Sketching Wealth Strategy: Masters in Business with Carl Richards

Summary

Masters in Business with Carl Richards: Sketching Wealth Strategy

Host: Barry Ritholtz (Bloomberg)
Guest: Carl Richards
Date: June 26, 2026
Episode Theme:
Barry Ritholtz welcomes Carl Richards—author, financial advisor, and renowned "Sketch Guy" from The New York Times—for a deep dive into the behavioral side of investing, the story behind his simple but profound financial sketches, the emotional aspects of money, and the lessons learned from a career dedicated to bridging the behavior gap.

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Episode Overview

This episode explores the intersection of behavioral finance, personal storytelling, and the visual simplicity Carl Richards brings to complex financial concepts. Focusing on his new book You: Reimagining Wealth in 101 Simple Sketches, the conversation traces Carl's unconventional path into finance, the enduring problem of human psychology sabotaging investment outcomes, and the vital importance of aligning money with meaning and joy.

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Key Discussion Points & Insights

1. Carl’s Accidental Entry into Finance

• Origin Story:
  • Carl shares how, as an undeclared major doing landscaping, his wife found a “security” job for him at Fidelity, which turned out to be about securities, not security.
  • "I was the newest hired at a landscaping company. Digging ditches for a living...She [my wife] was looking for a job for me...what we both thought was a security guard job at a little shop called Fidelity." (03:07)
  • That serendipitous entry led to a fascination with the human side of finance, especially after experiencing the emotional energy of the Netscape IPO.
  • "Nobody was doing math in there—they were excited, mad, angry, upset...That was my introduction to this idea of what we call money." (04:46)

2. The Power of Simplicity: The Genesis of the Sketches

• Explaining Complexity with Doodles:
  • Carl explains how, out of desperation during client meetings, he started sketching financial concepts on a whiteboard, realizing visuals could bridge communication gaps.
  • "They were really smart. This must be my problem...out of desperation...there was a whiteboard, nobody used it...just some boxes and arrows...they were like, oh!" (07:55)
• Imperfect Hand-Drawn Sketches as a Feature:
  • He saw his unpolished hand-drawn style as a flaw, but over time realized its humanity made the concepts accessible and memorable.
  • "Turns out the thing I thought was a flaw ended up being the feature." (10:32)
• Breakthrough to NYT:
  • The “Sketch Guy” column began by chance—someone shared Carl’s blog with Ron Lieber at The New York Times.
  • "I never thought maybe this could appear in the Times... I should still be sending Kent a gift every year." (12:31)

3. Behavior Gap: Why People Underperform Their Own Investments

• Core Concept:
  • Behavioral mistakes are the primary reason investors underperform both benchmarks and the very funds they own.
  • "We look at the difference between time-weighted rates of return (the fund’s published returns) and dollar-weighted (what the average investor actually earns)..." (21:34)
  • "The average investor underperforms their own invest." (19:07)
• Systemic Human Flaws:
  • "Buffett's statement that if you were to design a poor investor, you would design a human." (19:44)
  • The physiological similarity between the fear of losing money and mortal danger:
    "If the broker statement was down, you process that in the same part of your brain as you do mortal danger." (19:58)
• Entertainment vs. Investing:
  • Emphasis on the danger of confusing market noise and entertainment for actionable financial advice.
  • "Don't base my 5-, 10-, 20-year decisions on day-to-day media entertainment." (32:00)

4. The Danger of Short-Term Focus & Media Noise

• Mismatched Time Horizons:
  • The financial media focuses on the immediate, while real investing involves patience and time horizons of decades.
  • "If I'm putting this money away for 20, 30 years, what do I care what happens on a random Thursday?" (31:34)
• Financial Advisor’s Challenge:
  • The industry itself has trained clients to care about noise; real advisors help clients detox and focus on their true goals.
  • "Clients who work with real financial advisors often go through a period of the financial pornography detox program." (32:44)

5. The Next Generation: Humility, Human Capital, and Uncertainty

• Low-Cost, Diversified, Humble Investing:
  • After learning the basics, the next lesson is about focusing on human capital—working—instead of trying to eke out extra basis points via speculation.
  • "My main job should be to earn a bit more, raise my human capital. My ability to earn and save...will far outstrip getting an extra 25 basis points..." (35:19)
• Increasing Uncertainty & the Illusion of Precision:
  • Wall Street sells certainty, but the world is fundamentally uncertain—true financial security means learning to be comfortable with not knowing.
  • "We have a deep sense of physics envy...we just want the law of gravity for money...but these are complex adaptive systems." (37:56)
  • "After a crisis, we make plans to avoid that exact same crisis rather than acknowledge that the next one will be different." (39:29)

6. Money and Emotion: The Real Forces at Play

• It’s Not About Math:
  • "Money is less about math and more about emotion." (37:36)
• Behavioral Traps:
  • Regret, fear, and envy play a more significant role in decisions than spreadsheets or modeling.
  • "Comparison is the thief of joy." (62:06)
  • "We're never exactly sure if we really want the boat...you could run a little experiment, try it, and see." (62:32)

7. Spending, Joy, and the Purpose of Wealth

• Letting Go of Frugality:
  • For retirees and wealthy clients, the biggest challenge is often shifting from saving to enjoying their wealth.
  • "The very things that got you to that spot are working against you going forward...You get to a point at which you should no longer delay." (58:58)
  • "Can we pick something small...simple, like take the grandkids to the art museum this weekend." (61:51)
• Shared Stories of Wealth, Experience, and Regret:
  • Both host and guest share personal anecdotes about buying cars, boats, and experiences, using humor and candor to show how even the financially sophisticated can agonize over spending.
  • "We look back in regret on the things we didn't do, not the things we did." (75:44)
  • "We will not regret spending time and money on experiences with people we love." (78:44)

8. Mentorship, Influences, and Craft

• Mentors:
  • Carl credits Ron Lieber and Seth Godin as major influences, including the push for consistent content creation. (79:12)
• Books & Learning:
  • Fooled by Randomness (Nassim Taleb), When Things Fall Apart (Pema Chödrön) as most influential books. (80:00)
• Art as Service:
  • The book You is designed as a “conversation grenade”—to catalyze discussion, not just convey information.
  • "Everything about that book is designed to feel like you toss it in a room and conversations break out." (49:11)

9. Advice to Younger Financial Planners and Creators

• Start Small and Stay Present:
  • "Just take the next step...try not to compare."
  • In an AI-driven world, the value of a financial advisor will be presence and curiosity, not just solutions. (83:30)
  • "You're not going to be paid for solutions...solutions are table stakes at this point...it's presence." (84:00)
• The Importance of Not Interfering with Compounding:
  • "Prevent yourself from interfering with your portfolio's ability to compound." (85:25)

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Notable Quotes & Memorable Moments

• On Visual Simplicity:

  • "Turns out the thing I thought was a flaw ended up being the feature."
    —Carl Richards, 10:32

• On the Behavior Gap:

  • "The average investor underperforms their own invest."
    —Carl Richards, 19:16

• On Financial Media:

  • "Don't base my 5-, 10-, 20-year decisions on day-to-day media entertainment."
    —Carl Richards, 32:00

• On Emotion and Money:

  • "Money is less about math and more about emotion."
    —Carl Richards, 37:56

• On Compounding:

  • "If it compounds, let it compound."
    —Carl Richards, paraphrased, 85:07

• On Regret:

  • "We look back in regret on the things we didn't do, not the things we did."
    —Barry Ritholtz, 75:44

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Timestamps for Important Segments

• Introduction & Career Origin: 02:43–07:00
• Sketches & Visual Communication: 07:24–13:10
• Launching His Firm, Selling to Focus on Communication: 13:01–16:42
• The Behavior Gap & Investor Mistakes: 17:14–25:54
• On Media Noise & Action Bias: 26:23–34:11
• The Next Generation of Investing & Human Capital: 34:56–37:36
• Money, Complexity & Emotional Decisions: 37:36–47:35
• Conversation Grenade Book & Art Philosophy: 47:35–53:55
• On Spending, Joy & Purpose of Wealth: 56:24–78:44
• Mentors, Books, and Podcasts: 79:00–83:05
• Advice to the Next Generation: 83:06–85:34

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Final Takeaways

• Simplicity is powerful—embrace flaws and experiment; what seems a defect may become your signature.
• Behavior matters more than investment selection: time, discipline, and emotion management beat chasing returns.
• Enjoy your wealth; practice spending on what matters before it’s too late—experiences with loved ones bring lasting joy.
• For advisors: cultivate deep presence, curiosity, and conversation; solutions are becoming commoditized, humanity isn’t.
• In investing and in life, “comparison is the thief of joy.” Focus on what is truly important and authentic to you.

For a lively, soulful, and candid exchange on money, behavior, and purpose, this episode is not to be missed.

Transcript

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Bloomberg Audio Studios Podcasts Radio News this

[Barry Ritholtz]

week on the podcast, old friend Carl Richards joins me to talk about his new book, you, Reimagining wealth in 101 Simple Sketches. If the name sounds familiar, he created the Sketch Guy column in the New York Times. It ran there for a decade. He's probably done more than anyone to expand usage of the phrase the behavior gap, the difference between people's portfolios and what their results are. I thought our conversation was charming, and I think you will also. With no further ado, here's me and Carl Richards talking about money. Carl, welcome to Bloomberg.

[Carl Richards]

Very so fun. Been looking forward to this for years.

[Barry Ritholtz]

Same, same, long overdue. We've had you on at the Money, but we haven't had you for the long. Sit down. Let's start out talking about your backgrounds. University of Utah School of Business, Bachelor's of Science in Finance. That implies finance. Investing money. Was that the original career plan? Yeah.

[Carl Richards]

No, not even close, really. Right. Yeah. So I was. I've told this story occasionally. I was an undeclared major, which means back then it meant you had no idea what you wanted to do with your life. Right. I was the newest. Hired a landscaping company. So I was literally digging ditches for a living. I come home one day, my wife, we'd recently been married. This was 95, recently been married. And she has the help wanted ads open. She's got a job degree in finance, a job as the CFO of a small real estate company. Got the help wanted ads open. So I was like, hey, Corey. Her name's Corey. I'm like, corey, what are you looking. What are you doing? She said, I'm looking for a job. I said, well, what are you finding? No. I said, but you have one. And she said, I know. I'm looking for you. I was like, what are you finding? And she found what we both thought was a security guard job at a

[Barry Ritholtz]

little shop called Fidelity.

[Carl Richards]

A security guard. I was like, you know, I could work as a mall cop at night. This would be great. So I can still go to school full time. This would be great. I went to apply. Nothing about kung fu, nothing about self defense. You know, they were asking about things. I didn't know what they were.

[Barry Ritholtz]

Securities.

[Carl Richards]

Exactly. I didn't know the difference.

[Guest or Supporting Voice]

And I got through.

