Joseph Moore: The Investments That Matter Most May Not Be in Your Portfolio

Please stay tuned for important disclosure information at the conclusion of this episode. Hi and welcome to The Long View. I'm Amy Arnott, portfolio strategist for Morningstar. >> And I'm Christine Benz, director of personal finance and retirement planning for Morningstar. >> Our guest on the podcast today is Joseph Moore, a historian and author of the bestselling book How to Get Rich in American History: 300 Years of Financial Advice That Worked and Didn't, where he chronicles all of the various things Americans have tried to do to get ahead over three centuries. He's also an investor who went from being an academic to funding a tech startup, buying land on the moon, founding a cryptocurrency, and owning dozens of investment properties. So Christine, this was a really fun conversation where we covered a lot of ground about the history of financial advice in the US, as well as Joseph's own adventures in investing and money-making ventures. And one of the really interesting things he said I thought was that who you marry is actually a really strong indicator of financial success. >> I really liked that part of the conversation too, Amy, as well as his discussion of the secret role of women in household financial decision-making. I also thought Joseph's conversation of what he calls the despair industrial complex was incredibly thought-provoking. >> Yeah, those were all highlights for me, too. All right, so let's roll the tape. Joseph, welcome to The Long View. >> I am so excited to be here. Thank you for having me. >> Well, we're excited to have you. You started out as a college professor, and I wanted to ask how did you first get involved in real estate, investing and writing about financial history and what what gave you the idea to write this book? >> Um dodging a bullet is the answer to that question. So, it's 2006, I think. My wife and I were graduate students and back then the lesson of history supposedly was clear. Everybody told you the lesson of history was renting was throwing your money away. And instead of thinking about that like a historian cuz I was literally getting a PhD in history as a graduate student. I nodded my head like everybody else did and we got we're both graduate students and we got a no income no verification loan to buy a townhouse which is sounds as ridiculous today as it was then but nobody thought it was ridiculous then. Fast forward to 2008, friend our church offers a personal finance class for families. We went, they made us fill a budget, we go home. My wife goes to sleep. I did not sleep a week. I literally paced the house all night cuz I was thinking who who gave us a mortgage? Like what We have no business owning anything. We're graduate students. Um and so we put our house on the market. It sold on a Saturday and the reason I remember the Saturday is because the following Saturday our neighbor put her house on the market and it never sold. So, it was the 2008 Titanic had sunk and we were the last two people off of it. And I just kind of woke up intellectually and thought why did I not think like a historian? So, I I had no business training whatsoever. But I wanted to come at this topic as a historian would to ask what were people told to do. Did it work? And if so, what can we learn from that? And so that began kind of a over a decade long journey of trying to find absolutely every scrap of financial advice I could discover in American history. And as it turns out what everyone thought always worked was always changing. And so in every generation people finally feel like well, we finally figured out finance and what to do to actually get ahead and that it changes and you know, generation by generation people have to adapt and that's one of the things that you kind of take away from studying the past is we think the past is this stable thing and we are what moves through time. But the mean is moving behind you. And we can learn a lot by seeing how much change other generations had to endure and I you know, I got lucky and endured that change on the right side of the '08 financial crisis. >> Mhm. So we want to delve into some of the lessons that we can all learn from history, but we wanted to stick with your background a little bit. You decided to use what you know about history to make a million dollars and you actually succeeded at that. Did you always have a more practical bent than the typical academic? And I'm curious what people in your circle, your academic circle, thought about your money-making efforts. >> um they thought I was crazy, uh bluntly. Um so I have a lot of dear academic friends who who kind of cross all ideological spectrums, but there is a tendency in academia, especially in the humanities, where I reside, to think and talk very grandly about the working class. Very few of the people who make such statements are actually from themselves the working class. And I I was raised in rural South Carolina. You know, I come from where the money was not found. Nobody in my family had money. I didn't know anybody I didn't know a single person in my entire life I