on average. For the five years after, they return -1.1% per year on average. For the 10 years after becoming one of the largest 10 companies in the US market, they return -1.5% per year on average.

So, yes, if you can predict which ones, which companies are going to become the largest companies before it happens, you'll make a killing, 24.3% per year for the three years before. But after, once they've become the largest company, that doesn't tell you much about expected returns, at least not in a good way.

Cameron Passmore: Anecdotally, this is what we've lived since the late '90s. I know we've given this example so many times, but there were so many stocks that were the ones you had to own back in '98, '99, 2000 that aren't back to today what they were worth then. You've had dead money in some cases, not even dead money for the past 22 years.

Ben Felix: Yup. Yup.

Cameron Passmore: These companies, many of them have grown, profits have grown. It doesn't matter. These are great companies. What you pay for them is what matters.

Ben Felix: Yeah. They can take 20 or 30 years, like you're saying, for a company to grow into its valuation.

Cameron Passmore: Yeah. So interesting. All right, onto our book review.

Ben Felix: Let's do it.

Cameron Passmore: As my investigation into this whole deep work, working remote continues, I revisited a book that I started a couple of years ago called Reclaiming Conversation: The Power of Talk in a Digital Age by Sherry Turkle. After last week's discussion, or two weeks ago, I guess, now, I decided to go back and revisit this book because it talks about the power and the need for face-to-face communication and contact in our world, because that was one of the outstanding questions that we had.

 So first about the author, Sherry Turkle, she is a professor of social studies, of science and technology at MIT, and is the founding director of the MIT Initiative on Technology and Self. To paraphrase what that is, the study, the relationship between technology and conversation in a digital age, psychology of online life, how we share and withhold information, and the impact of online conversations on innovation and leadership, which is exactly what we've been talking about, going back to Fearless Organization, Deep Work, even going back to Johann Hari's book a few months ago and right through Running Remote. So this is right in the sweet spot about how people need to interact in that world.

Now this was written 2015, long before the pandemic, long before working remote. So I may be drawing inferences from the book that she may disagree with, but these are my interpretations from the book. So she's also a clinical psychologist and she has a joint doctorate in sociology and personality psychology from Harvard. So, as I mentioned, the outstanding questions that I think we had after the Running Remote discussion, where if you do go remote, is there a human side that's missing from working remote? Do we need face-to-face interactions? If we do, how do you do it? How do you do that without avoiding all those things that were not good in a synchronous environment, like interruptions, wasted meetings, gossip, drama?

So this discussion is not so much a book review, but more insights I drew from the book that can help us in this thinking. This applies to everyone, whether you're an employer, team leader, employee. I think it does have an impact on decisions you will make, which do impact you financially. So the point of this book, pretty straightforward, technology is killing conversation. Reclaiming conversation is a step toward reclaiming our most fundamental human values. So I quote here, "Face-to-face conversation is the most human and humanizing thing we do. Fully present to one another, we learn to listen. We learn empathy. Conversation advances self-reflection as we learn from others. Eye contact is the most powerful path to human connection."

The point of the book obviously is that technology is causing all sorts of problems. It's reducing the quality and quantity of conversations that people are having. Again, this was long before the pandemic. When people meet, the quality of the conversation is reduced when we divide our attention between the people we're with and our phones. And so, there's a proof point on this. So studies show that just the mere presence, get this, the mere presence of a phone on the table, even if the phone's turned off, changes what people talk about. If we think we might be interrupted, we keep conversations light, on topics of little controversy, or little consequence, and conversations with phones on the landscape block empathic connection.

If two people are speaking and there's a phone on a nearby desk, each feels less connected to the other than when there is no phone present. Even a silent phone disconnects us. If that doesn't blow your mind, just putting it on the table, even many of us put it face down, it's this beacon towards keep it light. I might be interrupted. This little signal matters to me. So the question I have from that is how is this now with people in online meetings who are obviously doing other tasks during the meeting? We see it. I think we all see it work in an online world. It's easy to click on email or Teams when you're in that meeting.

