Blind pigs and acorns investing

So my domain was the same — it was pension funds. By the way, I never predicted the global financial crisis but my backstop was, if I leave Merrill Lynch, do a year and a half of trying to do a pension consultant, speak to lots of trustees, speak to lots of CFOs and it is a complete failure, I am pretty confident Merrill Lynch or RBS or Morgan Stanley or Goldman Sachs would hire me back.

So I was driven by this clear sense of purpose and a desire to solve a financial problem. Also I was not doing it alone — I was doing it with Dawid, my co-founder and someone I trusted intimately. And so, not from a financial risk-and-reward perspective, but I actually thought my downside was pretty well-covered. KM: And when you started knocking on doors and calling people up, how difficult was it as a relatively young and inexperienced consultant to go into the consultancy waters?

Were people willing and able to take your calls? Or was it very difficult? He took out his business card and pointed to the Merrill Lynch logo, which is a bull, and he went on to say, look, Rob, you have got to understand — the only reason people talk to you is because you work for Merrill Lynch and, when you leave to set up your own business, no-one will talk to you.

That clearly did not work as a recruitment-retention technique but I think it did make a valuable point about credibility. Obviously, people need to trust you and trust is your integrity — do you do what you say you will do? Dawid and I were very credible — I think we had established a lot of credibility in what we did at Merrill Lynch.

We had deep domain expertise around derivatives, around pensions and around liability-driven investing. So we had that bit covered but we needed to establish ourselves as a brand. So a couple of things really — right from the get-go, Dawid and I have always tried to lead the industry through thought leadership, share ideas, put our ideas out there and build that sense that these people really know what they are talking about and are clear domain experts.

So that is point one — and use that to build a brand and a reputation around Redington. The second thing was a really simple one, which is I used to wear glasses. Lots of people now at SJP say, I did not know you used to wear glasses — and the reason why I wore glasses is it makes you look older, it makes you look more credible. Now I am older, I want to look younger and I wear contact lenses. But when I was younger, I used to wear a suit and a tie and wear glasses and make myself look older for exactly that reason.

KM: My co-manager grew a beard and wears glasses for exactly that reason! He does all our client meetings and he comes across as the mature, erudite one, whereas I sit in the background and try and do the thought leadership piece. So I am interested, Rob — how different was the reality from the original business plan when you set it up? So how different was the reality from what you expected?

Did you just say, if we build it, they will come? Or did you say, we need this number of clients by this day to validate what we do? And I think probably any entrepreneur would say But as I say, when we set up — it was not the FCA at the time, it was the FSA — and we wrote that we wanted to do to pensions what Jamie Oliver had done to school food.

And by that, we mwant we wanted to change the way people thought about pensions. And I remember writing how we wanted to be thought-leaders, that our way would become a gold standard and, actually, success would be that other consultants adopted our approach, which I think has proved to be the case. So it was not just financial objectives around number of clients and revenues. Of course, we tweaked our business model and all the rest but I would say the main thing is we were broadly directionally correct.

We just completely underestimated how long it would take. And then, two years after we started, the global financial crisis hit as well so that made things a little bit spicy. KM: By luck or judgement or, presumably, a bit of both, Redington has been very successful but then you came to the decision to leave your own firm, to leave your baby, to leave your co-founder and to go back into a more established business.

Can you talk about how your decision-making framework managed to strip out the emotion from anything else as part of that decision and what brought you to SJP? RG: It was partly some push factors and some pull factors. The background was, in , Redington actually tried to go and do a small private equity fund-raise as we needed some capital to grow. Up until that point, we had been completely self-funded. We had run what is called a customer-funded business model — so, as you get new clients, you get new revenues and you reinvest that — but that limits your rate of growth.

And we wanted to invest in technology and we wanted to expand into new territories. There is nothing like taking your business to investors. If you have children, no-one ever tells you your children are ugly but, when you take your business to investors, they do not hold back. And so, look — the positives were, we love the purpose of your business; we love the culture; we love the clients; you have an amazing client list and you have really long-term relationships with them.

