This week we have a special guest joining The Invested Dads Podcast! Ben Carlson, the Director of Institutional Asset Management at Ritholtz Wealth Management (as well as an invested dad), will be discussing his newest book, Don’t Fall For It: A Short History of Financial Scams. He’ll be talking about stories from the book, some key takeaways, and ways you can help yourself avoid scams (Hint: Don’t send money to that Nigerian Prince claiming you are entitled to millions). We are super excited to have Ben Carlson with us this week and we really hope you enjoy listening to our first guest on The Invested Dads Podcast!
The common sense one that's really hard for people to wrap their heads around is, if it's too good to be true, it probably is. Because a lot of times we just don't want to believe that's true for us personally. Click To TweetMain Talking Points
What Brought Ben Carlson to Writing this Book? [1:08]
How Did Ben Carlson Pick His Favorite Stories? [2:53]
If it Seems Too Good to Be True, it Probably is [6:36]
FOMO (Fear of Missing Out) and How it Can Get You in Trouble [7:30]
The Crazy Story of “Doctor” John Brinkley During the Great Depression [10:10]
The Best Scams are Made by the Best Salesmen [14:37]
How a Lot of These Scams Start Out [18:40]
Some Things People Need to Watch Out for to Avoid Scams [20:49]
Dad Joke of the Week! (Presented by Ben Carlson) [28:58]
Examples of Things in Life That Are Too Good to Be True (Outside of Finance) [29:40]
Ben Carlson’s Biggest Takeaway from Writing this Book [31:44]
Check Out Ben Carlson’s Book and Podcast! [33:03]
Links & Resources
Don’t Fall For It: A Short History of Financial Scams
Animal Spirits Podcast (Apple Podcasts)
A Wealth of Common Sense Newsletter
Social Media
Full Transcript
Intro:
Welcome to the Invested Dads podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments. Here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, Hey, Hey. Welcome back to the Invested Dads podcast. Today we have a special, special episode for you kind of with the overarching topic of financial scams. So have you or anyone you know ever been scammed? That is a very common thing that’s happened not just today, but for hundreds and thousands of years. And we have a special treat for you today.
Josh Robb:
That’s right. We have Ben Carlson, he’s the author of Don’t Fall For It: A Short History of Financial Scams. It’s a book he just released. Ben is the Director of Institutional Asset Management at Ritholtz Wealth Management. He is a blogger and a podcaster as well. And he’s written multiple books. So this is his newest book he’s released. He’s also an invested dad like us. He’s got three kids at home and he works, as well in our industry. So Ben, could you tell us a little bit about yourself and what brought you to writing this book?
[1:08] – What Brought Ben Carlson to Writing this Book?
Ben Carlson:
Sure. The dad part of the equation is I have three young kids. A daughter that’s five and twin two-year olds. So life outside of work is always fun. I’ve been writing since 2013, and never really wanted to do much with it, but once it got in me, it was kind of a bug that just spread. And I really enjoyed the process and wrote a couple books that were more about my philosophy. So that was my first and second book, which were basically books for individual investors. And then the other one was for institutional investors, which is a space I’ve worked in, throughout my career.
And this one was a little different in that I wanted to do something that was different, but it still touched on all of the topics that I’m interested in. And if you read my writing, you know that I’m kind of interested in the behavioral side of the markets and human decision making and what causes people to take things to the extremes. And also in recent years I’ve just been interested in why people are so easily duped when it comes to simple things like salesmanship or on a bigger scale, something like financial fraud. And there’s been a lot of that recently in the news in documentaries and that sort of thing.
So I just really became interested in the topic, started pulling on a thread and reading some stories. And the more research I did, the more stories I found that really were sort of mind boggling. So I started putting these stories together in a document and talked to my publisher and kind of crafted a little outline of it and it came together. And it’s something that I’ve never really done before, this type of project. And so it was interesting and fun and hard at the same time. So it was just something that really piqued a lot of my interests.
[2:53] – How Did Ben Carlson Pick His Favorite Stories?
Josh Robb:
Yeah. And there was a lot of good stories in this book and quite a few I had never even heard of. Did you have a lot and have to narrow it down to these final ones that were in here? Like how’d you pick your favorites?