So does just having that Teams or Slack or whatever open while you're in an online meeting have the same effect? I don't know. It's a question I have. Another problem that technology causes, it gives us the illusion of companionship without the demands of friendship. This is leading to people being less empathetic. So another proof point. From 1995 to 2015, so up to when the book was published, there was a 40% decline in the markers for empathy among college students, with most of the change in the last 10 years lining up to the time when technology, portable technology, really advanced. It's a trend that researchers linked to the new presence of digital communications. So another problem here, we have a generation that is not learning that boredom is good. Many people don't allow themselves to be bored. They're never alone, even though they may be with their phone. They're rarely ever in solitude.

That seems pretty obvious. But if you think about the generations ... Not the generation after me, but in the generation behind you, there's never a need to be bored. There's always something you can scroll through. The companies are so good at feeding you what interests you that if you have nothing to do, you just scroll through something, be it Facebook, TikTok. It's so good at engaging you, but you're never in solitude. The problem is that you need boredom because boredom ... It's what the author argues. Boredom spurs imagination. More generally, the experience of boredom is directly linked to creativity and innovation. Solitude reinforces a secure sense of self and the capacity for empathy. Then it enables you to provide others with rich material for their self-reflection, going back to the Fearless Organization. If you're going to do deep work, you have to be confident in the work that you're doing, and then be able to bring it back to others to help them in their drive to solve problems. So if you don't have practice in thinking alone, you're less able to bring your ideas to others with confidence.

So I think this is not terribly new to a lot of people, but I had an underappreciation for how important it is to be able to be in solitude, just in being bored. So many people just are not bored. I remember, I think when I was growing up the games we used to create ... Because obviously we didn't have technology growing up like this. I just think that whole experience is gone for so many people. So to link this to a discussion regarding Running Remote, Deep Work, and the Fearless Organization, I think it's important to both the employee and the company that people be able to do deep work. I mean that's a given, I think. This is both a personal skill that we've talked about, but it's also important in their environment that they could do deep work.

Many in-office environments just hamper that with distractions from colleagues, and that causes the individual to lose control of their own environment. But people are not the only distractions in the current work environment. Even if you work remote, tools like Teams and Slack are often arguably even more disruptive than colleagues in an office. There are so many things coming at us every day, be it people in the office, be it our desktop technology these days, or our attached cellphones that's coming at us that's very disruptive. So you combine the work tool demands, the allure of Twitter, Facebook, Snapchat, TikTok, whatever, it makes for a pretty tough opponent for your attention, and much, like I said, reviewing the book Running Remote, this is regardless of where you work. The whole synchronous/asynchronous model, that again, to me, is regardless of where you work.

So still have the same question. Do we need open-ended spontaneous, synchronous conversations? The author is pretty emphatic, saying, yes, we do. "Conversations in which we play with ideas allow ourselves to be fully present and vulnerable. These are conversations in which the creative collaborations of education at business thrive," the author says. So key takeaway for me is for the time with others to be more productive, you need time with yourself to be more productive. You need to learn how to turn off the distractions, work in solitude, and then we need to learn how to engage in a more productive solitude. Then with this productive solitude, you're better able to be intentional with your colleagues when face-to-face, more deliberate, more thoughtful, if that is the objective. This goes right back to Running Remote, where they talked about have clear processes documented and have clear communication processes, and go back to Fearless Organization, that when you come back to the team with a problem that you've been working on in your deep work, you can add more value to that discussion.

Ben Felix: I remember from talking with Liam, the author of Running Remote, about this. He's not opposed to face-to-face meetings. You may know this from the book, I don't know if it's in there, but in their company, they will occasionally travel to meet together in person, but it's never with everybody, because that can't be productive. It's like if there are two or three people required to solve a specific problem, then it can make sense to meet face-to-face in order to solve the problem together, for a lot of the reasons that you're saying, to create ideas and spur creativity and all that kind of stuff. But it's also like you're saying, it is for a very specific purpose at a very specific time, when everybody is coming with knowledge that they've developed in their own deep work as opposed to meetings with lots of people where everybody's going there to try and do what should be done as solo deep work.

