Guest User

May 5, 2022

Fixed Income, Historical Data, Investor Behavior, Portfolio Management

Episode 199: What Happens after Bonds Crash? (plus Reading Habits w/ Aydin Mirzaee)

Guest User

May 5, 2022

Fixed Income, Historical Data, Investor Behavior, Portfolio Management

As we near the 200th episode of our little podcast, we wanted to have a chat with our friend Aydin Mirzaee about one of our favourite topics: books. Before welcoming Aydin into the conversation we round up some important news, go deeper than ever into the fascinating subject of bonds, and share some thoughts on Setting the Table. As the host of the Supermanagers Podcast and the CEO of Fellow, Aydin has an unusual and stimulating perspective on many of our usual interests, and we get to hear from him about the development of his own reading habit, what he most enjoys reading, what would make him recommend a book to someone else, and few pieces of advice for strengthening your reading practices. Aydin also talks about why advice can be dangerous, increasing your ability to retain information, and he is generous enough to do a round of Talking Cents cards with us to finish off the episode. To hear it all, make sure to join us.

Key Points From This Episode:

Today's book review, looking at Setting the Table by Danny Meyers. [0:08:47]
Christopher Bloomstran's thought-provoking critique of Ark Invest. [0:18:06]
A follow-up on our ongoing discussion about bonds and look at their recovery time. [0:20:04]
Comparing real returns across the different decades. [0:27:30]
Research into a more complete view of the historical returns of stocks versus bonds. [0:39:31]
How correlations come into the conversation about stocks and bonds. [0:42:54]
Aydin describes his reading habits; audiobooks on a commute, hacks, and more.
The different purposes of books and how Aydin uses business content to generate ideas. [0:49:40]
Books as leverage and some thoughts from Aydin on his favourite genres. [0:52:27]
Where Aydin sources his books and what it takes for him to decide to recommend books to others. [0:56:12]
The role that podcasts play in Aydin's reading habits. [0:58:30]
Aydin's advice for how to read more and his approach to encouraging his children. [0:59:12]
Considering different ways to increase information retention. [1:02:11]
A round of Talking Cents cards with Aydin! [1:03:34]

Read the Transcript:

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

Cameron Passmore: Episode 199. Welcome everybody. Next week, episode 200, the interview that seems to be garnering lots of anticipation just based on the comments I've been seeing. But next week is professor Eugene Fama. Incredible. Two weeks after that will be Antti Ilmanen in author of the book investing Amid Low Expected Returns. And in five weeks time, it will be professor Ralph Koijen from university of Chicago. So it's a pretty good line, pretty technical, good content, super fun time to be doing this podcast.

Ben Felix: My head's going to explode. Ralph in five weeks, that's intimidating. He's done a lot of writing.

Cameron Passmore: It's interesting how the podcast has kind of ebbed in flowed. We kind of went into more psychology and time management stuff. So it's been kind of now in the more technical phase and it's been incredible actually. Incredible people we've had a chance to meet.

Ben Felix: That was only somewhat intentional. The shift into psychology type topics, that was pretty intentional. But the shift back to deep into Chicago has been less intentional. It's just kind of happened.

Cameron Passmore: Just kind of happened, which is great. So you want to touch on the community?

Ben Felix: Yep. So, we talked about, I should have noted which episode it was, but we talked about goals, how to set financial goals and all that kind of stuff a while ago. And one of the things that we talked about wanting to do was creating a goals master list. Basically people are really bad at setting goals.

One of the steps in setting the most meaningful goals possible is referencing a master list of goals. It's like, what are all the possible goals that you could have related to this thing? So in this case related to finances. That master list doesn't exist. So one of the things we wanted to do after that episode was send out a goals survey where we would collect goals from a whole bunch of people and collate them into a master list. So we are going to do that now. When the episode releases on Thursday, that goals survey will be available in the community.

So you can go in, there'll be a post in there. It's a Microsoft form that's submitted anonymously. There are three questions about financial goals and we'll collect the responses. I have no idea how many we're going to get. We've already done the survey internally at PWL. I think we maybe have 50 responses so far, but the hope is to get kind of hundreds or maybe even 1000 or so, if we can, and then we're going to take some time to parse that down into a nice list of, I don't know how many goals will be on the list. No clue how it's going to turn out.

Cameron Passmore: Such a great idea. I think is brilliant.

Ben Felix: I think it'd be cool. I think it'd be really cool because there's nothing out there. There's one version of this that exists that Morningstar did. It's okay. I don't find it to be inspiring when I look at it personally. So I'm hoping that we can come up with something that's pretty cool.

Cameron Passmore: Excellent. So in '22 reading challenge is still going of course. We have 478 participants that have read, get this 1411 books so far. We've had a number of people make it to the halfway mark. So they've read 11 books. And when you do that, you get a token that gives you a coupon to get 50% off any item in the merchandise store.

And there's been a bunch of orders come through that have reached that milestone, have decided to take advantage of that, which is pretty cool. We're going to continue doing these special, every month a special guest to join us. So in June we have Katie Milkman who authored the book, How To Change. She'll be joining us to talk about her reading habits. And then in July we have Dan Solan, author of Ask, and a good friend of ours, and also past guest is going to come by.

Today's episode, we welcome a long time friend of both Ben and I, as well as a long time client Aydin Mirzaee. He joined us for a great conversation about reading. Aydin's well known in Ottawa, but likely beyond Ottawa as he's been a pretty successful serial entrepreneur.

He co-founded Fluid Wear, which was sold to SurveyMonkey. And he is currently CEO of Fellow, which is a software that helps make meetings more productive. We use Fellow in our business and it's a great tool to help with meetings. He's also a host of the podcast that we've mentioned many times, Super Managers.

And I'm a huge fan of that podcast. I listen to every episode and many of the guests that Aydin has on the podcast come from his reading habit. And you remember, Ben, we talked about the book Working Backwards. That was from Aydin's reading and his podcast. Aydin and I share book titles back and forth fairly often.

Ben Felix: The conversation with Aydin was really good. I've known Aydin for years. I came away feeling impressed. He just had a lot of really insightful stuff to say.

Cameron Passmore: And just a bit of energy.

Ben Felix: He's always got good energy, but really good insights. I really enjoyed that part of the conversation.

Cameron Passmore: From the store, I don't know if you're wearing the green shirt, I've got the new green Rational Reminder shirt on for those on YouTube. So they're available in the store. Also, got a little incentive. We have some of the winter toques available. So we thought any order, just put a note. If you order something, just put a note in the form as you check out, just say, send me a toque and Jackie will send you a toque for any order you've got. So this also gives us a way to see if people respond to us, mentioning something on the podcast. You want to talk about some of these reviews, Ben?

Ben Felix: Sure.

Cameron Passmore: First one's about you.

Ben Felix: The first one just says Ben Flix, F-L-I-X - financial and a picture of a goat.

Cameron Passmore: From YouTube to podcast.

Ben Felix: Very nice.

One from Canada. They love the contents, the hosts and the guests on the show. They want to learn about investing, economics and behavioral finance and the show covers all those topics. So they want us to keep up the great work that they think we're doing, which is of course appreciated.

