Free Money with Sloane and Ashby: Recent Episodes
Sloane Ortel
Sloane Ortel and Ashby Monk explore what's holding the world back from investing in progress, answer the questions on the minds of people in the know, and deliver the Brooklyn-Bay Area consensus about institutional investing that you desperately crave.
Wow! We were fortunate enough to have had Joachim Klement join our most recent episode.
This one is jam-packed with a variety of topics which range from structural differences in growth between Europe and the U.S to Joachim's fascinating concept of industry "Cassandras".
Plus, we have even more Free Money to offer, including the usual beloved banter, industry updates, and burning questions from listeners just like you. Tune in to cash out!
This carbon special featuring Mark Campanale is one you don't want to miss - we discuss peak oil, Mark's vision for the carbon market, and whether it's reasonable to rely on the carbon market as the catalyst for change. Definitely one for the books.
We also answer some exciting questions from our lovely listeners, offer gardening tips galore, and share developments both fun and fund-related!
What an exciting show for our LAST episode of the year! We were joined by Bahar Baharloo, who was Sloane's roommate during her time in the McKibbin lofts of Brooklyn.
Their experience as an intimacy coordinator gives us some amazing insight into consent and how it applies to the governance and approval we encounter in investment decision making.
Ashby's head explodes multiple times, and we're quite confident yours will too.
Happy New Year from the Free Money Fam!
Hop in folks, this train is headed to Brakkestan! We were fortunate enough to meet up with Tom Brakke, one of the keepers of the flame in active independent investment management. We talk about what innovation really is, due diligence in the manager selection process, and more.
Ashby's whereabouts on January 6th are also discussed, and if you'd like the answer to that burning question, you'll just have to tune in!
Thanks for joining us - we genuinely appreciate each and every one of you.
Today we're joined by Bill Burckart and Megan Kashner of Colorful Capital, both of whom are professors of impact investing (Columbia and Northwestern) as well as co-founders of the venture firm focused on the LGBT community.
We hear from them on why the firm is necessary, how they've gone about trying to access the people they're trying to reach, and then discuss the role they see for Colorful Capital going forward. For a deeper exploration of the topics we discussed and links to various resources mentioned, check out our blog post on this episode.
Don't forget our typical helping of banter - this episode's topics feature new sovereign wealth funds, guns, and a roast of burning man. Ya know, the usual.
This one's nearly a year old - but still filled with the usual gold.
It honestly didn't come as a shock to us that modern American accounting practices are deeply rooted in slavery (nothing shocks us anymore). But in order to further wrap our heads around this insane concept, we spent some time chatting with Caitlin Rosenthal, historian of business and slavery.
Perhaps this episode could be a great business case for not hating yourself. It's amazing when you look at what you bring to the table at work as a truly happy person, which in Maeve's case was a result of coming out.
Join the crew as we discuss what it was like for Maeve coming out at Goldman Sachs, real experiences of what it's like to be trans in finance, and Maeve's expert advice for communicating around innovation in the industry.
AI, research, and farming? Oh my! On today's episode, we're joined by Ruchit Garg, who is working to build a much more efficient market for agricultural goods in India.
We also discuss ancient spreadsheets, whether or not AI will ever have a material impact on institutional investment decisions, and the general vibes this lunar cycle.
See - we told you we weren't dead! Our guest in this episode is...nonexistent (thanks to a typical tech error). That said, we're thrilled to get back in the swing of things and to be able to offer our listeners the usual flow of banter, news, jokes, and as always, a gardening tip. Our conversation in this episode touches upon an exciting change in Sloane's life, the explosion of crypto, growing pains, and more.
Some things are more important than beating the market. That's particularly true when it comes to managing a pension fund. In this episode, we chat with NYC BERS' Sandy Rich about what he's done over the past seven years to streamline decisionmaking, clarify the term structure of his fund's liabilities, and build a talented internal team.
Note: This conversation was recorded on September 1st, 2021.
Our guest in this episode is Mary Childs, The author of The Bond King, a look at the life and legacy of PIMCO founder, Bill Gross, the unusual organization that he built, and the fixed income market that he came to dominate. Our conversation starts by talking about why stocks are dumb, the elements of operational alpha that made PIMCO what it is, and what Bill Gross's success means for the neurodiverse community. It starts about 13 minutes into this podcast.
How much money is needed to keep climate change under 1.5 degrees celsius, how much is currently available, and how much more money needs to be found after the passage of the inflation protection act? We talk with Dimitry Gershenson and Erin Davis, co-founders of the climate-centric lending platform Enduring Planet, to get the skinny. The conversation starts about eighteen minutes into the episode.
Franklin Templeton's Ben Meng joins us to talk about why capital markets need carbon pricing to function properly, how litigation risks prevent companies from making certain disclosures, and why investment professionals need to use their imagination to get ahead of the climate crisis. That conversation starts about seventeen minutes into the episode.
If you’re like most people, you may not have realized that fish farm finance is somewhat unfixed at the moment. We talk with Scoot Science CIO Grant Cavanaugh about why that is.
What could a new mechanism for municipal funding unlock, and why is it neccessary? We speak with Tammie Arnold, a fixed-income veteran and the founder of AlphaLedger, to find out.
On this episode, we’re joined by Delilah Rothenberg of the Predistribution initiative. Her work focuses on reimagining investment structures to promote sustainability through stronger long-term alignment between asset managers and their clients. That conversation starts about thirteen minutes into the episode.
Plenty of institutional investors are making net zero commitments, but what do they actually mean? In this episode, we chat to Kristy Jenkinson, CalSTRS' Head of Sustainable Investment and Stewardship Strategies, about what these commitments mean to an organization that has been a recognized leader in the ESG movement since 2004. That conversation starts about 18 minutes into the episode.
How can financial advisers figure out what clients really want? We're zooming in on that question in this episode with Stacey Kline of Otto Intelligence. She’s built a behavioral questionnaire that helps advisers discover their clients’ detailed preferences and build portfolios that suit them. That conversation starts about 17 minutes into this episode.
Are carbon offsets a viable tool to help us build a more sustainable world? Lars Kroijer says so. He's a recovering hedge fund manager who got mixed up in the carbon offset market a few years ago. The conversation starts after the news (about 22 minutes into the episode.)
