In this episode, we explore the intricate world of home-country bias in investment decision-making and learn the secret sauce to effective communication and writing. We start by discussing the definition and influence of home-country bias and explore why investors tend to overweight their portfolios with domestic equities despite global opportunities. We dissect the home bias puzzle, the rationality behind bias, and the conditions under which home-country bias makes sense. Then, Mark McGrath joins us to unpack the complexities of segregated funds and why it might not be the investment product you were hoping for. Following that, we sit down with Todd Rogers, a prominent behavioural scientist and professor, to discover the science behind effective communication. He explains how we adapt to different communication styles and techniques over time, the foundations of effective communication, and much more. Be sure to tune in as we unravel the complexities of investing, navigate the world of behavioural science, and bring you the tools you need for financial success!
Key Points From This Episode:
(0:00:00) Episode introduction and what listeners can expect.
(0:01:30) Definition of home-country bias and its influence on investors.
(0:04:25) Unpack the home bias puzzle and Canadian home bias trends.
(0:08:27) Discover the conditions when home bias may make sense.
(0:13:10) Relative economic standing: an important aspect of home-country bias.
(0:15:00) Explore home-country bias through a quantitative lens.
(0:20:28) Common concerns of overweighting a small market cap.
(0:27:21) Mark to Market: the good, bad, and complicated side of segregated funds.
(0:31:24) Dissect the proposed benefits of segregated funds.
(0:39:07) Discover the drawbacks and pitfalls of segregated funds.
(0:44:05) Alternatives to segregated funds and Mark’s main takeaways.
(0:46:50) Highlights from our conversation with Professor Vanessa Bohns.
(0:49:38) Introducing today’s guest Todd Rogers, behavioural scientist and professor.
(0:51:37) Learn about the science behind effective writing and communication.
(0:53:48) The decision-making process when receiving new information.
(0:56:18) Todd shares the six principles of effective writing.
(0:58:28) When to send a message, why less is more, and tips for effectively communicating.
(1:06:32) Advice for using emojis and hyperlinks and the impact of bolding and highlighting.
(1:12:35) The impact of AI on effective writing and the importance of good writing.
(1:19:45) Final takeaways, book recommendations, listener reviews, and more!
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 295. A more traditional type episode this week, Ben. We have you with a deeper dive into an investment topic. Why don't you quickly cue that up?
Ben Felix: Yeah. We're going to talk about home-country bias. The decision of whether to overweight the stocks of your home country relative to their market capitalization weights.
Cameron Passmore: Great topic there. Mark McGrath, our colleague, is back with the segment Mark to Market. And this week he is talking about segregated funds, which is a popular investment among many people in Canada. That's a good topic. Then we'll look back at episode 206 when Professor Vanessa Bohns joined us. And that was about her book You Have More Influence Than You Think.
And then we have a fascinating conversation with another academic, Todd Rogers. Author of the book Writing for Busy Readers: Communicate More Effectively in the Real World. Very interesting take on that topic from a scientific standpoint.
Ben Felix: Mm-hmm. Yeah. That was a good conversation.
Cameron Passmore: Yeah. Anything to add, Ben?
Ben Felix: No. I think that's good. Lots of stuff to cover. It's a good episode. We'll get to it.
***
Ben Felix: All right. Let's do it. We're talking about home-country bias, which is the idea of overweighting the stocks of your home country relative to their market cap weights. We know international diversification is important. That's theoretically and empirically true. But the thing that a lot of people do in a lot of countries is overweight their home country stocks. If you look around at countries around the world and ask do people in that country own stocks in their home country at market cap weights, the answer is pretty much universally no. They overweight them pretty dramatically.
That's often considered a mistake. Whether it is or not, we'll talk more about it. But Canada, for example, we're like 3% roughly of the global market cap. But if you look at how much Canada, Canadians, have in their portfolios, it's closer to 50%. Pretty significant home-country bias that Canadians exhibit.
Now we're going to talk about when home-country bias can make sense. At the extremes, 50%, or 80%, or something like that, that's probably not great. But having some home-country bias I think can make sense. That's what we're going to talk about. We're going to talk about the arguments in favour of some home-country bias. And we're going to talk about how much home-country bias people might want to have.
A lot of that part is going to be from a Canadian perspective. When I talk about this on the internet, I get a lot of questions from American investors. Many of them listen to our podcast and watch my videos. Should they have a home-country bias? I think a lot of the more qualitative arguments that we're going to talk about before we get to the how much should you have, I think they apply to a US investor too.
And I know Fama and French, who are pretty smart dudes, I think Fama advocates for a 100% home-country bias for an American investor. French, I don't know if I've seen it quantified. But I have seen him say that he has a home-country bias for many of the reasons that we're going to talk about. This is split up into kind of two chunks. We have a more qualitative piece and then we have a more quantitative piece. The quantitative part is very Canadian-centric. Well, even that, there's some more universal evidence in there.
Anyway, I do also want to say that home-country bias is one of those things like investing in gold, or Bitcoin, or something that people do get really fired up about it. I actually don't have a really strong opinion on home-country bias. I have some in my own portfolio. Our clients at PWL have a home-country bias to Canadian stocks for the reasons that we're going to talk about. But if someone said I don't want a home-country bias and they understood the reasons that they might want to have one, I would not argue with them about it.
And I think that shows up in some of the evidence that we're going to talk about too where it's like it doesn't make that much of a difference even if we can say that it's optimal on the quantitative side. The qualitative stuff is I think more interesting anyway.
In just basic financial theory, start from there. Under the capital asset pricing model, the market cap-weighted portfolio is the optimal risky portfolio for all investors. Now listeners know we could go way deeper than the CAPM. We can start talking about the ICAPM, which we actually will touch on.
But just start from basic theory. Under CAPM, pricing in an efficient market, everyone should just own the market portfolio. Say you should own market portfolio of all stocks and maybe all bonds as a starting point. From that position, we would suggest that a Canadian should own 3% Canadian stocks in their investment portfolio.
Now because of that, because that's what CAPM pricing suggests or CAPM theory suggests, I guess, fundamental portfolio theory, it's often deemed a puzzle that people in Canada, for example, overweight their home country stocks. Known as the home bias puzzle. This has been documented. I don't know if it was the first paper. But I know Ken French and James Poterba had a paper in the early 90s, I think, on home-country bias. It's been a known thing for a while.
In their paper, they talked about how – I did not review that paper for this episode. I'm going for memory here. But I think in that paper they talked about the returns people had to expect from their home countries had to be unrealistically high to justify the level of observed home-country bias. Home country buys has come down since then. But it is still pretty high. People are investing more internationally now than they were in the early 90s.
A puzzle in financial economics can mean a couple of different things. It can mean that investors are making persistent mistakes for reasons like familiarity, for example, or the one I just said where they expect the returns of their home country stocks to be higher than international stocks, which could be related to familiarity. Financial literacy like all those kinds of mistake explanations. Or it can mean that investors are doing something rational that's just not reflected in the model being used to define the puzzle.
The CAPM, for example, makes lots of assumptions that we know don't reflect the real world. It doesn't typically account for costs and taxes. It ignores how the financial market portfolio interacts with other stuff like the cost of buying groceries in your specific country. And it's silent on how the treatment of foreign investors during times of geopolitical crisis can affect investment outcomes. That's just not in the CAPM or in any asset pricing model really.
Now, in Canada, on costs, the fees on a Canadian equity ETF tend to be quite a bit lower than the fees to own international developed – not so much US Stocks. You can get a US equity ETF for about the same as a Canadian ETF in Canada. But international tend to be quite a lot more expensive in emerging markets even more so.
But then another big one on cost of ownership is that, in Canada, if you're an investor receiving dividends from a Canadian corporation, you actually get credit for the taxes that the corporation has paid. We have this whole complicated dividend tax credit gross-up and credit system. But it's all designed to give investors in Canada credit for tax that corporations have paid when they receive a dividend from that corporation.
Now, on the other hand, if you're a Canadian or someone investing resident in Canada and you're receiving a dividend from a foreign corporation, you don't get any credit for the taxes that corporation has paid. That not getting credit for foreign company taxes paid, increases the relative tax cost of owning foreign stocks for Canadian investors.
All else equal. If we just assume same expected returns for foreign or domestic stocks, for example, the favourable costs and taxes make it more attractive to own Canadian stocks for a Canadian. Maybe not enough to explain the 50% weight to Canadian stocks that we see from Canadian investors. But that's why we're going to talk about some more of the reasons that a home bias might make sense.
I mentioned the ICAPM earlier. We have the CAPM, kind of the first asset pricing model. And then we have the ICAPM, the intertemporal capital asset pricing model that Robert Merton introduced. You can hear him talk about that in his episode if you want. But the ICAPM talks about how investors don't only care about how their portfolio behaves in a vacuum. They care about how it behaves relative to other stuff that matters to them like buying poutine. I like to buy poutine occasionally. I haven't had a poutine in a while actually. But anyway. Don't want to get too off-topic here.
But in all seriousness though, with something that is uniquely Canadian, yeah, I guess that's a good way to explain it. Could be poutine. Could be maple syrup. Could be – I don't know what else. What else is very Canadian?
Cameron Passmore: Beavertails. I don't know.
Ben Felix: Okay. Sure Beaver. Tails. To the extent that Canadian companies are producing cash flows that provide better protection against changes in the prices of local goods that people in Canada care about that they want to be able to purchase, some home-country bias could make sense. That's an ICAPM point on home-country bias.
Now to the extent that is true. I think some of the evidence we'll talk about later does suggest that there is a bit of a relationship there. I'll talk about that when we get there. Now a less often discussed problem. And this is one that I say less often discussed because I honestly hadn't really heard about it discussed in any serious way until we had Professor Eugene Fama on Rational Reminder. And he talked about this. The treatment of foreign investors in times of crisis can be not so great. And that can affect investment outcomes for someone who is internationally diversified.
International diversification looks great when things are going well and global capital markets are free and open, which they largely are today. But major world events like Wars can cause markets to really close up and it can cause foreign investors to get treated quite poorly. And this is something that has happened before and has happened recently as well.