probably was in my 30s who went to Ivy League school. So like it there there was just this was a world apart from most academic backgrounds. I have a a fun game I play with myself when I'm in academic conferences. We're sitting around shooting the breeze, drinking a beer or something and I'll ask people, "Where did you go to high school?" because they're not ready for that question. They are thinking where did you go to grad school, where did you do your undergrad? And so they'll just tell you and I'll go look it up and almost inevitably it's like the most elite public education school or a preparatory academy somewhere. And I'm like, don't you write books about the working class? But I can you know, my father used to climb underneath mobile homes and inspect electrical wire. Like that was his job. He made $14,000 a year for a long time. And so I was just raised around the trades. I was raised around guys who you know, did working class jobs and we had a working class life and it didn't occur to me to not have those values. And I remember when I got into academia, I was shocked cuz it was the first time I met people who would tell me without thinking about it that something was beneath them. Like I wouldn't do that. That's beneath me. And I was like, something's I I it had never occurred to me that something was beneath me to do. Uh and so yes, I do have a more practical bent, I think than the average especially humanities academic. And that led me to see things differently. And I think the one of the one of the things that's been a joy of this book tour is that in the world of finance the reason my book is so different is that it I didn't take any of the financial assumptions for granted that everyone just assumes are there. I asked different questions. And from the academic perspective it never occurred to me that those questions weren't worth asking. And hopefully that's led to a unique a unique book certainly. It's been a crazy ride for me. >> Yeah, it definitely is unique and also very funny. So I really enjoyed reading it. >> Thank you. That was intentional. I really wanted it to be a fun read. I mean I I told somebody I wanted to write a history of everyday people's finances that everyday people would enjoy reading. And so that's been one of the most rewarding things is people say they enjoyed it. You know, that it's fun to read cuz even I I remember when it was fun to read. So we need more books that are fun to read. >> Yeah, especially about finance. Um so one of the very first ideas you introduce in the book is the phrase go ahead. And you write that this was sort of like a 19th century internet meme that meant moving to a better place than you began. Can you expand a little bit on what that phrase means and what makes this idea of going ahead uniquely American? >> Yes, so the subtitle of the book is 300 years of financial advice that worked and didn't. And very few people have picked up on that, but the reason I did 300 years was that predates the American Revolution. And to some extent, what is the first uniquely American financial advice? And that advice is basically this, if you look around you in the poverty-stricken town in which you live, England, Scotland, later Italy, uh parts of China, Japan, if you will get on this rickety boat for roughly 2 months, then you can actually have a chance to get on the property ladder and move up with your life and go ahead from where you are to a better place and your children will have a chance to do the same. Now, that sounds inspiring, you know, on our side of the boat, but if you're on the other side of the boat, that's a risk-reward proposition. It's not entirely clear it will work out. And to be clear, there are some people for whom it does not work out. Some of those boats didn't land in places that worked out. But the idea that you could take a risk to move your family from a place that you would never get ahead to one where your family could actually see a better life at the end of yours was a uniquely American proposition at the time. You had to actually get on the boat and do it. And so that idea pervades the 19th century especially. And people would talk about this in newspapers, in books, in bars. Men, women, like people said it's a go-ahead culture. They commented on this over and over. We're a go-ahead, not get ahead. We talk about getting ahead like it happens to you. But their assumption was that go-ahead was something you had to get up and go do. And this crossed decades and the century all the whole of the 1800s. It was a white idea, a black idea. I mean, Frederick Douglass, the famous abolitionist, we remember him mostly for his speech What to the Slave is the Fourth of July, which is an incredible speech. We teach it in schools. I've taught it. We should continue to teach it. But in his lifetime, that wasn't even close to his most famous speech. Far and away, his most famous speech was called Self-Made Men. And in that speech, now the the gendered term there is just the term of the time. He means men and women. But the idea of that speech, the crescendo line, is "Maybe I cannot be president," he says as a black man