Interview With Meir Statman: Masters in Business (Audio)

an extra special guest. He is Professor Meyer Stateman of Santa Clara University, and really he completes our cycle of behavioral economists, beginning with Professor Schiller, going on to Sailor Ekonoman and now Stotman. We've essentially hit for the whole cycle. UM. He's written a number of books on behavioral economics. He's advised a number of financial institutions UM, both in real

life and online versions. Uh. He is extremely knowledgeable about not just behavioral economics, but contextualizing the development of this

field relative to finance over the years. And I really enjoyed the way he described first generation, second generation and in the not too distant future third generation behavioral economics, because it shows how our understanding of homo economists, of of humans as perfectly efficient, rational profit maximizers, how that model was so far off, how we began to recognize it being often And you'll hear in the podcast portion the discussion of how one of his first papers back

in generated so much pushback. It was one of the first behavioral economics papers published in a major nal of finance. People threatened to never submit a paper again. And it's really fascinating how the world has caught up. It only took so you go back to what is it thirty years, thirty plus years before the world of finance has gotten up to academia. I found him to be charming and delightful, and I think you will as well. So, with no

further ado, my conversation with Professor Meyer Stateman. This is Master's in Business with Barry Ridholts on Bloomberg Radio. I'm Barry Ridholts. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Professor Meyer Stateman. He is the Glenn Clinic Professor of Finance at Santa Clara University. If you follow behavioral finance. You should certainly be familiar with his work. His research has been published in the

Journal of Finance, Review of Financial Studies. He's won numerous awards, Bill Sharp Best Paper Award, Bernstein Fabazzi, Jacob Leavy Outstanding Article Award, the Moscow It's Prize, the MacArthur Industry Pioneer Award, i am c A Journal Awards, and three Graham and Dot Awards. He is on the Wealth Front Investment Advisory Board, and he was named one of twenty five most influential people by Investment Advisor Meyer Stateman. Welcome to Bloomberg. Delighted

to be with you, Barry So. By the way, that is really the short version of your curriculum, Vita. I could go on and on about um, lots and lots of stuff, but let's jump into it because you have such an interesting background and your work is so fascinating. Um, you were at the University of Jerusalem, and also at the University of Jerusalem were Danny Kahneman and Amos Tversky. Did your time their overlap at all with theirs? Death

is a very interesting question. Yeah, it is the Hebrew University of Jerusalem and and and the Economics building where I studied is right next to the psychology building, and and during my studies I earned pocket money by walking over to the psychology department and serving as a guinea pig for experiments. It turns out that these were not by Karman and Trusting themselves. When I talked to them and identify them, it was others. But I had no idea of who they are, and I had no idea

of their work. And and it can tell you that that while there were just feet separating the two buildings, the world that separated psychology and economics and finance was really very very tall, like some other wall I will not mention well. In the Undoing Project, which Michael Lewis just published last year, he said he spent a lot of times speaking to people at the university, and I guess later in their careers there were some really fascinating

tales about about the two of them. I think your age difference you might have been sort of in between that just before they they became quite famous. Death is right. Yeah, I became aware of their work really at the very beginning of nine, when I came to Santa Clarian University and I met her cheffering and her cheffering now of his work, of their work through a Dick Taylor when they were both at Rochester, and from that it was

off to the races, to say the least. So, so let's get into a little bit about um finance and psychology. You have an m b A. But you also have spent a lot of time in the world of psychology. How do you go from studying finance, how do you morph towards towards the psychology side of it? Well, I've always been interested in human behavior any any time when I think about my childhood, and then I thought that learning about economic behavior would tell me a whole lot.

It did, And I always felt that there was something missing in those models, but I could not identify precisely what. And it was only kind of thing in hindsight that I can see how things come together. Uh. And it was of course the work of khanmon In firs Key that creative structure, and I could see the connection between what they were doing and what it is that I had in mind. So, so let's talk a little bit

bit about where economics misses the human behavioral side. How did we ever begin with the assumption that humans or rational profit maximizing actors. If you spend any time with humans,

it's pretty clear they're not especially rational. Well, that too is a very interesting question, because I wrote a paper that led me to go back to all the issues of the genre finance and the financial analysts, you know, And if you look at stuff that was written in it's very clear that people in finance knew about human behavior.

For example, I saw an article that wrote about the reluctance of people to realize losses and how they they just hope against hope that it will come back, and and and that author tried to persuade them that tax considerations should drive them to realize their losses. Well, that was really lost once we got to Miller and Modigliani and the rational view of finance that fit in simple

mathematical models. And then it became the models became sort of the jail of people, and and people were cut and quartered to fit into the models rather than the models expanding to fit what people really are. So that naturally leads to the question, um our markets really efficient? And is the efficient market hypothesis is it truly valid? Well, there's great confusion about this issue of market efficiency. Uh, there's a claim that behavior finance great contribution is to

show that markets are not efficient. That I think is not so. There are two concepts, two notions of market efficiency there are that are regularly confused. One is the notion that efficient markets and markets were price equals value, and the other is the notion that markets are hard to beat. Now. Price equal value markets, for example, do not allow for bubbles because bubbles imply divergence of price

from value. But knowing that you will have bubbles does not mean that you know when they occur when it is time to actually take advantage of them. Coming up, we continue our conversation with Professor Meyer Stateman discussing Finance for Normal People. I'm Barry Ritolts. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Professor Meyer Stateman. He teaches at Santa Clara University, focusing on finance and behavioral economics. UM, so let's talk about

your most recent book, Finance for Normal People. I have to ask you about the title. How did that come about? Well, I've been speaking for a long time about people as normal. People like me, people like you, people like your listeners. The The history of the field is that we start with the standard rational people, people who are immune to cognitive errors, people who look only for risk and return

when they choose products, financial products, financial services. Then we moved to the first generation of behavioral finance, where we declared people irrational. Uh, subject to all kinds of cognitive errors. They are overconfident, they are suffering from hindsight bias, and so on. Almost people are stupid. Uh. What I say is that I'm not stupid. You're not stupid. Your listeners are not stupid. We are normal. Sometimes we behave in foolish ways, but normal people have normal wants. And you

can see that in ads or financial services companies. You see a grandfather and and and a grandchild. Uh, they are fishing together. Uh. This tells you what is the money for? You know, we we we talked about how you make the most money, But what is the money for. It is for the financial security of the grandfather. It is for the ability of that grandfather to help his grandchild and so on. So one of the things that people care about is financial security. Another thing they care