[Barry Ritholtz]

I was gonna call BS on this. Cause it sounds like, wait, how are you a finance major? But that happened afterwards.

[Carl Richards]

Yeah, that's exactly right. So I get through the interview, which tells you a lot about the applicant pool. Right. And they had narrowed it down.

[Barry Ritholtz]

Slim to none, two of us.

[Carl Richards]

Yeah. And they offered to the other guy, and the other guy said, I don't want it. You take it. So that's how I ended up at Fidelity's National Call center just before Netscape's ipo.

[Barry Ritholtz]

That's unbelievable. I started on a trading desk, and I was told, hey, rookie, no trading, Netscape ipo. So you. And I started. So just about around the same time.

[Carl Richards]

You know what was crazy about that was like, after I got clear that I wasn't a security guard, I was like, what's this job? And I was sort of looking around. Everybody was using calculators, right. And math. I was like, okay, this must be right. This must be a math job. And then, you know, a couple weeks into training, they called us out onto the trading floor to answer phones. Because back then you couldn't get a Quote, you couldn't place a trade unless you called. And it was the. It was the day of the Netscape ipo. And I remember thinking, this isn't math. You know, I mean, and that was like my first introduction to this idea of like. So I got. I like to say that I got in by accident, but I've stayed because of that moment. Like this. Like, what is this crazy thing that we call money? Because nobody was doing math in there. They were excited, mad, angry, upset. Right. So it was. That was because I always thought it was a mistake getting into finance. I always thought I would go off and do organization. I was gonna do the Stephen Covey organizational behavior thing at byu.

[Barry Ritholtz]

Right, right.

[Carl Richards]

That's what I always thought. Cause work is where people go to do things that matter. And then some of these early experiences open the door to like, money is the ultimate portal.

[Barry Ritholtz]

Hey, this money thing is.

[Carl Richards]

It's the ultimate portal to somebody's soul. You know what I mean? Like, what do you really care about? I can find out pretty quickly how you spend your money and how you spend your time. So that's how I stayed. So, yes. That the afterwards I was like, maybe I should get a degree in this.

[Barry Ritholtz]

So. So then you switch. You get your degree in finance from the David Eckley School of Business. When do you go for cfp? When you become a certified financial planner.

[Carl Richards]

I was looking at that the other day. You don't remember, do you? No, all I remember is I got made fun of because I.

[Barry Ritholtz]

For taking.

[Carl Richards]

Yeah. Remember back in the day, Right. Like I left.

[Barry Ritholtz]

I don't remember Fidelity.

[Carl Richards]

And I went to work for a big brokerage firm which we'll go and name, but has a bulls. It symbols owned by bank. Right. And about that. And I got my SEMA designation because that's what like cool kids did. You know, the sort of institutional consulting stuff. Because I thought I gotta. I gotta figure this thing out, this whole money thing. And then I started to get my cfp. So it was in the day when people in the. That side of the business were like, what are you wasting your time on that for?

[Barry Ritholtz]

It's pretty early fiduciary thing. I mean, it's really seriously wasted goals. What are you gonna not charge people commission? What are you thinking? That's right.

[Carl Richards]

That's right. So fun.

[Barry Ritholtz]

So. So what I find fascinating about your career and I'm now learning all the parallels between our career.

[Carl Richards]

Yeah.

[Venture Global Advertiser]

You.

[Barry Ritholtz]

You kind of reinvent yourself as a communicator, as an author, as a speaker. Is that something that helped you when you set up your own investment firm. Like, which came first, the chicken or the egg?

[Carl Richards]

Yeah, I can remember who was in the room and where I was when I first sketched something out. Because I didn't, I wasn't a doodler in school. It's obvious that I didn't take any art classes. Right.

[Barry Ritholtz]

I don't know if I would say it's obvious because these are really kind of interesting. Like, Charles Schulz very famously drew peanuts and said he didn't have skill.

[Carl Richards]

That's super generous comparison. Thank you.

[Barry Ritholtz]

Right? Oh, I'm not making that comparison. I'm just someone else.

[Carl Richards]

Somebody else said something similar.

[Venture Global Advertiser]

Good.

[Carl Richards]

But I just remember sitting across the table from some really smart clients and they were. He was an ER doctor, she was a technology sales rep, like at EMC or something back in the day. Right. Super smart. And I was trying to explain some concept and I was just getting blank stares. You know the feeling. And I. That had happened before, but this is the first time it dawned on me like, wait, they're really smart. This must be my problem. So I, out of an act of desperation, in the shared conference room, there was a whiteboard, nobody used it. And I stood up one day, I was like, no, like this. And just like some boxes and arrows like an estate planner would be, you know, and they were like, oh, oh. And at that moment I was like, I didn't make a grand conclusion. I just remember thinking, huh, that was really interesting. So that started this idea of like, how. So I started thinking like anytime I got asked a question more than once. So the second time I got asked it, I was like, what if I just wrote down the answer and sent it to everybody who asked? And I don't know if you remember, but there's these things called blogs back in the day.

[Barry Ritholtz]

Not only do I remember, you were

[Carl Richards]

one of the OGs.

[Barry Ritholtz]

I still am doing it. I have no interest in Beehive or Substack. I kind of learned early on I don't want to give my content to another company. I want to control it.

[Carl Richards]

So started putting those things up on the Internet. An answer to a question with some sort of diagram. And by the way, the hand drawn sketches were just a fatal. Were a flaw at the beginning. I mean, I went to download Adobe Illustrator and the download thing said three hours. And I was like, anything that takes three hours to download, I should not be using.

[Barry Ritholtz]

Illustrator would ruin this. The whole beauty of. And I know most of you are listening to this and not watching me. Thumb through a book. But the whole beauty of your sketches is just how simple and informative they are with just a few lines, a few circles, a few squiggles. It's not a giant, you know, organizational chart. It's, oh, he did that in 90 seconds. And look how much information is in that.

[Carl Richards]

Well, thank you. But that early on, it was like, I was only doing that because I couldn't download Adobe Illustrator. I saw it as a flaw. And so every couple of years, early on, I would. I would get them designed by somebody and I'd post those, and people be like, where are the hand draw? So I finally learned I'm only telling you these stories because it's so tempting of us to look back and create these, like, beautiful narratives of the experience. But it turns out there was just a lot of random experimentation and playing because it turns out the thing I thought was a flaw ended up being the feature.

[Barry Ritholtz]

Huh.

[Carl Richards]

Right.

[Barry Ritholtz]

That's really interesting. So I'm surprised you think of it as a flaw.

[Carl Richards]

Not anymore.

[Barry Ritholtz]

How long did it take you to get to that point? Because to me, the beauty of your drawings are, first of all, it's obviously not AI slop. You predate it by 20 years or so. But more importantly, they just look and feel human and personal and, oh, someone has really put some time into figuring out how do I communicate a complicated idea in the least amount of letters, words, images. Yeah. So at what point did you think, hey, I could do something with these drawings? Maybe publish them in the New York Times every week?

[Carl Richards]

Never. What happened was I was putting these up on this website. I tried to stop.

[Barry Ritholtz]

Right. I love that.

[Carl Richards]

Like a compulsion.

[Barry Ritholtz]

Can't. Can't help it.

[Carl Richards]

Yeah. I mean, and I even had people around me who were like, just focus on building your business. What are you doing? And I was like. And they were right. Do you know what I mean? Like, all the evidence. Well, I mean, but like, at the time. And I kept putting it up, and there's a guy named Kent, who I did not know Kent. Send them to a guy named Ron, who I did not know Ron Lieber at the time.

[Barry Ritholtz]

Oh, sure, I know. I know of Ron Lieber.

[Carl Richards]

Kent didn't know Ron. And Ron just sent a note like, hey, I think you might like these. And Ron sent me a note, and I have that email still, because nobody believes me. The email was, hey, we love these. Could we try something? And I knew enough from my, like, security guard background, right. To be a kid in the hills of Utah to say, I mean, I never thought I was like, yeah, of course. What do you have in mind? And that's kind of how. And I've talked to Ron since. Like, why did you open that email? Because, you know, like, he gets like, stacks of books, stacks of things that he would love to reply to and read, because that's the kind of human he is, but he just doesn't have time. Right. So why he opened that one that day, I don't know. I should still be sending Kent a gift every.

[Guest or Supporting Voice]

Every year.

[Carl Richards]

So I never thought maybe this could appear in the Times.

[Barry Ritholtz]

So. So from the late 90s, when do you launch the firm that you ultimately build up and sell? In 2012. Yeah, so.

[Carl Richards]

So I'm really, really bad with dates. But we were in early 2000s. No, 2008 or nine.

[Barry Ritholtz]

So after the financial crisis.

[Carl Richards]

That's exactly right.

[Barry Ritholtz]

So four years, you build this up. Why. Why sell it? You just like, hey, I'm gonna focus on a security guard business.

[Carl Richards]

The first thing I should tell you is why, like, why I left and started my own firm. I remember the thing that. The impetus for that was two. Two things.

[Barry Ritholtz]

One, this is that Fidelity.

[Carl Richards]

No, I was now working at the big brokerage firm. Oh, ok. And I left to start my own RIA firm.

[Barry Ritholtz]

Got it.

[Carl Richards]

And I remember when the. Do you remember that cover? I can't remember if it was Fortuner Forbes that had the COVID with Rex and David at dfa. And it said, how the really smart money invest do you. I had. I had that in the top drawer of my desk every time I opened my drawer. Because I still had this, like, I'm just a kid from the hills in Utah, like, imposter syndrome thing. Like, I'm supposed to be in jail. Do you know what I mean?

[Barry Ritholtz]

Like, right.

[Carl Richards]

Like, and I'm helping people make room. Really important decisions with money. I need to figure out, like, am I a security guard? Is this math? Like, what is this thing? And so this idea of, like, how the really smart money invests, I called and was like, how do I get access to this? They're like, well, you can't do it where you're at. So I left for that reason. And then the second reason was. Ended up being one of the greatest disappointments of my life. I left because I thought it was really important to be able to tell everybody that I was a fiduciary and that everybody would care. And I. And I left. And one of the greatest disappointments of my career was nobody seemed to care. I mean, of course, you and I both know it's incredibly important, but the most people don't know. I just remember people looking at me like, fiducia.

[Guest or Supporting Voice]

What?

[Carl Richards]

Like, of course you put my interests first. So that's why I left to start the firm.

[Barry Ritholtz]

Huh. That's fascinating.

[Carl Richards]

Yeah.

[Barry Ritholtz]

So you sell it in 2012. When did the sketch guy columns for the New York Times start?

[Carl Richards]

Before that. Is that. Is that right? No. Oh, yeah. Way before I started. I sold the firm. Part of the reason I sold. So I think 2000.

[Barry Ritholtz]

You sold the firm to concentrate on your doodles?

[Carl Richards]

That's right. So I. The book came out in 2012, and I sold the firm about the same time. And I remember specifically having this conversation with my wife. I was like, oh, we'll never sell this thing. I always thought of it as a security blanket. Like, I'd never sell it.