12:50 - THE NEWS! CalPERS is getting closer to hiring a new CIO and other big developments that will come in the new year. 24:59 - Trend #1 - 2022 should be the year when fiduciary investors' commitments to go net-zero and fossil fuel free actually get some teeth. 29:36 - Trend #2 - Robinhood's acquisition of Say Technologies might herald a new era of retail-driven shareholder engagement. 33:01 - Trend #3 - Tools and techniques for facilitating long-termism go mainstream thanks to the Long-Term Stock Exchange, Sequoia Fund, and growing adoption of ESG among long-term investors 36:44 - Trend #4 - Earth gets a black box to trace earth's unfolding climate crisis as it unfolds, recording data that future civilizations can find and learn from about how we reckoned with existential threats. 40:40 - Trend #5 - Investment decision-making shifts formally from a process-based model to a data-driven decision model (and Ashby explains what that means). 46:41 - Trend #6 - Sustainable investing starts getting real (and Sloane explains what that means). 52:30 - HARD THINGS - Sloane and Ashby talk about the challenges they've encountered in their respective projects 1:01:17 - Listener question #1 - Did you change your mind about anything big this year? 1:05:30 - Listener question #2 - What's your favorite desk toy? 1:07:10 - Listener question #3 - If you could go back in time and kill the person who ate and/or had sex with a pangolin to start the pandemic, would you? Nobody would know you did it. 1:11:02 - THE GARDEN TIP
On this episode, we’re talking with cryptocurrency entrepreneur Martin Froehler about what’s possible in the realm of decentralized finance. His company, https://www.morpher.com/ (Morpher), operates a 24/7 trading market that allows users to trade hundreds of stocks and cryptocurrencies with zero fees, infinite liquidity, and up to 10x leverage.
True long-term investing is profoundly different from the sorts of rationalizations that people make when investments don’t play out. But how, exactly? We dig into how adopting an identity as a “long term investor” affects the way one relates to the rest of the investment community, determines what you focus on, and colors the way you evaluate performance. We also talk about the great work Anne Marie is doing to bring more women into the investment industry at https://www.gainuk.org/ (Girls Are Investors).
We hear from John Bowman about why it's time to move past the ESG label, what the investment portfolio of the future looks like, and how allocators are looking past traditional asset class delineations and embracing more functional approaches to asset allocation.
We chat with Andrew Behar of As You Sow, a titan of shareholder activism, about how investors can use their proxy voting power to push their portfolio companies to make positive changes.
We chat with Anna Marie Wagner, the SVP of corporate development at Gingko Bioworks, a synthetic biology company that recently came public and is part of Invest Vegan's flagship strategy. We chat about how Gingko evolved its funding sources over time, the firm's decision to pursue a horizontal/service provider business model, and how she'll judge the success of her company and the broader synthetic biology industry going forward.
We're joined in this episode by Paul Smith, CFA, a co-founder of SustainFinance and the former CEO Of CFA Institute. We chat about: His favorite experience leading CFA Institute, which is global beyond simple comprehension. How prepared the industry is to navigate the climate transition Whether ESG Investing is just a new form of colonialism
We also discussed his outlook for Hong Kong as a financial center and, as always, took questions from listeners.
This is a very special episode of Free Money. Our guest, Jason Voss, is a close collaborator of both of ours and the Founder/CEO of Deception and Truth Analysis, or https://deceptionandtruthanalysis.com/ (DATA). And honestly, if you like this show at all, you're gonna love this one. We talk about identifiable blind spots in active management processes, the difference between deceit and lying, and all sorts of other good stuff.
Sustainable investment strategies are traditionally long on glossy marketing materials, but a little light on clear outcomes. Like, what happens as a result of making the investment? Our guest in this episode is Sam Duncan, CEO of NetPurpose, an impact measurement platform based in London that helps investors source, share, and stay abreast of the latest data associated with their strategies. We talk about the regulatory crackdown into greenwashing, the opportunities to converge ESG reporting frameworks, and more.
What if it turned out that the best way to actually “do” philanthropy and impact investing was by letting go of the outcome? Our guests on this episode explored exactly that question in a recent book: https://lettinggobook.org/ (Letting Go). How philanthropists and impact investors can do more good by giving up control. They are Meg Massey, a journalist covering social impact and social justice in finance, and Ben Wrobel, the director of communications at Village Capital.
In this episode, Sloane and Ashby talk about sex work. In particular, they talk about why the finance industry is so skeeved out about it and what that means for platforms like Onlyfans, which now seems likely to pivot away from a dominant position in adult entertainment due to various operational impediments we’ll examine.
Is it worth building a master narrative about institutional investors as a whole? How much progress has been made on racial equity and inclusion since the murder of George Floyd? And does financial advice reinforce destructive social norms? We speak with Institutional Investor's Alicia McElhaney about this and more. We also answer listener questions and talk about Sloane's new investment advisory firm. Also, here are links to https://shespends.org/ (She Spends) and the https://confirmsubscription.com/h/d/EEDB9AF2C4B7E5AA (Essential Allocator).
You may have heard that a teeny investment fund managed to force Exxon to take climate change seriously. In this episode, you'll hear from one of the people behind that successful campaign: Jennifer Grancio, the CEO of Engine #1 Asset Management. We talk about how a myopic fossil fuel focus left Exxon with underperforming investments, and about the ETF they recently launched (VOTE).
This week we talk with Rachel Freeman, Adasina's director of investor services, about what it means to build a bridge between social justice organizations and the capital markets. We also touch on issues like: Ending forced arbitration for sexual harassment, which have historically been left out of the ESG equation. Starting a new investment fund as a minority and queer-led firm. Why Adasina decided to start an ETF instead of a data company.
After discussing the peculiar difficulties Adasina encountered when starting a new investment firm, Rachel mentioned some allocator-oriented suggestions to make their due diligence process less onerous for startup managers, which are available here: https://www.duediligencecommitment.com/
A portfolio manager turned activist, Ulf takes us inside some recent fixed income transactions that imply some banks (and some pensions) are taking their commitments to ESG less than seriously. He then disaggregates the "yield pickup" that buyers of fossil fuel debt have been feasting on, explains how his activist ESG strategy benefits from fixed income trading's nature as a primary market, and talks about how pensions can profit from sustainable fixed income strategies.
Yale's CIO David Swensen passed away last month. He left behind an unprecedented track record, a whole new way of doing things, and a much better-funded university. How did he do it, and what can we learn from him? We explore with Capital Allocators podcast host and Yale Investment Office alum Ted Seides.
What does it mean to invest in infrastructure? How do you do it? And what happens when you do? We reached out to Ross Israel of Australia's QIC to learn more.
We chat with Marcel Prins, the COO of ultra-innovative Dutch pension APG, about the blockchain business his team built to maturity and spun out into a standalone company.
Gamification is the financial villain du jour after the whole "WallStreetBets" thing. But it's not all bad! In this episode, we talk to a startup founder who has found success using games to encourage saving.
You’ve probably been hearing a lot about a place on the internet called https://www.reddit.com/r/wallstreetbets/ (WallStreetBets). https://twitter.com/mslizzhang (Liz Zhang) joins us for an insider view. She has been active on the forum for three years or so, and has been trading options for fun for about that long.