Cameron Passmore: It's to be more thoughtful about those meetings, I think. Like what is the objective? I'll skip down to one of the punchlines. So this has led me to start reading a book that actually Tessa, your sister, who's our lead of culture in HR, she said I should be reading that book The Art of Gathering by Priya Parker. So I'm reading that book now. Although it's a lot about social events and event planning, a lot of it does lead to a work environment where she puts forth the argument that every meeting should have an objective. If you have a recurring meeting, what is the objective of that meeting? If it is just to update people, say objective is to update people, that's a very specific objective.

The problem with a lot of meetings, including recurring ones, is everybody might have a different opinion of what they want to get out of the meeting. I might just want updates. You might want to know what action items you can add value to. If we go at the same meeting with those objectives, neither of us are going to be happy, or probably one of us will be really unhappy with the meeting. So it just means, again this is what Liam talked about, put more thought into stuff ahead of time before you pull people together, before you put the email to them.

Ben Felix: I think a common reaction when something needs to be solved is to book a meeting to solve it. I think that's the problem.

Cameron Passmore: Absolutely. That's the default in a synchronous world. That's the world I've always worked in, many of us have always worked in.

Ben Felix: Yeah. Let's brainstorm. Let's get together and brainstorm. But that's one of the worst ways to come up with.

Cameron Passmore: And you have a generation coming up behind us that doesn't have the ability ... Many. I don't want to over generalize. But she puts forth the argument that many people don't know how to be alone just to think, because the stuff is always coming at you. I don't see that as a remote issue. That's just an issue. So the issues I'm learning are actually bigger than this whole remote debate. How much time is being burnt by people on the phone? I don't know the answer. It's got to be huge.

Ben Felix: Well, you can know, because does your phone tell you what your screen time is for every week?

Cameron Passmore: Sure, it does.

Ben Felix: What is it?

Cameron Passmore: I don't check it. I suspect it's not good. I'm not in any sort of denial.

Ben Felix: Doesn't it give you a notification to say what your screen time was for the previous week?

Cameron Passmore: I probably turned that off. I don't get that.

Ben Felix: Oh, interesting. I think I get it every Saturday or Sunday or something. So I had an iPhone X, I think, which is old now, but it was new when I got it. I had it for two years maybe. I dropped it one day. The screen didn't break, but the chip inside, I guess, died and it was going to be very expensive to replace it. My screen time was higher than I would like to admit when I had the iPhone X, because I had Teams and email and the Rational Reminder community and text. Everything was on there. And so, it was easy to do stuff. When that phone broke, I decided that rather than buying a new fancy iPhone for $1,600 or whatever they cost, I revived my iPhone 6.

Cameron Passmore: Oh, you went backwards.

Ben Felix: Now the thing about my iPhone 6 is that it can no longer run most of those apps. The Rational Reminder Community does not load. I have the app on there, but if I click on it, it just doesn't load. Great. All of our work-related stuff, I can't have on there, because we have some security app that PWL requires employees to have on their phone or in order to access our servers. I can't access that security app because my phone is too old. So all the stuff that I used to burn time on my phone is no longer ... I can't use it. My screen time has dropped. It's under an hour. I think it's like 40 minutes on average each day, which is substantially lower than it was previously. Now I'm hesitant to go and get a new phone at all. This is a thing. People have ... I can't remember what it's called. I want to say narrow phones, but that's not it. That's narrow banks. It's something like that where the phone only does texts and calls, nothing else. So I mean there are solutions to this problem of phones just sucking your attention away.

Cameron Passmore: Yeah. I do a fair amount of Twitter, but maybe this is just me making up stories. I view it as a lot of research. I cut out a lot of the news that I used to follow because it's just such a waste of time.

Ben Felix: Oh, yeah, Reddit. I still have Reddit.

Cameron Passmore: Yeah. Oh, I don't dare. I don't go to Reddit. I would be in there for a long time. I don't have TikTok, very few people on Instagram. So I think I'm not bad all things considered.

Ben Felix: But it's a reaction. I notice personally that if I'm struggling with a hard problem, there's a reaction to pick up the phone and make the pain go away-

Cameron Passmore: Really?

