January 4, 2024

Episode 286: Errol Morris: Tuning out the Noise

January 4, 2024

Roger Ebert has said, “After twenty years of reviewing films, I haven't found another filmmaker who intrigues me more...Errol Morris is like a magician, and as great a filmmaker as Hitchcock or Fellini.” Errol Morris’ films have won many awards, including an Oscar for “The Fog of War,” the Grand Jury Prize at the Sundance Film Festival for “A Brief History of Time,” the Silver Bear at the Berlin International Film Festival for “Standard Operating Procedure,” and the Edgar from the Mystery Writers of America for “The Thin Blue Line.” His films have been honored by the National Society of Film Critics and the National Board of Review. Morris’ work is in the permanent collection of the Museum of Modern Art. Roger Ebert, a champion of Morris’ work, called his first film, “Gates of Heaven,” one of the ten best films of all time. “The Guardian” listed him as one of the ten most important film directors in the world. Morris is the author of two New York Times best sellers, “Believing is Seeing” and “A Wilderness of Error,” and is a regular contributor to The New York Times opinion pages and Op-Docs series. His most recent book, “The Ashtray,” was published in 2018. Morris has directed over 1000 television commercials, including campaigns for Apple, Levi’s, Nike, Target, Citibank, and Miller High Life. He has directed short films for the 2002 and 2007 Academy Awards, ESPN, and many charitable and political organizations. In 2001, Morris won an Emmy for Photobooth, a commercial for PBS. Morris has received fellowships from the National Endowment for the Arts, a Guggenheim Fellowship, and a MacArthur Fellowship. In 2007, he was inducted into the American Academy of Arts and Sciences. He is a graduate of the University of Wisconsin-Madison and was a graduate student at Princeton University and the University of California-Berkeley. He has received the Columbia Journalism Award and honorary degrees from the University of Wisconsin-Madison, Brandeis University, and Middlebury College. Morris lives in Cambridge, Massachusetts with his wife, Julia Sheehan, an art historian, and their French Bulldog, Esmeralda.

Rational Reminder listeners get exclusive first access to Tune Out the Noise, a documentary directed by Academy Award-winner Errol Morris until January 31.

Tune Out The Noise Access URL: film.dimensional.com/podcast

Access Code (available until Jan 31): RATIONAL

***

In today’s episode, Errol Morris, Academy Award-winning film director and author, joins us to talk about his recently released documentary called Tune Out the Noise. The documentary focuses on the revolution that's happened in the financial system, how the markets work, and why the advancements made are so vital. Errol is an acclaimed figure in film and literature, boasting an impressive array of accolades, notably securing an Oscar for his renowned documentary The Fog of War. His work spans various arenas, encompassing short films for prestigious events and many charitable and political organizations. In our conversation, we delve into the significance of storytelling in communicating complex subjects, the power of serendipity, the evolution of finance, and the enigmatic nature of truth. We discuss the necessity of storytelling, the unexpected occurrences that influenced finance, the importance of empirical data in understanding truth, the central story of Tune Out the Noise, and much more. He also provides insights into the amazing economists, many of whom are past guests, who helped shape the financial landscape. Discover how chance, humility, and the pursuit of truth intertwine in this captivating episode, where the intriguing art of storytelling converges with the complexities of the financial world. Tune in now!

Key Points From This Episode:

(0:00:18) Introduction and background about our special guest, Errol Morris.

(0:07:33) The central story of his new documentary, Tune Out the Noise, and why it is important for the average person to see.

(0:12:38) Hear his personal thoughts on investing before the documentary and how his investment philosophy has evolved.

(0:16:10) A brief history of the documentary and initial concerns surrounding the project.

(0:18:21) Motivation for making it an “Errol Morris film” as opposed to a typical commercial project.

(0:20:27) The moment he had an epiphany about making the documentary and telling the story of the financial revolution.

(0:23:19) He shares his personal investment experience in the early days of Apple.

(0:24:23) Errol’s skepticism about beating the market and the interviewees that had the biggest impact on him.

(0:27:50) Iconic influencers of the overall financial revolution story that were not in the film.

(0:31:31) The importance of storytelling for conveying complex financial concepts.

(0:34:52) Unexpected revelations about the financial system and investing after making the documentary.

(0:36:56) Explore the role of chance and serendipity in the financial revolution.

(0:40:40) Aspects of the financial revolution story that are underappreciated by investors.

(0:44:30) How the approach to making Tune Out the Noise differed from his previous projects.

(0:50:09) Ben and Cameron share their opinions about the documentary.

(0:52:13) Discover his “shut-up school” approach to interviewing and the fundamentals of a good interview.

(0:58:07) Essential advice to become a better storyteller and Errol’s definition of success.

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 284. This week, we have a very special conversation with a very interesting person. Errol Morris, Academy Award-winning film director and author joins us to talk about a recently released documentary called, Tune Out the Noise. Before, Ben, you jump in and talk about the movies, let me give a quick background on Errol because it is so impressive.