Pension accounting is a cursed subject. So we called https://www.linkedin.com/in/hugh-o-reilly-35409314/?originalSubdomain=ca (Hugh O’Reilly), who was happy to wade into the discussion with characteristic Canadian politesse. He has loads of experience putting his knowledge into practice as the former CEO of OPTrust (One of Canada’s largest pension funds) as well as a pensions attorney.
It’s the time of year when Wall Street analysts attempt to divine the future. There are a million reasons not to do this, ranging from “it’s a performative waste of time” to “it’s devil worship". We did it anyway.
It’s a great one, featuring a discussion between Sloane, Ashby, Shawn Wooden (Treasurer of CT), Daryn Dodson (Illumen Capital), and Jean Rogers (SASB/LTSE). You’re gonna love it.
Hello and welcome to Free Money, a podcast/newsletter from https://twitter.com/sloaneortel (Sloane Ortel) and https://twitter.com/sovereignfund (Ashby Monk) about how long-term investors can free themselves from the shackles of short-term thinking. If you’re new here, thanks for signing up! If someone sent this your way or you found this post through Twitter or some other channel, be sure to sign up below. We publish most Tuesdays. And now, a look at the world of impact investing. Your money does something after you invest it. What is that, exactly? At some level, the most salient answer is “produces a financial return.” We tend to structure investment programs around such things, since growth in principal is the primary reason people go to the trouble of investing in the first place. But it’s not the only thing that matters. Investments are the engine that turns abstract concepts into actual undertakings. And sometimes getting a certain type of enterprise off the ground is what matters most. That’s where impact investing comes in. Defined as an investment intended to produce a measurable social or environmental impact alongside a financial return, it sounds absolutely wonderful on paper. And that’s kind of the problem. Remember: this is finance we’re talking about, an industry that’s known to exploit good ideas so much that they produce bad outcomes. What’s to stop someone from saying their initiative produces outstanding social and environmental impact, raising a bunch of capital, and actually producing an outcome more akin to the image above where an asteroid permanently and profoundly restructures earth’s surface? Third-party verification, we hope. There’s not much of it at present, but a few groups are organizing to give allocators greater transparency into the impact of their allocations. So we reached out to the CEO & Co-founder of one of them, Christina Leijonhufvud, for her take on how the market is evolving. Her company, https://bluemarktideline.com/ (BlueMark), is an independent impact verifier. So we asked the natural questions: how exactly does one do that? What elements of impact are even verifiable? Is the issuer-paid research model truly aligned with investor interests? How does one ensure that the investment’s outcomes align with community needs? This being Free Money, we also answered three questions from listeners. If you’d like to ask one for an upcoming episode, please don’t hesitate to reach out to freemoneypod@gmail.com! NYC comptroller Scott stringer is facing sharp criticism from progressive democrats for investing in Blackstone PE funds. Has this been an issue in other campaigns? How often? JP Morgan is saying that their full year earnings could swing +/- 15 billion based on the effectiveness of govt stimulus. Should we interpret this as posturing? Their bottom line is helped by stimulus, after all. Zeisberger et al are arguing that venture capital funds are under-performing because they over-diversify. Is a five position vc fund a workable vehicle? Isn’t it just a co-investment at some point? Get on the email list at https://freemoney.substack.com?utm_medium=podcast (freemoney.substack.com)
If you build a better market, will the world beat a path to your door? Michelle Greene, President of the Long-Term Stock Exchange, which https://blog.ltse.com/the-long-term-stock-exchange-opens-for-business-38b13f51e87b (opened for business) earlier this month joins us to discuss.
Looking for work is no fun at all. This is Sloane, and I know because I’m doing it. My https://www.riverorion.com/ (consulting business) has slowed down dramatically since COVID hit, which means I’ve gone from outright thriving to just surviving. Please do reach out if you’d like to chat about a project. But it’s not just my story. Everyone seems to have lost something during the pandemic. And the notion that tech companies are thriving under these conditions doesn’t make much in the way of sense. For instance, the startups Ashby is involved with building have variously had to pivot, shift priorities, and postpone investments. There’s just less money out there to buy data, and now that it’s near impossible to make sales in person that problem is compounded. None of that shows up in headline https://www.bls.gov/news.release/empsit.nr0.htm (unemployment statistics) in the United States. These necessarily simplified numbers do not purport to measure underemployment or changes in business’ investment plans, but they do tend to define our perspective of the labor market. So after a listener wrote in wondering how to get a job at a pension fund, we felt it was important to respond with a big picture perspective. That’s why we called http://www.charlesskorina.com/ (Charles Skorina), a longtime recruiter of investment professionals and observer of hiring trends at endowments, foundations, and public pensions. After talking about https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2120167 (a paper Ashby wrote) that examined this from the pension’s perspective, we asked the obvious question: how does one go about getting hired at one of these organizations? And we got an empirical answer, rooted in Charles’ study of the various CIO resumes he’s come across in the course of doing his business. We also looked at how career stage, job history, and the power of example can influence this search process. You can check out the transcript https://freemoney.substack.com/p/free-money-s02e11-transcript (here) or click above to listen in your favorite podcast app. We also touched on the lovely goods available at the https://www.etsy.com/shop/freemoneyatelier (Free Money Atelier). And as usual, we answered questions from listeners: You two talk about the rise of ESG investing like it's a good thing. And I'm sure that's overwhelmingly true. But are there any dystopian consequences of esg's growing popularity? This is 2020, after all. The "active ownership" theme is really interesting - how long has it been going on? What's the first action by a long-term investor you're aware of that you would classify as "active ownership" The giant "nasdaq whale" that has been hoovering up equity options with a highly unusual appetite was revealed to be... Softbank. Doesn't this prove that asset managers should be more closely regulated?