Ben Carlson:
That was the hardest part actually is figuring out what to keep in and what to leave out because there were so many. And now that it’s out there and people know that I’ve written this book about fraud, I’m just getting inundated with emails and Twitter DMs of people saying, “Hey, why don’t you include this one? Or why didn’t you include this one?” And it’s amazing how many of these crazy stories are out there. People are already saying, “When are we going to do a second edition, so you can include some of these other ones?” So that was the hardest part. And I wanted to keep it relatively short because I think anytime you get up into like a 300-400 page book, especially in the nonfiction side of things, it’s easy to lose people.
Josh Robb:
Yeah. Definitely.
Ben Carlson:
So figuring out what to filter out was actually difficult because there was a lot of really good stories that I didn’t even touch on and I may get into on my blog at a later date, but that was the tough part.
Austin Wilson:
Yeah, I was amazed with how long this has, obviously this has been going on pretty much since money started changing hands. But some of those examples are hundreds of years old and it’s just amazing that the overall principles of them really haven’t changed.
Ben Carlson:
Right. That kind of surprised me too, that I just saw so many similarities and I wasn’t really expecting that. And you start reading and you read, “Wait, this has been done before just in a different way. And this has been done before in a different way.” And you realize a lot of these financial scams that it’s just always touching on these different emotions and these pinpoints of human nature and the people who do them are just really good understanding the person on the other side of the aisle, and how to push the right buttons. And it’s not always the same emotions that people are playing on, but a lot of times it’s understanding the difference between fear and greed and getting people to want to believe in things that probably they shouldn’t. And it doesn’t matter how much information we have at our fingertips, it’s something that’s still going on today.
Josh Robb:
Yeah, and like you said, even with all the extra ability for us to gather information, with technology nowadays, it almost makes it harder for us to differentiate between something that’s legitimate and a scam. And you mention in your book some things to look out for. What are some of the big things … when you walked away from this thinking, if I want to avoid a scam, what are the things, our listeners, what are the things they need to really keep an eye out for?
Ben Carlson:
One of the things that might be more on the nerdy finance guy side of things is, just time and again was, when the person on the other side has control of the money. So when someone has custody of your money and it’s not held at a third party, it’s not held at a bank, it’s not held at a big financial center, when they actually have control of it, that just allows them to run rampant. So they can cook their own books and make up the financial statements and make up the statements to show you what the price of this stuff is or what it’s worth.
And so anytime you give someone too much control that’s really a huge red flag. And a lot of people might not, outside our industry, might not even know the appeal of having a third party, like a custody. And having your money at a custodian bank and that’s just one of these little things that you might not even realize. That one really stuck out to me. That’s one of the reasons that Bernie Madoff was able to keep his scam going for so long because he had control of the assets.
Josh Robb:
Right, and that’s something we talk about. When you’re looking for a financial advisor, fiduciary is that big word going around our industry, making sure not only that your advisor is a fiduciary, giving you the best advice for your situation, but making sure that you separate the custodian from the advisor, so that there’s different people watching your money and doing different things and they’re limited. Each one has a limit to what they can and can’t do.
Ben Carlson:
Yeah.
Josh Robb:
Like you mentioned Bernie Madoff is that big example, the most recent one that everybody still remembers because of the big impact it’s had.
[6:36] – If it Seems Too Good to Be True, it Probably is
Ben Carlson:
And the common sense one that’s really hard for people to wrap their heads around is, if it’s too good to be true, it probably is. Because a lot of times we just don’t want to believe that, that’s true for us personally. Like of course that’s true for other people that … Okay, this person promising me these eye-popping returns or this black box investment strategy that only they understand. So anytime there’s an aura of mystery around it and someone is just trying to make these promises and they won’t tell you exactly how they do it. I think that’s a big red flag, especially these days when the proof has to be in the pudding and it’s again, easier to look up pretty much anything these days on the internet.
And if someone can’t or won’t explain to you what exactly they’re doing and they’re trying to say that it’s proprietary and you wouldn’t understand, I think that’s something that’s a part of a bygone era. And so if someone won’t explain to you something, I think that, that’s just something that you should run in the other direction.