He, as I said, this recently released documentary called Tune Out the Noise. But before that, he has won many awards, including an Oscar for The Fog of War. Roger Ebert called his first film Gates of Heaven, from 1978, one of the 10 best films of all time. He's also the author of two New York Times bestsellers, Believing is Seeing and A Wilderness of Error. He's also a regular contributor to The New York Times opinion pages and op-eds. He's also directed, get this, over a thousand television commercials, including campaigns for Apple. He tells a story in our conversation about working with Steve Jobs, who is actively engaged with Errol on the production and design of the ads. He's also directed short films for the 2002 and 2007 Academy Awards, ESPN, and many charitable, and political organizations. In 2001, he won an Emmy for Photo Booth, which was a commercial he did for PBS.

Ben Felix: Yes, pretty cool.

Cameron Passmore: Pretty cool.

Ben Felix: We ended up talking to Errol. I mean, people may be wondering, okay, that sounds impressive, but why are we talking to him on this podcast about financial decision-making? His, I think, second most recent project, because he just had another new one come out, is a film called Tune Out the Noise, which is a documentary that Errol Morris directed. It's about the evolution or revolution that's happened over the last sort of 60 years in financial markets and investing.

The story includes many of the people that we've had as guests on the podcast. We've had many people with connections to the University of Chicago and a lot of that group. we've told bits and pieces of the story before, but a lot of that group crossed paths at the University of Chicago, just as computers were first getting the capability to analyze data. This is people like, past guests, David Booth, Fama, Mac McQuown, other people like Rex and Jeanne Sinquefield, and a ton more people that just took advantage of the technology that was becoming available, and applied it to how we view and think about financial markets.

The story is incredible. It runs over decades and it's really a story of science triumphing over. I don't know, human nature, the desire to speculate, and compete, and feel like we have control over outcomes, when in this case, we may not as much as we would like to think so. Errol talks quite a bit about that throughout our conversation. He's made this film, and it's interesting to talk to him about the story in general. But the incredible thing is, he came into this project without knowing any of it, without having the typical view of financial markets that you can pick stocks, and you can – I think he said during our conversation, you can hunker down, and really think, and outperform.

He went through this transition and this learning experience for his own personal investment philosophy as well. So that, given who he is, and his ability to do research, and tell stories, hearing how this story impacted him is a really interesting part of our conversation.

Cameron Passmore: Yes, and how he decided to even tell the story that there's enough meat in the story to tell and he was so taken by these characters and the serendipity that happened back in the sixties, seventies, and eighties for these characters that come together. We've talked about this story many times. You think back to our conversation with Robin Wigglesworth, for example, the book, Trillions. It's largely what the story is about. It was quite something to hear how he decided to actually make this movie.

Ben Felix: Yes. But you're right, it's the two pieces. It's the story, which we've heard bits and pieces of, and we've heard it from Robin Wigglesworth almost in full. There's the story and talking about that is interesting. But then I really think talking about the impact of telling the story on Errol is also really interesting. We got both of those throughout this conversation.

Cameron Passmore: It's also worth mentioning that this is the most unique kickoff to a conversation we've ever had. We just started talking and it was just so good. We just let the tape roll without any sort of formal welcoming. We are super thrilled to welcome him, obviously, even though there's not a formal welcome at the front end of our conversation, which regular listeners know we do every time.

Ben Felix: Well, the chatting was just so good. It was like we can't give up on the chat. You know what I mean?

Cameron Passmore: And we were both kind of stunned when he said he knew who we were when he jumped on the call

Ben Felix: Stunned? More than stunned. He said that we're familiar faces or something like that, and I was kind of like, "Excuse me. Are you saying that you've watched our podcast before?" And he had, I guess, that was part of his research for this project.

Cameron Passmore: Okay. Good to roll, Ben?

Ben Felix: Yep, I think that's good. Let's go ahead to the episode.

Cameron Passmore: All right. Here's our conversation with film director, Errol Morris.

***

Cameron Passmore: We have you for about an hour?

Errol Morris: Well, you have me as long as you need me.

Cameron Passmore: Do you have any questions for us?

Errol Morris: I'm a fan of your podcast.

Cameron Passmore: Wow.

Errol Morris: So there you go.

Cameron Passmore: It's quite something to have interviewed many of the guests that you had on the documentary. Incredible personalities.

Errol Morris: I was fortunate. It's a great collection of – as a kind of rogue's gallery, if you like, of very disparate, in many ways, disconnected characters, all of whom are really quite extraordinary. Compelling and extraordinary.

Ben Felix: I got to ask it out, you said that we're familiar faces and that you're a fan of our podcasts. You're saying that you've listened to our podcast?

Errol Morris: You have made the appropriate inference.

Ben Felix: Wow. It was an obvious inference, but it's surprising to hear you say that. I was not expecting to hear you tell us that you have listened to our podcast. That's a treat to hear.

Errol Morris: Absolutely. I sometimes say I make movies so I can learn something. Certainly, making this movie, Tune Out the Noise, I learned an enormous amount, an extraordinary experience. Just the opportunity to interview all of these people, to film a lot of David Booth's art. Certainly not all of it, but some of it. I have a background in history and philosophy of science. Very early on, I still am interested in this. I should write a book if I had the wherewithal, the time, more than the intelligence of just the connections between the financial revolutions in the fifties and sixties, and the scientific revolution in the sixteenth and seventeenth centuries. The parallels seem to be extraordinary, extraordinarily interesting. I hinted at it in the movie, but of course, I don't really have any time to fully explore it. That would take a movie in and of itself.