Cameron Passmore: And sleeping easy from the State's. Incredible information. Succinctly delivered. Just found the show by searching the web for a financial analyst journal article that he couldn't locate. And now he's hooked. Love the thoroughness and thoughtfulness of the content. Well, it could be him or her. I don't know. Can't get enough of Ben's research summaries. Best way to earn PL credits around. Also enjoys my book recommendations and can't wait for Fama. Double exclamation mark.

Ben Felix: We're getting close to 1000, somewhat close. It's 777 reviews on iTunes at this point. And I remember when we started the podcast thinking, man, imagine having 1000 reviews on iTunes, that'd be nuts. And now it's getting kind of close.

Cameron Passmore: So did you also notice the total download count is approaching three million?

Ben Felix: Oh, I did not. Wow.

Cameron Passmore: Another interesting thing, which I tripped over last week, the number one downloaded audio episode is the John Cochran episode around 26000 downloads. But when you add in the YouTube, it's over 40000, the ratio of YouTube downloads is really picking up.

On LinkedIn, I continue to hear from lots of people on LinkedIn. I love it. Adam, an advisor in Manitoba, I connected with last week. There's another person, Ellard, who was considering a career change, just past the CFP course. We're chatting this week Chris B in Toronto connected just to let me know that he left a review.

And I also wanted to thank Jorge Diaz who wrote the book, Car Leasing Done Right. Phenomenal book. We've talked about it. He gave a terrific training session to our advisor group a few weeks ago. First rate, just a phenomenal presentation. So Jorge, thank you for that very much. So as always, connect with us on LinkedIn, on Instagram at Rational Reminder, on Peloton I'm CP-3113, we also have the club hashtag rational reminder over there. Both of us are on Twitter.

Ben Felix: Is Peloton still, is that still a thing? People still do that?

Cameron Passmore: Apparently. I still do it. A lot of people I know still doing it. Every time I go on, there's someone in the community that's done the ride. I don't ride with other people, but you can see other people in the club have done that ride. So, you can see how your time compares, but in aggregate, I have no idea. No idea.

Ben Felix: Very interesting.

Cameron Passmore: All right. Shall we go to the episode?

Ben Felix: Let's go ahead. Welcome to episode 199 of the Rational Reminder podcast.

Cameron Passmore: All right. I have a great book review for you. As we heard Aydin at the back end of this episode talk about, explain why. So I'll explain why I like this book a lot at the end. So the book is called Setting The Table, the transforming power of hospitality and business by Danny Meyer. So Danny Meyer is the founder of Union Square Hospitality Group and is obviously one of America's most successful restaurateurs.

He founded the company in 1985 and they own many of the top restaurants in New York city. So iconic restaurants like Gramercy Tavern, Union Square Cafe, The Modern, Blue Smoke, Shake Shack and many others. I think there's well over two dozen restaurants that they own. So Danny's an incredible business leader and he's famous, particularly famous for his views on hospitality, which leads into so many other areas like hiring leadership, corporate responsibility.

The list goes on. If you're interested in learning more about him without reading the book, he had a great interview with Shane Parrish on The Knowledge Project and also with our friend, Matt Hall's podcast called Take The Long View. He was also a guest on Freakonomics, I think a year or so ago, talking about their transition to a no tipping policy, which is also called a living wage policy.

So as I said, I've been aware of Danny Meyer for ages, but I'd not read the book until earlier this year. And it's been out since 2006. And it's so interesting to me because if you think about restaurants, so many restaurants fail in the first few years. So to have had the success that Danny has had with so many restaurants and different brands, and they're all unique other than Shake Shack, unique, one off experiences, I think that's a testament to the fact that he's figured something out.

So the book of course starts with his upbringing in St. Louis, his family, his parents, travel. And through that, his description of food is unbelievable. Then he ends up in New York city and sets up his own restaurant. Anyways, let me get to the main takeaway. The main takeaway of the book for me is, and I think this is important for anyone who's in any sort of a service business, like we're in a service business Ben, if you own a restaurant, any sort of business where you're dealing with the public, I think it's important to understand the whole concept of hospitality versus service.

And he goes to great lengths to break down how they are different. Services, the technical delivery hospitality is how that service makes the client or the guest feel. Services standards, services technical proficiency, hospitality is dialogue, follow up, care, concern. One example he gave in the book, which I think illustrates us so well is, you know when you go to a fancy restaurant, I don't how many times you go up for a fancy meal, I don't do it that often, but you know you get that little amuse-bouche, I think it's called at the beginning of the meal.

Some places will come on, give you some great, big, long description of this amuse-bouche and what it is and how they made it all the ingredients and all the effort they put into it. His argument is, likely the guests don't really care. They just want to enjoy the amuse-bouche and enjoy their time together. So he says, don't focus on what you need to get out of that experience of telling them about the amuse-bouche, let them just enjoy it.

So he articulates that hospitality is the sum of the thoughtful, caring things that we do to make clients feel that we are on their side when they do dine with us or in our case, when they do their investment planning with us. And he talks about right down to how the table is cleared, he describes it like a ballet or how a bottle of wine is opened.

And I don't know if you've seen that before, but sometimes you go to restaurants and you can just tell that everything, they've practiced and have it down to an art form, how they open the bottle of wine and how they pour it is just so perfect in so many restaurants. So he described service is a monologue, hospitality is a dialogue.

He says, "You have to be aware of what your guests value." So here's some other things he points out, hospitality will cause patrons to take on a sense of ownership. Shared ownership develops when clients talk about your company as if it's theirs, this is my restaurant. Great hospitality means you know your guests and you collect information.

How many restaurants do you go to now, do they actually collect information about you? And you think about it. It's amazing. Like Lisa and I have a restaurant here in town that we love and we think, oh my gosh, they have such an opportunity to learn what we like. When do we like to go out? What sort of menus do we like? What sort of specials might we like? We love their crab, for example.

Well, maybe they have crab in. They could let us know by email or text or something. They don't do that, right? Well, this is something that Meyer's restaurants do and they make this happen at scale. So they know that if you go to a different one of their restaurants, they know enough about you to make that experience better.

But to do that at scale, think about that, like how busy these restaurants must be. When you hire, look for excellence, we've all heard this of course. His favorite reviews are the ones that say the food is fantastic, but I really love how great your people are. And he's possibly best known for what he calls his 51 score.

So he says, anyone you hire, if you look at the score out of 100, at most 49 of those 100 points can be allocated to their technical expertise. Innate emotional skills will always count for at least 51% of the score. So he says, you've got to score in the 51. And he gave this illustration of a light bulb. He says, you take a light bulb. The technical side of the bulb is all the engineering, the electronics, the glass, how it's made. But he said the emotional side is the brightness, the warmth, the ability to see and all the non-technical side of the light bulb.

So the top five core emotional skills he looks for are optimistic warmth, so genuine kindness, thoughtfulness. Intelligence, the curiosity to learn for the sake of learning. To have the excellence reflex and a work ethic. So a natural tendency to do something as well as it can possibly be done. Empathy and awareness of, and care for and connection to how others feel. Self-awareness and integrity.

