Barry Ritholtz’s Masters in Business: Helaine Olen Interview

She basically um looks at the world of financial uh, personal finance and financial advice UH with an oozy and is absolutely heartless about machine gunning down people who give bad advice. I think you'll find the entire podcast to be quite interesting if you read or follow some of the more popular financial gurus she has taken down were taken on nearly all of them, especially in the book Pound Foolish. But the slate column is pretty brutal as well.

That's what That's what I find so refreshing and fascinating about it. So, without any further ado, my interview with Helene Olan. This is Masters in Business with Barry Ridholts on Bloomberg Radio. My special guest this week is Helene Olan. She is an author and columnist and really focuses on some of the issues in the personal finance area. She writes a column for Slate called The Bills. She's a regular columnist for inc. She has two really fascinating books.

One is Pound Foolish, exposing the dark side of the personal finance industry. And some of you may remember Professor Harold Pollock's Index Card, How to invest with just a dozen bullet points on an index card, and and Helene co wrote, um, why the index Card, Why personal finance doesn't have to be so complicated? With Harold Pollock. She is a graduate of Smith College and was named by Business Insiders as one of the fifty women who are

changing the World's hell and Olan, Welcome to Bloomberg. Thank you for having me on. So there's so much stuff, um, I wanted to go over with you. You and I really uh tread and we really fish in some of the same waters, so to speak. So so let's start out really broad. What's wrong with the personal finance industry today? Well, what's wrong with it? Well, there's a lot of things wrong with it, right, but the the overriding issue is

that it's being sold to people under false pretenses. There's this idea that somehow, if you can just save up enough money and invest correctly, you're going to work your way out of what is a greater economic problem that we have right now, which is wage sagnation, the growth of the one percent, wealth inequality, and so on. That is just simply untrue. It doesn't work for most people.

So so let's talk a little bit about um financial literacy, which some people said, if only we teach people how to invest, how to save everybody's in time, it will be fantastic. Financial literacy broke my heart. Um. I started looking at it several years ago as a solve. Um I now always feel like when I talk about it, I'm bad mouthing apple pie or thanksgiving people. Okay, so here's really what what could be bad about people being literate about their own find It doesn't work, and it

doesn't work for a bunch of different reasons. First of all, people just don't remember stuff. Second, financial literacy doesn't work for another basic reason, Um, it's people literally don't remember. But more to the point, financial literacy is a movement brought to us by the financial services sector, and it was always set up to work around the fact that

they are doing what they want to do. So instead of giving us financial um I hate using the word products, but that's the word use, right, Instead of saying, you know, a thirty year fixed mortgage, they're going to claim that they can teach you how to read a hundred single space pages with tiny little print, with more gotcha clauses than than gotchas exist. This is obviously false and when you look at the history of the movement, the modern movement actually begins in the in the n nineties with

Ford Motor Credit. And Ford Motor Credit had something of a problem. They were getting involved in some prime auto loans, which of course all the automakers were, but Ford had a problem because a publicity problem, a pr problem, because Henry Ford was always against you credit like that. So they came up with this idea that they're going to teach people about financial literacy and they're going to teach

them how to do how to manage these loans. So they hook up with some Washington people and some economists and is sure enough their first um. Their first effort is a p s A in late auto loans that absolutely nobody remembers except for the fact it is in the next database. And then they get this idea that they're going to hook up and do children's personal finance. And this is what takes off because it's the late nineties, zero to three. And now I have to interrupt you.

What is children's personal finance? How? How to manage? Eliminate? Stands well, it's like teaching financial literacy and in elementary school and high school, and you know, and if we can just teach children how to manage their money, they'll remember it as adults. Now, of course this doesn't work. Again, this doesn't work because they test these kids a year in and year out. They kids who have taken these classes, no, no more than the kids who haven't taken these classes.

But the other thing that's going on is the financial world, um, you know, moves at a fast fast pace. What you're teaching people in is not necessarily what they're going to need to learn in two thousand five. Um. But at the same time, of course they're not acknowledging that, right, So the whole thing is kind of misbegotten, but we all believe it because it just sounds so good. What could it like you said, what could be wrong with

teaching personal finance? So what we're thick and so the final kick to this is is it then turns around and sets you up as the as the as the person to be blamed when it goes wrong. So when two thousand eight happened, the bags literally turned around and said, well, if people had just managed their money right, they never

would have bought these houses they couldn't afford. Instead of saying, well, we shouldn't have given loans to people we knew were lying, or that our people you know, filled out the paperwork for them, or you know, we gave them these loads. We gotcha clauses. So in the last minute, we have in this segment, how did you find your way into this tiny niche? This is a really focused area. Oh

this is great. Um, it was totally by accident. I was living out in l I with my husband and someone in late December calls me up from the big paper in town and says, we need someone to submit at the money makeover. Fe sure over Christmas? Of course, do you know anything about personal finance? And all I know about personal finance is the fact that it pays a heck of a lot better than anything else in journalism except for tech writing, and I don't do tech writing, right.

So with this background in mind, I say, sure, I know all sorts of things about personal finance. And just to be clear, I didn't know a mutual fund from mutual of Omaha. I mean, I want to make this real clear. I didn't know anything. So I get I get this gig, and I run down to the Best Center I lived a couple of blocks from the Beverly Center, and I buy a copy of Personal Finance for Dummies

and a couple of other personal finance books. And with this background, I go off to do my story and at some point I start asking the subject all about her money life. Um, you know, makeovers work like fashion makeovers, right, And I hadn't write this thing up, had the thing in wait for my screaming phone call. And instead of a screaming phone call, I get that was great. Can you do another one? I'm thinking, well, they just paid me double my usual fee. Sure, and I do another one,

and the same thing happens, and another one it. At some point I realized I was something of an expert. I'm Barry rid Halts. You're listening to masters in Business on Bloomberg Radio. My special guest today is Helene Alan. She is the author of, amongst other things, Pound Foolish, and I love this description of of the book. Pound Foolish looks at the gurus, pundits, self anointed experts, crackpots, cranks, and outright frauds who populate the backwaters and slip streams