[Barry Ritholtz]

It's an annuity. It generates income every year. And. And typically, you have a 10% wind at your back just due to market.

[Carl Richards]

Such a great business. Right?

[Barry Ritholtz]

It is a good business.

[Wise Advertiser]

That's right.

[Barry Ritholtz]

And especially if you're a fiduciary and doing the right thing by your clients.

[Venture Global Advertiser]

Exactly.

[Barry Ritholtz]

You not only make a decent living, you get to sleep at night.

[Carl Richards]

That's exactly right. All the things. So I never thought I'd sell it. There was just this increasing demand. The book was coming out. I was getting asked to speak all over the world. It was clear that I really, really liked that stuff. I had to make a choice. And in the end, I was like, this is. Well, I said, hey, maybe it's an anchor. And I was like, you guys speak

[Barry Ritholtz]

the same love language. It's kind of fascinating.

[Carl Richards]

Really?

[Barry Ritholtz]

Yeah. Because just think about. That's a very insightful observation from your wife. She's the one who tried to get you a hat, a shield, and have you parade around the mall like Paul Blart. I mean, that's. You guys are very much on the same.

[Carl Richards]

Yeah, I know. It's been super. I mean, she's been amazing. 31 years and amazing. But yeah, anyway. Really amazing. Yeah.

[Barry Ritholtz]

Yeah.

[Carl Richards]

And it's. And I. It's the best it's ever been, and I hope it's better tomorrow. Do you know, I mean, like, that one of those, like, two competing truths at the same time. Like, I could have never dreamed of

[Barry Ritholtz]

it, and I just wanted to get

[Carl Richards]

a little bit better tomorrow. And I hope I never stopped thinking that way. But anyway, left sold the firm full time into the speaking, writing thing for a little while. Was at a big firm, sort of the firm that Bought my company. Was there for a while.

[Barry Ritholtz]

Another nameless firm.

[Carl Richards]

Yeah, that was back then. It was Buckingham, so.

[Barry Ritholtz]

Oh, okay. I kind of remember that.

[Carl Richards]

Went into work and loved it.

[Barry Ritholtz]

Who else did you work with there? There were some people I really liked.

[Carl Richards]

Larry Swedroe, Tim Fernandez.

[Barry Ritholtz]

Larry Swedroe, Yeah.

[Carl Richards]

Whole crew out of their mom. The whole, the whole crew there. It was really, really good.

[Barry Ritholtz]

Really, really interesting. So. So we're gonna spend a little bit of time talking about behavior. But you know, you came from a big shop. You came from several big shops. Fidelity Merrill as well as Buckingham. They all have PhDs and Monte Carlo simulations and they run factor model tests. And yet people still buy high and sell low. What is it about the human condition that is a permanent drag on performance?

[Carl Richards]

That feels to me like the question that I've been exploring for 20 years.

[Barry Ritholtz]

That's why I asked it.

[Carl Richards]

Yeah, yeah. I mean there to me I thought at first, I remember I almost left the business because I couldn't solve this problem. Like after I got my SEMA designation

[Barry Ritholtz]

and I came back explain for laypeople

[Carl Richards]

what that the certified Investment Management Analyst. So it was sort of like for people who are doing institutional consulting work. So I thought it was not a

[Barry Ritholtz]

cfa, but more than a cfp.

[Carl Richards]

Yeah. And sort of like CFA light that can talk to people, you know. And, and it was back then it was taught in conjunction with Wharton. So I went to Wharton for two. Like that was the whole reason I'm always looking for external validation back then. Right.

[Barry Ritholtz]

So goes hand in hand with the imposter syndrome.

[Carl Richards]

That's exactly right. Exactly right. So, and I'm not afraid to admit it, but I came back from that working with clients and realized like, okay, now I've got this great system, the best training in the world, honestly, some of the best training at the firm. Right. And yet I still had this repeated experience where we would create really detailed spreadsheets of how to hire and fire managers. And then we'd have this experience over and over where the manager that showed up on our buy screen, we would commit clients money to it. It would become the, I thought that was our job, the search for the best investment. We'd find the best investment, we'd commit clients money to it and then it would go through a normal cyclical period of underperformance and it would show up on our fire screen. And I, you know, I repeated that like two or three times over maybe a three or four year period and was like, I, I don't know what's going on. Like, maybe it's just me. And then I. And then I ran across some of that industry research around investor returns versus investment returns, where you see that the average investment. Right. Average investor underperforms the average investment. Now, whether it's anything close to not,

[Barry Ritholtz]

not only does the average investor underperform the average investment, but the average investor underperforms their own invest.

[Carl Richards]

So it's like, I just remember, I remember, like, being so excited that it wasn't just me. Do you mean, like, wait, this is a. This is an industry wide, huge problem. So that's when I was like, wow, how do we. I mean, what that research said to me was that I could own a mediocre investment if I behaved correctly, I would outperform 99% of my neighbors. And that's all we care about in the first place. Right. Is outperforming our neighbors. That's the whole goal.

[Barry Ritholtz]

Right, Right. So how is that idiot down the block getting rich and I'm not?

[Carl Richards]

Yeah, exactly. As if that's the thing that matters. But that's what we.

[Barry Ritholtz]

That's how people.

[Carl Richards]

That's exactly right. So I just remember, so digging into that a bit, I really think, like, Buffett's statement that if you were to design a poor investor, you would design a human.

[Barry Ritholtz]

Right.

[Carl Richards]

Is as close as we get. Like the hard wiring. We are hardwired. And it was, I think it was in one of Zweig's books where they hooked up scanners and had people open their brokerage statements. Right. Like, talk about a masochistic experiment. And if the broker statement was down, you process that in the same part of your brain as you do mortal danger.

[Barry Ritholtz]

Yeah.

[Carl Richards]

Like where I'm doing like a bear

[Barry Ritholtz]

break or flight right there.

[Carl Richards]

Yeah.

[Barry Ritholtz]

The. My favorite Bill Bernstein quote is it's all about your amygdala. If you don't get. If you don't get your limbic system under control, you will die poor. And it's that exact same system. That's right.

[Carl Richards]

And then. Right. Yeah. Like, and if it's. If the statement's up. Same part of your brain as you do. Security and pleasure. And I think it was in the book that for women, that's chocolate, and for men that's sex. And I didn't quite understand the difference

[Barry Ritholtz]

in the book, but between sex and chocolate. Anyway, it must be a fun day.

[Carl Richards]

So. So if that's what's going on, it's a little bit like the interaction we have with our phones now, you know, like on the other side of that interaction are 300 PhDs trying to get us to pay attention to what's going on on Instagram. Right. And I just think we finally have to recognize, unless we put some serious guardrails in between us and the big mistake we're going to make the big mistake. Because it feels like, I don't care what you tell me, Barry, my hands on a stove, I'm taking it off. Do you know what I mean?

[Barry Ritholtz]

100%.

[Carl Richards]

So I think that to me is the work of worrying about, like, what does it mean to be a real investor, a successful investor, versus what it means to find good investments.

[Barry Ritholtz]

Let's talk a little bit about the behavior gap. I don't know if you created that phrase, but you've done more than anybody else I know to popularize that phrase. Tell us what the behavior gap actually is.

[Carl Richards]

Yeah, yeah. So it started out as a very narrow thing, which we already pointed to this difference between. And like the technical term would be the difference between time weighted rates of return and dollar weighted. And because I've had to explain this so many times, maybe I'll go through the explanation.

[Barry Ritholtz]

Sure.

[Carl Richards]

Imagine you open a newspaper, there's an ad for a mutual fund. It says the fund has returned 10% a year for the last 10 years.

[Barry Ritholtz]

Right.

[Carl Richards]

That's the investment return. And just for a minute, forget taxes, you know, any sort of fees or whatever, that's the investment return. That's the return you would have gotten if you had invested money at the beginning of the ten year period and not added or taken any way and left it there for the 10 year period. But nobody invests that way except your clients. Right. Like nobody invests that way. We are always chasing.

[Barry Ritholtz]

Right, Right.

[Carl Richards]

Whatever we hear in the news, the financial pornography network waves their hands and we've got a list of 10 funds to buy or whatever. In the old days, smart money, you know, like this. So we end up running around and that's the average investment return is 10%. But the average investor return is always different from that.

[Barry Ritholtz]

Who does the annual report that everybody criticizes?

[Carl Richards]

Yeah, yeah, for sure.

[Barry Ritholtz]

That shows this differential.

[Carl Richards]

So that, that was one of the early reports I ran across was Daobar. And I have not spent the. Well, I spent the time years ago to understand I don't really know anything about that number. I know Morningstar does a number and it seems to be 80 to 100 basis points, not 6%. Right.

[Barry Ritholtz]

And then what about the SPIVA numbers on manager performance?

[Carl Richards]

Yeah, for sure.

[Barry Ritholtz]

So you're running across these Behavioral errors on pretty much both sides. The manager who's running their funds and frequently underperforming. And the longer that timeline is, the greater percentage of manager underperforming. And on the other side, the buyers of those funds tend to not only underperform the benchmark, they're underperforming their own funds. So if only there was an alternative way to invest.

[Carl Richards]

Let me tell you a quick story. So this is back during my institutional consulting days. We had this client. We do a manager search and selection. We find the best large cap value manager for this client and hire that large cap value manager. And as I recall, it was Davis New York Venture back in the day. Right.

[Barry Ritholtz]

Chris Davis.

[Carl Richards]

Yep. We go two or three years. Davis has one of those cyclical underperforming values that are going to do.

[Venture Global Advertiser]

Right.

[Barry Ritholtz]

Especially value which runs in and out of favor.

[Carl Richards]

Yeah. And it was. It was even in comparison to other value managers. Right. As they're going to do. Right. So we fire Davis, not knowing any better. We hire another. And I can't remember, we'll just call him xyz, right? Like, we hire this new. And the client's like, yeah, yeah, I understand. It's two and a half. Two and a half years in, we make this change, we go to xyz. Two and a half years later, three years later, XYZ does the same thing. Cyclical underperforms. We go through our manager screening, they're up on our fire list, and guess who pops into our buy list?

[Barry Ritholtz]

Davis.

[Carl Richards]

Yeah. Call the client, thinking, I'm so smart. Hey, we need to fire XYZ and hire this manager. It's called Davis. And they were like, wait, wait, wait, wait, wait, wait, wait. Didn't we. His client's name was Jeremy. Didn't we just fire them two and a half years ago? And I was like, yeah. And he said, you know what I'd like? I would like the return of Davis for the. From the day we first hired them till now. I'd like the return of XYZ from the day you first hired Davis to now. And I like that. Compared to my account, I was, of course, like, that's not how it works. He said, yeah, that's what I'd like to see. And we all know the story, right? He underperformed either of both of those. He would have been fine in either one of those.

