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- [00:02]
Dr. Joseph Moore
So from the George Washington administration until Michael Jackson's Thriller album, dividends were 90 something percent of returns and price movement was very little of a gain. And since then, I think well over 70% of our investment returns come not from dividends, but from price elevation.
- [00:28]
Matt Grier
That was historian, investor and author Joseph Moore discussing his new book, how to Get Rich in American history. 300 years of financial Advice that worked and didn't. I'm Motley fool producer Matt Grier. My colleague Rich Lumello recently talked with Moore about all of that financial advice and about some timeless lessons for today's investor. Enjoy.
- [00:52]
Rich Lamello
Welcome to Motley Fool Conversations. I am Motley fool contributor Rich Lamello. Our guest today is someone who brings a rare combination of perspectives to the world of investing. Dr. Joseph Moore is an author, historian and investor who didn't start out believing in the American dream, but through his own experience in the markets, he's come to see it as not only real, but also achievable. In our conversation today, we're going to explore the strategies, decisions and lessons behind his investing success, including some surprising approaches that paid off and others that didn't. We'll also dig into what history can teach us about markets today and how everyday investors can apply those insights in a practical way. Dr. Moore, welcome to the Motley Fool.
- [01:33]
Dr. Joseph Moore
I'm so glad to be here. Thank you, Rich.
- [01:35]
Rich Lamello
Great. Well, you have just published a book called how to Get Rich in American history. 300 years of advice that worked and didn't. And so I look forward to kind of jumping into the thoughts around that and kind of pull out some anecdotes and some investing wisdom for our fool investors. But before we do that, why don't you just give us a couple minutes of kind of your background?
- [01:57]
Dr. Joseph Moore
Yeah. Thank you. So I was getting a PhD in American history. I came from a very rural, working class family in the South, Right. My mother was brought home to a house with no flush toilet and she was the sixth child, Right. So on my father's side, these were, they were active resistors to capitalism, as it were. These were mill strikers who had the Communist Party had sent activists down south to teach people to, you know, dumb rednecks to read the Communist Manifesto. Those rednecks were my, my great grandparents and they, like, you know, charge the mills and these kinds of things. So, like, my dad growing up would vote communist for president. So I did not enter through the door of believing in capitalism. And so I was getting a PhD in history, and I did all the same things that all that you hear professors, do I assign Karl Marx on day one, all the. You know. But not Adam Smith. But for some reason, at that time is 2005, someone said, well, the lesson of history is clear. You need to buy a house. And instead of thinking about that for a hot second, I just nodded my head. We bought a house. We're graduate students, right? I mean, this is the no verification loan world that. A friend of ours was going to lead a financial class at the local church. He was like, would you come? I said, absolutely not. I'm smart. I don't need this stuff. Plus, it's all a scam anyway. And he said, would you just do me a favor? Because I'm scared I'm going to be embarrassed if only, like, two people show up. So we went to help a friend, and they make us do a budget. We go home, we fill it out, and my wife falls asleep. And I stayed up literally all night. It was like, who gave us a mortgage? We have no money, you know? And so we put our house on the market on, I think, a Friday or Saturday. It sold the next Saturday in a bidding war. Our neighbor put her house on the market the following Saturday. It never sold. We were the last people off the 2008 Titanic. And I was floored and humbled and embarrassed that I thought I knew so much history. And a friend's class in a church basement had taught me more than any book I was reading. And I thought, there has to be a history here. And so I set out on a quest to understand, like, what were people told to do with their money? For 300 years, Americans had been told, this is how you get ahead. Well, what were they being told? Was it always the same thing? Did it change? And what I discovered, the longer I explored it was actually people really did get ahead, which I was actively in the process of teaching students you couldn't do. And that seemed like a problem, right? And so then I started experimenting with these various things. I thought, well, if people did it in the past, I'm going to try it in the present. And the only line that was drawn in the sand was my wife saying, under no circumstances, like, if we hit that line, then I would back off. But I Airbnb all the rooms in my house because that was the primary mortgage payoff strategy in the 1800s. I shorted all of Jim Cramer's stock picks because there's an economics paper saying that there's this thing called the Kramer bounce. But over time, I started to realize, oh, actually, people can get ahead. And this was quite embarrassing for someone who was arguing the opposite. And so now I've created what I hope is a very helpful history for people. This is what people were told to do in the past, and these are the things that work, these are the things that didn't, and hopefully we can apply those today.
