By Jack Forehand —
With so many great investing podcasts out there, it can be difficult to identify the best ones. Through our new Podcasts of the Week segment, I will try to help filter out the most interesting episodes and identify the podcasts I learned the most from each week. In addition, we will also take a look at a great podcast from the past via the From the Archives section.
Best Episodes This Week
Every once in a while, I listen to a podcast that makes me totally revisit the way I think about things. This was one of those examples. Tim Urban is the writer of the popular Wait But Why blog and a really impressive high level thinker.
I have seen many people try to separate what distinguishes the most successful people in the world from the rest of us, but this podcast offered the best explanation I have seen. While most people tend to reason by analogy and start with what other people do or think, people who really change the world tend to ignore what other people think and start with first principles, or what they know to be true.
Tim spent a lot of time interviewing Elon Musk, and that experience offers great insight into this idea. When Elon founds a company, he starts with the major issue for humanity he is trying to solve and then gets into the execution to get there. For example, to the outside world, Tesla is a car company, but to Elon, it is a means to solving the major energy issues faced by the world.
But you can’t start a company to solve the world’s energy issues and just appeal to people’s sense of doing the right thing. That won’t work since as a whole people will act in their own self-interest. So in the end, to accomplish that major goal, he started by building expensive cars that he could make a profit on. Then he expanded to less expensive cars that middle class people could afford. And as a result of the success of that, other car companies become pressured to also build electric vehicles, which multiplies the effect.
That ability to couple big picture thinking with the near term execution required to achieve it is what makes Elon Musk great.
That is only one example of the many interesting lessons from this podcast. If you like taking a critical look at the way you think, you will find so much more as well.
So much of investing today is built on models. As a quantitative investor, I am a huge believer in the ability of models to perform better than humans. But what happens when models don’t work? One of the biggest things any user of models needs to understand is that none of them work all the time and they all have their strengths and weaknesses.
That is where Paul Wilmott comes in. Paul is a leading researcher on quantitative models and maintains an excellent blog on quantitative finance at Wilmott.com. There are certainly many positives to quantitative models, the greatest of which is that they remove human emotion from the decision making process. But that doesn’t mean there aren’t downsides. When a user of quantitative models doesn’t understand their limitations, huge blow ups can occur and investing history is filled with examples of this.
*Source: Reuters, CHRONOLOGY: History of quantitative analysis
This podcast looks at some of those situations and the limits of quantitative models. It also delves into whether markets are truly efficient, and whether the implied volatility in option contracts does a good job predicting future volatility, among other topics.
One of the best lessons I have taken from podcasts in general is that whatever you think you know and whatever you think your strengths are, there is always another side, and this podcast allowed me to take a look at the opposite side of some of the beliefs I have, which is always helpful for my process of learning.
From the Archives
It is really cool to listen to a son interview his father. For me it is even more interesting when the father is Jim O’Shaughnessy, who is one a pioneer in quantitative investing, and the son is Patrick O’Shaughnessy, who in my opinion is as good a podcast interviewer as there is. Jim’s book What Works on Wall Street is one of the reasons I got into the field. He was one of the first people to show that this type of investing works over the long-term.
Both Jim and Patrick are big believers in quant investing, but the best part of this podcast is they spend almost no time on that topic. Their family story and how Jim became who he is today is much more interesting than any discussion of factors they could have had.
This podcasts takes you all the way from how Jim’s father’s philosophies affected both of them to the ups and downs Jim has experienced in his Wall Street career.
The most interesting part of the podcast is probably the part about premeditation. Premeditation is the concept that if you want to achieve something, you should first envision it in your mind. And when you envision it, it makes it more likely to actually happen. Jim discusses this concept and how he used it when he was trying to get his first book published and in other aspects of his life.
It is also not widely known that Jim created the first Robo Advisor during the dotcom boom, before the term even existed, an idea that was well ahead of its time.
Whether you a familiar with Jim’s work or not, I think you will find this very interesting and learn a lot from it.
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Photo: Copyright: bryljaev / 123RF Stock Photo
Jack Forehand is Co-Founder and President at Validea Capital. He is also a partner at Validea.com and co-authored “The Guru Investor: How to Beat the Market Using History’s Best Investment Strategies”. Jack holds the Chartered Financial Analyst designation from the CFA Institute. Follow him on Twitter at @practicalquant.