in the 1870s, "but I can be prosperous." And you have to think about like everywhere he went, white audiences and black audiences were calling out for that speech. And after he says, "I can be prosperous," he says, "Our motto is go ahead." And that idea was pervasive and and one that we've largely lost. We think we think getting ahead happens to you. They thought that you happened to it. >> So, a central idea of the book is that getting ahead or maybe going ahead is easier than ever, but we constantly see headlines about student debt, housing affordability, economic decline. And I would say that statistics I've seen on economic mobility in the US are pretty persuasive that it's not really what it once was. But maybe you can talk about that issue, why the media narrative is so negative and often at odds with historical evidence. >> Mhm. So, there's kind of two ways we can take that conversation. One is the rhetorical conversation and one is the statistics. So, let's do the rhetorical first. >> Okay. >> Rhetorically, I can find people telling you the American dream is dead probably 300 years before I can find the actual phrase American dream, which comes up in the 1930s. In In 1670s, this is a years before Hamilton is going to rap on Broadway. In the 1670s, the colonists of Virginia burned their own capital to the ground in anger because no one could get ahead anymore. Like they was So, it's like from the very beginning, there's been rhetoric around no one's getting ahead, you arrived too late. There's big speeches in the 1800s saying this. One of my prized possessions is a 1984 best-selling book, sold nearly 100,000 copies, that said that the baby boomers would never be able to afford to retire. And so, the rhetoric is very old. I call this big woe. A kind of despair industrial complex, because there's no clicks for a journalist, there's no votes for a politician. Heck, there's there's no tenure for an academic like me if I just get up and tell everybody that the world is getting better. But, I can have all of those things if I tell you it's getting worse. So, there's kind of the people who are giving that message out are actually being empowered by that message to implement their solutions or to monetize their traffic or whatever it is. But, you actually end up getting penalized for listening, cuz if you believe no one gets ahead, then you will not take the actions necessary to get ahead. So, there's the rhetorical part of it. All right, but let's move to the the statistical part of it. There's two buckets of those mobility statistics. One of them is wrong, and the other one I will take and use and flip on its head and show that it actually shows that it's a lot better than you think it does. The first set of statistics that came out about mobility showed that the 1800s had this wildly rapid upward mobility in America, and then it's declined ever since. The problem with those statistics is they were almost all taken from Iowa. >> Mhm. >> The thing about Iowa is that it's not really representative of the whole of the United States. It just happened to have a particularly good data set. And so, a lot of the early mobility stats that celebrated how fast people could get ahead in the 1800s and early 20th century, and then had the decline of it, basically had forgotten about a lot of poor people, especially minorities, who are just aren't in the data. And so, when you combine the actual different demographic data sets, you find that mobility has gotten faster, not slower. Well, we forget how impoverished early Americans really were. Then you look at something like the Raj Chetty famous paper in Science that talks about, you know, um basically mobility of Americans peaked for the generation born right after World War II, that they got ahead of their parents faster than any generation, and then it slows down after 1980. Okay. First of all, what they're really measuring is moving from the bottom to the middle class. And for the chance to go from the bottom to the middle, that is probably true. However, their parents were living through the Great Depression. So, this is a kind of skewed data set. This idea that like, "Oh, my parents lived through the worst economic collapse in history, and I'm doing pretty well." isn't necessarily It's, you know, the reality is the quality of life that we're living today absolutely dwarfs the quality of life of the early baby boomers. So, when I look at that stat, I say, "Okay, what what do we see? This is This is the Chetty data that I'm using." If you look at people born in the bottom fifth, six in 10 will get out in their own lifetime. That is not perfect mobility, which would be eight in 10, but it's not that far off. Four in 10 make it to the middle class. One in 10 go all the way from the bottom all the way to the top. That is, compared to the rest of human history, mind-blowing upward mobility. The flip side of that is downward mobility. Of children born in the top fifth, six in 10 will fall out in their own lifetime, which is the exact same as Denmark. So, we have a rhetoric around mobility that is kind of skewed to the idea of one generation's experience. But