Jason Zweig (@JasonZweigWSJ) joined Shane Parrish (@FarnamStreet) to talk about his new book, The Devil’s Financial Dictionary. Much like Zweig’s conversation with Barry Ritholtz, this is much more than a book release publicity stop – though even the parts about the book are quite good.
What we’ll cover: a day in the life of Jason Zweig, the current state of journalism, how to write a book, 2 things the average investor should do, if Zweig were king for a day, and Macklemore.
A day in the life of Jason Zweig.
Zweig says that his typical day is “kind of a mess.” If he’s lucky, he’ll arrive at work before seven and head to the gym. It’s a chance to “clear my head,” Zweig says. Scott Adams said the same thing about his morning routine when he talked to Tim Ferriss. Adams says that he reads the news while his coffee brews. Once he’s consumed enough, he tries to mentally flush and start fresh. Zweig too.
Zweig says that his job is to write the same thing over and over again without his editors or readers realizing it. “It’s harder and more challenging than it sounds,” Zweig says, “but it’s also more fun.” Work should be like this. Tyler Cowen noted that ambition could be as desirable as happiness. Seth Rogen and Evan Goldberg said that even their job has obstacles. Tim O’Reilly noted the importance of work. We like to solve problems. For Zweig that means figuring out what to write.
His model is to triangulate a story between financial markets, current events, and readers’ lives. Zweig will often pull ideas from areas beyond finance or business he says. He devotes the hours after work to non-business books. Something has to be really good, for him to read an industry book at night, Zweig says. Like Michael Mauboussin, he prefers physical books.
This exchange reminded me of the Richard Feynman story about desserts. Feynman began his career in the Northeast, suffering through the winters. One day he decided to get out, and an offer came from sunny California. But, soon after Feynman there was a day with awful smog. “This is absolutely insane,” Feynman writes. Winters weren’t worse than this. He decides to go back. Then changes his mind again.
Tired of flip flopping, Feynman comes up with this solution.
“When you’re young, you have all these things to worry about – should you go there, what about your mother. And you worry, and try to decide, but then something else comes up. It’s much easier to just plain decide. Never mind – nothing is going to change your mind. I did that once when I was a student at MIT. I got sick and tired of having to decide what kind of dessert I was going to have at the restaurant, so I decided it would always be chocolate ice cream, and never worried about it again – I had the solution to that problem.”
Zweig has done this with what he reads, but it’s true for any area he notes. We can all make decisions ahead of time, that make our lives easier. “I think you can put policies and procedures into place,” says Zweig, “that can help you make rational decisions.” In fact, it’s just what the doctors ordered.
In Mean Genes, the authors write that there are two ways to counter immediate cravings; substitutions and preemption. Ride roller coasters instead of motorcycles and don’t walk past the tavern if you crave alcohol. For finance, you can play poker with your friends rather than the stock market or for entertainment you can read fiction instead of watching television. Tadas Viskanta and James Osborne talked about how to do it with babies and investments.
The key is to decide ahead of time. “Structure your life so the things that tempt you into bad behavior don’t get surfaced in your stimuli,” says Zweig.
If his day is spent working on books, WSJ articles, tweets, and avoiding biases, Zweig’s nights are for broadening his horizons. He tries to read non-business and finance books.
This mix of working out, working hard, and working his way up has created a soup of success. One other ingredient, Zweig is quick to add, is luck. He says his career is built on it. His first job was working for a magazine about Africa, and from there he went to Time, and Forbes. “It was all serendipity,” Zweig says, “like everything in my career, if you took away the luck there’s no plan. There might be nothing left.”
While we should be quick to credit luck, we shouldn’t over emphasize it. Zweig’s career is actually well put together. Malcolm Gladwell advised people to just write a lot. Zweig did that. Stephen King wrote that all writers must write and read a lot. Zweig did that. Tom Rath said that his research said that some people align their careers with a natural talent. Zweig may have done that. Robert Green said that maybe you don’t need 10,000 explicit hours to be great. Maybe small, not immediately relevant experiences add up too. Zweig did that when he wrote about Africa.
Whatever the path was, it’s led to a good day for Jason Zweig.
The current state of journalism.
When he spoke with Ritholtz , Zweig shared thoughts about the negative changes to journalism. We won’t cover that again, but Parrish asks an insightful follow-up question, “what is a reader to do?”
This, we can work with. Take the site you’re reading now. My site. It doesn’t have the same oomph of the Wall Street Journal or Farnam Street. Strike one.
Strike two is that we know people actively manipulate the news. Parrish mentions the Ryan Holiday book, Trust Me I’m Lying. Holiday wrote the book to show how companies could newsjack situations for additional coverage.