Imagine governing a state right now. The best positioned public schools, parks departments, and police forces are merely contending with unprecedented times. For most, they are unpredictable as well. And neither condition is helped by a near-universal problem: there is not enough money. America’s national government can deficit spend thanks to the Federal Reserve’s money printer, which famously goes “brrrrr.” But forty-six states and the District of Columbia have https://www.urban.org/research/publication/balanced-budget-requirements (balanced budget requirements). So in the face of falling tax receipts, each must contend with an unpleasant question: how much spending to cut? This is a classic no-win scenario. In a time of economic scarcity, forced austerity is perhaps the worst thing that can happen. Without a spender of last resort, the snowball effects of recession roll on unchecked. And as mentioned earlier, that is bad. We called Tobias Read for a practitioner view of the crisis. He’s the Treasurer of Oregon State, which means he’s responsible for debt management, economic policy, investment management, and acting as a central banker for the state’s agencies. We’ve seen requests for state-level aid packages that range from a billion to a trillion dollars, so we started by asking him to clarify what is needed and the creative strategies Oregon has been using to raise funds. Then, as you might expect, we started talking about pensions. We went through what the state has done to steer its ~$111 Billion investment portfolio through the COVID crisis, including organizational changes and a potential new emerging manager program. We also talked about why he hates his Ford Focus and loves #FAnon, the evidence-based conspiracy theory popular among Free Money listeners which involves wide-ranging deep state efforts to design effective policy and serve the interests of ordinary citizens. You can check out the transcript https://freemoney.substack.com/p/free-money-s02e10-transcript (here) or click above to listen in your favorite podcast app. We also touched on the lovely goods available at the https://www.etsy.com/shop/freemoneyatelier (Free Money Atelier). And as usual, we answered questions from listeners: I've interviewed at some public pensions over the years, and my impression has been that (at least for mid-career/non-CIO investment positions) there is a pronounced preference for promoting from within. Just curious if this impression is accurate, and if is it another manifestation of the organization-wide risk aversion? What are the characteristics of plans that seem to have a greater willingness to hire from outside the organization? There's some contention over whether having operations in the west bank - a contested region claimed by both Israel and Palestine - is an ESG issue. What's your take? The federal reserve has decided to allow inflation to go higher than the fed's 2% target during a boom period, which effectively means rates will be lower for even longer. Would enough inflation effectively solve the student loan and debt crises?
Where do innovative products and services come from? You might imagine that we have the “invisible hand” of the free market to thank. But in lots of cases, the answer is government-supported research. Consider your smartphone. It uses technologies like GPS, advanced transistors, active-matrix liquid-crystal displays, voice recognition, and graphical web browsers. All of these began their lives as government projects. But not all government agencies are natural innovators. Public pensions, which we talk about a lot in these pages, are notoriously stuck in their ways. In fact, Ashby shared at the beginning of this episode that “the only way you get fired from a public pension plan is if you innovate.” Clearly, this sucks and is bad. Is there any hope for these organizations? Our guest Tom Kalil offered plenty. He spent sixteen years at The White House leading science, technology, and innovation oriented policy programs under Presidents Clinton and Obama, and https://schmidtfutures.com/person/tom-kalil/ (now works) as the Chief Innovation Officer at https://schmidtfutures.com/ (Schmidt Futures), the group led by former Google CEO Eric Schmidt and his wife Wendy. He shared why he identifies as a https://en.wikipedia.org/wiki/Meliorism (Meliorist), talked about various mechanisms the government has employed to boost innovation in the past, and the extent to which the work he and his colleagues did has survived the Trump Administration. You can check out the transcript https://freemoney.substack.com/p/free-money-s02e09-transcript (here) or click above to listen in your favorite podcast app. We also talked about the many delightful things available for sale at the https://www.etsy.com/shop/freemoneyatelier (Free Money Atelier). And as usual, we answered questions from listeners: Given the rise in "SPAC" issuance, should we expect to see the Free Money podcast float a "blank check" IPO of its own anytime soon? Is it true that a pension funding debate plays a significant background role in the ongoing US Post Office debacle? It's been a year since that famous/infamous business roundtable statement about the purpose of a corporation. How are firms doing? Is there a meaningful difference between corporate social responsibility and corporate actual responsibility
If you’d like us to answer a question from you on an upcoming show, write to freemoneypod@gmail.com.
Standing by while others suffer is bad. Profiting from their exploitation is worse. And unfortunately, it’s relatively easy to do by accident. Take real estate investment as an example: investors who hold a diversified portfolio of Real Estate Investment Trusts (REITs) are likely to hold shares in GEO Group (NYSE: GEO) and CoreCivic (NYSE: CXW). GEO describes itself as a “global leader in evidence-based rehabilitation.” CoreCivic says it’s a “diversified, government-solutions company with the scale and experience needed to solve tough government challenges in cost-effective ways.” But they both do the same thing: operate prisons for profit. And they’re both members of the Russell 1000 and the S&P 400 Midcap index. Which means you might own them right now. How many other problematic companies might have snuck into your portfolio? We reached out to Jay Lipman, a co-founder of sustainable asset manager https://ethic.investments/ (Ethic), to hear more about what’s out there and how to stay away from the worst of it. Our conversation starts at 11:43 if you’d like to jump right to it, but if you listen to the whole thing you’ll also hear about how Mario Kart almost ended Ashby’s Marriage, Goldman Sachs’ massive $3.9 billion settlement, and what we’re reading to take our minds off of the ongoing collapse of civilization.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity….” Charles Dickens, A Tale of Two Cities True classics never seem to age. Think of Pride and Prejudice, The Iliad, and the observation that the general state of things is both bad and good. We also have Macbeth, Jane Eyre, and the assertion that markets hate “uncertainty.” But they have plenty of it now. Our hope in this episode was to gain an understanding of the American consumer. Which really means the American Debtor. https://www.bcg.com/publications/2020/covid-consumer-sentiment-survey-snapshot-6-08-20.aspx (We hear from BCG) that Chinese Consumer activity seems to be changed, but recovering. That could inspire some optimism for the future if we didn’t have to balance it with the fact that “https://www.msn.com/en-us/money/realestate/nyc-rental-market-pushed-to-breaking-point-by-tenant-debts/ar-BB16tGiw (it would take something on the order of divine intervention)” to quell the rent crisis in New York City. So we asked an expert to help us sort it out. Perry Rahbar is the founder of https://dv01.co/ (dv01), a data startup that offers investors access to accurate loan-level information and the tools to turn that information into investment decisions. Their latest written take on loan markets in the era of COVID is available https://resources.dv01.co/dv01-insights-covid-19-loan-performance-update-vol-7-june-30-2020/ (here), but it’s worth listening to Perry explain it. He paints a fascinating picture of a marketplace in the midst of profound transition, where upstart online lenders are running circles around their more established competition. Read on for a few choice quotes after the break. “If