That's a big part of it, for sure.

And the evidence shows that's where this research comes in, is that, you know, the pros don't seem to be able to beat the market, you know, so they're not taking advantage of outsiders.

It's really one of the wonders of the world, of the public market.

You can these days, you can buy a market portfolio very inexpensively and very easily, you know, everywhere.

So there's no excuse not to invest.

Welcome to Top Traders Unplugged.

In markets, success does come from predicting what happens next.

It comes from being prepared for what you can't predict.

In each episode, we go deep with some of the world's most thoughtful minds in investing, economics and beyond to understand how they think, how they prepare and how they decide, and the experiences that shaped how they see the world.

No noise, no shortcuts, just real conversations to help you think better and invest with confidence.

Welcome, everyone, to Top Traders Unplugged.

My name is Kevin Coldiron and I'm host of the Ideas Lab series where we talk with authors of new books that help us understand and navigate the global economy.

Our guest today is one of the pioneers of the modern investment world, David Booth.

He is the founder and chairman of Dimensional Fund Advisors, which manages $1 trillion in assets.

And he was an early pioneer of index investing and one of the first people to bring the ideas of modern financial science out of academia and into real world portfolios.

And I know all this because my own career in finance was in the same world and I was lucky enough to start after David and others had built the foundations.

And if you own an ETF that tracks the market or attempts to do better than the market, say, by identifying stocks that have attractive valuation or repeatable cash flows, then you too are directly benefiting from David's legacy and the work of those people close to him.

He joins us today to talk about his brand new book, Stay Calm.

Learn to Embrace uncertainty in investing and in life.

David, thanks so much for joining us and welcome to the show.

Oh, well, thanks for having me.

So maybe we could start with your motivation for writing the book.

I mean, you say in the acknowledgments that Bob Merton, the Nobel Prize winner, had wanted you to write this for years.

And I'm just curious, why did you decide to do it now?

Well, it's kind of the result of working for about the last dozen years or so on trying to help make investing more intuitive.

What I realized about a dozen years ago is that all these, the new science the quantitative methods and so forth are very useful and most people have no chance of really understanding all those details.

If you really want to help people, I felt it important that we figure out how to talk to people using English rather than Greek.

And so over the last dozen years I've been working on it and finally I got the point where I thought I had a message to deliver.

You know, that and in particular this year where a lot of people feel, have a lot of anxiety about what's going on for what?

That we could write a book that would help people be more optimistic about investing and feel more confident that they can have a long term investment performance that'll enable them to meet their investment objectives and basically feel good.

I guess it's time to have a book has a little bit more about hope in this.

Yeah.

And I appreciated that about the book and we're going to talk about that, particularly about your.

You say you're an optimist and that you'll always be optimistic.

And I want to talk about that a little bit later, but I thought maybe we could, you know, start with a little bit about your personal background.

I mean, you grew up in Kansas.

You had an undergraduate degree and a master's degree from the University of Kansas and then you went to the Finance PhD program at the University of Chicago.

And you were there at a time of, it seems like, great excitement.

Oh, wow.

Yeah.

You were working with some of the pioneers in academia and, and what was interesting to me is you talk about this, that you had worked really hard to get into that program and you're there at this time, you know, where they're making new discoveries and it seems very exciting.

You're working with, you know, household names or people who are now household names.

Yet you were a little, you weren't, you weren't certain what career path you wanted to go on.

And it wasn't actually until you went back to your grandparents house in Kansas on a break that you were able to kind of clarify in your own mind what, what path your career wanted to take.

Could you tell us a little bit about that?

Well, yeah, I mean I, I learned a tremendous amount at the University of Chicago.

And then surprisingly, I learned quite a bit when I went home, you know, visit my grandparents over Christmas break.

And what I learned was, you know, what life is really more about, which is I was there with my aunts and uncles and cousins and over Christmas and everybody's just having a great time except me.

I'm totally stressed out because I'm working diligently on doing research.

And I go, I'm not really cut out for this.

I mean, doing research is a noble pursuit.

Some of us are cut out for it and some of us aren't.

And I, I realized that what was really important in life was being to be happy.

And here are my relatives who come from a very modest background.

And I mean, they were happy.

And that's, I realized all of a sudden that's what, that's what I needed to pursue more than a PhD.