[Barry Ritholtz]

Just leave it alone.

[Carl Richards]

And that was my first moment of, like, I got to get out of this business. I got to go to law school or something. And that's when I discovered this idea, or for myself discovered this idea that maybe the investment process only matters to the degree that I can behave.

[Barry Ritholtz]

So let's talk about what you call the financial pornography networks. They talk all day long about 10 year yield and the Fed and credit spreads and geopolitics and earnings and news. And you spend most of your books, plural, talking about fear, regret, envy, what moves markets and what more importantly moves investors? Portfolios.

[Carl Richards]

Gosh, that's such a good question. And I want to be careful about,

[Barry Ritholtz]

you know, I do this for a living.

[Carl Richards]

I know, it's a really good question. I want to be careful about the term financial pornography network. I think it was originally the Jane Bryant Quinn term.

[Barry Ritholtz]

That's right. That's exactly right.

[Carl Richards]

Which I love. I love the term, but I think it applies just really broadly.

[Barry Ritholtz]

I call it the fire hose of financial noise.

[Carl Richards]

Yeah, that's fine. I think like sometimes media circus, like it's a media business and there's nothing I want to be clear. Like, I live in the hills in Utah. I ride my mountain bike every day. The trail's out in my backyard. I have a different hobby. Just because that's my hobby doesn't mean my hobbies are better than anybody else's hobbies.

[Barry Ritholtz]

They're healthier.

[Carl Richards]

But I walk in this building and I see happy human after happy human walking through the halls. This is like shiny, happy people everywhere. Who am I?

[Barry Ritholtz]

Free cappuccino?

[Carl Richards]

Who am I to say? Right? So, but I think what's important is if we start to recognize, like, what are we doing it for? What's the goal? Because if it's something to talk about, there's nothing wrong with that. If it's entertainment, there's nothing wrong with that. But basing your financial decisions, your actual investment decisions on something you heard, even if it was secret underneath the subway and it was labeled, isn't the economist the one that all the really smart people read anyway? Right. Like, you're not the only one that's heard that. So I think we have to be careful with sort of making big investment decisions based on every wind of news or entertainment. Right. Versus linking. And again, this is back to like, how do we solve this behavior problem? I think it's gotta be. It has to be. The portfolio has to be designed to give me the greatest likelihood of reaching my goals. And my goals have to be carefully clarified and they're gonna change over time. So it's this constant process of saying, is this, Are these investment decisions aligned with what I want out of my Life. Both of those sides of that equation are really challenging. Getting clear about what you want out of your life. Super hard. Making sure you have a portfolio built on data and evidence that will get you the closest to that. Also really hard.

[Barry Ritholtz]

So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off. Deep in the work that moves the business. Let's create smarter Business IBM.

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[Barry Ritholtz]

So let's break that into two pieces. Yeah. Because I kind of feel like there are two distinct conversations. Yeah, we'll get to the goal portion in a moment.

[Guest or Supporting Voice]

Sure.

[Barry Ritholtz]

I want to stay with the media circus. Yeah. Isn't there really a very simple problem? And that is the mismatch in time horizons when you're putting money away to save for retirement or even to save for 529 for college or saving to buy a house or a second house or whatever like you're thinking 5, 10, 50 years. But all of the financial noise, that fire hose, that's about, that's the church of what's happening right now, right? So if we can simply readjust our media consumption into some context with the longevity of our portfolio goals, doesn't that solve a lot of these.

[Venture Global Advertiser]

Why do.

[Barry Ritholtz]

If I'm putting this money away for 20, 30 years, what do I care what happens on a random Thursday?

[Carl Richards]

But yeah, and, and I, gosh, what if we had kept. What if we actually kept track of every single change of opinion, right? And how sure somebody was right? Remember that? What's that old statement that even a broken clock is right twice a day?

[Barry Ritholtz]

I was gonna say who Often wrong, never in doubt.

[Carl Richards]

That's exactly. And that's like, again, entertaining. And there's nothing wrong with entertainment. We go to the movies, we go see plays, we ride our mountain bikes. Like there's nothing wrong with entertainment. I just think we have to understand what it is. And what you're saying is, yeah, that's day to day entertainment. I like it because I can talk about it. It's important. Don't base my 20, my 10, my 5, my 10, my 20 year decisions on it.

[Barry Ritholtz]

Right? And yet we continue to see people have that problem. So let me re. Ask this question in a different way. How do you bridge the gap between what clients ask for, what they think they want, and what, you know, they actually need?

[Carl Richards]

Another. Barry, you're super good at this whole job.

[Barry Ritholtz]

It's all AI, it's all, I didn't write anything.

[Carl Richards]

No, I just. Because now you've layered another problem in here is because clients, the humans that we call clients, show up having been trained by us as an industry, speaking really broadly that what matters is this day to day stuff, right? They think the job of an investor is to find the best investment because we taught them that on the television, waving our hands. So it's no surprise, like we did this to ourselves. It's no surprise that clients come in expecting. And that's why I think clients who work with real financial advisors often go through a period of the financial pornography detox program, right? Where they maybe wake up 18, 24 months into the relationship and go, hey, you know what? I'm not really paying that much attention anymore to that, like all the stuff I used to think mattered was critical has lost its urgency, its tenor, right? So we've got this problem of like, it feels like. And again back to the, the wiring in our bodies. Like it feels like we should be Doing something. The news is saying we should be doing something. The guy at the club is saying we should be doing something. And I call Barry and Barry says, hey, let's, let's hold on for a second. Let's review the. Are these goals still the goals? Is this still what's important to you? Turns out if that's true, we're okay here. And almost always we end up at the same place, which is diversified low cost portfolio. Hold onto it for a long time.

[Barry Ritholtz]

There's this inherent bias towards action for sure. Which is the nature of that fight or flight response.

[Carl Richards]

Yeah, one or the other.

[Commercial Narrator]

Right.

[Barry Ritholtz]

Don't just sit there, do something. And really the right way to do it is don't just do something, sit there. But that causes a great deal of uncomfortableness amongst people. Let's take this to the next phase. So Jack Bogle and Vanguard gave us low cost. Everything we've learned from Richard Thaler and the behavioral finance folks is about the importance of humility. What does the next generation of investors learn once they figure out diversified, low cost and a little bit of humility? Where do you go next?

[Carl Richards]

Yeah, you know what's so hard about that is this like everyone's a gambler thing that sort of slipped actually today. Yeah, that's sort of slipped in like it's, it's. I don't envy growing up as a, you know, 25, 30 year old person trying to sort this out right now because it just feels like everything's a bet. Right? And it is. Yeah, and it is, I think to

[Barry Ritholtz]

me,

[Carl Richards]

I mean, I'm careful with advice, but the observation that I've noticed most frequently is that if I can, when I'm younger, focus on human capital and then realize that the money over here does the job of compounding. My main job should be to earn a bit more, raise my human capital. My ability to earn and save when I'm young will far outstrip getting an extra 25 basis points by paying attention to, you know, some newsletter on the Internet.

[Barry Ritholtz]

You know, it's funny you mention gambling being everywhere we were talking before. Yeah, the podcast about Nine Finger Howie. And he wrote a post and created an index called the Degeneracy Index where he puts in all of the various prediction markets and gambling apps and, and it's been outperforming the NASDAQ, which has been on fire like 2 to 1. And it just is a kind of warning. Yeah, it's a warning that. All right, I understand the Supreme Court decision that says gambling can't just be legal in one state. But maybe the decision isn't to make it legal everywhere. Maybe the decision is to, say, an entire industry based on human foibles, cognitive errors, and enumeracy is kind of an evil industry.

[Carl Richards]

It's just the problem. We need to realize that we're just not wired for it. It's not that we're dumb. It's not that we're like, we can have any discussion we want about the morality of the whole thing, but underneath it all sits this idea that we're not wired to handle it. We're not. And I think this is another piece that's interesting right now is I don't think we're really sort of wired to handle the level of uncertainty that we're dealing with right now. Like, the exchange fatigue.

[Barry Ritholtz]

And it seems like a lot of what Wall street sells is this illusion of certainty.

[Carl Richards]

Yeah, this false sense of precision. Like, it's certainly so easy to sell. It's impossible to deliver, but it's super easy to sell because everybody wants to buy it. So I think those are the two, like, human capital and learning how to come to grips with the reality that the world is uncertain.

[Barry Ritholtz]

So the quote of yours that always stays with me is, money is less about math and more about emotion. That was your insight watching the Netscape ipo. Why is that so challenging for this industry, for finance, to accept?

[Carl Richards]

It seems to me, and I've been in a lot of the rooms where this discussion takes place, that we just. We have a deep sense of physics envy, for sure. Like, we just want the law of gravity for money. And. And when we understand that the systems that handle money, markets, economies, politics, and then. And then humans, those are a mix of complex adaptive systems. They're not simple systems, and they're not even complicated. They're complex, adaptive, almost chaotic. And when you understand a complex adaptive system, you start to understand that, like, there is no even with the benefit of hindsight. And you see this all the time, I'm sure. Like, even with the benefit of hindsight, we look back and, like, here are seven steps to having it turns out that that only works for that period of time. Right. You replicate those seven steps, it doesn't work.

[Barry Ritholtz]

Again, all models assume the future looks like the past, and very often the future looks nothing like this.

[Carl Richards]

Exactly. Like, all models are wrong. Let's make ours useful is, like, much more helpful. This idea of saying, like, okay, if that's the reality I live in, then how do I navigate a complex adaptive system? And then that gets us to this point where it's more about like, the problem is you. The problem is me. The problem is, like, it's us. And so it's. I think that's why it's so hard is we have to say, oh, man, we don't know exactly what we're dealing with here. Because it's so cute after a big crisis to see all the people who have very specific plans about how to avoid that exact same. We're still taking our shoes off in airports.

[Barry Ritholtz]

You don't have TSA pre yet.

[Wise Advertiser]

I do.

[Carl Richards]

That's true. I haven't taken my shoes off.

[Barry Ritholtz]

I'm going to share one of my favorite random data points. I don't know if this made it into the last book, but earthquake insurance. Earthquake insurance sales go up tremendously right after an earthquake, for sure. And if you think about how the plate technics work about these two pieces of.

[Carl Richards]

I'm so excited for you to tell me.

[Barry Ritholtz]

Keep going, sliding. The odds of an earthquake happening after that, 10, 20, 30 years of pressure is released, plummets immediately. The worst time to buy earthquake insurance over and over again is right after the earthquake. The best time is, hey, this is an earthquake zone and we haven't had an earthquake in 20, 25 years. Now's the time. I remember getting offered structured notes with downside protection in like 10-02-02. And I'm like, why do I need this? The Nasdaq is down 83%. Where were you in late 99 when this might have been useful? Down 83%. I'm a buyer. I don't need. I want all the upside. Why do I want to give any of this? Like, I had that conversation in a room full of salespeople pitching this. And I called into the chairman's office, what are you doing? We're trying to set up a relationship with these people. I'm like, this is crap. Nobody should own this product. And I like, I know you want a relationship. Tell them not to not bring us junk that we don't need. I mean, look, I like dessert as much.