[7:30] – FOMO (Fear of Missing Out) and How it Can Get You in Trouble
Josh Robb:
Yeah. And I think now, after a year where the stock market’s up over 30%, you’re hearing a lot of people with that fear of missing out that you were talking about in the book is, they see that 30% and, “I may have missed out on some of that.” So now they’re almost more desperate to play catch up and they’d be more susceptible to some sort of scam. Somebody promising, well I can do that, and I’ve been doing that every year for the last 10 years or something. Where they hear those words and maybe five years ago they wouldn’t have fallen for it.
But now with that fear of missing out and wanting to be able to brag in their parties and at their groups with their friends to say, “I’m also getting that big return.” They may be more apt to get it in an up market than in those bear markets. And now-
Ben Carlson:
And that was probably-
Josh Robb:
That’s one of the things I was surprised about in the book.
Ben Carlson:
That was one of the overarching themes that I found throughout this is that fear of missing out, really helps people let their guard down, unfortunately. And they see other people getting rich often very quickly and they assume that, “Well, if that person is getting rich, than I should be getting rich too.” And it happened not only to people at the lower end of the income scale, but also mostly to people with a lot of money. And so, Sir Isaac Newton, potentially the smartest person alive, I wrote a chapter about him, he got caught up in the South Sea Bubble, which might be the greatest bubble of all time.
And again, just one of the smartest people that ever was. And was hugely successful, not only in some of the scientific findings that he had, he was just a total … one of the things I never realized about him was just he was this Renaissance man that just knew so many different topics. And yet he got caught up in this bubble after he sold, he saw the price kept going up and decided to get back in and lost a huge chunk of his money. And so that FOMO is something that can affect all of us.
Josh Robb:
Yeah, he actually had sold out and made a profit, but he got back in and then watched it all disappear, which was incredible. And like you said, that blind spot, what you were talking about in the chapter, that no one’s immune to this no matter how smart you are. In fact the smarter you are, you may be able to convince yourself even more that, “I’m smart enough to avoid it. I’ll know when it’s not true.” It’s a scam and you can talk yourself out of it.
Ben Carlson:
Yeah. Right. There’s this idea that it’s only gullible people who get taken advantage of. And a lot of them are naive and they just are uneducated and don’t know what they’re talking about. A lot of times that’s actually not the case. It’s the people who have a little bit of information and it becomes just dangerous because they get overconfident in their abilities. And a lot of times it’s, “Well, I had success in this one field, so I’m sure it’ll translate over here into my finances and investments.” And you become over-confident in everything that you’re looking at and you just assume things will work out.
[10:10] – The Crazy Story of “Doctor” John Brinkley During the Great Depression
Austin Wilson:
Yeah. And you talked about how when things are going well, it’s easy for people to let the guard down, but that’s not always the case. In fact, when you talked about Dr. John Brinkley, he actually made millions of dollars from unsuspecting, desperate people in the pits of the Great Depression. So I just think that, that’s something that points out that people should be on their guard and keeping their wits about them, whether things are good or bad because it’s that desperation in either instance that is going to drive you to make a pretty poor decision probably.
Ben Carlson:
That was by far the craziest story that I came about. And I think when I was doing research into that, I think they may actually make that story into a movie with Matt Damon. It’s potentially coming down the pipeline.
Josh Robb:
Oh wow.
Ben Carlson:
But yeah, he was making $1 million a year during the Great Depression. That’s a time when incomes were falling 30 or 40% per year. And this guy is just … And that was one of the ones where he was really preying on the fears of people from a medical side of the equation, which it wasn’t even about really committing financial fraud against people. He was doing that because he was earning a lot of money for the procedures and the prescriptions he was making. But he was trying to sell these people that he was going to give them a miracle. And he was actually trying to position himself almost as this anti-establishment person. They were still trying to really get things above board in terms of regulations and becoming registered to be a doctor back then because it was kind of like the wild, wild West.
And he was saying, “Listen, those people who are registered, they don’t know what they’re talking about. I’m the one who knows what I’m talking about. I just won’t give my secrets to them because I don’t want anyone to ruin it.” And he really preyed on the hopes and fears of people who were in dire straits in terms of their health and their situation. And that’s one of those times where people, they just want to believe so badly that there’s no way this guy could be lying. He’s got to be doing exactly what he says, especially when it comes to your health. You want to believe those miracles are available to you.