when you pan the camera back out, you look over 300 years of history, Americans are getting ahead faster than our ancestors could have ever dreamed we could have. >> You also note that your father hated rich people and it seems like that's sort of a growing attitude in the country now. You know, we see lots of resentment toward the wealthy and you know, interest in taxing billionaires, things like that. Why has hostility toward wealth remained such a persistent part of American culture? >> So, I think there's I mean, that's a great question, by the way. I just, you know, I don't want to pretend that I'm going to unlock that mystery in a couple of minutes, but I'd probably take it in two kind of general ideas. One is the kind of upward mobility motif that is the American dream or or go ahead, as they used to say. There was an empowerment of people at the bottom that was very unusual compared to any other place in the world at the time. And that gave people a voice to decry anything. But we have I mean, the free press may be honestly part of the answer. Just the idea that you lived in a in a nation where such opinions could be freely expressed without fear of retribution from said elites and rich people was somewhat unique. And so, the ability to print those ideas and those complaints, there may have been those complaints for all of history, but you can't read them very often. I mean, you got the levelers in England and these, but they're it's not common. But I think the other thing, the reason that we seem to think it's getting more loud today, I think we probably misjudge how local life used to be and how national our media landscape has become in the sense that most people's experience with the rich was local. It was the local elites that they knew. They they may know the Rockefellers exist, but they never met one. They've never walked past their Park Avenue homes and had to like gawk at them and wonder why they have to live in a tiny apartment. Some New Yorkers might, but most people in the country are living a very local life. And now we have a very nationalized media. And so if you go over to the previous time that we have an explosion of kind of critiques of wealth from a kind of socialist perspective, the way we're seeing now, the last time was around around the presidency of Eugene Debs. And kind of started with a populist angst about the railroads. Well, what was happening with railroads and radio is an era in which we're nationalizing our economy and our media. So anytime local people are suddenly confronted with narratives about national elites that they'll I've never met Elon Musk and probably never will. Probably won't see him with my own eyes. But I'm very aware of him in a way I would not be if my media consumption and my life was entirely local. And most people's lives generally were. >> One of the book's main ideas is you live most of your life in slow time and that's a quote. You get rich in fast time. Maybe you could talk a bit more about what that means. >> Yeah, so most of us don't think a lot about financial history. It's just that's not It's not top of mind for most of us when we wake up in the morning. If we ever think about financial history at all, almost certainly it's what I call fast time history. That's when everything is changing everywhere all at once to quote the movie. And a handful of smart people saw it coming. Everybody else got wiped out and you just don't want to be the dumb people. It's always 1929. It's always 2008. And the problem with those histories is not that they're not good and fun. They are. But they're not written to teach you what to do with your money. They are written to entertain you. And they are very good at that. Like you are supposed to flip the page or look at the movie screen and scream, you know, "He's behind you. The subprime mortgage lender is behind you. Run away from the mortgage." Like, that's what you're supposed to do with those histories, and they're very good at that. But, they're not there to teach you what to actually do with your money because most of financial history is not fast time. Most change is slow and imperceptible. And by the way, that doesn't mean it's quiet. It could be very loud in fast time. One of my favorite things to do when I'm giving public talks is I go around like I give talks and, you know, different organizations or whatever. And I will put on the screen two quotes from the New York Times. And one essentially says, "A depression is right around the corner." And one says, "A booming economy is right around the corner." And I tell people, "These are less than three months apart." Headlines of the New York Times. Now, guess the year. And people will, you know, hands go up. 1939, 19, you know, uh 2007, 2008, 1929, 1930. I tell them it's 1948. And then I ask if anyone can remember anything that happened in 1948. And usually most people cannot because it was a very boring historical year, especially for markets. And yet people were screaming in the headlines that boom or bust was right around the corner. So, slow time can be very loud, but most of your life is lived with people being loud and