[Carl Richards]

This is what I came for right here.

[Barry Ritholtz]

But I just. I remember there are several times when so I would get called as the market strategist.

[Carl Richards]

Right.

[Barry Ritholtz]

Called into the vice chair, who is general counsel or the chair. He's like, what do you do? By the way, the firm Lehman Brothers. Yeah. So not only was I right over, but the counterparty risk was you would have gotten nothing anyway.

[Guest or Supporting Voice]

Yeah.

[Carl Richards]

And we will go to the lengths we will go to make up stories about that after the fact. Do you remember? I can't. Look, I'm going to deeply paraphrase. I'm sure I'm ruining the story but after Long Term capital management went under 98, do you remember? And I again there was some quote where one of those Ph.D. nobel Prize winners said our models weren't wrong, reality just refused to conform to it.

[Barry Ritholtz]

I don't remember who it was but broad thing when genius failed. That quote is somewhere in that book.

[Carl Richards]

That's exactly right. And I only point that out to point out that I certainly will go to great lengths to make a cute story that will protect me from dealing with uncertainty. Because our nervous system takes uncertainty as a threat and it turns out like we are in a period of uncertainty. And I don't think we're going back to be honest.

[Barry Ritholtz]

Well, let me. This is supposed to be about you, the guest, but you pushed my.

[Carl Richards]

Please, this is what I'm here for.

[Barry Ritholtz]

My uncertainty.

[Carl Richards]

We're all here for this.

[Barry Ritholtz]

So whenever you hear people saying markets hate uncertainty, my knee jerk response is always. Markets thrive on certainty. That's the whole point. The only time there's certainty is when everybody is on the same. In late 99 everybody was certain trees grew to the sky and in March 09 everybody was certain markets were going to zero. That's right. So for the handful of people who stepped up and bought, the future is inherently unknown and unknowable.

[Carl Richards]

That's right.

[Barry Ritholtz]

When people say things are uncertain, I always feel like what they're saying is normally I could lie to myself enough that I could BS you people that I have some idea what's going to happen, but goddamn, whatever's going on is so crazy I can't maintain that fiction anymore. So I default to uncertainty. That's right. In reality, most of the time everything is inherently uncertain.

[Carl Richards]

Can I Let me just. Just real quickly. I'm super interested in what you think about this. I feel like you and I came up the financial planning industry, the financial advice industry really grew up during a period that was an aberration. There was some. For a certain group of people there was a predictable path of progress.

[Barry Ritholtz]

Give me some years.

[Carl Richards]

My grandpa, I'm seeing post war, my grandpa, my grandpa got a degree, could afford a first time home without salary, stayed there for 30 years, retired with a pension.

[Barry Ritholtz]

There was this window that was the aberration. The entire post war period is the aberration.

[Carl Richards]

Yes, that's exactly right.

[Barry Ritholtz]

The roaring twenties, the uber rich and the rest of us. Please.

[Carl Richards]

Things weren't like that's normal that things weren't like that before.

[Barry Ritholtz]

Right.

[Carl Richards]

And they aren't like that now.

[Barry Ritholtz]

That's right.

[Carl Richards]

And I think the problem falsely believe

[Barry Ritholtz]

that oh, this is the new era.

[Carl Richards]

The problem is that was when we built all of our tools, our language, our planning tools, our Monte Carlo simulations around that aberration during that aber. Aberration period. I think much more, more likely is like if you think it's uncertain, feels like uncertain now. Like we're not getting more like we're not going back there.

[Barry Ritholtz]

No, no, it'll all settle down. This will all go away.

[Carl Richards]

Yeah, exactly. So I think to me that leads to this really interesting discussion at least around like how do I learn it's a posture shift. Instead of like trying to defend an outdated map like confirmation by don't you know, 10 best days. Just instead of trying to defend an

[Barry Ritholtz]

outdated map, explain 10 best days. Because it's a great and 10 worst days, it's a great always.

[Carl Richards]

Right? Like anytime anybody scared of anything in the markets, we. We just parade out. You saw this on Twitter back when it was useful, right? Like if anybody said anything bad like I'm scared or this market scares me, a bunch of financial advisors would jump in the room and say don't you know, if you sell and miss the 10 best days, you may as well be in CDs over the 20 year period or whatever. Or you miss the 10, 10 worst days. And.

[Barry Ritholtz]

And I think they all are clumped close together.

[Carl Richards]

That's exactly right. And I also think that that was an effort to say don't worry right. When. When I think and to spray people with facts and figures when they're feeling irrational.

[Barry Ritholtz]

I like the gun you hold.

[Carl Richards]

Spray people facts and figures. Because when you're feeling a hose when you're feeling irrational, the last thing you want is somebody to try and reason with you.

[Barry Ritholtz]

Wait, you're telling me that pure logic doesn't satisfy emotional teenager, Right?

[Carl Richards]

Like, like the last thing you want is. What you want is metaphorically a hug first, right? Like we'll get to the facts later and let's never get to the lecture. And so I think if we shift that posture a bit where we're like, turns out uncertainty is reality. I don't know what the. I mean add in sequencing risk, right? Like are we gonna have a great market for the first five years of your life or the last five years of your life? Like who knows? You add all this in not that

[Barry Ritholtz]

useful in the last five years.

[Carl Richards]

That's exactly right. Like we're, it turns out that we're, we're dealing with a very complex adaptive system and the ability to navigate, make really important decisions in the face of irreducible uncertainty is the primary skill. Like, if I was younger, I would be studying complexity theory, I'd be studying being resilient, I'd be studying understanding how to make really important decisions. Mountain guide, you know, how do I make really important decisions when I don't know? How do I get comfortable not knowing?

[Barry Ritholtz]

But they're life and death decisions.

[Carl Richards]

And how. Yeah, like some of my favorite people are like really thoughtful, really thoughtful. Like people who worked in Distressed because if they're on the ground with the company, they're having to make mission critical decisions and they do not know, they don't know how they're gonna work out. I've got a really good friend that way and he's just like, yeah, I have every day. Some of these decisions are thousands of jobs.

[Barry Ritholtz]

Right.

[Carl Richards]

And I don't know how to work out.

[Barry Ritholtz]

And you're making these decisions under intense uncertainty with incomplete information.

[Carl Richards]

And no amount of spreadsheeting will get you more information. The only way to get the more information is take an action. Fascinating. Right? Like to me, that's the skill, that's what this market is calling for in terms of leadership, is the ability to create containers for collective interpretation rather than scream at people.

[Barry Ritholtz]

So let's talk about this book. Sure. You describe it as a conversation grenade. Explain.

[Carl Richards]

Yeah. First of all, I think I first heard that term from Hugh McLeod. The gaping hug.

[Barry Ritholtz]

His. Some of his stuff. On my wall. Yeah. And on the opposite wall, some of your stuff.

[Carl Richards]

Well, that's cool. Thank you.

[Barry Ritholtz]

In fact, buy high, sell low, repeat until broke.

[Carl Richards]

Number one.

[Barry Ritholtz]

Number one.

[Carl Richards]

That's right. That's right.

[Barry Ritholtz]

On my wall. That's right. So full disclosure.

[Carl Richards]

Well, thank you. Yeah. I have some of you stuff in my office too, so. Conversation grenades. This idea that, like, it's the only reason I wrote the book I swore off writing.

[Barry Ritholtz]

Why?

[Carl Richards]

Well, because I love audio so much.

[Commercial Narrator]

Right.

[Barry Ritholtz]

I actually had, again, not mutually exclusive.

[Carl Richards]

This is exactly right. But I, you know, after I wrote the second book, I thought I'm just gonna speak. And then podcasting came around. I was like, this is amazing.

[Barry Ritholtz]

I had between bailout nation and how not to invest solid 15 years.

[Carl Richards]

Yeah, you did.

[Barry Ritholtz]

Like there's like, I needed a recovery. That was my refractory period.

[Carl Richards]

That's right.

[Barry Ritholtz]

Like, I need, I need a decade and a half.

[Carl Richards]

That's right.

[Barry Ritholtz]

And I, I really needed a decade and it just took me the pandemic, to make it start thinking about it.

[Carl Richards]

I kept noticing that people like physical artifacts.

[Barry Ritholtz]

I agree. And I don't love a Kindle. I like. Yeah.

[Carl Richards]

And especially that. So the working with. With Herriman really allowed me to. Everything about the book is designed.

[Barry Ritholtz]

I'm an idiot.

[Carl Richards]

Think of it.

[Barry Ritholtz]

We have the same publisher. I didn't even notice. Yeah.

[Carl Richards]

Yeah. I'm sure Craig helped you. Yeah, he's great.

[Guest or Supporting Voice]

For sure.

[Carl Richards]

So everything about that book is designed to feel like you toss it in a room and conversations break out. That's the conversation grenade analogy. Right. Set it on its coffee table. Unpretentious coffee table book. Like, I'm going to pick it up, I'm going to mess with. I want to. We talked about hardback. I wanted it to be that soft cover. We move the. You know, the. The front matter, the legal stuff. Go to page one. There's none of it in there.

[Barry Ritholtz]

You moved it to the back?

[Carl Richards]

They let me move it to the back. And they said, nobody's ever asked.

[Barry Ritholtz]

Dude, I love.

[Carl Richards]

Nobody's ever asked. But, yes, I was amazed they let me to do it. But there's this stuff's in the back. Because what reader has ever said, nobody gives me that crap. There it is in the back, right there.

[Barry Ritholtz]

I always assumed it was a legal requirement. It had to be up.

[Carl Richards]

And so they said, nobody's asked. So they let me do all sorts of things that allowed us to be like, no, this is in service of the reader. We want you just to have this sitter. And the number of stories I've heard, like, I had it on my table. My son asked me a question, or I sent it out to clients, and this. That's. It's really meant to be. Conversation grenade.

[Barry Ritholtz]

So. So we started out talking about your deceptively simple sketches. Is this simplicity a conscious act of rebellion? There's so much complexity and arcane language. We know every profession uses arcane language to hold lay people at arm's distance. But was this simplicity in your sketches? Is that purposeful, or am I deeply.

[Carl Richards]

Yeah, yeah, yeah. I think it's maybe just the way my brain works. I only have enough RAM for, like, one problem at a time.

[Barry Ritholtz]

Okay.

[Carl Richards]

And so I like to get into it, understand nuance, edge cases. You know, it gets like a giant ball. There's actually a sketch in there about this. Like, it gets like a big giant. Like, it's a simple question. You know, simple, simple, simple. Boom. What about this? What about that? What about that? What about that. What about that? Edge cases, Reading it all. And then there it was. And then. Yeah, and then once I get in there, I'm like, okay, now. And you actually shared a quote one time about, there are a lot of simple.