Josh Robb:
I mean, some people got pregnant and so he was able to point regardless of the cause and effect. But he was able to say look it works and he was able to use that to continue on the deception.
Ben Carlson:
And that was probably the worst thing that could have happened. Is some of these … he did these things and then people don’t understand the cause and effect equation sometimes. And they assumed, “Wow, this guy is a genius. He knows exactly what he’s doing.” And it was just, again, just a wild story that he … He initially started taking advantage of these people in the small town in Kansas and you think, “Oh, it’s just the small-town farmers. What do they know?” But it went all the way up to … he was tricking these A-list, Hollywood celebrities and even a Senator from Colorado. And so his appeal and the way that he sold stuff was just so wide and broad that he could talk to anyone into almost anything.
Austin Wilson:
And he had people sticking to their guns about, the people who say it worked stuck to their guns, even after this whole thing was falling apart. There was that part in the book about, there was this one guy saying, “Hey, it worked. This guy did this for me.” And he was already being investigated and all this stuff. So they just wanted to believe it so bad, that even as it was falling apart right before their very eyes, it wasn’t enough.
Ben Carlson:
Yeah. They just didn’t want to believe. And sometimes it’s tough. It’s like this cognitive dissonance, where you almost don’t want to believe this one small part of your own thoughts. And so you just push it aside and it’s the confirmation bias.
Josh Robb:
So that brings a point, too good to be true, may not even be financial. It may be they’re drawing on an emotion or something outside of finance. But the end goal for them is to get rich off of it. So you have to be careful that, they may not even be trying to convince you using money as the end result, but something that you’re desperate for, or hoping will have happen. And that’s really what you have to be careful for with these scams is, they prey off of that desperation to get something.
Ben Carlson:
And unfortunately these people are so good at manipulating humans that they just know all the right buttons to push. And they almost make you think that it’s your idea that this happened. And that’s one of the things that happened with Brinkley is, he was telling everyone that, “No, this wasn’t my idea. This was the farmer’s idea to implant these goat testicles into people.” Of all things. And he made it sound like he just had this secret potion.
[14:37] – The Best Scams are Made by the Best Salesmen
Austin Wilson:
So that kind of brings up where you talked about how one of the best ways to persuade someone to do something is to really allow them to come to that conclusion themselves. So that was a farmers’ conclusion as a joke, but Dr. Brinkley took that for what it was and made something happen out of it. So you said that the best scams are made by the best salesmen and that the most successful con artists are actually better salesmen than the best on wall street. Especially if they can convince people that they need what they’re selling. So kind of elaborate a little bit about on that and how these guys are really incredible salesman to have pulled these off, these scams off all over these people.
Ben Carlson:
My favorite person that I researched, was a guy named Victor Lustig who had about 45 different aliases. So, that wasn’t even his real name. It turns out they couldn’t even figure out where the guy was from. No one really knew what his whole backstory was, but he was just this really entertaining con artist and he almost took it as a game. I don’t think the money even mattered to him that much. It was more taking advantage of people. But he had this Romanian Money Box scam. And he would go to these highfalutin hotels and he would wine and dine wealthy people in the restaurants and talk about how he had perfected this way to counterfeit money. And he could create a hundred dollar bills and he had this box that could do it and he used this radium, quote unquote, to make new bills.
And he would show it to people and then he would kind of say, “I’m not really thinking about selling it though.” And he would have the people drive up the price of it against themselves, basically. People were negotiating against themselves because he was saying, “I don’t think I should really sell.” And of course he didn’t really have a good counterfeit box I, it didn’t really work as he said. He took people for thousands of dollars that they’d buy this from him and they’d end up with $200 of real bills in there, and then not the ability to make them again. And so he would kind of take a step back and allow people to come to these conclusions on their own.