Ben Felix: Did he tell us what story it is that you are telling with the film, Tune Out the Noise?

Errol Morris: Well, the central story is these massive changes in how investing was done. That Dimensional was a big part of. Uncertainly, a lot of the people who are central figures in Dimensional were a big part of that financial revolution. It's not like it has one part to it. It has many parts, as you well know, a whole appreciation of markets, what a market does, what a market is. But to me, the central comparison between the scientific revolution in the 16th and 17th centuries, and what happened in finance in the fifties and sixties was the accumulation of data. It's really an interesting and powerful parallel. You have, not the total replacement, but the replacement in part of astrology with empirical observation and theory based on empirical observation.

It's hard to believe, I think it's hard even for me to believe and I'm not steeped into the stuffed to be sure, that there was a time when people just didn't have data about markets. It just didn't exist. All of a sudden, that's changed. People started accumulating all kinds of data. They were amazed by what they found, totally amazed. As the data from organizations like Crisp started rolling in, people started building theories on that data. It's a great story. I mean, it's been told by a whole number of different writers. But it's an extraordinary story of how close to nothing was replaced with a new universe of information. Go figure.

Cameron Passmore: Go figure. The way you described it, I've seen the movie twice. Would you describe data as being the starring role?

Errol Morris: I would say data and theory, but the two working together. I guess, the data started it off, maybe. Cause and effect is really hard to analyze in these things, but it's clear that once you start having information about markets, you can start assessing what markets really are, and how they work. Otherwise, you're just the blind leading the blind.

Cameron Passmore: How important is this story to the average person?

Errol Morris: Well, I don't know about the average person, or maybe that's me. Maybe I'm the average person. I know these stories are important to me. I've been an investor for many, many years. Learning about the nature of passive investment, and the markets was something completely new to me. I just watched, Tune Out the Noise again yesterday to prepare for you guys. I'm not sure it prepared me very well. You should be the judge. But I was struck by so many things in that movie. Among them is something that I truly believe, there may be no rhyme and reason in history. History is inherently chaotic or to quote Merton's father, "It's serendipitous in many instances." Things happen, odd connections are made, people with diverse backgrounds are brought together usually by some odd set of circumstance, and things move forward. Yes, it's a version of The Dirty Dozen, maybe. They see all of these incredibly different characters funnelling good measure through the University of Chicago, now the Booth School, so many different backgrounds. It's hard to even describe. You have a shoe salesman from Kansas. It's a great and compelling story for me. I still find it truly compelling.

Ben Felix: What were your personal thoughts on investing before you started doing your research for this film?

Errol Morris: Probably like a lot of other people. A lot of it involves magical thinking, a lot of it involves thinking, "Well, I can be smarter than the next guy. I can hunker down. I can apply myself to stock tables. I can read articles in The Wall Street Journal and I can figure it all out. I can figure out how to invest money and how to make it multiply." Of course, it's a sobering thought to think that you can't really outguess the market. I have to say, having done all of this work, do I really believe it? In my heart of hearts, have I been convinced by overwhelming evidence? Not completely. Part of us want to see ourselves as somehow in control of our own destinies of what happens to us. The idea that markets are efficient and that the prices are already contained in the market itself. The correct prices are already contained in the market itself. It's kind of a downer.

Cameron Passmore: Do you recall some of the points that cause your own views to start to shift a bit, like some of those aha moments, perhaps?

Errol Morris: Interviewing all of these people, and watching what they have been able to achieve, how they created a sea change in investing. I wish Bogle had been alive because I would have loved to add Bogel to my list of characters. But it's a pretty great list right there, French, Scholes, Merton.

Ben Felix: That's a good list.

Errol Morris: It is a good list. I love these guys.

Ben Felix: They're incredible guys. You mentioned being not completely convinced. Can you talk a little bit about how your own investment philosophy evolved throughout this project?

Errol Morris: Well, part of it is luck. I have directed over a thousand commercials. I'm not sure I should brag about this. Maybe I should apologize, having bragged. But years ago, I did probably well over a hundred commercials for this little-known company, Apple Computer. I would talk to the CEO – this is the only instance I can think of, where the CEO would call me in the middle of the night to talk about commercials. Who does that? I mean, it's really unheard of. But Jobs did do that. We would argue, I loved it. We had serious differences in opinion and how commercials should be made, what the truly effective commercials could be. I invested in the company, this is the nineties. That accrued to my benefit.

Cameron Passmore: Love it. Can you talk about where the idea for this project, Tune Out the Noise came from?

Errol Morris: I'm not altogether sure though I even remember. I know that – I started talking with David Booth, and David Booth was interested in the film. It's not altogether clear what kind of film, but a film about his investment philosophies. Often, people will come to me and say, "Well, I have a great idea for a film." I will say, "Well, do you have a great idea of how to pay for it?" In this instance, there was a great idea for a film, and a great idea of how to pay for it. So it came into existence, David has been a wonderful partner in all of this, a person who really facilitated everything, but didn't try to control everything. Then, in itself, is really unusual. Take my word for it. You don't see that every day.

