September 21, 2023

Episode 271: Expected Returns of the AI Revolution (plus People are Lying to you About Money w/ Anthony Walsh)

September 21, 2023

Anthony Walsh is a life-long expat who grew up across 10 different countries. This instilled in him an appreciation for the plurality of lifestyles and different definitions of wealth across cultures. Coming back to Europe after growing up in Asia blew his mind; He could not understand how Europeans who live far richer lives seemed to exude far less happiness. Anthony used his frugal upbringing and his fascination with money to reach lean FI at age 29. Anthony now uses his financial freedom to combat financial illiteracy and show people that there is another way. One way he teaches that is in his book: People Are Lying To You About Money.

AI is not new and financial mis-education is rife. These are two ideas that form the foundation of this episode, which features insights from Ben Felix, Mark McGrath, and guest speaker Anthony Walsh. To start our conversation, we explore the history of artificial intelligence and what it might mean for the future and beyond. During this Mark to Market segment, Mark McGrath shares his experience of owning property and becoming a landlord before we look back on Episode 155 with Don Ezra, where he revealed his thoughts on planning for life after work. Anthony Walsh, author of People Are Lying To You About Money joins us to discuss his efforts to remedy the lack of financial literacy among everyday people, how he approaches financial planning as a risk-averse person, and his move from lean FI to Coast Fi. He also shares his thoughts on the relative value of money, the importance of planning according to financial wellness and health, and more. Join us today to hear all this and so much more!

Key Points From This Episode:

(0:04:07) The cycles of AI development, excitement, and disappointment in technological history.

(0:15:01) How technology bubbles impact investors and why investing in revolutionary technology is a questionable strategy.

(0:18:50) The paradox of skill and how it applies to investment strategy.

(0:23:40) Mark to Market Segment with Mark McGrath on real estate and rentals.

(0:34:50) Looking back on Episode 155 with Don Ezra on planning for life after work.

(0:37:03) Introducing today’s guest: Anthony Walsh, who wrote People Are Lying To You About Money.

(0:40:17) Four types of lies people tell about money and why most people are financially illiterate.

(0:48:46) How Anthony navigates financial planning as a risk-averse person.

(0:53:25) What motivated his move from Lean FI to Coast FI and the relative value of money.

(0:55:10) The importance of planning according to financial wellness and health.

(0:57:19) The after-show; shows and series your hosts have been watching and a book recommendation.

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 are hosted by me, Benjamin Felix and Cameron Passmore, portfolio managers at PWL Capital.

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

Cameron Passmore: Welcome to episode 271. This week's episode is jam-packed once again. Can't wait, Ben, for you to dive into your topic off the top, which is all about AI. So many conversations now, both at work and with friends at home, are about AI. This breakthrough technology might not necessarily mean higher expected returns, or am I stealing your punchline?

Ben Felix: Yeah, you stole it. That's okay. I'll give the details.

Cameron Passmore: I'm sure there'll be no surprise to anybody. This week's segment, Mark to Market, our colleague, Mark McGrath, will share his thoughts on being a landlord. For the book segment this week, we take a look at another excellent personal finance book that I came across in LinkedIn called People Are Lying to You About Money. The author, Anthony Walsh, will join us from Germany. Good conversation.

We'll look back at episode 155 with our good friend Don Ezra, who had an interesting perspective on preparing for retirement, or as he calls it, Life Two. Of course, we have the after show for our three die-hard listeners.

Ben Felix: We do have a couple of webinars that I want to mention coming up on September 27th. We've got a webinar on finding and funding a good life. Also, on October 4th, we've got another one coming up on Saving Your Retirement: Dangers That Could Drain Your Investment Account. Very catchy title. I'm sure they'll both be great webinars put on by the PWL team, and we'll put sign-up links in the show notes for the episode.

Cameron Passmore: If you want to keep track of those future dates, you can follow any one of our various online social media accounts. I thought I'd highlight a conversation I had with a new listener to the podcast recently. He's a friend of mine, and he had no idea. He said to me, he said, I had no idea that it was that good.” He didn't know we had one. He said, “I can't stop listening to it. I'm completely hooked to it.” He's told a few of his friends about it, and they're really interested as well.

I said, what is it about it that you find interesting? Because we often debate here how long and how technical should these be. He just loves the full-length discussion that we have, where no rush to get through topics. He appreciates that. He also highlighted that some of the deep dives that you do, like you’re into sometimes more than 20. For example, today's conversation, I think you have 23 different sources that you're citing. It was almost like, the least, he said, that one could do is spend half an hour, or 40 minutes listening to you, considering all the time you put into distilling all this research. I thought that was pretty cool.

Ben Felix: People don't owe me anything, just because I read a lot of stuff.

Cameron Passmore: I'm not saying on my Twitter feed, love Thursdays. I do love Thursdays. In 30, 40 minutes, or for your segment, or hour and 15 minutes, you can learn quite a bit. It seems like a reasonable investment of time for your economic future.

Ben Felix: I think so.

Cameron Passmore: Anyways, all that to say, share this widely. I think the information is pretty good. Don't be shy of sharing it if you find value in it.

Ben Felix: Yeah, share it and tell us what you think. I think we said this in a recent episode, too, that it feels good to get comments, but it's also useful. It's good to get feedback. Sometimes we get more comments. Sometimes we get fewer comments, but it's always good. I think it's also good for the algorithm on YouTube and all that stuff. That's not why I'm asking. We just love to hear what people think about the episodes and it helps us think about where to go in the future, but it also gives us ideas about topics. It's really useful when you leave comments, even if it's just like the episode, or didn't like the episode.

Cameron Passmore: I agree. All right, with that, let's head over to our episode.

***

Cameron Passmore: All right. Welcome to episode 271. Ben, dive in.

Ben Felix: Well, you gave it away in the introduction. Is artificial intelligence going to be a silver bullet for investing?

Cameron Passmore: Well, the listeners knew where you're going, as soon as I said the topic, I'm sure.

Ben Felix: Yeah, there's two parts to it. One is unexpected returns and the other one's on whether you can use AI to beat the market, separate from the expected returns of investing in AI stocks, but I'll talk about both. AI is back and that's something that, I don't know if everybody realizes that. I don't know if that's commonly known. I learned that from Daniel Mescheder in our crypto series. He talked about, I can't remember. He's made some reference to past AI winters, or something like that. I was like, “What does that mean?” AI has been through many rounds of hype cycles.

Right now, we're seeing lots about things like, ChatGPT and LLM's large learning models. We're seeing a lot of excitement around that. Now, that's gone on many times and in different ways, different forms of AI since the 1960s. It's consistently been cycles of extreme hype followed by disappointment, relative to the extreme hype. I also want to say that innovation has happened. A lot of things that were considered cutting-edge AI at one point that were being really hyped up have just worked their way into being regular parts of technology. It's not like AI's been a flop and that's not the point I'm trying to make it all. It's just been through many cycles of extreme excitement. Then what people call AI winters, where people get less excited, technological development still happens. It’s just maybe not what was anticipated at the peak of the hype.