volatility kind of staying within a normal range. And that's where most of your financial life will be lived. That's where most of your financial decisions will be made. And it's the decisions you make in slow time that can be stress tested in fast time. And people usually leap ahead in fast time. Any business owner knows this. They'll They'll have a phrase something like, "You work and you work and you work and nothing happens, and then out of nowhere everything breaks." And that's most financial life. >> You also argue that people should take more risks. What kind of risks are actually worth taking? >> Yeah, so let's first of all, let's define risk because some people can hear that and think, you know, put out a HELOC on the house and put it all on Bitcoin, uh, which is gambling. And the difference between gambling and risk could be summarized simply as, do you have some measurable impact on the outcome? You know, I can't affect the price of Bitcoin. Nothing I'm going to do will shake it. But, I can have some measurable impact on a whole lot of other risks that I take, whether it's an investment property that I'm going to turn around, whether it's an investment in a small business that I'm going to, you know, run better, whether it's a rearrangement of my investment portfolio so that I'm I'm putting away more money than I otherwise would. But like, if I have some control over what's happening, then at least it's a risk, not a gamble. And I think most risk, if you go back through history, the idea that most of your risks worth taking were all in the market would have not made any sense to anyone. Even business leaders would not have understood that. Most of your risks were going to be in your business or your career. One of the things I think people can misread in much of the literature, including in my book, you got to be careful, is I'm not saying quit your job and go start a small business and risk it all there. There's ways to risk in business and there's ways to risk in inside of a another business, like taking a salary from somebody else's business. But what I think has happened in the course of the last four to five decades is because the baby boomers have had such a wild successful run of having their retirement savings make them rich, we have assumed that the way you get rich is by slowly, steadily putting money away in low-risk assets. That usually did not work in history. So, the risks worth taking, the first one is in your career. You know, when young people if I'll talk to young people and they'll say, you know, should I be putting a hundred, two hundred dollars a month away in the stock market? Sure, sounds like a great idea. But just quick question. Is there a credential that you could go get that would help you in the next five years double your salary? Put your money on that. I mean I I met a guy researching the book who's never been to college, makes a fabulous salary because he's gotten every credential in the industry for airline mechanics. And you literally can't take the plane apart and put it back together, which you have to do every so many miles, unless he signs off on it. He's doing great because he invested in his career. There's a big difference in the income of an entry-level nurse and a nurse anesthetist. And so first and foremost, invest in your career, invest in getting better and better so that your income can grow by an exponent. But then there's small business. I mean that really is one of the ways most decamillionaires and above got to that point was by owning, investing in a small business. And we have more such decamillionaires and above than we've ever had in American history, even adjusted for inflation, by the way. And most of those people are doing very unsexy jobs in industries you've never thought of. Like The Wall Street Journal ran a thing on on these, you know, men and women who are doing this, one of who has a carpet removal company specializing in over the summer carpet removal because schools, when they need new carpet, they've got like 60 days max to pull that off. And you got a whole school. And he's just specialized in removing carpet for schools. And he's, you know, worth 10 million. And I've interviewed so many people like this in researching the book who are doing things you would have never thought to do. So take the risk in your own career, small business. Uh I think those are risk worth taking. >> So if most wealth is created in occasional bursts rather than a steady march upward, how should investors position themselves for those fast time moments? >> So I'm work That's a great question, too. I'm I'm working on an essay on this for my Substack right now. I have it wrestled down, but I want to make it interesting and fun to read. So, that's the part that How do you How do you make social sciences equations fun to read? It's not always an easy circle to square. But, um it basically boils down to this. The equation's going to look something like this. You're going to have volatility, which you can't predict. You're going to have concentration of assets, which you control. You decide how concentrated your risk profile is. And then