The Rational Reminder Podcast, Episode 382: Ted Cadsby — The Power of Index Funds, and Being Human

Release Date: November 6, 2025
Hosts: Benjamin Felix, Cameron Passmore, Dan Bortolotti
Guest: Ted Cadsby

Episode Overview

This episode features a deep and wide-ranging conversation with Ted Cadsby, author, former CIBC executive, and thinker on investing and human cognition. The discussion explores the rise and challenges of index funds in Canada, Ted’s role in advocating for index funds within a major bank, and his pivot towards understanding the psychology underlying financial decision-making. The second half dives into why humans are slow to adopt rational investing approaches, the cognitive flaws that shape our choices, and practical insights on cultivating self-awareness and metacognition.

Key Topics & Insights

1. Ted Cadsby's Career & Early Index Fund Advocacy

(00:24 – 03:55)

• Ted’s Roles:

  • President/CEO of CIBC Securities Inc., head of wealth management in various international posts, and ultimately leader of the retail branch system with 18,000 employees.
  • (04:36) “...Investing runs through my veins and has for many years, right up to the present day, where I still meet and evaluate active managers and in various advisory and board roles.” — Ted Cadsby

• Direct Influence:

  • Created and oversaw investment products, including CIBC’s early index funds.

• Active Manager Evaluation:

  • The challenge of distinguishing true skill from luck:
    (05:58) “It became quite apparent...how extraordinarily hard it was to separate noise from signal...when you dig down, it's rare to unearth skill that is really sustainable.” — Ted

  • Active managers often believe their own narratives:
    (08:16) “There's confirmation bias times 100 in the case of taking a position in the market...” — Ted

2. Why Index Funds?

(08:41 – 14:43)

• Skepticism Toward Active Management:

  • Ted was drawn to indexing not only due to mediocre active fund performance, but also because randomness—more than market efficiency—makes beating markets so hard.

    • (08:51) “The biggest obstacle for an active manager is not whether the market's efficient...it's all the unknown unknowns that can easily swamp any information they have.” — Ted

  • Personal Experience:

    • Describes a billion-dollar CIBC write-down to illustrate the limits of even insiders’ knowledge.

• CIBC’s Indexing Push:

  • Led CIBC to become Canada’s leader in index funds during his tenure, though the momentum stalled after he changed positions within the bank due to internal reticence and low margins.

3. The "Power of Index Funds" — Reception & Industry Challenges

(14:43 – 23:20)

• 1999 Book Launch:

  • Brought US Vanguard index fund philosophy to Canada.

  • Fought steep headwinds in a culture obsessed with picking "hot funds."

    • (16:58) “You're giving a math lesson to people who aren't necessarily interested...trying to sell math. Explain randomness, explain luck vs skill...” — Ted

• Pushback and Internal Politics:

  • Early support from CIBC when results were good, followed by resistance with new leadership focused on traditional brokerage and active managers.

    • (19:05) “I was essentially told...do you want to be a media darling...or do you want to be developing a career in the bank...they're mutually exclusive and you’ve got to pick one.” — Ted

  • Visible enough in public that his forced disappearance from media was noted by the press.

4. Influence of John Bogle & Vanguard

(23:23 – 26:52)

• Major Personal Influence:
  (23:33) “I can’t exaggerate John Bogle’s influence on my thinking...enormous influence on me.” — Ted
• Tried to bring Vanguard products to Canada via CIBC, but Vanguard ultimately declined to partner with a bank.
• On Bogle’s resistance to ETFs:
  (23:33) “He was just stubborn...that ETFs encourage day trading...My counter was...the beauty of ETFs is not just their liquidity, but...you know what price you're buying at.”

5. Modern Perspective on Index Investing

(26:52 – 31:00)

• Still passionate, but notes new issues:
  • Market concentration isn’t the main worry; it's the high correlation among large caps ('Mag 7').
  • Indexing isn’t simplistic—index funds can be used to build very sophisticated portfolios.
  • Expresses concern that rise of private equity is reducing investability in public markets; not convinced retail investors should pursue private equity to compensate.

6. Behavioral Finance: Why Humans Struggle to Adopt Indexing

(31:00 – 34:36)

• Indexing as a gateway to exploring human cognition and vulnerabilities.
• Origin story of his interest in philosophy and the limits of logic in changing minds (e.g., debates with his Jehovah’s Witness friend as a teen).
  • (34:36) “...what is it that is so unusual about humans and our thought processes...We're basically off the rack primates with souped up brains...the complexity...is highly imperfect.”

7. The Five "Cognitive Design Flaws"

(34:46 – 44:02)

Ted summarizes “the Big Five” cognitive flaws affecting all facets of human life, especially investing:

1. Greedy Reductionism:

   • We oversimplify complex realities; see cause/effect everywhere.
     (34:46) “We simplify absolutely everything we think about, and we have to…”

2. Certainty Addiction:

   • We crave the feeling of being right—often more than actually being right.
     • (34:46) “Feeling right...is often more important than being right.”

3. Emotional Hostage Taking:

   • Outsize, often negative emotions hijack decisions.

4. Competing Selves:

   • We’re divided (now-self vs. future-self); have conflicting inner drives.
     • (41:22) “The question...is not who is the real me...the question is: who is the me I aspire to be?”

5. Misguided Search for Meaning:

   • Our advanced minds uniquely trouble us with existential questions.