But if we look back, Will Goetzmann, who's another past guest, has a great paper on the history of financial markets and how they used to be very open in the early 1900s. Lots of countries had active financial markets. And European investors were being encouraged in popular books to diversify their portfolios internationally. Kind of funny to think about, I guess. But people were saying the same kind of stuff then that they're saying now. And people were writing investment books then as well.
But French British and German investors, they did export huge amounts of capital in the early 1900s in search of returns and diversification through international cross-border investments. But then starting with World War I, global financial markets started to contract. And between market closures, foreign exchange restrictions and, at the extreme, nationalizations, foreign investors experienced a lack of access to their investments and the potential for either meaningful or total losses on their international investments.
Now I mentioned that is not only an artifact of very long-ago history. It's happened recently. Argentina instituted restrictions on the flow of capital in 2019. And Russia put restrictions in place in 2022 that affected the ability of investors in deemed unfriendly countries to transact in the shares of Russian companies. Of course, you wouldn't have those problems. And you would not tend to have those problems in domestic stocks.
Investors in Russia also had issues apparently. I did not know this one. But someone in my YouTube comments said that they're not living in Russia but they're Russian. And they had had a similar experience. And I did double-check to make sure that these sanctions were actually real. It wasn't just a person saying random stuff on YouTube. But they said that their experience was that the EU sanctioned the Russian National Settlement Depository, the NSD, which blocked the relationship between the NSD, and Euroclear and Eurostream. People in Russia can't transact in foreign securities while those sanctions are in place. Went both ways on that one, I guess. That's an interesting one. And I have a clip of Fama from when he was on that we can maybe play.
Eugene Fama: And the problem is nobody cares about investors. Investors get expropriated. Each side always expropriates the other side's investors. But they don't fix it after the war. It stays expropriated even if you win. That's the risk of international investing. And it's not gone.
Ben Felix: One other point that I think is worth considering is that people care a lot about their relative economic standing. There's a lots of evidence on this. Given the fact that a lot of Canadians do have a home-country bias, we know that empirically. if you're the one person that doesn't have a home-country bias and Canadian stocks are doing really well over a period of time, that could be a psychological challenge. It was not that long ago before my time. A little bit in this industry at least. But it was not that long ago that Canadian investors had to be convinced to invest outside of Canada because Canadian stocks had done so well over a reasonably long period of time. And the Canadian dollar had been appreciating, which made the returns of foreign stocks look that much worse.
Cameron Passmore: That's funny. I remember in the late 90s when all the tech boom was going on and the US stocks are doing so well. And if I'm remembering correctly, the Canadian dollar fell. That was like another boost to the returns of foreign investments. it was like a wild time.
I remember working very hard. Because back then in RSPs, you had a cap of I think 16% then it went up to 18% of your RSP. And then 20% could be in foreign content. And then we learned that if you put a little bit of money into a labor-sponsored investment fund, you could double that. I remember aggressively doing this to all the RSPs to get so much foreign content during that time.
But you're right, Ben. Through the years, you go through periods where US outperformed Canada, Canada outperformed, Can dollar was strong. Can dollar was weak. So you get this whipsaw effect where you get this recency bias going on. Yeah, very interesting to see these shifts through the years. But the returns in the 90s was nuts when you look at in Canadian dollars. It's just unbelievable.
Ben Felix: Yeah. In my video on this, I put a chart in there of Canadian stocks over that period relative to world stocks. It was crazy. Canada was just incredible for a period of time.
Okay. Those were all fairly qualitative points, I think. They are important to consider. And then they have potentially, some of them, quantitive consequences. But I think it's also kind of interesting although arguably less meaningful, but still really interesting to look at just a purely quantitative perspective. What does the data say on home-country bias? This evidence is weak like. This is not conclusive evidence. But it is interesting. And there are multiple observations that we'll talk about.
The recent paper that Scott Cederberg co-authored on life cycle investing, they did find in a large sample of developed markets from 1890 to 2019 that a 35% allocation to domestic country stocks was optimal in their sample. They found that the all-stock portfolio was pretty good over the life cycle in the main specification of their paper. And within that, being 35% in domestic stocks was optimal. Not by a ton. They looked at domestic allocation from 5% up to 100%. And they were measuring the utility of retirement consumption and the utility of bequest.
And the way that they compared the different asset allocations is by asking from a baseline level how much more or less would you have to save to achieve the same utility if your asset allocation was different. Using that comparison, they found that 35% was optimal. But, again, not by a ton.
Although being 100% domestic was real bad. That did see significant deterioration. But between, for example, 5% and 35% domestic, not a big deal. But in any case, they do find that some home-country bias seemed to be useful. But keeping in mind that they're relatively small differences, I would say that there's a level of reasonableness and preference. And keeping in mind that my opinion on home bias is not super strong anyway. Someone said that they didn't want it or wanted to be 2% of their home country relative to a .5% weight or no home-country bias. It doesn't bother me. But anyway, that paper does suggest some home-country bias doesn't make sense.
And the observed reason – again, this is purely empirical. But the observed reason for that finding was that when a market does well over the long run, it's common for it to have currency appreciation relative to foreign currencies and stock market appreciation at the same time. When your local currency appreciates relative to foreign currencies like you said earlier with the Canada example, Cameron, your local returns on foreign stocks are going to be lower. And if domestic stocks do well during those periods, it's going to help make up for the weaker return on foreign stocks.
Their empirical observation in their sample, in Scott Cederberg's sample, was that domestic stock returns are better than international stock returns in periods where your domestic currency appreciates over the long run. How much that predicts the future? I don't know. But that's our observation.
And also, that 35% domestic allocation does not account for the more favourable costs and taxes when you're investing domestically. If they had that in their model, that would presumably increase somewhat the domestic allocation. And then on the quantitative side, there are two more weaker, weaker than that empirical observations. But I'll still talk about them.
Vanguard had a paper a while ago where they looked at minimum variance analysis for Canadian investors. They incrementally added Canadian stocks to a global equity portfolio and found the point of least returned variance over the period 1999 through 2023. And they found a 30% allocation to Canadian stocks was optimal for variance minimization. And they do have asset allocation ETFs with a 30% weight to Canadian stocks.
When I was preparing this video, I've got the Dimson, Marsh, Staunton data set. And so, whenever I have something like this that I want to check out, if I can, I'll try and run it in those data. I took the Canadian dollar real returns for global portfolios with various allocations to Canadian stocks. And this is for 1900 through 2022. I'm again incrementally adding Canadian stocks to the portfolio. And I was looking at, in this case, risk-adjusted returns. And I found somewhere between 30% and 40% was kind of the highest Sharpe ratio of those portfolios.
Again, kind of interesting. But also, it's data, but it's pretty anecdotal. But still interesting. And it matches up with the Cederberg finding and with the Vanguard findings. I don't know. All kind of points generally in the same direction. Caution is definitely warranted though with findings like Vanguard's, and mine, and Scott's Because they're purely empirical, they're specific to the time periods that we're looking at. Although the bootstrap approach that Scott uses, Scott and his co-authors use, is trying to deal with that a little bit. But at the end of the day, they're all purely empirical observations.
In my analysis, I didn't do this. But if I had used a country other than Canada, like Italy, for example, which has had pretty bad equity returns, it probably would have been a much lower allocation. That would have made sense. I'm guessing. But Canada is one of the best-performing country markets going back to 1900. One of the better ones at least.
Okay. Given all that though, we talked about the qualitative piece, we talked about the weak but interesting quantitative piece. Taken all together – we talked about the ICAPM piece. Take it all together, I think there are pretty good theoretical on the ICAPM side. Practical on the tax and cost side. And empirical that we just talked about arguments for having some level of home-country bias in equity portfolios.
One common concern with that when you're overweighting a small market like Canada, small by market cap, is that it may have low realized returns. I understand that concern completely. But, empirically, there's a couple of papers on this, the stock returns of smaller countries where size is measured market cap of the country tend to be quite a bit higher than larger countries on average. You could still have an outlier that does poorly. But on average, smaller markets tend to do better. That's from a 2017 paper in the Journal of Portfolio Management. Should you tilt your equity portfolio to smaller countries?
But there was another one in the journal of investing I think. The small country effect revisited. Similar stuff. I mean similar data. A materially different paper. But people have looked at this and small countries tend to do pretty well. Just worth keeping in mind when you're concerned about what this small country might do poorly in the long run, which could still happen. Which is why we don't go 100% domestic. But I also don't think it's a reason to completely eliminate home-country bias given all the other stuff that we've talked about.
Another common one, and this is coming out for Canada right now, is that – insert country, Canada in this case, has really poor economic prospects. There's an article in The Globe and Mail that kind of skewed Canada for its economic situation and related that back to its stock returns. But I think we always have to remember that that relationship between economic growth in a country and realized stock returns is much weaker than people imagine it to be. Somewhere between unrelated and negatively-related depending on how statistically significant we want to be with making that statement.
The reason being that expected economic growth is reflected in current stock prices. Rather than stock returns being tied to economic growth, they're tied to how actual economic growth compares to expected economic growth, which is a super noisy arguably even a random relationship.
One other point on this, on country-specific risk I guess, is that the economy is pretty global. A lot of companies and a lot of stock markets around the world derive a lot of their revenue. And it varies from country to country. But they derive a lot of their revenue from foreign countries. Like you've got multinational businesses and countries all over the world that are deriving large portions of the revenue from markets outside of their home country. No country is really an economic island.
Although in my YouTube video on this, I said no country is an island. And then people from countries that are literal Islands said, "Well, actually –" no country is an economic island.
Cameron Passmore: That's pretty funny.
Ben Felix: Yeah. I know. That's funny.
Cameron Passmore: You can't get away with anything, can you?
Ben Felix: No. No. Everything's scrutinized. Foreign revenues don't explain all of local stock returns, which is one of the reasons that we still diversify globally despite the existence of multinationals. I talked about that in my video on international diversification. But foreign revenues do explain a meaningful portion of domestic market return.
A country's stock market is affected by more than its domestic economy. Now economic prospects aside, investors in some countries, including Canada, may be concerned that there are just too few companies for their market to deliver a reliably positive risk premium.
I thought that was interesting to think about. I went and looked at the MSCI-developed market indexes going back to 1970. And I looked at the number of holdings in the indexes, which would have varied over time. To be clear, I looked at the current number of holdings in the indexes and just assumed that that was somewhat consistent over time. And compared that or just charted that against historical returns. There's no relationship at all.