Ben Felix: ... rather than sitting down and focusing on solving the thing. I don't do that with my broken phone because there's nothing on there, or, likewise, if there's a stressful situation, it's so easy to pick the phone up and scroll through. It's honestly like a drug or whatever. It makes the pain go away.

Cameron Passmore: It is. It does. It makes you feel like you're being productive. That's another point that she makes, because we're so hyperproductive. We can answer Teams. You can be on a call answering Teams, responding to emails. People know. They can see your eyes moving around. You can answer texts. You can do all kinds of things while you're doing other things and you think you're productive. But you're not really being present. The conversations aren't as deep, and that's missing.

Ben Felix: I'll tell you the other trick I have with my old iPhone 6, that it has my wife's purple case with gold glitter. And so, I'm also too embarrassed to pull it out if I'm in a face-to-face social interaction. So those are my two hacks.

Cameron Passmore: Okay. So that'll work then. So you're not bringing that at the dinner party or something.

Ben Felix: Yeah.

Cameron Passmore: Well, that's one way to do it. But it's given me more awareness of what other challenges people have. Again, I don't think there's an absolute here. Everybody is different. So there's going to be some sort of mixed model, I think, that companies will have to figure out. Will offices go away? No, but I think the way we worked, I think progressive companies will work on that much more, do more asynchronous, figure out the distractions. Then after that, I think that's the elephant, not the in-office or home.

Ben Felix: The distractions are huge. Who else did we talk about this with? With Ashley Whillans, I think, where she's referencing a different researcher. I don't remember who that is, but they call it time confetti, where you get pulled in all these different distractions. And so, you don't have any big blocks of time for anything, not for leisure, not for work, not for anything. It's a disaster.

I'll make a prediction here. I think this is going to be the kind of thing that we look back on ... And I'm not the first person to say this, but I think it's the kind of thing we'll look back on in 20 years or whatever and it'll be smoking or something like that, where now we look back on cigarettes and we'd look at ads for how they could calm you down or whatever, endorsed by Dockers, and we think about how crazy that was.

Cameron Passmore: But we did talk about this. The social media companies have an opportunity to make things better, instead of making it so addictive. Tristan Harris was from Google. I was reading about him in the book Tessa recommended this morning. Talked about how there's one of you on this side of the phone, but he said there's thousands of engineers on the other side of the phone that are there to just draw you in. Well, they could do things to help you with tools to improve your life, be it fitness, be it relationships, be it whatever. There's things they could do. But it's an ad-based model. They want to keep your eyes on there.

Ben Felix: Yeah. I think it is affecting people a lot. I know. I don't even want to say what my previous average weekly screen time was, but it was high. And I knew. I would think about trying to spend less time on my phone, but it's hard. It's easy now because there's nothing on there.

Cameron Passmore: So if anyone out there has book suggestions on the topic of meeting face-to-face, this book by ... Like I mentioned, The Art of Gathering is okay, but it's not really as workplace-related as I had hoped. Still a lot of good stuff in there. But if you have something, send me a note. I'd love to hear about it. So there you go. You want to take a look at some reviews?

Ben Felix: So we had two new reviews. We always appreciate them. One from Mattyboy99 from Great Britain. They say that this is the best podcast for aspiring financial advisors. They're a long-term listener, only writing a review now. They've listened to pretty much every podcast episode and watched all of my YouTube videos. They love the open-minded, evidence-based approach to investing, financial planning, and wellbeing, and it's inspired them to start their own channel and website about personal finance, that's always cool to see, and to pursue a career as a financial advisor. That's cool.

Cameron Passmore: It's interesting. This is actually Martin and he reached out to me on LinkedIn. I mentioned to him that I may be in London in November. So he's going to try to organize a meet-up. So, again, drop me a note if you're in London and you might be interested in a meet-up if I end up going to London in November.

Ben Felix: Well, that's cool. That'd be super cool to have a London meet-up. I won't be there. I don't ever want to get on an airplane again. You think that's overly ambitious? What do you think? Do you think I can do it?

