Animal Spirits Podcast Summary: "Talk Your Book: How Not To Invest Like Buffett"

Release Date: April 19, 2025

Hosts: Michael Batnick and Ben Carlson
Guests: Barry Ritholtz and Alex Morris
Podcast Description: Animal Spirits is a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they discuss what they're reading, writing, listening to, and watching.

1. Introduction to the Episode

The episode begins with modest sponsorship messages from Betterment Advisor Solutions, followed by brief introductions highlighting the podcast's focus on markets, life, and investing. Michael Batnick welcomes listeners, setting the stage for an engaging discussion about investment strategies and philosophies.

2. Investment Books and Continuous Learning

Michael Batnik (01:11) emphasizes the differing perspectives on reading investment books, acknowledging that while some investors may not enjoy them due to their focus on numbers, he personally finds enduring value in such literature:

"But for me, I still very much enjoy reading investment books. I got to tell you, they don't... It's not old. They don't get old."
— Michael Batnik [01:11]

Ben Carlson (01:35) echoes this sentiment, highlighting the importance of recurring, evergreen messages to maintain the right investment path:

"I feel like sometimes you need, even if it's just evergreen messages, you need them beat into your head again and again to keep you on the right path."
— Ben Carlson [01:35]

3. Overview of “How Not to Invest” by Barry Ritholtz

The hosts introduce Barry Ritholtz's book, "How Not to Invest," co-authored with Alex Morris.

Michael Batnik (01:45) praises the book's engaging narrative, noting its combination of humor and insightful content:

"I still enjoyed reading this book because he makes it fun. It moves. It's quick."
— Michael Batnik [01:45]

Ben Carlson (02:46) commends the book's structure, likening its short chapters to blog posts and emphasizing its utility as a reference guide:

"It's really well done too, where you can use it as a reference book. You don't have to read it from cover to cover. You can pick and choose which spots to look at."
— Ben Carlson [02:46]

4. Reducing Investment Mistakes

A significant portion of the discussion centers on the book's focus on avoiding common investment errors. Alex Morris (10:08) elaborates on the concept that financial education alone isn't sufficient due to its short half-life and the behavioral aspects that often undermine it:

"Instead of say, here's what to do, buy this, buy that, here's how to build a portfolio... I spend most of the book telling people, hey, if you avoid the unforced errors that we all make... you'll be so much better off."
— Alex Morris [10:08]

Ben Carlson (11:49) supports this by emphasizing the importance of context over tactics, particularly for beginner investors who often focus excessively on trading strategies:

"I agree with you that the context is so much more important than tactics. But most beginning investors assume that they need the tactics."
— Ben Carlson [11:49]

5. The Interplay Between Politics and Investing

The conversation delves into the impact of political events on investment decisions. Ben Carlson (12:53) recounts how Barry Ritholtz was among the first to caution against mixing politics with investing, a message that has become more pertinent given recent political turbulence:

"People told me for years, politics and investing don't mix. What about now?... the problem is if you're using the politics... to make your decisions, that's where the problems come in."
— Ben Carlson [12:53]

Alex Morris (13:26) references a study highlighting how counties' voting patterns correlated with investment behaviors, underscoring the importance of maintaining an investment strategy independent of political climates:

"If you kept investing the whole time, it's worth twelve hundred dollars. It's just so blows everything away... do less and try not interfere with the magic of compounding over decades."
— Alex Morris [13:26]

6. Navigating Market Noise

Addressing the overwhelming influx of information and "noise" in today's markets, Michael Batnick (14:59) raises concerns about the challenges of contextualizing or dampening this noise. Alex Morris (15:29) responds by advocating for a curated approach to information consumption:

"I put together a list of my all-star team... I don't feel the need to dip into the firehose all that much."
— Alex Morris [15:29]

He advises listeners to rely on trusted sources tailored to specific investment areas, thereby filtering out the majority of speculative and emotionally charged content.

7. The Halo Effect and Reliance on Experts

One of the most critical insights from the episode is the discussion on the "halo effect," where investors may overvalue experts based on their reputation or past successes.

Ben Carlson (20:17) identifies the halo effect as a common novice mistake, where investors assume that having credentials or historical success guarantees future accuracy:

"The first chapter is the halo effect... some people think they have to know what they're talking about."
— Alex Morris [20:17]

Alex Morris (20:24) further illustrates this with examples of renowned investors like Michael Burry and Robert Kiyosaki, pointing out that even high-profile figures can repeatedly make incorrect predictions:

"Barry can't help himself. He has to call out everything he sees... if somebody makes an outlier forecast and they're right, that's it. They're going to keep making outlier forecasts forever."
— Alex Morris [20:24]

This segment underscores the importance of critical thinking and skepticism, even towards celebrated experts.

8. Managing Investment Conviction vs. Market Signals

The hosts explore the tension between maintaining investment conviction and responding to market fluctuations.