And Denmark, which is the best-performing developed market from 1970 to now, has 16 holdings in its index. And that's not its investable market index. The investment market would have more. If you include small caps, that's just it's large and midcap index. But still, 16 holdings, best-performing market.
And if you look at the chart that I did on this, which was in my video, there's just no observable relationship. And Canada has more than 16 companies in our main index. Home-country bias, which is overweighting your home country's stocks relative to their market capitalization weights, is detrimental at the extremes. I think that should just be common sense obvious.
But some modest home-country bias I think we can say is theoretically, practically and empirically justified or useful. It can reduce fees in taxes. It may hedge the cost of local consumption. And it reduces exposure to the potential mistreatment of foreign investors through times of geopolitical turbulence, which we have lived through very recently. And it may also help psychologically due to the role of social comparison in determining individual happiness.
And then if we look to the week but fun empirical stuff for Canada, or for a developed market I guess, if you look at the Cederberg paper. For Canada, if you look at the Vanguard and my analysis with the DMS data, something like 30%, 35% in domestic stocks, Canadian domestic stocks. Well, I keep saying Canada. But the Cederberg paper is not about Canada. It's about a representative developed market. That 35% number comes up in all three of those analyses. But even lower domestic allocations, like 5%, for example, which still represent a home bias for investors outside the US have been better empirically, again, based on the Cederberg paper, than no home bias at all.
Cameron Passmore: I think this is a very reasonable and recent take on it. I agree with you.
Ben Felix: Always got to be careful. We're coming from the position of doing this for clients and having that in my personal portfolio because I think it makes sense. But I am talking about it from that position. So, maybe I'm biased. But, again, I wouldn't feel too strongly about someone saying they don't want a home-country bias to Canada. I would maybe say that's not going to be as tax-efficient. But no problem.
Cameron Passmore: All right. That was awesome. Are you ready to go over to our conversation with our buddy, Mark?
Ben Felix: Let's go.
All right. Let's kick off our Mark to Market segment. Mark, welcome back to the podcast.
Mark McGrath: Thank you. Always a pleasure to be here.
Ben Felix: What do we got? What are we covering today?
Cameron Passmore: You're so formal. It's so funny.
Mark McGrath: That's right. Serious business here.
Ben Felix: Podcast, Cameron. It is serious.
Cameron Passmore: It's very serious. Yes.
Mark McGrath: I was going to talk about Bitcoin. I pitched that to Ben. And Ben's in the middle of reading some books that I had recommended to him on the topic. And I think so far his reviews are not that good.
Ben Felix: My intermediate review. Yeah. I've got to finish the book. You've got to read some books I sent you too though.
Mark McGrath: I do. I do. I've got a long reading list ahead of me. But I think it would just be fun. Because I'm sure you would just eviscerate me and my views on the topic anyway. And I think it'd be fun for the listeners to watch that smackdown happen in real time.
Ben Felix: I don't know if that's completely true. You can't argue against a $63,000, whatever it is, Bitcoin price. What's the counterargument to that? That's kind of a joke.
Mark McGrath: Yeah. Kind of. But, yeah. Not going to make it. Have fun staying poor. I don't know. All that good stuff. No. I'm not going to talk about Bitcoin today. We'll hold off for potentially a future episode. But I am going to talk about something called segregated funds or seg funds as they're known.
These are interesting products, I would say. There's a lot of nuance to them. They're actually somewhat deceptively complicated. On the surface, they seem kind of simple. But as you kind of dig into them, they're quite complex. I thought I'd go through kind of what they are. What the purported benefits are. Some of the drawbacks. And then some of the issues I see with seg funds. Good and bad. But some of the issues with the way I think that they're sold and some of the purported benefits. And why they may not be as strong as some proponents would lead us to believe.
With that, segregated funds are sometimes called GIFs, guaranteed income funds. That term is mostly interchangeable from what I can tell. But we'll call them seg funds for the segment. And basically, what they are is just they're a mutual fund with a wrapper. An insurance wrapper around them.
And so, the way I think about them is this was kind of the insurance industry's solution to, “How do we sell investment products?” And so, they've created this sort of hybrid product that acts in a lot of ways like an investment. You participate in the growth or lack of growth of the underlying investment. You can get seg funds that have – or Canadian equity, or Canadian dividend funds, or Global equity funds, or fixed income, or whatever you want. And they have this insurance component to it.
And the insurance component has a couple of different pieces. And so, there's what we call maturity guarantees and death benefit guarantees. I'll get into those a little bit more. But these are the actual insurance component to the segregated fund. Where after a certain period of time, if the value of that fund is lower than X after, say, 10 years, you actually get the higher of whatever the market value is or whatever the guaranteed amount was. Again, I'll get into that in a little bit more detail shortly.
They're usually actively managed. They're professionally managed. But they're usually done in a way that is like tactical management. Getting in and out of different markets or a lot of stock picking and selecting securities within the underlying fund. I couldn't really find any like index fund variations.
There are ETFs that are kind of marketed as the solution to this boom in ETFs that we're seeing. But when I looked underneath the surface, these are actually just actively managed ETFs with the insurance wrapper. From what I can tell, there's not really a big market for index fund seg funds. At least not yet. And granted there's thousands of these things out there. They're sold by insurance companies. And I didn't go through every single one. But in my preliminary search for it, I couldn't find any real index fund solutions for it.
As I mentioned, they provide these maturity guarantees. And that means you can also name a beneficiary. That's kind of the other side of this insurance piece is you can name a beneficiary and the funds on your death, the value of that seg fund would pass directly to a beneficiary outside of your estate. We'll talk about that a little bit.
And as of 2021, there was $130 billion in segregated funds in Canada. And I couldn't find an updated figure. That's 2021 figures. But as of 2023, there was just over $2 trillion in mutual funds and ETFs. And so, the seg fund market, if you assume a couple of percent growth on the seg fund market over the past couple years, it's probably between like 7% to 10% of the Canadian investment universe right now, which is I don't know if that's higher or lower than I thought it would be. I think I could probably make the argument that it's too high based on the applications of these things. but it's a pretty big market and it does seem to be growing.
The proposed benefits are – I would say there are three. There are maturity guarantees. There's the probate planning. And then there's potentially creditor protection, which I think is potentially a weak argument. But let's start with the guarantees. With seg funds, there's two guarantees. There's a maturity guarantee. And that's based on a timeline for you holding the fund. It's usually 10 years. But it can go up to 15 years it looks like. And then there's a death benefit guarantee. And each of these guarantees is offered as a percentage of the principal value of your investment.
More commonly, it's 75%. And sometimes there's more expensive versions that will be 75% for the maturity guarantee and 100% for the death benefit guarantee. And so, what this means is if you put $10,000 into a seg fund, after 10 years, if the market value of that seg fund has dropped by more than 25%, then at that 10-year maturity date you'll get the higher of the market value or that reset value. If it's 50% lower after 10 years, you'll actually get it bumped up to whatever that maturity guarantee was, say 75%. Okay?
The death benefit operates in a very similar way, where if you pass away, that 75%, or in some cases 100%, it gets bumped up to that value. Interestingly though, after age 80, these things usually go to only a 75% guarantee. Or like you can imagine a situation where an 89-year-old potentially has a very, very short lifespan and they've got a million-dollar portfolio and they just throw it into the seg funds. They're not going to get 100% guarantee. They're going to get a 75% guarantee. That guarantee is in my opinion largely useless.
There are very few periods historically I think where, after 10 years of a reasonably well diversified portfolio, you would be down by more than 25% on your investment. And in fact, and I said this on Twitter a while back, I think one of the reasons that the guarantee is important is because the fees on these things are so high that the probability of you losing money in a seg fund is actually much higher than the alternative only as a result of the fees that these things charge. We'll get into the fees in a minute because they're egregious.
Cameron Passmore: But you can't get into focus funds anymore, right? Because I know back in the day, I had one client that owned a NASDAQ 100 fund that actually went down by three quarters. And we waited out the insurance company for a decade. I locked in March 23rd, 2000 at something like 30 cents on the dollar. And we just waited the decade and it never came anywhere close to what they ended up recovering, which was 100 cents on the dollar. But it was a focus fund. I think the rules changed after that to you have to be more diversified in these portfolios.
Mark McGrath: I don't know if I'd call them sector funds or anything like that. But there's a lot of options, right? Again, there's Canadian dividend funds only. There's us equity funds. There's balance funds. Fixed income funds. Global equity. There's a lot of options out there for sure. The marketplace is pretty wide in that respect. I didn't see anything that specifically track one index. Maybe those are harder to come by these days.
But, Cameron, to your point, that's actually in practice one of the few potential times where I think one of these might have made sense. But you won't know that going into it, right? I mean, if we could all predict the next tech crash I think we'd all be doing pretty well at the end of the day.
Sure. There would be maybe periods historically where these things would have played out. But the opportunity cost by paying these additional fees in anticipation of something like that I think is too expensive. And because that reset is 10 years long now or potentially 15 years, again, there's just going to be so few periods where that's going to be a problem. And if the guarantee is only 75%, it's not that you have to break even after the 10 years, you still have to be down by 25%. And I just think that's very rare. Those guarantees I think are largely good marketing gimmicks but in practice are not really going to be a real benefit except for in very fringe edge cases.
Now one thing that I think is actually a reasonable benefit is the bypassing of probate. There's I guess two components to that. One is, in some provinces, we have probate fees. In Ontario, I think it's pretty much more or less 1.5%. In B.C., where I am, call it 1.4%. In some provinces, it's a flat fee. Like Alberta, it's super cheap. It's a flat fee. In many provinces, this is not actually going to be a benefit. But you can bypass the probate process. Meaning you bypass the probate fees on the value of that seg fund when you pass away. But I think more importantly, you bypass the entire probate process.
Probate, for all of us advisers out there, we've been through a client passing away or a family member. If you've ever been through that process, it's awful. It's a nightmare. It takes a long time. It can be expensive if you have executives that are charging fees. Because they're allowed to charge fees. Lawyers are getting involved. They're charging fees. Bypassing that whole process, I think is a reasonable benefit.
The problem is again the fees that you pay for that benefit are very high compared to the alternatives. Unless you know that death is imminent, you're likely going to be paying too much for that potential benefit.