Cameron Passmore: It might be a little assertive. But, yeah, I'm also going to the, as you know, Future Proof conference in September. It'll come out very soon in Huntington Beach. So I shall be meeting up a lot of people there that are listening.

Ben Felix: Yeah. I won't be there either. G. Campena from Canada says, "Excellent podcast. I'm learning a lot every week. And that's coming from someone who already was doing investing in a way that's similar to a lot of the conclusions that the podcast comes to." They appreciate the crypto series as it approaches the subject in a way that they've never seen before.

They do say that the podcast is heavier than the average podcast and that they need to listen to it doing an activity that won't be interrupted a lot because you really need to be in the flow to follow the discussion. So that's interesting. Then they do ask that we include chapter markers in the podcast. That is something that we're working on. I didn't even know about this, but the same person that gave feedback that started to thread in the Rational Reminder community that we talked about at the beginning of the episode, which led us to investigate the data and switch up the format a bit.

In that thread, we also learned about different ways to do chapter markers on different platforms. So on Spotify, there's a different format than on Apple or whatever. So we're working with our production team to get the proper chapter markers on all the different platforms. The other thing that's really cool that somebody suggested is that in the audio versions of the podcast, if we have a chart, we can use a chapter marker to line up with the chart and you can have artwork for each chapter. So if we want to show a chart on Apple Podcast, for example-

Cameron Passmore: Oh, wow.

Ben Felix: ... we can have artwork that goes with that chapter marker. So people following along on audio can, if they want to, pull their phone out and view the chart we're talking about. That's something I don't even know. It was cool. So we will be making those tweaks as well.

Cameron Passmore: Cool. Also heard from Pete Zah from the US. "Very smart hosts with insightful guests. Ben and Cameron are both very smart people." It always feels weird giving these reviews. It feels so self-indulging. Although I must admit, I don't feel as bad about that since it's at the end of the podcast, because if people are interested, it would've bailed by now anyways. So I guess they're here if they want to keep listening to it. Anyways, he said we do a great job, "explaining financial concepts for even those who do not have a traditional finance background, such as myself. Every guest they have on the show has some really interesting and thoughtful takes." I really agree with that. I think the guests are and have been phenomenal.

Also, some really interesting connections last week that I think are worth highlighting. I heard from Chris. He reached out to me. We had a conversation this week. He's a fee-only financial planner in Alberta who's considering starting a podcast. So kind of like what Rob Menga's doing and others, having the fee-only model. I think there is great demand for that. I also heard and spoke to an advisor this week in Ontario, who is with a bank and who wants to migrate to the independent advisory space. I've never worked in a banking environment, but talking to him and others, of course it's just such a different animal from the independent space. So that was a really interesting conversation. So shout out and thanks for reaching out.

Also spoke with an advisor in Coquitlam. This is interesting question for us to think about. So he was asking about the podcast and whether we found that all the to-dos that go with the podcast are draining our happiness. I said, "Interesting questions." I'll let you answer as well, but I thought it was an interesting question because if you don't love the process of doing a podcast, there's no way you'll keep it up, I think. There's just too much work and there's too many to-dos. But having a purpose, we talked about this over the past month or so, does give happiness. I think we do have a purpose and I personally just love the whole experience, even though there are a number of to-dos for sure. But so much the research is part of ... And I know you always say this, this is part of what your day job should be anyways. So you should be doing the research. You should be reading some level of books. So I don't find that draining our happiness at all. What do you think?

Ben Felix: I agree with what you just said. It's part of my regular job. But my regular job, I don't even feel like is a should. There's not a whole lot of stuff in my job that is something like, oh, I've got to do that.

Cameron Passmore: Do you know what's funny about this? I think about your answers. So we're preparing to give a presentation to advisors that are coming to Canada about the podcast. I think a lot of people ... And I talked to someone else yesterday about this, who thought, "Well, you must have an editorial calendar all planned out. You're in advance. You think about your key messages and your value proposition. You plan all the guests out." I remember it in our preparation meeting for that presentation. You're like, "Yeah, I don't really have a whole lot to say," and it's true. There's a whole lot of chaos that happens behind the scenes. We do not have an editorial calendar. We do not plan out more than two, three, four weeks in advance.