But what we do not know is how reliant Redington is on you two, the co-founders — can you win new business and can you grow without the co-founders? And so they offered us some money but they hair-cut the valuation — they were very clear about that because they were like, we think there is a lot of key-person dependency on Dawid and you.

So that was the sort of push factor, which I had not really thought about. Interestingly, we had both stepped down on our 10th birthday, which was — so we had already put a new CEO in place. And then the second factor was, unlike me, a bit sliding doors. I was having breakfast with David Lamb, who was my predecessor at SJP and he basically said, look, Rob, confidentially, I am going to be retiring soon, we are running a process for my replacement and we would like to include you in that.

So in terms of my decision-making, once I had realised that, actually, I needed to find a way out of Redington, I then needed something that was aligned with what I cared about. If you imagine a Venn diagram with overlapping petals — what you are good at; what you can get paid for; the intersection of those two is your profession; what the world needs; and what you love — if you can find all of those things, at the heart of that is your Ikigai, your sweet spot.

I spent the bulk of my time really advising pension fund trustees — Redington is very much a business-to-business relationship — rather than talking to an end-client. We have, as I said earlier, , clients so, for me, it was very much in that Ikigai circle. The second thing is I knew the business very well. I am a big believer in not changing too many variables at once and it was still in my domain.

So although I was changing domains from pensions to wealth, the investment part of my domain was staying strong. They were a client of Redington so I knew the people and the organisation very well. So, actually, the variables I was changing were relatively small. And again, I always take the view that my downside risk is low — if I go in and do a good job, I am reasonably confident I will find other opportunities elsewhere. And so, in a way, it was a similar mindset of decision-making to leaving Merrill Lynch.

JTR: Changing gears, we have twice had Annie Duke as a guest on this podcast and she is a passionate believer in equipping people at a younger age with the tools they will need to make better decisions in life. That includes some statistical tools that she believes should be part of the curriculum at primary and high school.

I believe you share some of that passion, having written a book to educate children very early in their lives about financial matters. Can you tell us what the book is about and maybe this is the time to talk about the RedStart Educate charity as well. Really the idea is to start the conversation with children — and actually, secretly, with their parents — about money and how it works. And the backstory to that — and also to Redstart, the charity I founded — was, when I was working at Redington, it was very clear to me that financial responsibility had shifted from the people we work for — our employers and governments — to us as individuals, but no-one had really told individuals.

So you could find yourself at Schroders sat next to someone who is five years older than you and they have a defined benefit pension fund, which is worth many, many times more than you and your defined contribution pension.

To the average person, you both have a pension — except one is called defined benefit and one is called defined contribution — and how can they be that different? But, I promise you, they are very, very different outcomes and promises. One of the things — going back to that Ikigai — that I feel passionate about is And it is not a surprise, really, because financial education is not on the school syllabus — it was only put on the secondary school syllabus in Parents would rather talk to their children about sex than about money.

Money is a very taboo subject — we do not really talk about it. And, actually, decision-making about money has become infinitely more complex than it was 50 years ago. We have credit cards, we have store cards, we have pay-as-you-go So I am deeply committed, through financial education, to try and teach the next generation about how money works and how to make it work for them. JTR: Based on everything you have researched and your experience, what would you say is the most difficult financial concept to get across — not only to children, but to people in general?

Probably compound interest — it is the one that, I think, changes the game. You and your listeners work in fund management and have figured out that, actually, managing capital gives you massive leverage, massive compound returns on your efforts and your careers.

I think compounding is everywhere. It is not just financial compounding, knowledge also compounds, social networks compound — who you know and how you use your social network can make a big difference. So this idea that you can earn money on your money and you can earn money while you sleep, or you can just change your wealth by some very simple steps but done over decades, is enormous.

If he had stopped at 65, no-one would have ever heard of him. He would just be a guy with a few million dollars. RG: What he has nailed is what Joe talks about in his podcast — he understands that the most valuable asset is time. And yes, he has had very impressive returns but, actually, he has been compounding for 75 years. KM: That is right. Through some extraordinarily good environments but also managing, in the drawdown environments, to make sure you do not get hit too much as well.