Ben Felix: That's interesting. Are there parts of the film that you think David or Dimensional would have rather not have told as part of the story?

Errol Morris: There are parts of it that made people nervous, and it's inevitable when you're making a film for a company. I mean, it is a company and there are investors. There's always that inevitable concern, are we going to do damage to our business? It's not inappropriate either. It would be inappropriate if you didn't have those concerns. But I like to think that I made a movie that I'm happy with, and they're happy with, maybe that I achieved the impossible. How could that be? That's not supposed to happen.

Ben Felix: So you mentioned working with Apple and Steve Jobs, and then you mentioned all of your commercial work. But my understanding is this is an Errol Morris film, as opposed to a commercial project. How did you decide to make it an Errol Morris film?

Errol Morris: I just made it. I don't look at it as an advertisement for Dimensional. I think it probably could serve as an advertisement for Dimensional because Dimensional is – and I'm sorry, I'm probably advertising them, as I say this. I think it's a good company. It's hard to imagine all of these Nobel laureates in a line signed up to work at this place, but it happened. A lot of the people who didn't receive Nobel Prizes, either should have gotten them, or they did work that was certainly compatible with a Nobel Prize. I don't know why French doesn't have a Nobel, but it's easy to imagine that he could have one or should have one.

I was once interviewing Peter O'Toole, years ago, and asking him, "How is it possible, sir, that you didn't get an Oscar for Lawrence of Arabia? This might be the greatest movie performance in Motion Picture history. This is unbelievable. How was it you didn't get an Oscar?" He said to me, "Because someone else did." It was Gregory Peck. So yes, there's a kind of crapshoot in all of these things. But what's really clear about the people that I was interviewing for Dimensional, people connected with Dimensional is that they were extraordinary economists who made very, very important contributions to economics, pure and simple.

Cameron Passmore: When did you realize that this is a story worth telling?

Errol Morris: You mean the epiphany?

Cameron Passmore: Yes. Like you're meeting these people, you're learning the economics, the data, but when is it like, "Man, this is something I want to tell"?

Errol Morris: I could have had a V8 moment. I think, pretty early on. But what interested me, when I made the first time that connection between the history of science and the history of finance. It really, really is interesting that you have these central figures, Copernicus, Tycho Brahe, Kepler, all before Galileo. What did Brahe do? He built these observatories and he started accumulating data. I mean, the amazing thing is that this is data done without the aid of telescopes. This is data accumulated with just the naked eye and a lot of astronomical instruments. As this data starts to pour in, it enabled Kepler to come up with his three laws of planetary motion.

In the end, it enabled a small group of people to change the way we see the world, utterly change the way we see the world. It was called a scientific revolution, probably for good reason, because everything changed. Data played a very important part in all of it. Without Brahe's data, perhaps none of this would have happened. But that's one of those counterfactuals, one of those hypotheticals, which you can never know the real answer to these things. But you can observe that conjunction of data. And then, people building on that data with new models, new conceptions of planetary motion, new conceptions of the cosmos. For whatever reason, we look at it now, and you say, "Well, people really didn't have information about stock prices. How could that be? How could that possibly be?"

People didn't have information about how markets move, and just the realization of what you could have had in your pocket, what you could have had in your wallet if you just left stocks alone, or a group of stocks alone, and just allowed to increase in value. All of these changes in our notion of risk and probability. It's a deeper understanding of the world and the mechanisms in the world, from the late 19th century on to the present time.

Ben Felix: With your personal experience with the Apple stock as the example, were you skeptical?

Errol Morris: I don't know if you can generalize on. I think I was just plain lucky. Although, I will make this claim. I often thought I'm really stupid. I'm earning good money directing commercials, people seem to like the commercials that I'm making, and they hire me to make more, and on, and on, and on, and on. But if I had just created a portfolio of the stocks, a company's stocks, companies I was making commercials for, I don't know, I could be living in a castle with turrets, rather than just an extremely comfortable home.

Ben Felix: With that, though, you come into this project with that experience with the Apple experience, and the other example that you just gave. Well, the one counterfactual and the one actual experience. Did you have skepticism when you start hearing that there's data suggesting that people can't beat the market?

Errol Morris: Of course, I'm human. When data arrived on the scene suggesting that maybe you can beat the market, but most likely, you ain't going to. Did that put an end to gambling? I don't think so. I don't know what you would have to do to stop the impulse to gamble. Shoot everybody in the head. I'm not sure that it's possible. It's just that it's innate in us the desire to have something for nothing. If you're asking me, am I immune to those kinds of feelings? Of course not, and I doubt that either of you are immune to them as well.

Ben Felix: You're right about that. You mentioned that just the level of the people that you were speaking with being impactful. Were there any particular characters that you talked to and came away from the conversation having a big shift when you're thinking about this stuff?

Errol Morris: Each and every one of them. I mean, these guys, I remind myself, they're professors of this, that, and the other thing. But they're used to talking to classes, they're used to talking to groups of people, and they're eloquent. They really are, each and every one of them. Another thing, which I found amazing, many of them are really funny. They really are. They have extraordinary senses of humour. I interviewed McQuown and Fama early on. I've seen your podcast with Fama. Of course, I have. Fama is irresistible. I mean, when I talk about The Dirty Dozen, when I talk about the shoe salesman from Kansas, you have the guy who created an economic revolution, from a suburb of Boston, a crummy suburb of Boston, who really changed the way investment is done.

