We interviewed Žiga Vižintin of https://irrationalretirement.com/about/. We talked about some common themes of this investigative series: -delay discounting -episodic future thinking -lack of intuition about growth in curves -harnessing the power of time -gamification Listen in as we tie it all together to design a retirement fund contribution stimulus app to produce irrational levels of investment in your future. WHAT WE DO We solve the mathematical problem of causing an enormous increase in one's bank account balance through human effort. The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour. WHERE WE ARE Twitter: https://twitter.com/ergofin Podcast: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8yN2I1YzZhYy9wb2RjYXN0L3Jzcw?sa=X&ved=0CA Substack: https://behafin.substack.com/

In this episode we introduce you to the science, taboo and business of psychedelics. Tara Austin, consulting partner at the Ogilvy Behavioural Science Practice, wants to run as a UK conservative party candidate on a psychedelics platform. Josh is in the top 100 psychedelics influencers and founder of Psilocybin Alpha. We first came across Tara when she rescued David Nutt's psychedelics presentation at Nudgestock after his internet cut out: In turn, she introduced us to Josh after we expressed an interest in the business of psychedelics. Josh was involved in this recent piece on psychedelics research in Yahoo News. It was a terrific discussion covering a couple of significant psychedelics stocks, Atai Life Sciences and Compass Pathways. Importantly, Josh also emphasised the long term commitment of not for profits such as Multidisciplinary Association for Psychedelic Studies (MAPS) and Usona Institute in combating the taboo created by the Nixon administration. In addition to her political plans, Tara is currently involved in the Psilocybin Access Rights campaign (visit par.global or https://www.cdprg.co.uk/psilocybin). This has the goal of changing the classification of this drug so people are not criminalised for possessing it, and so it can be used as medicine. Visit the website to see how to contribute. After dispatching the psychedelics taboo, we ended with the next taboos Josh and Tara are turning their attention to. Quite inspirational guests, and we are proud to have had the chance to bring them to you. Thanks again Tara and Josh. WHAT WE DO We solve the mathematical problem of causing an enormous increase in one's bank account balance through human effort. The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour. WHERE WE ARE Substack: https://behafin.substack.com/ Twitter: https://twitter.com/ergofin Podcast: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8yN2I1YzZhYy9wb2RjYXN0L3Jzcw?sa=X&ved=0CA

Last episode Nick Mishkin (https://behafin.substack.com/p/s3e4-being-intelligent-about-emotions) mentioned Keith Chen’s futured languages research. Here he mentioned Japanese is not a futured language, which leads us to this episode where we spoke with @CacheThatCheque (https://twitter.com/CacheThatCheque), a value investor in Japan!

CTC mentioned a few resources to help foreigners get to know the Japanese market, such as the Buffett Code screener (https://www.buffett-code.com/), which is easy to use in conjunction with Google Translate. He recommended searching for blogs in Japanese for deep dives on businesses brought up by the screener. Examples of such blogs are:

1. https://tsubame104.com/archives/category/%e9%8a%98%e6%9f%84%e5%88%86%e6%9e%90
2. https://net-net-value.com/totalranking/
3. https://tsubame104.com/archives/5126
4. https://toushi-matomeblog.com/
5. https://tsubame104.com/

CTC's Twitter has his portfolio pinned. During the interview we discussed Eiwa (https://www.eiwa-net.co.jp/english/).

As such, CTC gave us a great overview of the Japanese market and some useful tools to find one’s way around it as an outsider.

Perhaps the most important thing, however, was the discussion at the beginning on how Japan isn’t the dull place it has long been thought to be. It has grown at the same rate as Western markets in the past ten years, for example. With half the market available for purchase net of cash, much opportunity awaits for activist investors.

As an aside, here is a very popular recent ergodicity tweet. 

WHAT WE DO

We solve the mathematical problem of causing an enormous increase in one's bank account balance through human effort. The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour.