Ben Felix: It can also be pretty messy to bypass probate, right? That can lead to all sorts of other unintended consequences. Probate, I've heard some estate plan lawyers say that paying the probate fee is actually not so bad relative to the benefits of probate. Making sure the estate is settled properly and fairly.
Mark McGrath: Yeah. Because you can end up with unequal distributions in the estate, right? If you have some assets that haven't named beneficiary like life insurance, RSPs, TFSAs and, say, seg funds, some assets that don't, say, your home, or a rental property, or non-registered portfolio, you now have to balance the direct payment of the funds that have beneficiaries attached with what the will is going to do to distribute. You can accidentally or inadvertently end up with unequal distributions. And that may not be ideal.
To your point, Ben, I think there's many cases where we recommend the estate just take over as the beneficiary. Everything goes into the estate. The will determines where the money goes. The taxes get paid. And it's very clear. It's very simple.
Interestingly, probate or estates rather are public information now. You can go and look up the record of somebody's estate. With the seg fund, because it bypasses probate, there's an element of privacy to it.
Now, again, I would argue that privacy is likely only a real feature for those who have relatively large estates. And family dynamics come into this obviously. But if you have a relatively small estate, that privacy probably isn't worth much. It's probably for something like a big estate. And if you have a big estate, I think there are better estate planning alternatives. Like using things like Alter Ego Trusts and joint partner trusts, which maybe we can talk about on a different episode.
But with large estates, there's better, in my opinion, estate planning that can be done if privacy is the goal or if the expediency of probating estate planning is the goal. Again, you're going to pay a lot of fees for those. Now the third potential benefit is creditor protection. Because it's an insurance contract, at the end of the day, these are protected from creditors.
I don't know. Maybe for business owners who don't have a corporation who run a sole proprietorship who needs some level of liability protection, maybe there's an argument there. I'm kind of reaching. But I don't know that the creditor protection is something that is worth paying all of these extra fees for when you could have just good liability insurance or a corporation that can protect you from liability.
Again, these are kind of fringe benefits that I think are used to sell the products. But at the end of the day – look, and it's case-by-case. I'm not saying there are never times where something like this would make sense. I'm just struggling to come up with like an ideal scenario where it's just obvious that this is the solution to that problem.
There's two other ones actually I missed. One is simpler tax reporting, which, okay, sure. They take care of the adjusted cost basis for you. You don't have to calculate that yourself. Not really a big deal I think for most people. But at the end of the day, that is true. And then the other one is you can reset these features. So, you can lock in your gains.
Let's say you've got $100,000 in a seg fund. It goes up to 150,000 after 3 years. You can lock in that gain. But then it also resets that maturity deadline. It pushes the maturity deadline out to another 10 years. In my mind, this is no different than just buying a brand new seg fund at $150,000. It's no different than selling your portfolio and just buying a new one. If it didn't reset the maturity guarantee, I could see these locking-in of gains being great. But that's not the case. Again, kind of a fringe benefit there. Okay. Those are the benefits.
Some of the drawbacks. One, these are Insurance products. They can only be sold by insurance-licensed advisers. That in itself is not bad. But what I've seen in practice, and you guys have probably seen as well, is because this was really I think the answer to the insurance industry trying to find a way to sell investment products, you end up with a lot of insurance-only advisers who can only use segregated funds for clients.
I know for example an adviser I used to work with 10, 12 years ago that had hundreds of millions of dollars of seg funds in his client portfolio because he was only insurance licensed. And I think it's very hard to make the argument that, statistically, I just happened to have all of these people who needed segregated funds as clients. I think it's one of those when you're hammer – everything's a nail-type situation. They can't sell anything else. So, they end up selling seg funds, which it is what it is. But I think they're oversold for that reason.
Probably the biggest problem is the fees. The average segregated fund fee in Canada for a 75% guarantee is 2.92% I'll use A-class fund comparisons. For those who don't own A-class is basically there's a trailer fee inside it. But to make an apples-to-apples comparison, if you were to just buy this off the street essentially, the average fee is 2.92%. For 100% guarantee, the average is 3.27%. This comes from Morning Star from an article I think about a couple years ago where they looked at this. But if you compare that to the average balanced mutual fund in Canada, the fee is 2.3%, which is still ridiculously high. But at the end of the day, these things are half a percent to a percent more expensive.
And the reason is because they have to add an insurance fee to the management expense ratio, right? To the annual fee you pay, there's actually an additional fee called the insurance fee. And that usually ranges from between 0.25% to 0.5%. You're automatically going to be paying more for the equivalent seg fund than you would a mutual fund.
But on top of that, they have to pay taxes within the fund on that additional insurance fee. Because the base fee is higher and taxes are applied to it, that pushes it up another couple points. They're very, very expensive. And I mean if you look at A-class index funds, you can get those for 1.2% to say 1.5%. Often, you're paying between two and say two and a half times more for some of these benefits that I mentioned.
If you compound that over long periods of time, the effect is substantial to say the least, right? You have to think, are these potential benefits of seg funds really worth this significant increase cost?
Ben Felix: Yeah. The cost compounds. And some of the benefits, like the guarantees like you mentioned earlier, they diminish in terms of any benefit. Because over 10 years, you're very unlikely to lose in any equity fund even if it has a 3% fee.
Mark McGrath: Yeah. Exactly. And even then, if you're paying the extra 1% per year for that benefit, even if it's lower at the end of the day, you still have to overcome the fee as well. The fee itself impacts why that guarantee I think is actually reasonable. Because the fees are so high that it improves the probability that you're actually going to lose money on this thing over the long run.
There's a lot of complexity behind some of the other benefits or features of these things. There's income for life type variations where, at a certain point, you can convert it basically into an annuity, which is cool. I think annuities are great. I think they're underused, to be honest.
But I went and took a look at one series of these come seg funds versus comparable annuity quotes today. And the seg fund version comes in around half a percent lower per year in terms of the return. You would get using a seg fund versus actually just going and buying an annuity for like a 65-year-old male, for example. Still, it's expensive. It's an expensive way I think to annuitize your income when other options are available.
One of the other issues that I found was the I guess insurance or protection of your investment. And what I mean by that is if the insurance company that you've bought in the seg fund through fails in any way, the insurance is provided by a company called Assuris in Canada. They protect insurance contracts. And with investments, we have something called the Canadian Investor Protection Fund, which protects you up to a million dollars in certain cases. Not against market losses. But against the insolvency of the fund.
But Assuris, the guarantees on seg funds are significantly lower than what you would get from the Canadian Investor Protection Fund. Assuris only guarantees you up to $100,000 per seg fund or 90 % of the guarantee value, whichever is higher. What that means, is if you have say a $150,000 seg fund with a 75% guarantee, that 75% works out to $112,000. And Assuris is only going to protect you for 90% of that. It's not 90% of the value but 90% of the guaranteed amount. Which means, on $150,000 seg fund, you're actually only protected in that case for about $101,000 in the insolvency of the insurance company, which granted is very unlikely. But those protections are lower from what I can find than something like the CIPF, the Canadian Investor Protection Fund. There's some risk there.
I think there's alternatives that are more appropriate in the case where you have a large estate. I mentioned things like alter ego trusts, joint partner trusts. These are estate planning tools. There's some complexity there. No doubt. But I think on a large enough estate, the cost of implementing that is significantly lower than the additional fee that you would pay for a segregated fund.
I was trying to come up with scenarios where this is just a no-brainer. And at first, I was like, "Well, if you're terminally ill with a couple of years to live and you have a million dollars in cash in the bank, sure, you could use this and it would bypass probate." But in that situation, you could also just gift the money, right? You just give the money to the beneficiaries now if you know you're terminally ill and death is imminent.
I did struggle. And I'm sure there's going to be people out there who use these more frequently than I do obviously who have good scenarios where this makes sense. But my takeaway was they're expensive. Very few people need them. And just be wary if somebody's selling them to you. Because there's potentially a motive there, especially if they're only insurance-licensed.
Ben Felix: Will the people who have better use cases than you, will they be only insurance-licensed?
Mark McGrath: I think we both know the answer to that. When I talked about this on Twitter – inevitably, anything I talk about on Twitter, I get people on both sides of the argument and it becomes very clear. This happened to me just a couple weeks ago. And this person was touting the benefits. And so, I looked them up. And, of course, they're an insurance-only adviser. And that's fine. I get that. Again, there's nothing wrong with that. But there's a lot of confirmation bias I think that goes into the way that these things are sold. And a more objective view where you have alternative options that you could offer to your clients. And if a seg fund is the right answer, sure, that's great. But I think in most cases, it's not.
Ben Felix: That was great.
Cameron Passmore: I like your assessments. Great
Ben Felix: Yep. Great points.
Mark McGrath: Fun stuff. Cool. That's all I got for you today. See you next time. Hopefully, Ben and I can fight it out over Bitcoin one of these days.
Ben Felix: I don't know if it'll be two weeks. Probably need more time to finish.
Mark McGrath: Yeah. I'm not like super pro-Bitcoin or anything. But I read a couple of books and it did answer some of the concerns that I had about it. I'm a little bit more I think open to the viewpoint of some of the Bitcoin maximalist –
Cameron Passmore: You guys can debate and I'll moderate. How's that?
Mark McGrath: That sounds good. I'll still get absolutely licked by Ben, I'm sure. But it'll be fun for everybody.
Ben Felix: I mean, I don't know if that's true. The thing about a lot of the arguments, like in the book that I'm reading, a lot of the arguments are deeply ideological. And the book recognizes that to an extent but it also takes a very clear position from the beginning and builds the case toward Bitcoin from the very beginning. It's kind of funny to read when you know where it's going to go. It's funny to read how they build up that conclusion. Anyway. It's a tough thing to debate. Because debating ideology is kind of hard.
Mark McGrath: Fair enough. I'll think about it next time.
Cameron Passmore: Cool. All right.
Mark McGrath: Great. Okay, guys. Thanks.
Cameron Passmore: Thanks, Mark. See you. Okay. Great to be back in the groove with Mark. I thought that was a great segment. Let's look back on a past episode quickly. And we've had many impressive academics and professors join us from the world of psychology. And episode 206 with Professor Vanessa Bohns is no exception. I thought she was fantastic.