- [04:48]
Rich Lamello
As you embarked on this, you didn't have a history of investing. Sounds like far from it. What were some of the initial principles that you kind of started looking into that started to guide your investing? Because it's kind of fascinating, you start going down all kinds of different paths. You mentioned shorting Kramer. I mean, you invest on the moon, you start to play crypto, you start to, you know, kind of dabble in a lot of different things. Is this the academic in you kind of thinking, you know what, I'm going to throw stuff at the wall, 30 different things, and just see what works and what doesn't work?
- [05:15]
Dr. Joseph Moore
Yes. I wanted to test all the assumptions, and that was where academia came in. Very handy is there is a baseline system of saying, this is the proposition. Can we test the thesis? And I wanted to test it in two ways. In one way, I wanted to test it by saying, did this work for people in their real lives? And then I wanted to see if I could do it in the present and see if it still worked. Now, one of the conclusions that really struck me the more I did the work, was how many things we think are old that are actually very new, and how many things we think are very new are actually very old. So to give an example, we think that everyone always got ahead by using compound interest, right? This is. If you just walk into your generic financial advisor, the message will be compound interest is the magic superpower that's going to get you where you want to go. I argue in the book that's actually a very new phenomenon, because if you go back through most of American history, compound interest is not how people actually got ahead. Compound interest depends on two things. Time. 99% of Warren Buffett's wealth, I think the stat goes, was made after his 65th birthday. That's a birthday most Americans never live to see. So time was not on their side. And secondly, most of their wealth was in land, which doesn't compound. So, you know, we all get this experience of going into the Financial advisor, right? And they slide across what I call the chart. And, you know, it doesn't matter when you go, it's always the same chart. The dates have changed. Mine was 1929. $10,000 invested in 19 the guy said a mere 10. I remember him saying a mere $10,000 invested in 1929 would today be worth more than $10,000,000. And he slides this across to me, expecting me to be blown away. And I looked down and I thought, okay, a house did not cost $10,000 in 1929. So you're telling me that someone invested their life savings, they lost 80% of it in the crash, they fought Nazis, feared nuclear holocaust, saw double digit inflation, cried when Ross and Rachel got back together and not once did they touch that money. Like that's not the real world people were living. So compound interest does work. I'm not saying it doesn't work, I'm saying how powerful it is, is actually fairly new to our experience. Things like crypto we say are very new, are actually very old. So we've had self issued currency in America for most of our history. At the dawn of the Civil war there were 10,000 separate currencies privately issued in America. My favorite example of this is there's a runaway slave named William Wells Brown. He gets out of Kentucky, he makes it as far as Michigan and gets stuck. And a local landlord takes sympathy on him and says, hey look, I'll rent you this space in my shop and you can start a barber shop. Which is a fabulous idea with just three problems. Number one, he has never cut hair in his life. Number two, he does not own scissors. And, and number three, no one in town has enough money to pay him. So he, number one, doesn't tell anybody he's never done it. Number two, he borrows some scissors and then he goes to a printer's office and says, will you print money for me? And it's basically money good at my barbershop. And then he goes around town and he uses this money. He says, I'll give you this kind of coinage at my barbershop and you give me food and lodging. And within a year this runaway slave's money is circulating through Monroe, Michigan as legal tender or valid tender to everyone else. Because he's like, oh, you can always use it for a haircut. And so after about a year it's so trusted he's able to start exchanging it for better gold backed dollars. And that's how he eventually makes it to New York and freedom. But by the way, all of his money goes to zero. And that's one of the lessons of history is that all self issued currencies eventually will go to zero. So many things that we think are new, they're very old and many things we think are old are actually pretty recent. Yeah.
