Season 3, Episode 1

Host: Matt Hall

Matt Hall (00:07): Welcome to Take the Long View with Matt Hall. This is a podcast to reframe the way you think about your money, emotion, and time. The goal? Helping you put the odds of long-term success on your side.

Matt Hall (00:23): Hey, I'm flying solo today and excited to share with you one of the beliefs I have that has been critical to my success and the success of many others, I think. In case you're a new listener, though, who the heck am I? I am the co-founder of Hill Investment Group, which I think is the leading evidence-based investment advisor for successful families. I have this podcast. I also wrote a book called Odds On. I'm going to talk a little bit about that - The Making of an Evidence-Based Investor. And I live in St. Louis, Missouri with my wife, Lisa, and my daughter, Harper.

Matt Hall (00:57): A couple of quick updates I want to share with you before we get to the main event. I've had several calls from people in my industry who are writing their own personal finance books, and they're thinking about how to get the word out. Why are they talking with me? I guess in my space I'm known to some as a person who wrote a very different kind of personal finance book five years ago, and it's still rocking and rolling. Much like the Morgan Housel book I've mentioned in the past, Odds On is aimed at helping you, the investor. It's not a show-off book written for practitioners, which is too often the case. It's a book for you.

Matt Hall (01:37): One of my goals was to get 10,000 readers, and I believe we have surpassed that mark. But if you're interested, email me at Matt@HillInvestmentGroup.com, and I'll have one shipped to you as a gift. If you've read Odds On or you request a copy, you may recall that in chapter five, my life gets changed by meeting a couple in Las Vegas, of all places. And Vegas has been on my mind because the Final Four basketball tournament just concluded. And it's a fascinating place because it's full of temptation. It plays on the pleasure-seeking frailties of human psychology.

Matt Hall (02:21): And I think about this a lot because I'm a huge 60 Minutes fan. I love the stories they tell. They are master storytellers. And there's an old episode where Charlie Rose interviews Steve Wynn, the highly successful casino owner in Vegas. And I'll never forget the exchange they had as they were walking through one of his new multi-billion dollar casinos. And Charlie Rose asks, he says, "I want to understand a bit about the casino business." Steve Wynn replies, "So do I." And Charlie Rose says, "Have you ever known anyone in your entire life, any gambler who comes here and wins big and walks away?" He says, "Nope." He says, "Over the entire stretch of time in your career, you've never known a single person to walk away over the long run? "Nope." "So the only way to make money is to own the casino," Charlie points out. "Yep," Steve Wynn admits.

Matt Hall (03:37): I think if you really think about that example, what it means is the shows, the restaurants, the shops, the bells, the whistles, the dinging of the machines, it's all about getting us distracted. Instead of emphasizing sort of the long-lasting, dull, and boring math that is a winning combination for the owner, we're emphasizing all these short-term, whizzbang, exciting, pleasure-based temptations. And it's such a fascinating connection to try to make with investing, where so many people treat investing like it's a game, where they want sort of the bright lights and the bells ringing. And I think of CNBC and so many of the hosts who play on the short-term, pleasure-based weaknesses of the investment community.

Matt Hall (04:39): And what I want to tell you is that boring is better. Not saying boring in all aspects of our life. We need some excitement in some places. I'm saying boring, boring math, boring economic principles. Those are the things that are truly satisfying.

Matt Hall (05:03): I've been thinking a lot about this idea. This idea connects perfectly to our way of investing. Our approach is said to be a boring way to get and stay rich. Well, I'm here to tell you that boring isn't bad, and satisfaction is better than pleasure.

Matt Hall (05:28): Stay with me. What do I mean? Well, we're just a year out from the fear and uncertainty that caused the pandemic-driven market crash of 2020, and the financial media seemed to me to be back at it again at what they do best: spinning stories about the latest must-have investments. And I've been thinking a lot about how to avoid the lure of exciting investments because successful investing is so much more. It's actually more mechanical than it is dramatic. And yes, any reasonable investor wants to avoid volatility or rapid and unpredictable change for the worse, especially when it comes to their money that's committed to long-term goals.

Matt Hall (06:10): But what if you take a step back and consider that boring can really be satisfying? Adopting the perspective of boring is good calls for understanding our human tendency to emphasize pleasure over satisfaction. And here's why this subtle but important distinction matters. Pleasure tends to be a short-term feeling, delivered through an external experience. On the other hand, satisfaction comes from inside yourself. It is internal, it is long lasting, and often involves a journey rather than a short timeframe.

Matt Hall (06:53): Take just a second and think about an example in your own life, something that gives you pleasure, something you find satisfying.

Matt Hall (07:10): Did you do it? Okay, good. Because when it comes to investing, a focus on pleasure can cause investors to engage in activities they expect to deliver immediate gratification. These investors will chase short-term gains that may be exciting in the moment but often disappear just as quickly. An evidence-based investment approach doesn't hit these flickering pleasure buttons, but its rewards are much greater and enduring.

Matt Hall (07:40): Here's a timely example that is both boring and satisfying. Recently, there's been major outperformance of small cap or tiny companies and value stocks compared to their large cap and growth counterparts. And the Wall Street analysts, they say small cap stocks and value stocks are benefiting from a multitude of factors, including inflation, rising interest rates, presidential policy, and economic recovery, among others. And while these factors may contribute, it goes back to basic, boring economic theory at the end of the day.

Matt Hall (08:14): Why? What do I mean? Because we know that not all stocks have the same expected return. Small cap stocks or smaller companies over long periods of time do better than large, and value companies do better than growth stocks.

Matt Hall (08:28): Well, let's look at what's happened over a longer period of time, not just the recent out-performance, but a long period of time, going all the way back to the '20s. If you invested a dollar in small cap value stocks in 1926, today you'd have nearly 300,000. If you invested a dollar in large cap growth stocks in the same time period, over the same time period, you'd have almost $9,000. 300,000 versus 9,000? That is a stark and satisfying difference if you ask me.

Matt Hall (09:06): But the math is boring, and it's over a long period of time. These rewards do not come overnight, and investors looking for something to brag about at a cocktail party, whenever we have those again, probably won't get much more pleasure from talking about small cap and value stocks. But we believe, and I believe, you are best served by making decisions based on the sound economic principles, boring, supported by a preponderance of the evidence.

Matt Hall (09:33): Global markets and economies are constantly evolving, and you, by building an investment strategy on the theory that underpins the size and value premium and having the discipline to tune out the noise and stick with your strategy for the long run, that will be truly satisfying.

Matt Hall (09:54):

Take the long view. I'll see you next time.

Matt Hall (10:03): Have you ever enjoyed being bored?

Matt Hall (10:09): Please note the information shared in this podcast is not intended as advice. The intent is to share meaningful experiences. I am likely not your advisor nor wealth manager nor financial planner, and my opinions are my own and not necessarily shared by Hill Investment Group. Investing involves risk. Consult a professional before implementing an investment strategy. Thank you.

Please note the information shared in this podcast is not intended as advice. The intent is to share meaningful experiences. I am likely not your advisor nor wealth manager nor financial planner, and my opinions are my own and not necessarily shared by Hill Investment Group. Investing involves risk. Consult a professional before implementing an investment strategy. Thank you.