There was another time where he was literally trying to sell the Eiffel Tower and of course it wasn’t for sale. And the way that he convinced this guy that he was going to sell it is he said, “All right, I’m going to need a bribe here too.” And the idea was all Parisian government officials back then, it was assumed that they were all a little shady and taking some money under the table. So when this guy heard, the scrap metal dealer who wanted to take all the parts from the Eiffel tower and sell them, when he heard that he was going to have to pay a bribe, he thought, “Okay, this guy must be legit because he really is a government official.”
So not only did this guy get taken for a lot of money and swindled out of money because he thought he was buying the Eiffel Tower, he ended up paying a bribe as well. So that’s how good this guy was. And it’s almost too bad in some instances where these people have the ability to sell almost anything that they can’t use it for good. Because obviously we’re all in sales in some capacity. This is especially true in the financial services industry. We’re selling this intangible thing. Whether if it’s a financial plan or a portfolio or whatever it is, it’s not a readymade product that someone can hold and look at. So we’re all in sales in some aspect or another. And you have to have that side of your personality, otherwise you’re not going to survive. So it’s almost too bad that they couldn’t use these elements of their personality for good.
Josh Robb:
Yeah, on trying to persuade someone by having it be their idea. I mean, that’s how you get people bought into a good financial plan is they need to have that buy in. They need to convince themselves that this is what’s best for them. I just tell someone, “Hey, this is what you need to do saving-wise to get to your retirement goals.” If they’re not bought into it, they’re not going to do it. So you almost have to be good at helping them come to that conclusion themselves in a positive way. So you’re right, that sales technique is positive when you use it the right way to get someone to be bought into a plan that’s beneficial for them.
Ben Carlson:
Right. And trust is that number one element, especially in a service business. And the thing that I found again and again with a lot of these people was it’s so simple, but people just want to do business with others that they like and they enjoy being around. And that was one of the things where a lot of these people just had these gregarious personalities and they were outgoing and they could talk to almost anyone. And they told great stories and they told good jokes and so they just had this ability to have other people like them. And even after the fact sometimes, when people were getting scammed, they still couldn’t help but appreciate and respect that person. So it’s just about being a likable person. But that trust is the number one element. And that can be a good thing in our industry if you use it the right way, or a bad thing in terms of financial fraud when people are scamming others.
[18:40] – How a Lot of These Scams Start Out
Austin Wilson:
I think that something that was really intriguing is that a lot of these instances it seemed like they started off relatively benign and small. And then the con artist, which once they figured out how to make it scalable, really just took it to an extreme on a lot of these cases. And that’s how these things kept going and going and going and they’d figure it out, get a little bit better, move towns, do it a little bit more, move towns, do it a little bit more and just scale it. When it really started out pretty small, but a lot of these scams start small and then end up being huge, millions of dollars.
Ben Carlson:
And some of the corporate ones turned out that they were, it was a good idea at the time and it was a legitimate business. And when they wanted to continue to grow and get bigger, they realized defrauding people was the only way they could do that. So it started out as a good thing and they just got in too deep almost. It’s not like a lot of these people set out to be con artists. A lot of them just ended up buying what they were selling and they talk themselves into, “Well this is the greater good I have to keep pushing forward and making this bigger and gaining more power and more money.” And see a lot of these, they start out … and that’s one of the reasons it’s so easy to sell people on it because if you have a legitimate good idea and you’re sincere about what you’re doing, it’s hard for people to realize that they’re even being tricked in the first place.
Austin Wilson:
Right. And that’s kind of like the type one charlatan discussion that you had in the book where it started off maybe as something that wasn’t necessarily intended to be this horrible, nasty, unethical, scammy thing. But eventually there was opportunity and the opportunity was taken and just taken to an extreme and it turned into a snowball effect.
Ben Carlson:
Yeah. I think those people are harder to see through, than the type two charlatan, which is someone who’s just an out and out con artists and the only thing that they’re looking for is more money or taking more advantage of people. But the person who starts out sincere and just gets in over their head, that person is tough to figure out because they do sound so sincere and you want to believe them because it sounds like they obviously believe in it themselves.
[20:49] – Some Things People Need to Watch Out for to Avoid Scams
Josh Robb:
So as we’re looking through this, and you had those six points that point out, but if you’re talking to somebody and you don’t want your grandma to say, “Oh, you know I just sent some money overseas because I just found out I inherited a bunch of money and if I give them my bank account, they’re going to send it to me.” What are some things that people need to watch out for to be aware of these type of scams and situations?