8. How Modernity Exacerbates Our Innate Flaws

(44:02 – 47:46)

• Our brains evolved for “World 1”—straightforward problems (System 1)—but now we live mostly in “World 2” (complex, feedback-poor environments)—where intuition (System 1) routinely fails.
  • (44:10) “All of our design is geared toward thriving in World one and not as well suited in World two, which is more complex and unpredictable.”

9. Metacognition: "The Human Secret Weapon"

(47:46 – 51:32)

• Our unique ability to observe and assess our own thinking ("thinking about thinking") can help override cognitive flaws—but must be practiced.

  • (47:59) “We’ve got one secret weapon that is unique to us, and that’s the human form of metacognition…”

• Adopt a "meditative stance"—mindfully step back and observe one's thoughts, especially when emotionally triggered.

  • (49:57) “How do you distance from your own thinking? … I like to call it taking a meditative stance...there's a variety of ways we can invoke a meditative stance that enables metacognition.”

10. Meditation, Mindfulness, and Practical Self-Regulation

(51:32 – 53:56)

• Meditation is useful, but so is any mindful pause.

• Awareness of cognitive biases is only the first step; some flaws, like loss aversion, can remain powerful even when recognized. Discipline and emotional regulation are what counts.

  • (53:56) “...Our emotions are strong, and we can understand that maybe we haven’t quite got the situation quite accurately depicted...and yet it’s a real struggle to rein ourselves in.”

11. Practical Triggers & Tools for System 2 (Deliberative) Thinking

(56:20 – 58:03)

• Strong negative emotions should cue conscious reflection.
• Complexity—situations lacking clear, repeatable cause-effect—requires skepticism of intuition.

12. Reductionism & Complexity in Investing

(58:03 – 64:11)

• Over-interpreting random streaks in active manager performance is a core error.

  • We must understand the clumpiness (streakiness) of randomness and avoid attributing skill where there’s only chance.

    • (64:20) “It’s near even. It’s 47%. So it’s almost...that you can get four heads or four tails...in a six flip experiment...But it's only astounding because we underestimate the streakiness, the clumpiness of randomness...”

13. Certainty, Overconfidence, and Probabilistic Thinking

(65:47 – 71:26)

• We are addicted to certainty and often prematurely "lock down" on explanations; this fuels overconfidence and type 1 errors (false positives).

  • (65:56) “Certainty locks down our search for explanation...we lock down on the first solution that makes a little bit of sense to us at the exclusion of all kinds of alternatives...”

• Practical antidotes:

  • Adopt humility and skepticism.
  • Think in probabilities—be explicit about your confidence level.
  • Remain aware of type 1 errors (seeing patterns/signals where only noise exists).

14. Emotion as Signal: When to React, When to Pause

(71:26 – 74:54)

• Positive bias is real, but negative emotions are more intense/lasting.
• When experiencing strong negative emotions, pause and ask: invest (act on them constructively) or divest (let them dissipate)?
  • (71:39) "Every day we have an opportunity...to ask ourselves, is this an emotion that I'm feeling that I want to invest in or divest myself from?"

15. Ted’s Definition of Success

(74:54 – 76:46)

• Success can be individually defined—not necessarily outward or virtuous.
• For Ted: Personal growth across intellectual, psychological, and spiritual domains.
  • (75:01) “One of the key measures that I hold for myself as a measure of success is personal growth...And for me, it's an important value to keep growing as a human being on a whole variety of dimensions.”

Notable Quotes & Moments

• On the index revolution:
  “...sometimes in life, things just fall into place in a way that you can see so clearly.” (12:53)

• On the limits of skill:
  “The signal of a manager's potential skill is so deeply buried in statistical random noise...” (05:58)

• On why humans struggle:
  “We're basically off the rack primates with souped up brains...” (34:36)

• On cognitive self-defense:
  “Metacognition is an extraordinary feature of the human mind...we can take our thinking as an object of consciousness.” (47:59)

Suggested Listening — Timestamps for Key Segments

• Ted’s CIBC career & product creation: (04:36–05:51)
• Active management skepticism: (05:58–08:41)
• What led to index fund advocacy: (08:41–12:53)
• Internal politics of indexing at a bank: (19:05–21:53)
• Influence and anecdotes about John Bogle: (23:33–26:52)
• Modern challenges for index funds (private equity, concentration): (26:58–31:00)
• Origins of Ted’s interest in psychology: (31:00–34:36)
• The Five Cognitive Flaws explained: (34:46–44:02)
• System 1 and System 2; World 1 and World 2: (44:02–47:46)
• Practical application of metacognition and mindfulness: (47:57–53:08)
• Examples of randomness in investing: (64:11–65:47)
• Certainty, overconfidence, tools for skepticism: (65:47–71:26)
• Emotion as a trigger for reflection/action: (71:26–74:54)
• Defining success: (74:54–76:46)

Tone and Takeaways

The episode is thoughtful, candid, and intellectually curious. Ted Cadsby bridges the gap between investing best practice and the often-irrational realities of human psychology. For listeners, the discussion delivers both a masterclass in the foundational logic behind indexing and a toolkit for examining one’s own thinking, decision biases, and emotional reactions.

Summary prepared for those seeking a comprehensive, timestamped guide to the episode’s key discussions, memorable quotes, and practical insights.