you went back in time and described the scenario that we would encounter through COVID and then asked people what would happen to consumers and how would they respond in their loans, you would have gotten some pretty draconian responses. And I think what we've seen has been surprising to everyone, but then when you step back and think about it you know, it's not that surprising. If you kind of go back to March, people are starting to get tax refunds. All of a sudden COVID happens, and they're locked in their homes. They're not spending money on anything. They get a $1,200 check and then even if they do lose their jobs they're getting these unemployment benefits (15:02)“Here was a vibrant non-agency market finally that was going to probably pump out $20+ billion in securitizations this year and maybe north of $50 billion next year. And you just saw some of the rule changes from the CFPB around the [Qualified Mortgage] rule and so forth, which would have been another positive tailwind for the market. And then, you know, this whole thing happened.” (29:19)“We're still spot checking every loan with the servicer. Find a loan. It didn't make a payment, not delinquent, but there's no modification reported. And it's like, it's obvious something happened. I mean, it's just crazy how there's still a lot of auditing and going on. And then you look at the trustee report and we know that number's wrong. And then, you know, but it's just, there's a certain level of apathy when it comes to these markets that have been operating a certain way for so long, no one, no one has that vested interest.” (36:36)
There are durable returns to be found in deep research. So if you're taking the time to integrate a full understanding of environmental, social, and governance issues in your investments, you will tend to end up with innovative and enduring solutions just by doing the work. So in this episode, we decided to spend some time with a significant, oft-neglected issue: food systems. We were fortunate to have Ambassador Ertharin Cousin on hand to direct our exploration. Named one of Time Magazine’s 100 most influential people, she was previously Executive Director of the UN World Food Program, which is the world’s largest humanitarian organization. She is also a visiting scholar at Stanford and the Founder/CEO of https://fsfinstitute.net/ (Food Systems for the Future), which invests in and provides services to market-driven food and infrastructure enterprises to improve nutrition outcomes for low income communities. We’ve excerpted some of her comments after the message below, but you should really listen to the whole thing. Here are a few choice excerpts from our conversation. You can also read the whole ai-generated transcript by https://freemoney.substack.com/p/free-money-podcast-s02e06-transcript (clicking here). “Let's look at it from an economic standpoint. FAO estimates that the gross value of agricultural production is over $5 trillion. The World Bank says it's closer to $3.2 trillion. Whichever number, it's a big number. And the world bank also suggests that the system generates two to five times as much value off-farm between farm and consumer as it does on-farm. In the United States for every dollar spent on food by the U S consumer 11 cents, is accounted for in farm activity. And all of the other value is in the middle. So the estimated value of the global food system post farm to consumer is about $8 trillion or 10% of the $80 trillion global economy.” (26:52)On the types of investments that might be attractive to pension funds: “We know that we need investment in more foods that will meet cultural demand, but also healthier outcomes for populations. And there we have seen how how plant based proteins coming online have brought in additional have brought in significant revenue to those asset managers who have invested in that space. But those products are not coming online in support of the consumers that we are most concerned about who are most detrimentally impacted by the food system today.” (33:23)On what individuals can do to address food insecurity: “Many of your listeners are high net worth individuals, we need their support to invest in organizations like FSF, like Root Capital and Acumen and others who are working to address these challenges with new market based tool that will deliver evidence that is required to grow the agricultural productivity of our food system in a manner that is sustainable. And as I said, not just for the affluent, but for everyone.” (37:10)
How have pension funds handled the last few months? We’re told markets are in turmoil. But they’re also just an inch away at all-time highs. Retail investors are racking up triple-digit returns, and seem to be making an attempt at necromancy with the bankrupt husk of Hertz, the rental car market’s onetime global leader. So we called Marcie Frost. She oversees a team of 2,800 professionals as CEO of CalPERS, the agency charged with managing roughly $400 Billion on behalf of California’s public employees, retirees, and their families. We’ve highlighted a few of her choice observations below, but you should really listen to the whole thing. One quick programming note before you do: we’ve partnered with Columbia University’s Center on Sustainable Investment and Beyond Alpha research on a study of the investment industry’s role in meeting the UN Sustainable Development Goals. If you are interested in participating, https://forms.gle/fEfYgxnRxqhej9LD8 (please fill out this form). On COVID-related volatility: “Our liquidity position was much better in this pandemic than it was in '08-09. So we didn't have to sell assets to pay benefits. We didn't have to sell assets to make capital calls. And I think even more importantly, we had liquidity that we could actually take advantage of the market dislocation with opportunities, and we were able to do that. So we have to think long-term, we plan on being here for decades, paying benefits out over a member's, lifetime and their beneficiaries' lifetimes.” (11:16) On operational changes stemming from COVID: “It is likely that, so we will have half of our workforce working remotely from this point on. We don't see a need to carry the cost of having, you know, an office or a workstation or having two sets the desktop computer. If you all having a docking station, there'll be times that we'll need people to come into the office. We'll have hoteling available for those individuals then.” (15:00) On meeting a 7% return target: “it's a really strange group of expectations that we have, if you will, that it's expected to get the 7% return, we're expected to pay out 24 billion. And while we do that, we want to find opportunities where we can do well while we can also do good for the environment and for governance issues.” (21:00) On recent pressure from Congress to divest CalPERS’ Chinese investments: “it wasn't any different than any other requests that we get from any other entity. It just happened to be a member of Congress. It happened to be on a television channel and it was done in a really horrific way.” (30:14) On her career path: “the traditional way is you graduate high school, you go to college, you start working, and then maybe you go in for an advanced degree. I really didn't have the means at the time I, I grew up in a household that didn't have many financial options. I started working right out of high school. I started a family when I was quite young and those were my priorities. And I was able to work my way through these systems, if you will. I started as a typist in October of 1985 and worked my way through until starting here at CalPERS in October of 2016.” (41:38) A computer-generated transcript of our full conversation is available https://freemoney.substack.com/p/free-money-podcast-s02e05-transcript (by clicking here). As is tradition, we also took questions from listeners at the end of the show. If you have a question, a comment, or just a wry observation, please write us at freemoneypod@gmail.com. This week, we answered the following: A leaked British Petroleum brand document made headlines recently for asking how the company can be more like Greta Thunberg. How can they? Private equity funds are often proud to mention that their investors include police pension funds. Should we expect that to change in the future? What adjective describes your preferred form of capitalism (I.e, conscious capitalism, Subaru capitalism,...