Strike three is the volume of work available. There’s more to read than we have time for reading. Seth Godin writes about this in regards to podcast: “As of now, there are more minutes produced by the podcasts I listen to each day than there is time to listen to them. I can’t listen to something new without not listening to something else. Which makes it challenging to find the energy to seek out new ones.”
I added the emphasis because Godin notes the two types of energy required; finding and consuming. If you spend too much on the former, you’ll have none for the latter.
Back to Parrish’s questions then, “what’s a reader to do?” Zweig suggests three things.
One, approach something with a doubtful until proven philosophy. “If you’re not a skeptical reader,” Zweig says, “you’re not really reading.” That doesn’t mean we have to do it all the time. I trust Zweig, Parrish, and other writers. When you find someone that leads you astray, you need to decide what to do. Naval Ravikant said that when he finds a discrepancy, he is immediately done.
Two, steer the world to journalism you want. Judge a site by the quality of links it uses. Then if you find something good, support it financially. Donate to Parrish, or the wonderful Radiotopia studios.
Three, connect with history. Zweig says that he tries to write with “points of contact,” with history. We often discount the past and believe we know more. In some ways we do, but in other ways we don’t. Stoicism, says Naval Ravikant, has become popular in Silicon Valley. If it was true two-thousand years ago, and it’s true today, it’s probably true forever. Zweig’s new book, touches on this as well.
How to write a book.
Zweig says that The Devil’s Financial Dictionary came from a series of events. First, he redesigned his website. Then, he needed to add new content to the site and he started coming up with these terms. Zweig was inspired by Ambrose Bierce’s (“one of my favorite writers,” he says) The Devil’s Dictionary.
It was an adventure, says Zweig. First he wanted to see if he could come up with words and definitions less than 150 words. Then 100 words. Then 50. Then even a single word. He did it!
One a larger scale, Zweig wanted to test himself. “The ability to define a term in such a way to be cynical or funny is a measure of your own skepticism.”
“Until you can do this,” says Zweig, “you don’t understand the weaknesses in what the person is telling you.” You are biased to ideas, one way or the other, figure out what you don’t know to get the full picture. Maybe it’ll even turn into a book.
Two things for the average investor to do? (or not do)
There are two questions the average investor should ask; should I do nothing and if I do act, what do I do? Learning from people smarter than us can help us answer these questions.
Should I do nothing? Yes. “Any recommendation to take action,” says Zweig, “has to be compelling enough to overcome the inherent intrinsic advantage of just sitting there.” Like in the board game, Risk, the advantage goes to the non-mover. Barry Ritholtz quips in his podcast, “don’t just do something, sit there.”
In his book, Getting Smarter, Seymour Schultz explains his “decision maker.” Take the status quo, and weigh all the components. If it’s buying a house, weigh the values of good schools, number of baths, proximity to work, and so on. Then, do the same for the option under consideration. Is the new house in a better school district? If so, it gets more points. Schultz said he only took the option for action if its total was twice that of staying the course.
Sometimes the best choice, is to do nothing. Other times we should act.
If I do act, what should I do? My daughter just started reading “choose your own adventure books” (fun fact: Tim Ferriss was a beta reader for them as a kid) Let’s use this as an analogy for our decisions in life. Much like the hero of a book will face the choice of entering the cave without a flashlight, or searching for one on the hillside – we too must make choices.
If it’s familiar, go with your gut.
If you’ve entered dark caves before, and your gut says this looks okay, then go ahead. Intuition is maximized with experience. In the book, Superforecasting, Magnus Carlsen is quoted:
“If I study a position for an hour then I am usually going in loops and I’m probably not going to come up with something useful. I usually know what I’m going to do after 10 seconds; the rest is double-checking.”
It’s the last part we should note! “The rest is double-checking.” It’s figuring out if you’ve overlooked something (maybe a bias) and then making sure your initial choice still fits.
Gary Vaynerchuk said that he looks for investments with his gut (intuition). Before he invested in Twitter, he recalls saying to himself, “wait a minute, I’ve seen this before.” If it’s familiar, go with your gut.
If it’s unfamiliar, proceed with thought.
First you check what the base rate it. Then you check the base rate. No really, check the base rate. This isn’t like going the dentist and her saying you should floss, and you thinking yeah. This is liking going to the dentist and her saying you need to floss or die because you’re getting oral cancer. Check the base rate, it could save your life.
The problem with base rates is that they aren’t very much fun.