Now I'm not taking a position on whether that's where we're at now. Like, are we at the peak of hype of something and then there's going to be another AI winter, or are we truly in something revolutionary? I'm not taking a position on that. What I will take a position on is that even if the current iteration of AI is revolutionary, if we just take that as a given, I don't think that it means that investing in AI related stocks is a good idea.

We know throughout history, AI or otherwise, technology has persistently revolutionized the way that we live our lives. Going back hundreds of years, well, probably longer, but we have it well documented, going back hundreds of years. The other part that we know about that is that revolutionary technology has consistently been associated with asset price bubbles. Extreme price increases followed by extreme price declines.

To name some of the big ones, we have insurance and global trade in the 1720s. We have canals in the late 1700s and early 1800s. We've got railroads in the mid-1800s, electricity in the 1800s and late 1800s. Huge advances in intangible capital measured by the growth in patents in one paper in the 1920s. There's a model there that helps to explain why the 1929 bubble happened from a rational perspective. Like, there was based on the patents, there was a lot of innovation happening at the time.

Then of course, more recently, we have the internet of the 1990s. I think it's debatable, whether crypto is a revolutionary technology, but it certainly had some extreme price increases and declines on the claims that it was revolutionary. I have an image that will hopefully show on the YouTube video that's an article about Coinbase telling the SEC that it no longer thinks crypto is the future of finance. That's the basis for me saying that maybe it wasn't revolutionary.

Anyway, there have also been smaller scale technology bubbles. These are also really, really interesting to think about. There is a big bubble in bicycle company stocks in the UK in 1890, electronic stocks in the US and maybe elsewhere, but for sure in the US in the 1960s, biotech in the 1980s. Then more recently, we've had cannabis. Some people maybe got burned on that one, no pun intended. Electric vehicles, clean energy, they've all had these similar paths of big price run-ups and declines.

What happens is, I mean, there's a big run-up in stock prices and we've seen this and as people got enticed by a lot of this recently, like the cannabis and EVs and clean tech, but then the innovative firms usually fall back down to earth in the presence of high volatility and a lot of investors end up losing money. Now that pattern, which is incredibly consistent for hundreds of years, going back to the 1700s in a way that we have really well documented and good academic papers, is well explained by academic theory, a couple of different approaches to the theory that I'll talk about.

I think that that pattern makes investing in a revolutionary technology a pretty questionable strategy. That's why I say, even if we take the position that we are in a truly revolutionary period for AI, it doesn't necessarily mean that you should be investing in AI stocks. I think a lot of investors do understand this, but it's also one of the most common mistakes that I see inexperienced investors make. I think that point's important. Novice investors, they're often the ones that end up holding the bag when prices drop. So much so, that they're a key ingredient in one of the books that I'm referencing here, they've got a model for technology revolutions, for stock prices in technological revolutions. One of the key ingredients is the existence of novice investors clamouring for the stocks within that theme.

Two important questions to think about for investors are, why this bubble behaviour is so consistent, and why investors keep coming back to it for more pain? We've seen how this plays out, but people keep piling their money into it. This is the theory, two theories. One theoretical explanation for the phenomenon is that investors learn about a new technology, stock prices associated with it increase rapidly on optimistic future cash flow expectations and relatively low sector specific risk. Then with successful broad adoption of the technology, stocks associated with it become integrated with the economy, the risks become more systematic, more connected with the overall market, which drives the prices down. That's the model from Lubos Pastor. In other words, the bubble behaviour is explained by equilibrium asset pricing, and investors are just responding rationally. That's a rational model.

We did two episodes a while ago, with a full episode detailing the rational and irrational model for these technology bubbles. The other model, the irrational model, suggests that investors excitement about a new technology causes stock prices to rise above their fundamental values. This is often accompanied by a new era, or this time is a different narrative, which if you think back to all those examples I gave, at least the ones that we've lived through, you can definitely see that. A ton of it. This time is different, though. The world is changing, whatever.

Now, I think this is plausible. The irrational explanation is plausible, because investors often make extrapolation errors. We know that. They often engage in attention-induced trading. We know that. They respond to sensationalized coverage from the media. Again, we know all of those things independently. They help to support the idea that investors may be behaving irrationally, driving up prices. A version of that model, and this is in a book, a really neat book that I read on technology bubbles. They've got a version of this model, and they look at 88 technologies over a 150 years. They suggest that technology, this is their model, technology bubbles require uncertainty surrounding the innovation, the existence of pure play firms tightly coupled with the innovation, easy to understand narratives, supporting the importance of the innovation, and the presence of novice investors fuelled by over optimism and overconfidence.

Novice and inexperienced investors have been found to be more prone to the biases that lead to return chasing, which potentially contributes the existence of bubbles in the first place. More prone to extrapolating recent price performance, more heavily influenced by attention, and more prone to hurting. Again, there's independent evidence supporting each of those points.

Cameron Passmore: I was just going to say that you've got the attribution numbers in your notes here. Incredible research behind this. But it comes out so simply and clearly.

Ben Felix: Yeah, it is pretty crazy to think about. This book, I hadn't read this book previously. I mean, this is a topic that we've definitely covered before, but there's a book by Goldfarb and Kirsch, Bubbles and Crashes: The Boom and Bust of Technological Innovation from Stanford University Press. Anyway, they have this model of technology bubbles that their specific framing of it, I hadn't seen before. Hopefully, some new information on that relative to what we've covered this topic in the past.

Now, I know we're talking about AI, but crypto is a recent example with some pretty interesting evidence supporting the model that we just talked about. Again, I'm not saying crypto is a revolutionary technology. I personally don't think it was, or is, but in any case, it did follow that bubble pattern. Within crypto, financial illiteracy has been associated with investing in crypto. When crypto prices rise, retail investors tend to buy, although largest crypto holders tend to sell resulting in retail investors losing money most of the time in crypto. The financially illiterate people and the novice investors are the bag holders of crypto, but I think that maps to the broader trend.

Anecdotally, I definitely see this as a problem. New investors often link expected economic growth to positive future investment returns, which is super intuitive, but it's also super wrong, or at least fairly wrong, or just maybe wrong. The counterintuitive reality that expected economic growth and stock returns are somewhere between unrelated, just no relationship, and inversely related, due to the way that assets are priced is pretty tough to grasp. It's just not intuitive. Asset prices reflect expected future cash flows discounted to today's dollars, where the discount rate is related to risk. Technologies with revolutionary potential have some combination of low discount rates, as we mentioned earlier, and high expected cash flows, which drives their prices up.

Cameron Passmore: Worse to both worlds in one formula.

Ben Felix: That's high stock prices, right? It's some combination of low discount rates and high cash flow expectations. Now, eventually, usually, discount rates rise, and cash flow expectations fall, and then we see the sharp drop that's so consistent in the data. One of the challenges for investors with all this stuff is that financial product manufacturers, and we just had the episode with Zahi Ben-David recently, where we talked about this. Financial product manufacturers seem to know that exciting themes attract investor dollars. They strategically launch niche products that coincide with the price run-up of exciting themes, but unfortunately, for investors, the funds tend to launch at the peak of historical returns, and the peak of media sentiment related to that theme, and the stocks tend to go on to underperform their risk-adjusted benchmarks.