RG: Yes. KM: So I totally agree with you. I have two young kids as well and I have a savings app set up for them. I do not know if we are allowed to plug other apps but it is called Bankaroo — so I have plugged it anyway! But you can put money into separate pots. So we have a savings pot for them, a spending pot for them and a sharing pot for them. And every week we put a pound into those three different pots and, on the savings pot, we have put an outrageous amount of interest so they can see the impact of that compound interest on a weekly basis.

And they like nothing better than to see how much interest they have made over the last week on their savings. The higher rate was put on it so they can see it on a weekly basis and so to try and really hammer home that importance of saving and the benefit of compound interest on that. Now, switching gears RG: Kevin, I was just going to plug another app — RoosterMoney, which is the same thing — and we have also done the same. And in fact, drawn out over a much longer time period, it is much harder to learn.

So if you are taking penalties in football, you immediately know whether you have scored, or if you are serving in tennis, your feedback is immediate — but, when making investment decisions, the feedback is often noisy and occurs sometimes years later.

And that means people make poor investment decisions and often learn the wrong lessons — they often do not save enough because they do not know how long they are going to live for; they do not think about the environmental impact of some of the decisions they make.

So how do we create structures or processes that better give feedback or teach those lessons to adults? RG: It is a great question and I know, based on previous podcasts, you are later going to ask me what one of my favourite books is. Basically they track these graduates from Harvard University and check in every five years and it is about their decisions about relationships and about their health and, 20 or 30 years later, who is still healthy, who is still in a healthy relationship with their partner, who has healthy relationships with their kids.

And I guess parenting is a great example of something where the feedback [is very delayed] Someone once said to me, you have 1, weekends with your children — spend them wisely. And it does not matter what mistakes you make along the way — we will only know we have been good parents once they have flown the nest and they are adults standing on their own two feet. And that is really tough, right? That is every decision you make every night — you know, do you help them?

Do you not help them? How do you prepare them to make decisions? Obviously, the parallel there is it is something that takes decades for you to realise the outcome. And this sounds terrible and completely unromantic but how many of us apply a proper process to identifying who is going to be our life partner.

I have been married for 13 years, I have been with my wife for 17 years and, in some senses, we are quite different people from who we were. So how do you know that you are going to build a life together? And one of the best ways to destroy your wealth is to get divorced. All of this does not answer the question you asked me because we never really think about these things, right?

I mean, who gets married and has a conversation about, if we have kids, what kind of education are we going to give them? What kind of parenting style are we going to have? And yet, when you do get married and you do have kids, these are absolutely the conversations you need to have. So somehow we need to understand and experience these concepts at a faster pace — which is exactly what you have done and I have done with the compound interest — so you can understand it even though it does not play out.

And the second thing is, it is all about habits and staying the course. How do I not get divorced because I spend my entire time at work and not enough time at home? Or how do I make sure I benefit from compound interest by putting money into my pension or my ISA every month. In the case of investing, automated saving is the best behavioural hack you can do to keep you on track to achieve the outcome you want to achieve.

KM: That is really interesting. JTR: Yes. I want to go back to your book because — and this goes in line with what you were just saying — one of most difficult ideas just to get across to people in general, and important for children as well, is the fact that there is only one future that will play out but there might be many different scenarios, and you just do not know which one will actually happen.

In your book, you have the example of bad behaviour and good behaviour and one tool we have talked about a lot in this podcast is how to adopt probabilistic thinking, which should help you assess the fact there is not only one outcome, but many different outcomes that can play out in the future. So we are interested in whether or not you have given any thought on how to educate people at a very young age to adopt probabilistic thinking — and what would be the best way to do this?

Is it through more books, like the one you have already written, for example, or table games, where you incorporate chance? Obviously Annie Duke is a former world champion poker player, which is probably one of the best games to understand probability and a whole host of negotiation skills — a wonderful, wonderful game.

