Podcast Summary: "The Wall Street Labels That Trap You: Chris Mayer & Robert Hagstrom on How Language Misleads Markets"

Podcast: Excess Returns (100 Year Thinkers Roundtable)
Episode Date: December 15, 2025
Featured Guests: Robert Hagstrom, Chris Mayer
Hosts: Matt Zeigler, Bogomil Baranowski

Overview of Episode Theme

This engaging roundtable brings together Robert Hagstrom (author of The Warren Buffett Way, CIO at Equity Compass), and Chris Mayer ("Mr. Hundred Bagger" and author of several books on investing and general semantics) to explore how language, philosophy, and mental models shape long-term investing. The core focus is on how labels, abstractions, and Wall Street’s standardized terminology can mislead investors, and how adopting broader interdisciplinary approaches—drawing from philosophy, general semantics, and the liberal arts—can help investors achieve “worldly wisdom” and superior returns.

Key Discussion Points & Insights

The Problem with Wall Street Labels and Language

• Labels are Traps:

  • [01:18 | Hagstrom]: “Value investing is all about buying something for less than it's worth. It has nothing to do with price earnings ratios, has nothing to do with price to book.”
  • [01:38 | Mayer]: “Growth is a component of value ... designations are things that were packaged together by Wall Street because they have something to sell.”

• Abstractions Detach Investors from Reality:

  • [05:31 | Mayer]: "Finance is one of these worlds where we're just embedded in these abstractions ... It’s easy to forget that when people on Wall Street talk about small caps or large caps, whether it’s a value stock or a growth stock ... These are all very big abstractions.”

• General Semantics in Investing:

  • [06:51 | Mayer]: “General semantics will teach you, anytime anybody presents you with an either-or option, your little alarm bell should go off. There’s never just an either-or.”
  • [07:00 | Mayer]: “AAA meant safe,” but the crisis showed “all kinds of things under there that weren’t safe.”

The Latticework of Mental Models: Broadening the Toolkit

• Charlie Munger’s “Worldly Wisdom”

  • [03:51 | Hagstrom]: Credits Munger: “Investing really is more of a subdivision of this meta, you know, achievement ... if you’re going about trying to achieve worldly wisdom, the benefits will flow through down to stock picking.”

• Liberal Arts and Interdisciplinarity

  • [09:08 | Hagstrom]: Being a liberal arts major and exposure to various disciplines helps build this latticework.

• The Importance of Intellectual Curiosity

  • [15:48 | Mayer]: On discovering general semantics: “I've always liked to just read and explore things that were not in the mainstream ... and that just leads you reading different kinds of books.”

Buffett, Miller, and Going Beyond Labels

• Buffett as a Semanticist

  • [12:48 | Mayer]: “Warren Buffett would have made a great general semanticist ... he's always bringing things down to the real practical ground level.”

• Rejecting Wall Street Jargon

  • [13:22 | Hagstrom]: “He just dismisses all the language of Wall Street ... beta, tracking error, information ratio.”
  • [13:54 | Mayer]: “It’s not a popular idea either ... easier to fall into those abstractions ... it takes a Warren Buffett ... to come along and say, you know what, that’s a lot of blow.”

• Definition Drift and the Weight of Words

  • [25:53 | Mayer]: “Words don’t have meaning, people give them meanings … If you look at the top 500 most used words in the English language ... 14,000 definitions.”

• On Explanations and Mistakes

  • [26:29 | Hagstrom]: Quoting Wittgenstein: “The words that you choose give something meaning ... Failure to explain, when you make mistakes in investing, is caused by failure to describe.”

Time Horizon & Myopic Loss Aversion

• Dangers of Frequent Evaluation

  • [28:45 | Mayer]: “It's easier to avoid short-term thinking as an individual than as a professional ... try not to look at stock prices during the day ... disengage yourself from that news cycle.”

• Patience Premium and Magnitude Over Frequency

  • [30:55 | Hagstrom]: “Called a patience premium or what’s called long horizon arbitrage ... That’s where the excess returns were for me ... trying to figure out what can compound on a consistent basis over three, four, five years.”

• Myopic Loss Aversion

  • [33:17 | Hagstrom]: “Myopic loss aversion is the single biggest reason why people can't make money in the market. They just can't divorce themselves away from a decline in price ...”

• Buffett’s Practice

  • [35:14 | Mayer quoting Buffett]: “The market is there to serve you, not instruct you ... If you're looking at market prices for your cues, then you're starting from just the whole wrong foundation.”

Complexity, Cause & Effect, and Over-Simplification

• Complex Adaptive Systems Over “Mean Reversion”

  • [38:12 | Hagstrom]: “When you begin to think of [markets] as biological animals who evolve, adapt and change versus a physics-based reversion to the mean animal ... your thinking changes immediately.”

• Spurious Correlations & False Causality

  • [41:23 | Mayer]: “Butter production in Bangladesh ... explained 99% of S&P 500 movements ... Those seem unconnected, but lots of things we do like that seem plausible—and that's where we get in trouble all the time.”

• The El Farol Problem and Limits of Prediction

  • [43:27 | Hagstrom]: “There is no mathematics yet discovered ... that can predict the behavior of complex adaptive systems over the short term ... But CNBC will throw everybody and their mother at them that will tell you they can.”