WHERE WE ARE

1. Substack
2. Twitter
3. Podcatchers
4. YouTube
    

Nick is doing an MA in behavioral economics at IDC Herzliya (https://www.idc.ac.il/en/schools/rris/pages/behavioral-economics.aspx). We reached out to him for an interview because he curates the Behavioural Economics podcast playlist (https://open.spotify.com/playlist/2qVC324gaGLfO9HVoSddNv?si=hg8DUYx0QKGnEliXZ_nYiQ&nd=1). As it happens, he’s also been interviewed on Merle’s blog (https://www.moneyonthemind.org/post/interview-with-nick-mishkin), whom we interviewed recently ourselves! Yes, we’ve reached that stage of penetrating the behavioral finance landscape. Have a read of the reference list below for the topics he covered in this interview. The most useful point for our mission to understand why no one executes on Ben's Billion Dollar Compounding Plan is futured language, the first study below by Keith Chen.

REFERENCES

Chen, M. K. (2013). The effect of language on economic behavior: Evidence from savings rates, health behaviors, and retirement assets. American Economic Review, 103(2), 690-731. Accessed 24/7/21: https://www.jstor.org/stable/pdf/23469680.pdf.

Crosby, D. (2018). The Behavioral Investor. Harriman House. Accessed 24/7/21: https://www.amazon.co.uk/Behavioral-Investor-Daniel-Crosby/dp/0857196863.

Danziger, S., Levav, J., & Avnaim-Pesso, L. (2011). Extraneous factors in judicial decisions. Proceedings of the National Academy of Sciences, 108(17), 6889-6892. Accessed 24/7/21: https://www.pnas.org/content/pnas/108/17/6889.full.pdf?nr_email_referer=1%29%2C.

Levav, J., & Argo, J. J. (2010). Physical contact and financial risk taking. Psychological Science, 21(6). Accessed 24/7/21: https://journals.sagepub.com/doi/abs/10.1177/0956797610369493.

Levav, J., & McGraw, A. P. (2009). Emotional accounting: How feelings about money influence consumer choice. Journal of Marketing Research, 46(1), 66-80. Accessed 24/7/21: https://journals.sagepub.com/doi/pdf/10.1509/jmkr.46.1.66.

Matsumoto, D., & Willingham, B. (2006). The thrill of victory and the agony of defeat: spontaneous expressions of medal winners of the 2004 Athens Olympic Games. Journal of personality and social psychology, 91(3), 568. Accessed 24/7/21: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.491.414&rep=rep1&type=pdf.

Simonsohn, U. (2007). Clouds make nerds look good: Field evidence of the impact of incidental factors on decision making. Journal of Behavioral Decision Making, 20(2), 143-152. Accessed 24/7/21: https://onlinelibrary.wiley.com/doi/pdf/10.1002/bdm.545.

Thaler, R. H. (1999). Mental accounting matters. Journal of Behavioral Decision Making, 12(3), 183-206. Accessed 24/7/21: https://onlinelibrary.wiley.com/doi/abs/10.1002/%28SICI%291099-0771%28199909%2912%3A3%3C183%3A%3AAID-BDM318%3E3.0.CO%3B2-F.

Paul Lloyd, CMO of Snoop, tells us about how the app arose through the introduction of open banking legislation, and exists to help people save money whilst monitoring their spending. He mentioned using Openwrks.com for bank data, although they themselves need to perform additional data cleansing. A nice function of the app is displaying user contributed tips on deals or cheaper services. It was a privilege to hear from someone with Paul's depth of experience, having spent 20 years at Virgin Money prior to the Snoop venture.   More here: https://snoop.app  WHAT WE DO     We solve the mathematical problem of causing an enormous increase in one's bank account balance through human effort. The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour.     WHERE WE ARE   Substack: https://behafin.substack.com/  Twitter: https://twitter.com/ergofin  Podcast: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8yN2I1YzZhYy9wb2RjYXN0L3Jzcw?sa=X&ved=2ahUKEwjowqeApeLtAhU-LbcAHUHCBm0Q9sEGegQIARAC  YouTube: https://www.youtube.com/channel/UC4MEB2vMIQYNOqz2ofyLiBQ