the other things you can control outside of that is how much liquidity do you have against how urgent are your debt deadlines? Not not the amount of debt you have, but the payment schedule for that debt. Uh and people who are in different industries know that debt works very differently in different industries. If you have a lot of debt, but it's all in, you know, 3 and 1/2% mortgages on rental properties, your debt deadlines are pretty easy to manage. If you've got a balloon note coming due in 18 months, that is much harder to manage. So, if fast time hits when you have a low liquidity and a looming debt deadline, you can get wiped out quickly. And so, needing to manage the liquidity versus the deadlines for your debt is one part of that. But, the other part is the concentration. Fast time rewards and punishes concentration. So, when fast time comes, when everything shifts, the people who are concentrated in the areas that it's in are the ones who out they outperform everyone else because of the concentration when everything shifted. And of course, same thing to the downside. And so, you have to think very strategically about where do I want to be concentrated when change comes? And when that change comes, especially if it comes in the way I wasn't expecting, can I survive it by looking at the relationship to my liquidity and the debt deadlines that I have to carry? And I Now, that's again, you could see why I struggled to make that essay fun to read. But, you just have to understand that financial time and and regular time don't work on the same speed. So, imagine I put, you know, on your wrist a regular, perfectly timed wristwatch. And then I take another clock and I take it to the floor of the New York Stock Exchange. The one on your wrist is going to tick with everyone else's time, but the one on the Stock Exchange is going to tick for every normal second of financial activity. On the average month, the clock on your wrist and the clock on the Stock Exchange are going to roughly you know, they're going to align pretty well. Cuz there's an average month with an average amount of up and down, and so they're going to stay aligned. But every now and again, that clock on the Stock Exchange speeds up incredibly or goes backwards. And and so financial time can operate at a different speed than the time of the life you're living. And so you want to be concentrated in the right places when that happens, and you want to be able to survive it if you're concentrated in the wrong places. >> We also wanted to ask you a couple of questions about the history of financial advice, which you also cover in the book. And you argue that financial advice as a profession emerged almost accidentally. There was no job title of financial advisor before 1969. Can you talk about how the profession of financial advice first got started? >> Yeah, so let's go before the dawn of modern financial industry. Where was most financial advice found? And this surprised me because the trail went cold for me as a historian. I'm basically a detective, where I'm reading dead people's mail trying to figure out what happened. And the trail went cold right around 1910, 1912. Where I ended up finding most financial advice before then was in housewife manuals. Cuz the average housewife has to manage the whole family's income and outgo. Um women's magazines are replete with financial advertisements for mortgage companies or investment opportunities. So like women were really active in forming financial ideas and executing them. And that's a part of history that's been completely lost. >> Hm. Then something happens in 1912. All financial advice before 1912 was kind of easy to understand. Everyone knew what to do. And that basically boiled down to, you know, if you were going to have paper investments, you wanted to invest in bonds or dividend yielding stocks at about 5% because there was 0% inflation. And then in 1912, when there's 0% inflation, everything changes. Inflation goes from zero So, 1912, a gallon of milk cost $0.24 a gallon. If I go back in time to 1812, think about 1812 to 1912. In 1812, Napoleon rules France and men wear hose. Like that's a different world than 1912. And in 1912, inflation goes from 0% to the next year it goes 8, which is double where we are right now. 8, 18, 17, 17, 15 in 5 years. Prices doubled. There wasn't a mother, a grandmother, or a great grandmother who knew what to do. And everything that used to work stopped working. And all the things that you used to be told not to do, like invest in stocks, started to work. And so there's this explosion of financial literature in the 1910s and 20s about how to understand this new world and what to do. But there's really not anybody to turn to who has mastered this and kind of codified it into a job description where they help you. You can go to your banker and they can help you execute some things. You can go to a broker, but most people don't have brokers and most people don't buy stocks. That starts to shift in the 1960s. Most people's financial purchases were one of two things. If it was a market or you know, put aside real estate, which was actually what