And so you went back to Chicago and you, I believe it was Gene Fama, you said, well, I'm going to leave the program.

And you ended up going to work for Wells Fargo in San Francisco.

And we were working on what became the world's first indexed portfolio.

Can you tell us a little bit about the, the genesis of that idea at Wells Fargo and what your involvement was?

Sure.

I mean, it was kind of the, what had happened is, Starting in the 60s, everything changed in finance.

You know, I, I could do magic, you know, whatever.

Then all of a Sudden, in the 60s, people got data.

We all of a sudden had a good research, quality data and big enough computers, and you could research some of these claims, and a lot of them really didn't survive, you know, and that was the, the exciting part of it.

One of the things that's, and still debated but which is the idea, do professional money managers add value?

The evidence was pretty sketchy.

I mean, in fact, it looked like, you know, on, on balance, once you consider fees, professional managers aren't worth the cost.

So, but that creates a problem, which is if, if investing is not about pulling your hair out and analyzing financial statements and all of that, what are you supposed to do?

And that really kind of led to two schools of thought, and both of them were at Wells Fargo at the time.

You know, the group I worked on, with which, and the two consultants primarily I worked with were Fisher Black and Myron Scholes, who ended up creating the Black Scholes option pricing model for which Myron got a Nobel Prize.

Anyway, these were young assistant profs, and we were trying to say, look, how can you beat the market without trying to outgass it?

You know, that's really the essence of it.

And that's been basically my whole career.

The other point of view was, I don't know, let's say I would think of our approach as being more trying to apply science.

Somebody, I think is more from the marketing department at Dave Wells came up with the idea of an index fund, you know, instead of if you can't beat the market, then what you want to do is, you know, track an index.

And I don't think the scientists were led to that.

I think it's people from the marketing group there that realized that's a pretty easy concept to sell.

You know, look, what we can do is track an index for you.

And that turns out to be a much easier idea to.

To buy into.

Track an index.

And I, you know, about half of the equity money in mutual funds is an indexed money, you know, which is pretty cool.

That's great.

But then what?

But we've continued on with that pursuit of how can we do better than a market?

Or now in the modern world, how can we do better than an index fund without trying to pick stocks or time markets?

That's really the essence.

And that's what we've been working on at dimensional now for 45 years.

It's been a great career.

And now the exciting thing with the book coming out is that we can, I think, help people understand better about how markets work.

And if people understand better about how markets work, I think first off, they'd be more likely to invest.

The people I feel really sorry for, people that don't never really get around to investing, you know, in the market.

If you want to change the world, you gotta appeal to everybody.

Yeah.

You know, you, you say early on in the book that we're actually trained, we're kind of innately trained to manage investing because investment is about managing uncertainty, and so is life.

So on the one hand, we manage our way through life our whole.

Pretty much every day we're managing uncertainty in some way.

And that's kind of a key, key element for being successful in investment.

On the other hand, you know, I think the.

We have this desire to predict the future for certainty, and that is, you know, dangerous.

In fact, you know, you say plan, don't predict.

So how do you.

How, when you talk to people about investing, how do you help them balance out that, that.

That kind of natural ability to manage uncertainty with also the natural tendency to want to predict, which isn't going to work in the market.

You have to recognize that it's.

Uncertainty creates the opportunity.

Suppose there were.

In life.

Suppose there were.

No.

Everything was preordained.

You know, life would be pretty dull and it would take away the possibility of actually progressing, you know, so it's the taking advantage of uncertainty is how we have grown in life and in investing.

You know, uncertainty is, is really important as well, because if there were no uncertainty in the sense that if markets were predictable or riskless, then all investments would have the same return, you know, the riskless rate.

So getting people comfortable in the idea that, yeah, you want to, you want to manage uncertainty, you don't want to eliminate it, you know, that's it, that's kind of a big con, you know, concept, but it has to, that's the way it has to be.

So, so by the time we meet people, they've already learned how to deal with uncertainty with varying degrees of success probably.

So we draw the parallel based on that.

You know more about investing than you think you know, because investing is just really about managing the uncertainty of markets as well.

You can't predict markets, but you can control how much risk you take, for example, and that's where managing uncertainty comes in.

Is that really about just balancing how much money you have in the market versus how much money you have out of the market and risk free investments or is there more to it than that?