She's a social psychologist and professor of organizational behaviour at Cornell. And wrote the book You Have More Influence than You Think. This is very important to realize that most people see how others influence us. However, we also think that they have little influence on others, which is just not true. Our actions and words impact those around us and often in really subtle ways.
I remember this question you gave back to Vanessa, Ben. As an introvert, you talked about in the interview, it can be terrifying to think that we have as much influence as we do and that we're being observed this much. However, she explained back to you and I, because we're both introverts, she explained back to us that it's not necessarily what we say in a group setting. People simply observe how we behave, and how we treat and what we treat as important. And people take cues from that. And as she said, people often notice what we take for granted.
Another fascinating point that she made was how just being around other people when we experience things can actually amplify the experience. For example, people report liking art in a gallery much more when people around them are enjoying it. And then the amplification continues if they talk about it. There's that power of the verbal cues that come with it.
If you put these two points together, which I think is so fascinating, in the context of money, you may notice people around you and how they act around money and people that you observe behaving well will have an impact on you. But then if they tell you something, that really amplifies the impact on you. And this is something you should be keenly aware of when you're making decisions. Because it can lead to, as Vanessa said, turning off your critical thinking. Such a fascinating idea.
After that, we also dove into how scammers benefit from this kind of influence. How to say no and how to ask for what you want. That's a very quick recap of episode 206 with Vanessa Bohns and the book You Have More Influence Than You Think.
Ben Felix: I talked to my kids about this. People notice your behavior and they notice the stuff that you take for granted. But the other side of that is that they don't tend to notice that stuff that you worried about them noticing. People are worried about how they look or what they're wearing and all that kind of stuff. People don't notice that stuff. But they do notice how you behave and whatever. I talk to my kids about that when they're worried about whatever the shirt they're wearing when they're going to school. People won't notice. They just don't notice that stuff.
Cameron Passmore: Nobody cares. Okay. Let's jump now to our special guest, Todd Rogers. He's a behavioural scientist and professor of public policy at the Harvard Kennedy School of Government. He's a behavioural scientist who works to increase student attendance, strengthen democracy and improve communication. He's also co-founded two social enterprises. First one is the Analyst Institute, which focuses on improving communications. And also, Everyday Labs. Again, to help reduce student absenteeism.
At Harvard, Todd is the Faculty Director of the Behavioral Insights Group and Faculty Chair of the Executive Education Program, Behavioral Insights and Public Policy. Got his PhD from Harvard's Department of Psychology and Harvard Business School. And received a BA from Williams College majoring in both religion and psychology.
He co-wrote the book Writing for Busy Readers: Communicate More Effectively in the Real World with Jessica Lasky-Fink, who is the Research Director at the People Lab at Harvard. Hal Hershfield, once again, made this great introduction to Todd. And I thought this was absolutely fascinating to put science behind how we communicate.
And off mic, you were saying something earlier, Ben, about how – which I think is so interesting, how people adapt to different communication styles. This is really an adaptive system that evolves over time. We did talk about that with Todd.
Ben Felix: Oh, yeah. This conversation is great. But that part definitely stood out for me that, like you said, people adapt to communication styles. And something that would get your attention previously will eventually stop getting your attention as you adapt to it. And so, we always have to be finding new ways to get people's attention with our communication.
Cameron Passmore: Okay. Let's go to our conversation with Todd Rogers. Todd Rogers, welcome to the Rational Reminder podcast.
Todd Rogers: Thank you for having me. Happy to be here.
Cameron Passmore: It's great to have you. And it's very nice of our good friend, Hal, to make the introduction. Off the top, what does science have to do with effective writing?
Todd Rogers: It's actually a great question to start with. Because people historically and in present day think of writing as this art and skill that you master. And there's a lot of taste involved. And what makes something better than something else when it comes to writing is either determined by your high school English teacher or by completely subjective things that we'll disagree on, like reasonable people will disagree.
And the approach that my co-author on this book, Writing for Busy Readers, Jessica Lasky-Fink, the approach that she and I take is – well, if we're writing practically. This is not about writing beautiful poetry or works of art. This is about practical writing. Let's start with thinking about how people read and then construct how should we write from that perspective.
And so, the science is what do we know about how people read? And how can we study it? And then the next part is, okay, so what does that mean about how we should write to make sure that we can help people read?
Ben Felix: What do people need to understand about the human brain in order to write effectively for a busy reader?
Todd Rogers: What we know from studying people is that they're busy and they tend to do a thing called satisficing, which is doing good enough. Maybe the first best thing. And it is a completely rational response to having too many things to do. And so, what do we know about how humans behave? Humans optimize under constraints. And the constraint is time. And the constraint is attention.
And so, what they do is they do their best when there's too much information overloading them, which is like they skim. They read as fast as they can. They jump around. And I don't want to sound scary or offensive, but they very often just don't read what we write. That's how they navigate the busy lives they have and the limited attention is they skim and they decide in every given moment, "Is this worth more of my incredibly limited attention and time?" And very often, their answer to that question is no.
Cameron Passmore: What decision-making process do readers go through when they receive a new communication?
Todd Rogers: Well, Jessica and I break this down into a few steps. First, am I going to engage at all? And that means like they look at it. Just getting the gist. No reading. But just visually looking at it. Saying, "Am I going to deal with this right now?"
Let's say we're talking about email. But it could be about analyses in a report. It could be about a text message. It could be about a Slack. It could be about a proposal. Am I going to deal with this? And they look at it. And then you get a taste of like do I really want to engage with it? And part of that is does it look like it's going to be hard?
And we ran an experiment that is hardly worth reporting because it's so obvious, where we show someone three lines in an email or seven paragraphs. And we're like, "Which would you be more likely to engage with right now?" And, literally, 241 out of 242 people are like, "The short one, please."
First, do they engage? Then if they say yes, then the question is like how intensively do they engage? Are they skimming? And one of the cool things that I have learned about how people read is there are three kinds of reading. There's close reading, which is what we're taught to do in school. Very close sentence-by-sentence reading. Or word-by-word reading. That's like, I don't know, the platonic ideal of reading.
Then there're skimming, which is moving pretty vigorously through but still linear. It often requires bouncing backwards if you realize you missed an important thing. But it's skimming. And then the last one is scanning, which I just think is a real breakthrough for me in just labelling it. It is where you look and you just jump around, backwards and forwards. Not just orienting but actually just trying to like where is the thing I'm looking for? And they're scanning.
And people use all three of these reading tips when reading any one thing. First is do they engage? If they do engage, they have to like navigate and negotiate what level of investment are they going to do in general. But also, specifically, as they navigate the document.
And then, finally, if they've understood it, if you're asking them to take an action, the last one is do they take an action or not? And that's a whole another negotiation with themselves about, "Is this going to be painful? How much time is it going to take? Am I gonna have to look up new things?" Or, "Can it be really quick?"
And, again, almost not a study worth running, but we still ran it, people are way more likely to do the thing where it's like, "Well, yes or no?" Versus, "What do you think?" And, of course, people want the easiest stuff because they're busy.
Ben Felix: Okay. given all that, can you rip through your six principles of effective writing?
Todd Rogers: Sure. The first is less is more, which is fewer words, fewer ideas, fewer requests. The basic idea of this is that if things are shorter, people are more likely to engage and read. That's obvious, and easy and cheap, right? There's a famous book by Strunk & White called The Elements of Style where they have a well-known phrase "omit needless words". That's obvious and great. Do it. Instead of, "The reason for this is –" just say, "Because." Or, "On order to –" "To." Right? You don't lose any substance or content. Just you rip through it.
The second is fewer ideas. This is all under this heading of less is more. Every additional idea you add, the less likely someone is to read and engage. And so, it's just a judgment call. The more you add, the more likely someone is to not engage or not get what you want when they skim it.
And so, it's just a judgment call the whole way. We don't even talk about it as a principle. Well, Jessica and I always refer to as principal zero. You can't write unless you know what your goal is. There's just no writing without having a purpose. Often, writing helps you figure out what your purpose is. It's like writing can help you clarify your thinking. But that's stage zero. Then you're writing to communicate. And when you know what your purpose is, the more ideas you add, the more you risk losing your reader.
And the third part of that is fewer requests. We've done these experiments. And others have too. I love them. The more you ask someone to do, the less likely someone has to do any one of them. Think about it. I ask you to do three things. One, you may just get deterred and not do any. Two, you're going to skim it and figure out what the easiest one to do is and do that first, which may distract you or derail you from the other things.
And so, again, hard to write effectively. I'll even go farther and say impossible to write effectively if you don't know exactly what you're trying to achieve. That's the first one, less is more. Instead of continuing in monologue for the next seven minutes, that's one of my favourites.
Cameron Passmore: A question I had for you, what advice would you give to someone when deciding when to send a message?
Todd Rogers: That is a common question that the marketing world wrestles with all the time. And so, Jessica and I come up with in this book Writing For Busy Readers six principles. One of them was less and more, which we just talked about. And those are just true. I really think that they are pretty close to universally true given the constraints of you knowing what your context is. If you're writing for an audience that has expectations, you need to write for that audience. We couldn't write a book that was one page that had to look like a book. Within the constraints and the expectations, ours are at a level that is more general.
A question like timing. It really is a question of equilibrium. And so, I love this example. I was a political pollster in a previous life and I founded a think tank in Washington that is the centre of data science and behavioural science for the Democratic party on the left. We'll say progressive groups.
And in 2008, Obama was running for president as a democratic nominee in the United States and was a pioneer in online small-dollar donations. And raised more money than anybody up to that point by like an order of magnitude, I think. So, then what do you guys recall, or remember, or think was the most effective subject line for a fundraising email from Barack Obama in 2000? It was famous. You'll recognize it as soon as I say. And it was not his slogan hope or something like that. It was not. I don't remember what his slogan was.
Ben Felix: Not a clue.
Todd Rogers: Lowercase h-e-y. Hey. That was the most effective subject by a lot of any subject line during the campaign. Lowercase h-e-y. Why would that be so effective? It's partly effective because the only people who write you informal personal messages like that are people you know.
And, again, stage one of all of it is do you read and engage at all? And it probably got past that first filter because we thought it was my friend emailing me. And then you get to it and you're like, "Oh, it's my friend, Barack Obama." After that campaign, other inquiring campaigns and people seeking alpha on campaigns decide that they're going to write informal subject lines. That's going to be the frontier. And it worked for a while until it didn't because everyone did it. And then it stopped being effective.