Ben Carlson:
Well first of all, just having a broad understanding of how the investment world should work. So, what’s a general range of returns you should realistically expect on something?
Josh Robb:
You mean that in the 15, 20% per week or per month that they’re offering isn’t real?
Ben Carlson:
Yeah, and a lot of cases that was the case and so you just have to have some sort of bogey to compare it to. whether that is interest rates or the historical track record of the stock market. I think you have to have some sort of grounding in reality to understand, “Okay, this is how things generally work, so why would this be different?” Why would the returns on this be so much higher than what most people can assume to get in the normal markets? The other thing you have to think about is, “Okay, this person has the secret. They have the Holy Grail. Why are they offering it to me? So what’s so special about me that they want to give it to me and if they’re pressuring me to do something very quickly and saying that if you don’t act now, this deal is going away forever.” I think you never want to make a huge financial decision with your life savings where you have to press a button and make something happen immediately.
I think any of these situations need to take some time and effort and some thought and critical thinking. And the other thing is just really having filters in place. And I think that could just be some simple rules of thumb where … the way that I look at us as financial advisors is a lot of times we’re acting as bouncers. And the majority of the time we’re saying, “No, you cannot come into the club. Nope, not you. Nope, you’re not on the list.” And so I think a lot of times having some rules about some things that you will or won’t invest in and more to the point, probably what you won’t invest in.
So you don’t have to think about these things and get yourself excited and tempt yourself to invest in them. Because “Hey, even if this turns out to be the deal of a lifetime, it’s just not something I’m comfortable with. It’s in my too hard pile, I don’t think it ever really makes sense. And even if it works out, I’m not going to understand why. So I’m just going to pass.” And so anytime you can have this ability to say no, I think the stuff that you say no to, is going to have a far greater impact on your finances than the stuff you say yes to, in most cases.
Austin Wilson:
Yeah. I think the example you made where you were like, “I feel like sometimes we do more research on the reviews of our Amazon purchases than we do on big chunks of our life savings and what we do when we invest that.” It really hit home, that’s what goes back to do your due diligence on what you are putting your life savings into because it makes a difference and it matters more than it does on buying that trinket off of Amazon or whatever.
Ben Carlson:
And it’s hard for people to wrap their minds around it when they see something going up in price. And to use an example this week, I’m not saying it’s a fraud, but the Tesla share price was going bananas this week. People see it going up and going up and they think, “I got to get in on this rocket ship before it’s too late.” And that’s the mindset of … So people again maybe place this undue burden on themselves where they think, “If I don’t do this now, I’m going to miss out on the chances of growing exponentially wealthy overnight.” And that’s the other problem is people just … No one wants to invest in something boring and stodgy and that they can get wealthy on over years and years and decades at a time. They want to have something that allows them to take a shortcut and make things easier. And again, those things don’t really exist for 99.9% of the population. But we want to believe that, “Maybe this one time for me, this maybe it’s true.” And obviously most of the time it’s not.
Josh Robb:
Yeah. And going back to … investing is not that complex. If you can’t explain it to your kid, then probably it’s not the right thing to invest in. If you’re investing in something that’s so complex that you can’t understand it and turn around and explain it to somebody else, we tell a lot of our clients, “That’s probably a little too much.” Like you said, have some rule set up. Because investing in stocks and bonds and those types of things, you understand what the concept is. You understand why it’s there, what the purpose is. But then when you look at some of … especially the scams in the books, no one knew what was happening. Like you said the South Sea, they weren’t even doing anything. If someone would have just stopped and looked and said, “Ships aren’t even leaving, there’s nothing here.” You can figure that out, if you would just stop and say, “Okay, what is-
Ben Carlson:
In those instances people were … there were some detractors at the time saying, “Listen, this makes no sense at all.” But no one wanted to listen to them because, “Hey look what’s happening. You’re not the one making $10,000 a day.” And I would say, obviously I work in the financial services industry, so do you guys, I think it makes sense for some people to outsource their financial advice, or portfolios, or financial planning, whatever it is. Obviously I think that, that’s a noble goal and something that certain people that make sense for, for a number of reasons.