These guys have changed the way in which – and I don't exaggerate by using this. I have a tendency towards hyperbole, but this isn't hyperbole. They changed how trillions of dollars were invested. They changed the whole nature of investment. I mean, this is a big, big, big thing. I'm not telling you anything you don't know. Well, probably anything that your listeners don't know. But yes, it's one of my favourite scenes in the movie. I asked Fama, "Did you really get pleasure from second-guessing Wall Street, for proving all of these financial analysts wrong?" You know it as well as I do, he has this fabulous laugh. He really does. He starts laughing and says, "Of course, I did. Of course, I enjoyed doing that." Poor kid from Malden, Massachusetts confronts the world of finance and wins. Come on, it's an amazing David and Goliath story, among others.

Cameron Passmore: Sure is. You mentioned Bogle, are there other people who were not in the film that you think are important part of the story?

Errol Morris: Well, one regrettable thing, and there's very little I can do about it as people have the tendency to die, all of them. There are people who I wish were still around that I could interview. But we were lucky we got a lot of really great people, great characters, and great stories. I mean, I just love the story of Myron Scholes talking about the development of option pricing formula, Black Scholes. He then tells us, it got published in some peer-reviewed journal. Texas Instruments came out with a calculator that could apply his formula to option pricing. Way to go.

I asked Myron, I asked him, "Did you get any money out of this?" Again, you changed how trillions are being invested. Did you get a little runoff from this? Maybe a little skimming off the top of the pond." The answer is no. Texas Instruments developed a calculator to use their formula for pricing options, and they got nothing. Then, Scholes asked them, "Well, can you give me a calculator? Maybe just one. Can I have a calculator?" They said, "No. No, you can't." It's filled with kind of amazing, ridiculous stories that I find hard to believe.

Working in Wells Fargo, the chairman of Wells Fargo, the developing this idea of index funds and passive investment. The question is, Bogle becomes interested, and the chairman of Wells Fargo says, "Just give it to him. Give it to him." What? You probably know better than I do. How much is Vanguard managing today?

Ben Felix: Six trillion or more.

Errol Morris: That seems like a large figure.

Ben Felix: It's a pretty big number.

Errol Morris: It's a big number. “Just give it to them.” I mean, I'm a storyteller, truth be told. Did I really want to make a didactic movie where I was explaining? We were talking about it just in my office this morning. Merton is saying how after he had been shown the Black Scholes formula for option pricing, he read their arguments, and he said, "You know, you're right, but for the wrong reasons." Now, I have to fess up here. Do I explain in the movie what the wrong reasons were and why Merton had the right reasons? I don't really, but it's such an extraordinary story. I included in what I did. And yes, he developed a stochastic calculus. He had a different way of mathematizing the problem and conceiving of the problem. But these are really interesting stories of incredibly smart people changing the way we look at the world.

Cameron Passmore: I have to ask you, I'm a big fan of learning about storytelling. How important is having a story like this to get people to understand how important this evolution has been?

Errol Morris: It's absolutely essential. You don't want a big fat textbook. Maybe I like big fat textbooks. I do kind of like them. I like papers. I like reading. I like thinking about stuff and learning stuff. But what propels us to do things? Inevitably, it's stories. There's a paper that I really love from the 19th century, written by author, Schopenhauer, a fun fellow. It's called The Art of Controversy. In it, he says there's two ways to win an argument, it's really about how to win an argument. Two ways to win an argument, any winning argument. He says, "Well, this logic." He says, "We all know, no one wins an argument with logic. That's a non-starter. Let's get rid of that right from the start." He says, "This is dialectic."

Then he proceeds to give you 36 ways to win an argument any way you can. The guy has made you look like a complete ass, a complete fool. You look them right in the eye, and you say, I'm glad you've come around in my way of thinking, and on, and on, and on, and on, and on. The ugly truth about the world is that it's not based on rationality, at least to my way of thinking. Maybe rationality slips in from under the rug from time to time. But for the most part, we're looking at a lot of irrational behaviours.

Do I think that history is rational? No, I don't. If I look around me today in the world, I don't see some kind of rational process at work. I see people with competing interests, contrary values, and people confused about what they're doing. But somehow, something emerges from all of that. Storytelling was a way of getting a grip on the world. The world is a chaotic, confused, hopelessly complex place. The only way we can ever come to deal with it or understand it is to have stories to help us guide our way along.

Ben Felix: It is fascinating. When you think about this story, you've told it, you understand it now?

Errol Morris: I understand bits and pieces of it. It too is a very – as you well know, because you have – how many episodes of this podcast have you had? I know it's over 200.

Cameron Passmore: You will be Episode 284.

Errol Morris: There you go. So you couldn't do it in just one episode.

Cameron Passmore: No.

Ben Felix: No. I agree with that. We joke, we say somewhat tongue in cheek that investing has been solved, even though it hasn't really, but it's kind of a fun thing to say. But anyway, you've told this version of the story, the summary version, maybe. What surprised you or surprises you about the whole thing?