And it wasn't a universal law of the way our vision or attention evolved that h-e-y captures the most attention. It was the context in the Inbox. And so, the same applies to like when is the best time to send a message. It could be that it's Thursday at 12 Eastern Time until everyone sends their messages at Thursday at 12 Eastern Time. And then it becomes Sunday at 2am. And then eventually everybody goes there. Whatever. That is not a stable equilibrium, whereas the principles are about like, "Well, people are generally busy." And how do they navigate busy text when they're busy? Well, that's universally true. How you translate it to your writing, well, that's going to be tailored to your context. That's where your judgment and knowledge about your context is going to matter.
Ben Felix: Man. Getting people engaged with communication is like a complex adaptive system.
Todd Rogers: Yeah. It sounds exactly right. And it's even easier to understand than a complex adaptive system. Because we're all chasing whatever the best practice is. And then once we converge, it's almost not complex. I mean you're right. It's a complex adaptive system. But this little part is like so obviously marketers optimizing that it becomes simple.
Ben Felix: Yeah. It's crazy to think about. Because I've seen it. You know what I mean? I've experienced that where something's new and, "Oh, I'll read that email." And then everyone does it and it's no longer new. And you no longer open that email.
Todd Rogers: I was talking to we'll just say like a federal-elected politician in Washington this week. Or I guess whatever today is. It was last week. I don't know what day we are. Well, I think it was last week. Where we were talking about fundraising by printed mail. And there is a common practice in printed mail fundraising that they send you. And I don't know if this is true in Canada. Actually, I think the election laws they don't have the same kind of norms of fundraising that we do in the United States. But there are these insane norms of like six-page letters that you get asking you to donate $25.
And then we were talking about how this relates to writing for busy readers. And like, "Shouldn't that be just like one paragraph?" And it depends what your goal is. I think that those may be effective. Maybe. Because people aren't reading them anyway. They're just a signal that we take this very seriously. And this is like our platform is serious. It could be the same paragraph over and over because no one is reading six pages anyway. It may just be a signal. But it just depends what your goal is. If your goal is to be read and understood, I don't think the goal of that letter is to be read and understood. I think the goal of that letter is to send a signal, say, “We're worthy of your $25.”
Ben Felix: We talked to somebody recently talked about Morgan Housel, who wrote a very popular book The Psychology of Money. But he wrote a book more recently and he was like, "I could have written this book much shorter." But you can't write a book that's less than – whatever. Or fewer than 200 pages. You alluded to that too.
Todd Rogers: Right. Yeah. Hopefully, people are buying the book to read it. But sometimes they have other purposes. And, hopefully, an author is writing because they intend to be read. But sometimes they may have other goals. But, again, you write to achieve your goal. And it's really hard to write effectively, and I would even say impossible if you're unclear on your goal. And the goals are varied.
In fact, think about contracts. The terms and conditions for your cellphone or for any service. The goal there is probably obfuscation and not reading and understanding. And the Canadian Supreme Court has a web page I'm about to send out on my newsletter where they translate all the decisions into plain language so they are comprehensible. Because judicial language tends to be really esoteric and like technical. They have a whole another page that they rewrite their own writing so that it's accessible. You could imagine, if they really wanted terms and conditions to be comprehensible, there's a lot of things they could do. I don't think they do. And I think it's unkind if not even illegal.
Ben Felix: The principle that you talked about, less is more. Say, stick with that one. Does that apply in all cases?
Todd Rogers: Yes. I mean it applies if the goal is to be read and understood. But you may have another goal layered on top of it. I was working with an intelligence analyst in the CIA. The CIA in the United States. The Central Intelligence Agency. It's part of the intelligence apparatus in the US. And in their unit they write intelligence assessments that are 70 pages. That's the norm. If he comes in at 30, it's going to look a lot like he didn't do his job. The norm is the norm. He can still make it easier to read, which leads us to some of the other principles. You can make it easy to navigate. Adding headings, and structure, and a good introduction, and make the key information obvious to pull out. If there are actions to take, making them unambiguous at the very beginning. You can make it easier to navigate but it's still got to be as long as – less is more. If your goal is being read and understood, then it's more likely be read and understood if it's fewer words. But you may have other goals.
Ben Felix: Okay. Sticking with the goal of being read and understood. Do the principles apply to other mediums like text messages or, I don't know, social media posts?
Todd Rogers: We've done experiments with text messages where you go from two sentences to three sentences and you decrease people's likelihood of responding, even on text messages. But think about it. For those of you listening, I'm holding my cellphone. How often have you like received a text and you look at it and you're like, "I'll deal with that later." Right? Because it's just like it's too many – it's unclear. Whatever. We all have that experience. And that's the shortest mode of communication we have.
I mean, everybody's busy and they're all optimizing under very rigid constraints. And the rigid constraint is so much time, so much attention and too many things that we would like to do and also too many things that we would not like to do but still have to do.
Cameron Passmore: Any advice on using non-words like hyperlinks or emojis?
Todd Rogers: We'll talk about both. But hyperlinks, if you watch yourself when you read, we tend to jump to hyperlinks visually. And there are some papers showing this with eye tracking. Because they sort of stand out. And it kind of stinks. Because hyperlink just means that there's something to link to. It doesn't mean it's the most important content.
And so, for it to draw our attention seems like such a just wasted tool. I try to hyperlink as few – instead of the whole title of a report, like, "Hey, Ben, you asked me about the American Disabilities Act Section 8 guidelines." I'll do parenthesis here instead of highlighting the whole title. Because that's the first thing you'll see.
I mentioned specifically that because in the United States, there's a federal rule called Section 8, which is that you want to make your writing able to be understood by people who use readers, like who are visually impaired. And so, this tension. You want the hyperlink to be self-explanatory but not consuming visual attention. It's a balance there. But there's things you have to trade off.
On the emoji side, emojis are incredible as long as we all understand what they mean. And I don't want to impute ages to either of you. But the young people today, it turns out interpret the same emojis differently than I do. And so, when someone sends me a message with a smiley face at the end, I think that's like thumbs up, sounds good, this is a warm feeling.
Surveys, The Wall Street Journal, recently published show that like – whatever. This is before Millennials. I don't know what's the youngest. The Zenials. Isn't there like Zenials too? Whatever. The youngest people interpret that as sarcasm.
Cameron Passmore: Oh, wow.
Todd Rogers: Almost 180 degrees from the way I interpreted it. I send them a message with a smiley face and they're like, "Why would you do that to me?" I thought I was sending warm.
If these emojis insert ambiguity, then they're worse than nothing. But if they don't, they may be an efficient way to convey something as long as we all agree on what they mean. But just word of caution. I was teaching one time and in the chat the students were all putting skull and crossbones. Even now I wrote about this in the book. I was confused. I thought maybe there was some national emergency or something. I didn't know what was going on. Apparently, that means something is good, I think. I don't know. Now I'm going to go the other way. You guys are young. You tell me what does that mean.
Ben Felix: I would have thought the same thing as you. I guess I'm old. I don't know.
Cameron Passmore: Well, if you're old, Ben, I'm really old.
Ben Felix: That's fair. I got an email recently not with an emoji but just the interpretation thing made me think of this. The end of the email said something along the lines of sent with warm feelings. And it was just like such an explicit way to say that this was all said nicely and in good faith. Huh? That's a really interesting way to sign off an email.
Todd Rogers: It's a little bit like my goals for fashion where I just don't want to be noticed. And I want the opening and close of my messages to be forgotten and absent them is also a problem. I'm like, "Hope you're well." But now I feel like that's tired. I'm still trying to come up with something that will check the box without being noticed. I am not yet ready to close my messages with sent with warm love and affection, hugs. Or whatever yours was.
Cameron Passmore: The hug emoji.
Todd Rogers: Maybe. That sounds awesome. But it is so abnormal that it captures attention such that we're even talking about it. And if that's the goal, that person is truly spreading warmth and I give them a smiley face in the way I mean it.
Cameron Passmore: The good smiley face.
Todd Rogers: Not the young person's smiley face. The middle-aged smiley face.
Ben Felix: What about stuff like bolding and highlighting? How does that affect a message?
Todd Rogers: One of the other principles is direct attention formatting. I think that's what we called it. And your listeners, I assume you have show notes. We have a one-page PDF checklist that is just the six principles. I would love to make sure that that ends up in there. Because the high-level goal of all this work is we want everyone to add a round of editing to everything they write. Everything. Where they step back and ask themselves, "How do I make it easier for the reader?" Because if we make it easier for the reader, we're more effective and it's kinder to them.
And so, the checklist is a path to making it easier. This principle of like direct attention with formatting, people interpret bold, underline and highlight. Bold, underline and highlight. As the writer saying to the reader, "This is the most important content in the message, in the report, in this paragraph." Whatever the unit we're looking at. Bold, underline and highlight. There seems to be convergence among readers. That's what the writer means by that. And that's incredibly powerful tool for us as writers. But it also has the side effects that are unintended or at least unexpected, which is it licenses readers again who are busy with too many things to do to not read the rest of it.
Because, again, their goal is like optimizing, especially if this is not central to what they're interested in, pulling out the key info and moving on. We've done these experiments, Jess and I, where you bold, underline or highlight one sentence and you decrease the likelihood of them reading the other sentences relative to not bolding, underlining or highlighting anything. Which is just like they jump to that and then they move up. And so, it's a really powerful tool that we just have to use judiciously.
Ben Felix: I think the way the principle for that one is written is use enough formatting but no more.
Todd Rogers: Yeah. That sounds better than saying direct attention with formatting judiciously. Your version sounds better.
Cameron Passmore: Since it's 2024, I have to ask you this question. How do you think about the impact of AI on effective writing?
Todd Rogers: I think a lot about it. Two takes. The first is we are focused on, again, how do people read? Starting with that as the anchor. How should we write to accommodate the way people actually read? And to the extent that you want humans to read what you're writing, then this all applies to all of it no matter who's writing it. Whether it's your large language model, you and your co-pilot. Bard, Anthropic negotiating how to write. Whoever's writing it, these are the principles of how people read.