But you can never outsource your understanding of what’s going on. So you have to have a good understanding of, what do I own and why do I own it and why does this fit within my plan or my tolerance for risk? Or whatever it is. And I think that’s the thing people get away from, is they just see the money signs in their eyes and they want to just make as much money as possible without thinking through, “Well, what does this have to do with my goals and what I’m trying to do with my money besides just grow it and become rich?” And so that’s part of it too, is just things just get away from you when you detach from that financial goal reality.
Austin Wilson:
And that’s kind of a Warren Buffet-ism mentality of investing, is he likes to know what he is invested in and how the businesses operate and he can explain it to himself and to others. And that’s something that we look at when we’re looking at additions to our portfolios, or race research ideas or whatever. At least on my end, I’ve got to understand the business or else we can’t put our money into it because we can’t explain it and really understand it. So like the continuing theme of just doing the due diligence, putting it in just a little bit of time and understanding. Whether that’s doing it on your own or working with an advisor, you still have to know what’s going on and if you don’t, then that’s probably a red flag.
Ben Carlson:
And Buffet is where I get that concept of a too hard pile. Where he’s passed up on a lot of good deals and he says he’ll basically never invest in technology companies. And he missed out on a lot of them in the 90s and he was best friends with Bill Gates. They met in the 90s, I believe, and could have easily invested in some of those stocks. But said, “I just don’t understand them enough to be comfortable in it.” And I think that’s the place where you have to be just comfortable enough in your own skin to realize, “This kind of thing is bad for me. And I know how my personality works and I know my own weak points. And so here’s the things I’m going to do to avoid having my lesser self takeover.” Because it’s something different for everyone, usually.
There’s not one list of bullet points I can give every single person saying, “This is the biggest bias you have to look out for. And this is the biggest bias you have to look out for.” It’s something different for everyone because we all have those pain points that can cause us to lose our minds at times.
Josh Robb:
Yeah, and it comes back to the ego too. Is sometimes it’s more just comparing yourself. Looking at somebody else and say, “Look what they did. I want to be like that.” Even if it doesn’t fit in what your goals are. But it’s that ego of seeing someone making a ton of money on an investment. Well, they took a risk to do that. And do you have that risk tolerance to do the same thing if it went the other direction?
Ben Carlson:
And that’s why it might be even harder these days to pass on some of this stuff because we live in a relative world. Where in the past, you were comparing yourself to your coworkers, or your peers, or your family members, or the people in your neighborhood. And now we have the ability to compare ourselves to millions of people every day on the internet, or on social media, or in the news stories we watch. And so it may be even harder to turn things down, even though we have the ability to do more research on this stuff.
Josh Robb:
That’s right.
[28:58] – Dad Joke of the Week! (Presented by Ben Carlson)
Austin Wilson:
All right, Ben, every single week we like to tell our listeners a dad joke of the week because we think it breaks up the monotony of what something … This is super, super interesting, but sometimes finance can be a little bit heavy. So do you have a dad joke of the week?
Ben Carlson:
Here’s the one I stole from my friend Eddie Elfenbein.
Austin Wilson:
I love stealing dad jokes.
Ben Carlson:
Yeah, how many dad jokes do you think there really are that original? Right. There can’t be that many.
Austin Wilson:
Every time I tell Josh one, he’s like, “Nah, I already know that one.” I’m like seriously?
Ben Carlson:
And I think Eddie probably stole this from someone else too. But he used this last year and I liked it. So he said to the person who stole my antidepressants, I hope you’re happy now.
Josh Robb:
I love it. That’s good.
Austin Wilson:
That is funny.
[29:40] – Examples of Things in Life That Are Too Good to Be True (Outside of Finance)
Josh Robb:
And along with that, Austin, and I were talking about when we look outside of finance, what are things that are too good to be true just around our lives that we see. So Austin had a couple that he thought of.
Austin Wilson:
Yeah. I think all you can eat buffets are too good to be true. I think that that is just … either you get your money’s worth of your food and then you feel like crap later, or the food is just awful.