of American finance. Did you leave anybody out in that list? That's a pretty good list. That's a good question. Um, I probably left tons of people out. There's so many of these people, right, So so let's go right to the beginning, because you in the book, you wrote a couple of things that really surprised me. Um. First, personal finance industry started as a response to the Great Depression. I had no idea about that. That's an amazing piece

of information. Give us the historical background of this, Okay, So there was always like little bits of of like budget guidance and papers, right, and there was also always investment advice, you know, prior to the Great Depression. What happens afterwards is a woman named Sylvia porter Um, who is a nineteen at the time, nineteen year old college

student and hunter. When her mother loses the family fortune in a stock market scam after the nine market crash, and Sylvia Porter decides to make it her life'sbmission to make sure something that like the Great Depression can't happen again,

and she begins she decides to go to journalism. Um, at least of the days when you can actually make a living in journalism, right, So anyway, she goes into journalism, and she starts writing for the New York Post, and she's got this sort of engaging voice, and over a period of a number of years, they give her a column. This turns into a regular feature and it's initially s F. Porter says, they don't even say she's a woman until the early nineteen forties. And over time, over a period

of several years, I mean, this isn't disputatious. Yeah, she's sort of gates what we today call personal finance. And by nineteen sixty she's on the cover of Time magazine. She gives advice to jfk um Lyndon Johnson actually says something like, why can't my economic advisors talk and give advice more like Sylvia? She becomes this massive guru. And of course today she's all but forgotten. I mean, it's

kind of wild to me. Nobody, almost no one under the age of fifty even remembers who she is anymore. What sort of advice did she give and was it any good? Well, you know, she started very political. She started off as an extremely political figure. She would get into arguments with the Roosevelt administration over bond issues. She um gave tax advice to JFK as I said. But then over time, like a lot of gurus, she starts

becomes increasingly wealthy, increasingly prominent. She gets increasingly cut off. And what starts happening is by the nineteen seventies, she's giving inflation advice. She joins President Ford's Whip Inflation Now campaign, which was really absurd. Um, you just think buttons helped bring down inflation. I mean, a few years later inflation was almost gone. So there's a correlation there, to say the least, poor Sylvia, right, she never recovered from this.

So so she starts giving advice to people like don't buy veal, which was then very expensive, buy chicken, and of course most of her people were never buying veal. And then what had to be my favorite and unfortunately I found this column after I wrote pound Foolish actually suggested to people they substitute, um, several teaspoons of peanut butter for lean meat if they couldn't get their social

Security check to stretch far enough for meat. Um. Actually, the United States government at the time had a better idea. That's when we got the cost of living adjustment for Social Security because the elderly were increasing trouble as the inflation began to pick up in the nineteen sixties and was fairly rampant way back right, it was when we were children. Elder poverty was very still fairly significant. And um, so that's Sylvia Porter. And then so let me jump

in right here be us the Silvia Porter. Those recommendations are one of my pet peeves. I've always despised the advice. Hey, you know, if you skip the latte and reinvest that money every day for the next thirty years, by the time you retire, you love millions of dollars. And my perspective has always been, no, five dollars a day isn't going to make a difference. And second, if five dollars is the difference between you retiring comfortably or bankruptcy, there's

something wildly wrong with with your entire financial situation. You've written even more aggressively about this. I think it's absolutely us I mean, there's a couple of things wrong with it. Um On a mathematical level, it makes what's going on in our society it makes no sense. Right. Our problems are not and I particularly use you know, a Starbucks

latte because it became so famous. Our problems are not that people are drinking too many Starbucks latte's, though I'm sure there are people who are spending too much money at Starbucks right, too much money anywhere? All right. My older son frankly be one of them. But that's neither here nor there at the moment. But the the issue is that what was going on is people salaries were

stagnating and falling relative to inflation. But what was going up was healthcare, housing, education, childcare, stuff like that, and that was going up at rates over inflation, not for years, not for a decade, but for decades and continues to this day. So the idea that you're throwing your money away at Starbucks is absurd. What was really going on is your can't keep up with the cost of living.

The other thing that really makes me crazy about this is that the idea that we're spending too much kind of falls into this sweet spot in the American you know canon right where on the left wing, spending is always seen as somehow morally wrong in some way. Right, Well, it's a hobby of the rich, and therefore it's tainted, right like, you shouldn't be wearing good clothes, you shouldn't help me enjoying good food. There's something not right about it, right And on the on the by the way, does

that still exists anymore? Because that might have been true in the sixties and seventies, and you have this really nascent movement about live small or the dumpster divers and all that's a Mr money Mustache says, don't spend any money. Retired at thirty. But that's a you know, consumerism is a huge part of American culture. Well it is huge because most of us like like luxuries. It's that great experiences everything. It's that great line from three Petty Opera,

Live Life and luxury. That's what it's for, right, We like luxury. There's nothing wrong with it as long as you can afford it. Right. So on the other side, though, on the right wing side. What you get is this idea that people are wasting their money and that they're somehow not deserving. And that's where you go out. You see people at CNBC, and I always love this. They're always dressed in like three hundred dollar suits and they're

ranting about poor people and they're smartphones. Smartphones have kind of become the new latte factor now and smartphones of the new welfare queen in a catalyze. Remember that line of argument exactly. And you know, as I always say, you know, try getting a job anywhere without a smartphone. First of all, right, but second it's just absolutely again untrue of anything. People with less money actually have less smartphones than anybody else. They actually do surveys on this.