- [08:50]
Rich Lamello
At what point did kind of the switch get flipped and you realize, either A, wow, I'm pretty good at this, or B, man, did I find a strategy. I can't wait to tell people about this. But when did the gears kind of start to shift a little bit in your head on that front?
- [09:02]
Dr. Joseph Moore
Yeah. Well, first I almost went broke. So that's, you know, there's nothing. I think it was Samuel Johnson that said, there's nothing that so clarifies the mind as knowing you're to be hanged in a fortnight. And I literally got up against the edge of bankruptcy because one of the strategies that became very popular in the 60s and 70s because inflation was taking off was to buy real estate with no money down. I know your audience is not necessarily real estate investors, but I tried this and very nearly had to declare bankruptcy because as it turns out, buying real estate with no money down is very hard to pull off. And so I was on quite the rollercoaster ride there. But eventually what happened, both in real estate and with paper investments and with other things was the light that went off for me. Somewhat Buffett esque, was, I need to think about this not as investments, but as a business. I am running ME Incorporated, and I have got to treat ME incorporated, or I used to. I actually call it US Incorporated, because my wife. One of the biggest pieces of financial advice in history is marriage advice. Believe it or not, if you go, you would find marriage advice in young men's business manuals. And then the next chapter would be how to factor an interest rate table. Right. So U.S. inc. Was when I thought, I've got to run this like a business, and I'm going to treat my profits, my losses, the way I see time horizons, the way a business should be treated. And when I began to run it like a business, that's when things began to turn around. And so that's one thing I do encourage most people to sort of wrap their mind around. Don't see yourself as sitting back investing, because most of that type of advice is about solving you and your problems, right? Oh, well, should I drink lattes or should I invest it or should I buy this thing or that thing? Those are solving your problems. You make the biggest money solving someone else's problems. And that's what businesses do. And so I started to think about how can I use this money to do what the market rewards by solving the problems that need to be solved.
- [10:52]
Rich Lamello
And I'm curious with, specifically with regard to stocks, although we could look at other investments too. But specifically regarding stocks, did you find yourself having more success with kind of a buy and hold strategy or.
- [11:04]
Dr. Joseph Moore
Yes, you did. Okay, well, we've lived through a particularly wonderful time to be a buy and hold investor.
- [11:09]
Rich Lamello
Right.
- [11:10]
Dr. Joseph Moore
So I'm not so sure that's always going to continue. By the way, I don't know that the lesson of history is that because buy and hold has worked well for the past few decades, therefore it will continue to work well because. And here's one thing that I really took away from experimenting with stock market investing was the stock market that I'm buying in today is different than the stock market my grandfather would have bought into in a different generation. He was buying. So from the George Washington administration until Michael Jackson's Thriller album, dividends were 90 something percent of returns and price movement was very little of a gain. And since then, I think well over 70% of our investment returns come not from dividends, but from price elevation. So our grandfathers would have been buying a share of future profits at today's prices. I'm buying a share of future buyers at today's prices because in essence, I am assuming more people will want this in the future than want it now. And so when you wrap your mind around that, you start to see how the index fund revolution is pouring trillions of dollars into into this system, you start to realize that it is more the volume coming in that I'm betting on and betting that the volume isn't about to turn around and go out that that's really rising my boat.
- [12:27]
Rich Lamello
Interesting. And were there, as you were going through, you know, kind of these myriad investments, were there any investments that either investment singular or, you know, kind of multiple that surprised you with, you know, kind of outsized returns?