Ben Carlson:
Yeah. That’s a quantity of a quality thing.
Austin Wilson:
Oh, that’s never good. I think gas station sushi should be avoided at all costs. I think Red Bull is overrated. I love the company, but it does not give me wings. So that’s too good to be true. Josh, what do you think about you?
Josh Robb:
So a couple I had was, and Ben you’ll probably relate to this, if your kids are playing quietly together. That is too good to be true.
Ben Carlson:
Yeah. Calm before the storm.
Josh Robb:
Yeah, if it gets quiet. Oh yeah, there’s something going on. The other one is, and maybe I’ll have to change this one for you, but I wrote down, this is the year for the Browns, but maybe you’re up in Detroit, so maybe this is a year for the Lions. That’s usually too good to be true.
Ben Carlson:
I’m definitely a permabear on the Lions.
Ben Carlson:
And here’s ways one for you.
Josh Robb:
Yeah?
Ben Carlson:
I think the biggest scam on earth is the Supreme carwash.
Josh Robb:
Oh yes.
Austin Wilson:
The subscription?
Josh Robb:
The extra dollars for the-
Austin Wilson:
Or like the $17 carwash?
Ben Carlson:
They have the four tiers and I always get the lowest one because I’m thinking how is it really that different? There’s no way.
Josh Robb:
Yeah, it’s just water and soap.
Austin Wilson:
They spend … there is more colored bubbles that come on your car with those extra levels. That’s kind of a funny one because I always tell my wife, I was like in the winter especially, I said, “That one has some wax stuff in it, I think that’ll keep stuff off your van. So use the expensive one.” So, that’s so funny that you brought that one up.
Josh Robb:
And then the last one I had and I jinxed Austin because I said, this is something my wife says usually about this time of year is, “I think we made it through cold and flu season without any of our kids getting sick.” And that’s always too good to be true because as soon as you say that sure enough one kid comes home with something.
Ben Carlson:
My wife always thinks that I jinx that one.
Josh Robb:
He’s got a little cold now. I think.
Austin Wilson:
Yeah, he told me that yesterday and I come to work and I’m like, “Josh, I have a cold.”
[31:44] – Ben Carlson’s Biggest Takeaway from Writing this Book
Josh Robb:
In wrapping this up, and again, Ben, thank you for coming and talking with us. It was a great book. We’ll link it in our show notes, but anything you want to leave us with from either your research on this or just as you have been in this industry for quite a while, for the people listening?
Ben Carlson:
My biggest takeaway from the research I did for the book was one of the points I’ve been trying to drive home lately for people and I think we all see these big success stories and home runs. We want to take them and then back out of that, what those people did and then try to follow that path. I think that’s almost impossible for most people to do because you just never know what someone went through to get to where they are. And I think that’s true. I get asked a lot of times for career advice and in thinking through how someone made it to where they are in their career.
So many times, it’s these random interactions, or networking, or luck that you can’t have someone else figure out how to do it. But I think you can avoid the mistakes that people have made in the past. And so I think for most people, avoiding mistakes and trying to just avoid being stupid is much better. That’s a much better way of going through life than trying to emulate brilliance. Because brilliance is really tough to figure out and hit that lightning in a bottle twice. Whereas avoiding mistakes and trying to avoid stupidity, I think that’s something that can actually help people get ahead.
[33:03] – Check Out Ben Carlson’s Book and Podcast!
Austin Wilson:
Absolutely. Yeah. Thanks Ben. So like we said, we’ll link Ben’s new book, Don’t Fall For It: A Short History of Financial Scams, in the show notes below, an Amazon link there. We’ll also link his blog, which is awealthofcommonsense.com. And be sure to check out the Animal Spirits Podcast. We love Michael and Ben and we subscribe and listen to their show and think you should too. It’s great, so thanks for being here, Ben. As always, don’t hesitate to reach out if you have any podcast topics or questions, send those in at hello at theinvesteddads.com.
Josh Robb:
All right. Thank you very much Ben and everybody else, you have a good rest of the week.
Austin Wilson:
Thanks.
Outro:
Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review. Click subscribe and don’t miss the next episode.
Josh Robb and Austin Wilson worked for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guests are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.