But so this whole idea that we're just spending ourselves into oblivion is ridiculous. I'm Barry Rehults. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Halleane Ollen. She is a personal finance author, most recently co author with Harold Pollock of The Index Card, the book which explains why personal finance does not have to be complicated and the genesis of this is really pretty simple. Professor Pollock wrote an index card with like

a dozen bullet points. I actually have it right here, a dozen bullet points. It got tweeted and then became a column or one off column, and it went completely viral. And how did you end up meeting him? And how did you guys decide to turn this into a book? Well, he The way the index card came about is he

was interviewing me for a blog cast. Remember when people used to do video blog casts all that way back in two thousand, right, and he um interviewed me about pound Foolish, and at some point in the interview he said, well, this is just ridiculous. Everything you need to know about

personal finance can be put on an index card. Meeting, of course, the industry is selling bs, right, And we laughed about it, and we go on with the interview, and neither of us thinks about it for the next half hour or whatever we're doing, right, And then people begin to write him and say that index card, that sounds great, where is it, thinking like he had done it index card. Of course, he had done no such thing. So he decides to do it index card, which you

have right here. In front of I mean, really, this is this is an index card MAXU four oh one K buy an expensive diversified funds. You know, a whole run of things that are basically just straightforward common sense advice, right, And so he puts it online on the on the same blog that he interviewed me with, and the next thing I know is on Google alerts. I'm starting to get you know, my name with index card, and I'm like,

what the heck index card? And then of course we ended up you know, I knew what happened pretty fast, and we ended up deciding to do a book together that that's fantastic. And I saw this on Twitter with like forty likes or some insane number it had. It had just gone absolutely um absolutely viral. So of the dozen or so bullet points he uses, what do you

think are the most important that people should be aware of? Well, I think for people who are investing, and this is a big you know, what if, right, because I'm not what if, but you know big that's a subsett right because but don't buy individual stocks, don't buy manage going to manage mutual funds. I mean, the thing is is

people are being ripped off blind. Here people are. They're being sold on this idea that there's a secret out there and that you know, they're going to find the person who's going to give them the secret, and they're going to do better than the markets. Right. Couple of things. First, this is a really expensive way to invest, so Wall Street is making a killing. That's why you're being sold

on this idea. Second, every study we know shows that the vast majority of people, by which I mean about more than um have no ability to outguess the markets you're in and you're out, especially after costs are taken into account. And third, you then have to ask a

certain amount of common sense. If you have found that rare person who actually has that ability, right, or you think you are that person, why on earth would anybody tell you this, Right, you and your ten thousand or hundred thousand, or even million or two million dollars, Right, Surely they're going to go find somebody with a couple of billion to invest, or even better, set themselves up on a yacht outside the Caymans or some other really

nice place in the Caribbean and trade for themselves and make a lot of money. Why are they selling you the secret makes no sense whatsoever. So let me let me go to one of the last bullet points here, which is something I've always found to be fascinating. Make financial advisors admit to a fiduciary standard. So let's let's just briefly explain what is the fiduciary standard, what are the alternative and why uh, why should people adhere to

one over the other. Okay, we all think, or most of us think that when we go off to seek financial advice, we're gonna go off and see somebody and they're the equivalent of a doctor. Right, they've got some hippocratic account. Yeah, they've got some hippocratic oath to our finances.

This is absolute bus. They worked to something called the most most of them, not all of them, work to something called the suitability standard, which is sort of this idea that as long as the financial advice they're giving you as sort of okay, it could lie yeah, suitable, it can line their pockets, you know, as much as yours. And to to get a little technical, the broker dealer side of the world, the commission based side of the world UM, which is governed by an s r OH

called FINRA. They're the ones who regulate and manage the suitability standard, which I'm fond of saying, don't sell some high tech I pot to Grandma, that's my definition of suitability. I think they would say that that's perfectly okay, and you can even go further than that, right. So anyway, so most people don't realize this though, because the kick is of course they don't even have to tell you this.

So what the fiduciary standard is is what the registered investment advisors and certified financial planners mostly work too, which is this idea that they do have to act your best interest and they have to put their your best interest ahead of their own. The Department of about they used to be under the suitability standard in the last minute, tell us what's about to happen with the Department of

Labor change. Okay, So the Department of Labor is decides a few years ago that they're going to bring individual retirement accounts under the under the fiduciary standard as well. Okay, And you have to understand something. Regular accounts are managed by under the rule of the sec and retirement accounts are under the Department of Labor. So that's a whole

other craziness. So the Department of Labor says, we're going to deal with this, this with the with iris because but for most people, they're investing their retirement money, right,

and the financial industry goes insane bonkers. This starts in two thousand eight, it is going on to this day, and essentially they are claiming people won't be able to give get good advice, middle class people because they won't be able to afford to give them advice, which when you think about it, if you believe them, which I don't, but will come to that in a minute. They are essentially saying, if we have to act in our client's best interest, we don't have a business model. Okay, this

is a logical follow through, but they don't admit that, right. So, in fact, what we know is because the Center for Retirement Research at Boston College studied this a couple of years ago, it will cut into their profits. But they can still make a profit giving financial advice. They just can't make as much of a profit as before, and

they're really unhappy about that. So there's there's a fascinating little history that correlates with this, because I've I've written about it, and I just did another column about this.

What people don't realize about this whole debate and how it came about is within So the financial crisis comes along, and while there are many many causes of it, one of them is something just called misaligned incentives, where you're creating an incentive for people to do stuff that turns out to be both really really stupid and personally lucrative. Turns out that's not a great thing to have in finance,

really really dangerous, damaging stupid stuff and highly lucrative, bad combination. So, as part of the Dodd Frank regulations, there is a research report that the SEC has to do looking at the various standards of incentives and compensation and conduct that of which there's this patchwork, this dual um, this dual

system that doesn't seem to make any sense. The SEC zoned owned staff releases this giant report in two thousand eleven and recommendation is get rid of suitability, make it fiduciary across the board, and the SEC, politically deadlocked, doesn't vote on that, doesn't doesn't pass that, so that then

sits in lingers for the next five years. The Council of Economic Advisors does some research into this, and the White House put out I think it was last year or earlier this year, they put out a report that says the lack of fiduciary standard in just in retirement accounts alone, just in four oh one case iras, what

have you costs investors seventeen billion dollars a year. And someone comes up with the bright idea of saying, well, since we can't get the SEC off the dime to to vote on this and approve it, the industry really doesn't want to see suitability. What doesn't want to see fiduciary across the board? Hey, these retirement accounts are essentially compensation four oh one K four oh three B. That's

why they're governed by Department of Labor and ARISSA. It's a form of compensation, so they get to have reign over that where the SEC doesn't. So really, because four oh one k s are a form of compensation, the

White House gets the back door. The SEC go to the d o L. And the thinking is that once the fiduciary standard is on four oh one ks and other retirement um accounts, that'll take us up to thirty five and that's like a tipping point and eventually, look when we look at Morgan Stanley and Merrill Lynch, they're a hybrid. They're both the broker and an r I A. They used to have like single digit percentage of fee based are A stuff. It's now over two thirds of

their at least their retail business. It's all gravitated to that. So, in a bizarre way, the financial crisis lead to to this new fiduciary rule, which, by the way, the UK has, it's a standard rule. The sec Zone staff wreck amended it. It's amazing that we just haven't adopted it in the US. It works in the UK is a bit different. They they've banned commission sales, which we're not looking to do here.