Not ideal for investors. But we've seen that. Again, think of the recent examples, right? ETFs launched for all of those. cannabis, EVs, crypto, AI. It's like, when are we going to learn? Now, I know I'm painting a negative picture about this whole idea, but technology bubbles are not all bad, or a low-cost of capital for innovation, maybe I'll say that. It’s a nicer way to say it, is not bad. Is not all bad. Providing low-cost capital for innovative firms helps to implant new technologies in the economy.

Interestingly for AI, back to that topic, we're supposed to be – what we’re talking about here, just being added to an AI-labelled ETF boosts the price of AI-related companies, which drives down their cost of capital. Which makes sense, right? That sucks for investors, but hey, it's great for innovation. Bubbles have historically been associated with the construction of technological infrastructure that does a lot of good for people and the economy overall. But it should not be unexpected that supplying low-cost capital to fund innovation has not benefited investors. For the obvious reason that they've been supplying capital at a low cost, even buying assets at high prices, or investing in assets at high prices.

As I mentioned earlier, in many cases, it's been inexperienced investors who end up on the losing end of the innovation trade. The current wave of AI enthusiasm may be no different, leading to, again, let's just take that position. Maybe it will lead to revolutionary new technologies that change how we live and work, but I think that makes AI a weak investment thesis. Not a strong one.

One of the common responses, whenever I say this investing strategy, or that investing strategy is bad, people often say, “Okay. Well, let's just short it then.” If you're saying it produces a negative alpha, why don't we short it to earn a positive alpha? I don't think it's that easy. Shorting is expensive, especially for the stocks that you want to short. It's risky, and there's some really interesting research on this, too. It's particularly risky when overconfident and uninformed traders are the ones excited about the stock, or ETF, or whatever that you want to short, because that's the whole thing of whatever prices can stay irrational longer than you can stay solvent, or something like that. Yeah.

Suffice to say, I don't think investing in AI companies, or shorting companies is a sensible path to capturing the benefits of a potential AI revolution. The other interesting angle that I mentioned is maybe AI is getting so powerful that we can use it to beat the market. Maybe we can use AI to pick stocks, basically. You don't need to buy AI stocks, or invest in the AI ETF, but maybe you can use AI to choose stocks that outperform, like I have a GIF of Bradley Cooper and Limitless, with the numbers of floating around his head and he's – you’ve seen a movie?

Cameron Passmore: No, but I know what you're referring to.

Ben Felix: Yeah. He gets way smarter than everyone and he's able to just beat the market and get super wealthy.

Cameron Passmore: Look at you with a pop culture reference.

Ben Felix: Yes. It's a bit of an old reference. Hopefully, people get it. We can put a clip of it in the video. I think the problem with this proposition, and it worked in Bradley Cooper's case, because he was the only guy with the Limitless drug. He was able to take that pill and he, in the story, gets so much smarter than everybody else that he can beat the market. But in real life, I mean, in the movie too, to win at investing, you can't just be good. You have to be better than the competition. If everybody had the Limitless drug, he wouldn't have been able to beat the market the way that he did.

In the case of AI, as more AI-enabled competitors compete with each other to find winning trades, the winners are increasingly determined by luck, rather than skill. That's called the paradox of skill. To do it, a super anecdotal test of this, and I acknowledge how anecdotal it is, there is an AI-powered ETF that has a bit of history behind it. Definitely not statistically significant, but still interesting. With the AI-EQ, AI-powered equity ETF launched in 2017. This is a quote from their literature. It utilizes IBM Watson to equal a team of 1,000 research analysts, traders and quants working around the clock. That's impressive, and I'm not saying that it's not. It's absolutely impressive in absolute terms.

The thing is, the fund has trailed the market, measured by both returns and risk-adjusted returns, which, if I remember correctly, its goal was to produce superior risk-adjusted returns to the market. The reason, I think, or if we were to assign a reason to it, a team of a 1,000 research analysts is impressive, without question, especially if it's running on a computer and costing you just electricity, or whatever; electricity and data inputs, or something. It's impressive. But it's irrelevant, or at least not impressive, relative to the collective knowledge of the market. A thousand research analysts is nothing when it's competing with the market. Especially if all those other research analysts, or even some of those other research analysts are also using AI. It's your relative level of skill, or information that matters.

Now, beyond that anecdote, there is a paper that looks at a sample of 15 AI-powered mutual funds, including AI-EQ, the one that we just talked about, and it finds that they do not generate significant excess risk-adjusted returns on average. They looked through the funds in the paper, only 15 funds. They all had much higher fees than a typical market cap weighted ETF, which you'd expect. Interestingly, I looked through the funds that were in that paper, so the 15 funds, only four of them are still in existence today. The rest of them have closed down.

Funds typically close after poor performance, because investors chase performance, as we've heard from Zahi Ben-David recently. Investors care about performance. They chase performance. And so, if you have bad performance, investor dollars leave your fund. Anyway, I thought that was super interesting that it's a relatively recent paper, and a ton of the funds have closed down. Not super surprising.

But I think one of the takeaways here is that in the long run, investing is a loser’s game, which we had the pleasure of having Charlie Ellis tell us about. He's the guy that wrote about that in the 1970s for the first time and coined that idea of investing the loser's game, not a winner's game. If you didn't listen to the Charlie episode, Charlie Ellis episode, what that means is that long-term investors win not by outsmarting the market, using AI, or whatever other means. Not by winning. You try and beat the market. You try to win by being smart. That's not how winners win. Instead, winners win by making fewer mistakes in the competition. They win by not losing, not by winning.

I think the simplest way to avoid mistakes is to just own the market, whether through index funds or factor tilted funds or whatever. Conceptually, the similar idea, just owned the market. Not to chase the next revolutionary technology, and not to look for the next hot fund manager, whether they're human, or AI-powered. That's it.

Cameron Passmore: Awesome. You did reference 23 different sources.

Ben Felix: That's good. We'll put them in the episode description. I don't know if we put those in the actual show notes, because it ends up being a huge block of text. But in the Rational Reminder community, we'll put the full list of sources.

Cameron Passmore: All right. Beautiful work. Let's head over to a conversation with our colleague, Mark McGrath with a segment of Mark to Market.

MARK TO MARKET

Ben Felix: All right, let's go ahead to our segment with Mark McGrath, which we are calling Mark to Market.

Cameron Passmore: Today, we dive into the real estate market. Mark?

Mark McGrath: Nice. We do. Today, we're going to talk about real estate and rentals and becoming landlords and all that fun stuff.

Ben Felix: Let's go. I mean, you've got a personal story. Is that what we're focusing on?