Merle van den Akker is a behavioral science PhD candidate at Warwick Business School. She runs the Money on the Mind (http://www.moneyonthemind.org/) blog and co-hosts the Questioning Behavior (https://youtube.com/channel/UCcz8ms4jDnmqcRlOR5RQSIg) podcast. She can also be found on Twitter (http://www.twitter.com/moneymindmerle). In this interview we discussed her research on contactless payments and other technology-based means of removing friction and a sense of loss from the paying process. This is a fundamental issue for those practicing personal financial self care, who wish to maximize the proportion of their income that is invested rather than lost during unnoticeable spending events. The interview also covered research on poverty and the feeing of time as someone struggling to survive. We discovered that hyperbolic discounting rates modulate depending on one’s level of financial distress. A key study she cited is On the Psychology of Poverty (https://science.sciencemag.org/content/344/6186/862). This lead us to a discussion of structures in society that stop people lifting themselves out of poverty, a key challenge to our assumption that the compounding sheet discussed throughout this series shall be sufficient to take care of people’s financial prosperity. Similar to our S1E9 interview with Leigh Caldwell, she pointed out that business ventures are a major differentiating factor in finding financial success. It appears then that not only good financial compounding behavior but also starting a business shall need to be a focus of this podcast going forward, to answer the question why almost no one is seriously on a path to accumulating a billion dollars within 3 generations. Finally, as a PhD candidate, Merle was an excellent source of information on conferences: https://eshop.qmul.ac.uk/conferences-and-events/conferences-events/conferences-events/behavioural-finance-working-group-2021 http://www.rbfc.eu/ https://waset.org/behavioral-finance-and-markets-conference-in-october-2021-in-paris https://conferenceindex.org/conferences/behavioral-economics https://www.aobf.org/ https://www.behavioraleconomics.com/event/boulder-summer-conference-on-consumer-financial-decision-making/ https://www.consumerfinance.gov/data-research/cfpb-research-conference/2021-cfpb-research-conference/ https://warwick.ac.uk/fac/soc/wbs/subjects/bsci/events/spudm_2021/ https://www.ukfinance.org.uk/events https://cepr.org/content/cepr-network-household-finance

Francesca Johnston (https://twitter.com/FrancescaChess) is a behavioral science master’s student at the London School of Economics. We talked applications of behavioral design to fintech. 

The premise of latest book by Dr Grace Lawden from LSE was hyperbolic discounting: https://www.amazon.co.uk/Think-Big-Small-Steps-Future/dp/0241420164/ref=sr_1_1?dchild=1&keywords=grace+lordan&qid=1622051681&s=books&sr=1-1. This author states that the most effective behavior change means is medium term, not long term: 5 years.

Fintech BD exmples:

Episodic future thinking by NatWest: contrasting yesterday, today and tomorrow’s versions of the self: https://www.moreaboutadvertising.com/2021/03/natwest-strikes-an-optimistic-note-with-thepartnerships-new-tomorrow-begins-today-line/. Aged images of your future self helps to reduce the effect of delayed/hyperbolic discounting: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3949005/.
Monzo: Designing good mental health into the way we bank: https://www.designcouncil.org.uk/news-opinion/monzo-designing-good-mental-health-way-we-bank.
Plum: an app for your financial health and wellbeing: https://withplum.com/.

Effects:

Prospect theory is composed of loss aversion, anchoring and the probability effect: https://en.wikipedia.org/wiki/Prospect_theory. It is about how humans make decisions where there is a degree of uncertainty, such as investing.
Memories are built based on our biases, they can be distorted by: duration, neglect, forecasting bias, spotlight effect (https://thedecisionlab.com/biases/spotlight-effect/).
Peak-end effect: https://en.wikipedia.org/wiki/Peak%E2%80%93end_rule.
Loss aversion: https://en.wikipedia.org/wiki/Loss_aversion.
Anchoring: https://en.wikipedia.org/wiki/Anchoring_(cognitive_bias).
Losses are felt twice as much as equivalent gains: https://milfordasset.com/insights/investors-feel-losses-twice-much-gains.
Lunch effect: judges just before lunch sentence more people: https://www.nytimes.com/2011/08/21/magazine/do-you-suffer-from-decision-fatigue.html.