So an understanding of what makes you tick and a natural inclination to be a accountable for doing the right thing with honesty and superb judgment. For example, in his restaurants, you're not given a script of how to say things. You have to create your own script. He gives you guidelines though. Like they can't come up to you and say, how are the first few bites tasting, which I think we all hear at every single restaurant you go to now.

So you're encouraged to come up with your own way of seeing how everyone is. He also talks about how you must know your center. And he says he's learned over the years that everyone that you come across will try to move you off your center. And it could be your employees. It could be your guest, but you've got to keep bringing it back to the center.

He gives this analogy of a salt shaker. The salt shaker is supposed to be in the middle of the table. He said, "Everyone's kind of coming at you to try to move that salt shaker." So he says, you need to know your values. So he talks about your values. You have to know what your values are. So you have to know your values and live by them and believe in them constantly. And he said, "Everything in the restaurant is like that salt shaker."

So he says, "The definition of business is problems. His philosophy comes down to a simple fact that business lies not in the elimination of problems, but in the art of creative, profitable problem solving." Food is secondary to uplifting outcomes for human experiences and human relationships. And here's his probably most famous line, "Business like life is all about how you make people feel. It's that simple. And it's that hard. How you feel in a restaurant is so much more than the food."

So key points, hospitality exists when you believe the other person is on your side. Shared ownership develops when guests talk about a restaurant as if it's theirs, this is true of any service business, dots or information, the more information you collect, the more frequently you can make meaningful connections and make other people feel good and give you an edge in your business.

The information is sitting right there. All you have to do is pick it up. And the excellence reflex is a natural reaction to fix something that isn't right or to improve something that could be better. So this excellence reflex, he talks about how it's rooted instinctively in people's upbringing, and you can improve it. You can hone it. You can bring it to your job every single day.

So highly recommend this book. If you are in the service business, again, many people I know in our industry have this book on their bookshelves and use it regularly, great book.

Ben Felix: In the experience business, maybe, right? That's what-

Cameron Passmore: True.

Ben Felix: ... Dennis Moseley-Williams told us about long time ago. I'm not big on restaurants.

Cameron Passmore: But if you were to go to a restaurant, you would prefer an experience.

Ben Felix: As you were talking, I was thinking about that. I don't know if that's true. When I go to fancy restaurants, very rarely do, but when I do, like you said, you can tell that it's a performance, that they've practiced. And I actually find it personally, anxiety inducing, because I can tell that they're performing and it's not the fact that they're performing that makes me nervous. It's hoping they don't screw up.

Not for myself. I know that I would feel terrible if they messed up because it's obvious how hard they're trying. That's personally my experience eating at fancy restaurants. That's one of the reasons I don't like it. It stresses me out.

Cameron Passmore: All right.

Ben Felix: Wanted to touch real quickly on ARKK. I didn't have daily data. I tried to recreate these numbers just because I like to double check numbers before I talk about them. I didn't have daily data though. This data looks like it came from a Bloomberg terminal screen shot or I don't know. I don't know what the data source is, but anyway, it's from Christopher Bloomstran who has been a vocal critic of ARK and Chamath.

All of the large growth tech stuff, but he's got very intelligent commentary. So it's interesting to read his stuff. Anyway. So he tweeted on April 28th that, on that date, since inception of the ARKK, A-R-K-K, the main fund, as of April 28th, it had underperformed Berkshire Hathaway, since ARKK's inception. Just it's interesting. It's like leading up to the .com bust.

Warren buffet was criticized for not being in tech and then tech crashed and he came out looking pretty smart. I'm not saying that's what we're seeing again here, but it is a pretty amusing anecdote. Just wanted to throw that out there.

Cameron Passmore: Certainly no shortage of people piling on ARKK right now.

Ben Felix: Piling on with criticism, but not assets.

Cameron Passmore: Actually, I think they had some positive asset flow this year.

Ben Felix: Did they?

Cameron Passmore: Yeah.

Ben Felix: Piling on though?

Cameron Passmore: I'm not sure it's piling on. That's why I qualify that. I just think I saw something like that going by, but I think they're down 20 plus percent in April alone.

Ben Felix: Well, it's been a rough go, and you've got to feel kind of bad for the people who did invest at the peak. This is a guess, a hypothesis. The unfortunate thing is probably that a lot of the people who did pile in late were relatively uneducated, naive investors. I doubt it was large institutions.

For example, investing at the peak of ARKK, that's a guess though. So I wanted to follow up on bonds. We talked about bonds in our last episode before Gerard and I don't know, I just had more to say. I also find it interesting that after our last episode where we did talk about bonds, a lot of the tone of the discussion in the community afterwards and before actually, bonds are a divisive topic, which is weird.

Why would bonds be a divisive topic? I don't know the answer to the question, but some people really detest bonds and then other people are like, well, I want to have less volatility or I want to have more certainty about future consumption. So, that's why I own them. And then other people are almost angry. Why would you want to own bonds?

It is just an interesting observation, but I was thinking about that. And I think asset allocation decisions, I think the way people often think about asset allocation decisions is from a CAPM mean variance perspective. Now what do I mean by that? That's the single portfolio that the theory that there is one mean variance optimal portfolio, and everybody's going to combine that with the risk free asset to find their optimal portfolio and it completely ignores investor heterogeneity, right?

So I think a lot of people think about asset allocation from that CAPM mean variance perspective, which means that if somebody holds a portfolio that is different from yours, they must be wrong or you must be wrong, which makes asset allocation topics very emotional. This is just an interesting thing that I was thinking about.

But of course, as we've been talking about the ICAPM or just investor heterogeneity in general, there are infinite optimal portfolios for each individual investor, depending on their outside income, their other assets, their tastes as Fama talks about in our episode next week. I asked Fama what dictates the difference in people's portfolios or whatever.

And his answer was tastes, it's all tastes. I was kind of taken aback like, what about other stuff? Taste was his answer. Anyway. So, there is no single optimal portfolio, which means that somebody can own bonds and some other person cannot own bonds and they can both have the optimal portfolio for themselves.

Asset allocation's not something that we need to fight about, unless we're talking about dividends, which we're going to talk about a little bit more later, that was a joke. People can own dividends, dividend paying stocks.

If you think about the average investor theorem, the global market cap of stocks at the end of 2021 was about 105 trillion US dollars. For bonds, it was about 150 trillion. If we take the average investor, the theoretical average investor, that's a 40% roughly stock, 60% bond portfolio. Now, of course the average investor is not an individual.

A lot of those assets are institutional. And a lot of those bonds in particular, I would guess are institutional. So you'd probably increase that equity. I don't know, maybe the average retail investor is 60, 40 or 50, 50 or something like that in that range. But in any case, it's not a 100% equity investor.

I also just, when I was looking at those numbers, I thought, what does real estate make up in that mix of total assets? The estimate I found for the total real estate market cap was 300 trillion. That's all real estate, residential and everything, not just investible real estate, 300 trillion.

Cameron Passmore: Wow.

Ben Felix: So 54% of the total market portfolio, if we classify the market or define the market as real estate, stocks and bonds.

Cameron Passmore: So that's all residential and commercial.

Ben Felix: That's everything.

Cameron Passmore: Globally.