about is family. And once you begin with what people want, then you can ask yourself. What kind of mistakes do people make on the way to what they want? And this is really where cognitive and emotional errors come in. So so what I'm hearing from you is that investors should be goal oriented, not merely money oriented. It and

the money itself should serve a certain purpose. And that's what you're working towards, not just how could I maximize what my stock participation on my precisely precisely that the question is what is the peney for? Uh? And people don't stop and ask this question, you know. I I kind of joke about about an investor who comes to his advisor, UH in early two tho nine, and the advisor all shaking, of course, and the advisor says, what

they're complaining about? I put you on the efficient frontier. Well, of course we know exactly what he is complaining about. He is complaining because he is no longer sure that he will be able to retire, He is not sure that he'll be able to help his grandkids as he promised himself to do. Uh. So we have to be begin with what it is that people want, what it is that normal people want? And this is why call the book Findance for normal people. So in the book you have a box and you have a list of

common wants and desires. But that raises a question, can investors really get everything that they want? No, investors, we cannot get everything we want. We have of course trade offs. We can. We can give money to charity, uh, and that is going to feel good, and that is going to be consistent with our values, but it might if we give too much. Imperial our financial security and that is one thing that we want as well. And so

you can see that there are many competing ones. And one of the things that we do in life, of course is balance them and ask ourselves what is most important. And that really matters also to people who are older people who ask themselves, of now what am I going to do with that money? We have used become used to saving. We are good at saving if we already have saved a good amount, but now we find that terrific difficult to spend. So what they're going to spend

the money on? And and some people live as if they are poor when they have a ton of money because they've learned to save, but they've never learned to send.

That raises an interesting question. We see this all the time in that people who who start out very risk embracing very aggressive they start businesses, they're entrepreneurs, they start companies, and they're used to taking a lot of risk, and suddenly they're sixty years old, they've sold their business, they're thinking about philanthropy, retirement, wealth, generational transfers, and you it's very challenging to get them to wreck nies. They shouldn't

be taking as much risk. They should become a little more conservative because they've already they've already hit the jackpot. They don't need to to embrace more risk. And that's a really challenging transition. How do you get people to recognize that their needs and wants change over time. Well, I think that people need to be reflective, and people need to be helped in becoming reflectives. An advisor can

help them do that. I mean, here, here's a personal story. Uh, my wife and I flew to Israel a few months ago. We bought coach tickets and we were on the weightlist for upgrade. It would have cost us six hundred dollars a piece each way to get us too from California to You should have spent the money so so we

were not upgraded. Uh so we decided that we are old enough and well off enough to buy regular business class tickets, even though you know, I feel a bit like like a fold because it costs four or four five times flight. Who needs exactly? If you can afford it and your kids are taking care of and so on, what will you do with that money? So you have to figure out what matters to you. This is one example.

In another example, we decided to buy a regular car and donate the savings relative to a prestige car to charity because it gives us more pleasure and they're going to feel awkward in one of those luxury cars. That's interesting. So really you're raising the point, how should investors and indeed families who are putting together a household budget, how should they prioritize their wants and needs exactly? And that is true for the saving stage, the working life, as

well as the retires stage. Coming up, we continue our conversation with Professor Meyer Stateman of Santa Clara University discussing what investors really want. I'm Barry Ridhults. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Meyer Stateman. He is the Glenn Clinic Professor of Finance at Santa Clara University. He is also the author

of Finance for Normal People. His previous book, What Investors Really Want Know What Drives Investor behavior and makes Smarter financial Decisions is highly regarded and available on Amazon or your favorite book bookseller. Let's talk about what investors really want? You know. We briefly touched upon economic rationality um before, but that kind of demands that investors seek utilitarian benefits from investing. That doesn't really seem to be how people operate.

We're not just measuring risk and putting it up against potential reward, are we? That is right. We we do look for utilitarian benefits. We do look to increase our wealth at the level of risk that is right for us. But we also look for expressive and emotional benefits. You know. I like to tell the story of a man who is considering whether to give his beloving a red rose or ten dollars, which is the price of that row. As well, A rational man would say, why not give

her ten dollars? This way she can choose what she wants. A rational single man, a rational single married man knows better those who are still married. Yeah. So, so the idea is, and let's bring this back to investing. There are expressive and emotional benefits to what we do with our money that go over and above the mere utilitarian function of it. Is that a fair way to absolutely and so and so I think think about about donations to charity. When you donate to a charity, you give

up utilitarian benefits of money that you just donated. But hopefully you get a sense that you are true to your value, that you have done good for people who don't have as much as you do, and that is sufficient compensation in expressive and emotional benefits for the utilitarian benefits that you lose. So let's let's again let's talk about some things. Um, the sort of emotional benefits investors get.

A positive one you mentioned previously was security and the ability to help the next generation in their family as well as as well as philanthropy. But but I want to talk a little bit about what I like to call the cocktail party factor. And we see less of

this today than perhaps we used to. If you remember in the ninety nineties, you couldn't go to a cocktail party or a barbecue or a dinner party where all the people outside of the industry, the finance industry, all they could talk about was their favorite stock, what they were buying, how much money they were going to make. We saw something similar in the two thousands with at

least the first half with houses and this and that. So, what is the emotional benefit of being able to chat about your stock picking prowess, how great your hedge fund manager is, etcetera. What what is the value of that irrational or not to investors? Well, what is the value of solving puzzles? Uh? You know if if you fun entertainment exactly, and and so for for lots of people, it is fun entertainment and also demonstration of their ability off their smarts, and so I can pick stocks that

are going to beat the markets. TIChE is that it is. It is a self satisfaction. It is an image of myself as a competent person and a demonstration to other people that I'm a competent person. And so I invest sometimes in individual stocks which I don't. But but but if that typical person you're talking about, uh, most likely tells others only of those stocks that went up, uh, not those that went down because he's trying to demonstrate competence to himself but also to other people. That selection

selective retention. Uh, people only remember their winners, they don't remember their losers. Do that. Yeah, well they have not really lost anything because they have not realized that loss yet. So so let's talk a little bit about um some other ways this manifests itself. We see index funds gaining in popularity. Uh, that doesn't really give people much to talk about at at dinner parties. How does the rise

of indexing chan enge investor behavior? Well, I think I think that finally people are getting the point that if you are a typical individual investor, markets are difficult to beat. Their hard to beat. Yes, hedge fund managers do beat them, but you do not. And so people are moving towards index funds and in in an odd way, Uh, they're getting the same kind of satisfaction of feeling clever, feeling smart by buying index funse. That is what I do.