Mark McGrath:Yeah. This is my story with rentals and being a landlord. Basically, back in, I think this is around 2015, my wife and I had saved up some money, and we decided we wanted to own rental properties, like every Canadian. Seems like a rite of passage, I think. For many, it’s the next thing you do after you buy your primary residence. Yeah, we endeavoured to build a real estate empire. We did a reasonable amount of research into this. I spent a lot of time on real estate investing forums and that kind of thing.

We decided to go with pre-construction units, because I am the least handy guy that I know. I can't hang a picture properly without breaking something. There's no way I could buy an existing property, fix it up. None of that. That was totally off the table. This is before we had kids, so we had time, but I didn't have the skills. We bought two pre-construction units. One in Vancouver, where we lived at the time. This is real estate prices were a little bit more respectable back then. Then we bought one where I live now, which is in Squamish.

The attractive thing about buying pre-construction units is the down payment system is usually, or at least it was at the time, you just have to put 5% down. Then as the units progress, you put another 5% and then another 5%. The capital outlay is relatively low. Of course, the idea is you're hoping that the price appreciates from the time that you put down that initial 5% until the time that it's built. We put down, basically, the 15% on these properties. They were delayed a little bit, but nothing too crazy. I think each of them was delayed by four to six months. That was to be expected.

Those came online. We got the mortgages set up, everything like that. Got them rented. Generally no issue there. They were running pretty smoothly. The funny part of this story is that I had a great experience, as far as being a landlord goes. You hear lots of these nightmare stories about being a landlord and people trashing things and eviction issues. None of that happened for me. It went as well as it could have gone. We got great tenants. Nobody ever missed a payment. Mortgage rates were low back then. The cash flow was sufficient to cover all of the expenses. On paper, everything was working as intended.

Then, I even hired property managers, just because I really wanted this to be as passive as possible. I wanted absolutely no involvement to this. Then after a while, I realized with property managers, you're really just managing the property manager, instead of the tenants. I'm not actually sure that it reduces the amount of work that you have to do over time, because you still have to manage the property manager. Any time that –

Cameron Passmore: That’s interesting.

Mark McGrath:Yeah. Yeah. I don't know that that's the case, because I never really had to deal with a tenant. Anytime there's an issue, or a question, I mean, maybe there's relationships that you can build with property managers where you give them express permission not to contact you, unless it's a problem that's over a certain amount of money, or something like that. I didn't do that. But I was communicating with them relatively frequently.

Then, of course, because these are new construction units, there's all these warranty issues that come up in the beginning, and so those have to be fixed. There was a lot of just communication, I think, initially with the property managers. All things considered, things were running smoothly. Then over time, a few things started to bother me. One, the lack of liquidity. We had our primary residence and obviously, we had a mortgage at the time there. A lot of our capital on our net worth statement was really tied up in local real estate.

I started to get more concerned about the concentration risk on my balance sheet, so to speak, of local real estate in this little corner of the world that we call Canada. Obviously, a lot of risk there. Just the inability to access that capital to do other things with it without borrowing money against it through a home equity, line of credit, or something like that. It just started to bother me a little bit. Then over time, little things started to happen. In one of the units, the dishwasher broke three times in a year. This is a brand-new dishwasher. It shouldn't break three times in a year, but it wasn't the first year. The warranty was up on it. It cost me, I don't know, several thousand dollars to repair. You have to make this decision with something like that. It's like, okay, the dishwasher itself is 1,500 bucks. The repair is 400. You fix it the first time.

Then you end up with this sunk cost problem, the sunk cost fallacy, where the second time it breaks, it's another $400. You're like, “Okay. Well, I've already sunk $400 into this. Should I fix it again, or just replace the whole thing?” Then by the third time it happened, I realized in hindsight, I should have just replaced it the first time, and it would have actually been more cost effective, right? Little things like that just started to pop up and nothing major.

Then every year, I'd get the property tax bill, I'd get the utility bill. There'd be a small assessment. The strata fees would go up. Still on paper, the rental income was covering all of the expenses. Again, as far as real estate investment goes, this was generally a positive experience. But every single time I got one of these bills, or I got the property taxes, or something like that, it just, I didn't like it. Then I had to track all of these expenses for accounting purposes and everything like that.

Look, I mean, for a lot of real estate investors, this is just cost of doing business. This is not a huge thing. For me, I absolutely detested it and it bothered me. I was actually late filing my taxes one year, just because the mental energy that I needed to put into just going back and tracking all of the deductible expenses and everything just seemed like too big a project for me, and so, I just kept kicking it down the road. I asked my accountant. He's like, “You're probably in a refund position. If you don't file, there's probably not any penalties.” That just gave me permission to just kick that can down the road. I was nine months late filing my personal taxes as a result of this rental.

Ben Felix: Then we had kids. Obviously, life gets hectic. This just became a job for me. It's not like I'm putting 20 hours a week into this, right? This is probably relatively low from a labour intensity standpoint. But it was just enough that I looked at my wife, I think maybe six months ago and I said, “I'm done. We're selling them both. I don't care what the market's doing. I'm not talking about interest rates. I'm not making a prediction on real estate prices going forward. That has absolutely nothing to do with this decision. Let's just get out of this. There's better things we can do with the money. We can just stay diversified, stay liquid, clear off all the debt on that balance sheet.”

We decided to do that. Then, so just last week, we finally closed on that second rental property. They're gone. Just because, I don't know why this happens to me, but things like this tend to happen to me. The bank is still taking mortgage payments out of my bank account, even though the mortgage has been totally cleared off. I don't know if that's normal for this type of –

Cameron Passmore: It happened to Lisa when she sold her house.

Mark McGrath:Oh, okay.

Cameron Passmore: Another example right here.

Mark McGrath: Yeah. I'm told that mortgage departments are just so busy right now that they're just slow in processing things. Now, I'm fighting with the bank to get my mortgage payments back and all this type of thing. It's done. It's over. The relief that I felt when that second property closed when this was all done was really difficult to measure, but it was overwhelmingly good for me.

I think, the interesting lesson here is that even if on paper and even if the actual experience of owning real estate goes as well as it can go for you, and I'll be blatantly honest here, from a return standpoint, it went quite well. West Coast of British Columbia has done pretty well price-wise since 2016. We did well from that perspective. Even with all of those things going perfectly, I was not cut out to be a landlord. It just was not for me. It was not for my wife. We decided, we're getting rid of it. Never doing rental properties again.

Cameron Passmore: I'm guessing, you're talking to the converted here. I'll speak for myself. I'm not up for that either. Ben, I'm not sure that's your jam either.

Ben Felix: No. Not a chance. I don't even like having my own house.

Mark McGrath: I agree with that, actually. I was talking to somebody this morning about that. I've always said, if I could get a 99-year lease, a one-way lease where I could not be evicted on a prop, I would never own my own house. It's just, you want this again, you guys have talked about this, but you want the security and the consumption hedge of owning the property. But at the same time, it's expensive, it's a lot of work. You're locked into a place.