Ben Felix: That's all. The estimates for investible real estate are much lower. I think if I remember correctly, I saw an estimate at 10 trillion. That's professionally managed real estate that you could invest in through a REIT or through a private real estate fund or something like that. But 300 trillion is all real estate assets.

Cameron Passmore: Wow.

Ben Felix: Which, not investible, right? Just like most private businesses aren't investible. That's the interesting thing about that number, right, is we're talking about the 105 trillion for stocks, but if we included all unlisted businesses, that number would be much larger.

Cameron Passmore: That's true.

Ben Felix: Anyway, so based on 300 trillion, that's 54% in the average investor theory and 54% of their portfolio's real estate. And interestingly, I went back to Betermier's paper, which talks about theoretically optimal real estate allocations, but also looks at some empirical data on real estate allocations.

It's kind of in that range, kind of interesting to see. Anyway, that's the only thing I have on real estate. I just, I was curious when I was looking at the total stock bond numbers. So back to bonds. When prices fall, as we talked about last time, expected returns rise. It's very mechanical in bonds. When stock prices fall, expected returns also rise, but it's not nearly as mechanical. With bonds it is extremely mechanical.

And when we found, when we did our expected returns paper a while ago, the predictive power of current yields was like, it explained 90% of the differences in future returns. Whereas for stocks, it's 20%. So current yields matter a lot for bonds. And when prices fall, current yields go up. Something that we didn't touch on in our last episode about bonds is that nobody's recommending a 100% fixed income portfolio.

And that's something that I think I regret not talking about in our last episode, I talked about here's what stocks look like in the data. Here's what bonds look like in the data, but we didn't talk about them together. And that's what really matters because assets in isolation don't matter. It's what do they contribute to a portfolio? So, that's one of the other things that I wanted to touch on in this re-visitation of bonds.

Before talking about that, after bond bear markets, I looked at the data on this, which is pretty interesting. So if you go back to 1900 using Canadian long term government bonds, which is what the Dimson, Marsh, Staunton data use, there are 13 calendar years because this is annual data, 13 calendar years with a real bond return of negative 10% or worse.

Two of those were in 2021 and 2013. And I'm going to leave those out of the rest of this discussion because there's not enough future data to make any interesting observations. So another interesting point actually is that all of these drops are before 1981, which maybe you'd expect because since 1981 rates have been going down, down, down, bond prices have been going up, up, up. So you don't have as much negative return experience. But leading up to 1981, we did have rising rates. And that's what people are worried about now, when people look at, oh, rates are going to go up, therefore bond returns are going to be terrible.

Well, I mean, there's some truth to that if rates go back up to 1981 levels, but of course we can't know that. So on average in these 11 calendar years, with a 10% or worse bond return, long term government bond return in Canada, on average, the return was negative 14% for those 11 calendar years. The worst was in 1915 where long term government bonds lost 26% in the calendar year.

Pretty bad. Long term government bonds are volatile assets though. We know this. So people shouldn't think about this and think, oh, my universe bond index fund is going to do the same thing. It's a different animal. There's not a whole lot of long term government bonds in universe bond index fund, not enough where your returns would resemble anything like this, at least over the same periods.

Now the decade of following those returns, and this is the part that I was really interested when I started pulling these numbers. So if we look at the decade following the returns, including the year with a negative 10% or worse return, so starting with that negative year and then including it in the decade, the following decade, the average decade returns were positive 1.73%.

Cameron Passmore: Real?

Ben Felix: Real annualized return.

Cameron Passmore: Gotcha.

Ben Felix: That is correct. The worst decade and we're going to talk more about this decade in a second, the worst decade was 1947. So the first year in 1947, there's a negative 10% return, real return. But then the average annualized return compound for the following decade was negative 2.8% real, but annualized. That hurts. The best decade, this was also interesting, the best decade in my sample of negative starting points was in 1920, where there was a negative 14% real return to start. And then it went on to have a positive 7.3% annualized real return for the decade.

Cameron Passmore: Wow.

Ben Felix: Now, we have this 1.73% figure. The other interesting observation there is that the real geometric average return for the full period 1900 to 2021 is a little over 2%. So in the decades following negative 10% or worse returns, you're actually pretty close to the long term average. So you start with the worst negative years as starting points.

The following decade is what is that? 27 basis points lower than the very long term average, including post 1981 where returns have been crazy high. I just thought that was kind of interesting. It's like a bad year is not a death sentence for bonds, it actually doesn't look a whole lot different from normal times.

The time for long term bonds to recover their real value after the negative 10% return, this is also an interesting data point, was on average 12.5 years, which is a long time. Don't get me wrong, I'm not minimizing that it is a long time, but it's heavily skewed by periods starting in 1947 and 1948. They took, are you ready for this? 42 and 38 years respectively to recover their real value.

So if you owned long term government bonds, Canadian government bonds in 1947, you took that initial hit, but you didn't recover your purchasing power until 42 years later. I thought that was pretty crazy, pretty crazy to see. I kind of knew that data point, but going through and seeing the numbers was ... that's wild.

Cameron Passmore: But again, these are long bonds, to confirm, long term bonds.

Ben Felix: Long term Canadian government bonds is what we're looking at here. Now, of course, over those 42 years, this is still a volatile asset. You're getting no compensation for taking on a whole lot of risk, which is not that fun.

Now, again, to be clear, we have been talking about long-term Canadian government bonds. We just talked about that really rough period of 42 years of flat real return starting in 1947 going until 1981 so before breaking even, you had taken some pretty serious losses in Canadian long-term government bond. So from 1947 to 81, you lost a cumulative 53% in real terms. That’s a big loss over a long period of time in annualized terms. It’s not that bad, but it chipped away at a lot of wealth over a long period of time. US government bonds were very similar in a cumulative term, it was a 50-basis point cumulative difference over that full period so kind of immaterial, very similar performance.

What’s interesting and I was very interested to see this result and curious before I looked at it because I really didn’t know what it was going to look like. Corporate bonds did better, depending on the data you look at, quite a bit better. So 1947 to 81, 53% cumulative loss in long-term government bonds, this is US data now, triple A corporate bonds over that same period loss a cumulative of 45% in one data series that I looked at, the Ibbotson series, in Morningstar. And then asked Damodaran, which has a return series as well for triple A so like high grade long-term corporate bonds and in his series, they lost a cumulative of 34%. So between the two data series, it’s a 40% cumulative loss over the period for taking a little bit more credit-risk, long-term corporates risk. Damodaran also has BAA bonds, so this is lower credit but still investment grade bonds. Again, long-term corporates but more credit risk and they lost a cumulative 18% so again, the material improvement. So we’ve gone from long-term government taking a big cumulative loss, long-term high grade corporates taking still a meaningful but not as bad as long-term government loss and again, taking a little bit more credit risk with BAA bonds. Again, still a long-term cumulative loss but not quite as bad.