We interviewed David Fanner, behavior analyst at Ogilvy, about how to execute on Ben's Billion Dollar Plan from S1E1. David can be found at https://twitter.com/utterlydavid. David’s behavioral science heroes are Rory Sutherland (https://www.amazon.com/Alchemy-Curious-Science-Creating-Business/dp/006238841X) and Nicholas Christakis (https://en.m.wikipedia.org/wiki/Nicholas_Christakis). Here are some notes on the first principles he mentioned. Get who to: Use a “Get who to” analysis. As a first step, “Get 18-34 year olds to start investing”. As a second step, look at retention: “Retain family members in the behavior continuing the dynasty.” You can also do a COMB analysis (capability, opportunity, motivation = behavior). -Capability: physical, mental (knowledge about how to invest). -Opportunity: physical and social. Design of the lift vs the stairs. If stairs are further than the lift then the physical opportunity favours the lift. Social: do you or the office identify as stair users, are you a weirdo for using stairs? There can be a social barrier or bitter divide between groups. -Motivation: reflective, automatic (95% of decisions are automatic). Priming relates to automatic. Put incentives in the present: A participant in a prior Nudgestock (https://www.nudgestock.co.uk/) stated that putting the incentives in the present is key. A pint at the end of the month is less motivating than something nice now. With Ben’s Billion Dollar Plan we have the opposite, a payoff 3 generations later. Humans have multiple time perspectives: Zimbardo - time perspective inventory, there are more than a handful of time perspectives that we shift in and out of throughout the day, here’s a speech by Zimbardo https://youtu.be/0YuzfwZlTJ0. Naming: name it after yourself or something meaningful. ‘Ben’s Billion Dollar Plan’. As it’s named after you, you can claim credit in the now. The concept of designated driver, spread through soaps, made it ok for one person in a group not to drink for the good of others. Name the investor similarly. Make the desired behavior a default: Prefilled boxes. Tap and go. Remove the potential to fiddle. Add friction to undesired behavior. Goal gradient effect: As we approach a goal we put more effort toward it. Make mini milestones, thousands of them. Design the environment: How does everything in your life point to this behavior?  Fresh start effect: People are much more likely to start new behaviors at temporal landmarks.  Streaks: you’ve been doing this for x days in a row. Backfire effects, you need a forgiving streak. Variable rewards: variable rewards elicit a far more enthusiastic, effortful response compared to constant rewards. Badges: fitness apps often use badges, as do computer games and some investing communities such as www.strawman.com. Accountability buddies: if you have a buddy to hold you to account, they can keep you on course. Private clubs: Invite only clubs are far more interesting. Acquisitions are more likely to be the ones who will be good for the service as they’ll be nominated by people already in the club. Members also get to subtly signal to the in group that they’re part of the same thing.

We interviewed Yegor, author of From 100k to 1M (https://from100kto1m.substack.com/
). You can also find him on Twitter and Instagram using the handle @from100kto1m (https://twitter.com/from100kto1m/
, https://www.instagram.com/from100kto1m
).   

Yegor is a value investor aiming to make 1,000,000 from 100,000 within 5-10 years and maintains a record of this on Substack. He uses this as motivation but also for evidence of his achievements if he decides to become a fund manager.   

He has met and was educated as a value investor by Phil Town. He is something of a legend: https://www.ruleoneinvesting.com/
.  

Finally, shoutout to Fintwit Summit organisors where we met Yegor, showing that the summit lead to great connections and further content for #FINTWIT
. Onwards.

WHAT WE DO  

We solve the mathematical problem of causing an enormous increase in one's bank account balance through human effort. The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour.  

WHERE WE ARE

Substack: https://behafin.substack.com/

Twitter: https://twitter.com/behafin

Podcast: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8yN2I1YzZhYy9wb2RjYXN0L3Jzcw?sa=X&ved=0CA

In this second part of our interview with Jag, he turned the tables and interviewed us. Here he showed his wealth of experience in finance by prodding us to find something deeper than merely aspirational purchases like Lamborghinis. He warned us that inspiration is more durable as a motivator. Have a listen for the path he directed us down with his line of questioning.