- [12:40]
Dr. Joseph Moore
Best bet I ever made. And I want to make sure everyone understands that when you're a history professor, you are not rolling in cash, Right? So it's not like I'm stroking massive check. These are all like play money. I didn't have a lot of money to lose or play with, but I would play with that money to try out these strategies. Best bet I ever made was when I read an article in the Economist about this new thing called artificial intelligence and LLMs that were being experimented with. And I went and watched the very first. This is how old this is. This is the very first video. I think it's anthropic. No, not anthropic. It's OpenAI. They did like a let's make hangman video. This is the very early iteration of LLMs. And they're like, telling it to basically make the game hangman. And it did it. And I thought, huh? And between the economist article and that, I thought, okay, what's the thing? You know, what's the old principle? Don't try to mine for gold, try to sell pickaxes. And I was like, okay, what is the pickaxe here? And it's compute. And. And so I didn't know it would be Nvidia. I just thought, well, there's only so many companies that make compute, so, like, let's go buy all of those and just see what happens. And that proved to be a relatively, you know, broken clock is right enough times a day that that worked out. That was more me saying, let's try to figure out where the direction is going to go and not pick the winner. And the reason I tell people to avoid trying to pick the one stock that's going to win as opposed to, like, try to pick the thing that in general is going to move in the right direction in the next era is because everybody wants to go buy Microsoft in 1984, right? Like at the IPO. But I tell them, if I actually took you into the stock market in 1984, and I said, go buy the computer future, there's Atari, Commodore, Lotus, mips, Wang, and all of them are gone now. But it's not clear to anybody in 1984 that this one with an M is going to be the one that wins, right? And so. But if you had bought all of those stocks, including Microsoft, and then over time started to realize who was winning this race and begin to concentrate there, then you're probably going to do a lot better than closing your eyes and throwing the dart.
- [14:43]
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- [15:46]
Rich Lamello
going back to, you know, when you were kind of trying all these different investments, was there anything that just didn't work? Well, I'm sure there were many things.
- [15:53]
Dr. Joseph Moore
Oh, so many things.
- [15:55]
Rich Lamello
Was there anything that. Where you like, your takeaway was, wow, avoid that at all costs. Not just, I did it wrong the first time. This is not the answer. I mean, I'm not gonna. It's not gonna be real estate, but, like, you know, something like that. Don't touch this or don't touch that.
- [16:07]
Dr. Joseph Moore
So, wow, I could go into so many directions here. I could tell you, don't buy land on the moon. It doesn't pay. I actually own. I own an acre of land on the Sea of Serenity because there was this big movement in the 1930s to be like, whoever can own the moon will own the future. And so, believe it or not, these things are still around. So it was advertised as having phenomenal Earth views and zone for tourism. And I was like, well, yeah, it makes sense, because if it was zoned for heavy industrial, then the phenomenal Earth use would not be as good. So let me pivot to something maybe a little more practical for your audience. Here's what I tell people. And this. This does get me in some hot water. You can beat the market. Trying to beat the market is a waste of your time, though, because back to my original idea. So many different things can work well, that if you individualize success for yourself instead of trying to beat the other guy, if you can actually invest your way into an incredible life. But if you try to beat the market, you might actually do it, and that might be the worst outcome. So when I read the economics paper, the Kramer Bounce, it basically says under this very strict set of criteria and only under that set of criteria, when Jim Cramer on his show Mad Money, suggests buying a stock, that stock will bounce for 50 to 55 days and then come back to Earth and you can short it. So I'm like, great, we're going to make tons of money doing this, right? And so I start glued to the television for three months of my life, waiting for all these factors to align so I can go, you know, short a stock and take advantage of someone else in his audience. Technically, my trades beat the market. But while I was having Jim Cramer yell at me like I was a child, I heard my wife scream, come quick, she's doing it. And I missed my daughter's first steps, right. I beat the market. It wasted my time. So there's a good paper on this that shows that asset managers with $600 billion or more do indeed beat the market by about 1/2 of 1% a year. Now, if you got $600 million, that's good money. But if you take the median 401k balance and you do what those asset managers do, spend four years of tuition at Yale, do a free internship, and then work 70 plus hour weeks, you're going to take the median 401k balance and you're going to eke out an additional 500 bucks a year so you can get one extra hotel night in Miami. But would that really be worth your time? I tell people, like, don't focus on beating the market. Focus on using the market to get where you want to go. And you can do that all day long. And people have been doing it for 300 years.