[Barry Ritholtz]

Investing is simple but hard.

[Carl Richards]

No, there's a lot of simple. There are a lot of answers that are simple, elegant, and wrong. Oh, remember this?

[Barry Ritholtz]

I don't know where I stole that. That could actually be me.

[Carl Richards]

Yeah, No, I remember you shared somebody else's quote, and I was like, oh,

[Barry Ritholtz]

because simple, elegant, and wrong.

[Carl Richards]

Yeah, And I really worry about that because when you're in that ball of yarn complex and you decide to distill or edit, you have to make some conscious decisions about what to leave out. And I often get that wrong. And when I do, I hear about it, and it makes the work a little bit better. There are words and lines in some of those sketches I've been thinking about for over a decade that you want to change. I removed a word that had been in there 15 years, which sketch. It's. It's. The word was

[Barry Ritholtz]

people you love. Experiences, spend the money.

[Carl Richards]

Yeah, that one's one of my favorite ones. That is one of my favorite.

[Barry Ritholtz]

Do you like a good Venn diagram?

[Carl Richards]

Well, by the way, the Venn diagram police have come after me, so I'm always. I just call them circle sketches. Oh, dude. I used to get two page emails from the Times readers. I call these people Venn Diagram, Picture shaper, Picture Straightener. And. But I used. I used to say, send equal rebuttals. And then finally, I just developed a template email that said, you're right. It's. I call them circle sketches. So, yeah, the Venn diagram piece.

[Barry Ritholtz]

These are. These are legitimate Venn diagrams.

[Carl Richards]

They can make an argument. Of course.

[Barry Ritholtz]

No, if it's this over here, this over here, and the overlap that you want to focus on, for sure. Things that matter, things that you can control is another one of yours, what

[Carl Richards]

we should focus on.

[Barry Ritholtz]

And then. And then the overlap. How is that not a Venn diet?

[Carl Richards]

I don't know. I don't know, but somebody will find. But my point really is that when you distill and leave things out, you get things wrong sometimes. And you asked which one? Like, I.

[Barry Ritholtz]

For a point, though, you're trying to communicate cleanly and simply.

[Carl Richards]

It's true. But I'm saying some of that feedback's amazing. Like, the Venn diagram police weren't particularly helpful, but some of the feedback is amazing. Like, hey, have you ever thought of this? And it makes me reconsider and adjust. And there have been changes that I've made. Like there's one sketch that says what's important. What you. I used to say what's important to you? It was an alignment sketch. It was like your use of capital aligned with what you say is important to you. And that word say?

[Barry Ritholtz]

Well, it's implying that it's not important, but you're claiming it's important.

[Carl Richards]

That word say bothered me for a decade before I was like, no, no, no. It's we want to get to what's important to you, not what you say.

[Barry Ritholtz]

You were hinting at another problem with people not speaking.

[Carl Richards]

That's right. Revealed stated versus revealed preferences. I'm more interested in the revealed preferences. What's actually important.

[Barry Ritholtz]

That's really. That's really interesting.

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[Guest or Supporting Voice]

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[Barry Ritholtz]

Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC advisory services by Public Advisors LLC. SEC registered advisor complete disclosures [e-mail] disclosures stay with the concept of spending money. Yeah, right. Since I just flipped to whatever that was. Every advisor that manages money for people can tell you story after story after story. My favorite one, I'll share here. Hey, Barry's a car guy. He has a boat. You want to buy a boat and a car? Why don't you talk to Barry? So I speak to the client. So I'm thinking about buying a 60 foot, 50 foot, whatever, sailboat. And I'm thinking about buying a Ferrari. I go, that's really easy. What's your boating experience? Zero. You don't start with a 50, 60 foot sailboat that requires a crew. It's two and a half million dollars. You'll take it out twice, you'll sell it for a 30% loss. On the other hand, go. By the way, this guy could buy a Ferrari a month for the rest of eternity. And he's fine. Go by the Ferrari. Take the whole family down to the Ferrari High Performance Driving School, which I'll let you in on a little secret. All of these advanced driving schools, they're really defensive driving classes in disguise. And you will learn not only the limits of the car that you'll get nowhere near, but you'll learn the limits of your own driving ability. And more importantly, learn how to operate within your own skill set.

[Carl Richards]

And so will your kids if you bring them.

[Barry Ritholtz]

That's right. So everybody becomes a better, safer driver.

[Guest or Supporting Voice]

Yeah.

[Barry Ritholtz]

So he goes out and buys the Ferrari. They do the class. They love it.

[Carl Richards]

Yeah.

[Barry Ritholtz]

He also buys the boat. A year later he sells it for a 30% loss. Anytime Barry gets on the phone with a client, the advisor always says, do not mention the boat. So the only thing worse than being right is being wrong. And I could say this at the back of a podcast because you can confess to murder at the end of a podcast and no one will.

[Carl Richards]

No one knows no one will hear.

[Barry Ritholtz]

So I'm very comfortable saying this year. But so with that Barry digression here, let's talk about how do you help people focus on what's important, what matters, and what the purpose of money really is. What should they be doing?

[Carl Richards]

Yeah.

[Barry Ritholtz]

With their money.

[Carl Richards]

Yeah.

[Barry Ritholtz]

Especially later in life. They've accumulated a nice pile. Can't take it with you. Yeah.

[Carl Richards]

Running experiment, like practice, like, like often one of the things we see is the very things that got you to that spot are working against you going forward. Right. Like you're being frugal, saving aggressively, being very disciplined. And now you're saying, hey, I've been putting off this delayed gratification thing was really important maybe like. But it definitely got you to the spot. It's. You get to a point at which you should no longer delay. There's not gonna be time to delay.

[Barry Ritholtz]

It's so tough to. For some people to make.

[Carl Richards]

So you practice. You just like, like your boat example is great. Yeah. Like, I mean, I literally have had people who can't spend any money and like you're saying, have enough money that they could spend it for the rest of their lives. Right. Go like, go get a coffee with a friend, pay for theirs and just under. Go on the trip and enjoy the trip. Right. Just one of my favorite stories is from Alan Smith in the uk. Had a client, he's a great financial planner. Had a client that had. And he's told this story publicly, had a client that had relatives that had moved. There was a bunch of people from Wales that moved to Argentina for mining way back. Way back in the day.

[Barry Ritholtz]

I know exactly where you're going to go with this.

[Carl Richards]

A bunch of his relatives moved. A bunch of her relatives moved. She'd always wanted to go see the Welsh national rugby team play the Argentinian, the Pumas in Argentina.

[Barry Ritholtz]

How hard is that?

[Carl Richards]

And she was like, I just can't. I can't. And he's like, you could do this every year for. You could do this every month for the rest of your life. It's like, well, I can't sit that long. You could have a lay flat bed. And so he finally.

[Barry Ritholtz]

Or you could go from Wales to New York. Go from New York to Brazil. Go from Brazil to Argentina. You don't have to do it.

[Carl Richards]

So he finally just over time, like got her used to the idea. She went and she says it was the best. Like, we're never gonna replicate those things. We're never gonna. We're never.

[Barry Ritholtz]

AI is not going to replace that.

[Carl Richards]

No. And so to me, it's like, dude, I think I would. I don't know if I'd rather err on being irresponsible, but I know I should. We should spend the money. Spend the money.

[Barry Ritholtz]

You know, when you. Irresponsibility never comes into it, you're looking at someone's portfolio.

[Carl Richards]

Yeah.

[Barry Ritholtz]

Hey, you have $10 million. You live on 350 a year. You want to bust out another 50 so you can take the whole family to the old country and show them where your grandparents came from. Why not? Yeah. I mean, it's not even $100,000.

[Carl Richards]

Yeah. And so I think, to me, these,

[Barry Ritholtz]

by the way, are very first world problems.

[Guest or Supporting Voice]

Of course.

[Carl Richards]

But they're problems like, I've decided Brene Brown got really clear about, like, comparative suffering does us no good.

[Barry Ritholtz]

Right.

[Carl Richards]

So I always, like, like, whenever I hear first world problems, I'm always like, well, yeah, but this is a challenge, and it happens to be the challenge that many of your clients and the people I'm talking to are facing. So why not just practice? Like, can we pick something small? Right. Something you've always wanted to do. Right. And it might be simple, like, take the grandkids to the art museum this weekend.

[Barry Ritholtz]

I'm gonna share another line with you. Not comparative suffering. Often falsely attributed to Teddy Roosevelt. It hadn't been around until, like, the late 1980s. Comparison is the thief of joy.

[Carl Richards]

Yeah, for sure.

[Barry Ritholtz]

What a great phrase that is. And it's really. There's always someone with a bigger boat or a larger house or faster car, Whatever it. Whatever you're envious of. You have this car, you really happy with it, then who cares what the guy down the block has? That's pointless.

[Carl Richards]

I just. Real quickly. That's one thing that I think makes this even harder, is we're never exactly sure do we really want the boat. Do you know what I mean?

[Barry Ritholtz]

Well, if you're not sure, then that's easy. Don't get the boat.

[Carl Richards]

Yeah, but you could go out for a day. You could rent a boat, try little experiments. Try little experiments. Because I just remember growing up, I always wanted. I grew up in the hills in Utah, right. We all had BMX bikes.

[Barry Ritholtz]

I love this BMX story of yours.

[Carl Richards]

I always, always want a slightly better BMX bike.

[Barry Ritholtz]

Oh, no, you wanted a really nice bike, and what did you end up doing?

[Carl Richards]

Which one are you talking about? Are you talking about the road bike? The moots that I end up spending a moots. Titanium bike out of steamboats. Different story. But, yeah, that's one of those moments where I. Are you kidding? Those things were. I could not. Like, I think those are 6 or 7,000. That's nothing today in terms of people.

[Barry Ritholtz]

You could drop 10 grand on a bike.

[Carl Richards]

But still, it was like. And that bike, like, per unit of dollar per unit of fun. I've never made a better investment, Right,

[Barry Ritholtz]

but what's the BMX story?

[Carl Richards]

I was little, when I was like eight, we all had, like, I had slightly better BMX bike than some of my buddies, and my buddies, some of my buddies had slightly better. That's all I knew, right? I didn't know at the time that I was supposed to want a private jet. And now I do. Like, now Instagram has taught me. So I think we have this problem of, like, cultivating our comparison set. So now we're talking. Even getting clear about your. The word goal is hard because you don't know if it's your mom's goal, if it's society's goal, if It's Instagram's goal, $5 million in a sailboat. Like, when did you.

[Barry Ritholtz]

Insane.

[Carl Richards]

Where did that come from?

[Barry Ritholtz]

Let me share a fun private jet story with you.

[Carl Richards]

I love private jet stories.