Um and that scene, and you know, under the same theory of course, because if you can't do a commission and in the capital about fifty basis points and so the idea is, of course you can't have a conflict of interest if you are on commission. Because one of the things that's going on right now is people are

um financial advisor types. UM by the way, and financial advisor I have to say it's just an absolute junk term that means absolutely nothing um and either a broker in a CFP, there's got to be some real title there. So you know the ideas. If there's no conflict, there's no commission, you know, discrepancy, you won't be able to have this conflict of interest. Over here, it looks like the Department of Labor is not gonna do the do

the commission issue. They're going to allow commissions, but they are going to insist that it can't affect your thinking. I don't know how you do that, because you've so here is the problem with the suitability standard for these sort of accounts. When you have a incentive set up.

In the first rule of economics, incentives matter. So if you're incentivizing someone to every transaction generates a commission, well, essentially you are subconsciously, at the very least encouraging transactions that will generate commission, which means you're generating costs, you're generating taxes, generating turnover. All three of those things are not good for long term performance. So someone had had there's a really fascinating hashtag on Twitter, hashtag fiduciary, and

you'll see all the arguments pro and con. And I've been looking for the arguments against the fiduciary standard that carry water, and it's really hard to find them. The best one of the best arguments I've seen, which is still pretty weak, is well, it's much cheaper to set this up with a one time commission you set up the portfolio as opposed to an ongoing fee. But if that's the case, aren't you better off just paying someone

in our rate? There are thousands of people who will do that sort of financial work for you on a per hour basis, charge you once and you never have to pay them again. That's probably the cheapest, least conflicted way to do it without is this mutual fund company

paying them without any of the obvious conflicts that are right. Well, the turnaround claim is that people won't pay for it, and of course they might be right, but one of the reasons is because of the industry has basically told people that they're getting the service for free, which is not true but of course not but people don't see it that way because again they don't have to tell them, so people think that they're getting a free service when

in fact they're paying commissions. I'm Barry, what helps you're listening to masters in business on Bloomberg Radio. My guest today is Helene Olin. She is a personal finance author. She's written the book Pound Foolish, as well as UH Index Card Investing. Let's talk a little bit about some of the columns you've done for Slate and elsewhere. You You have some really really fascinating headlines and fascinating columns

that I've personally found very amusing. UM. So I understand the Obama administration's new fiduciary rule is going to stop people from discussing personal finance on the radio. Right, Well, that's absolute falsehood. That's one of the things being put

out there by the opponents to expanding the fiduciary standard. Um. It got linked to by the Drudge Report recently got hundreds of thousands of hits, hundreds of I think last time I checked about five thousand, and I of course went and checked this out and I was like, really, we should only be so lucky, right, And and the answer is, of course, this is absolute falsehood. The fiduciary standard only applies if you have a relationship with the person.

If you call a financial radio program or UM or a TV show and you discuss you ask for advice, let me explain something. You might think you're getting legal advice. You are entertainment people. Nobody thinks if you give a thirty second overview of your financial situation and somebody just rants for a few minutes allah Dave Ramsey or Jim Kramer, that you're in an advisory situation. In fact, Jim Cramer doesn't even take personal finance clients. How could you be

an advisory situation within that makes perfect sense. So here's another one that I think is fascinating. Why is financial advice quote just for women a bad idea? Oh, it's ridiculous. Um. The idea is that women have special financial needs. Um, we do have special financial needs. Let me explain we. Um, we earn less than men at all stages at our careers. We have more responsibilities, we have more um, scattered careers thanks to caregiving. And by caregiving I mean everything from

children to parents, to elderly relatives and friends. Um, we will lose more money for that caretaking than a man will if he takes it on. And of course the final kick is we live longer, so we need more money. Services industry says, oh, then you should save more money, and we have special advice for you. Now understand if

you're underpaid, aren't working as steadily and living longer. I mean, this is like asking This is like the old line about ginger rogers that I think and Richards once said she had to do everything fred Astaire did but backwards in high heeled shoes. This is not going to work. So there is no special financial advice for women. What women have as a social and economic problem that needs

to be addressed. So you don't think that could be solved by being condescended to that won't That won't resolve that issue now and then the kicker is right, it is condescending, thank you. And then so this women's financial advice has this weird combination of sounding empowering and infantilizing at the same time. It's kind of like, God, you're multitasking so much, you have so many burdens. Here, we'll take this one burden from you so that you don't

have to bother your little head about it. Right, So let's let's talk about one of my favorite things. Tell us about wealth therapy. Oh, I love wealth therapy. Right. The the idea is is that people need um psychological help managing the emotions around money. Right now, somehow this mostly applies strangely enough to people who have the money to pay the bills for therapy, because I understand financial

therapy is not cheap. It's two HUR and up. Yeah, it's more right, it's more like four D. And understand it's not in the D s M, so there's no code for it diagnostic manual for for um, you know, for medical reimbursements. Right. So, weirdly enough, financial therapy just sort of presumes that, like, you know, wealthy people need help, and it's like stuff like affluenzauh and like do you feel bad about having to pay your housekeeper? And what do you do if your friends are really jealous of

the money you have? I mean, this is absolutely ass right. I mean, I'm sure people have issues if they have a lot of money. Don't get me wrong. I have met people over the years they do. But this is not They do not have money problems in the way somebody who can't get on their paycheck has money problems. These are these are good money problems to have, as opposed to can afford healthcare? How am I going to

pay for medicine? That's a horrific money problems. And when I looked at financial therapy, what I found was a lot of the financial therapists, and I don't say with all of them, by the way, a lot of them were former eating specialists. And there's a couple of reasons. Wait a second. First of all, how do you find that out? You just do research on people offering wealth therapy and it turns out they're also obesity specialists or