That is, I look at people who try to play the market, and I think about them as idiots, and I take pleasure and being smart enough not to waste my money on attempts to beat the market. Coming up, we continue our conversation with Professor Meyer Stateman of Santa Clara University discussing the details of behavioral finance. I'm Barry Ridholts. You're listening to Mass Teas in Business on Bloomberg Radio. My guest today is Professor Meyer Stateman of Santa Clara University,

who is an expert in both finance and behavioral economics. Uh. Let's let's talk a little bit about something you alluded to earlier. First generation behavioral economics, second generation, third generation. So you started out saying first generation was the recognition that people aren't rational, and the second generation was, well, people make bad decisions, they make mistakes, but that doesn't mean they're stupid. That's just humans being humans. What is

third generational? What I'm still I'm still in the second generation. In the first generation, Yeah, people are are irrational, people are idiots. Uh, but of course we are not idiots. There are things we want so so consider for example, trading. Trading has been attributed to a cognitive era. Why is it that people trade so much because they're overconfident in their abilities? Yes, that is true, but as we mentioned, it is also a matter of entertainment. Why is it

that people play video games? For some people, trading is the equivalent of video games. But with money, there's there's I used to call it atari for money. You basically would sit at a screen lightswood flash, things would move, and you were trying to shoot the bad guys in order to make money. And it was absolutely an addictive adrenaline rush, as intense as any video game. Yeah, and if you do it, you know, with with a measure, just a little, you'll be fine. Think about buying a

lottery ticket. You know, people who buy lottery tickets are derided as people who don't know math. But but you know, a lottery ticket costs a dollar or five and it gives as hope for the entire week before we find out that we lost again, and hope. Now, think about movies, you know, movies of fiction, and yet we pay real money for them. You're entertained for two hours. Buy a lottery ticket, you get to talk about here's what I would do with the hundred million dollars exactly, and and

and so and so. The question really is not uh but mistakes. You have to begin with what it is that people want, and then ask yourself, how should you go towards what you want without making mistakes. And so buying one lottery ticket a week that's fine. Spending half your pay on lottery ticket, that's an error. That's a problem. That's a real problem. So you're drawing an interesting dividing line between the both emotional and utilitarian uses of either

investing or money or what have you. And it sounds like you leave we run into trouble when we don't acknowledge or recognize the legitimate, expressive and emotional side of investing and not contain it. Don't try and completely shut it out, but you have to contain it in a dollar a week for a lottery ticket isn't the end of the world, precisely. And so think about socially responsible investing.

If you if you invest in a way that's socially responsible, you may say, lose one percentage point of your return, it will give you expressive and emotional benefits. You have to ask yourself whether that one percent laws in utilitarian benefit UH is not too large relative to the benefits that you derive from it UH. And so all of those things have to be done in proportion, in in a in a good sense. The same applies to things

hedge funds. You know, hedge funds are prestigious because not everyone is allowed to buy a hedge funds, so you can signal your wealth by doing so. But buying hedge funds for prestige and ending up losing money that is not really a very good way off achieving prestige. I'm

gonna I'm gonna share a personal anecdote. There was a friend of the family who asked my opinion of a specific hedge fund manager who I personally um suggested he stay away from famous guy regard well regarded early in his career, not so much lately, And this person ignored the advice and spent the next five years gleefully. I can't describe it any way other way than bragging about how much money this fund manager was losing for him. And it took me a while to realize, Oh, he's

not complaining, he's bragging. He is so much money. This guy could lose a millions and it doesn't affect them. And exactly what you're saying, it's not the dollar side of it, it's the prestigi and emotional side of it. Yeah. Well, one of one of the things that I discovered very soon after I came to the United States, is that people in the United States, like in Israel, are very interested in money, and very interested in in their own income but incomes of other people. But Americans are very

secretive about that. The last question you would ask somebody here is how much money do you make? But people signal how much money they have in all kinds of ways, you know, dropping hands about their extra house and upstate New York or or or whatever, or through the cars they drive, or the vacations they take, or the stories they tell. And again, you know, if you do it in a way that is within reason, and you don't waste too much money doing so, fine, but be reasonable.

Some people get into trouble putting up a good front, spending more than they can afford for show. And that's a problem that is exactly another a facet of it. So let's let's talk a little bit about um some of the things you've learned having studied behavioral finance for so long. First, once we become aware of our own behavioral foibles and cognitive areas, what can we do to

overcome them? Or can we? We can? We can? The first thing is to stop and think now you don't have to do it, which is and every and every decision. You're at a restaurant and and there is fish, and there is beef, and there is chicken. What will you choose as well? I don't know. I feel like fish today.

That debt is fine. But if you're going to buy a house, or if you're going to invest, you bet to pause and ask yourself whether you should not engage what we call system to the thinking system, uh, to consider your choices. UH. So, for example, for me, whenever somebody tells me about something that was absolutely clear in the past, you know nine eleven or or or the results of the recent election, I say, you know, my

mind kind of rings and says hindsight. Check to see what people actually said before nine eleven or before the election, and you see that it's different. And so the first thing is to recognize the kinds of mistakes people make, whether it is hindsight or framing, and try to hold yourself two ways that will correct them. This the same thing applies to emotions. We can step bay back from our fears, from our anger. Count ten before you speak when you're angry, they say, uh. And so we can

help ourselves do better in life. That makes a lot of sense. I'm I've noticed following this election in the United States a lot of I guess I would call it the narrative fallacy. People are creating these stories that pretty much describe the outcome as inevitable, when in reality, this was in a very close election and it could have just as easily gone one way or the other. And yet we've convinced ourselves this was the inevitable outcome and we knew it all along. That exactly is what

hindsight is. And you have to be careful. So let's talk a little bit. Let's talk a little bit about um something you you had referenced in one of the book that the numbers are just astonishing. If we go back to the beginning of the Tao, if we look at eighteen nine on the Dow Jones industrials, the year the average was at forty one. Fast forward a century, and that hadn't grown fairly bust lye to over nine thousand.