And so, however it's produced, we want to make sure that we're making it easy for them to read to the extent that our goal is humans reading it. And that is what Jessica and I are focused on. And so, right now, the large language models are not really trained on this approach to writing because they're trained on the data that they have, which is basically medium to well-written text that's online and whatever other data sources they can use to train on. Easy to update. And, eventually, they will be better at this.
In the meantime, with a computer science colleague of mine at Harvard, we, on my website, have trained OpenAI's GPT4 on the principles and then tuned it with pre- and post-email examples that we manually changed. We basically trained GPT4 on the principle to rewrite emails. And if you go to the website we have tens of thousands of views who's like, "It's just so fun and awesome at it." It was really able to learn how to make it skimmable.
And then you post your message and then it just sort of side-by-side puts it up and shows what it would look like if it was easy to skim. And it has been a really good coaching and teaching tool as I work with a lot of companies and government agencies and – just like organizations on their communication. This is just a nice tool for seeing what it would look like.
It's OpenAI. It's GPT4. It's not secure. You shouldn't put anything that's confidential in there. But I'm surprised at how much traction it's got. And we'll put that in the notes too. It's free. It's up there. Would you ask about AI? I think two things. I think one, whoever is writing, an AI right now is going to increasingly help us write. We want it to be easy for humans to read on the other side. And in that case, the principles are the principles, whoever the author is. And in the meantime, we've demonstrated. It's really easy for these LLMs to learn how to write this way. They don't currently. But they will soon I'm sure.
And in our website, we have a little tool. We also have a Chrome extension and a wide range of stuff.
Cameron Passmore: How do you do that? Do you tell the AI what your objective is? To look important. To blow away with fact. To make it as short as possible. How does it know what you want it to do?
Todd Rogers: Oh, my God. What's the phrase that the AI people use? Interpretability. I don't know how it does it. I mean, this is all going to age in like six months. They'll be like, "Why are they talking about it that way? I don't even listen to podcasts anymore. I just get a download from my AI Overlord."
We teach it the principles that are on this checklist. And then we give it feedback on how they apply with regards to, in this case, email. And then we give it a bunch of examples so it can sort of like learn what they look like applied. And one of the – you'll see one of the kind of subtle principles under design for navigation, which is one of the principles we haven't talked about. But it's one of the principles. This basically make it skimmable, add headings and things like that.
One of them is put similar ideas next to each other and separate dissimilar ideas. Because it's just easier for people to consume in a single section of the text. And these LLMs, we tell it that. We train it on the principles. We show some examples. And then if you put test emails in there – and this is only email. We're talking with other organizations about making versions for reports, or proposals, or sales pitches, or whatever. But this is for email. And you send them an email where it's like, "Ben and Cameron, so much fun on the podcast. I love your backgrounds. When we were talking, I could see your backgrounds." And then two paragraphs about the substance of what we talked about. And at the end, I'm like, "I especially like the sign both of you have Rational Reminder in the background so we can remember the name of the podcast while we're talking. It's great. Warm affection and hugs, whatever, Todd."
And then the LLM pulls out that last part. Because I said in the very beginning, loved your backgrounds. And in the end, I ended with like you guys said Rational Reminder in the background. It puts them together. It's really cool. It's like, "Oh, those are related ideas, they should be next to each other.”
Ben Felix: Yeah. That's crazy. I think I can guess the answer to the question but I want to ask it anyway. Just with the context you have with the research that you've done on this and the work you've done with companies and governments. The answer is probably obvious but I'm going to ask it. How important is good writing?
Todd Rogers: I would start answering that question by making a distinction between good writing and effective writing. Okay? And good writing is what we have been taught. We've been taught how to write well. And effective writing is what we've been talking about. Writing that is easy for readers to consume, understand and respond to. And they're different.
They are different. And we've never been taught how to write effectively. That said, how important is effective writing? I mean it depends on your context. I work with a private equity fund that pitches companies and NLPs on things. And you can go from a response rate of X to a response rate of 2X. And the ROI on that's really high.
I work with the federal government of the United States where we have the Department of Health and Human Services. They're rewriting their notices of funding opportunity, which is basically their RFPs. And their concern is that the RFPs are so complex that New York City, L.A. and Chicago have the infrastructure to respond to them. But smaller cities like Omaha and Buffalo don't. But they want everyone to be able to use it. They're really interested in not the ROI from an LP investment standpoint. But instead the ROI of like how do we make our federal funding for grants to remove lead from the housing of low-income households with small children everywhere. Not just in the big cities have the infrastructure. Depends on your problem.
But the payoff can be high because we don't really tend to write with centring the reader. Realizing that like the reader is going to skim us. And it is not enough to just be clear and complete.
Cameron Passmore: Amazing. Todd, your book Writing for Busy Readers: Communicate More Effectively in the Real World is excellent. It's been so great to have you join us.
Todd Rogers: Yeah. This was fun. I want to end with just repeating what I've said before. The goal is that everyone add a round of editing to themselves where they ask themselves, "How do I make it easier for the reader?" Because the easier we make it for the reader, the more effective we will be in achieving our goals. And it's also just kinder to them. Thanks for having me, guys.
Ben Felix: Awesome. Thanks, Todd.
Cameron Passmore: Okay. Time for the aftershow. Todd was great. So great to learn stuff in areas that you kind of weren't expecting necessarily. Pretty cool. Do you want to kick off talking about this upcoming webinar we've got?
Ben Felix: Okay. We've got an upcoming PWL webinar. It's on March 8th at noon Eastern Time. The topic is Women's Wealth: Investing Basics for Women. And this is hosted by Melissa Laursen and Kelly Thomas from PWL. It's going to be an interactive and, as always, educational session.
They're going to cover women as investors, which is a topic that I've seen their notes on. And this is why it's women's wealth. The rest of the topics are pretty gender-neutral. They've got some really interesting things specific to women to think about from a financial planning and investing perspective.
Then they've got what to know before you get started. These are all more gender-neutral. Why you should invest? What is a stock? What is a bond? Active versus passive funds and how to get started. I think it'll be a really good session for women definitely. But lots of universally interesting topics for anyone.
Cameron Passmore: And what's really cool about how they operate these is they are legitimately interactive. There's tools inside of it that really is engaging. They do a great job with these events.
Ben Felix: Yup. They are good.
Cameron Passmore: Okay. Reading challenge update. There's 105 active readers in the challenge that have read 376 books so far this year. Still lots of time to join the 24 and 24 challenge. You can register. There's a link on our rationalreminder.ca website.
Speaking of books, I don't know if you got yours yet, Ben.
Ben Felix: I don't think so.
Cameron Passmore: The 20th anniversary – I'm holding it up for the YouTube viewers. The 20th anniversary of Index Funds: The 12 Step Recovery Program for Active Investors by good friend Mark Hebner, who was a past guest on episode 116. Mark was also in Errol Morris' film Tune Out the Noise. This book is much smaller. Remember the original one? It was huge and extremely heavy. He's condensed it down. Beautifully done. Full of formula, charts, tables, quotes, QR codes. Foreword by Karry Markowitz. Endorsing quotes from Burt Malkiel, John Bogle, David Booth, Paul Samuelson. Beautifully done. His own artwork work in it. Kudos to Mark. It's available everywhere now including on Kindle.
Reviews. We had a few reviews here. Why don't you kick it off?
Ben Felix: All right. Daniel X. Martin from Great Britain says, "Best evidence-based financial podcast. Been an avid listener for a while now. And the episodes being released keep getting better and better. Thank you both for your hard work. Keep fighting the good fight. Much appreciated from a UK-based financial planner."
Cameron Passmore: And this next one will show you that we don't cherry-pick the reviews. BGA1234$ from the United States gave us a one-star and said, "Fall from grace. It was disgraceful of this podcast to do a hit piece on one person without involving the other side. I've been a fan of this podcast. But the episode on Ray Dalio has significantly dented the reputation, at least in my eyes."
Ben Felix: Sorry to hear that VGA1234$. I wonder if it did more damage to our reputation or Ray Dalio's. Probably not helping. I'm probably not helping the situation.
Cameron Passmore: You're probably not helping. Just take the feedback. Feedback is a gift, Ben. Remember that.
Ben Felix: Yeah. It is. We would have Ray Dalio on. Maybe I'll ask him. As if he's actually going to read my email. But maybe I'll ask him. I would genuinely have him on.
Cameron Passmore: For sure.
Ben Felix: But to VGA's point, we have not asked Ray Dalio to come on and defend himself. We should probably do that.
Cameron Passmore: He was referring to the episode we had with the retirement dream team. David Blanchett, Wade Pfau and Michael Finke. That's what he's referring to in these comments.
Ben Felix: I see. The title of the review is January 25th, 2024. Oh, I see. You put a note in there explaining this and I didn't read the note.
Cameron Passmore: You're disclosing our secrets. The mystery.
Ben Felix: Yeah. They said, “That that was one of the most interesting guest lineups you've had. I watched it on YouTube. Shared with a couple friends. Did rewinds because some topics were so important. I'm a Florida listener. That was a great episode.” It's been one of our most viewed episodes in recent history.
Cameron Passmore: Those guys are so good. So good.
Ben Felix: So good. Yeah.
Cameron Passmore: I heard from some interesting people lately, had a great conversation with Florian who's a medical student or just became a doctor in Quebec who's an avid listener. Reached out to talk about possibly helping some of his family. And how much he's enjoying The Money Scope Podcast. Shout out to Money Scope. Man, I'm a huge biased but a huge fan. I think you guys are doing great as I say every time. Thanks, Florian, for reaching out.
On LinkedIn, I heard from Tom in New York City, "Love the podcast. Great, thoughtful content. I recommended to everyone. Cheers." And he started to read Rob Copeland's book The Fund. And his favourite episode is the Chris Hadfield episode.
Also heard from Jeff and talked to Jeff in Calgary who I think has a very bright future in the industry. He's an avid listener. And reached out to talk about his career. Then you and I both received an email from Cameron in Sydney, Australia. He wanted to thank us for the podcast and described the impact. And he's so well put the email he sent to us that the impact has had on his own money habits and also on his career choices. And I have a call set with him in a couple of weeks. It's super fun to meet people like that.