As always, here are some links to topics discussed during the session so you don't have to Google them yourselves:

• Family Fortunes: How to Build Family Wealth and Hold on to It for 100 Years - https://www.amazon.com/Family-Fortunes-Build-Wealth-Years/dp/1118171411
• Is it True that 40% of Americans Can’t Handle a $400 Emergency Expense? - https://www.cato.org/blog/it-true-40-americans-cant-handle-400-emergency-expense-0
• Canadians and their Money: Key Findings from the 2019 Canadian Financial Capability Survey - https://www.canada.ca/en/financial-consumer-agency/programs/research/canadian-financial-capability-survey-2019.html
• Square Kilometre Array - https://www.skatelescope.org/
• Earliest Record of Accounting - https://fremont.edu/history-of-accounting/
• France CAC 40 Stock Market Index - https://tradingeconomics.com/france/stock-market
• Black Walnut Trees, grow black walnut wood for profit - https://treeplantation.com/black-walnut.html
• How Beeple Crashed the Art World - https://www.newyorker.com/tech/annals-of-technology/how-beeple-crashed-the-art-world
• Stashing Your Art in a Tax Haven Can Be Dicey - https://www.barrons.com/articles/stashing-your-art-in-a-tax-haven-can-be-dicey-1445663281
• Behind Closed Doors: A Look At Freeports - https://itsartlaw.org/2020/11/03/behind-closed-doors-a-look-at-freeports/
• The Compound - https://docs.google.com/spreadsheets/d/1k0IDctrpzyLjFFjYqTiPXZuSTwYFJdK-QZQ3AG859Dw/edit#gid=485472545
• The Average Canadian Salary in 2020 - https://www.jobillico.com/blog/en/the-average-canadian-salary-in-2020/
• Personal Income in Australia - https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/personal-income-australia/latest-release
• The Selfish Gene - https://en.wikipedia.org/wiki/The_Selfish_Gene
• Memes - https://en.wikipedia.org/wiki/Meme#Dawkins
• Positive Psychology and Familial Factors as Predictors of Latina/o Students’ Psychological Grit - https://journals.sagepub.com/doi/abs/10.1177/0739986315588917

DISCLAIMER:

This is not financial advice. We are not financial advisors.

AD:

One way to manage behavior when investing is to use http://passiv.com/behave. This can be used to rebalance your portfolio, with one click, in accordance with allocation rules you have set.

INTERVIEWEE: JAGDEEP MAVI

Jagdeep Mavi (https://twitter.com/jagmavi) has a hedge fund and ETF sales background. His focus is on maintaining a portfolio of uncorrelated assets to minimize turbulence. His extensive experience gives us great insight about managing behavior as well. This is the first part, in part 2 he turns the tables and interviews us, so keep an ear out for the next episode.

Links to some of the topics discussed: 

• The Lost Decade (https://www.pattonfunds.com/remembering-a-lost-decade.html)
• ETFs (https://www.investopedia.com/terms/e/etf.asp)
• Non recourse finance (https://www.investopedia.com/terms/n/non-recoursefinance.asp)
• Non recourse leverage (https://www.investment-and-finance.net/finance/n/non-recourse-leverage.html)
• Out of the money call options (https://www.investopedia.com/terms/o/outofthemoney.asp)
• Wallstreetbets (https://www.reddit.com/r/wallstreetbets/)
• Volatility and tail risk investing (https://thehedgefundjournal.com/volatility-and-tail-risk-investing/)
• Tail risk hedging (https://verdadcap.com/archive/tail-risk-hedging)
• Mutiny Fund (https://mutinyfund.com/)
• World Tree: Impact Investing for Everyone – Future for Farmers (https://www.worldtree.eco/)

Alistair Cowley is a value investor who runs a website: growthwithvalue.com and podcast by the same name (https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8xZjJjYzQ5MC9wb2RjYXN0L3Jzcw?sa=X&ved=0CAMQ4aUDahcKEwjwy9yy_azvAhUAAAAAHQAAAAAQAg&hl=en-QA). His heroes include Warren Buffett and Tony Hansen (https://www.youtube.com/watch?v=FD7dF2QrnTw), particularly with regard to having skin in the game and only taking a performance fee. As an aspiring fund manager, Alistair has written an owner's manual for his portfolio (https://growthwithvalue.com/wp-content/uploads/2020/11/Owners-Manual-1.pdf). 