Ben Felix: Landlords are like, they're not bad. Well, some of them can be, but I had great landlords. On one place that we lived in, he was the builder. I proposed that I'd pay for materials if he built us this really nice deck. He's like, “Great.” We lived there for, I don't know, three years. I think, we for sure got value for the cost of materials. Our kids used to play out there all the time. I don't know. People always say, “Well, you can't customize your rental to be what you want.” It's like, I don't know, you can. At the same time, I could not rent the house that I live in now. My wife was always worried about, what if they sell or whatever? Just that uncertainty that comes with renting. I don't mind that at all, but it's something that my wife really didn't like.

Mark McGrath: It's an expensive problem to have to solve too, right? There's just not really an easy way to solve that, except for buying a property, and we all know what real estate prices are like in Canada, right? I get it. I actually have a friend who's a tax lawyer and he showed me his lease and he's actually negotiated something like that, basically, like a one-way perpetual contract, where it's an option where only he can exercise the option every year. He gets to choose only whether he wants to continue the lease and the landlord has forgiven their right on paper. I don't know if that contract would hold up in court, but he obviously agrees that it was quite interesting to see that.

Ben Felix: While you were trying to become a real estate mogul, what were you saying to your clients about real estate?

Mark McGrath: That's a great question. I'm an open book. With clients, I tell them exactly how I'm invested, what my portfolio looks like. I was very candid about it. Now, I'm not a real estate expert. I wasn't recommending people do what I do at the same time, but a lot of my clients already had some form of real estate, whether it was their primary residence, or what have you. When they would ask questions about rentals and real estate, I would describe my experience with it and trying to recognize my own bias as an advisor that doesn't generally recommend real estate. I would just have open conversations with them about it.

It's funny. When I posted this story on Twitter, tons of people came in and said, “Same. I hate it. I'm just getting rid of my rentals, or I got rid of mine 10 years ago and I've never been happier.” That was so fascinating to me, because the narrative that you see online about this generally is totally different and it doesn't feel like a lot of people are honest about their experience with rental real estate being negative. Yeah, in talking to clients, some people shared the same experience, but it was rare. A lot of people were endeavouring to buy rental real estate. I could at least speak to the process and the administration process behind buying and managing rentals. But I fell short of straight up recommending them.

Ben Felix: Super interesting.

Cameron Passmore: Awesome.

Mark McGrath:Yeah. That's it for me this week. But if anybody wants to chat about it, or just tug on any of that experience, let me know. I'm happy to chat about it.

Cameron Passmore: Awesome. Thanks for joining us, Mark.

Mark McGrath: Yeah, of course. Always a pleasure, guys.

Ben Felix: Thanks, Mark.

***

Cameron Passmore: Just awesome having Mark join us on the podcast regularly. Love it. Okay, let's shift to look back on a past episode that might be of interest for listeners who have not had a chance to go through the entire collection. Actually, it’s someone funny today on Twitter, asked me for suggestions of other podcasts to check out. I said, well, if you listen to all 268, that we published, plus your crypto series. He said, “No, I'm going to get through that.”

Anyways, Don Ezra joined us, just a little preamble here, back on episode 155. I think you'd agree, Ben, Don is one of the nicest people, certainly that I have ever met. He's become a friend of both of us and also, PWL. He was telling us when we last spoke to him that his family jokingly calls him 155, as we sent him a bunch of mugs with. Remember the episode mugs we had that had the guest name and the episode number? He's got his name beside 155. His family and kids and grandkids call him 155. That's pretty funny.

Anyways, he's been a great resource and supports us, which we appreciate. With that, we’ll do a quick brief. In June of 2021, Don Ezra joined us to talk about planning for life after full-time work. He, I think, it's safe to say, is the perfect person to speak with authority on this subject after a very successful career in the investment world. Don retired to a new world, a world where he felt uprooted, completely discombobulated, as he put it. This caused him to learn about the process of retirement and publish the book, Life Two, representing what retirement is, or at least what it is to him.

He described the U-curve of happiness and how happiness actually increases as you get older. Given Don's background as an actuary, we jumped into the risk retiree's face, such as outliving your money, sequence of return risk, and of course, a benefit of considering annuities and asset allocation. At the end, we talked about lessons Don learned from his years advising, yes, some of the largest pension funds on the planet. For anyone either approaching retirement, or currently retired, Don is an absolute gem of a resource. In episode 155, I'd suggest it's worth checking out.

Ben Felix: Agreed. Again, like you said, he's just a gem of a person.

Cameron Passmore: Agree. Great guy. For this week's book review, this is a book I came across on LinkedIn. I know you asked me after the interview how I met Anthony. Honestly, I think it was through LinkedIn. He posted his book, which was recently released called People Are Lying to You About Money. I read it. I enjoyed it. One of our goals this year was to bring more financial planning, broadly applicable financial planning and investment books to the audience. I thought this would be an interesting one to bring. I reached out to Anthony on LinkedIn and he agreed to come on.

He does his background – is a background, is probably most eclectic background that I think I've ever heard from where he's lived and what he's done through his career. Young guy was on the path towards financial independence. He talked about that, then he got inspired to write this book. With that, let's go to our conversation with Anthony Walsh.

***

Cameron Passmore: Anthony Walsh, welcome to the Rational Reminder Podcast.

Anthony Walsh: Thank you for having me. Lovely to be here.

Cameron Passmore: Great to have you. Congratulations on your recently released book, People Are Lying to You About Money, which I read. I enjoyed it thoroughly and I'm glad to have you join us. Off the top, Anthony, just give us a very brief, your very brief background.

Anthony Walsh: Sure. My name is Anthony. I am half French, half Irish, but I’ve lived abroad most of my life. Just to give you a very quick run through. I was born in France, but I grew up in Scotland. I went to kindergarten in Louisiana, primary school in Netherlands, secondary school in Thailand, high school in Singapore, bachelor's degree in Poland, master's degree in New York, first job in Dublin, Ireland. I then moved to Germany, where I worked at the European Central Bank for six years. Been saving money since the age of 16. That allowed me to reach a Lean Fi at age 29.

I then left my job and tried this Lean Fi lifestyle for a while. I learned how to surf, I learned how to dive. Realized that Lean Fi wasn't really for me, so I'm not trying to transform it into Coast Fi by trying to build a lifestyle business around money.

Cameron Passmore: Wow. That's one heck of an intro. Your book is called People Are Lying to You About Money. Pretty provocative title. How did you come up with that name and why did you write the book?

Anthony Walsh: Because that's how I felt on my journey to financial literacy. My journey to financial literacy has been full of mind-blowing moments, and full of moments of that stuff is awesome. Why has no one told me this before? I've been through so many different schooling systems, and I was a bit upset that not a single school, not a single teacher, not a single classmate of mine told me about financial freedom.

Then I worked in different places. I worked in data analysis, consulting, two different Fortune 500 companies. I worked in fund management. I worked at the European Central Bank, where I was surrounded by people with PhDs and economics. There too, nobody told me about financial freedom. Not one person. I had to discover that the age of 26, on a random US blog talking about dividends. I was a bit upset I thought, I would take all of these mind-blowing moments which I've accumulated in my journey to financial literacy, put them together in a book and presented to people and say, well, there you go, that's the stuff that you've not been told and you should probably have a look at.

