One of the finest perks of creating this blog has been conversing with people from all over the world. I’m an American, but about half of my readers are not. People from eighty nine different countries have read this blog. And lots of readers from those countries have reached out through email or on twitter.
A few months ago a couple of Australians, Wil and Ben from The Behavioral Investor Podcast, reached out to me about ergodicity from a recommendation from Taylor Pearson. We traded some emails, and I started listening to their podcast.
The Behavioral Investor Podcast
Their podcast is an interesting one, essentially built around a grand vision that I really like.
Their vision is to learn how to create multi-generational wealth. We’re talking about Rockefeller and Vanderbilt type wealth. A billion dollars. And they’ve laid out a plan to reach this level of wealth in just over 100 years.
Here’s the intriguing thing: their plan is plausible.
It’s clearly a multi-generational task. It’s 100 years away so you personally won’t see the end Your kids might not either. But when you break it down, it looks achievable. It’s an eye opening realization.
Your grand child could be a billionaire.
Now is it easy? No, and I think Ben and Wil have shrewdly identified the obstacles to reaching their billion dollar dream are not just about investing prowess, but also behavioral challenges.
Behavioral Challenges
They describe their podcast this way:
We solve the mathematical problem of causing an enormous increase in one’s bank account balance through human effort.
The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour.
They have determined it takes just over 7% compound growth rate per year and a dedication to investing $35,000 each year to reach their billion dollar goal. This is a lot of investing per year for many people. However it’s also not such an extreme number that it’s unreachable for many as well.
Now the 7% per year isn’t a given by any measure either, but if history is any guide, it isn’t outlandish. The Australian stock market has provided this level of returns over the last 100 years. United States stocks are close, which is why on paper this is enticingly possible. You have to be a good investor, but not necessarily world class.
But it’s only possible if you stick to the plan.
Ultimately, the behavior challenge may be the most difficult hurdle. The math is right there. It’s complicated, but not hard to see that it’s possible. But you need discipline and dedication to pull it off.
Interviewing Non-Financial Experts
Their approach to this has been really interesting, and I think is very relatable to the average investor. First there is no pretext of anything other than exploring this grand concept and how to achieve it. Ben and Wil are not investing professionals, (although they have a lot of financial curiosity) so there isn’t any un-accessable jargon restricting their audience. They are exploring these ideas through internal discussions on various investment philosophies–trying to root out foundational wisdom–and with interviews of mostly non-financial professionals.
They’ve interviewed an airplane pilot, a tennis player, mathematician, and psychologist. Essentially they are trying to take knowledge from non-investing fields and apply it to investing, which if you’ve read just a bit of my blog, you know I love.
But the journey they are taking is really just a wonderful search for truth. I feel like there are similarities in how they are exploring finance knowledge any my own path. Both of us probably could have discovered certain things quicker by just focusing on traditional finance methods and knowledge. But I certainly wouldn’t have learned as much along the way.
The easy answer isn’t always the best answer. Wil and Ben are discovering time tested truths for investing, but they are doing it their own way, and they are tying the truths to relatable stories. Therefore the lessons learned from the airline pilot won’t leave their psyche. And they may not leave yours either.
Breaking The Market to Mend Our Lives
So I was more than happy to say yes when Ben and Wil asked me to join them to discuss some of the ideas on this blog. Last week the three of us discussed behavioral investing from the east coast of the United States, the east coast of Australia, and the east coast of the Arabian peninsula. Three corners of the world talking about building multi-generational wealth and ensuring future generations have a better world to live in.
I think it was a great discussion. I hope you enjoy it.
Podcast as a Behavioral System
One of the points we discussed was the benefits of investing with a system you believe in. I’ll let you listen to the podcast to get the details, but essentially, a system you believe in gives you a behavioral mindset that helps you overcome the “biases of the prairies“. The system could be a passive system, it could be an active system. But you need a plan.
But this only works if you understand the system and if you trust the system. This is a key reason I like Wil and Ben’s podcast. By developing thier own understanding through multiple avenues of wisdom, they virtually ensure they will develop a strong trust and belief in their own system to achieve their goal.
In a strange way, hosting a podcast is itself a wonderful behavioral system to ensure they absorb the lessons needed to make their grand vision a reality, and I’m very proud to have been a part of their journey.
This is very heart warming, to read, so much soul searching and honest reflection around creating wealth for the future, generations. Feeling the ethics, here. Seeing the Wisdom manifesting. Congratulations, Cam Waters.
the math is wrong. it actually takes 8% return if you’re investing $35,000 a year.
If your return is 7%, you need to invest $80,000 a year.
Probably correct. They have dual incomes for part of the period, and that probably makes up the difference. I didn’t want to confuse the post with those details as it doesn’t take away from the bigger picture.
yes that’s correct. It assumes you’re taking a 3 generation approach. Over that time period we assume you have 1 child who is also contributing for their working life, in parallel to the parent where their working lives overlap. Same for grandkid.