Michael Batnik (51:20) highlights the challenge of adhering to one's investment thesis in the face of daily market volatility:

"The market's telling you, hey buddy, you're wrong... how much do you let your conviction fight with the market?"
— Michael Batnik [51:20]

Barry Ritholtz (52:37) shares his evolved approach, emphasizing patience and the importance of reassessing rather than reflexively reacting to market movements:

"I try to be mindful of the things that I certainly don't know and I just try to kind of plod forward from there as intelligently as I can."
— Barry Ritholtz [43:25]

He discusses how experience has taught him to resist the urge to make frequent adjustments, instead focusing on long-term theses and minimizing unnecessary activity.

9. Investing Philosophy Inspired by Buffett

Barry Ritholtz (43:25) articulates his investment philosophy, drawing inspiration from Warren Buffett's long-term, ownership-focused approach:

"I'm trying to find stuff that I truly, truly, truly want to own, which obviously requires a lot of confidence in the business and then also the management team."
— Barry Ritholtz [43:25]

He emphasizes the balance between confidence in a company's fundamentals and realistic valuation assessments, aiming to align his investments with businesses he believes in deeply.

10. Personal Investing Experiences and Lessons Learned

The discussion delves into personal anecdotes and lessons from both Barry Ritholtz and Ben Carlson, highlighting how their experiences have shaped their current investment strategies.

Barry Ritholtz (49:21) reflects on the difficulty of holding investments long-term, especially during periods of underperformance, and the importance of adaptability:

"I try to keep those things in mind... you have to create your own group of all-stars who've lived through a few cycles."
— Barry Ritholtz [49:21]

Ben Carlson (49:57) shares his perspective on the challenges of maintaining conviction and the emotional aspects of long-term investing:

"Knowing when it's time to hold a stock for multiple decades... how do you ever get there?"
— Ben Carlson [49:57]

11. Advice to Listeners

In closing, Barry Ritholtz (29:20) channels investment wisdom to encourage listeners to minimize investment mistakes rather than focusing solely on picks:

"Investing is the same thing. Instead of trying to pick the next Nvidia or market time... just make fewer mistakes. You'll be so much better off than everybody else."
— Barry Ritholtz [29:20]

Michael Batnik (28:22) wraps up by endorsing the guests' books, urging listeners to read and apply the lessons shared to improve their investment approaches.

Notable Quotes with Attribution and Timestamps

• Michael Batnik [01:11]:
  "But for me, I still very much enjoy reading investment books. I got to tell you, they don't... It's not old. They don't get old."

• Ben Carlson [01:35]:
  "I feel like sometimes you need, even if it's just evergreen messages, you need them beat into your head again and again to keep you on the right path."

• Alex Morris [10:08]:
  "I spend most of the book telling people, hey, if you avoid the unforced errors that we all make... you'll be so much better off."

• Barry Ritholtz [29:20]:
  "Investing is the same thing. Instead of trying to pick the next Nvidia or market time... just make fewer mistakes. You'll be so much better off than everybody else."

• Michael Batnik [51:20]:
  "The market's telling you, hey buddy, you're wrong... how much do you let your conviction fight with the market?"

• Barry Ritholtz [43:25]:
  "I'm trying to find stuff that I truly, truly, truly want to own, which obviously requires a lot of confidence in the business and then also the management team."

Key Takeaways

1. Avoiding Investment Mistakes: Focus on minimizing errors rather than chasing high-reward strategies. Less frequent trades and disciplined investment can lead to better long-term outcomes.

2. Political Neutrality: Decouple investment decisions from political events and sentiments to harness the power of long-term compounding.

3. Managing Information Overload: Curate information sources to filter out speculative and emotionally driven content, relying instead on trusted, data-driven insights.

4. Critical Evaluation of Experts: Be wary of the halo effect; credentials and past successes do not guarantee future accuracy. Maintain a healthy skepticism and perform independent analysis.

5. Long-Term Conviction: Develop confidence in chosen investments and resist short-term market pressures. Patience and adherence to a well-thought-out investment thesis are crucial.

6. Adaptability and Learning: Continuously refine investment strategies based on personal experiences and evolving market conditions. Recognize and adjust when initial theses are proven wrong.

Conclusion

In this episode of Animal Spirits, Michael Batnik and Ben Carlson engage in a profound discussion with Barry Ritholtz and Alex Morris about the principles outlined in "How Not to Invest." Emphasizing the importance of avoiding common investment blunders, maintaining political neutrality in investment decisions, and the necessity of a disciplined, long-term approach, the conversation offers valuable insights for both novice and seasoned investors. The guests advocate for a mindful, selective approach to information consumption and stress the significance of personal conviction backed by solid research and understanding. Listeners are encouraged to read the featured books to deepen their investment knowledge and apply these timeless lessons to their financial strategies.

For more insights and detailed discussions, visit Animal Spirits at the Compound.