Ben Felix: How are people lying about money?

Anthony Walsh: It's a good question. I think there are four main types of lies. I would say, the first type of lies are lies that are born out of ignorance. For example, that's when people tell you that real estate is safe. That you can't lose money in real estate. Now, of course, we have data, we know that real estate does fluctuate and that people do occasionally default in their mortgages, they do lose their family home. These things do happen. That is simply not true.

Another form of lies are lies which are born of what I call intellectual laziness. An example of that is when people tell you that the stock market is the casino. Again, we have academic evidence. We know that if you invested in the US stock market at any point between 1926 to today, and you held on to that investment for at least four years, the probability that you would have made money is 91%. Now in my view, 91% probability of success is not the casino. That's also a lie.

The third type of lies are what I would call non-verbal lies. That's when people are lying to you without necessarily opening their mouths. For example, if somebody is poor, if somebody is in debt and they wear a really fancy watch, $20,000 watch, or they have a fancy car, or they live in the fancy part of town and they insist in flashing it into your face, that's a bit of a lie. I think it's a very destructive lie, because it causes the rest of us to feel like we're lagging behind and we try to keep up with the Joneses. But a lot of the time, the Joneses are themselves pretending to be rich.

The fourth type of lie are when people lie to themselves, and this sometimes, they don't even realize it. One example of that is when people tell you that their number one priority in life is their children. Yet, if you look at their bank statements, we would notice that their number one priority in life is actually alcohol, cocktails, parties, brunch.

Cameron Passmore: How well do people understand money?

Anthony Walsh: On the back of my book, I have this sentence. It says that I worked at a consulting firm, a startup and a central bank. I've never met anyone who truly understands money. Now, this single sentence probably accounts for about 99% of all the criticism I ever received in my book. People hate the sentence. They hate being told they don't understand money. That comes from people in general who have, let's say, a degree in business, or a degree in economics and therefore, they believe they understand money.

The truth is the field of money is huge. Even if you have a degree in microeconomics, it doesn't mean that you understand macroeconomics, or political economy, or monetary policy, fiscal policy, behavioural finance, financial therapy, financial planning, investing, personal fines. It's a huge field. Even if you have a PhD in 16 different fields related to money, it's still not enough, because next year we're going to come up with new a concept. We're going to come up with financial therapy. We're going to come up with financial counselling.

Only now, we're really scratching the surface on what it means to have a personality type around money. As a result, I think that we don't have enough information as a society about money yet. As a result, we don't know much.

Ben Felix: How do you think someone should assess how much they know about money?

Anthony Walsh: It's a very good question. Correct me if I'm wrong, but I feel as if 90% of what there is to know about money has not yet been discovered. We're pushing the frontier every year. We're sailing uncharted waters. As I said, every year, we come up with new topics and therefore, there's more to learn. Probably, 10 years from now, somebody will take up all these new concepts, put them together in a book and we're going to have a whole new way of looking at money that we've never seen before.

What this means is that as a society, we know very little. I think that's reflected in mainstream media. That's reflected in our politicians. That's reflected in our leaders. Here's something that recently blew my mind. It turns out, maybe I was naive for believing this, but it turns out that you can actually look up the portfolio of your politician online. In most places, they are legally required to disclose it, which means if you want to check what the head of the IMS is invested in, you can check that. If you want to check what the president of the European Central Bank is invested in, you can also check that. I did.

If you look at Christine Lagarde, who is a big fish, I mean, she was a minister of the economy in France. She was the head of the IMF. She is now president of the European Central Bank. She sits at the G7 and the G20. She's also a member of the board of trustees at the World Economic Forum. She's clearly on a 40 in this field. There's no dispute in that. No one can boast such credibility in that field. Yet, you look at her portfolio, and this is public information, and it's made up of six funds. Three of them are actively managed. Two of them are multi-athlete funds. One of them is a fund that tracks convertible bonds for some reason.

She doesn't have any index funds. She doesn't have any factor funds. The lowest fees on these fund is 1.3%. The highest fees is 2.3%. She's not alone. She’s not a black sheep. Others are much worse. The governor of the Bank of Belgium, for example, has 24 funds. Half of which are actively managed. Two or three of them are tracking the exact same index, the MICI world. There is some overlap. There is some potential for help from a financial planner, for example.

As a society, we just don't know enough about money, and I think that's reflected everywhere in society, including our leaders. I think this really underlines how you can be an expert in economics, but still not an expert in financial planning and investing. Does that make sense?

Cameron Passmore: Sure does. You mentioned real estate earlier. What does real estate propaganda arise?

Anthony Walsh: Real estate propaganda is when people are willingly, or unknowingly giving you false information about real estate. An example of that is when people tell you that real estate is a good investment. For example, they might tell you, look at your uncles. He bought property, and now he tripled his money on it over a lifetime. It can happen, but most of the time, it doesn't. Again, we have academic evidence on this.

Robert Shiller, who is a Nobel Prize winner in economics put this together in his book, Irrational Exuberance. He looked at almost 200 years’ worth of historical data on US real estate. He found that the average real increase in home prices after accounting for inflation, taxes, renovation costs, and real estate investment fees was only about 0.3% per year, which is not great. It's not something that a real estate agent would tell you.

Another example of that is when somebody tells you that unlike stocks, real estate is safe, that you can't lose your money, that is safer than stocks. Again, we have data. We can check. If we compare, or if we analyze the US real estate data, and we can take a subset of data and look, for example, at US real estate investment trusts, which are composed of multiple apartments, multiple buildings, to arguably a bit more diversifying, therefore, a bit more safe than a certain apartment. If we look at that, we can see that the volatility on these funds is higher than the average volatility for the average stock market, which means the idea that real estate is safer than the stock market is simply not true. Just because you can't see the volatility, does not mean it's not there.

Ben Felix: Why do you think more people don't invest in stocks?

Anthony Walsh: It's a good question. I think there are four levels of what I call investment confidence. Level one is ignorance. You don't know you should invest, therefore, you don't. Very clear. Level two is you know you should invest, but you don't know how. Therefore, you don't. Level three is when you know you should invest, you know how it works and that's where most educated people are at, because they've heard of index funds before. They've heard of Vanguard. They've heard maybe of factor phones, of rebalancing, etc. But they're not convinced the stock market is the right solution for them. They're not convinced that’s the best way to build wealth. As a result, they're always looking for alternative ways to invest their money. They're looking into Bitcoin, they're looking into real estate, maybe into bonds, or maybe into cash now, because some savings accounts are paying 5%. As a result, they're faced with a paradox of choice. They're immobilized by choice, so they don't invest in stocks, or they invest not enough in stocks to reach their desired outcome.

The last level is what I call investment confidence is when you know you should invest, you know how it works, and you are convinced the stock market is the best way to grow your money. What this means is that when there is going to be some downturn in the market, which will happen eventually, you will have the mental fortitude to put down more money, or at least hold your investments, so that you can get the best outcome in the future.

