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The Behavioral Investor
Wilfred Waters
27 episodes
4 days ago
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.
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Investing
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All content for The Behavioral Investor is the property of Wilfred Waters and is served directly from their servers with no modification, redirects, or rehosting. The podcast is not affiliated with or endorsed by Podjoint in any way.
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.
Show more...
Investing
Business
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S1E9 A Mathematician Uses Non Ergodic Returns to Destroy The Hopes and Dreams of Naive Index Fund Investors
The Behavioral Investor
1 hour 18 minutes 30 seconds
4 years ago
S1E9 A Mathematician Uses Non Ergodic Returns to Destroy The Hopes and Dreams of Naive Index Fund Investors

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


The Behavioral Investor
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.