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- [00:06]
A
Russell Napier, welcome back to Hidden Forces.
- [00:09]
B
Demetri it's good to be back, and we're both surrounded by books.
- [00:13]
A
Yes, that's right. But your setup is way cooler. You've got four giant stacks of books in front of your shelves because it just shows you that it's overflowing. You're overflowing with knowledge, Russell, which is why we come to you.
- [00:26]
B
Overflowing the books is not necessarily the same thing. As, you know, I'm going to need a bigger boat if I can take that line from Jaws, right?
- [00:34]
A
That's right. So this is actually not an episode. I said, welcome back to Hidden Forces. It's not exactly an episode. And it's in fact, the first time that I'm doing anything like this. And this is strictly a promotion of your course, A Practical History of Financial Markets, which I should note is listed under the title Advanced Valuation in Financial Markets on the Edinburgh University website. So when you go to libraryofmistakes.com to sign up for the Practical History of Financial Markets, you'll be redirected to the university's website to sign up for the course under a different name. So don't let that dissuade you or confuse you. You're in the right place. So back to what I was saying, Russell. We've promoted guests work in the past in small instances. We've run a previous promotion for you for this specific course that we're going to discuss today. And I've run similar discounts for the American Affairs Journal. And I cannot recall another instance where I've actually done this where we've run an explicit promotion for someone else. And on that note, it's important to state up front that I don't get any kind of financial benefit or take any kind of profit from this course or from any of the sales of this course. All of those profits go to your nonprofit that supports the Library of Mistakes and makes donations and conducts other charitable work in the field of financial education. However, I have and continue to profit from your mentorship, Russell, and from all of the conversations that we've had both on and off the air over the years and from the books you've written and your writings in the Solid Ground newsletter, which we're not here to promote today. But I have told many people this, that if I had to cancel all of my subscriptions except one, that's the one I would hold onto for dear life. Truly, it's been an incredible letter to get in my inbox, and I've been an enormous beneficiary of your thinking and of your writing over the years and our relationship, Russell. And it's had an outsized impact on how I've structured my own portfolio. So I've been an enormous beneficiary and I'm grateful to you, as are so many of our members and our audience members as well, which is why it's an honor to get to promote this course to them and to offer such a generous discount to our premium subscribers and and Genius members who want to take advantage of it. So let's just talk a little bit about what people can expect to get out of this course, because I've taken it. I took it around this time last year ahead of a similar promotion that we ran. Is this the same course that I've taken and that we promoted last year or has anything changed in that time?
- [03:07]
B
Well, first of all, thank you for that introduction. It's quite something to live up to. This course evolves because it's taught by practitioners. So if you took this course, it would be virtually the same course, but it would have moved on because that's what practitioners do and what academics don't. So the course has been running since 2004 and actually without ever having a revolution. It's actually significantly changed since 2004 because it's simply evolved as time has gone by. So it is the same course. Yes, with slightly evolution and a little bit from me on the end. But the future, what we discovered a long time ago and most of our students have been financially market practitioners, is it's virtually, and this, I'm talking about the real live version now. It's virtually impossible to put practitioners in a room for two days and not talk about the future. So we finally capitulated and we also talk about the future as well. So that obviously has to be updated and changes.
- [04:04]
A
Yeah, I bet it's quite a treat getting to do these courses in person. As you know, a few members of our Genius community have attended the in person course in the past, and I know of at least one who will be attending in a few weeks. So if you haven't met him already at one of our previous dinners, I'm sure he'll make a point to introduce himself. And I should mention that you've been very generous in attending our Genius events in the past. Russell, you're going to be at our next London dinner in 2026. And you're also joining me for a live Q and A in the Genius community next month. This is a good opportunity to give out the discount code so people have it top of mind and I'll make a point to mention it a few times during this conversation. Hidden Forces Premium subscribers are eligible for a very generous 50% discount when signing up using the email tied to their account along with the code HF50 when signing up@libraryofmistakes.com course. Or you can just go to libraryofmistakes.com and click take a course and that will take you to the same landing page. Genius members are eligible for a 75% discount and that's been posted in the open forum on our Circle so platform. So, Russell, the course is taught by professionals who themselves are expert tutors. But this course isn't just for professionals, is it? Would you say that pretty much anyone could benefit from taking it?