• Why People Still Seek Predictions

  • [45:44 | Hagstrom]: Cites Michael Shermer’s book Why We Believe: “Just the idea that you don't know what's going to happen tomorrow is so uncomfortable ... you'll sign on to anyone that can tell you what's going to happen next week ... regardless that they don't know ...”

Conviction, Expectations, and When to Sell

• Balancing High Conviction with Realistic Expectations

  • [49:20 | Mayer]: “You have to allow your businesses, they will perform in a range of expectations ... they're not machines ... you have to give that room ... you don't want to let go of a great business just because of one bad year.”

• The Cost of Selling Winners Too Early

  • [53:54 | Mayer]: "The cost of being wrong—letting a great company go, then subsequently it continues—is huge. Versus just holding a bit longer ... and having to sell at a loss is a small mistake in the big realm of things."

• When to Throw in the Towel

  • [51:16 | Mayer]: “If you lose faith in the management team ... or it's obvious you've lost competitive advantage, that's a pretty good time to go. Otherwise, it's better to just sit.”

Building an Interdisciplinary Investing Approach

• Advice for New Investors (Where to Start)
  • [56:59 | Hagstrom]: “Bill said there’s an intellectual promiscuity to achieving the art of worldly wisdom. You've got to cast the net wide ... If you read 10 more philosophy, history, biography books, it probably will improve your investment performance.”
  • [59:04 | Mayer]: “Read Poor Charlie's Almanac ... or try my book, How Do You Know? as a good entrée ... get you thinking outside the usual finance canon.”

Notable Quotes & Memorable Moments

• On Value vs. Growth Labels:
  Robert Hagstrom [01:18]: “Just because a stock is a high PE stock with a high price to book does not mean that it's not a value stock. Nor is a low PE stock with a low price to book necessarily a great value investment if you can't sell it for more than what it's worth.”

• On Mental Models:
  Chris Mayer [05:31]: “Even the phrase Wall Street itself is an abstraction ... General semantics will say, will teach you that anytime anybody presents you with an either or option, your little alarm bell should go off.”

• On “Spurious Correlation”:
  Chris Mayer [41:24]: “Butter production in Bangladesh really closely fit the S&P ... He’d find these spurious correlations ... we laugh at those, but the point is there are lots of things we do like that, that seem plausible.”

• On Letting Winners Run:
  Chris Mayer [53:54]: “The cost of that error is huge ... if he just held Walmart that whole time, that would have been worth more than the $8 billion [Jack Laporte] inherited.”

• On Why Prediction is Hard:
  Robert Hagstrom [43:27]: “There is no mathematics yet discovered that can predict the behavior of a complex adaptive system over the short term. Absolutely not. It’s nothing but guesswork.”

• On Intellectual Humility:
  Robert Hagstrom [47:16]: “[Bill Miller] outperformed 15 years in a row ... But if he did it November to November, only outperformed 9 out of 15. He said, ‘I got lucky. Just the stock prices closed at December 31st.’”

• On Getting Started with Interdisciplinarity:
  Robert Hagstrom [56:59]: “Allocate some time each week, just reading something that isn’t finance ... If you read 10 more philosophy, history, biography books, it probably will improve your investment performance.”

Suggested Resources (Referenced in Episode)

• Poor Charlie’s Almanack (Charlie Munger's recommended reading list)
• Latticework: The Art of Worldly Wisdom – Robert Hagstrom
• How Do You Know? – Chris Mayer
• Buffett’s Annual Letters
• Concepts from Alfred Korzybski’s General Semantics & Ludwig Wittgenstein’s philosophy of language

Timestamps for Key Segments

• [01:18] — “Value” is not Price-to-Earnings or Price-to-Book
• [05:31] — Abstractions and the Role of Language
• [06:51] — General Semantics and Labels (e.g., “AAA” as a misleading safety stamp)
• [09:08] — Building the Latticework of Mental Models
• [12:48] — Buffett as a Semanticist; Rejecting Wall Street Jargon
• [20:37] — Should We Drop Value vs. Growth Labels?
• [25:53] — Words, Meaning, and Misdescription in Investing
• [28:45] — Myopic Loss Aversion & Avoiding the News Cycle
• [33:35] — Patience Premium in Investing
• [38:12] — Complex Adaptive Systems vs. Mean Reversion
• [41:24] — Spurious Correlations (Butter in Bangladesh example)
• [43:27] — The El Farol Bar Problem & Why Market Prediction Fails
• [49:20] — Balancing Conviction and Realistic Expectations
• [56:59] — Building Interdisciplinary Wisdom—Where to Start

Additional Reflection and Takeaways

• Interdisciplinary thinking isn’t just for academia; it’s a practical edge in investing that helps you break free from mental ruts set by Wall Street convention.
• Language is a toolkit—but also a trap. By making the “invisible” abstractions visible, you can become a better decision maker.
• The best investors are curious, wide-ranging readers whose success is not grounded in formulas or jargon, but in a deep, clear understanding of reality.
• Complexity trumps simple cause-effect thinking: Markets operate more like living, evolving systems than simple machines, making humility, patience, and adaptability more important than precision forecasting.
• Advice for newcomers: Start reading outside finance; philosophy, fiction, history, and science will often do more for your investing results.

This summary was structured to highlight major insights, thematic takeaways, and actionable ideas. For further reading, check out Robert Hagstrom’s and Chris Mayer’s work, especially on the interplay of language, philosophy, and investing.