Cameron Passmore: What is risk in your mind?

Anthony Walsh: I'm somebody who's very risk-averse. I don't like taking risk. You would never see me jumping out of an airplane. You would never see me going bungee jumping. I'm also not a big fan of debt, and I always tend to get to the airport way too early for my flight, which always annoys my wife. My friends know that. They know that I'm risk-averse. Yet, when they discover that I've got about 80% of my money in the stock market, they're very puzzled. They ask me, “Isn't that risky? Isn't that irresponsible?”

I respond with, well, actually, no. Actually, investing in stocks is actually probably the most responsible thing I could do with my money. The way I see it is the following way, right? If I was to lose my job right now, if I was to lose all my income coming in, my current portfolio, on how it is based on expected returns and safe mutual rates, would be enough to finance my lifestyle for the next 21 years. If I take my money out of stocks and put it into cash, it would only be enough to finance eight years of lifestyle.

The eight is by investing in stocks, I'm improving my financial security from eight years of expenses into 21 years of expenses. In that sense, investing stocks actually makes me safer, even though my portfolio will have more volatility, it guarantees me or gives me a higher probability of achieving my goals, which I think is what really matters. Does that make sense?

Ben Felix: Yup. I think that's a good way to define risk, is the risk of not achieving your goals. I agree that for long-term investors, stocks are from that metric, probably safer than bonds and cash, if you have a long time horizon. Can you talk about how you differentiate between being rich and being wealthy?

Anthony Walsh: Rich is quantifiable. You can check how rich you are. Historically, we've got data on this. It turns out the average Chinese person today is 16 times richer than the average Chinese person in 1950. The average Canadian is six times rich, or sorry, four times as rich. The average Italian is six times as rich. We can check how rich we are on a historical level, but also on a global level. Here's something else that blew my mind. Turns out, if you earned the minimum wage in Spain, measured in purchasing power, you are richer than 90% of the world's population. You are in the top 10%. But it doesn't feel this way, because you compare yourself to people who are earning more. Maybe you compare yourself to Northern Europeans, or people from America.

As a result, your views are going to be skewed. That's why most of us in the West are rich, but we're not necessarily wealthy, because rich is quantifiable. Wealth is more subjective. I would say, you are rich when you have enough money to support your lifestyle without having to work. That is very subjective. Somebody might be very happy with $2,000 in passive income sitting on a beach in Mexico, while someone else may be earning $10,000 in Vancouver thinking that it's not enough.

Cameron Passmore: How does our spending habits affect – I mean, speaking as someone who is approaching, or is at financial independence, or some level of it, how does spending habits affect your financial freedom?

Anthony Walsh: I think it doesn't just affect it. I think it shapes it. I'll give you a very quick story here. About 13 years ago, I was hanging out in Thailand with a few friends and we were approached by this guy who started speaking to us in French. It turns out, he was a metro conductor in Paris who was on vacation by himself. This guy was in his 20s and he was on vacation by himself in Thailand for about two weeks.

Now, at the time, I didn't really develop any social filters, so I just asked him straight up, “How did you afford the 12-hour flight on a train conductor salary? I mean, your salary is only €1,300 and Paris is really expensive. How did you do it?” He said something that I will always remember. He just looks at me and he says, “Oh, I'm Muslim.” I thought, “well, what does that have to do with anything?” Then he explained that because of his faith, he maintains the exact same lifestyle as his friends, with the only exception being that he doesn't drink. He's not spending on alcohol. He's not spending on the covered charge to get into nightclubs, and he's not spending on buying drinks for girls.

He can have the exact same lifestyle as his friends, but save any bit of money because of that and that gives him enough money to go vacation in Thailand. I think people really underestimate how much small efforts can aggregate into. Because in life, small efforts aggregate into incredible things. But in personal finance, they don't aggregate, they compound.

Ben Felix: You switched from being on Lean FI to Coast FI. Is that because was it too lean? Was that what happened?

Anthony Walsh: I think it was more of lack of intellectual stimulation, and also, a bit too lean, to be honest. Also, being risk averse and being only 29 at that time, I thought, well, my safe withdrawal rate probably is not looking too great if I have to maintain my living standards for the next 60 years. I also thought, I might need to change that up a little bit. Does that answer your question?

Ben Felix: Yeah, yeah. Definitely. Can you talk about how the value of money changes as we age over time?

Anthony Walsh: A dollar amount is not worth the same to everyone. For example, a 10-year-old with a $1,000 is incredibly rich. But a 70-year-old with $1,000 isn't. A $1,000 is not enough to retire. It's not enough to buy yourself a home. Money is worth differently, or different amount to different people. Next, in general, money is worth more when you are young, because you haven't experienced lifestyle inflation yet. As a result, because you've got lower standards, you can appreciate life in different ways. That's why hostels are full of young people and all-inclusive resorts are full of old people. It's not because young people can't afford it. They spend money on many other things. They can afford all-inclusive resorts. They just choose not to. They've got different standards.

It's also why if you're in your 20s and your friend says, “Hey, let's go to Colombia for a month. Let's backpack through the country and sleep in hostels.” If you're 20, you're getting excited. If you are 50, you feel insulted. It will depend on your background. The last element is that in general, as you get older, you progress through life, you get kids and life becomes a bit more expensive, as you know yourself. Even if you just want to go out for a drink, you need to hire a babysitter and that just adds up, or piles up a lot more cost on top of that.

Cameron Passmore: What are the implications of all that on financial planning, life planning?

Anthony Walsh: It means that you should try to plan your life decision according to two components, which are finances and health. What this means is, for example, if one of your goals is to hike Mount Fuji in Japan, you should probably do that when you're young, because you're fit, your healthy, you're good-looking, you can do it. If you postpone that until your 60s, there's no guarantee that you're going to be fit enough, or that your knees will be good enough to hike that volcano.

On the other hand, if one of your goals is to sit on the beach and drink cocktails, you can probably do that in your 60s. It's okay to delay that by a few decades. Where it gets, I think, really tricky is for young people. Because young people face an incredible choice. We know that money is worth more when you are young, but we also know that the earlier you start investing in the stock market, the better returns you're going to have. If you're like me and you're trying to maximize wealth, you live below your means, you invest the difference, which from a financial perspective, makes a lot of sense, until you start looking at the data.

This is going to get a bit more difficult here, a bit more morbid, let's say. If you look at the US Social Security data, only 90% of US men live up to age 50, which means there's a 10% chance I will not make it to age 50. Only 82% of men make it to age 60, and only 68% of men make it to age 70. Statistically speaking, I think it is unwise to postpone all of your spending, all of your happiness until after the age of 50.

Let me put it this way, right? If you make a deal with the devil, and the devil tells you, “Okay, I'm going to give you phenomenal stock market returns, but there's a 10% chance you're going to die when you're 50, or before 50. Would you take it?” If you're like me, you would say, no way. But that's not a deal with the devil. That's life. That's a decision that every single person who's investing when they're young is taking. I think, the middle ground is try to maximize enjoyment as much as you can, while also keeping an eye out on financial security, because the goal is not to be rich. The goal is to be happy.