What did we learn? Well diversification is important, we kind of know that but within bonds, diversification matters a lot based on this sample and of course, anybody investing in a universe bond index fund has corporates government bonds and different maturities, these are all long-term bond series we’ve looked at so far. And that’s all we’re going to look at because that’s what where most of the really long-term data tends to be and the other thing that is important of course, is how the bonds perform alongside stocks. So over these bad periods, I’ve looked at a 60/40 portfolio just of Canadian stocks and Canadian long-term government bonds. I didn’t have the corporates in here just to keep this piece of the analysis simple. In those bad periods for long-term government bonds, the decade starting with a negative 10% or more long-term bond returns, the 60/40 portfolio had on average a 6% real return per year over those decades. So, pretty good, relatively speaking, and that’s a better return than the full sample average for the 60/40 portfolio. And then, in the 1947 period where bonds had meaningfully negative returns for decades and were flat for more than 40 years, on average a 60/40 portfolio return 3.2% real from 1947 to 81 and that’s the period when bond returns were meaningfully negative. And then by 1989, when the long-term government bond portfolio had broken even to the purchasing power it had before things declined in 1947, the 60/40 portfolio over that period so 1947 to 1989, 60/40 portfolio return 4.4% so again, diversification at work, both within bonds and across stocks and bonds.

Would you have been better off in a 100% stock portfolio? Well, in terms of your total return, yes, but it would've been more volatile. And the last point I want to make, you would've had a wider distribution of outcomes or potential for a wider distribution of outcomes. So I asked Braden to look at this. He had a model built that we used a while ago to compare different equity markets. And I just said, "Hey, can you feed this data for bonds in a 60/40 portfolio into the same code?" It spat out some really interesting numbers.

So we looked at rolling historical bootstrap and Monte Carlo. So rolling historical is taking 40 years is the numbers I'm going to talk about. So it takes the 40 years starting in 1900 and tells us what the return looked like. And then it steps one year forward to 1901, tells us what that 40 year period looks like. And it keeps stepping forward one year until we've used up all the data.

That's the rolling historical periods. And then we did bootstrap. So bootstrap is randomly sampling from the actual historical return distribution with replacement. So we've got this big bucket of annual historical returns. We pull one out, stick it in our simulated distribution, put it back in, pull the next one out, it goes in our simulated distribution. And then we also did Monte Carlo where we take the historical mean and standard deviation. And we use that to randomly generate our own distribution of returns.

In this case, probably because we're using annual returns, the Monte Carlo and bootstrap are basically identical. A lot of the non-normal characteristics of stock returns seem to kind of go away or get a lot weaker when you do annual as opposed to monthly returns. So anyway, I'm going to talk about the bootstrap, but just so everyone knows if they're interested, the bootstrap and the Monte Carlo were very similar.

The cool thing about bootstrap is that with rolling periods, we're constrained. There are three non overlapping 40 year historical periods from 1900 to 2020, which is not a lot of data. The overlapping data is there's still information there, but it's the non overlapping samples that are really insightful, but we only have three.

With bootstrap, well, we ran 10000 simulations. So you just have way more data now. It's simulated. So there are pros and cons to that, of course. Anyway, the serial correlation. So when we run the bootstrap, serial correlation dies. That means any relationship that year to year returns might have like mean reversion or momentum or anything like that goes away. So we kill that with bootstrap.

That's one of the downsides. Maybe it's a downside, maybe it isn't, but it's a difference between bootstrap and a historical analysis. So using rolling historical periods at the 50th percentile, stocks returned 5.62% over 40 years, for bootstrap that drops to 4.63%. So, I just wanted to mention that to highlight the importance of serial correlation in the historical returns.

Mean reversion makes returns less volatile, which increases the 50th percentile return in this case. Because we don't have serial correlation, we might expect lower returns in our simulated results than we've had on average, but you don't necessarily want to bet on historical mean reversion repeating anyway. So, there's pros and cons. In the bootstrap, the 90th percentile return is 8%.

10th percentile is 0.95% for the global stock portfolio. So it's a big distribution of outcomes between the 90th and the 10th percentile. In terms of ending wealth, that's the difference between a hundred thousand dollars turning into 2.2 million at the 90th percentile or turning into 150000 at the 10th percentile.

It already has a big distribution of outcomes. It's not as big if we look at historical data, but I don't know if that's the right thing to do because we've got three periods and we know X post, they've all been pretty good, all things considered. In the 60/40 portfolio using the bootstrap, at the 90th percentile the return was 6.1%. And at the 10th percentile, it was 1.12%. So a much tighter range of outcomes in that case. And the 10th percentile is better than 100% stocks, marginally better, but it was still better.

So then we looked at the conditional value at risk CVAR, which the way we defined it is the average outcome in the fifth percentile of outcomes. So the average outcome in the fifth percentile, the worst outcomes on average, I guess. For stocks, minus 130 basis points. So we're deep in the left tail here, on average at the fifth percentile of stocks, minus 130 basis points.

Whereas for the 60/40 portfolio plus 46 basis points. Not a great return in either case, but difference between losing a lot and not making a lot. That's kind of that left tail risk for stocks that could show up. Who knows if it will though? I guess that's the risk. So again, keeping in mind that those results are from bootstrap. I think the historical data looks calming almost because of how good it looks because returns do revert to the mean, and they've been positive.

There's actually a paper that was floating around the Rational Reminder community today, looking at much longer historical returns, going back to the 1700s, that was something maybe we'll talk about in a future episode. But if you go back really far, this most recent period, like the starting in kind of 1940s to now, or even the 1900 to now, where stocks have pretty much always outperformed bonds over long periods of time, you go back further in history and there have been periods where stocks underperformed over long periods of time, 100% of the time relative to bonds.

And the data changes as well like how I mentioned corporate bonds earlier. When you compare stocks to long term government bonds, they look really good, relatively speaking. But when you add in corporate bonds, stocks have a higher hurdle to overcome. Anyway, so that's something we can touch on in a future episode. We're often lulled into a sense of safety by how good stocks look in the readily available historical data.

Cameron Passmore: Absolutely.

Ben Felix: That's obviously no guarantee of the future. And I think people get that, but I don't know. I think the risk of stocks in the long run often gets minimized. And we've talked about that, I think quite a bit in the last episode on this, just speaking to bonds as a diversifying asset. All of the years from 1900 to now, where stocks had negative returns, on average bonds had positive 1.5% returns.

So that's that benefit of diversification. In the first half of the sample though, where rates were rising as opposed to falling like they had been recently, when stocks had negative returns, bonds had on average negative 1.86% real one year returns, but stocks in that same period in the years where they were negative were on average negative 13.35%. So still a big reduction in draw down from holding bonds, even over that period where the correlation was positive as opposed to negative, like it's been more recently.

I also just wanted to touch on in the Credit Suisse Global Returns Yearbook, the 2022 edition, which came out recently, they had a pretty good discussion on bonds. So they show that while bonds have had larger and longer real draw downs in stocks, a portfolio of 50% stocks and 50% bonds has had fewer extreme negative events than either asset class individually.

So kind of what we were just saying there about the benefits of diversification, it just kind of makes sense. Because of the characteristics of each asset, you would expect them to respond differently to different economic circumstances. So the diversification benefits, I don't think that they should be too surprising. Dimson, Marsh and Staunton talk about how stocks and bonds have individually on several occasions throughout history lost more than 70% in real terms. Since 1900, a 50/50 blend of stocks and bonds has in the US never, and in the UK, almost never had a decline of 50% or more.