Errol Morris: The whole idea of efficient markets surprises me. I mean, now, we may think that this insight of Eugene Fama and others is just kind of platitudinous. We're obvious. I guess that's what you would say. When you don't like something, you say, "Well, that's obvious." But I'm very fond of pointing out there's nothing so obvious that it's obvious.

I guess it's learning along with all of these really great economists. What data could show us? You come into the world with a certain mindset? I can imagine myself being back in the 16th century with a view about the heavens being immutable, unchangeable. One of the events that is talked about is Tycho Brahe's observation of a supernova in 1572. Well, if the heavens are immutable and unchanging, how can a new star suddenly just come into existence? Often, it's data challenging an existing mindset that tells us that somehow that existing mindset, maybe it's not all wrong, but it can't be all true. There has to be something missing, there has to be something more, some deeper understanding of what's going on in the world.

To watch how those changes occurred in the early part of the 20th century, and through the middle of the century is an amazing story. It will always be an amazing story. Maybe someday I will write the comparison between the scientific revolution and what I think of as the financial revolution. But it's endlessly fascinating to me. Still is.

Cameron Passmore: How important do you think serendipity was to this whole story?

Errol Morris: I think it's completely important. How did these people all end up at the University of Chicago? In my movie, they tell these stories. David Booth could have been killed just as easily as not in Vietnam. Many of his friends were. I did not put it directly in the film, but he becomes quite tearful talking about all the people that he knew who were lost in Southeast Asia, and he was spared by chance. It's seemingly by chance, by the medical examiner in his draft board looking at his application and saying, "Nah, I'm sending you to the University of Chicago to learn economics." How often does that happen? No, I don't think it probably happens that often. The whole story is ridiculous. I don't know how better to describe it.

Fama tells us about his application to the University of Chicago. Another amazing story, to me, he tells us they lost his application. He applies, he doesn't hear anything, calls up to find out what the hell's going on. And they say, "Oh, I don't think we have your application." Then the Dean asks him, "How often does this kind of thing happen?" The Dean asked him, "Well, how are your grades?" Doesn't ask to see a transcript.

Cameron Passmore: It's Eugene Fama.

Errol Morris: Ask Eugene Fama, "How are your grades?" he had been planning to become a French scholar. He was going to do a thesis on Voltaire. He tells the dean, "I have all A's. What do you mean? I have really good grades." Then the Dean says to him, "Well, guess what? We have a scholarship for just your kind of person. How about coming to Chicago?" Now, is this destiny? Is this serendipity? Is this pure chance? What is this? I don't know. But as a result, in assembling this group of people, it's not all Chicago, it's not all Booth School of Business, but a lot of it is.

These people just came together and changed everything. Maybe without an intention to change everything, I have some part, an intention to change things. But just because of the love of investigating and thinking. Or Merton, whose father was a world-class scholar in his own right, sociologist, who wrote a whole book, by the way, on serendipity. He was one of the people who popularized the term, and maybe even coined the term. A kid who just liked thinking about money. These people all ended up together, they ended up, many of them, Chicago, many of them as consultants for Dimensional Fund Advisors. And yes, they weren't everybody. There were the offshoots like Vanguard and Bogle, but they were an important element in kicking this ball forward. Maybe that's a bad metaphor, I'll have to think about it.

Ben Felix: It works.

Errol Morris: It works. Thank you.

Ben Felix: So there's these trillions of dollars now being managed based on the ideas that come out of this story. What aspects of the story do you think are underappreciated by the end investors who are benefiting from it? The people that represent those trillions of dollars that are now being managed by this approach to investing.

Errol Morris: I think, the efficient market hypothesis is something still underappreciating. And there's a reason for it. As Fama himself would say, and as David Booth would say, all of these are models, let's be honest with ourselves. If they weren't models, they would be reality, and they're not reality. Reality is reality. As I like to reference, Philip K. Dick once said, “Reality is that which doesn't go away or when we stop believing in it.” The desire to really believe that we control everything, it's hard to remove it from our thinking. Maybe it's built into our DNA. It can't be survival of the fittest if you don't believe you're the fittest and are going to survive. That may be true in investment. You may think that, but that doesn't make it true.

People think all kinds of things that aren't true. Years ago, I was interviewing the last living inhabitant of a Utopian community in Ohio, the community of Zoar. This woman on her deathbed, it's, again, one of my very, very favourite quotes. She said, "Think of it, all those religions, they can't all be right, but they could all be wrong." The ideas that were popularized and became part of Dimensional, people are still grappling with the world around them, trying to understand what's out there, what's going on. But this is a very powerful and important idea, and it force us to look at a lot of claims that people were making about investments.

Should I pick this investment advisor over that one? Well, this guy in the past seems to have very good returns. Maybe he'll have good returns in the future. Well, maybe he won't. Maybe those good returns were the result of pure happenstance, good fortune, good luck. I can tell you that my investment in Apple was on the basis of, I was doing commercials for this guy. I like Steve Jobs. What can I tell you? I liked arguing with him. He was fun to argue with. Did I ever convince him about anything? I don't think so. Maybe I did. But it's very hard to convince people, even if there's enormous empirical data backing up the claim that they're wrong, and the data is right.