But that doesn't include reinvested dividends. Tell us what happens over that same period if you reinvest dividends, well, I'll tell you better. I'll update it to about today. So right now the Dow is at the around twenty thousand, from from forty one in eight exactly to twenty thousand. If you were counting dividends and their reinvestment, it would amount to two point three million. Wow, that's that's a lot of money. Why why do we not? Why can't

we conceptualize exponential growth like that? Because we are really anchored to the level today. We've been speaking with Professor Meyer Stateman of Santa Clara University. If people want to find your work, the books are obviously available at um find bookstores everywhere. Where else can they find your writings? Oh, they can find a both books on Amazon. The second book, Finance for Normal People, will appear on May one, but

you can pre order it. Uh. They can also look up my name and get to my website and see papers that I have written. If you enjoy this conversation, be sure and stick around for the podcast extras, where we keep the tape rolling and continue discussing all things behavioral finance. We love your comment, feedback and suggestions. Be sure to write to us at m IB podcast at Bloomberg dot net. Check out my daily column on Bloomberg view dot com or follow me on Twitter at rid Halts.

I'm Barry rid Holts. You've been listening to Masters in Business on Bloomberg Radio. Technology shifts, policy changes, new regulations. When it comes to investing, things move quickly, so you need a partner you can trust. At Merrill Lynch. That's been our goals since day one. It's why we explain our service is in fees, measure progress around your life and goals, and offer access to resources whenever and however you want. At Merrill Lynch, we are bullish on the

future yours. Visit mL dot com and learn more about Merrill Lynch. An affiliated Bank of America. Merror Lynch makes available products and services offered by Merrill Lynch. Pierce, Fentner and Smith Incorporated, a Registered Broker Dealer member s I PC. Welcome to the podcast, UM, Professor Statman, thank you so much for doing this and being so generous with your time. I find this endlessly fascinating and there's so many questions

I haven't got to. I have to, uh, I have to follow up with you on starting with we really didn't talk about this. You're on the Wealthfront Investment Advisory Board. How did that come about and and what influence are you having over I don't I don't know if the term robo advisor is all that accurate. But software driven UM asset allocation models. Well, I was asked to join as an advisor to wealth Front because of my work

in behavior finance. And of course, if you're going to do a platform, whether it is with the flesh and blood advisors or or it is with an automated system, you need to understand people. You need to understand what it is that they want, the kind of mistakes they make, and help them identify their ones, balance them and avoid mistakes. So speaking of mistakes, let's talk a little bit about Social Security and four oh one K, four one K and four h three being another tax deferred SARCEP other

tax deferred retirement accounts have been pretty strongly criticized. Do you look at the returns since the early seventies, they haven't been great despite having one of the greatest ball markets of all time right in the middle. What's wrong with four oh one ks and and their ILK? What do we do wrong setting that up? Or is it just four one ks are fine? And it's the behavioral side that's the problem. It is not the behavioral side.

It is how programs are structured. I, for example, like fellow academics, have been on a defined contribution plan for a three B plan since I first was teaching at the City University of New York in nineteen seventy five. Now, how does that differ from a traditional four ones as exactly four a one exactly like not a defined benefit. It's defined defined contribution. So I've never had defined benefit. I've never had a pension plan. And I can tell

you without bragging, that I have a lot of money. Now, now let me guess you're you started early. Every time you gotta raise, you raised your No, okay, So here's the story. The story is that the City University of New York contributed I think in the twelve or fifteen percent into my measly salary at the time. I added to it. Same at Rutgers College and at Santa Clara

University today, and that is common. The university contributes ten percent on top of my salary, no matching, no anything I can add to that, and I do, and I do. They contribute. There's that top out at I want to say, either eighteen or twenty four No real, it is without limit. So this is like a rough four oh three b. Is it pre tax or post tax? It is it is pre tax. The thing that thing. Here's the thing. There are two aspects to the move from from pension

plans to define contribution. One has to do with who bears the risk, and so now it is the individual employee of the company. The other has to do with how much the employer contributes. Employers used to contribute to pension plans the equivalent of about eight per center, perhaps even ten percent. Now yeah, now, if you're lucky to contribute three percent, my office is a four percent match, that is, and and ask for a match and it

tops out. That is the problem. The problem is not with the four one k. The problem is where the miserly corporations that contribute so little to it. Because employees in the early stages need the money, you know, for for for for diapers, and and for for rent and so on. It's very hard to save when you are young. So Santa Clara could do a ten percent. It's not even a match. It's a straight up ten percent. It is not just Santa Clara, it is Harvard. It is

all private institutions do that. That's a nice that's a nice uh number. Well, that that is the way it should be. And that is a point that is not made. Uh. Instead we are pushing it to the employee ease and call them irresponsible and talk about how to nudge them. I say, I say enough of that. First of all, you don't need to nudge people, you need to shove them into So you and Dick Taylor disagree about this, I, well,

I think that we differ in some way. Uh they really is the politics of it, it is it is very hard to have mandatory contributions given given the political situation. But but I think that that there's a need to have a system that is structured kind of like source security, not extending source of security, but mandatory like source security. And there's really a need for employers to step up and contribute a whole lot more two employees retirement accounts.

M that's quite interesting. Um, wow, all right, I think that's quite fascinating. You know, the ail er nudge thesis is simply get people to pre first of all, make the four one K enrollment automatic, make the rise and contribution. Have people agreed to do that or opt out. So how you set the defaults make a big difference. But you're taking it a step further and saying employers need to really be part of this that. How do you persuade companies to do that? I mean, think about think

about pensions. People did not have a choice. It was mandatory. In fact, people did not have a choice. Do you want a pension or do you want to get the money right now up front? Uh, it was done in a paternalistic way without nudging people and so on. How is it that we got ourselves into the nudging thing. We just moved really by accident, almost from pensions to defined contributions, and nobody asked should it be voluntary or should it be mandatory? Oh, I don't think it was

an accident. I think it was a big money, say much less headache for the companies. And that's why they want the nature of it as being voluntary. That was something that could have been made one way or the other.

It could have been made mandatory. So once we started giving up pensions, for one, every company with more than ex employees should offer a four oh one K and you know, whether you match or not, you should at least set it up and run it, and you should and you should not even have it as a matching thing. You should just have it as a straight contribution. That is, matching helps people like me and like you that there's people who have enough money to actually save and then

they get the bonus. But the people who really need to save, the people who find it hardest, and many times they just forego the match because they don't have the money to make their own contributors. We see it all the time. Let's um, let's shift gears a little bit. I want to talk about the hard to beat mark it hypothesis, not necessarily the efficient market hypothesis. What is the hard to beat market hypothesis and what does that

mean um for investors? Well, the hard to beat market hypothesis says that gaining consistent advantage in the market, gaining consistent above average return is very hard to do. Very hard does not mean impossible. Hedge fund managers do that, many active mutual fund managers do that, and so on. Insiders definitely do that. The question really is who can do that? We talked about them. Who cannot do that?