And the duration of draw downs is briefer for the blend than it is for bonds on their own. I alluded to this earlier, but they also make the interesting point that even though bonds are economically less risky, because the baseline expected return for bonds is lower than it is for stocks, it shouldn't necessarily be surprising that we do see in the data extended periods of negative real returns.

Because you're starting from a lower point, even with less volatility, it's not out of the ordinary to have long periods of negative or flat real returns. I mentioned correlations a second ago. One of the reasons that stocks and bonds have historically looked really good in portfolios, especially in more recent history is that they've had lower negative correlations. On average, the five year rolling average correlation of stocks and bonds in the US is negative 0.27, in the UK is negative 0.09.

Back to 1900, like I mentioned, they've been negative recently, but if you go back in time, there have been periods where they're pretty positive, long term government bonds and domestic stocks. Like in the UK, there was a point where the correlation, the five year rolling correlation was 0.8. That's very high. In the US, it was about 0.7 for a period of time.

So I mean, that's one of the things that I've seen people talking about, like the leveraged ETFs of long term treasuries and stocks. Let's combine those together in a portfolio and because they're negatively correlated, it's the perfect portfolio. You've got triple leverage and if they crash, they're going to crash at different times. So, it's basically free money, but the problem is this, it's like yes, in recent history where everybody has data to play with, correlations were negative, but you push it back another 50 years or more and there are lots of periods where correlations were positive and a strategy like that blows up real hard.

So my takeaways from poking away at these long term bond numbers is that after calendar years of poor performance, bonds tend to go on to produce historically normal returns on average, not necessarily high, but in line with the historical average. There are some outliers, one big outlier, which is long term government bonds in that period, starting in 1947, where they went on to have a long period of poor returns that cumulated in a very substantial long term loss at the worst point.

It is actually pretty time period specific too. If you dial that back a little earlier than 1981, it doesn't look quite as bad, but anyway, either way, it didn't look great. But like I mentioned earlier, to my surprise and perhaps my delight, over matched time periods, when those really bad returns for long-term government bonds happened, corporate bonds have done much better and bonds in a portfolio of stocks have done quite well.

And you take all that together and then think about the distribution of outcomes that we talked about, it's very reasonable to own bonds just for that purpose, just to reduce the uncertainty about future consumption. And as an asset class, I answered an email this morning, it's for the ETF All-Stars article that Money sends to us.

One of the questions from the person writing it was how much drag should we expect from aggregate bonds going forward on the assumption that rates are going to rise. And my response was basically that, well, if we could predict that rates were going to rise, say to 1981 levels, hey, maybe I would recommend not to own bonds, but I would recommend all kinds of stuff if I could predict rates going up to 1981 levels, but we don't know that. At this point in time, the expected returns of bonds are just fine, nothing wrong with owning bonds, particularly as part of a broader portfolio designed to meet a certain objective.

Cameron Passmore: Awesome insights. So we will do the dividend relevance next time.

Ben Felix: Yes. I mentioned that we were going to talk more about dividends and we are at a time today, but in a couple of weeks, we'll cover the relevance of dividend irrelevance. I'm quite excited about that topic. I think it's going to be a good discussion.

Cameron Passmore: I think it is. So how about we go over and have conversation with Aydin Mirzaee for the 22 in '22 reading challenge.

Ben Felix: Let's do it.

Cameron Passmore: Aydin, it's great to have you join us for the reading challenge discussion.

Aydin Mirzaee: Excited to be here. You know that I'm a big fan of you guys, so it's exciting to be here.

Cameron Passmore: Well, we're a big fan of you. And as we mentioned, your podcast, the Super Managers on this podcast, many times, it;s great to have you with us.

Aydin Mirzaee: Excited to chat about also a topic that I'm always excited about.

Cameron Passmore: Well, you're such a lifelong learner and you and I have exchanged emails many times just talking about different books. So it's great to have you join us to talk about your actual reading habits. So to kick it off, how do you describe your reading habit?

Aydin Mirzaee: It's interesting, right? I'm a very strange person. I don't know that I recommend other people do what I do, but I'm very much a creature of habit. So I think when I first started consuming content, it's very largely audio based was, back when we used to have to commute to the office, right? And so I learned that rather than listen to music and it was hard for me to make the transition because music is very ... it's awesome, right?

It puts you in a good mood and so on and so forth. But one thing I learned about myself and I think this is true for most people, is that even if you don't like doing something in the beginning, if you do it for long enough, then you will start liking it. And so I thought if I can only keep listening to an audio book instead of music, if I do it for long enough, my hypothesis is that I'm going to start enjoying it.

I started doing that and it was painful in the beginning, but then I got really addicted to it. So, much so that every time I got into a car or every time I went for a walk or as I'm in between things, it just became the thing. So if I could fill up my in between time with consuming content, that could be super valuable. And it's so interesting, just going back to the creature of habit thing, when the pandemic happened and Fellow, we're a remote first company now, and so my commute disappeared.

And I was very addicted to my audio book time. So this is why I don't recommend others do it, but basically I've decided to generate a commute for myself. So every morning I drive to Starbucks and I'm listening to my audio books on the way there, on the way back.

And then even when I go on my run in the mornings, I'm also listening to an audio book the whole way. And so I'm getting probably, I would say an hour to two hours of just content consumption time during this period while I'm doing other things. So I don't feel like I'm ever just sitting down and only reading. I'm always doing multiple things at the same time. And for a productivity junkie like myself, that really gets my juices flowing any time I'm like, ha, I beat the system and I got more out of my time than I otherwise would have. And so that's the stuff that excites me.

Cameron Passmore: Do you consume all your reading in the audio format?

Aydin Mirzaee: I would say I consume probably 90% of it in that way. I mean, there's a lot of advantages to doing things like this. I built some hacks around it. The way that I think about this is, books serve many purposes to me and we can kind of get into all the different purposes. But one of the things I find is that, especially with business books, one of the biggest things I get out of business books is it helps me generate ideas.

So a lot of times you'll have a book and I'm sure you've read books like this, where it's like, the title tells you the whole book. And you're like, why did I read that whole book? But the thing is that inevitably a lot of those sorts of books have a lot of different stories and examples and so on and so forth.

And a lot of times what I find is, when I'm consuming something like that in the process of listening to it, I will think about things related to my own business or what's going on in my own life. And so what I've learned is what I do, and oftentimes it's like, oh, I should talk to our marketing person and get them to look into this, or maybe what if we reorg our company like this.

And so it gives me all these different ideas. And what I've learned is that if I don't do something about the idea right away, then basically it's as if I didn't have it. So what I do now is, I have an Apple watch. And so every time I'm on a run or I'm anywhere, I'm constantly leaving voice notes for myself. And then what happens is, when I get back home at a desk, I action all of the ideas and the different thoughts and everything else that I got from the material that I consume.

So it looks really weird if you ever see me out there running, but I'm listening to this thing and then, speaking out loud as I'm basically taking down notes, but I've even taken the note taking process and I've turned it into an audio note taking format. So I would say Cameron, 90% of my ... And I consume a lot too. Volume wise, it is a lot of stuff.