An example of his analysis skills is this report on Flight Centre: https://growthwithvalue.com/wp-content/uploads/2020/12/Flight-Centre-Company-Analysis.pdf. As shown in this report, he uses a checklist. This has been distilled from a number of books by expert investors, such as found in: 

1. The book Financial Shenanigans (https://www.amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071), and the 
2. Credit Suisse whitepaper Measuring the Moat (https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=em&document_id=1066439791&serialid=RojFyPPuyB52GjdsfOiNhlbEB2L63HISLZqSTpL1p48%3d)* 
3. And Tao of Charlie Munger (https://www.amazon.com/Tao-Charlie-Munger-Compilation-Commentary/dp/150115334X) In one of our standard final questions he mentioned the mental handwashing equivalent of ignoring market volatility. 

This is a point emphasised by the great Australian investment advisor Peter Thornhill: https://www.youtube.com/channel/UCwH2W3eN7WoWWTC7KiUVR6A/videos. Some useful episodes from the Growth With Value Podcast are: 

1. Filtering the market: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8xZjJjYzQ5MC9wb2RjYXN0L3Jzcw/episode/ZTQwM2JkMGQtN2VmNy00MDQ5LTg1YjgtN2JjNDIyODQ0OWY4?sa=X&ved=0CAUQkfYCahcKEwjwy9yy_azvAhUAAAAAHQAAAAAQAw&hl=en-QA
2. Discount Cashflow Analysis: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy8xZjJjYzQ5MC9wb2RjYXN0L3Jzcw/episode/NTk5MjE4N2QtMzI2NS00OWQxLWIyNjgtM2JlYzQ5YjlkN2E1?sa=X&ved=0CAUQkfYCahcKEwjwy9yy_azvAhUAAAAAHQAAAAAQAw&hl=en-QA 

Alistair's watchlist can be found here: https://growthwithvalue.com/watchlist/. It is a good place to start to see which businesses he likes based on his framework.

*Mauboussin is a great resource: https://themokaya.com/2020/12/28/michael-mauboussin-resources/

Today we talked with licensed clinical psychologist and behavioral finance consultant Dr. Joy Lere. We covered the paralysing effect of shame and how it's a mistake to think of emotions as bad. The conversation then turned to relationship damaging, smartphone-driven habit loops and the consequences for our capacity to focus. We concluded with a discussion about possibilities for elevating, rather than obscuring, humanity's wealth accumulation abilities. Dr. Lere was introduced to us via Twitter by none other than Dr. Daniel Crosby, author of The Behavioral Investor. She can be reached on Twitter and Instagram with the same handle, @joylerepsyd. She's also on LinkedIn and Substack, with the wonderful newsletter name of Freud + Finance.

A note to our listeners: Wil interrupted Sebastian too much in this episode. He will improve in this regard in future interviews, sorry about this - we're both total newbies to podcasting! This is in strong contrast to today's guest who has been a TV anchor!

Sebastian Salazar Nunez:

https://t.co/YNRm7o9zMB?amp=1,

https://twitter.com/Naanull

...is an economist and investment analyst at Coril Group in Peru (https://www.grupocoril.com/about.html). He has also been a news anchor for Canal Channel N:

https://www.youtube.com/watch?v=L7JCyKMuHOw&feature=youtu.be.

Join us as he takes us on a tour of investing in Peru, with commentary on everything from software patent company Network 1 Technologies:

https://simplywall.st/stocks/us/tech/nysemkt-ntip/network-1-technologies#:~:text=Price%20to%20Book%20Ratio&text=PB%20vs%20Industry%3A%20NTIP%20is,industry%20average%20(2.5x).

...to news companies like Empresa Editora El Comercio SA:

https://www.marketwatch.com/investing/stock/elcomei1?countrycode=pe 

...to food companies like Alicorp:

https://www.alicorp.com.pe/pe/es/

...and also a large bank, Credicorp:

https://credicorp.gcs-web.com/investor-overview

All of these are traded on the Lima Stock Exchange (https://www.bvl.com.pe/). Sebastian also covers behavioral investing advice, The Investment Checklist (https://amzn.to/3puzMpc), and the challenges managing client behavior from the perspective of a broker. 