Cameron Passmore: Good answer. The book is People Are Lying to You About Money. Anthony, it was great to have you on.

Anthony Walsh: Thank you for having me. Lovely to be here.

***

Cameron Passmore: Great to have Anthony join us, Ben. Let’s go to the after show. What’s been on you mind lately?

Ben Felix: What's been on my mind?

Cameron Passmore: It'll queue up for you.

Ben Felix: I don't know. You always talk about shows that you watch. This was a few weeks ago now, I think, but Angelica mentioned it in our chat. It reminded me of the show Painkiller on Netflix about OxyContin and Purdue Pharma. It was really good. Really, really good.

Cameron Passmore: I've seen one documentary on them, but not this one, but it did show up at a Netflix feed.

Ben Felix: It's not a documentary. It's a series. It's a dramatic series. Well, I don't know what you call it. They're acting out not exactly what happened. A lot of it's filled in with writing, fiction, but the broad theme in the general story is follows what's actually happened. It's, yeah, just crazy. Crazy story. The impact that it's had on, and they don't put references quite a bit, I guess. But we know separate from the series how impactful opioids have been around the world. Yeah, seeing the story is just mind blowing.

Cameron Passmore: Wow. Well, we'll check it out. I saw it there last night. This past weekend, Lisa and I took our bikes and spent a lot of time riding around Ottawa. We went out to what's called River House. Have you been?

Ben Felix: No, you sent me a picture, but I've opened myself.

Cameron Passmore: I couldn't believe it. First of all, the trails for Ottawa and the bridges for bikes is fantastic. Just to the east of downtown on the river, obviously, is this 100-plus-year-old heritage building right on the water. They built beside it on the river this massive decking, this plastic decking with this huge open square in the middle for public swimming in the river. It is a spectacular, spectacular spot. I was blown away. It's so nice to see civic investment like that, which gives free access to a fantastic facility. Beautiful deck. Nice, little cafe and gelato spot there and a place you can go for lunch. Beautifully done.

I was pretty proud to see that as an Ottawa resident. If you're looking for a place to travel, some pretty cool sites, it was really cool. Living downtown, well, a few rentals happened at our house, has been a lot of fun for us. Why don't you talk about this review we got this past week?

Ben Felix: Yup. We got a review from Tuco Salamanca, who I believe is a character from, oh no. What's that show called?

Cameron Passmore: Oh, that's Breaking Bad.

Ben Felix: Breaking Bad, yeah.

Cameron Passmore: Tuco. You're right.

Ben Felix: Yeah. The review was titled, Never Boring, which is a hey, I'll take it. They said, “No matter the topic, Ben and Cameron make it accessible, interesting and palatable. Their guests are incredible and they can make the most out of any conversation. For example, episode 237 about storytelling. I didn't put much emphasis on improving my discussion skills with clients. Now, I want to write a story every day of my life. Thank you, RR, for educating, giving perspective and doing what you do.”

Cameron Passmore: Very nice. I heard from Joseph on LinkedIn, who is a 17-year-old from Atlanta, reached out to thank us for the pod and discovered it after coming across your video, Reasons to Avoid Index Funds on YouTube. Nice that he’s getting a head start at his age on learning about this stuff.

Also, heard from Patrick in Seattle, who wanted to come to our meetup in Huntington Beach. By the time this episode airs, we will know if he came to see us or not, but it was very kind to hear from Patrick. Also, heard from Constantine in New York, who will also be at the live recording in California. I wanted to highlight in the store a special offer while supplies last. Eight years ago, I'm holding up here the book for people on YouTube, Dimensional Fund Advisors produced a special edition book for their 35th anniversary, which again was eight years ago. The book is called Quotations on a Better Way to Invest. It's a beautiful hard copy book with quotes from some of the greatest minds in finance, including many of our past guests, people like, David Booth, Gene Fama, Ken French, Bob Merton, Mac McQuown, Myron Scholes, Dave Butler, Gerard O’Reilly, and many others are quoted in this book.

Yes, it's a Dimensional book. It is not a sales tool, or anything like that. I think there's lessons for anybody as they build their portfolios and implement their portfolios, how these thinkers in finance do what they do, I think, is applicable to everyone. If you want a copy this book, just place any order for any merch in the store and just leave a note in the apps and Jacky will send along a free copy of this book to you. Just drop a note and we'll send your copy with your order.

Ben Felix: Can you crack it open and read one of the quotes?

Cameron Passmore: Sure. Just take a quote at random here. Modern finance is based primarily on scientific reasoning guided by theory, not subjectivity and speculation. That's from Mac McQuown. Here's one from David Booth. The important thing about an investment philosophy is that you have one you can stick with. Here's another one. Let me see, I find someone different here. Gene Fama, we build diversified portfolios that capture the dimensions of expected return. Myron Scholes, ideas alone are cheap. Implementation is what really counts.

Ben Felix:Oh, I didn't know that was a Myron quote. I've heard that before and didn’t know it was from him.

Cameron Passmore: Let's see. Merton Miller. I like that Dimensional invited all these Nobel laureates on their board before they got their Nobel prizes. It's easy to invite them afterward.

Ben Felix: Hm. That is cool.

Cameron Passmore: Ken French. It's just fun to do research, learn new stuff and potentially have an impact on the way other people are thinking about the world. It also talks about the background of these different people in the book. It's not a long book. I don't know the page count is here, but beautifully done. I mean, beautiful piece. I think we have 50, 60 copies on hand. Reach out, order anything and we'll send you a free copy. Coming up on the pod next week, Rob Carrick joins us again. That was a great conversation.

Ben Felix: Mm-hmm. It was.

Cameron Passmore: The week after that will be our live interview that we taped in California with our good friend, Hal Hershfield. The week after that, wow, another ringer, Ben, with Professor Sam Hartzmark.

Ben Felix:Oh, yeah. That's a good episode. That's, what do you call it? The red meat episode. That's a red meat episode for sure.

Cameron Passmore: I loved it. In four weeks, we will have recorded our live event in Toronto at the CFA Toronto Wealth event. We'll be broadcasting that. Both of us are on X. Do you call it X? I still call Twitter. We both have open county links there. I'm very active on LinkedIn. Love to hear from listeners. We're easy to find. Follow the Rational Reminder on all these different platforms that we keep up to date on the live events. Ben, any final thoughts?

Ben Felix: I've got a couple of secret projects that I'm working on, but I'm not ready to announce them yet. I'll start building the excitement now though.

Cameron Passmore: These are the ones that I know about?

Ben Felix: Yeah.

Cameron Passmore: Okay. I want to say, I'm in the loop.

Ben Felix:Oh, yeah. No, you're in the loop. Not secret to you. Secret to everybody else.

Cameron Passmore: Like Radar O’Riley. Anyways, that's an old reference that maybe some listeners will remember. Okay, awesome. With that, thanks, everybody, for listening.

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