I do sometimes buy the Kindle version of certain books if I want to reference them. The reason I like the Kindle version is because on your computer, you can also get the Kindle app, which allows me to control F and go to that section and copy and paste it somewhere else. So I know that as long as I know that something I can reference at a future date, having ... sometimes I will buy the Kindle version for that reason.

Ben Felix: Your reading habit sounds very similar to mine. I'm big on audio too. And I don't do voice notes. I have notes on my phone, so I'll stop and start typing on my phone. I probably look weird too, but in a different way, maybe not as weird as talking to my wrist.

Aydin Mirzaee: Ben, it's hard to do that if you're driving. So voice notes are incredibly helpful. It's such an unlocked though, the ability to do voice notes. It's amazing.

Ben Felix: I usually read while I'm walking, so it's not an issue, but the voice notes are definitely more versatile. It's a great idea. You mentioned business books. Do you have a favorite genre of book?

Aydin Mirzaee: I mean, this is an important thing for me too, because I always like talking about the why. And so for me, the thing I think about books is books are leverage. It's very interesting, right? You can basically say, imagine if I had the smartest person in a particular topic to teach me about a certain thing. People are all excited about the concept of a masterclass, but books basically are master classes.

This is extreme leverage. You can go choose any person in the world that you want to learn something from, if they've written about that topic and you can learn that. And here's the best part. They spend a lifetime learning about something and then they spend years writing and then you can consume it in 10 hours. If that's not leverage, I don't know what that is. So that's why in general, I'm very bullish on the concept, but in terms of genre, what I figured out is my favorite genre that I always get super excited about is biographies.

I particularly like them if the person, the author is over 70 years of age and my feeling is that after that point, people stop ... it's not about, showing off or hiding certain facts, they'll just tell you like it is, and it feels more real. And I also like it if it's in autobiography, that's definitely my favorite.

But what I would say is, each book has a different use for me. And so what I found is that I get different things from different books. Biographies are really good for me because they serve as, I learn a lot of things from them, but they're also very motivational in nature. Building a company is a lot of work. It's got ups and downs and sometimes it's more challenging and sometimes a rollercoaster ride and it's uncertain and it's not.

And so what I find is that it's a really good motivational boost for me to listen to the trials that other people have had and how they've kind of overcome them. And so, yes, I learn. It also helps my psychology as well. So I reserve those things for that purpose. And sometimes I won't waste them because I'll know that I really want to go through this, but I should really save this for a certain emotional time.

The other things I think about are different times I want to go deep on different things. I'm very excited about learning about something. And so, I've been very excited about, for example, operations in general and Cameron and I have been exchanging notes on this, but things like Working Backwards, the book or Amp It Up, or the High Growth Handbook, which I'm reading right now, these are very operationally focused books.

And what I found is that, if you can figure out what's going on in your life and what you really want to kind of amplify, reading something that is related to that will get you to get way more out of the book than you would at another time, because you're just going to be that much more interested. If I force myself to read something where it's not super relevant to me right now, the interest at which I'm reading that thing is way lower.

And so I will get a lot less out of it, which is why a lot of times it's not just about what is the book, but it's also about what is the book for the period of what would benefit you the most. So it's almost like, we talk about product market fit. It's like book, time period in your life fit. And so High Growth Handbook, which I'm consuming right now, you don't understand, it's how do I generate more in between time so I can just really hardcore listen to this. I'm listening to it at two X speed. Maybe I should take a day off and just like, oh listen, because it's so relevant to what's going on at Fellow right now. And it increases my interest.

Cameron Passmore: So where did you get the idea to read that book from? Who sourced that for you?

Aydin Mirzaee: This particular one I got at a CEO peer group. It's basically a CEO peer group. And how peer groups grow, you basically are like, hey, here's some challenges. And people tell you about experiences. And someone said like, hey, have you read this? And I said, "No," and a few other people seconded it. And so I started listening to it and it's awesome. I haven't finished it. I rarely recommend something before I finish it. But in this particular case, it is that good.

Cameron Passmore: That was my next question. Because you referred a number of books to me. Can you share how and why you commonly recommend certain books?

Aydin Mirzaee: Yeah. By the way, this is a thing that I think about advice in general. Advice is really dangerous and time is super valuable. So everybody has a book recommendation, right? And so I think it's not the book recommendations that matter. I think the important question to ask is why do you recommend that book?

And a lot of times they'll tell you about, oh, it taught me about this thing. And I'm like, oh I already know that thing. It's not like the best thing for me to prioritize. But I think rarely, we kind of look at someone we admire and then we say, oh, what book are they recommending and then I should go read it. We rarely ask a second question, tell me why you like it so much. And that tell me why is often the real reason that you should kind of look through it.

But I mean, it's interesting. I mean, you know that I like biographies and I think Cameron, when I started recommending stuff, I think you had ... I forget which book it was that you were saying, oh, it's so good. And then I said, "Oh, if you like that, then these are some other things."

And two of the books that we talked about were Shoe Dog and Open. Shoe Dog, which is Phil Knight, Nike's autobiography and Open, Andre Agassi's. But one thing that both of those have in common is they were, and I may be butchering his name, but they were both ghosts written by or written with the help of J.R. Moehringer. That's very interesting, right? So sometimes I'll also say, oh, someone wrote something and it's so good that I'm going to ... Like Brad Stone, I think wrote The Everything Store. And then he wrote some other things. So sometimes I'll also follow who's writing this content too.

Ben Felix: Do podcasts play a role in your reading habit?

Aydin Mirzaee: 100%. So podcasts are super important, especially when there are topics that are not really covered in books all that well. So, one thing that I've taken an interest to, I mean, I'm not the only one out there, but is just crypto currencies and web three. And I don't think the best way to learn about that is to go read a book.

And so there's a lot of really great podcasts about it. And so it's kind of outside of my norm. So what I do for that is I'll subscribe to some podcasts, industry specific. That's how I consume my content that way, but I try to get different types of content from different sources of content.

Cameron Passmore: So you have three kids. Can you tell us about how you encourage them to read?

Aydin Mirzaee: So one of my favorite books is, I don't know if you've read it, I actually, I highly recommend it to parents, although six may be a little too young for this, it's called Why An Economy Grows and How It Crashes. Pretty sure it's a Peter Shift book. You may or may not agree with all of his opinions on all the things, but this book in particular is really good.

And I'll tell you why. It's basically this cartoon animated book. And it starts off with three people on an island. And the way it works is, they go fishing with their hands and every day they can only catch one fish. And then they consume that fish and they need one fish to survive. And then this is how things go. One day one of them has a dream and invents a net. And so all of a sudden he can catch two fish in a day.

So he starts to have a savings rate. And so it just goes from this very basic thing, all the way to quantitative easing and international trade. And it kind of builds up an economy in that way. And so I started reading this to my six year olds and it's trying to teach them about economics very early on. And it turns out it's really hard to teach people about credit and debt and a lot of ... and how you should charge more interest if there's going to be more risk and all these things to a six year old, but I'm working hard at it. But I recommend the book. That's one of the ones that I've actually personally read more than once. So, it's awesome.

Ben Felix: I'll have to check that one out. What advice do you have for someone who wants to read more?