- [18:35]
Rich Lamello
And as you were kind of going through this over the past kind of 15, 20 years, are there certain habits that you identified? Like you mentioned having the discipline, the floor and, you know, the willingness to, you know, kind of lever. Are there certain habits that you utilized? Okay, this is something I definitely, you know, as I'm writing this book, I definitely want to highlight to people.
- [18:53]
Dr. Joseph Moore
Well, I think first and foremost, committing yourself to a path where you kind of understand it's very dangerous to invest in things you don't understand. I think that is. So in the book, I label out 25 things that always worked and seven things that didn't. One thing that fails pretty regularly in history is novice investing in a thing you do not understand, like not taking the time to get a true education in that thing. We have the bankruptcy wreck. So people don't know this often. We did not get bankruptcy until about halfway through American history. So you literally, if you failed, you were done. And there's one exception to that. Well, there's two exceptions to that. 1840 to 1842, there's a brief experiment with bankruptcy law in America, and we have those records. And so we're able to go back through and say what worked and what failed. And then of the people that failed, what did they do differently and did that succeed? And what we find is that one of the most common threads of people failing as investors was they rushed out into something they didn't really understand that they'd heard was a hot ticket versus taking the time to study underneath somebody else who really understood that. This happened again in the 1890s, I think or 80s, 80s. Teddy Roosevelt lost a ton of money in this. Cattle investing in the Dakotas was suddenly the hot ticket because you could get 20 something percent returns annualized in cattle investing in the Dakotas. And someone wrote a book saying you could get this and so many Harvard gradu and left and went to the Dakotas that Harvard magazine tried to track them all down. And one of them is Teddy Roosevelt, a young Teddy Roosevelt who goes out there hunting and he decides I'm going to invest in this. And he buys on the spot a cattle farm. They all lost all their money. I mean maybe Roosevelt basically just gave the cattle ranch away because there was no money left to be had in selling the land. But none of them knew what they were doing. None of them had ever done cattle before.
- [20:42]
Advertisement Voice
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- [20:42]
Dr. Joseph Moore
Like they didn't take the time to like study the thesis and learn from people who'd done market how it rose. So I think the biggest takeaway there take the time to get the education that would actually allow you to become an expert in this investment.
- [20:56]
Rich Lamello
And actually that brings up a good question. Are there certain resources that you kind of identified over this period of time that were just incredibly helpful? I mean, is it as simple as doing your own research on the web or watching CNBC or reading the Journal or you know, something else?
- [21:10]
Dr. Joseph Moore
Yeah, no, I've been actually love the Wall Street Journal for the record, like I'm a big fan. I'm a subscriber and the Economist, I mean I lean on those. But here's what I have to tell people. If you are truly a long term retail investor. And so let's look, let's, let's, let's segment out. If you were, if you're on the subway and you work on Wall street and you're on your way there, you're doing a different thing than a retail investor in Houston who's trying to figure out what to do with their money. So let's just see, segment that out. Let me talk to that second group of people who are trying to figure out what to do with their money in Miami or in Atlanta or in Bend, Oregon. The most profitable section of newspapers like the Wall Street Journal or the Economist for you may be to read it backwards to forwards. Because if you read the technology section, if you read the kind of culture sections first, then you start to get a sense of where you are in time and how time is changing. And that for instance, I'll go back to the earlier example of like, oh, there's going to Be I'll give you another example from the Economist actually. And then I actually read the same thing in the Wall Street Journal. I was like, well they're both saying the same thing was that we were going to have a revolution in battery technology. Now this, it was obvious. It was not obvious that Tesla would actually be a battery company. Right. But here were people who, the science reporters especially are so sharp at those institutions and they truly do get to kind of peek around the corner of the future. So I got to the habit. When the Wall Street Journal shows up, the Economist shows up, I flip to the back and start there. Because if I really want to see where we're going, it's probably going to be in the technology section, not in the politics and who are we bombing today section. And so if you're more of a medium to long term investor, I would start reading those kind of sources and be careful and really read like really study up on it. The average American Stock Investor spends 6 minutes on their average trade. Somebody has done a study of looking at how much research an investor does before they click buy. It's six minutes. Almost all of the six minutes is right before they click buy. That's not an education. So if you take the time to really think through how to seep yourself in all the relevant information and then form your thesis, you're going to have a lot better outcome.