Will Uber go public? How much will Square be worth? Is Twitter in trouble? Those questions are fun. But, they also don’t really matter. Jeremy Siegel said that IPO returns are not any better than small cap funds. That’s a base rate that says “stay away unless speculating.” Plus, IPOs are floated when the market is up. Buying an IPO is like buying a ski jacket at the ski lodge, it’s fun to pick out, but it’s not going to be cheap.
Base rates can even be found outside of investments. Ramit Sethi demanded you do this for business too. What are click rates? What are open rates? What is your conversion? These are all base rates to figure out.
After you figure out the base rate, ask why you are different. “Ask, what do I know that the other side doesn’t know, and why do I think I know more than they do?” says Zweig. Both of these need to be a strong answers if the base rate significantly moves toward the number you came up with. If there’s not a good reason, the base rate is the number you use.
In the choose your own adventure books I always entered the cave without a light and I always fell down a hole. But, going back in time is only a few pages away. In life, it’s impossible.
More important than the right answers is that you ask these questions. Zweig says, “temperament is the most important trait for success.” He notes that when Benjamin Graham wrote, The Intelligent Investor, he used the term enterprising as the term for who could benefit. There’s a reason. You don’t have to be smart, gifted, or brilliant. You just need a certain attitude of inquisition, humility, and thoughtfulness.
King for a day.
Parrish asks Zweig what he would do if he were king of the financial markets. His answer was brilliant. Rather than regulate, Zweig would nudge.
An example of a nudge is how Sanjay Bakshi begins to solve a question. He starts with, “part of the reason is this,” rather than “this is the reason.” In anything we do, there is a starting place. If we can tweak the place we start (a nudge), we can make better choices. When Bakshi says to start with “part of the reason,” that’s a nudge.
Zweig isn’t speaking about decision making, but retirement. In one study, participants were switched from needing to enroll in a retirement plan to automatic enrollment. The participation rate rose from 65% to 98% with almost no change in the dropout rate.
The one other thing Zweig would do, this one much bigger, is to reinforce the belief in a just world. From Wikipedia:
“The just-world hypothesis or just-world fallacy is the cognitive bias (or assumption) that a person’s actions are inherently inclined to bring morally fair and fitting consequences to that person, to the end of all noble actions being eventually rewarded and all evil actions eventually punished. In other words, the just-world hypothesis is the tendency to attribute consequences to—or expect consequences as the result of—a universal force that restores moral balance. This belief generally implies that in the existence of cosmic justice, destiny,divine providence, desert, stability, or order, and has high potential to result in fallacy, especially when used to rationalize people’s misfortune on the grounds that they “deserve” it.”
This was more philosophical than I expected Zweig to get, but I liked it. The point comes up after Zweig mentions this WSJ article about a million dollar parking spot.
Zweig’s concern is that we stop feeling this way, and he tells a lovely story from Where are the Customer’s Yachts. (You’ll need to listen to the podcast to get that part).
“You don’t need an Uber, you don’t need a cab, forget a bus pass, you got a moped man.”
Wait, were those Macklemore lyrics in a blog post about a Wall Street Journal reporter? Yes, yes they were. We’ll get to that connection in a moment.
Late in their conversation, Zweig and Parrish talk about private sector valuations. On the one hand, Zweig notes, it takes risky investments away from the public and into private hands. If tomorrow’s equivalent of Webvan.com blows up, the damage will be to people who knew that was an option (and fits within the just world philosophy). On the other hand, it feels bubbly. “It’s hard for outsiders to have a transparent view of what’s going on,” Zweig says. Here, he touches on our idea of layers.
The Phil Rosenthal post has the full idea of layers (see the “Idiots and Honesty” section). Briefly defined, the more layers between the current state and the ideal state, the worse something is. Private companies like Uber have lots of layers. They don’t share their finances. They have marketers who might be “newsjacking.” They have investors who might be charlatans. They have a new aura. They are over represented in the news. From Google Trends (October 2014).
Each thing is a layer that disguises the true thing. But this isn’t necessarily bad. Macklemore’s song Downtown (which the quote above is from) has many layers.
Tribute, mockery, history, a good beat, and so on. Just like Uber, this song is one thing as we see it and another thing if we examine it. The difference arrives here. We know what the parts of the song are, and that they are benign. We don’t know anything about Uber.
Thanks for reading, Thanks for reading, I’m @mikedariano on Twitter.
One part I didn’t get into with regards to intuition, is that situations should be familiar and stable. Football is a good example. It’s stable in the sense that the rules are the same, the players act in similar ways based on their positions, the plays that have been run are consistent. Contrast this with being a writer. That career is much less stable, and writers would be best served by relying less on their intuition. For more on this, read Kahneman’s Thinking Fast and Slow.