[Barry Ritholtz]

So whenever anybody used to ask me, hey, you gonna sell the firm? What's your fu. Money. Questions like that, my answer has always been the same. Whatever it takes to never step foot into a commercial airport ever again. And then I made the mistake of saying this in public somewhere, and I started getting marquee jet netcheck. All these guys started sending me pictures. So out of curiosity, one day I said, run the numbers for me. What does this really look like? So it turns out East Coast, 6,000, 6,500 an hour, cross country to California, 8,000. You want to go to Europe, it's 12,000 per hour of travel. So do the math. So I start deep down inside. I'm a numbers guy. I'm like, oh, this is quarter million, half million a year. For that to be rational, you have to be. Not have $10 million. You have to be earning $10 million gross to spend a mere 5% of your annual income and cap gains on a PJ at half a million per PJ. Right from succession. I never heard that phrase before that show. And so all of a sudden, I'm like, oh, I have no interest in that. I don't ever expect to be pulling down 10 million a year. And while it's attractive, bypassing all of sure. Airports, I kind of learn. All right, so I'm not gonna go on high traffic days, we travel for Thanksgiving weekend. I'm the first flight out Thursday morning. Yeah. Blow through security in five minutes. Two hours later, it's a zoo.

[Carl Richards]

Right.

[Barry Ritholtz]

So, all right, I'm not gonna spend a half a million dollars a year. I could spend a little bit of brain power trying to navigate around the worst. Worst. I won't arrive at the airport at 5 o' clock because I don't want to get. Get stuck in traffic. And I won't take a 9 o' clock flight in the morning that require. So like, all right, I'm not flying private. I'm trying to fly a little smarter commercial. But even if you're in the front of the plane.

[Carl Richards]

Yeah, but that to me is a really good example of like thinking that something might be important. Running a little bit of an experiment, just actually running the numbers, deciding. So we're just constantly narrowing in for our whole lives on. And those things change.

[Barry Ritholtz]

It would still, it would still be delightful to be able to just show

[Carl Richards]

up at the airport and you made a trade off when you want to

[Barry Ritholtz]

leave and, you know, save a day of travel on each side, for sure. But is that worth half a million dollars a year?

[Carl Richards]

Yeah.

[Barry Ritholtz]

To you?

[Carl Richards]

It's not.

[Barry Ritholtz]

In order to make it, I had. I'm oversharing, but I'm going to overshare. One more thing. So I'm. Friends of my wife get a pied a terre in the city. They're empty nesters. They downsize, they have a house and then they have the city apartment. And I started thinking about a pied a terre we loved when we lived down at Gramercy Park. And I start looking at this and again, I start running the numbers and I'm like, wait a second. Just the monthly co op fees are like three or four grand a month, to say nothing of the insurance, the taxes, and the 1, 2, 3, 4, $5 million purchase price, whatever the hell it is. And I'm doing the math and I'm like, gee, this is really like five grand a month. It's 60,000 a year I can't spend. And we take weekends in the city. I can't spend $60,000 a year on hotels, restaurants. Like, I can't get it. I can't spend that much. If I tried, like, we do a few weekends in the city, it's a couple hundred, a couple thousand bucks. But it's certainly not 60 grand. Pierre Terre makes no sense to me. And I'm explaining that I'm having this conversation with a very wealthy client. And I see this look on her face, and I go, oh, you're saying if $60,000 is too much in co op fees, you really can't afford this pied a terre? And she says, well, I wasn't exactly thinking it, but you're not wrong. And what I was about to defend myself with was, well, the $60,000 just isn't worth it to me. But before I said that, it's like, yeah, but if you had 50 or $100 million, who cares? I just want a place that I'm comfortable in the bed, my clothes are in the closet, and I'm not dealing with checking into a hotel that's worth 60 grand to me. If you have X dollars. Yeah. And she never said that, but I immediately saw the whole. I immediately, like, I have a question for you. I can afford. Afford this.

[Carl Richards]

On the heels of that, I have a question for you. What's the last thing you decide? You decided, I'm gonna buy that. And you didn't. You were just like, I don't care. I'm just buying it. Doesn't matter how much it costs. That you didn't actually. Because both those examples, you're like, I wanted a thing. I went around the numbers, decided not to do a thing. Is there a time when you.

[Barry Ritholtz]

When was the last time I decided not to do.

[Carl Richards]

No, you decided to do it. You're like, I. And I just threw. I didn't even care what the number said. I didn't even look. I just wanted to do that thing so bad. I was just like, I'm doing it.

[Barry Ritholtz]

There's two answers. There's the Barry before he turns 60 and the Barry after he turned 60.

[Carl Richards]

Really?

[Barry Ritholtz]

When Barry turned 60. So I. I think this is a function of immaturity. I never had a midlife crisis, probably because when I should have, I was still an idiot child. I still was 10, 20 years, maturity level below where I should have been. And I turned 60, and I very much woke up with the sensation. All right, fourth quarter, down by seven. If you want to win this game, you got to get busy. Like, literally, that was what I thought, right? And I've told. I don't know if I ever told this story on the podcast. And I. The spouse still survives, so I can't really go into details, but person about to sell a business for a ton of money, hundreds of millions of dollars, gets a diagnosis, six months to live. And when you know, you know this. If you're managing money for enough families, the actuarial tables are such that people will begin to die. I mean, that's just the normal human finite lifespan. And so it's easy to start to pick up. That pattern of life is short. What are you waiting for? So the combination of turning 60 soon after the pandemic ended, and a lot of people. A lot of people lost a lot of people during that. I kind of said, money should never prevent anyone from experiencing joy. And so what I started doing is not saying no and gifting a lot of stuff. Like, my favorite thing in the world around Christmas is to pick a book and send it to 10, 20, 30 friends, the same book. And I'm like, 20 bucks is 30 bucks. This year it was the Uncool by Cameron Crowe. And I was just talking about this with somebody, and I said, oh, I gave that book to a few people for Christmas. And I went through Amazon. Oh, I gave 26 of these to various people.

[Commercial Narrator]

So good.

[Barry Ritholtz]

It's $300. Anybody who's making.

[Carl Richards]

Yeah, I love that idea about that.

[Barry Ritholtz]

Reasonable income, by the way. You don't have to wait until Christmas.

[Carl Richards]

I know, I know. I was just thinking about that Carl's book, Carl's Secret Book Club. It's like launching that.

[Barry Ritholtz]

It's a really fun thing. Now there's a little bit of a puzzle figuring out what's the right book for the right person. And not everybody gets the same book because they're different people. But all this comes back to spend the money. So. So I. Again, it's the end of the podcast, so I can. I can say stuff.

[Carl Richards]

Alexis, no cutting any of this out.

[Barry Ritholtz]

So 1987, 1988911 cabrio I purchased three or four years ago for, like, 60 grand. It was an old, ratty car that needed to be restored, and the plan was to convert it to an ev. This car wasn't right for that. So I ended up doing it with an 87 coupe with 300,000 kilometers on it. But the 88 turned out to be this rare. Matching numbers, M491 911. That was worth a ton more than I paid for it. So I put a bunch of money into it. My wife was complaining. My wife was complaining she doesn't get to drive a stick anymore. Hey, honey, here's your weekend car. I bought it for this reason. We're just parking cash. And it's worth double what I paid. Drive it. And she's like, it's loud. It smells. It doesn't have abs. It doesn't. She goes, nice. Nice clutch, but no airbags. No abs. And I'm like, so what are you saying? You. By the way, this is my cross to bear. My wife is very unhappy that I got her a old 911 and she is forcing me to buy a newer Porsche. Like these are problems that most married men do not have. That's how you know you married woman,

[Carl Richards]

if your wife says, nice clutch, right, you're onto something.

[Barry Ritholtz]

I taught her to drive a stick when we were dating. She drives a stick better than so her daily is an unusual color. By the way, another great purchase. During the pandemic when everybody was freaked out. I got her a Panamera 4S hybrid in amethyst metallic, super rare color, substantially less than it should have. And some of the. One of the guys from my car group says to me one day, you know, you have the only amethyst metallic Panamera on the island. I saw your wife driving it. I tried to catch her. She's got a crazy lead foot. I couldn't catch her. I was beeping, I was waving. So I'm like, oh, I'll ask her. So I go home that night and I said, I said, hey, how was your day? She goes, crazy thing. This guy In a green 911 was haranguing me, was chasing me and I just put the hammer down and this guy couldn't catch me. And I said, you know, that was Joe. That green. It was green, right? She's like, yeah, yeah, that was Joe. He was just swinging, trying to catch up to say hi. I like, weren't he. He said he couldn't catch you. It's a GT3. It's like the fastest street legal. You know, just below the Turbo S. There's only one other car that's a fastest street legal Porsche with a stick shift. So good.

[Carl Richards]

So that's what I'm talking about.

[Barry Ritholtz]

So. So I am in the process of swapping the 88 for a 2024. I know exactly what I'm going to replace it with. I found a little bit of a unicorn. The only problem is the color is wrong. But it turns out it you, you know a new car, a relatively new car, you put a PPF wrap around it to protect the paint. Now they make those wraps in colors so you could get. I really like this paint to sample. Purple, violet. That's like a $20,000 upgrade. When you order the car new. No, just put plastic on. It's six grand. And now you have the car, whatever color. So she picked that color. This is, she's the purple. The purple. I found this. It's a gts. It's a cabrio, it's a stick, it's a chalk interior which is even rarer and rarer still. Ceramic breaks, it's just the wrong color. It's like, I'm gonna fix this, don't worry.

[Carl Richards]

So good.

[Barry Ritholtz]

So that was the. This is an obsession. Obscene amount of money and I don't care.

[Carl Richards]

Yeah, yeah. You tell me that 20 years from

[Barry Ritholtz]

now nobody looks back and says, oh, why did I buy that? We look back in regret on the things we didn't do. That's exactly not the things we did.

[Carl Richards]

I mean my version of that is two months ago I did not know that my 24. 24. 24. 25 year old son. 23 year. Anyway, 24 year old son was going to ask me to go spend some time adventure on adventure motorcycles this summer. It wasn't in my financial plan.

[Barry Ritholtz]

Do you have a license for that?

[Carl Richards]

Yeah, I actually do because 10 years ago, five years ago I was on a BMW, the 900GS.

[Barry Ritholtz]

Oh, that's a big bike.

[Carl Richards]

Yeah. And so we just got Yamaha T7s. So the Tenere. Tenere 700, which is a great bike, but my son is the one. I didn't know that. It's costing me more money than I'd planned on spending and I'm not gonna regret a second of it.

[Barry Ritholtz]

Isn't that what.

[Carl Richards]

That's the whole point.

[Barry Ritholtz]

First of all, you have to stop. And I know you have gratitude drawings in here. The fact that it's a realistic option for you or I to indulge in these ridiculous spending things. And a part of me knows how utterly ridiculous of course this is. So first you have to have some gratitude for that. But second, if not for that, what are you gonna do with the money?

[Carl Richards]

And. And the fact that my 20something son asked me to do it.