Ben Felix: Oh, if that, yeah.

Cameron Passmore: Just in terms of guests, not topics. I mean I never know what your topic's going to be week-to-week. You don't know my book review week-to-week. The thinking is going on. But the point is I would find that tedious. If we had to meet and have editorial meetings and stuff like that, that would start to become tedious to me.

Ben Felix: Oh, yeah, 100%. That conversation was funny because based on the questions that were being asked to answer for that presentation to other advisors that you're talking about, it became apparent to me that they were looking for the secret sauce. They want to know, "What is the process that you follow so that we can do something similar?" I'm like there's no process. I think my answer was like, "I 'work' ridiculous hours on this stuff, but it's not because I'm miserable and I'm grinding it out to achieve something." It speaks to the question that we're answering from the advisor in Coquitlam. I just thoroughly enjoy it. Like the crypto series, I don't know how many hundreds of hours. I think that's-

Cameron Passmore: Oh, for sure.

Ben Felix: I don't even ... Yeah.

Cameron Passmore: For sure.

Ben Felix: I've put into it at this point. But it's thoroughly enjoyable. Like you said, Cameron, if it's not, if someone's trying to do content and it's not thoroughly enjoyable, it's probably not going to work, because it is a ton of time, but it's not time that I have to force myself to spend doing this stuff.

Cameron Passmore: To that point, I don't think you can force a lot of it. I mean the example of David Senra coming on the podcast, I mentioned at the top, that came from just randomly listening to one of Patrick's Invest Like the Best interviews. I thought it was great. You had to figure out ... We call it slinking. Had to figure out how to get to him, because it's not obvious how to find him. So ended up digitally chatting and he agreed to come on.

That to me is super fun. But if you're not immersed in it, there's not some recipe book, okay, you go down, there's the guest, tick, tick, you do this. That's not how it works. You found guests this week coming up this fall. It's just random poking around and thinking and you never know where the opportunity's going to be. If I wasn't on Twitter or podcast and immersed in this, we wouldn't find the ideas, I don't think.

Ben Felix: Oh, yeah, no.

Cameron Passmore: Whether that works for everyone, someone's got to find their own recipe for what they want to do.

Ben Felix: Yeah. But the immersion is necessary. If it's a task, if it's a to-do, the immersion would make you go insane.

Cameron Passmore: Can you imagine if you didn't like doing research and someone said you had to work X dozens of hours per week to do this? You couldn't.

Ben Felix: Yeah. Yeah. I know. I know. Well, the last two weeks, I spent a ton of time ... And this is only tangentially podcast-related. It's my regular job-related. But I spent a ton of time developing expected return assumptions for alternative asset classes. It was like, I don't know, over the last couple of weeks, probably 15 hours of work, but I loved it.

It'll be an internal white paper at least, but I don't know if we'll publish it externally. Maybe we'll talk about it as a podcast episode. Ray, my senior researcher on the research team, he suggested that. He was like, "This is good. This is really cool stuff. You should talk about it on the podcast." So maybe we'll do that. But the point is that was fun. I had to remind myself to take breaks to eat because I was having such a good time. Anyway, there are no to-dos. The to-dos are the other stuff in life like exercising and making sure I eat, because the work is enjoyable.

Cameron Passmore: I think that's the key message. That's what I told Robert yesterday, who I met, an advisor in the US. I said, "You've got to find something you love. You've got a topic you love, run with that."

Ben Felix: Yup. Anyway, we're droning on here about this, but it's freeing having this at the end of the episode. There's no rush.

Cameron Passmore: Because there might be three people left. It's pretty funny if they bailed.

Ben Felix: Real quick just on conversations related to the podcast. I had a conversation with somebody this week who is very accomplished in their professional career and they're looking to make a change in their career. They said that they wanted to talk to me because they want to do something impactful. They listen to our podcast and they believe that what we are doing is extremely impactful to a lot of people. They've got a lot of respect for what they're doing. So, anyway, they wanted to talk about next steps for themselves. But I thought that their words about what we're doing with the podcast were very kind. It was just a cool interaction.