or um. Right. Well, I would get disorder special pound foolish like, talked to a whole bunch of them, and a lot of them would tell me that they had done time in food disorders, and they would make the link, right, and they would say, well, you know, people binge when

they're unhappy, and they spend money when they're unhappy. Right, And it actually is an interesting link because actually a lot of people have weight issues not just because of because they binge eat right, because the food supply has changed and you know, they have put cord oil and everything,

which puts more weight on seria bright thank you. They You know, people who have less money can't buy fresh food because they're afraid it will go bad or so they have to buy packaged, processed food, which puts weight on as well, and you can go on. Right, So there actually is a link, but that's not the link they see. The link that's really going on here, of course, is a god. You know, the insurance companies have cut back on reimbursements um to a huge extent to people

have had to move on um. So in other words, they weren't getting reimbursed. They couldn't. People coming in for eating disorders were no longer being reimbursed. Well, they are reimbursed, but like for instance, it's much harder to get there, you know, get in patient therapy now than it used to be. Right, remember back in the nineties, anybody could get in patient therapy. Now of course, you know, the

insurance companies put you through gazillions of hoops. So you set up instead and and you know an on site you know, facility for money disorders, and people are just paying cash out, cash out. It's like a doctor who doesn't take insurance. I was gonna say, insurers aren't paying for this, are they. If you're wealthy enough to have to require wealth therapy, I think you have to pay for that out of pocket, right exactly. So it's a great, great business to get into and hey, you probably are

helping some wealthy people who need some handholding. But my favorite was one of the Judd sisters, and I'm forgetting which one it's in Pound Foolish did Um wealth therapy and she becomes like the poster girl for it, and she gives us interview in the New York Times in two thousand eight the Fall of two thousand eight, mind you, and she says, you know, yes, I went down from five cars to one car, and if I could do

it anyone cat. That's true when you think about it, it's very easy to just let those leases expire and just stick with one or two regular vehicles. How many of us really need five or six vehicles exactly? How many of us have that problem? That's that's really good advice for our listeners is to just cut it down to one or two cars. And I find the same with boats. Just keep it to one or two boats. Your your budget will be much vacation houses to skiing vacations.

Is there really that much I know I'm being sarcastic for those of you who may have missed that, but is there really that much of a lack of self awareness amongst that sort of cult of celebrity who just as wholly unaware of how the average person lives. It's more than the cult of celebrity. What it is else,

get very serious for a moment. It's really about the one percent society because one of the many things that our society has done is as as we have become more economically stratified, we tend to only interact with people who are like us. People. The society you and I grew up in was more ethnically segregated, but it was more economically open. Right, all the Jews lived in the same neighborhood. Kind of you may need to meet people more, and now it's kind of a little not so much

like that. And what happens is is you just interact with people like yourself over and over and over again, and so you kind of lose perspective. I mean, this is a very common problem for people and so for and that's why, by the way, you see people renting on TVs about poor people in smartphones too, they think that's really the problem because hey, probably for their kids. It might be right, Well, nobody has landlines anymore. Everybody who's under thirty has a smartphone, and if you need

to get a hold of them. What's your home number? This is my only number. Half the time it's a Google Voice number. Anyway, it's not even It goes with whatever phone they happen to be near. Is that a legitimate issue amongst amongst the public that poor people have smartphones? Because I've read the argument that why are the poors complaining?

They have air conditioning and satellite TV. The argument is that people shouldn't be complaining because hey, compared to poor people a hundred years ago or two hundred years ago, we've got air conditioning, we have refrigerators, and so I wanted so forth. This is ridiculous. We live in the here and now right and people are, you know, living paycheck to paycheck. They they really are strapped. We live in a society where if one thing goes wrong for you,

you can end up in bankruptcy corps. Medical not very good still for a lot of people. The deductibles are absurd. A lot of stuff is not covered. Um, you know, people can't afford childcare. Um My last I do an advice column over It's slate um called ask the Bills every two weeks, and the last one I did is somebody wrote it and you know, just laying out their situation. It said, I don't think I can afford to have children?

What do I do? And I don't know what to say to that, except for the fact that obviously, if one wants to have children, they should not be able to have children and figure it out as they go along. But the fact is we live in a society with no supports whatsoever. If people want to find more of your writings, what's the best way for them to track you down? UM? I write for Slate several times a week.

I have the column the Bills I contribute to money Box. UM. You can also buy Pound Foolish or the index card there on all sorts of sites, including Amazon and Powell's, at the independent bookstore and the Strand. UM. I love the Strand. I have to get that in UM and UM all over the place. Oh and also I write a column every couple of months rank. So if you've enjoyed this conversation, be sure and check out our podcast extras,

where we keep the tape rolling and continuing chatting. You can check out my daily column on Bloomberg View dot com. Follow me on Twitter at rid Halts. I'm Barry rit Halts. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast. Helloine, thank you so much for for doing this. Thank you for having me and being so generous with your time. So there's so many questions I

didn't get to. Before I get to my standard questions, I have to go through some of the things that that we missed, and we really plowed through a lot. A lot of the stuff we missed had to do with Pound Foolish, which I'm gonna have you signed for me later. So so let's talk about I love this line. You described a distinctly American tribe, the spiritual Savior posing as financial expert. Well, I love that phrase. What does that mean? Personal finance originates in the self help industry? Right,

People don't really understand this. The almost like it's some form of business writing, and it kind of is, right, But it's really an offshoot of the self help industry, and the self help industry dates to, you know, the nineteen thirties when, as with selfia porter, you know, people were looking for answers and at the same time it kind of met mass culture. So you know, during the nineties. You have a lot of stuff going on. I mean you could you know, you have communism, you have fascism.

People are looking for answers. The self help industry is one of the isms of the nineteen thirties. So you began to see things like Napoleon Hill, Think and Grow Rich. Sure that when that came out, people are living in Hooverville's And this book is a best seller. Right when did the Dale Carnegie books calls the nineties and a little bit before as well, but during the nineteen thirties and thinking, um, you know how to win friends and

influence people. So but the thing is with all of this stuff is you need the story, right and the story is the story, and you have to somehow for the people who become the big financial gurus, they have the story of how they were lost and they were found. It's like St. Augustine, except for personal finance. So like Susie Ormond, for instance, So wait before you go into that. You have a beef with a number of gurus in Pound Foolish. You basically just caught her off at the knee.