That's a big part of it for sure.

You know, my parents grew up during the Depression and then fought in World War II and so forth and considered themselves as outsiders and thought that insiders, when it came to investing, insiders made all the money and would take advantage of them.

So they never got around to investing in the market.

And now the evidence shows that's where this research comes in, is that, you know, the pros don't seem to be able to beat the market, you know, so they're not taking advantage of, of outsiders.

It's really one of the wonders of the world, the public market.

You can, these days, you can buy a market portfolio very inexpensively and very easily, you know, everywhere.

So there's no excuse not to invest.

Yeah, no, that's.

And I think in the end maybe that's the, the number one benefit from all this last 50 years of finance is essentially delivering the ability for people to get access to the market at low cost and.

Right.

And give people the help them understand why markets work the way they do.

You know, it's the last hundred years I think is a pretty good test case for how the stock market works.

I mean, you start with a Great Depression, then go through World War II and you know, periods of high inflation, low inflation, all kinds of good test case, good taste test data.

Over that time period, stocks are down about 10% a year through all of that, you know, that's pretty encouraging.

And so you have to ask yourself, why do you think stocks have a 10% return?

Well, my explanation is that goes back to real basics, which is people basically want to make their lives better, and when they go to work for a firm, they want to make their firm better.

I mean, what's, what's going to happen?

I go, well, I can't, of course, predict what will happen.

You're not going to catch me in that one.

But here's what I believe.

I believe that people are just going to sit there and take it.

They'll.

They'll figure out how to get back on track and maybe do something new in different things and firms, there'll be winners and losers, and it's hard to predict who, who the winners will be.

But the overall market, the overall economy will get back on track maybe faster than you think.

That's, that's human ingenuity.

That's actually what happened.

We, I think the recession was one quarter or something.

You know, it was so.

It was painful going through that period, but it shows you how amazing the economy is and the people in it.

So really, if I could.

I don't know, just listening to you and reading your book, it sounds like what you're saying is participating in the market is participating in the essentially competition in the economy.

And it's this competition ingenuity, the desire to get better, that that's driving the growth.

And you want to, you know, you want to participate in that to a scale that's, you know, appropriate for your own circumstances.

Right?

I mean, you don't want to invest more.

Almost nobody has 100% of their money in stocks, but almost everybody should have some percent in the market.

Can I ask you about flexibility?

That's one of the key.

You know, the middle of the book, you talk about essentially principles for staying calm.

And one of them is bend and you won't break.

And I like that idea.

I mean, it's basically you're saying, you know, stick to your core principles, but be flexible.

And I wanted to ask you about that with regards to some kind of structural changes in the markets that have taken place over the course of your lifetime.

You know, you, you started dimensional with a fund that essentially, if I, if I understand correctly, emphasize small stocks, small cap stocks.

And at the time, there was a lot of data that supported the idea that small cap stocks do better on, on average over time.

But, you know, say over the last 10 or 20 years, that really hasn't been the case.

The small cap premium hasn't really been there.

And I was wondering, I guess a couple questions related to flexibility.

How did you, as a manager of a firm that started off in that space, adjust to these changes that I don't say undermined, but made your original investment thesis more challenging?

Changed it.

How long do you stick to an idea?

How do you change?

When do you pivot?

Well, you know, that's.

You always want to update your research and challenge your assumptions.

You know, I come from a background of outsiders, you know, and I think you always want to be an outsider and challenge the, what the insiders are doing.

You know, our connection with academics, you know, is we've, we've stayed with that over the 45 years and, and there's all kinds of new research coming out, you know, all the time.

You know, it is the case that our first nine years we happened and that was when all we had was really a small cap portfolio.

It, it performed miserably, you know, the last 35 years it's done fine, the last 10, not so well.

But if you, so these things, you have to look at it over a long period of time.

So.

But the basic thesis that we started with was, wasn't so much that they'll outperform.

The thesis was you ought to have stocks of large companies and small.

You shouldn't just have all your money in large companies.

And so that was the breakthrough.

We were the first people to even use the term small cap really as an investment category or a dimension.

You've mentioned a couple times this notion of being an outsider, and that's important.

Early on in your book, you talk about the value, the gift, I think, of being an outsider, and I thought about your own personal journey.