- [23:20]
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- [24:07]
Rich Lamello
You began this investment journey in around 2008. At what point did you think, you know what, I got a book here, I'm going to write a book about this.
- [24:14]
Dr. Joseph Moore
Oh wow, that's a great question. First time no one's ever asked me that. Thank you so not at first. I did not think I was going to write a book at first. I truly was just dumbfounded at how lucky I'd gotten. And I just wanted to know, right? I'm just, at heart, I'm kind of a humanities nerd. And I just wanted to understand how, how other people had done or lived through what I had just lived through. And then I started experimenting on it for fun. Honestly, just thought this would be cool. And I kept assuming I was going to find a book one day that would answer my question. And I just thought, you know, look, there's a lot of books out there. This isn't my primary field. I will eventually find somebody wrote this book. And I just kept not finding. There were some really good books out there, but most of them focus on the Rockefellers or they focus on Wall Street. Very few of them focus on what everyday people did with their money. And then the dean of the honors college knocked on my door and he said, hey, I like you. You're a bright young faculty. I want you to teach an honors seminar. I said, well, you know, I already teach kind of my specialties. I don't know how. He said, no, no, no, you literally can't do your specialty. You just have to teach something you think the students will find fascinating. And I guess my whole life had been leading up to that moment because I just thought for a second, I said, okay, financial advice in American History. And he said, fine. And then he walked off. And. And so I was like, oh, okay. And so I went to the library. It's like, now I really have to find the book that it's got to be there. Now I need to find this book. And I'm literally on the floor. Floor. I've been like a. I'm like a kid after school. I've got 20 books. I. I can't find this book. And I finally, I go back, I can't. I email him and I say, hey, I'm so sorry. Like, I can't find a book to use. And he emails me back and says, too late, it's already booked. And, and kids are already enrolling. And so I said, well, I'm in it now. And that's when I pivoted. It's like, okay, no one has written this book. I've got to write this book because we don't write enough histories that help people. We write so many esoteric histories about, you know, politics or war and what I call these fast time histories where everything is changing everywhere, all at once. And all the smart people saw it coming. And it's always 1929, it's always 2008, and you just don't want to be that right. And I try to tell people the purpose of those histories is not to educate you on what to do with your finances. The purpose of those histories is to entertain you. It is a murder mystery. You are supposed to yell at the screen, he's behind you. The subprime mortgage lender is behind you. And run away from the mortgage. And that's what people are getting out of that. But that doesn't tell you what I call slow time history is what do you do in between those moments that's going to get stress tested later. Who do you marry? What career do you pick? What do you get addicted to? How good do you get at what you do? And those are the kind of decisions, and I have a chapter on this in the book on how to understand time and your life as an investor in time. So that's when I made the decision to write the book because nobody else had.
- [26:55]
Rich Lamello
Well, Dr. Joseph Moore, the book is how to Get Rich in American history. 300 years of advice that worked and didn't. And it is going to be out on April 28th. And I can't tell you how much we appreciate you coming on the Motley Fool.
- [27:08]
Dr. Joseph Moore
The very first stock book I read was published by Motley fool back in the 90s. And it was a book that I found when I started doing my research. And I was like, oh, stocks, let me talk about this. So I've really appreciated the Motley fool for decades and really appreciate you taking the time. It's been a great conversation.
- [27:23]
Rich Lamello
That's awesome. Thank you again. Take care. Thank you.
- [27:29]
Matt Grier
As always. People on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for the Motley Fool Hidden Gems investing team, I'm Matt Greer. Thanks for listening and we will see you tomorrow.