Susie Orman. What's your beef with Susie Orman? Susie ormand as all over the place she has given rampantly in consistent advice. Um, she can be very judgmental, which was not how she started. By the way, Susie Ormond comes out of the nineteen seventies and nineteen eighties Bay Area self actualization seed. Um you know, Um, I don't think she ever did asked, but somebody would have to ask her that she follows u or followed. I'm not sure

what the correct answer to this is. Now a big yoga guru out there, and um, there's a lot of this sort of emotional money stuff, right. She sort of combines the personal finance of Sylvia Porter with the self actualization of the nineteen sixties and nineteen seventies, And which is why she's Susie Orman and everybody else is that nobody else ever thought to do this, And so it becomes this emotional money sort of how do you feel

about it? Combined with tough love, and as you can imagine, since that doesn't sound very yeah, it becomes very inconsistent over time, basically, and but it reinvented personal finance. For the nineteen nineties. She started out doing an infomercial and financial television and Eventually the infomercial got so popular they offered her a show. Right she well, she you know, did a number of books. She I mean, to her credit, she hustled like crazy. I mean, it's not like she

was found overnight. And she became a big star in part because women really liked this sort of you know, more emotional approach, less about you know, here's the five stocks you need, right, it was more about how you feel about your money, which was perfect in the nineteen nineties. So you're not a big fan of her as you think that herd if I'm I'm paraphrasing from the book. Some of the advice she gives is conflicted, some of its inconsistent. What's really your biggest beef with her? Before

we go to the next two people? That's it, And there's a judgmental thing that has crept in over the years. So let's talk. Let's talk about Dave Ramsey because you haven't had kind things to say about Dave. Well, Dave is you know a guy, He's another one. He's got the story right, you know that Dave Ramsey's story is that he was a real estate wheeler and dealer in his early twenties, he gets it over his head and

he has to declare bankruptcy. And then he decides to reinvent his personal financial life and he never takes credit again, which is apparently quite true, never uses credit at all. Right, he boys his house outright everything. By the way, there's not I have to say, there's nothing in the world wrong with a thirty year fixed mortgage, assuming you can afford it and the house. Yes, it's called leveraged money.

It's a really great thing. And I would urge anybody who can come up with down payment to do it right, so as long as they think they're going to stay put. But that's a digression, right. So anyway, though, he gets on the air and he starts with a radio show as well, with the story, right, you know, I'm a former bankrupt I've been saved. Well, my other things is he says, nobody should be declaring bankruptcy, or almost no one should be declaring bankruptcy. But he declared, right, I mean,

which is just utterly absurd. By the way, he is rapidly against the fdician. Well, he has the whole empire, right, he does. He has an advisory network that works to the to the suitability standard. He does load funds of more than five The last I might checked, I would have to double chees do insurance. He only does term insurance. Here's good things mean. I don't want to say he's totally awful, but more to the point, I think the thing that concerns me the most is people think of

him as a simple personal finance scurrew. He's not. This is very political. Stuffy's conglomerate, and more than conglomerate, this is real political stuff. He gets on the air five days a week, five hundred plus stations, I believe, really five fifty right now. He says social Security is a debacle, he cannot stand um, the Affordable Care Act. He bashes Obama. I mean, I can go on about this. This is this is a lot of political stuff going on here.

The very first column I wrote for the Washington Post was called was titled why investing in politics don't mix, Because once you're bringing in the emotions of politics, you're investing portfolio is just skewed. You lose the ability to be objective. And we saw it with people when Bush was in oh He's going to destroy the budget market doubled from OH three to o seven we saw with Obama, Oh nine famous wolfs Regeneral OpEd. Obama is going to destroy the DOAO and and then the S and P

triples over the next seven years. It's a terrible way to think about money. Well, I would say there's another thing going on too, and I would agree with you. But there's another thing going on to right, which is again it's a lot of personal finance is kind of very subtly political. And it's political because it accepts the system as it is. It doesn't say, Allah of the early nineteen seventies, we really need to do a cost of living adjustment for social security. It puts the blame

on the individual. Now, in many cases, this is like bailing out the Titanic with a bucket. I mean, it's not going to work, um, But it accepts the world as it is, and it then blames you, the individual who might be suffering from unemployment, who might be suffering from ill health, who might be forced to retire early and be suffering from age discrimination and not be able to get a job, who might be living in an area where housing still has not recovered in two thousand sixteen,

It says the fault is yours. That you made the mistake and that there's nothing government can do. There is nothing to be done, and you're at fault and you should suffer. And that's my main beef with us. So so let's talk about one more guru. Robert Kayosaki. You've you've thrown him under the bus as well. I think a lot of people have thrown him under the bus, including Susie Ormond to her credit. Oh really, you know that there's some interesting Well you've written about some of

the crazy bankruptcy litigation that happened. He's been wildly successful as a person who writes books and give seminars. Right. Well, he came up with this idea, this book called Rich Dad, Poor Dad, where he claimed he was mentored by a rich dad who, by the way, nobody has been able to prove existed, Um, you know, and rich Dad told

him he should take leveraged money. So it's the opposite of Dave Ramsey, right, and you know, and by multiple homes and multiple investments and you know, be really wealthy. This is a sort of wealth grew thing. It's kind of the opposite. You know, people like Dave Ramsey and David Back came up with the latte factor are telling you to send factor. Was that a book? It was in the I don't think he ever wrote a book named that. Um it was. I'll come back to it

in a minute. So anyway, but they're telling you to sacrifice, sacrifice, sacrifice, and you know, if you save your five dollars a day, you'll you'll retire with with millions of dollars. Kiyosaki is

coming in it from the opposite perspective. He's basically saying, do what I'm telling you, you know, buy multiple properties or investments with borrowed money, and you could buy the you know, the coffee, the ground underneath the coffee shop, and have as many lattes as you desire, which and enough itself is you know, not unreasonable, like in terms of well, yeah, people deserve their latte, right, But at

the same time, of course, this is wildly irresponsible. I mean, my favorite Kiyosaki of all time was and Chuck Jaffee caught this out at market Watch. I love his work, as I have to give credit for us. He caught him out once. Asked once telling people they could trade on margin at a brokerage where they didn't have money