Another friend of mine wrote a book about fake cancer cures, and he thought by debunking fake cancer cures, am I depriving them of a possible cure? Maybe the belief that the fake cancer cure works will cure cancer? It's possible. I wouldn't rule it out. Maybe optimism about your physical condition, and about various kinds of interventions that you could possibly make could produce a cure. Then he tells himself, "Well, wait a second. Am I destroying the benefits that these fake cancer cures could have?" He said, "I don't think so, because after all is said and done, false hope springs eternal."

Cameron Passmore: How does telling a story like this different from stories like The Thin Blue Line or The Fog of War?

Errol Morris: In The Thin Blue Line, I was really, really lucky. That's another example of luck. I did not come into that story knowing that there was even a story there. I was making a completely different film and stumbled by accident on this case. Did I know that this guy – well, maybe I should give you some kind of detail. I was interested in murders and I was interested in the psychiatrist who is making predictions about future behavior, much like a broker. He was used in Texas, the penalty phase of a capital murder trial to make a prediction about whether the defendant would do it again. Part of their capital punishment law in Texas was, in order to sentence a man to death, you had to make a prediction about their future behavior. This does relate to finance, I'm surprised.

I would say, I don't know if you can predict future behaviour, but you can predict what the psychiatrists are going to say on the stand and Dallas. They're going to say the defendant is going to do it again, and again, and again, unless he's strapped into the electric chair and executed. By the way, those were the last words to the condemned in the Texas death chamber, that's when they still had an electric chair, "Please have a seat." My response was always going to be. "No, thanks. I'd rather stand."

I became involved in a three-year investigation, because this one case, and I became obsessed with it, totally obsessed with it. The guy who was sentenced to death came within three days of being electrocuted. He was innocent, completely innocent, he wasn't there. The chief prosecution witness against him was the real killer. I spent years investigating. In the end, I was able to prove – yes, I was able to prove that the guy I believed was the killer was the killer. The guy who had been falsely convicted was truly innocent. That's the one story I can think of.

Someone asked me recently, "Do you believe the truth is subjective?" I said, "Of course, not. Truth is objective. There is truth out there. There's a world out there in which things happen, or don't happen. There's a world in which stocks go up, or they go down, or they stay muddling around the middle. But there's a world in which things happen. And just thinking one way or another, or believing one way or another, doesn't make it so."

Taking empirical evidence and trying to prove what's true, and what's false, what's real, and what is just phantasmagorical is essential. We may never, never, any of us, be able to ascertain what truth is, and what is true and false, because it's a quest. It's not something that you open a big book like the telephone book and you get your answer. It's something you pursue.

What's so interesting about the story that I told in this movie, is there's a group of really serious guys. Funny, but serious guys trying to pursue truth. None of them thinks they have their hands on it. I love what Fama says to me at the end of this movie. Here's a guy who is trying to come up with a model. Is it two factors, three factors, four factors, more than four factors, ten factors? What are those factors? What do they mean? If you get too many factors, does it mean that it's all ad hoc anyway, and you should start all over again with a different set of premises? But what he's doing is he's wrestling. He's wrestling with the world, trying to come to a deeper and better understanding of what's out there. I have to tell you, a lot of these guys, I just love them and I love talking to them.

David Booth, all of them, I don't even want to single out. Fama is, as you well know, incredibly charming, and incredibly likeable, and incredibly funny. In many ways, arrogant, and at the same time, self-effacing, which makes him so, so ultimately, in the end, compelling. I'm lucky I got to do this movie. Did I learn something? I learned everything. I learned a lot. I knew nothing going into it. I didn't ask you, I'm not supposed to be interviewing you guys. It's your podcast. But what did you learn looking at it? I mean, you know this stuff so well to begin with.

Ben Felix: Yes, it's a tough question. We've spoken with many of the people that are in the film on our podcast.

Errol Morris: I know you have.

Ben Felix: I think that the serendipity, or whatever we want to call it of how all of these people happen to come together. When we started talking to that sort of group of people, the original guys that were there, I learned that talking to them. That's not something that I had appreciated beforehand. So that for me was a big learning experience. What about you, Cameron?

Cameron Passmore: I just love the characters. I knew many of the stories. You're right, these side stories about David Booth, for example. But I'd heard kind of over the years, you pick up these stories like how Fama got into Chicago. There's incredible stories that led to this lucky trail. Now, Fama has told – I think he told us in the podcast, and if not, I've heard him say it before that this evolution was going to happen. We just happen to be the right people the right time with the right technology. So this story was coming.

Errol Morris: That's the self-effacing point.

Cameron Passmore: I think so. But the way these people came together, in hindsight, with all the credentials and Nobel Prizes, in hindsight, it is absolutely mind-blowing. They're just such great caring – because we spent a fair amount of time with many of these people, the level of care and concern for our ultimate clients, the wealth of so many investors, not just Dimension, but Vanguard, and other companies. It is truly remarkable.

Ben Felix: Yes. I think the humility too, like you mentioned with Fama. But with all these guys, the humility is also incredible. Given what they've accomplished, and what they know in their heads. Their humility compared to, for example, an active manager who tells the world or tells their customers that they do know everything, that they can predict the future, it's just such an incredible contrast.