Aydin Mirzaee: The main thing is to capitalize on your emotional state and say, what book can benefit me the most right now? What thing, that if I learned, I'd be the most interested in. The other thing I would say is, read multiple things or consume multiple things at a time. Again, I have a roster of things, usually four to five that I have at any point in time.

And depending on what I feel like, I will listen to that. The other thing I found is, for me, from a retention perspective, it's really good for me to alternate between books. Because if I, let's say, listen to two hours worth of a book, there might be a lot of things that I would learn. And it's harder for me to digest all of them. But if I only listen to 30 minutes of one and then switch to 30 minutes of another, it allows this, I don't know, gap that allows me to then digest the information better and be able to describe what I've read in that thing.

The other thing I would say is, don't feel like you need to finish things. I often don't finish a lot of things. I have multiple things on the go and I don't feel bad if I bought something and I don't finish it. To me, the other way I look at it is not number of books. I don't care how many books I consume. The way I think about it is I'm going to devote one to two hours a day of content consumption and I'm going to fill it with the best things that I can. And I don't care where it comes from or how it's done, or if I finish something or not, it's about, that's what I'm optimizing for on a per day basis. And I think if I can do that, I feel pretty good.

Ben Felix: You talked about voice notes and you talked about actioning things that come out of those voice notes right away. Do you do anything else for long term retention? Do you have a notebook or anything like that?

Aydin Mirzaee: I don't do anything specific. Occasionally what I've done is, I've taken notes. I do journal and occasionally I'll put in lessons there, but the thing I found for me specifically, just the way I operate, if I learn something and I describe it to someone else, it is imprinted in my brain and it'll never go away. If I don't repeat what I've learned to someone else, then it doesn't happen.

So one of the things that my wife, Amanda and I do is, at the end of the day, amongst our debrief of the day, I will also say, here's something I learned. And because I've said it, I will remember that 100%. So it's just the repetition and explaining it to someone else. You really have learned something if you can explain it to someone else.

Ben Felix: That's a great idea. I like that a lot.

Cameron Passmore: Super. Aydin, thanks so much for joining us for the reading challenge. So can you stick around for the talking sense part?

Aydin Mirzaee: Yeah, let's do it.

Cameron Passmore: So these are the cards from the University of Chicago Financial Education Initiative. Ben and I have kind of put this on ice for probably a couple months now, hey Ben, so we'll jump back in with some cards.

Ben Felix: Well, we finished all the cards, right? Didn't we get them all?

Cameron Passmore: I think we did, but I think I found some that I don't remember us doing, which may speak more to my memory than anything. All right, Aydin, you ready?

Aydin Mirzaee: Yeah.

Cameron Passmore: Here's a question. What is something you really want to buy, but you don't need?

Aydin Mirzaee: Can it be something that I did end up buying?

Cameron Passmore: Sure.

Aydin Mirzaee: It's very funny. I don't know if you've heard of this. There's this thing called an eight sleep mattress and it's basically this temperature controlled mattress where you can have a temperature and your partner can have a temperature and apparently it promotes better sleep. And for a long time, I was like, ah, that's like, just turn up the air conditioner and it'll be fine. But I went out and I bought it and definitely don't need it, but it actually had a very good impact on my life. So I wish I had done it earlier. So maybe buy the things that you don't need.

Ben Felix: Wow. Wait, so you're really sleeping better with that mattress?

Aydin Mirzaee: Oh, 100%. And the way I know it is I've been really obsessing about sleep is I always have an Oura Ring, which tracks sleep. So when I saw the numbers in my Oura Ring improving, that was kind of more the numeric data about, yes, this thing actually works. The biggest hack in the world is getting better sleep.

And it used to be, we used to show off about, oh, I have so little sleep. Look at me how hard I work. But actually now I show off about getting good sleep and a whole bunch of people at Fellow, I think there's seven or eight of us that all have the Oura Ring and it's awesome.

Ben Felix: I also obsess about sleep. Now, I'm interested in the mattress.

Aydin Mirzaee: Cool.

Ben Felix: My answer to the question, Cameron is a bike. I don't have a bike right now and I haven't had one for years. They're kind of hard for me to get, because I'm pretty tall. You can't just go into a store and buy a bike. So I want one, haven't bought one yet.

Cameron Passmore: So, what does that mean? You need a custom bike?

Ben Felix: That's what I mean, yeah. It's not as easy as walking into a store or even ordering from most manufacturers.

Cameron Passmore: But that's something you want and you do need, you should get one, especially up there.

Ben Felix: Do you need a bicycle? I don't think I need a bicycle.

Cameron Passmore: What I want is an epoxy resin garage floor finished, but I don't really need that. You must have that, Aydin.

Aydin Mirzaee: No, actually I don't. I have a friend that does. They are nice. You can slide on them and ...

Cameron Passmore: All right, next question for you, Aydin, what is the best thing about money and what is the worst thing?

Aydin Mirzaee: What I've come to realize is that the best spend of money is anything that you can do to save you time or increase your time. That is the best use of money that I've realized over the course of time is just, what can I do to increase the amount of time so that I can focus on the things that I love doing.

That's the best use. The worst thing about it is it's a thing to think about and it's a thing to manage. As you all know, when I first started working with you, it was after I sold my last company. And so before that I didn't have all that much to manage. And so after it becomes a thing that you actually have to actively think about and you have to manage, but it can be useful to get you more time.

Cameron Passmore: Ben?

Ben Felix: Similar to what Aydin said, the best thing about money is that it allows you to move economic value through time. That's a pretty cool thing. The worst thing about it, it's addictive. We know that to be true, it's addictive in the same way that gambling or drugs are addictive, the desire to obtain more money and the feeling you get when you do. So I think that as a generalization is a bad thing about money.

You probably had the author, The Psychology of Money.

Ben Felix: Yep. Morgan Housel.

Cameron Passmore: Morgan. For sure. For me, the best thing is it can buy experiences. I think if the kids talk about a lot of the trips we've done and great things we've done together, and I think your worst things are great. Last question, name a job that you would never consider doing and why. I'll go first. To me, I couldn't stand being a scientist in a lab, something about doing something highly technical in a very private indoor environment like that. It appears to be very introverted. It may not be, but that's my observation. Aydin?

Aydin Mirzaee: I'm very oriented around doing things where I have full control over my destiny. I feel like having control over my destiny is the most important thing for me, the thing that I value the most. And so it often leads me into entrepreneurial endeavors where that's just there, but anything where, if I had to be ... If you put me in a box and you said you have to operate in this specific way and do these specific things and you can't do anything any other way, anything that would have a lot of rules, I would not operate well in that. That applies to many a jobs out there, but would not work for me.

Ben Felix: I'm not good at being told what to do either. A job that I would never want to do is selling something that I don't believe in. I've done that before. And it's miserable.

Cameron Passmore: What did you sell?

Ben Felix: Commission mutual funds and insurance. My first ever job that eventually led me to you.

Cameron Passmore: I didn't know if your title was something before that.

Ben Felix: Nope, that was it.

Cameron Passmore: Awesome. Must have been fun. Aydin, great to have you on.

Aydin Mirzaee: Always fun chatting. You know I love the show and thanks for all the work you do.

Cameron Passmore: Awesome. Well, thank you. And thanks everybody for listening this week.