[Barry Ritholtz]

He's enthusiastic.

[Carl Richards]

The answer is yes. Right? I called. Yeah. The answer is yes. You know, and, and so am I Gonna look back five years from now, 10 years from now, 30 years from now and regret that there's no. We spent more money than we really should have on our four years living in New Zealand.

[Barry Ritholtz]

Right.

[Carl Richards]

And I would do it.

[Barry Ritholtz]

What years were you in New Zealand?

[Carl Richards]

16 to 20. We didn't mean to do it. It wasn't political. We went 16 for a year, we ended up just staying for four.

[Barry Ritholtz]

Yeah, I assume it was fantastic.

[Carl Richards]

Unbelievable.

[Barry Ritholtz]

Right.

[Carl Richards]

We spent way more. It was the whole. Irresponsible.

[Barry Ritholtz]

Right.

[Carl Richards]

In this case even. But it was a requirement. My wife was essentially like after the financial crisis and everything that went. I was just a broken human and really. Oh, just.

[Barry Ritholtz]

I never thought of you that way.

[Carl Richards]

Well, that's nice of you, but yeah, I did. See, that was part of the problem is I was a superhuman out here, not inside, not in the house. And it was just a lack of patience and not deep presence. And she was like, we're going. Would you like to come? And I was like, yes. We ended up staying four years. It was hard money wise. Like, it was a bad decision financially.

[Barry Ritholtz]

Were you working there?

[Carl Richards]

Yeah, but, you know, like New Zealand, you're doing the same thing.

[Barry Ritholtz]

Like, you're not that far from China. Did you do anything in Asia at all?

[Carl Richards]

Very little.

[Guest or Supporting Voice]

No.

[Carl Richards]

So really. But, but, but my point really is it probably wasn't the best from a spreadsheet financial decision, but I wouldn't. I would do it again all over. So for sure. Same thing with a car. Spend to the degree that you can find the things that align with your use of capital and your family and your experiences with the people you love. We know that we will not regret. We will not regret spending time and money on experiences with people we love.

[Barry Ritholtz]

So we've been. We've been at this for a solid 90 minutes. Let me jump to my favorite questions. I ask all my guests. Otherwise I'm going to keep you here through dinner, starting with who were your early mentors who helped shape your career?

[Carl Richards]

I know you asked that question. I thought really carefully about it. And the one that actually probably had the biggest shaping on me was a little far. Iran had a huge impact. So between Ron and Seth Godin. Oh, really?

[Barry Ritholtz]

Seth Godin. Stuff is really interesting.

[Carl Richards]

Yeah. And Seth, I always saw Seth as somebody who was doing something here that applied here and that was really like,

[Barry Ritholtz]

so doing something in a narrow little space.

[Carl Richards]

Like he was a marketing guy. Marketing, marketing, marketing. But, you know, had broad application and doing it consistently over a long period of time. I mean, behavior App radio was started because of Seth's daily blog. He said to me, why aren't you doing a daily blog? I said, I don't like to write. He said, you like to talk. And so I started, we're episode 1500 now. You said, yeah, so Seth Godin, Ron Lieber had the biggest impact on me.

[Barry Ritholtz]

Let's talk about books. What are you reading right now? What are some of your favorites?

[Carl Richards]

My favorite.

[Barry Ritholtz]

And I know when you're writing a book, it's really hard to read.

[Carl Richards]

Yeah, yeah. No, my, my. One of the most two really impactful books fooled by randomness.

[Barry Ritholtz]

Nassim Taleb.

[Carl Richards]

Come on.

[Barry Ritholtz]

I wanted to have him on the podcast. He told me to go after myself.

[Carl Richards]

He probably said that. Exactly.

[Barry Ritholtz]

I'm giving you the polite.

[Carl Richards]

Yeah, yeah, sure. So that book and then Pema Children's When Things Fall Apart.

[Barry Ritholtz]

That's a really interesting.

[Carl Richards]

Pema Children. When things. Well, they're both, if you understand. Yeah, they're both related to this idea that. This false sense of certainty that we talked about. So Pema's work has had a massive impact on me reading right now. I just finished literally last night. I just finished Homes Homesick. Nomad about. And I can't remember her name. Brianna.

[Barry Ritholtz]

Fiction or non Fiction?

[Carl Richards]

No, it's a memoir, short little memoir about a lady who drives her van around the southern. The desert of southern Utah. So it was like a home. She has a Utah connection, Salt Lake connection. So that was really good. And. And Bison for the Broken Heart or Buffalo for the broken Hearted. Dan o' Brien's book. Someone else in that, I think. I think you. Oh, I told MEB about it in his book Roundup.

[Barry Ritholtz]

Okay.

[Carl Richards]

Yeah.

[Barry Ritholtz]

Huh. Really interesting. Yeah. What are you streaming these days? Tell us what you're either listening to or watching.

[Carl Richards]

Mike Birbiglia.

[Barry Ritholtz]

Uh huh. So hilarious.

[Carl Richards]

Working It Out.

[Barry Ritholtz]

You know he has a podcast.

[Carl Richards]

Working It Out. That's his podcast.

[Barry Ritholtz]

Oh, I thought that was the name of his Stand up.

[Carl Richards]

I listened to it religiously. I'm trying to get Mike, if you're listening. I've been trying to get a hold of Mike for a long time.

[Barry Ritholtz]

So there's a handful of comedians with their own podcast now, not just Seth. Seth Rogen. Not. Not just Joe Rogan.

[Carl Richards]

Yeah, for sure.

[Barry Ritholtz]

Tom Papa has a podcast.

[Carl Richards]

Mark Maron, the original Mark is the

[Barry Ritholtz]

OG in the space.

[Carl Richards]

Who's Pete Holmes?

[Barry Ritholtz]

Who's the guy who's the co writer? Blocks with Dave Chappelle, Jonah Blank on his name. His pod is occasionally interesting.

[Carl Richards]

Pete Holmes is actually really great too.

[Barry Ritholtz]

Why do I know the name Pete Holmes?

[Carl Richards]

He's another one of these Netflix comedians. It's amazing.

[Barry Ritholtz]

Like, good hang with Amy Poehler. I was just watching her with Billie Eilish. That was really kind of fun. Yeah, there's a ton of them.

[Carl Richards]

Yeah, really. I mean, his is the reason I really like Birdiglia is it's really about like the process. Right. And I think about a lot of my work, especially the public speaking about like testing bits, you know, seeing how they land, paying attention. That didn't work quite the way I wanted to. And Mike does a really good job of explaining that. And then I just finished the Dark Wizard. Dean Potter's the story of Dean Potter, who was an El Cap climber long before El Cap climbing was this mainstream thing. And about his untimely passing through BASE jumping or something is an amazing story for.

[Barry Ritholtz]

There are a lot of these hobbies. Like, I don't mind going fast on a track. There are a lot of these hobbies where my brain does the risk reward analysis. Oh, there's just way too much random risk in this. Like wingsuit.

[Carl Richards]

He's a wingsuiter.

[Barry Ritholtz]

Yep.

[Carl Richards]

Yeah. I mean, he was driven by the fact that the only thing that made him feel alive was the death consequence.

[Barry Ritholtz]

Right.

[Carl Richards]

That's a whole nother thing.

[Barry Ritholtz]

It's called the Dark Wizards psychological issue.

[Carl Richards]

Yeah, for sure. But it was super interesting.

[Barry Ritholtz]

We'll skip that. Final two questions. What sort of advice would you give a recent college grad interested in a career in either being a financial planner, being an author, being an artist? Sometimes don't think of yourself as an artist. Yeah, you clearly are.

[Guest or Supporting Voice]

Yeah,

[Carl Richards]

just take the next step. Right. Like I just, I think like getting too caught up in how is this gonna work and what's your narrative.

[Wise Advertiser]

Yeah.

[Carl Richards]

And a thousand miles starts with try not to compare. Like there's a Lao Tzu quote. Be who you really are and go the whole way. And I think. I wish I would have started that a little earlier. Like, what does it even mean? Okay, take one small step. 1. Take one small step. And if I was preparing finance, I'd get more comfortable, especially in the advice side. Get more comfortable with learning to be deeply present with people. Curiosity questions.

[Barry Ritholtz]

Deeply present.

[Carl Richards]

I think financial advisors aren't going to be paid for solutions. If they are right now, they're not going to be paid. They're going to be paid for presents like opening up the ability to have these. Because the solutions are table stakes at this point. Right. And. But it's like self driving cars. I was in the Waymo. Right. It was safer than the Uber driver.

[Wise Advertiser]

Right.

[Barry Ritholtz]

Did it feel very weird?

[Carl Richards]

But here's the thing. I still have to tell it where to go. And even more importantly on the journey, if I saw something like, oh wait, what's that perk? Right. I think that requires.

[Barry Ritholtz]

Could you do that? In a way.

[Carl Richards]

Mo.

[Barry Ritholtz]

Could you ask it?

[Carl Richards]

Yeah, you can tell it to stop. Yeah. I don't know how you do it, but I, you know, on the app. So I'm a big fan of self driving money. I can't wait. And there's still going to be somebody there that needs to say, hey, is this really. Is the boat really important to you? Go try the. Go try the racetrack thing. You know, like. And I. That to me is curiosity and presence. Still, you got to be a technical rock star, but curiosity and presence is where the value will be.

[Barry Ritholtz]

Final question, what is it that you know about the world of investing or psychology today might have been useful back in the 1990s when you were first looking at that Netscape IPO.

[Carl Richards]

Yeah, yeah. That compounding does all the work. Right? Like that. If, like, stop spending time trying to find the best investment and just own stuff. If it compounds. I don't know who said this. If it compounds, let it compound.

[Barry Ritholtz]

The line I use is your job is to prevent yourself from interfering with your portfolio's ability to compound that time

[Carl Richards]

is the thing that matters.

[Barry Ritholtz]

Absolutely. Carl, this has been absolutely a delight. Normally, I want to make this about the guest, but there's something about you that just encourages me.

[Carl Richards]

My whole goal,

[Barry Ritholtz]

it's your. It's your. It's your aura. You bring it out in people, which is probably why you were a good advisor. You get people to open up to you.

[Carl Richards]

That's a really high compliment. Thank you.

[Barry Ritholtz]

It is.

[Carl Richards]

Cheers.

[Barry Ritholtz]

We have been speaking with Carl Richards. He is the author of the book youk Money Reimagining wealth in 101 Simple Sketches. If you enjoy this conversation, well, be sure and check out any of the 639 we've done over the past 12 years. You can find those at YouTube, Bloomberg, Spotify, Apple, or wherever you get your favorite podcast. I would be remiss if I didn't thank the crack team that helps put these conversations together each week. Alexis Noriega is my very patient video producer. Producer, New Yorker. Dropping the R. Sean Russo is my researcher. Anna Luke is my producer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

[Venture Global Advertiser]

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[Wise Advertiser]

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[Carl Richards]

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