You were definitely an outsider when you began, but over time you've become an insider.

And you say that really your status as an outsider or insider is not really defined by where you're from.

It's more of a mindset.

But that must mean, I think for you, that you, you, you probably have to now like, actively cultivate the mindset of an outsider because you're no longer an outsider.

So, like, is that right?

And if so, how, how do you do that?

No, I consider myself still to be an outsider because, okay, see the conclusions, you, you, you do research to gain insights from the past that help you going forward.

You don't do research and social sciences to prove things typically, I mean, we can't prove that small stocks have higher expected returns than large capital.

Historically, that has been the case.

And we use that information so, you know, as we update research, we learn more and more, gain more and more insights.

We'll never have the final chapter of Risk and Return written.

That's what makes research exciting.

So if I going back to this notion of being an outsider, is what you're saying, that you have your investment ideas, but you're, I don't know, are you constantly reevaluating, retesting, willing to change them?

Is that what you mean by being an outsider in that sense?

Yeah, I think that's right.

When these ideas first started percolating in leading business schools, you know, Wall street was challenged by all this and, and reacted really negatively.

And, you know, so this small group of academics in large and only just a couple of institutions really, you know, Chicago and MIT and maybe Stanford a bit.

It was a relatively small group of people that really changed the world.

And the institutions that were around really fought that, those ideas.

And now the ideas have become mainstream.

There's still always work, you know, going on, improving things.

I was our first portfolio manager when we started investing.

And when I tell our portfolio managers now how I did it back in 45 years ago, they howl.

They can't believe how, how naive I was.

And I just point out that, okay, well, 40 years from now, whoever's running the portfolio is going to laugh at you too, because how naive you are.

That's so, you know, you always want to be challenging yourself.

And hopefully we never get to the point where we go, oh, yeah, we know everything, so, you know, we don't have to worry about changing.

It's funny, as you talking about that story, I remember in the book you said, when you said you actually set up the firm from your apartment in Brooklyn and you applied for six phone lines and were turned down by the phone companies, they thought you were running a bookmaking operation.

Brooklyn wasn't really the hotbed of entrepreneurial activity for sure.

I mean, it was going through really a tough time.

And so we started out of my apartment and because I wanted six telephone lines, it wasn't like the telephone company wasn't used to having people calling up wanting a lot of telephone lines, so they, they weren't going to give them to me.

I had to go up to the, eventually go up to the assistant treasurer at New York Telephone.

He, he was kind enough to send some people down and I got, got the lines and that's how we started, you know, little downtown Brooklyn.

Let's talk about, yeah, this, this idea of change and flexibility with regards to, you know, so okay, you know, you're saying that it's, it's important to be invested in the market.

We now have the ability to invest in low cost index funds.

Everyone can get Access to this 10% return on average over the long term.

Basically invest in the productivity of the economy.

And you mentioned that one thing that's changed a lot over your career is just how much money is actually doing precisely that, just tracking the market.

And no one really knows how much, but you could argue it's as much as half of the market in one way or the other.

And the question then becomes, if everyone is just tracking the market, what's keeping the stocks within the market priced properly?

And is getting access to the market now really the same thing as it was 20, 30, 40 years ago?

I mean I know plenty of people, professional managers who've simply given up over the last five or six years saying well, the prices just don't reflect anything regard to fundamentals of the stock.

So is it still the same market?

Does the logic apply or do we have to maintain this kind of flexibility and think well maybe accessing tracking the market isn't really the same as it used to be.

I don't think we have to worry about that.

I mean, I'll give you for example, just a sidebar discussion.

You've had an explosion in indexing.

Now index funds, one of the characteristics is they have very low turnover, let's call it zero relative to conventional active management.

So we've had an explosion index fund.

So let's say it's half of the market.

To a casual observer you might think, well then trading volume may have declined on of stocks.

It hasn't, it's exploded as well.

So what's one explanation for that is that people have given up on stock picking but they haven't given up on market timing.

So they, you know, like most technologies, it can either be used for good or bad, you know, and indexing, you know, is the ideal way to time markets because you can buy a whole market very inexpensively and get in and get out.

So I think that's a lot of what's going on now.

Flexibility, that's kind of an implication of option pricing.

Theory, really.

But flexibility has economic value.