The typical amateur individual investors cannot do that. In fact, the reason those professionals are able to beat the market is because they take money out of the pockets of the idiot individual investors who try to to compete against them, and so and so. It's not the question of whether the market is is efficient, and if it's not efficient, then anything goes and it's very easy to beat the market. You have to ask yourself what edge do you have. If you have an edge, by all means, trade on

it and beat the market. But if not, just buy an index fund and forget it and be better off. So you you there's something in and I don't recall which of the books um you reference it. It might be the more recent one about investors who have weak self control and how they can manage their own um behavior. And one of the things you suggested is, hey, you could spend your dividends but never dip into capital. So so describe the sort of rules that makes sense for

people who, under normal circumstances are perfectly rational. But hey, at the market drop and people start to freak out. Well, the distinction people make between income and capital is a very basic one, and and it is usually very helpful when you're saving. It is very helpful because it means this portion of the cake you can eat, but this portion you cannot touch. You cannot dip into capital. Uh. The problem with it is that people are trying to

get yield. People are trying to get income because interest rates are low and dividend rates are low, and they get themselves into dividend capture funds for example, that waste their money. They create something they can call income by getting more dividends, or they get into junk bonds because they have more higher interest rate. But but they're oblivious to the kind of risk that taking when they do that, and they're oblivious that those high rates that are promised.

I'm not realistic because of course this assumes that none of those companies will go bankrupt. So I recall something else you wrote, and I hope I'm not mangling this too badly. Someone is presented with the choice of owning either a stock or an index that pays a lot of dimonends and taking the dividends, or or just recognizing the difference in tax rates on dividends and long term capital gains and instead just shaving off the equivalent amount

of stock selling it instead of of the dividend. Why do people have such a hard time doing the math on that and understanding, Hey, it's better under these circumstances and this tax differential to sell a little bit then hold onto it, take the dividend, and pay a higher tax. Well, that's difference between rational people and normal ones. Rational people say money is money, Uh, call it capital, call it dividends. If I don't get dividends, I can simply sell a

few shares and get the equivalent of that. That is what Miller Modigliani show does. But but again for normal people, there's a problem of self control creates a need to have rules that will prevent you from spending too much. And one of those rules is spend dividends, but don't dip into capital. And that is very helpful during your

working years. But then when you retire and you need to actually dip into capital, people find it really really difficult, and and they go in foolish ways to generate income, where in fact they should find the way themselves with an advisor to depend too capital, because after all, uh, people don't live forever. Sorry to break the news, So there was something, um interesting, I'm gonna I'm gonna do

that again. Edit that out. Um, your own behavior. You mentioned you um tend to index, but as an investor, what else has changed in the way you interact with investing in markets based on studying investor behavior. Well, of course I've I've learned about markets and I've learned about myself.

And I find that even today, when I begin an investments class and I asked people what it is that they expect to know by the time this course is done, Uh, somebody is going to say, I want to know how to pick the best stocks, and so I have to go and explain why that is not likely to be a good idea to try to do that unless they are going to be investment professionals. Uh. And so it

is still hard for people to get. But by the time they're done with the course, and by the time they read not just my writings, but of course this is now widespread the Jack Bogel and and Worn Buffett and so on have said it. People are getting the point, and people in fact invest in index fund And sometimes I hear from students who took my class many years ago and right to say, thank you, that's that's wonderful. What what are the most challenging biases to overcome what

cognitive errors present. The biggest problem, Oh, I think that framing, uh is a problem. That is, when we are faced with a problem, we simplify it by framing. And so they give an example, well, again dividends and and capital. You know, we frame it as being two separate money is as if they have different colors. But but money

is fungible. A dollar is a dollar no matter what it comes exactly, and and so and so there's really a need to recognize that framing and frame it correctly as one part of money, and you have to find ways to dip into it in a responsible fashion. But but don't get confused as no, I cannot really dip into capital because it's a different color money. That's quite quite interesting. So we we've talked in general about um various cargnit veras we've talked about behavioral issues. How can

people self identify their own blind spots? The classic Dunning Krueger um people who aren't especially talented have a blind spot for their own lack of talent in that given space. What can people do to not be as susceptible to their own cognitive deficits, to their own emotions and to their own second generation behavioral problems. Well, we need we need to know ourselves. And sometimes the way you see

yourself when you shave is to use a mirror. And the way you see yourself in terms of investment is sometimes to read, uh, to speak with people who are knowledgeable in the field, knowledgeable I mean knowledgeable in say, those cognitive errors identifying wants and and this way you kind of change your way of thinking. Uh. And so you learn, you learn rules that are in fact useful. Again,

you learn to step away from your emotions. For example, whether fear, uh, you're you're afraid, but then you say, well what can possibly happen? Uh? And and you can put it in perspective anger, a hope Uh. You know it is again something where where you cannot just just go buy hope and buy lottery ticket with with abandoned. So there was um, I'm paraphrasing this, And again I don't remember which of the two books this was from.

There's discussion on how much money we need to be happy and what having more than enough money does to our psychology. Am I am I capturing that right? Well, one aspect of it of more than enough uh. For some people of course there's never enough. And and if you ask yourself, really, why is it that somebody who has two billion dollars strive so much to get three billion dollars? Uh, well, three is more than two exactly. Well but but but you know they they but that

doesn't sound health standard. Well, the standard finance or the standard economics says, why do you say so that you can spend, so you can have a security, so you don't have to worry about health care costs? Exactly? But but then you see many people and not just the very wealthy, who have way way more then they need, say for retirement or even for their family, and and the next generation who still strive for more. And the answer is status, because because two billion dollars is a

lot of money, but three billion dollars is more. And if you are in this company of people for whom money is in billions, it matters whether you have two or three. It matters whether the fellow who was below you with one and a half now exceeds you with three, because now your relative status goes down. And so one of the things that we want and we have recognize it, is social status. And social status is relative, which makes it really really hard. It means that that that we

are competitive to the end. And so if you can just step back and say, hey, you know, you don't have as much as Warren Buffett, uh, but you have more than you need. The Leon Cooperman is a hedge fund manager and he's one of the people who signed the pledge to give away half his money in his lifetime.

And he's worth several billion dollars. And he tells the story at when he signed the pledge, He's at a dinner with about eight people, and there's Bill Gates at the table and Warren Buffet at the table and a handful of other people and the check comes and they give it to him. And the reason why Warren Buffet and Bill Gates and the rest of the table gave the check to Cooperman is he was worth three billion dollars.