Cameron Passmore: I agree. All right. Anything else?

Ben Felix: Nope. That's it.

Cameron Passmore: All right. Thanks to the three people who are still here listening.

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https://community.rationalreminder.ca/t/episode-217-the-expected-returns-of-financial-literacy/19094

Books From Today’s Episode:

Reclaiming Conversation: The Power of Talk in a Digital Age — https://amzn.to/3cUAueX

The Art of Gathering: How We Meet and Why It Matters — https://amzn.to/3BhzjQc

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

'FAANGs Gone Value' — https://www.dimensional.com/us-en/insights/faangs-gone-value

'Optimal Financial Knowledge and Wealth Inequality' — https://repository.upenn.edu/cgi/viewcontent.cgi?article=1093&context=bepp_papers

'The Stability and Predictive Power of Financial Literacy' — https://gflec.org/wp-content/uploads/2020/11/Angrisani-Burke-Lusardi-Mottola.pdf.pdf?x53868

'The Economic Importance of Financial Literacy' — https://gflec.org/wp-content/uploads/2014/12/economic-importance-financial-literacy-theory-evidence.pdf

'Using a Life Cycle Model to Evaluate Financial Literacy Program Effectiveness' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2707618

'The Cost of Active Investing' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1105775

'Financial Literacy, Retirement Planning and Household Wealth' — https://gflec.org/wp-content/uploads/2019/07/Rooij_et_al-2012-The_Economic_Journal.pdf

'Financial literacy and stock market participation' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X11000717

'Measuring the Financial Sophistication of Households' — https://www.nber.org/system/files/working_papers/w14699/w14699.pdf

'What Do the Portfolios of Individual Investors Reveal About the Cross-Section of Equity Returns?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3795690

'Investor Sophistication and the Home Bias, Diversification, and Employer Stock Puzzles' — http://www-personal.umich.edu/~mkimball/keio/5.%20papers/sophist3%20copy.pdf

'Presidential Address: The Cost of Active Investing' — https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.2008.01368.x

'Debt literacy, financial experiences, and overindebtedness' — https://www.cambridge.org/core/journals/journal-of-pension-economics-and-finance/article/abs/debt-literacy-financial-experiences-and-overindebtedness/6140546AF9CA1BAC33FAE47F35C5C178

'Household Finance' — https://onlinelibrary.wiley.com/doi/full/10.1111/j.1540-6261.2006.00883.x

'Individual differences in susceptibility to financial bullshit' — https://www.sciencedirect.com/science/article/pii/S2214635022000193?via%3Dihub#tbl1

'The Causes and Consequences of Financial Fraud Among Older Americans' — https://crr.bc.edu/wp-content/uploads/2014/11/wp_2014-13.pdf

'Financial literacy and fraud detection' — https://www.tandfonline.com/doi/abs/10.1080/1351847X.2019.1646666

'Investment Literacy, Overconfidence and Cryptocurrency Investment' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3953242

'Financial Literacy and Attitudes to Cryptocurrencies' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3482083

'Bitcoin Awareness, Ownership and Use: 2016–20' — https://www.bankofcanada.ca/wp-content/uploads/2022/04/sdp2022-10.pdf

'Boys will be Boys: Gender, Overconfidence, and Common Stock Investment' — https://faculty.haas.berkeley.edu/odean/papers/gender/boyswillbeboys.pdf

'Fearless Woman: Financial Literacy and Stock Market Participation' — https://gflec.org/wp-content/uploads/2021/03/Fearless-Woman-Research-Final.pdf?x53868

'Financial Literacy and Retirement Planning in the United States' — https://www.nber.org/system/files/working_papers/w17108/w17108.pdf

'Measuring financial well-being' — https://files.consumerfinance.gov/f/201512_cfpb_financial-well-being-user-guide-scale.pdf

'Financial Well-Being of the Millennial Generation' — https://gflec.org/wp-content/uploads/2019/12/Financial-Well-Being-of-the-Millennial-Generation-Paper-20191122.pdf

'Financial literacy and financial resilience' — https://sci-hub.se/https://doi.org/10.1111/fima.12283