- [05:23]
B
Yeah, it's not for professionals. This course runs in three different formats. It runs at the Edinburgh Business School for students who are mainly postgrads, but actually we get a few undergrads in as well, so obviously they're not professionals. It runs in the online versions taken across the world and to be frank, I don't know how many of those students are professionals and how many aren't. But certainly when we run the in person version, which is the one that's coming up in London in November, there is a different There is professionals and then there are other people there and they are people with a desire to learn and a base degree of understanding about financial markets. And usually because they have skin in the game, almost always it's because they have skin in the game. They have investments. They are responsible for their own money and it's being part of responsible. No doubt why they subscribe to Hidden Forces as well, is to try and get up that learning curve. Everybody feels responsible, if not to themselves, to their families, for what they're doing with their money. So increasingly, actually over the years, it's more and more of those people coming to the course and I suspect probably taking the online version.
- [06:24]
A
Yeah, I know, absolutely. I mean, that's exactly where I've come from, whether it's the course or like I said, reading your other work or your newsletters or your fantastic book on the Asian financial crisis, which, again, I'm not here to promote those things, but there are so many ways in which I think I and our audience have benefited from what you've put out. So what can people expect to learn from this course?
- [06:45]
B
The course is mainly focused on equities, but it's not exclusively on equities. So we'll be looking at a lot of long run Data that you really won't come across anywhere else. I mean, some of our valuation data for the US stock market starts in 1801. And this data is available, you can go and find it. But there's not many people who teach it and say it has a relevance. But it does have a relevance. A history of valuation is where we begin this course and we look at all of the available data on valuation. So as I said, we can start at 1801, but we've got pretty good earnings data for the S&P 500 from 1881. Obviously we have bond yields for America going back to that over that same period and for other countries going back even further. So you effectively three asset classes here. You've got equities, bonds and cash of course as well. And the role of the course is to give you some insights into what conditions you'll be making real returns in those three key asset classes. There's a little bit of gold in there, we cover a little bit of gold and a little bit of property. But effectively it's about those three liquid asset classes. And I would say it's not a trading course. I think you've been on the course. We're not really trying to help anybody trade financial instruments here. It's not one of those courses. There's plenty of those courses around. It has got a longer term time horizon and that's the focus, I think, which is a realistic time horizon for most people who, who will becoming their principals. It's really interesting I think when we run this course because we have agents in the room, they are the professionals and then we have principals, the people who own the money. It's really interesting to see the two of them together and how they interact. But I think most of the principals on the whole have a longer term time horizon even than the agents that are in that room. They're looking about, they're talking about intergenerational wealth here as well. So it's the longer term time horizon. It's on those key asset classes we use a lot. I mean you can tell from what I've said already, we use a lot of American financial history, simply financial data, simply because it goes back a long way, but it's not exclusively about the American stock market. And actually we also use the Dimson, Marsh and Staunton database, which is for over 20 different countries, for the returns for those three asset classes in that case starting in 1900. So we're looking through all of this valuation data to see if we can find a valuation that is better than others. And when we say better, we mean it. Telling the future and then of course, the forces that would make that valuation mean revert.
- [09:05]
A
I should also mention this is not a short course. I don't remember exactly how many hours it was, but can you tell us? It was quite a long course. It has five different modules as well.
- [09:14]
B
Yeah. If you come in person, you'll be there 8am to 8pm for two days and then 9am to 1pm on the final half day. And if you take the online version, it's about 14 hours of material. We're trying to cover a long period of history and kind of the building blocks and the mechanisms and that's not a quick thing to do. We don't. I mean, I should probably say we've got lots of simple answers to difficult questions. I don't think we have simple answers to difficult questions. I often say about this course is what it's really about is learning how to ask the right questions. And that is crucial, in my opinion, after 36 years now doing this, what should it profit a man if you get all the right answers to all the wrong questions? So I hope you leave with getting the right questions and even that takes a long time to get through. And I wouldn't say we don't have any of the right answers, but the beauty of investment is you don't need the right answers, you just need better answers than the other people. So we give you the right questions and hopefully it leads you to getting better answers than other people.
- [10:09]
A
So how does your approach, or the approach that you take of this course to stock valuations or bond valuations compare to what people might learn in a rudimentary college course on the subject or in some competing course?