He was the poorest man at the table. So the rule is the poorest guy has to pick up the check. And that's pretty you think about that, that's pretty hilarious. But even at that level of wealth, people are still measuring and comparing and and are aware. He he actually describes it as I was the piker at the table. Well, and you can see how people treat their wealth. You can see what Bill Gates is doing with his wealth,

and Buffett as well, Buffett as well. And then you can see people who create those a generations, skipping trusts and so on and and and keep the money as if they can take it with them to the next world. Cooperman actually is driving an old car, and I for him. I yelled at him, and I said, listen, you don't have to go out and spend two hundred thousand dollars on some insane thing. But the new cars have bluetooth and safety things and better air bags. You don't need

to be driving a fifteen year old Lexus. You could, you could, He goes, I feel like it's not my money. I'm spending money that will be better used for charitable purposes. Well, that is really a kind of you said the same time. That is right, you. We we develop habits, we develop an image of ourselves. I mean, you know, seeing myself in a Lamborghini. I can buy Lamborghini, but I'm going

to feel ridiculous. You can get in low enough to get in the car such as that you know that that that is it just I just don't have enough hair for a Lamborghini. I've seen plenty of people without a lot of hair and Lamborghinis. I just don't see that being in the Santa Clara University Faculty parking lot. It would stand out a little bit that that is also true. And and you really it is an image that you have in your own eyes and in the eyes of others. And so yeah, I would be perceived

a bragger if if I if I drove one. Now, if you were a hedge fund manager, the perception would be different. Your peer group might perceive it differently. It is true, and I'm happy I'm not in that company. So before we get to some of our favorite questions, I have a handful of things that that I want to go over that I think we skipped. There's a question I have on risk aversion that we didn't get to. And there was one other question. Um, well, we really

talked about priorities. Do you do you look at smart beta at all? Have you have you researched much of that? Because because because we're now over half a billion I'm sorry, we're now over half a trillion dollars in smart Beta, how much of this is people just chasing the new thing, or is is this chasing factors that have worked in the past, or or is this something that's just a fad and it's going to fade one day. Well, here's

an academic answer. Unfortunately, the the the question really is what does the extra return that you get with a smart beta represent. Is it representing beating the market or is it representing just a fair return on your money? Anything, You're assuming more risks, so therefore your potentially generating either risk or or it is. It is simply how returns are determined. And so if you have, for example, that returns are higher for value stocks and small cap stocks,

it is not necessarily risk. It might be other preferences, but value. If so, if you tilt, if you tilt your portfolio towards value, towards small perhaps a low low beta, and so on, you get essentially your money's worth, you're not beating the market. And and does it really work, does it really add as much as it really stable? I don't know. I mean, I telled my portfolio towards value and small, so but I don't really go much

beyond that. We do something very similar. The thing that I think a lot of people forget when they're looking at returns, they should really be looking at risk adjusted returns. So if you're gonna if you're gonna assume a little more risk and a little more volatility, let's say with smaller cap stocks, you should be compensated for that additional risk. Yes, But more than that, you have to be aware of

the cost. Uh. That is, the people who promote those smart beta funds and so on, they take big chunks for themselves. Doesn't leave you anything that that's that's the general problem with the hard to beat market. That is, it's not that money managers don't beat the market, it is that they don't share it with their investors. Well, someone's got to keep those Lamborghini dealers happy, right. So so my last question before I get to the favorites.

We briefly talked touched on risk aversion and loss of version. Is there really a big difference between the two? Well not really. In daily language, when we talk about risk, we really talk about laws. That is, we are not really talking about about gambles. Where where it is if you if you lose, you win just one hundred dollars and if you win, you win a thousand. Uh. It

is always uh, you possibly can lose. You put in one hundred dollars, you might end up with zero, or you might end with two hundred dollars and so and so that is what loss of version. Actually, they really interesting distinction in my mind is between loss of version and short fall version. That is what's the difference. So so so think about think about the case where you bought a stock for one dollars and now it is

trading at sixty. Well, the forty are lost. An economists will tell you the forty dollars are lost whether you realize the lass. But but your aspiration, but your reference point is the one hundred, and so you hate that shortfall. And so you are reluctant to realize the loss because you're still trying to get even. Uh. And we heard that countless times from investors. Dear God, just let me get back to break even, and I'll never buy another

fill in the blank friend. So and so, when you think about ambition more generally, that is that is shortfall version. That is, I am now in a position where I make ten dollars an hour. My aspiration is to get a job that pays thirty dollars an hour. I am now in a short fall position. That gives me the ambition to go study, what do whatever is necessary to upgrade my skill sech that I can get more. Uh, and so that that really is so. So you can

have five billion dollars. But but if your benchmark, if your inspiration is ten, you feel as if you are still a loser and you're trying to reach that aspiration. Huh, that's amazing. So let me jump into my favorite questions. In the last twenty or so minutes we have we have left UM. So we described discussed a little bit about your time UM at Hebrew University and in Rusal University. No, it's Hebrew Investigation. UM. Your undergraduates where you have an

m b a. In finance. Yeah, what what did you study undergraduate? Well, and the righteous studies in Israel are different from from the United States, uh, in that you begin with majors, and so my majors were economics and statistics, and so it was very much a finance oriented Well it was. It was an economics and statistics and then and then I continued on for an n b A. Immediately after I got my undergraduate degree. Uh. And they're

my focus was on finance. And when you come to the United States, you go to Columbia, you get a PhD. Is that where psychology started to come into this? So I I had, like all PhD students, I had some smattering of psychology there. But but that's not really where where it came from. What what the experience in New York and the experience of living in the United States,

of course stayed with me. One of the things that I years later in my studies is is the time of the energy crisis UH seventy three seventy four, when conn Edison eliminated its dividends and and the the annual meeting was raucous and people wanted to hang the chairman. So Professor statmon tell Us, who were some of your early mentors, Well, I was fortunate to have very many, and I tried to reciprocate now by mentoring my students

and my younger colleagues. It goes back. I can think of of high school where my English teacher said, I can see you doing a master's degree. Well, you know when we are in high school, just just the sense that that the grown up is is saying that you can set your sights high it's really very QUI care exactly and and you know, I think of Peter Burn's uh, Peter Bernstein. I got to know because I sent him some some paper and he and he took to the ideas of behavior of finesse right away. I mean, it

was right in him. And it was his book on Risk against the Gods is just spectacle, is spectacular. And I have I have his book on gold literally on my desk. It's two or three back in the queue, but it's it's on my list. So you know how fortunate I am that that's amazing as as a mentor, and so he opened he opened many doors for me,

and he encouraged me to do that work. Uh and and in between so you met him just merely by sending him a paper I sent him, Yeah, I sent him a paper very very early nineteen eighty probably, uh, a simple paper about betas and and so on and and and he accepted it for the John Portfolio Management. He was he was editing that at the time. And and then I sent him some more and we got it too into a correspondence. And he's he was always interested in ideas. That the last thing that matters to

him a status. You know, you're you're a full professor or or assistant. He just he just thrilled two new ideas, and so and so and and he was always innovative, and so it was. It was really quite quite a pleasure, uh and and very very beneficial. So so he recommended me for a particular award. He put me on on some board of a money management company, and and so on.