I mean, that's kind of the premise that we started the firm on indexing.

You give up flexibility if you're an index fund manager.

You, if the index provider, let's say standard and poor changes, takes a stock out of the index, you gotta sell it.

And if it had one, you gotta add it.

At the same time everybody else is doing the same thing.

So, you know, it's, there's a cost to, to giving up flexibility and putting constraints on yourself.

That's why, you know, scientists didn't come up with the idea of indexing.

I think it's more of a marketing people that came up with the idea of indexing because science would tell you you want to have a.

Research would tell you that what you want to have is really broadly diversified portfolios, hundreds if not thousands of stocks.

If you're in an equity portfolio at low cost, low turnover and index, you know, satisfy, you know, checks all those boxes.

But, you know, that doesn't mean there aren't better ways of, of accessing, you know, the markets.

And that's what we've dedicated our, our business to figuring out.

You know, another way of saying is, you know, ideas are cheap.

It's execution that counts.

I mean, as you get older, that's a.

And that's really what, that's what we focus on.

How can we structure portfolios better?

How can we trade better and pay attention to all the details better and take advantage of the flexibility we have because we're not trying to outguess the market.

One point we probably should bring up is how pricing gets done.

And in, in the U.S. let's, let's look at the stock market, you got enormous trading volumes and, which is terrific.

And you have basically very sophisticated institutional investors on both sides of these trades.

You know, if a trade gets away too far from its what's deemed to be the fair value, you know, the institutions are all over it, which is great.

I mean, then that competition, as you pointed out, is kind of leads to fair prices.

What falls out from all of that is, you know, pricing that's very difficult to beat.

It's kind of the wisdom of crowds, if you will.

You know, once you accept that, then you start focusing on things that really do matter and spend less time worrying about can I outguess the market?

Do you?

You know, you talk a lot about diversification in your book.

And I was just thinking again, is investing in the market providing the diversification that it used to with, I don't know, the concentration of the biggest stocks in the US Market, the concentration by industry, is it the same?

Is investing in a, you know, a market portfolio as diversifying as it used to be, or should people have a different idea of diversification?

There's a lot of research and on all of that I will point out that in the US there, you know, this magnificent seven or whatever, there's more concentration.

But if you have a global portfolio, US and non US stocks, you know, it there isn't near it nearly the concentration because it's mainly in the U.S. outside the U.S. you don't have that kind of concentration.

Tuning out the noise, that's a big chapter in your book.

And I have to say that really resonated with me.

I mean, a lot of people listening to this show are professional investors, also personal investors.

And you say in that chapter that you need to recognize that interesting isn't the same as meaningful.

And that really resonated with me.

And I just wonder.

The question is, you say a lot of things that are written about the markets, about investing, about economics are interesting but don't really help you with your long term investing plans.

Maybe this podcast falls into that category, I don't know.

But my question is, should people be, I don't know, reading less about about the markets?

Well, I think particularly in as we go forward with AI and so forth, we're going to have to be better critical thinkers, you know, we do.

But thanks for the kind of the plug we did.

We had to do this movie a couple years ago and with Errol Morris.

It's actually an Errol Morris film called Tune out the Noise, which you can get on YouTube.

But the principle is pretty straightforward.

We, we're inundated with data now, much more so than any of us growing up.

But there's a difference between data and meaningful information.

And so trying to sort through how do I focus on getting meaningful information I think is a challenge.

It's going to be even more of a challenge going forward.

So how do you do that personally?

I mean, how do you stay engaged with what's going on but not focus too much on, as you say, on the noise?

Do you have tools for that?

Do you, I don't know.

Do you not read very much about the markets?

How do you approach it?

Well, I approach things first off by yeah, I'm kind of going back to first principles and this piece of data that is I'm confronted with here.

Is there any evidence or any reason to suspect that that would be meaningful to me?

And if it is, then I'll spend a little more time thinking about it and trying to analyze how I can use it.

But then I go, no, it's interesting, but I don't think I need to make any portfolio changes based on that.

What type of information would you think change a long term investment approach?

People think they need to make changes their investment strategy based on what happens in the market.

And sometimes that is the case.

I mean, over your lifetime, you know, you'll, you probably have to be change your long term approach, you know, from time to time.

But those changes typically have to be done based on what's happening to you.