The episode also contains some commentary on the Advanced Value Investing Workshop (http://www.advancedvalueinvestingworkshop.com) run by Professor Kenneth Jeffrey Marshall, which we discovered we are both currently participating in!

Matt runs Breaking the Market: https://breakingthemarket.com/welcome, introduced to us by Taylor: https://taylorpearson.me/ergodicity. Topics: Fortune's Formula (https://amzn.to/3rU8sSV) Invesco S&P 500® Equal Weight ETF (https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&ticker=RSP). Input RSP and compare it against the S&P 500 here: https://www.theonlineinvestor.com/cagr-calculator. A similar fund for Australia is VanEck Vectors Australian Equal Weight ETF (https://www.vaneck.com.au/etf/equity/mvw/performance). It does not perform as highly as $RSP though. The first post of Matt's we talked about was Repetition Economics: The Story of the Hunter, the Mammoth, and The Wolves (https://breakingthemarket.com/repetition-economics-the-story-of-the-hunter-the-mammoth-and-the-wolves/). This was in the context of the environment of evolutionary adaptedness described by evolutioary psychologists Tooby and Cosmides: https://www.cep.ucsb.edu/primer.html. Both of these items are ESSENTIAL READING for the behavioral investor. The Undoing Project (https://en.wikipedia.org/wiki/The_Undoing_Project) Farmer's Fable - a Tale of Cooperation (https://www.youtube.com/watch?v=sR2JxfiH7gk and https://www.farmersfable.org). This video and site is based on work by the London Mathematical Laboratory and you should really become familiar with them as a source of first principles: An evolutionary advantage of cooperation (https://researchers.one/articles/19.03.00004, https://lml.org.uk/research/economics) Matt mentioned how geometric returns, under 15% volatility, are 1% less than arithmetic returns, see Vol: https://docs.google.com/spreadsheets/d/1k0IDctrpzyLjFFjYqTiPXZuSTwYFJdK-QZQ3AG859Dw/edit?usp=sharing On cooperation: https://breakingthemarket.com/an-ode-to-cooperation The Most Misunderstood Force in the Universe: https://breakingthemarket.com/the-most-misunderstood-force-in-the-universe Stocks, Treasuries, and Gold: https://breakingthemarket.com/stocks-treasuries-and-gold Why Market Index Investing Works: https://breakingthemarket.com/why-market-index-investing-works Milestones: https://breakingthemarket.com/reflecting-at-the-milestones-implementing-the-partial-kelly-strategy The Ultimate 401k Strategy: https://breakingthemarket.com/the-ultimate-401k-strategy

Nick McCullum (https://twitter.com/NickJMcCullum) is Director of Growth at Passiv and a great source of advice about Python scripting on Twitter. Passiv is "Autopilot for your Portfolio: Passiv turns your brokerage account into a modern portfolio management tool. Build your own personalized index, invest and rebalance with the click of a button, and seamlessly manage multiple accounts." (https://passiv.com/). Full disclaimer, Nick approached us about the possibility of an interview and sponsorship. We were curious about how to start a successful finance software company using behavioral investing ideas so agreed to the interview. It turns out the Passiv team is serious about developing a platform that fosters application of good behavioral investing principles, so we will also have him back for a second interview to give a tutorial about the platform. Keep your ears peeled for that.  Some links to topics discussed: The $FRDM ETF, which "...seeks to invest in countries with higher human and economic freedom scores." (https://freedometfs.com/frdm/). "Q: How Would a Mathematician Invest?" by popular ETF provider Van Eck (https://www.vaneck.com.au/how-would-a-mathematician-invest). "Why Market Index Investing Works" by Matt from Breaking the Market, a blogger whom we subsequently interviewed, check the feed (https://breakingthemarket.com/why-market-index-investing-works/?subscribe=success#blog_subscription-2). "Success in investing doesn't correlate with I.Q. once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." (Business Week, July 5, 1999)" (http://www.jameslau88.com/warren_buffett_and_his_wisdom.htm).