But at RedStart, the charity we created, the way we teach is through what is called experiential learning. Earlier, I said it was about habits, and we use Montessori techniques to teach concepts like compound interest — for example, we use wooden blocks and building towers to understand how you can compound. So it is like being a hairdresser or an Uber driver — there is only so much hair you can cut a day, so you are capped out on how much money you can earn.

And if you are skilful at darts, you can make a lot of money. And if you are not skilful at darts, you do not — so it is about skill and do you understand your skill and can you leverage your skill? You can win the lottery. The Druids worshipped the oak as a giver of food and referred to it as the "tree of life" because it also hosts mistletoe, which was, and is, an important plant for celebrations.

The Druids also believed that fairies lived in oaks, leading the Greek writer Lucian to write in the second century the earliest surviving example of science fiction, the "Verae Historiae," "True Histories" or "A True Story," a then modern comedy based on historical mythology. In the book, Lucian writes of "Cynobalani" or "Puppycorns," dog-faced men who fight on the backs of winged acorns. Lucian was probably also referring to the pre-Celtic "magic-mushroom" cult lore regarding the "Oakmen.

If you walked into the woods at night, the Oakmen would tempt you with food from toxic fungi. Those who ate the food went insane. The only way to appease the Oakmen was to help them bury acorns in the dark of the moon. Further legend tells us that burying an acorn in the dark of the moon ensures you will receive money in the near future, linking acorn symbology with material prosperity. Why would anyone be out on a dark night gathering acorns? The belief is that acorns gathered at night are the strongest bringers of fertility.

The oak tree and acorns have long been associated with many gods and goddesses. The acorn is the Celtic symbol for Zeus and the Roman symbol for Jupiter. Many Celtic and Roman goddesses, including Artemis and Diana, were frequently carved wearing acorn necklaces. The acorn was considered a talisman to ward off evil spirits and was under the protection of Cybele, Goddess of Nature. The magician Circe, Daughter of the Sun, fed acorns to the sailors of Ulysses after she had turned them into swine acorns were used to fatten pigs in ancient times.

A Libyan myth states that Garamas, the first child of Mother Earth, rose from the plain and made an offering to her of the sweet acorn. Ever wonder why window blind pulls frequently feature acorns? Norse legend has it that Thor sheltered himself from a thunderstorm under an oak tree, leading to the belief that an acorn left on a windowsill will prevent the house from being struck by lightening. More likely, the belief stemmed from the observation that the oak tree is extremely hardy.

An oak can endure lightening strikes and fire and can continue to mature though considered ancient. For these reasons, many cultures have chosen the acorn to represent "strength secreted within," rebirth, regeneration and have considered the acorn a small but potent package of unmanifested power, thus a connected pair of acorns came to represent male virility. Age-old traditions from the British Isles guarantee the carrier of an acorn in the pocket or the wearer of the symbol on their person long life, good luck, immortality, youth, ease of pain, protection from storms, from getting lost and from evil intent.

Is it any wonder the motif has found it's way into jewelry design from ancient times through today? In , Bartholomeus Bruyn the Elder, a painter for the region of Cologne, Germany, who painted many portraits of people with rosaries, painted a portrait of Balthasar Eicheister, just betrothed as evidenced by the holding of a carnation in his hand and holding acorn-shaped rosary beads, since known as "Balthasar's Acorns.

Her Renaissance costume was completed with what is assumed to be a rosary of silver acorns. How did the acorn symbol make the transition from the Pagan belief system to that of the Christo-European belief system? The facts don't seem to be documented; however, the symbology appears to relate to the proverb, "A seed can only grow into a tree by first falling to the ground and dying.

The juice of the gall could be used to darken the hair; the powder of the acorn could get rid of superfluous flesh and warts; the gall could be placed on decayed spots of the teeth and could treat bad breath; acorns could cure constipation probably due to the tannins ; and a juice extracted from acorns could be given to alcoholics to cure them of their condition, or to give them strength to resist another bout of drinking.