And he was he was a very tough mentor. That that is really he would uh sometimes I would get I would get comments on on papers that really uh didn't make me cry, but but surely surely we were were painful, but of course these were comments that helped me do better. He is a meticulous writer. Everything I've ever read of his, every page is just filled with not only deep research, but you could see the structure of the structure of the book, the structure of the chapter,

the way he puts paragraphs together. So much thought and consideration goes into it. He's just a wonderful writer. So if he likes your writing, that that says a lot. Well. Yeah, as I said, he was a tough mentor, but that a very very good one and a very kind one overall. That that is even even when he was tough uh and and I had I had many others who are kind to me at Columbia, and and any stand out

who do you want to mention at Columbia. At Columbia, you know two professors who actually left not long after I came, but but helped me even after they left. Richard Rippy uh and Jerry SCHNEI have been exceedingly helpful to me at a time when I really needed most. And it was quite a pleasure to send them um my book uh and and add an inscription that that really thanks them for for their help when I needed

it most. So, so let's talk about investors who influenced your approach to investing and what other investors affected how you looked at the world of behavior. Well, you know, I mean, you can think of of Peter Bernstein as an investor, but but I have not really followed a particular investor. I like the insights of Warren Buffett. Warren Buffett, I think is very good at recognizing precisely the difference between markets were price equals value and markets that are

hard to beat and and so and so. He says, yes, markets are such that prices deviate from value. But when it comes to individual investors, you say, invest in index funds because markets are hard to beat. And so that these kinds of insights really stayed with me. And now let's talk a little bit about about books. I referenced Peter Bernstein's Against the Gods The Untold Story of Risk. Tell us about some books that have been either influential to you or that you've just enjoyed or or what

have you. Well, on the on the just enjoyed or touching a book, a book in Hebrew that just was translated. It's called Judah, and it's about the story of Judah. Is scary it and it kind of twists the story where by Judah becomes becomes the the the hero of the story under Jesus of course, uh. And it is said in Jerusalem, Jerusalem that I know, and so it

was very very touching to me. On on the nonfiction, of course, I read recently the Undoing Projects by Michael Lewis that we just talked about, and and one of the things that really struck me there was one how Calman. At first you were laughing as they did. And when I think of my work with her, chafferd my good friend and colleague. We did the same thing. You know that the people really wondered why is that we love so much? But but that is one. The other thing

that struck me is the struggle for status. I mean between the two of them, between the two of them ultimately ultimately broke them up. And so if you needed some piece of evidence of how important social status is to us, you have that. And it's kind of this. This part of it, of course, is a sad story. I knew just a bit about it, but not but not much. Uh, And that exposed it. And I look at them and I say, they are There are people

like me and you. There are normal people. And and when one feels that he is treated unfairly, and and and there are want of fairness is another thing. We want one response in ways that that really terminates a good friendship. That's fascinating. Any other books you want to reference, It doesn't even have to be financed related. Oh I don't. I don't find myself reading too many books. What are you reading right now? What's the most recent book you

read other than undoing projects? Well, I'm beginning to read the book in Hebrew again about that that relates to kind of the political situation that they sort of back and forth between between Israelis and Palestinians. That goes nowhere, and it kind of makes a story of their about how how Palestinians arranged for a demonstration. Israelis have a rule book is how to disperse the demonstration, and so and and so it kind of goes one step here

and one step. They're wasting time and energy and lives and getting exactly what um or the author I don't remember, Okay, emailed me. I'll add it to the list. Um let's keep going down our our favorite questions. So, since you joined the world of academia and since you've started studying finance and behavior, what's the single most significant change that

you've you've become aware of? Well, in in finance, I think I think that it's not just because I'm biased, was behavioral finance, but but one of the things that that has changed really is the reception of not just behavioral finnance, but but generally looking at individuals, looking at people, I'm asking how is it that that they behave? When her schefferd and I in fact wrote the very first paper that was published in in a in a top

academic journal, journal Financial Economics. Uh and it was published in nine and it has to do with this issue of dividends. There was there was almost a riot there at Rochester uh and and people and we heard later that that that people uh said that they will never ever send another paper to this journal if they published

this one. Uh and And Merton Miller two years later wrote a paper essentially attacking our paper exactly exactly when when Merton Miller does that today, you know, it's not that the work is how harmed, not at all that there's really no exciting work, informative work, but you don't really have the kind of struggle that we had at the time in the al the eighties. So Merton Miller attacked your paper made it more well known by the attack. Have you ever heard the phrase the Streisan effect? So

this is an interesting little bit of internet lore. Barbara Streisan, the famous Center has this beautiful California ocean front home on the top of a cliff. Some company does all these aerial footage and they sell the footage to things like Google Maps and to real estate companies because they want to you know, it's a it's a useful tool if you're if if you're doing construction, if you're looking

at environmental impact. There's a ton of uses for it. So, but theoretically these one thousand foot flyovers violate people's privacy. It turns out it doesn't. But Barbara streisand sued the company because they violated her privacy. All the documents that no one have you know, it's one house of a million along the coast, no one would have known it's hers.