Black lives matter. And not just in the abstract. When given the proper space and support, Black investors can materially improve portfolio returns. But that almost never happens. In aggregate, https://knightfoundation.org/reports/diversifying-investments-a-study-of-ownership-diversity-and-performance-in-the-asset-management-industry/ (only about 1% of the $70 Trillion) managed by professional investors is overseen by minority-owned firms. On this episode of Free Money, we were fortunate to speak with Daryn Dodson, a Managing Director at https://www.illumencapital.com/ (Illumen Capital) who knows perhaps more than anyone else what needs to be changed in order to create a more equitable future. We spoke on Friday, June 5th. And because the perspective he shared was so valuable, we decided to dispense with our regular essay and include a transcript of the conversation instead. Enjoy! Ashby Monk (https://www.temi.com/editor/t/cysEDZbrel21S7oECXFxUnSj5UTmtuc6AsqLu7xTeEjMei19QstRQjVmfhalR4jKGS9T_1_6KQHb8FjZg0hWIZMDLo0?loadFrom=SharedLink&ts=644.08 (10:44)): We were just kind of talking through the issues of the week, obviously a pretty heavy week out there and wanted to connect with somebody who could really explain a couple of things. You know, why the asset owner community isn't doing more to support the managers that are people of color, but even before we get there, how are you doing? Daryn Dodson (https://www.temi.com/editor/t/cysEDZbrel21S7oECXFxUnSj5UTmtuc6AsqLu7xTeEjMei19QstRQjVmfhalR4jKGS9T_1_6KQHb8FjZg0hWIZMDLo0?loadFrom=SharedLink&ts=673.29 (11:13)): I am a hosting a group in a conversation of a hundred billion dollars in asset allocators to put a through line from slavery to lynching, to mass incarceration, to tuck that into the asset management overlay so that people can understand how assets got to be so imbalanced and the huge disparities that lead to suboptimal returns for our portfolios. They also violate fiduciary duty. We have about 30 hours of work over the weekend. So I just finished the opening session. We offer for a lot of our investors at Illumen Capital something called the Illumen impact experience to bring them together, to put these dots together. So I'm heartened by that work. A lot of this is doing the work to move capital in ways that's optimal as I've worked with Dr. Jennifer Eberhart, and as well as Dr. Ashby monk to hit to work on this paper, uh, with a few other authors, really to prove and show the bias managers of color face as they increase performance, particularly black managers. So after we proved that in a paper and published it, then the question becomes, what do we do about it? A lot of people are making statements all over the country around how they value communities of color and black communities. But when you look at their balance sheets, I've been kind of thinking about things like, not public statements, but balance statements and financial statements, and whether those mirror the statements that people are making publicly. So that's something we believe in as a firm at Illumen Capital. It's something that is evidenced in the paper that we published. It's something that we share with our investors, who currently manage over a trillion dollars in capital so that they can begin to apply these ideas to their broader portfolio. Sloane Ortel (https://www.temi.com/editor/t/cysEDZbrel21S7oECXFxUnSj5UTmtuc6AsqLu7xTeEjMei19QstRQjVmfhalR4jKGS9T_1_6KQHb8FjZg0hWIZMDLo0?loadFrom=SharedLink&ts=795.91 (13:15)): Let me just hone in on a sub point of that. I think throughout history, whether through red lining or another process, you might want to name, the financial community has been a big player in perpetuating inequality, perpetuating in effect segregation. Is it still happening in your view? Daryn Dodson (https://www.temi.com/editor/t/cysEDZbrel21S7oECXFxUnSj5UTmtuc6AsqLu7xTeEjMei19QstRQjVmfhalR4jKGS9T_1_6KQHb8FjZg0hWIZMDLo0?loadFrom=SharedLink&ts=811.68...
Good things are happening even as we endure a global crisis. A Mumbai-based startup has https://interestingengineering.com/young-rat-plasma-successfully-reversed-aging-54-in-old-rats-say-scientists (successfully reversed the aging process in rats), a previously unthinkable breakthrough. A https://www.theverge.com/2020/5/26/21266277/spacex-nasa-commercial-crew-dragon-demo-2-launch-human-mission (new era in American spaceflight begins tomorrow), when two astronauts travel to the International Space Station onboard a SpaceX Falcon 9 Rocket. It will be the first crewed launch from the US since the shuttle program ended in 2011 and the first time a new type of spacefaring vehicle has carried humans from Cape Canaveral to the heavens since 1981. And Blackrock — the world’s most humongous asset manager — https://www.blackrock.com/corporate/literature/investor-education/sustainable-investing-resilience.pdf (reported) that the recent downturn in financial markets had only strengthened their conviction in sustainable investing strategies. At this and other firms, Environmental, Social, and Governance (ESG) driven investment strategies are increasingly understood as a source of comparative resilience in portfolios, not just ethically admirable allocations that are “nice to have.” This is clearly rad. But it also pushes one to wonder about the harbingers of resilience. We wanted to do better than hoping we’d know it when we saw it. So we called Jean Rogers, Chief Resilience officer at the Long-Term Stock Exchange (LTSE) and a founding mother of the global sustainable investing movement. As founder and CEO of the Sustainable Accounting Standards Board (SASB), she created industry-specific materiality frameworks that opened the investment profession’s eyes to the promise of ESG investing. And she’s hard at work to compound that contribution. In our conversation, she pushed us to see the set of things that matter to a company’s performance as more than just a static list. Conditions change. And circumstances can arise where something “wasn't material for a company one day and now stakeholders are up in arms about it. Now it's a material condition for the company.” She recently outlined a framework for this process of transformation in https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3482546 (a paper co-authored with Harvard Business School’s George Serafeim) which urged investors to understand materiality as a “process of becoming” rather than a “state of being.” In our conversation, she outlined five factors analysts can use to assess a company’s capacity for resilience to acute events or exogenous shocks. The first, is "bigness of vision," or: The transformative impact of their vision. “Bigness of vision matters because it creates momentum. People — other stakeholders, policy makers, employees, and investors — rally around the company because they want the company to succeed in achieving that big vision. So think of Tesla and its vision not only of producing amazing cars, but transitioning to a renewable infrastructure. That bigness of vision really can carry a company through volatile events and tough times.”On inventiveness: “That's prolific innovation where you don't have to really worry about your intellectual property much because you're actually confident you're going to produce more. So you don't have to protect it, you can open source it and enable human progress, enable others to build on what you're doing. And you're going to continue to execute because you're investing in innovation and you’ve created a culture of experimentation. Think of Google, which puts a great deal of of its capital expenditures into innovation and long-term strategy. Think of Amazon, which invests more in R&D than marketing.”Culture. “It's how you build a company that puts people first. This is a really important aspect which gives you a talent advantage over the long-term.”A signal advantage. “Being able to read through all these...
Unless we recognize “Something has died, and something new is coming after it,” it could take until 2040 before humanity emerges from the aftermath of this pandemic. That comes from https://www.baruch.vc/tom-baruch (Tom Baruch), a prolific “clean tech” venture capitalist who has led investments resulting in 18 IPOs and 8 M&A transactions and now operates from his family office, Baruch Future Ventures. He was our token optimist on this episode of Free Money, which was recorded on May 15th. But his outlook didn’t take the shape that one might expect. As an introduction, he offered “I believe this is going to last awhile. I don’t see us bouncing back until 2023 or 2024…. I don’t believe that the world [we used to live in] is going to come back.” Our mouths hung agape as he talked. But then he started describing a future that doesn’t sound so bad. His belief that, thanks to technology, “we’re entering a period of free clean water, free energy, and free protein” is beyond provocative. It brings to mind the world of Star Trek, where scarcity has altogether ceased to exist. Tom thinks we can get there soon. “People used to think that to really effect the kind of change we’re talking about it’ll take 20 years, you have all these scaling issues. And it’s all true. But now we have tools that we’ve never had before.” That means “It’s not gonna be a 20 year deal. we can do it in 10 years.” That sounds pretty good. But of course Tom isn’t saying it’s a guaranteed outcome. What scares him is that “the government - especially our current government - is gonna try and prop up broken old Industries. So we’re not going to add to GNP. That’s the problem. The way to add to GNP is free energy, free food, free water. That way we’ll build a very prosperous society.” Tom describes some of what’s needed to accomplish his vision in https://medium.com/@tbaruch/funding-an-entrepreneurial-blitz-against-climate-change-88fae1a548d2 (a recent paper on Medium), but the best way to access his imagination is by listening to this conversation and looking through https://www.baruch.vc/portfolio (his portfolio). He blends optimism and pessimism together in a way that can’t help but open your mind. We also answered three questions from listeners at the end of the show. This week we discussed: Why exactly is it bad that PE funds don't get marked down during a selloff? CalPERS caught some flak recently for unwinding a tail hedge program literally right before the market fell off a cliff. Was that bad luck or a bad decision? There is a fairly significant movement to cancel rent, which sounds pretty good. Would that create long-term consequences that are actually...bad?