Sasa Kusic, the knife maker mentioned at the start of the episode: https://www.instagram.com/nozevi_sale/?hl=en Ben's compounding sheet, adjusted with Leigh's help, from S1E1: https://docs.google.com/spreadsheets/d/1k0IDctrpzyLjFFjYqTiPXZuSTwYFJdK-QZQ3AG859Dw/edit?usp=sharing Steven Pinker's talk about the denial of human nature: https://www.ted.com/talks/steven_pinker_human_nature_and_the_blank_slate Evolutionary Psychology: A Primer: https://www.cep.ucsb.edu/primer.html Desmon Morris talks about his life and The Naked Ape: https://www.youtube.com/watch?v=aZoJbK9hBMo&list=PLVV0r6CmEsFwtuDq9yKrhqqkJ-Era-N7w&t=0s

Here Ben and Wil casually reflect on what stood out from Season 1, noting common themes amongst interviewees. They began to look at how to develop a framework for optimal investor temperament from these observations, a project which will continue in the next episode.

The Stanford course mentioned was Value Investing: An Introduction, by Professor Kenneth Jeffrey Marshall (http://www.kennethjeffreymarshall.com/). On 11th January 2020 his Advanced Value Investing Workshop (http://www.advancedvalueinvestingworkshop.com/) will start, recommended!

Today's guest is Leigh Caldwell, partner at Irrational Agency (https://www.irrationalagency.com) and author of The Psychology of Price (http://amzn.to/leighbook). He began a mathematics degree from age 14 and is therefore the perfect man to check Ben's compounding spreadsheet discussed in Episode 1. Not only do we discuss his book and the exponential function but also an economy simulator that he has programmed called Euristica (https://www.youtube.com/watch?v=7a9FKsLf96U). We managed to get him on record registering an interest in using this tool to model different personal finance and investing behaviors across a population, so keep an eye on his future work. Considering these aspects and his blog about cognitive economics (http://www.knowingandmaking.com), Leigh is a very useful guest to have in completing this first season of The Behavioral Investor. Links to some items discussed in the episode are found below.

1. The Compound sheet: https://docs.google.com/spreadsheets/d/1k0IDctrpzyLjFFjYqTiPXZuSTwYFJdK-QZQ3AG859Dw/edit?usp=sharing
2. Episodic future thinking paper mentioned by Wil: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0214397
3. The Stanford Marshmallow Experiment: https://en.wikipedia.org/wiki/Stanford_marshmallow_experiment
4. Mental accounting: https://www.investopedia.com/terms/m/mentalaccounting.asp
5. On rabbits and compounding: https://pawleysblog.com/2012/09/26/the-rabbit-effect-on-your-portfolio-compounding-and-the-time-value-of-money/
6. Sand and the chessboard: https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem
7. Family Fortunes book: https://amzn.to/3lFIrD4
8. Trump would be richer if he invested his inheritance in an index fund: https://fortune.com/2015/08/20/donald-trump-index-funds/

...or would he? Maybe he knows about non-ergodic returns ;-)

Leigh can be found here: 

Twitter: https://twitter.com/leighblue

Blog: http://www.knowingandmaking.com

FIrm: https://www.irrationalagency.com

Book: http://amzn.to/leighbook

TEDx talk: https://www.youtube.com/watch?v=7a9FKsLf96U

Ross Bentley runs Speed Secrets, a race driver coaching service in Canada. He is also co-athor of Performance Pilot along with Phil Wilkes, whom we interviewed in Episode 3. His expertise not only covers the physical act of driving but also how to tame the mind, such as his presentation The Mental Game of Driving. He also has an eBook on the same topic, Mental Imagery Guide for Drivers. He has worked with Stanford psychology researcher Carol Dweck and grad student Fred Leach to apply Carol's growth vs fixed mindset concept to race drivers. For further info on this, she has written a book called Mindset. He was also involved in the development of the Garmin Catalyst™ Driving Performance Optimizer. Listen up for some great insights into how to program the mind with imagery and triggers and some enthralling racing stories.

Find him on:

Facebook
Twitter
Instagram
Youtube (this link takes you to the Mental Game of Performance Driving playlist)