I'm that's absurd. Of course, you can't do that treade on margin and and and for people who may not be aware of the rules, margin is two to one of whatever dollars you have, So if you have zero two times zero is still zero. You can't really do that. You can put stock and you can put other things in, but there has to be some legitimate asset there. Right, I have a standing offer in my slate column. If anybody does this and it's successful, they should write me

immediately and I will write a column about them. Um. At the same time, I will also write a column if you seriously call up your your brokerage and just ask and if you can tell me what the brokerage says to you, I'd like to put that the column too. So so Kaya, So we've talked just loosely about him, but you've written about this thing that took place with him and the people who were sponsoring him. There was a break and and what happened, Well, there's been a

massive falling out between him and learning and learning. Do you guys remember the learning add extra, this big thing like you know, and fifteen twenty years ago we right, and um, they would like bring people in and they do lectures and whatnot, and so Kiyosaki actually they helped Kyosaki get his start as a big time guru. And then they were talking about doing these wealth seminars with him.

Allah Trump University now right where you know, you bring people in and you say, you know, hey, spend thousand dollars this weekend in Kyosaki will tell you the secrets. Right, they they have these self appointed teachers. Well, Kiyosaki decided

this was such a great idea. He ultimately found another partner to do it with, and not surprisingly, the Learning Addics got a little annoyed because they felt they brought the idea to him, and they sued him, and the courts eventually, after several years, ruled in the Learning Addics. Is between the two of them, Yes, it was, you know, ongoing conversations and anyway, So the next thing is that Kyosaki's business outfit that was negotiating with the Learning Addics

declare his bankruptcy. So there's now a whole thing in Wyoming where there seems to be a case that is closed. Well, there is a case that is closed to the public that seems to be about where Kyosaki's money is. We don't really know for sure that that's what it's like twenty something. By the way, I don't know if if there was a contract, I don't know how much it is. I'm doing this off the top of my head. Memories implies it was about four million dollars. I think it

might have been. But it's a big chunk of money. It's a huge chunk of money, and every there's some underlying I don't remember it was a contract relationship, but some basis that the learning annex actually rings the court case right, which leads to the bank corporate. I don't believe there was a contract. I believe there was conversations

and emails and such. That's interesting, um, but I would have to double check that actually, And yeah, so this is what's going on now, and there's movements in this Wyom case. Um learning Um is it the learning addicts People have sued to get the case opened up basically learning addics once the case opened up to the public, so that they can see what on earth is going on here, if indeed that is what's going on. Nobody really was the basis of closing this is in a

child case with a child or anything. Why would this be sealed? We don't know because it's sealed. That's fascinating. So but I don't want people to think we're just trashing Dave Ramsey, Susie Orman, Robert Kayasaki. There are people who genuinely like what they say, who've benefited and learned from them. But you raise some very credible issues as to some problems with the advice they offer or some

of the conflicts conflicts they have. I only have you for another ten minutes, and we could talk about these guys and others for hours. So I want to get to some of my favorite questions with you that I asked all my guests, and I'm gonna do the abbreviated version before they throw us out of here. Um. So, who are your early mentors? How did you who helped shape your worldview? Oh? Goodness, UM, I was always a reader, right, Um, But that's my next question. I was. I was research

assistant for walt BYG. Danitch, who's now at The New York Times and is either on his third or fourth Pulitzer. I'm forgetting which he has so many Pulitzer He was amazing, um. And one of the things he taught me, of course, was the idea of don't be afraid of silence. Right when you're interviewing someone, just let them talk like if they The natural inclination of people is to fill the silence and that's how they bill their guts. So he was a huge mentor to mate. Um and then I

UM in personal finance. I mean I was at the l A Times, which you know, really had had Kathy Christoph who took over Sylvia Porter's column real died. I had Liz Weston who now writes for Nerd Wallet. Um, I had amazing people. To this day, the LA Times has amazing people. Um. Lazarus is there and Mike Kiltzic his work is They're both fantastic. Um. Lazarus. By the way, I just have to say this wrote the great great

piece on Trump University in two thousand and seven. Really, you have eight years ago, nine years ago, and it is still an amazing place for this sort of writing. Um. So let's go to let's go fast forward to books. What are some of your favorite books, be it fiction or nonfiction, finance related or not. Um. Oh god, I was just thinking about this the other night because I was like he's going to ask me about books and money, right, doesn't have to be money. It could be it could

be the Bronte system, whatever you like. I love a Tree Grose in Brooklyn. That was one of my favorite books when I was growing up way back, which is about money. Um. I think everybody should read it. Um. One of the many things I at least reference it at least once a year in a column. Um. It's a poor girl growing up in Williamsburg. And it basically shows how this isn't why I love it, mind you.

I love it for lots of reasons, but basically shows a lot of the lie of personal finance in it because one of the things that's going on in the book is the fact that the mom is trying to save money to buy land and they have a little bank because of course in those days, uh, poor people didn't have bank accounts. They have a can in the closet that they put money in, and they're always having

to rate it. I mean, it's just ridiculous. And they finally end it when they're dead broke, after the father dies and they have to pay to have him buried and the mother and the mother looks at them ironically and says, well, we have our bit of land. Now. I never thought of that as a personal finance parable. But now that you say that, it reveals itself in a small way that in that in that direction. What other book, um, would you like to mention? What other books?