And as a bonus, here’s Sloane’s https://www.youtube.com/watch?v=FUpS3aIonEY&t=2s (wipeout compilation from the 2020 ski season), which she mentioned in the introduction.
There is “a time bomb waiting to go off” in some American states. That’s according to Ben Oppenheim, PhD, a computational epidemiologist at https://www.metabiota.com/ (Metabiota) and our guest on this episode of Free Money. We spoke on the first of May, one day after the United States endured its highest death toll so far in this pandemic. And the outlook isn’t great. The places with growing case counts “have older populations, a lot of preexisting conditions, worse health systems, and more structural barriers to people getting the kind of care they need.” He stressed that “my worry is not wave one [of infections], but wave two.” That’s because “we can be successful in the first round, but until we’ve got a vaccine, really good therapeutics, or herd immunity, this thing could come back in a hurry. We’ve seen that in some countries that were initially successful.” These events — often thought of as the public health equivalent of a ‘hundred year flood’ — are vastly more likely to occur than people generally think. In fact, this is the third coronavirus outbreak this century. SARS struck in 2003, followed by MERS in 2012. So it’s not like this wasn’t on our radar. The chart below comes from a textbook chapter Ben contributed to entitled http://dcp-3.org/sites/default/files/chapters/DCP3%20Volume%209_Ch%2017.pdf (Pandemics: Risks, Impacts, and Mitigation). It shows estimates of the annual probability that the death toll from an influenza pandemic will exceed a given quantity. Note that the x-axis is denominated in millions, which means Metabiota simulations show a roughly 1% annual chance of more than one million dead. At one point in our interview, Ben muses about our collective priorities before the pandemic and wonders aloud: “What the hell were we doing?” And that’s where we want you to concentrate. This is likely to be the crisis that makes ESG-aware investment processes not just commercially viable, but highly relevant. The Wall Street Journal https://www.wsj.com/articles/sustainable-funds-fell-less-during-the-selloff-11588422269 (reported) over the weekend that ESG funds protected investors from some losses during the recent selloff, likely because they held fewer investments in energy companies. Long term investors, take notice. This is the second historically aberrant natural disaster we’ve endured recently. When we recorded our last episode shortly before New Year’s Eve, much of the west coast had lost power due to widespread wildfires. Integrating ESG processes won’t predict these events, but they will prepare portfolios with an awareness of future risks and promote better corporate citizenship. Ben reminds us that “Pandemics are not a health system event…when they hit, they engulf the whole of society.” So the question for you is: can you find your part in creating a better whole? We also discussed all of these questions in this week’s Dear Ashby segment: If states do wind up declaring bankruptcy due to the coronavirus, what would happen to state pensions? What have you started doing during lockdown that you plan to continue when life returns to normal? Because of the pandemic, lots of Americans are making more in unemployment benefits than they typically make in income. How should we be thinking about that?
It’s the end of the year. What have we spent all of this time talking about? Mostly what it means that pension funds, sovereign funds, endowments, and other https://blogs.cfainstitute.org/investor/2018/02/20/the-seven-kinds-of-asset-owner-institutions/ (asset owner institutions) collectively manage roughly a third of all the money on earth. They tend to be globally diversified and invest with long time horizons, which aligns them with the public interest because they cannot succeed unless human enterprise flourishes around the world. They also provide most of the world’s risk capital, which makes them the base of modern capitalism. Our mission at Free Money is to help them find the freedom to properly fulfill their potential, orient their operations toward projects that build collective value, and serve as truly effective stewards of society’s accumulated capital. It’s more profitable to try and extract value from them, so we have plenty of competition. But our greatest enemy is ignorance, not malevolence. So we spent the last episode of the year talking about at least five forces which work together to leave the world’s financial plumbing in thrall to the tyranny of low expectations. We’ll enumerate and examine each in essay form after this quick word from our sponsor. Are you aggravated by average? Obsessed with outperforming ordinary? Tired of what's typical?You're not alone. Most investors expect exemplary experiences, but reality seldom satisfies. That doesn't have to be true for you! Free Money is pleased to introduce Portable Alpha, a revolutionary sports drink with a propriety mix of caffeine, taurine, and orange.Future profits are assured once we've given you permission to order, and the first serving is free! It will be shipped in a black box with only a few additional fees once you order an additional 127 servings. You'll start performing abnormally once it hits your lips.The global supply of Portable Alpha is limited, and Free Money is its exclusive distribution agent. Don't miss your chance to buy it! https://freemoney.substack.com/ (Click here to sign up for the Free Money email list today).Profits will accrue to Free Money Holdings, a Cayman Islands limited liability company.The Influence of Unexamined Norms Substantially every form of diversity imaginable is present among institutional investors. They exist in China, California, Canada, Texas, Taiwan, and Tuvalu. Some invest to support educational institutions while others provide insurance or fund members of a certain family. At least one is meant to stabilize the country of Iran. With so much inherent difference, we wonder: why do they act so similarly? One reason is that they have constraints which vary in their specifics but create similar operating conditions. For instance, they often hold monopolies over the assets they manage, which creates incentives for staff to optimize for not getting fired, rather than what’s best for the organization. On top of that, conformity tends to be written into the law in the form of the https://www.oecd.org/finance/private-pensions/2763540.pdf (prudent person rule), which states: A fiduciary must discharge his or her duties with the care, skill, prudence and diligence that a prudent person acting in a like capacity would use in the conduct of an enterprise of like character and aims.On the surface, this makes a lot of sense. Skill, prudence, and diligence clearly belong inside of an investment decision-making process. But imagine trying to apply investment skill while required to mimic a person acting “in a like capacity” at “an enterprise of like character and aims.” What if you are able to recognize and access opportunities that your peer group can’t imagine? Are you to forego such opportunities and thereby constrain your ability to access abnormal returns? It does not pay to ask such questions in investment committee meetings, which exist to pursue and monitor certain prescribed forms of...