Of course, the scientific community still had to fight the superstitions of the day. In the s, if you wanted to find out if a child was bewitched, in silence you would place three acorns in a basin of water beneath the child in it's cradle. If the acorns sunk, the child was bewitched. Similar lore said that if two young lovers wanted to predict their future together, they could place two acorns in a bowl of water. If the acorns drifted together, they were certain to marry.

Here's the secret: Acorns will drift together if placed closer to each other than to the edge of the bowl.

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Tax-credit buyers must remain in the houses they buy for at least 3 years. Anytime after 3 years they will be able to sell their homes. Part of me wants to keep ideal upscale houses for fractions of their cost and holding them as rentals. But, the prospect of buying bargains solely with profit from a prior sale and selling them quickly to millions of new buyers, who will rush to buy their first homes, is irresistible.

As prices rise along with interest, it will be much harder to sell. During the Nixon recession I was funding down payments for buyers by having them create an Option to buy the house they were trying to buy. Sometimes it shared future gain. Once documented and recorded properly, these fully disclosed Options could be sold for enough cash to provide down payments and closing costs. Since there was no additional debt involved, even FHA loans were approved.

All documents needed to exercise the Option were escrowed. Initially, as a Broker, I used this technique to spur sales. This attracted lots of buyers. Often, I agreed to take an Option on a house in lieu of a brokerage fee. Still later, I began to provide the funding for the down payments for buyers by having my company buy the Options.

When prices began to rise and people began to sell their homes I shared in the profit in accordance with the Option terms. After ten years or so, when I summed up, I discovered that I had bought back almost half of all the homes that I had sold as a Broker and as an entrepreneur. In all of these situations, the Option technique previously described combined with private financing can enable buyers to buy while creating profit for lenders and sellers.

Buyers must be able to qualify for first-time homeowner tax credits. One way to resolve this is to enter into a sale contract that incorporates the tax credit as part of the purchase price and down payment; then to see whether or not the loan is approved. If they completed their purchase before they filed their tax returns, they could claim their credit refund on it. Those who have already filed their tax return can file an amended return on Form X. In any event, until December 1st, sellers have been given an outstanding tool to attract buyers.

Think of this as additional cash that can be added to any transaction for the benefit of buyer, seller, lender, or possibly all three. The cash tax credit could be used to motivate more tenants to become buyers if it were described in terms that tempted them, or solved personal problems. It could be further secured by an assignment of the amount of tax-credit-cash that you calculate would be coming back to them.

How might you increase the price of a house? Anytime a house is sold with seller financing it is commonplace to increase both the price and the interest rate on the loan to offset the higher risk that selling to an unqualified buyer might incur. That might explain part of a price increase. Another maxim in the seller-finance business is that buyers are more interested in down payment and monthly payments than in price.

If you reduced the interest rate, you could increase the price and payments would still be sustainable. Plan B might be to finance the house with a combination of payments that are less than market interest and a short-term balloon Note. Loan terms would require that all of the tax credit be applied toward the principal on the balloon Note rather than to accrued interest.

The cash would be taxed at lower long-term capital gain rates for non-inventory property; which a former rental would be. Depending upon the price and terms, you might motivate buyers to pay more if you allowed them to keep a portion of the tax credit for their own use. Your ads might easily be confused with car-dealer ads. A prevents school districts from forcing transgender students to use facilities that correspond to their birth sex rather than gender identity.

The new law also requires the state education commissioner to establish guidelenes for schools to acknowledge name and gender-identity changes and pronoun use and "procedures to allow students to participate in activities that correspond to their gender identities. The Legislature passed the bill — an effort led by Assemblywoman Valerie Vainieri Huttle D-Bergen — in a vote in the Senate and a vote with three abstentions in the Assembly in June. In both houses, the bill had bipartisan support, but most Republicans voted no, and a few Democrats abstained or voted no.

The new law will help change cultural perceptions of trans children and hopefully influence how students treat each other in and outside of school.

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