I love books about New York or l A. Um. I lived in l A for a long time, so aside from Chinatown about New York that you like New York? Let the Great World Spin, which is about the trade center building being built in the seventies. Claire suits that I pronounced her name right. The Emperor's Children, which is about New York, also on the verge of of the Tree of what Happened at nine eleven, But it's really about how the money class took over from the literary

class in New York. It's a really brilliant book about that. People don't realize that. About help. What's the name of that again? The Emperor's Children? The Emperor's Children? UM, give me one more, give me one more. I've got to think about this. UM. I love history. UM, what's the

best biography you've read recently? I wouldn't say biography. What I would say one of the great historical works of all time is um John Demos is The Unredeemed Captive, about a girl who is kidnapped by the Indians in the early seventeen hundreds in New England and refuses to come home. Huh, The Unredeemed Captive. And it's a great, great book about American life. So let me ask you

a question about personal finance, Uh, journalism. What do you see as changing in that space since you began covering that lo these twenty years ago. I don't think it much has changed. I think there's some great, great stuff that's done at the l A Times, at the New York Times, the Wall Street Journal, Um, but I think most of it has remained not particularly very good. Um. I think there's a lot of judgment. There's a lot

of scolding. If anything, the Internet has made that worse because there's just this reflexive instinct now to just throw everything up there. So these scolding things get put up constantly. Americans aren't saving enough for retirement, you know, Americans, you

need to save more money. Not this thoughtful. Well, why aren't people saving more money for Retire's a bigger and it's just totally neglected and I guess the last thing I'll say is this is in keeping with the history of personal finance reporting the if you study this, and I want to credit Trudy Lieberman at c JR, who's

really written about this extensively. Personal finance writing became very big in the sixties and seventies as an offshoot of the consumer movement, and it was initially seen by newspapers as a way around some of the problems of the consumer movement had given them advertising objections, right with cars in particular, car dealers were very angry, so they thought, oh, well, write about this personal finance stuff and it'll be a way of giving people some hard hitting consumer coverage and

their money and still get advertising dollars, right, and still get advertising dollars. But they didn't realize because they just thought they were still thinking car dealerships and department stores. But they didn't realize was how big the financial services sector would be common advertising and what a conflict of interest that would ultimately cause on the consumer side. And I think some of what he writes is of value.

There's a guy called Mr money Mustache, and his whole stick is if you save up enough money when you're early, you could retire at filling the blank and enjoy your life. And where I agree with him, it's not so much on these self deprivation, no lats, no this, no. That is that we have this blind fealty to consumerism. And look, I'm a consumer, but it's not what drives me. And I think people are somewhat just stumbling into spending money

without thinking about it. And he raises that issue in a way that I think is very but again, that's not most people's problem. Most people's problems they can't keep up in the society because their incomes are stagnating while costs are going up. What I would say is, we're

not talking about iPhones and iPads. We're talking about healthcare in college, right, And what I would say is, I think Mr money Mustache makes a very valuable argument about how you can be tied to jobs that you hate, and that you need to think about this because I think that is a huge problem in our society, right, that people really feel trapped. But I think his answer it just simply blaming the consumerism, is completely and utterly wrong. What you really need to say is why don't we

have single pay or healthcare? Why don't we, you know, help people have some sort of base income if that's what you believe in, UM, Why or why don't we support people having children? Why do we only revere children as long as they're in the womb and then the day they come out. No, there's no support whatsoever. Only industrialized country with no paid maternity leave. That's us, right, I mean it's and to me, I would take what he's saying a lot more seriously if he would start

pounding on those topics. All right, So, now a millennial comes to you when they say, I'm thinking about going into journalism, personal finance, what have you? What sort of advice do you give them? There's no operating business model in journalism. Don't go into it. Of course I tell them not to do it. Really, Yeah, there's no operating business model here. No, the business model is simple, have an expensive terminal adjacent to your your journalism, and there's

plenty money for everybody. The amount of jobs in journalism has fallen by a huge percentage since I got into it in the late eighties. Early it has fallen even more significantly. You know, since two thousand, UM, nobody has worked out a sustainable model that I am aware of accept online um and I basically aside from basically a business in but I just got sold. They're not making money.

Did you see their losses? Yeah, well my point right, as far as I could tell that the main model that's going on here is one of two things is what I call either rich guy with hobby and that means somebody who wants to support journalism for whatever. The Guardian has a huge, huge and then the same thing with the Pro Publica right, that's rich guy with hobby, right.

And then the other, of course Washington Post, right, is you know, selling some service with it um like Bloomberg or third I'm sorry, there's one other and that is venture money like BuzzFeed or Fox. And we really have no idea what's going on at those diseases right now. Aren't making money, but we don't know so so really, you have the Wall Street Journal in the New York Times. I believe both of those are fairly profitable there massive both of them are under severe constraints. They took on

too much debt. See it's their own fault. No, they're dealing with the fact that the print is still bringing in most of the profits. But in fact, the move is towards digital and nobody seems to know how to deal with this. There is no one has come up with an answer to this yet. So your advice is don't. My advice is don't. And then the less less you have an independent source of income. If you have an independent source of income, my advice is, it's a great job.

I love it. Do it. And then the last question I have for you, what is it that you know about the personal finance journalism industry today that you wish you knew when you started out twenty years ago? Oh? Just how in the pocket of the financial services sector so much of it is. It didn't even occur to me when I first got into it at all. How long did it take before that, actually you came to that realism. It's a gradual realization over a number of years. I don't think I had a moment where I woke

up and said, oh my god, this is awful. But what I do remember is even when I was doing money makeover, I remember the thought would creep into my hat, like the stock market, this is really for rich people like this, Like it wasn't just that, like ten dollars really can't turn into a million dollars. It was worth this idea. Yeah, that I understood instinctively that this was going to be careening all over the place, and that you know this idea that well, what if it doesn't

go up. At the time, they were claiming ten percent after janual returned, as you might remember with dividends reinvestor, right, and I was like, well, what if it doesn't go up like that? And one of the issues that has actually crept in is one of the reasons the number is going down now is because dividends have been cutting more than in cut in half since the early nineteen eighties. You've seen much more buybacks increases than you've seen dividends.

When dividends or something that are far more valuable to an investor, especially a long term investor, than a stock by well, that's part of the issue, right, The dividends are a huge value to long term investors or people who need money for it. From this Hello, this has been fantastic. Thank you for being so generous with your time. I want to thank Michael bat Nick, my head of research,

for helping me do the deep dive here. Taylor Riggs is our producer Slash booker along with Charlie Vollmer, my recording engineer Mark. If you've enjoyed this conversation, be sure and looked up an Inch or down an inch on iTunes and you could see the other eighties six or so such conversations we've had over the past two years. I'm Barry Ridhults. You're listening to Masters in Business on Bloomberg Radio.