You know, you're retired, you know, you have children, you're sending your kids to school, those kinds, you know, you want to save for a house.

Those are meaningful changes.

Trying to time short term moves in the market doesn't, you know, the evidence is that doesn't make any sense at all.

It's really interesting you say that because in my class I try to get my students to focus as much on liabilities as on assets, you know, because all the work is, you know, they'll, they'll try to predict stock prices or markets and they have very sophisticated tools and that's fine.

But at the same time, I think what you're saying is that it's really the liability side, what you're investing for, that, you know, should be the driver, I guess, of the, of the assets.

Right.

And some, some level, that's a very basic principle.

You want your assets to be, to be relevant for your liabilities.

But I feel like that liability piece almost gets not talked about or forgotten about.

Well, no, I think sounds like you have a good class.

I mean, that's, that really is what it, investing is primarily about.

And that's why we focus on, on your personal life.

I mean, we're drawing parallels between investing in life in general and investing is uncertain and complex.

So is life, you know, and so you want to look at all the sources of uncertainty and, you know, somehow pull it all together and come up with an approach of the best that's best for you.

And it probably isn't the same approach that your neighbor has or whatever.

I mean, because your circumstances are different and your, your goals are different and you know, so, you know, all of a sudden you get a new job, may start making a lot more money.

I mean, you want to factor that in, maybe that causes you to change your investment approach.

You know, those are the, those are the things that are meaningful.

Yeah, that makes a lot of sense.

And that really Maps back into your plan.

Don't predict, right?

So don't spend as much time predicting the markets, you know, your own circumstances.

Use that as the basis for planning and then that can drive what you're investing in, right?

I mean, you could have 20 years ago, you couldn't predicted where you'd be today, you know, and you can't predict where you'd be 20 years from now.

Right.

So don't worry about predicting.

Just come up with the best solution you can and be thoughtful about it.

And if you're comfortable, you've made a good decision, that you've done everything you can, that's, that's basically it.

And so then you can stay calm, you know, so that's why I wrote the book, tried to help people feel like that if they've made good decisions, they, they probably going to be okay over the long haul.

You know, you have to pay attention.

As you pointed out, you can't just ignore things.

But if you do, if you pay attention, make it, you know, what do you think are reasonable choices?

You've done everything you can.

So you know, in some ways the, the biggest issue is training people on how to accept the outcomes.

You know, the thing about uncertainty is sometimes you end up with a bad draw.

That's why they call it uncertainty.

I mean, if you knew you were going to win all the time, it wouldn't be there wouldn't be uncertainty.

So it's working.

But I think the key to that is coming up with sensible approaches that you, you understand why you're investing in say, small cap stocks, you know, or whatever.

And, and so when, as things change and you know, the market structure as you point out, has changed over time, but the, your, the market mechanisms are still the same.

I mean you're, the reward for investing in stocks is, is based on uncertainty.

You're getting, you think of uncertainty as a commodity.

That's what you're buying in the, in the, in the stock market.

And I think the key there is, you know, drawing a distinction between individual stocks and the whole market.

Individual stocks can go to zero.

The stock market is not going to zero.

So that's one way to eliminate catastrophes.

You know, the second way is just not to have more in stocks.

And as you pointed out earlier, relative to riskless assets, don't have more than you can really tolerate.

And that's if you do those two things, you've gone a long way to avoiding catastrophes and coming up with a sensible approach.

I think I might also comment that people benefit from Professional advice.

I mean, your podcast or financial advisors, you know, are very helpful in that regard.

You know, when people have a serious medical issue, they go to doctors.

But, you know, everybody has a serious financial issue, I mean, regardless of how much money you have.

And a lot of people try to figure it out on their own.

I. I think that's.

That's a mistake.

You know, try to get as much good information as you can and.

And make an informed choice rather than just based it on random data.

I think over the long haul, you're going to be okay.

Yeah.

We've had a number of guests on the show, actually.

One academic at the University of Chicago, Alex Emos, he's a young guy.

And another behavioral economist, Daniel Crosby.

And they both talked about this notion that actually, people who use financial advisors, they do better and they're happier.

Not necessarily because the advisors themselves have any great skill, but just that they kind of create a distance between the person and the portfolio.

And so the emotions, you know, you can't screw it up as much, I guess, is the bottom line.