But as part of the litigation, the specific house, the location, the address, all this stuff becomes public and since then, um people have taken the attempt to suppress something and accidentally making it more broadly distributed. Is the strides and effect? Merton Miller did that for you in part. Yeah, he did that. Yeah, it is. It is really nice to sort of struggle against something. If something is is fully accepted,

it is no longer that's exactly that's exactly right. What about UM so you mentioned that that was one of the changes that took place a little more acceptance of behavioral finance. What do you see as the next shifts in the future. Well, I think I think that that it is about creating a structure for behavioral finance. Really central to my second book, UH, is to dispel the notion that behavior finance is is kind of a set of interesting stories about people who behave and in ways

that are not entirely rational, and so on. But people say, where is your portfolio theory, where's your answer pricing theory, where's your market deficiency theory? And my answer is that is that we have all of that, and that is what I tried to show that that is, you have rational people, we have normal people. You have a standard mean variance portfolio theory, we have a behavior portfolio theory, and so on. And uh, just just to add Harry Markowitz,

uh is modern portfolio your portfolio theory. He is also a great fan of behavior portfolio theory. Uh. Harry Marcos really knows investors and he knows behavior. Uh. And he think of himself with a good amount of justification as being one of the fathers of behavior. Sure, if you think about modern portfolio theory there it's certainly he is

an intellectual father of the of the study. Right. Well, But but more than that, you know that there's one one of the central things about me in variance portfolio theory is that you have to look at your portfolio as a whole, meaning the combination of stocks, bonds, and other non concided as I I I liken it to looking at a food from the perspective of the stomach, where it's all mixed together. It's not it's not starch, protein, vegetables.

That's interesting. But but uh, he understands that that you have to begin with people's goals. UH, so you have this kind of goal based planning. And so he and I and two of our colleagues wrote the paper together

Marcos Marco Witz. What year was? What was published in two thousand ten, and and we developed a a uh a mental accounting portfolio theory where where people keep their money in separate pockets, separate goals UH, for example retirement and college education and bequest UH and they optimize each of them by the rules of mean variance and then put it together. And so we show some some interesting theoretical results. But the most interesting part really is to say, yeah,

normal people think this way. They don't think about money as being kind of generic. They think about it money that I need for this goal of that goal. Portfolio optimization with mental accounts exactly fun with Google. Uh and and um oh that's quite that's quite fascinating. And I'll have to take a look. There is a non technical version of that in the ce J S t o R. It's uh, the Journal of Financial and Quantitative Debt one. But but the other one is in in the Journal

of Wealth Management. Okay, I will, I will, I will make I'll add that link for when we uh, let's see Journal of Wealth Management. See if they instantly called that portfolios for people who want to restore goals or something when here here's how someone else described it, when behavioral portfolio theory meets Markowitz. That that's interesting, all right, So I will find all those links and make sure

they're included. I'm down to my last three questions. So what do you do to relax or keep mentally fit outside of the office? Oh? You know, I I exercise. No, what do you do? What do you do to exercise? Oh? You know, I have equipment a treadmill and a bike and one of those whatever that that that helps kind of the equivalent of lifting weights and and what else do I do? You know? Mentally? Of course, my my my work, and and and politics and and the like,

of course, keep me, keep me alive. But you know, around the houses, it is odd. I I kind of take delight in doing projects like like building, uh and enclosure for for for storage, and and and and so on. And so I have to ask you a political question

because uh, this has been a very political era. But I can't help but notice that the way Americans argue over politics is very different the way Europeans or Israeli argue over You know, israelis canna have a political argument, debate, discussion and then say let's go to launch and it's forgotten Americans. It goes into two camps and neither side. Here's what the other side says. What do you attribute those differences to you? You've seen both countries long enough.

Culture is very is very different. That That is one of the things that struck me when I came to the United States. In in Israel, Uh, if people agree with you, they are quiet. But if they disagree, you will hear them. In the United States is the opposite. Uh, you will know that they disagree with you if they are quiet, rather than telling you that they agree and and so and so, they they they are very Americans. We are very debate argument of verse and land. Well, no, no,

but I think that it's actually good. It's it's kind of it. It's a politeness, it is a civility. And so before before I tell you my political take, I try to probe what yours is to see, and if it is very different from mine, I just termine the discussion and move on to talk about sports. What's the old expression, never talk about politics, religion or um. I don't remember what the third one is sex, religion or sex, don't talk about that. That's the money. UM. People here

talk about money. I don't think, not about income. They talk about and they talk about spending, and they talk about houses and cars, but it's never income. And our favorite two questions. If one of your students or another millennial were to come up to you and ask for your advice, telling you they were interested, UM in going into the field of either finance or behavioral economics, what sort of advice would you know? I I coordinate internships of finance majors, and and what I tell them, I

use the word serendipity that is fined by accident. Uh. You have to figure out not just the world around you, You have to figure out yourself what what works for you? And and you do that by kind of keeping your eyes open and keeping to this idea of serendipity. Figure out, you know, ask yourself, would you want a job along the lines of this internship or is that definitely one that you would not want? Uh? And so and so

continue on in in that way. And so I tell them you want to go into finance and to behavioral finance. If you want to go to the academic side, ask yourself whether you delight in new ideas if you don't, and and willing to work. Of course, if you don't delight in new ideas, you know you may as well go to engineering. Um, I think there might be some

new ideas and engineering, but but who knows. And our final question, what is it that you know about investing in human behavior today that you wish you knew thirty years ago when you were first started. Well, you know, my answer might might surprise you, but the answer is nothing. That is that is, I really enjoyed the journey as much as I enjoy the destination, and I continue on

that journey. And so all I need is kind of like like when you drive a car and you don't really need the headlights to show you anymore than than a distance uh that is out there. Uh. And as you move, you know, the lights move with you and you see the next part of the road. You don't need the navigation system. You just need to You might you might need the navigation I sadly do. But but but I think that joy, the joy of discovery, is really uh too much to give up, uh to know

that that is. I don't know that I would have wanted five years ago or thirty years ago to know exactly where my life is going to take me. I think, I think that it is a nice thing when discover things along the way, and you explore things and you enjoy them. We have been speaking with Professor Meyer Statman of Sata Clara University. If you enjoyed this conversation, be sure and check up an Inch or down an Inch on Apple iTunes and you could see the other hundred

and thirty or so such conversations we've had previously. Thank you so much, professor, for being so generous with your time. I would be remiss if I did not thank Taylor Riggs, my booker, Michael bat Nick, our head of Research Medina Parwana are recording engineer. We love your comment, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. I'm Barry Ridholtz. You've been listening to Masters

in Business on Bloomberg Radio. Our world is always moving, so with Merrill Lanch, you can get access to financial guidance online, in person or through the app. Visit mL dot com and learn more about Merrill Lynch. An affiliate of Bank of America. Merrill Lynch makes available products and services offered by Merrill Lynch. Pierce, Fenner and Smith, Incorporated, a Registered Broker Dealer member s I p C