- [10:21]
B
Well, it's really radically different. Most courses that I'm aware of anyway are based on a theory of high securities should be priced and then they discounted. Cash flow would be the most obvious one. We don't have any of that. We work on the basis of how they have been valued, as opposed to the theory of how should be valued, and then try to find in the history of the actual valuations some guide as to what conditions or what changes in conditions change valuations. So the course actually has two titles. I'll explain that because it's rather ironic why it has two titles. So it's launched 2004 as a practical history of financial markets, and that was to differentiate it from these other courses, which really wouldn't have any financial history in it. I mean, we Teach what happened to security prices during the Great Depression, during the Weimar Republic, we look a little bit at Post World War II Japan, actually a very good indicator on the impact of monetary policy. You just don't get that on other courses. However, the word history on any course has always been seen as something that means it's not going to sell. So the actual online version at the behest of the university, and when we run it at the university, it's called Advanced Valuation of Financial Markets, and that's that word history again. But, and I think this is the really fascinating thing, I think it was risky to put the word history in a course all those years ago because people thought, well, all available information is in the price. I don't want to read history. It's all academic. But in the world we live in today, Dmitry, I think the penny is dropping. Reality is daunting. That history and these huge geopolitical changes, to name just one, domestic political changes as well, these things are really, really important. And frankly, the other courses simply don't do that. In the context of financial markets, in the context of securities markets. I'm sure you can take a course on the history of the Great Depression, but we are very focused on how to make money in these different environments. And that's, I think, what sets us apart. I would never have guessed when we launched in 2004 we'd still be the only course doing it, because it seems to me such an obvious thing to be teaching.
- [12:22]
A
You took the words out of my mouth because that is my favorite section of the course, the part where you examine how financial markets respond to different monetary and inflationary regimes and what asset classes outperform or underperform. Because you also have a really fantastic section on behavioral psychology. But again, you can find things elsewhere that speak to some of those topics. I have not come across anything that teaches you how to view investing in the context of different inflationary regimes. And that couldn't be more relevant. Let's just talk about that for a moment. What can people expect to learn here from an investment point of view in terms of what works best during periods of inflation, deflation or disinflation?
- [13:01]
B
Yeah, so we have a section in that, and it's taught by Peter Warburg, who has got even more experience than I have. There's some people who've been going even longer than me. It's hard to believe. But anyway, Peter has been doing that. And that piece is called Investing in Periods of Inflation, Disinflation and Deflation. And one slight aside Here, when we put this course together, we had asked lots of investment managers who had 30 years experience on plus what they knew today that they wish they'd known. And they said, well, we wish we knew about this. And so I announced to the gathered masses that we were going to teach this. And there was a great laughing from the back of the room from some academic monetary historians who'd been along and they said, remember this is 2002. And they said, well, you can't teach deflation because you cannot have deflation in a fiat money system. Well, how wrong they were. And obviously we find it relatively easy to get out of the deflation. But you will learn about not just Ohio market and which asset classes behave well in deflation, but also which sectors. And then we take that for inflation and disinflation as well. So we've got some really great sectoral data on performances really going back into the 1920s for the American market, more from the late 1960s for the global markets in terms of was it banks, was it chemicals, was it retail, was it pharmaceuticals, was it tobacco? So for each of the differing conditions, there are different sectors that did well or badly. And of course, the transition between sectors is pretty vital as well, which I cover in my first book and also we cover in my course as well, this transition from regimes. When do you know? Because that's important in terms of moving from these one sector to the other. But once again, not trading advice, investment advice for the long term, when the regime changes. So I think one of the more exciting bits actually is the sector work and which sectors perform in different bits of this, rather than just total asset classes. Bond, equity and cash.
- [14:57]
A
So there are five different sections in the course. One of them deals specifically with financial valuations, as we discussed. Another deals with behavioral psychology. Another deals with the effect of monetary policy on asset markets, inflation, disinflation, deflation. I think those two are actually separate modules in the course and I might have missed one, maybe I didn't, or maybe it's one explicitly on.
- [15:20]
B
Well, I think what you missed is just me winding up at the end, which is a humorous story in itself, because when I pitch this to the Edinburgh Business School, they were quite enamored of the other four units and then said, and who's going to write the unifying theory? Well, I think if we really had a sort of coherent unifying theory, we'd probably get the Nobel Prize for that, given that we are so different. So I said, I'll just do that based on that. Basically a run through A history of the mean reversion of a key equity valuation known as the Shiller pe. And that is me at the end doing that and also making some judgments about the future.