Errol Morris: Yes. Did I know going into this that these characters, this group of people would be so interesting, and so likable, and so compelling? I didn't. That was an extremely welcomed surprise.

Ben Felix: Do you have a ballpark number of how many interviews you've conducted throughout your career?

Errol Morris: No, but I just released the movie through Apple, The Pigeon Tunnel. I had to do 40 or 50 interviews in a row. I believe I started to crack. There's a limit to how many interviews a person can do without going in stark raving mad. But I wanted to write a book, and I started doing it on interviewing on the nature. I didn't include you guys, watch your step. I call it conversations with myself. It's interesting. Interviewing is interesting because it's a kind of human relationship in a bottle. There's so many ways that they can be conducted.

When I was interviewing for my film, David Cornwell, John le Carré, the British spy novel writer, he suggested that there was no difference between interviews and interrogations. Well, I don't think that is true. I don't feel like I'm being interrogated here, by the way. I believe we are having a conversation. To me, the best interviews I've ever done are when I don't really know what I'm going to say. I don't know where the interviewer is going. I don't know if I have an agenda, maybe I don't, or the people I'm talking to have an agenda, maybe they don't.

I remember the best single interview that I ever did was on The Thin Blue Line. I was talking to a reported eyewitness to the crime. She said she was driving back with her husband, and they saw the killing of this Dallas police officer. She was telling me about a police lineup. She told me without me even asking her – I call it the shut-up school of interviewing, say as little as possible. I'm not even obeying my own rules here. I'm talking too much. But shut up and listen. She tells me she failed to pick out the defendant in a police lineup. I say, "I think somewhat innocently, you failed to pick out the defendant in a police lineup. How do you know? How do you know you failed?" She became immediately annoyed with me. She said, "I know." I said, "I know you know, but how do you know?" She said, "I know because the policeman sitting next to me told me I picked out the wrong person and then pointed to the right person so that I would never make that mistake again."

Ben Felix: Oh, man.

Errol Morris: Oh, man is right. If I was interrogating her, would I have ever gotten this information? No, it would never have happened. It happened again, by chance, by shutting it up, by trying to listen carefully, and maybe learning something in the process.

Ben Felix: What makes you evaluate an interview as good?

Errol Morris: Lots of things. I enjoy talking to the people. I'm enjoying this. Thank you very much, both of you. They say interesting things. I mean, I hate to say this. If I'm making a movie, I say, "Oh, I could use that in the movie. That's good. I like that." So, it's the hope of hearing interesting things that make you reflect and think about what you're doing. I'm glad that you're talking about these things. You see, you wouldn't see this in a traditional book on the history of 20th-century finance. I don't think you would feel so acutely. Maybe the element of chance in the markets, but the elements, and the chance in this huge market of people investigating the nature of finance, of how they came together, how they came from different walks of life, different economic backgrounds, different places in the world, and how they came together and created what really is amounted to a revolution. That's the heart of the story.

Not that contrived story that I made for the movie, but that combination of all the stories that these people were telling me about what they had done, who they were, and how they became involved with each other. There was all of these questions. Myron Scholes says he really came up with passive investment. That's a bold claim to make. Everybody said, "Well, should he be making this claim?" But Myron never struck me as an egomaniac or a person who involved himself in just complete hyperbole. I think he may have. Maybe a number of people came up with this idea at the same time, but it's a very powerful and very interesting, and in many ways, a counterintuitive idea, but it changed a lot of stuff.

Cameron Passmore: I have to ask you, if storytelling is an important skill in today's knowledge economy, how can people become better storytellers?

Errol Morris: Oh, no. Read a lot of books. Probably read a lot of comics. I don't really know. I think some people are natural storytellers and others are not. I don't have any algorithm, any theorem that I can give you that will tell you how to become a storyteller. But part of it is that desire to tell stories. I wanted to tell something at the heart of what created Dimensional. There wasn't just a Dimensional story, per se, but a story about how companies like Dimensional came into existence, and how they represented this change in the nature of investing. Hopefully, I've done that, and that was a fun, fun thing to do.

Cameron Passmore: We have one final question for you, Errol. How do you define success in your life?

Errol Morris: Have I been successful? I'm not even sure I have been. I like to think just, by carrying on with it all. I know that there's many times in my life where I thought that I was finished, that I wouldn't be able to go on, but I did keep going. I love filmmaking. I do it for a reason. It's not about money making, although one does need to support oneself. One does need to make money. That's part of the deal. But there's some enjoyment of creating stuff, and trying to do a job, and trying to do it well.

I'm planning to do now more drama. I like documentary. One of the reasons I like it is because each time you do it, you get to reinvent it. You get to do something different. I hope this film gets to be seen more widely. It's, I think, a good film. I think an interesting film, and I think it has some kind of emotional depth to it as well. I think that's perhaps a little bit unexpected in a movie about finance, but I think it's there and I'm proud of it.

Cameron Passmore: It's been a great pleasure and privilege to meet you and get a chance to learn from you. Thank you very much, Errol.

Errol Morris: Thank you. It's a pleasure to meet both of you. It's nice to actually talk to you rather than just watch and listen to you. Thank you so much.

Ben Felix: Thanks, Errol.

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