It's kind of a triangulation or whatever.

All of a sudden you talk to friends and so forth, and you think you, I have an opinion about things.

Then all of a sudden you listen to a podcast go.

That makes a lot of sense.

And it really wasn't anything different than what you'd been talking about beforehand, but it just sounds different coming from a third party.

Yeah.

So, okay, the last chapter of your book is called why I Will Always Be Optimistic about the Future.

And that.

I really like that.

And I wanted to talk more about that.

You say that optimism is both a choice and a skill.

It requires intentional practice to develop, and I suspect most people to understand why optimism is a choice.

But how is it a skill?

And I guess, what do you personally do to practice optimism?

Well, I don't.

First off, apparently, you should change that and sit and still saying, I'm always an optimist.

I'll say, I'm always a realist.

Because in the sense that if you.

What's the difference between optimism and realism, then in your mind.

Well, when it comes to the stock market, I think we have all this data.

An optimist can be an optimist without any data.

A realist says, okay, now we have data.

We can use that data to gain insights, to come up with a real.

To make sure that whatever I do is realistic.

I think that's really the difference.

And here again, going back to their discussion about how markets work and the pricing, you Know, it's competition on both sides of trades.

And a trade doesn't happen unless both the buyer and the seller think they got a good deal.

And so that kind of tension is what leads to great outcomes.

And that will always be the case.

It's not because people are nice to each other, it's because they're competing with each other, you know, and then, and so let the markets work for you rather than having to fight the market, sit back and say, look, you got really bright people here making these decisions on pricing.

Geez, why do I think I'm better than that?

Are there things that you personally do to, I don't know if you're saying you're not to be, or to, to be a realist or to, to, to practice realism, you know, how do you, I don't know, you kind of train yourself to, to do that?

Well, I kind of, I have kind of a checklist of things to go through.

First off, you know, forget about planning.

I mean, I mean, forget about predicting.

Let's, let's plan, let's develop a plan.

Here, here, here's the information I have about whatever it is I have to decide on going to first principles.

Are there any principle in economics or whatever that would help me gain insights as to how to analyze the data or whatnot and then, you know, fall back on, control what you can control and manage what you can't.

I guess that's the main driver here.

Again, I can't control the market, I can't predict the market.

I can control how much risk I need to take or want to take and then play for the long haul, always and come up with solutions that are sensible.

I mean, and you don't give up on the idea that, that they're optimal solutions.

Typically they aren't optimal solutions, they're only trade offs, you know, so come up.

So the best you can do is probably have a, you know, a well informed opinion and then just go with it and not look back.

Maybe we could finish up by just reflecting on a comment you made.

And I guess I can see both sides of that.

The students I have in my class at Berkeley can kind of replicate the stuff I was doing back then very, very quickly.

And so it feels to me like from that perspective, and I guess here I'm thinking about you with your dimensional hat on, it must be much more challenging to run the sort of portfolios you do now than it used to be.

So why do you say you'd rather be an investor now?

Was that more from a personal perspective and less from a professional perspective?

Actually, I was thinking from a personal perspective.

I mean, fees are so much lower.

I mean, all these ideas that we have been promoting, if nothing else, have caused the price of management fees to come way down.

Which, you know, your net return is.

You know, your return before fees minus.

Minus fees, you know, so your net return goes up.

And also, based on all the evidence you see, portfolios today are much better diversified, better risk controls than in the old days.

So those two, those are what I was thinking about, you know, fees and risk controls in terms of.

But the basic idea that it's tough to beat the market, that was true back then, too.

Still is true.

Well, yeah, I think that's a good place to wrap up.

I mean, I really appreciate you taking the time to write the book and to come talk to us about your ideas.

It's really been a pleasure to meet you and talk with you.

So thanks so much for joining us today.

Well, I really enjoyed it.

Look forward to it.

Thank you.

Well, thank you.

Okay, so the book is called Stay Calm, Learn to Embrace Uncertainty in Investing and Life.

It's a fun read, easy, but also really thought provoking as well.

So go out and get a copy and follow David's work.

Work, because I think you can tell from what we've talked about today, a lot of these ideas are not being discussed enough on mainstream media.

So for all of us here at Top Traders Unplugged, thanks for listening and we'll see you next time.

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