- [15:55]
A
So if someone is familiar with your work, if they've read your books, they read your newsletters, what would this course add to their understanding or to their approach to investing? How does it add to and complement what you already do and what you've already done?
- [16:12]
B
It's funny, I was in Toronto last night having that very discussion with someone and the most important thing, I think, in the markets is to have an idea how the thing works. I mean, that might sound just basic, but so often we spend so much time looking at the screen, so often we spend so much time looking at what's happening in the near term and also what dominates the headlines. This is crucial. As I discovered in the first book, what dominates the headlines may not actually be the news. So when I write for a living, for the solid ground, or in my books, I'm writing about that near term, but it's in the context of how the thing works. Now, as you already said, to describe how the thing works or how we think it works takes two and a half days. So I can't put that in every research report. So every research report written in the context of a belief or my belief that that is how the system works and it is really, I wouldn't say radically different. It's not radically different of your historian, but certainly it's radically different from economic theory, finance theory, modern portfolio theory. So that's what the course is. It's working out a system and you may agree or disagree bits with it, but it will add to your understanding of how the mechanism works and then of course, day to day, what we are in the trenches trying to fight. But you need to have that strategic overview of how this works and that's why the course was put together. And of course I put it together for completely the wrong reason. I didn't want to put together a course, I wanted to take it, but there was nobody offering it. So we built this course. And I do meet people all the time, professionals and non professionals, who say I took your course and it changed my career. And when they say that, I have to assume it changed their career for the better or they probably wouldn't have mentioned it.
- [17:50]
A
Yeah, no, it's. I can't say enough, but I don't feel like I need to say much, Russell, because anyone who knows who you are will probably be running to take this course as I mentioned Hidden Forces Premium subscribers get 50% off, which is an incredible, incredible discount to the course. This is a limited time offer. You have to subscribe using your Hidden Forces Premium subscription email, the same email you use to sign up to the Premium feed and the code hf50@libraryofmistakes.com in order to get the discount. Genius members get a 75% discount to the course. This is just for the online course. I can't imagine how awesome the in person course is as well. Again, we're not promoting that here, but I'm sure that if you have an opportunity to go to Edinburgh and take the course in person. You also mentioned this, but I should state it as well. This is in conjunction with Edinburgh University. So when they take the course in person, that's at the Library of Mistakes or that's at Edinburgh University. Yeah.
- [18:47]
B
It doesn't get any easier to describe this, does it? So let me give you a little quirk of history. The Edinburgh Business School is not at Edinburgh University. That's who'd have thunk it? But it's at a sister university or another university, Edinburgh, called Harriet Watt University and they got the name first. So our partner in that is Edinburgh is Harriet Watt University, and that is that we're on a version solely for their students, which I think is really great because it challenges all of us to communicate this to 22, 23 year olds. Now there's the two and a half day in person course we run primarily in London. There's an occasional version that we run Library of Mistakes Edinburgh, but actually we run in London. We've been running it in November. I think it's 18th to 20th. I should know that.
- [19:26]
A
I should.
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B
I mean, it's been a few hectic weeks. I should know where I'm going to be on the 18th to 20th of November. That's the concise two and a half day version for people who've got busy lives rather than people who want to try and string this out like an academic subject, like the students would do over a whole semester. So those are the three versions it comes in. And I think the good thing about the in person one is obviously you get to ask questions. We cap the numbers. We don't let more than 30 people in. So it's interactive. But if you're coming as a principal, as I said, as a saver yourself, you get to mingle with professionals as well. And I think some of the learning is done in way of breakout sessions and discussion sessions. I think a lot of it is done Learned in there discussing these topics with professional investors as well.
- [20:07]
A
I bet it's a really great crowd.
- [20:08]
B
It's a self selecting different crowd, let's put it that way.
- [20:11]
A
Yeah, self selecting history geeks. Financial history geeks.
- [20:14]
B
Yeah. And there's one other set which is all the 25, 26 year old kids that get sent by their boss who's a history geek. And that can be quite interesting as well given that their background is in a very different form of finance. So yeah, it's an interesting mix.
- [20:27]
A
Lovely. Do you get a lot of emails from sub 30 year olds people, either kids in high school, college or recent graduates who are sort of ambitious and want to learn and are looking for either mentorship or some kind of direction on where to go and what to study?