Ben Felix: In the Rational Reminder community, there was a milestone reached, which is that there's one big topic called This Market Is Weird. And it just became the topic where people congregated to sort of chat about stuff day-to-day. It's not a dedicated topic that people discuss one thing. It's just like this ongoing dialogue, which is always entertaining to read. But it reached 10,000 replies, which is the limit in discourse.
And so, the topic was closed. And a new one, This Market Is Weird Part Two was created. And it's now up to only 42 replies. But I'm sure it'll eventually get to 10,000 as well. The community has been very active though. Lots of really good discussions.
Cameron Passmore: Upcoming guests. Next week, Adam Alter's here. Author of the book Anatomy of a Breakthrough. What a phenomenal – oh, my gosh. That was such a good conversation. In 3 weeks’ time, leadership coach. This will be a very different episode. Randall Stutman is going to be joining us. He founded the firm Admired Leadership, which we've talked about in the past. I'm a bit of a junkie. So, it's a bit of a self-indulgent topic. But I think people will enjoy it. Randall is amazing.
Then in four weeks, Ryan Hawk and Brook Cupps will be here. They have a book coming out, The Score That Matters. Ryan is the host of the long-running weekly podcast, The Learning Leader Show, which I'm a regular listener of.
Why don't you queue up the question? We have a very important question, Ben for listeners.
Ben Felix: Okay. Sure. We did a live meet-up in Toronto last year. And there are a ton of people there. How many people were there? Do you know?
Cameron Passmore: Forty? 50? Something like that?
Ben Felix: Yeah, at least. And people cycled through throughout the – anyway, we talked to a bunch of people. That was enjoyable. As much as I joke about not liking to leave my house and stuff like that, it was great to meet a bunch of people that listen to our podcast.
One of the comments that we got there from a few people was that we should do more premium merch. People like to rep RR. And they would like to rep it with premium stuff. Because we get, whatever, reasonable quality stuff. But like cheap printed T-shirts and things like that. And so, we got this feedback that you guys should do just like real high-quality merch and people will buy it. That's our question. If we did like a Rational Reminder vest, a Patagonia vest, for example, Rational Reminder branded, would people buy it? Do we know what the price point is roughly?
Cameron Passmore: 175 to 200. And we take no spread on this. This is just a cost flow-through. It'd be in the –
Ben Felix: I'd buy one personally. I would buy one.
Cameron Passmore: I mean, I love them. I'm a huge Patagonia fan.
Ben Felix: Okay. That's the question for our listeners. If we make a RR-branded, Ration Reminder-branded Patagonia vest, would people pay $175 to $200 for it?
Cameron Passmore: And I think Angelica's going to set up a thing in the community to respond.
Ben Felix: Yeah. We'd probably do a poll in there.
Cameron Passmore: Poll in there. Or if you have an opinion, drop us a note. We're easy to find.
Ben Felix: I'll buy one. I'll tell you that right now.
Cameron Passmore: Anything up with any news you want to share about The Money Scope?
Ben Felix: Money Scope continues to do well. People seem to be really enjoying it. We did an episode a couple weeks ago, I think, when this episode comes out. We called it an intermission. But we just took a break to kind of talk about the podcast. Because unlike Rational Reminder, we don't have really a chat at the beginning or at the end. There's no after show. We just took a break from regular content and talked about how things are going.
One of the things we talked about was the scope theme. Mark and I just thought this was like the smartest thing ever to call it The Money Scope and to have the sounds of a scope between the introduction and the body of the episode. We've got mixed feedback on that. And we talked about that on our intermission episode. And then people chimed in with more mixed feedback. I don't know. We'll probably leave it to be honest with you. Because we both like it. And listeners, some people say like, "Yeah, it's really off-putting." But then some people say, "I absolutely love it."
Cameron Passmore: What do you do with that?
Ben Felix: I don't know. And someone made the interesting comment that it gives it a type of character that will be decreasingly present in content as AI does more of the work. I thought that was a really interesting comment. We've seen some AI-generated videos that you can barely tell the difference between that and a real video. And so, this person's comment on YouTube was that – I think it was on YouTube, "Character like that, it'll separate real content from AI-generated content."
The next few episodes for a bit. At the end of the series, it gets less niche, I guess. But the next few episodes are going to get pretty Canadian account type and tax and Canadian Corporation planning heavy. We spent a ton of time preparing the episode on how to compensate yourself from a corporation. If you have a corporation in Canada, how should you pay yourself? How should you get money out of the corporation? A lot's gone into that. And it's being reviewed now by a couple of other financial planners and a couple of accountants because it's such a complex topic. But there's like, I don't know, three or four major common myths that are getting busted in that episode. It's going to be a good one.
Cameron Passmore: To have that done to the quality the two of you are doing it in one spot is so beneficial as opposed little random snippets and opinions. You're bringing it together so thoughtfully. And, again, to have it reviewed by some of our peers and friends is just incredible, I think.
Ben Felix: Yeah. We did that for one I think of the earlier episodes. Because a lot of it's relatively basic. For Mark and I to talk about the basics of investing, we didn't feel like we needed anybody to review that. But for how to compensate yourself from a corporation or even for the account types episode, it's complex enough that we asked peers to look over it. It's not peer-reviewed in the sense that it was a formal peer-review process. It wasn't a blind peer review. But we did ask people with expertise on these topics to review the content.
Cameron Passmore: Anything new with your YouTube channel?
Ben Felix: No. I've been trying to post on there more. I haven't posted recently because I've been busy with Money Scope and Rational Reminder and doing other research stuff.
Cameron Passmore: Any great content you've seen lately? Or anything great you've read lately?
Cameron Passmore: No. I've been listening to a book about Bitcoin that Mark told me to look at. I won't name the book yet because I don't know if I have an opinion on it. But it's been interesting to read to say the least.
Cameron Passmore: Oh, yeah. I'm supposed to mention this actually. A special guest I alluded to on Twitter a couple weeks ago. I've been reading Scott Galloway's book The Algebra of Wealth. Scott Galloway is going to be a guest coming up in a few weeks. Super excited about that.
Yeah, I'm an avid listener of his Prop G pod. And the book is really interesting. I mean, if you know Scott, he's a very articulate speaker, very passionate about his opinions. Entertaining for me to listen to. Somewhat polarizing. I get that. Some people I realize, I hear the comments coming already, are going to disagree with me on this. That's totally okay. But the book is really well done. He's going to be a great guest. Be a lot of fun too.
Ben Felix: I was thinking about why I haven't not been reading much stuff recently or watching stuff. I started doing something new this year. I've got two papers on go right now with financial planners who do not work at PWL. External collaborations. I've got one paper that's almost done on infinite banking. The idea of shovelling all your money into a permanent insurance policy and borrowing against it instead of using the more traditional approach to saving and investing. That's been an interesting project.
And then I've got another paper on the go about Canada Pension Plan, the CPP. That we talked about this in a recent podcast episode as well. But for a business owner who can choose whether to pay themselves salary, which requires paying into CPP or paying themselves dividends, which does not. Just looking at that problem from an angle that as far as I know nobody has looked at before. Both of those are with guys that work at other firms. But that's been a really interesting process to collaborate with new people.
Cameron Passmore: And fun. They're good guys.
Ben Felix: Super fun. Yeah. That's the thing. And I'm learning a ton. It's something that I'm going to continue doing, collaborating with other people.
Cameron Passmore: Love it. As always, you can reach us online, LinkedIn, X.
Ben Felix: It's Twitter, man. Come on.
Cameron Passmore: I'm trying to be progressive here.
Ben Felix: Oh, maybe I'm going to go take a shower now.
Cameron Passmore: So many people say X. Formerly Twitter. Okay. Is it Twitter or is it X? I'm trying to be –
Ben Felix: I don't know. Maybe I'm just a dinosaur. I refuse to call it X. So ridiculous.
Cameron Passmore: We're meeting a lot of people through there though. A lot of people are using the Calendly link in Mark's bio, your bio, my bio, and booking directly to meet advisors. Yeah, it's interesting. It's a whole new world.
Ben Felix: Yep. Good to hear.
Cameron Passmore: It's pretty cool. Okay. Everybody, as always, thanks for listening. Have a great week.
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Books From Today’s Episode:
You Have More Influence Than You Think — https://www.amazon.com/dp/1324005718/
Writing for Busy Readers — https://www.amazon.com/Writing-Busy-Readers-Communicate-Effectively/dp/0593187482
Index Funds: The 12-Step Recovery Program for Active Investors — https://www.amazon.com/Index-Funds-12-Step-Recovery-Investors-ebook/dp/B0CL2Z23CT/
The Elements of Style — https://www.amazon.com/Elements-Style-Fourth-William-Strunk/dp/020530902X
The Psychology of Money — https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681
The Fund — https://www.amazon.com/Fund-Bridgewater-Associates-Unraveling-Street/dp/1250276934
Anatomy of a Breakthrough — https://www.amazon.com/Anatomy-Breakthrough-Unstuck-When-Matters/dp/1982182962
The Score That Matters — https://www.amazon.com/Score-That-Matters-Excellence-Yourself-ebook/dp/B0CGZ8HRXD
The Algebra of Wealth — https://www.amazon.com/Algebra-Wealth-Formula-Financial-Security/dp/0593714024
Links From Today’s Episode:
Benjamin on X — https://twitter.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://twitter.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://twitter.com/MarkMcGrathCFP
Home-country Bias YouTube Video — https://www.youtube.com/watch?v=qYedjI03Q0g
The Money Scope Podcast — https://moneyscope.ca/
Professor Vanessa Bohns — https://www.vanessabohns.com/
Professor Vanessa Bohns on X — https://twitter.com/profbohns
Professor Vanessa Bohns on Instagram — https://www.instagram.com/profbohns/
Professor Vanessa Bohns on LinkedIn — https://www.linkedin.com/in/vanessa-bohns-33219710/
Professor Vanessa Bohns on Goodreads — https://www.goodreads.com/author/show/21035835.Vanessa_Bohns
Todd Rogers on LinkedIn — https://www.linkedin.com/in/todd-rogers-6ba447/
Todd Rogers on X — https://twitter.com/Todd_Rogers_
Women's Wealth: Investing Basics for Women Webinar — https://us06web.zoom.us/webinar/register/8217079363034/WN_aVV7ElsLS6aVGd-cpBHw3A