Many institutional allocators are troubled by the self-evident lack of diversity in investment management. It’s easy to suggest that one fix that: cultivate more diverse talent! Build a more welcoming environment for new funds! But how exactly would one accomplish that? Many pensions made worthy attempts with emerging manager programs, which were meant to support asset managers that did things a little differently. Unfortunately, those different managers were very much the same as others when it comes to delivering lackluster performance. So now they’re canceled. Not everywhere, but at enough pensions that it makes a trend. On this episode of free money, Ashby and I talk about what this means for diversity, inclusion, and innovation in the industry. And as always, we answer the questions on every institutional allocator’s mind. Specifically: Why are “long-run short sellers” worried about GPIF’s move to restrict stock lending? It’s legal to do anything you want to an opossum in North Carolina from December 29th - January 2nd. What would you do with those five days?
Apparently allocators will still consider backing investors who've had trouble with sexual harassment. WTF? But like actually.
Does misogyny cost money? Yes, but not enough. Ken Fisher - who runs the eponymous Fisher Investments - has a long history of inappropriate invective. One particular instance earlier this month at an investment conference triggered an outcry and then outflows of about $3 Billion. That response took remarkably quick action from the asset owner community. On this podcast, Ashby wondered aloud why these large institutions were quick to respond when a man says bad things, but drag their feet when it comes to deeper issues of racism, climate change, and technological disruption. Good questions to ask! But I wonder why Fisher doesn’t just lean into sexism. His Camas, WA advisory firm is only about three percent smaller after all of the fallout. I even went ahead and mocked up a new ad campaign featuring the man’s prodigious forehead. It could work! Misogynists need money managers too. Anyway, we also took questions from listeners. This week we answered: What’s the worst name you’ve ever come across for a financial services firm? What do you believe about investing, but know that you could never prove? What’s the best investment advice you’ve gotten from someone outside the industry?
Capital markets are an inherently queer place. Securities produce financial returns by manifesting intrinsic value. Or as some might say, “living their best life.” As America’s leading loft-based finance transsexual, the inherent gayness of creating shareholder returns this way has long been old news to me. But while Ashby and I were discussing queer issues on this latest episode of the Free Money Podcast, he reminded me that some have been working to exclude companies which support (among other things) the “LGBT Lifestyle” from their investment portfolios. The Inspire Global Hope ETF (BLES) is perhaps the largest such fund. And with roughly $150MM in assets under management, it’s no behemoth. But with a slightly bigger base of assets, it might form the basis for a poetically beautiful pairs trade. That’s where investors buy one security and bet against another, hoping to profit from the difference between their performance. The chart below shows: The aforementioned BLES ETF in khaki (the official heterosexual color). The LGBT Employment Equality ETF (PRID) in lavender (the official gay color). The MSCI ACWI index in black (the official color of benchmarks). An investor who bought PRID and bet against BLES at the beginning of 2018 would have captured a 12.7% performance spread before fees and transaction costs. In other words, if this fund gets a little bigger, one could build a business around betting against it. Here’s hoping. Have a listen to the podcast for some further discussion about queer issues, coming out, and (as always) pensions. And for fun, here’s a picture I took right before coming out two years ago and a selfie I took yesterday. You might say I’ve womanifested some intrinsic value in the meantime.
Fox News host David Webb accused American liberals of “https://www.foxnews.com/media/david-webb-climate-change-is-the-religion-of-the-left-prosperous-america-is-satan (turning climate change into their religion)” last week. An interesting thought. Pascal’s Wager came to mind while Ashby and I were exploring it on the podcast. It’s a 17th century philosophical argument about the existence of god advanced by the French polymath Blaise Pascal. The gist: humans bet with their lives that god either does or does not exist. He argued that a rational person should live as though god exists. If they’re wrong, they avoided sin for no reason. But if they’re right, the potential gain (an eternity in heaven) is infinite. I think this logic holds for climate change. If we’re wrong and the planet isn’t dying, we’ll have cleaned it up for no reason. A specific loss. But if we’re right, the potential gain is infinite. To me, it’s an easy choice. Check out the podcast to hear us talk through the logic in more detail. As always, we answered questions from listeners. Write with a question and we’ll answer it in the next episode! HBO’s show succession features a plot line where investors from a Canadian pension fund issued the most creative and aggressive swear words in the entire series. Is this realistic? I thought Canadians were nice. I saw that someone tweeted candid, negative comments about a startup and caught a lot of flak. Why is outward positivism such an entrenched norm in Silicon Valley? Why do we keep calling it a risk free rate when there is no risk free rate?
If financial risk doesn’t confuse you, you’re not paying attention. That’s advisable. Market minutia gets treated like breaking news around the world, and people listen even though it’s “a tale told by an idiot, full of sound and fury, signifying nothing,” as the late Jack Bogle http://srvo.org/in-conversation-with-jack-bogle (told me) in 2017 (and Shakespeare wrote a few hundred years earlier). But the mad moron has a megaphone. Traders listen and then act altogether, which makes them feel like risk exists in two states: on and off. It’s not so binary in real life. I’ve pasted a slide from Deutsche Bank’s 2019 market outlook below. At first glance, it shows that risk comes in at least thirty flavors. But seventeen of the scary things it lists have happened, and US Equity markets are just a hair’s breadth from all-time-highs. So are these things even risks? Ashby and I weren’t sure when we sat down to tape the last episode of Free Money, so we decided to phone a friend: Rick Bookstaber. He’s the chief risk officer for the University of California’s investment funds—which oversee roughly $120 billion—and a founder of the financial technology firm https://talagentfinancial.com/ (Talagent). Before that, he developed risk models to assess vulnerabilities and help stabilize the U.S. financial system at the US Treasury after the financial crisis and served as chief risk officer at Bridgewater, Moore Capital, Solomon Brothers, and Morgan Stanley. He also wrote https://press.princeton.edu/titles/10972.html (The End of Theory), an in-depth look at how to account for the human complexity of our financial system. In other words, we were glad he picked up. We talked about how agent-based modeling can be used to build a better picture of what’s happening in the markets and why you’re better off ignoring the ones which most often make headlines, like Brexit and the trade wars. Then as always, we took questions from our listeners. Check out the podcast to find out how the office ball pit below featured in our conversation. I am an Indian citizen, but has kept its money in Swiss bank accounts since my grandfather's time. As of this month, government has all my account details. I'm worried they are going to take my money. What can I do? I run a venture-backed startup in Austin, and the firm that led my "A" round is based in China. I love working with them, but worry that the trade war will somehow affect their ability to follow on in later rounds of funding and doom our company. Am I wrong to worry about this? What should I do? I'm a few years out of business school, working at a multinational company that signed onto the Business Roundtable's recent statement about shareholder value. Their words are nice, but nothing seems to have changed. Should I whistleblow? Would anyone care? Would it help?