- [20:42]
B
Well, more and more we're getting that and really it's because of the Library of mistakes which I also run and it's people asking for reading lists and that's younger. I mean just Even I've spent 10 days now traveling around the US talking to institutional investors and quite often the younger ones come up at the end. Say, can you recommend a couple of books? Can you point me in the right direction? Which is quite tricky to nail it down to just a. A couple. The number one question I get asked about the library diverging slightly here is what are the two books in this library I should read? Well Dmitri, I'm looking at your library and I think you're looking at my library. I think we'd both be challenged to pick two. But anyway, there is a new thirst. If you're 25, 26 year old and you want a career in this business, I think everyone's realizing now that you need a skill set that is bigger than discounting cash flows. If you're not going to get that from financial history, where are you really going to get it from?
- [21:31]
A
Yeah, there's nothing I love more than getting emails from young people. It's fantastic. I love it so much. So I'm going to give out the code one more time. It's HF50 and you have to go to libraryofmistakes.com course and put in the email address associated with your Hidden Forces Premium subscription with that code. If you don't remember the full URL, just Google Library of mistakes. There's only one, right? Well, there might be a few. Are you guys going to be creating more of these?
- [21:57]
B
So we're Library of mistakes dot com, that is us. That's where you'll find the details on the course. So we have one in Lausanne in Switzerland, we have one in Pune in India. There will be one in Singapore, destination to be announced. But that is going to happen and that will be open late next year and we're definitely going to open one in London and we hope to have sealed the venue for that too. But even if we haven't sealed this particular venue, there will be Library Mysterious London. We have discussions underway from Mumbai and I am hot foot from Canada where we've just launched a Library Mistakes Montreal. Except it's not called Library Mistakes. It's called Observatoire des ll and I hope I got that right. I'm sure someone will correct the pronunciation. And it may sound like I'm going around the world telling people they need libraries of mistakes, telling them they need financial history, but I'm not, believe me, I'm exhausted. They're coming to us and saying we need these. We realize that there is more in heaven and earth than is dreamt of in the philosophy of the modern portfolio theory. So it's great. It's great. I mean, we are popularizing, we don't make any, we don't apologize for popularizing financial history, getting younger people in, getting people to think about it. And it's great that other people in the world are seeing the need for it and asking for it. And that's why we're expanding and it's very exciting.
- [23:12]
A
Well, I hope I get an invitation when you open one up on Wall Street.
- [23:15]
B
Russell. Yeah. I'll tell you a very brief little story. I did pitch it to somebody on Wall Street. Literally on Wall Street. Literally on Wall Street. And at the end of my 30 minutes of impassioned plea, he said, this is Manhattan. We don't do mistakes.
- [23:30]
C
Really?
- [23:31]
A
What a great story.
- [23:32]
B
I didn't help the case by saying I think you're the world's greatest exporter. But anyway, that's another story.
- [23:38]
A
Wonderful. Russell, thank you so much for coming on and doing this promotion. Again, I can't possibly recommend this course enough along with everything else that you put out. I just think it's so incredibly useful. And, and your point about learning to ask the right questions is so spot on because as you've said many times during periods of change, the assumptions that we've used to fuel our models need to be rethought. And you can't do that with an answers based approach to learning. You have to have an inquiry based approach and you have to know what questions to ask. And I think you do that so incredibly well. Again, for the last time. That discount code is HF50 and you go to libraryofmistakes.com put in the email associated with your Hidden Forces Premium subscription, put the code in and you will get a 50% discount. Russell, thank you so much for coming on and doing this and sharing it with not just our audience but anyone who wants the code.
- [24:33]
B
Great to meet you. I look forward to meeting some of the Genius members soon.
- [24:36]
A
I look forward to it as well. Russell, thank you so much.
- [24:40]
C
If you enjoyed listening to today's episode and want to join in on the conversation by becoming a member of the Hidden Forces Genius community, which includes Q and A calls with guests, access to special research and analysis in person events and dinners, you can do that at hiddenforces IO. Subscribe and if you still have questions, feel free to send an email to infoiddenforcesio and I or someone from our.
- [25:08]
A
Team will get right back to you.
- [25:10]
C
Today's episode was produced by me and edited by Stylianos Nicolaou. For more episodes you can check out our website at hiddenforces IO, you can follow me on Twitter cofinas and you can email me at infoiddenforcesio. As always, thanks for listening. We'll see you next time.