most people spent their money on or invested their money with, but let's go to paper investments. It was mutual funds and insurance. That's what most people did. And in the late 1960s, there were all kinds of scandals about just how egregious some of the sales techniques were for basically selling insurance products that were mostly good for the insurance company and selling mutual funds with huge fees. I mean, fees that would that would make mutual fund advisors today feel embarrassed if they got. And while that was great for the industry, was bad for the average consumer, and a group of mutual fund salesmen and insurance salesmen agreed to have a meeting at the Chicago O'Hare Airport. And I can't remember exactly how many. It's not many. It's maybe a dozen or so people fly in. These are like the top selling mutual fund and insurance salesmen of the country, and they all feel like this industry is kind of getting rotten, and they don't want to be associated with that. So, they they fly in, they have a meeting, and they decide we're going to found a new entity, a nonprofit that's going to be financial advising. So, they fly in as insurance salesmen and mutual fund salesmen, and they never leave O'Hare, by the way, and then they fly out, and they're financial advisors. Like, that's a change like they changed their title in that meeting. And going forward, that idea spreads that you could have certified financial planners or financial advisors. Different groups spring up to do it, but that's a new thing in the '60s, and in a way I I argue it's actually a really good thing. Because prior to that, you couldn't really find anybody in your local community who could help you understand all of these different financial investments all at the same time. So, it's a new profession because it's an entirely new investing world. >> You write in the book that Dave Ramsey has changed more people's personal finances than maybe anyone in history. So, why do academics and financial experts tend to look down on figures like Ramsey? >> Well, I've always loved Morningstar, so something tells me that the Morningstar audience is not going to like that. You got some very sophisticated financial listeners out there. So, let me make my case for why gurus get a bad rap, uh especially amongst professionals. Finance professors have incredible equations that work very well on spreadsheets. What gurus have is the awareness that Super Bowl ads work. Birthday sex leads to baby number three. And I have yet to see a finance equation that models accurately a midlife crisis or a child with special needs. When you live in the real world and it's dynamic and changing, you need some rules of thumb. And what you find when you look at studies of what people who read personal finance gurus actually remember, it's not what's in the book. It's what do you remember from the book? And if I go to the average person who read a finance guru, let's just pick one off the shelf that's particularly egregious, Rich Dad, Poor Dad, which I think we can all agree is a an eye-roll level book. But if the average person only remembers that they should buy assets and that assets are defined very simply as things that make you money instead of cost you money. That's what they actually remember. Now, as a thing to remember, that's not such a bad thing, right? And so, if you look at the way people read gurus versus what gurus say, there's a disparity. And that disparity really matters. So, let's look at Dave Ramsey. And every single academic discipline has a paper somewhere in a journal. I And And I'm not making this hypothetically. I have read these papers that condemns Dave Ramsey. Sociology, women's and children studies, history, finance, economics, they all have an anti-Dave Ramsey paper somewhere. And sure, there's plenty of things that Dave Ramsey says that I could disagree with. But a German economics student who did not have a dog in the fight, who was just looking for an interesting thesis to write, I think it was his PhD thesis, had the idea to overlay credit card credit card balances with where the Ramsey show, which was an AM radio show through the '90s and 2000s, would show up in a new market. In other words, when a new radio station would pick the show up, did it change anything? Lo and behold, credit card spending went down in that metro 1.3%. Well, how do you correlation is not causation? Or you know, all those things. He has the idea to realize AM radio waves cannot penetrate mountains. Therefore, the zip codes on the other side of mountain ranges won't get the show. They won't get the signal. And sure enough, the credit card spending data there stays the same. So, if you do the math on that, which I have, that means that over the course of his life, Dave Ramsey has saved the American economy, the GDP of a mid-size nation-state, just by yelling at people to sell the car. Now, you can agree or disagree with the finer points of his ideas, but I challenge you to prove that you could save the American economy, the GDP of a mid-size nation-state, and then concentrate most of those benefits to average working-class Americans. That's a pretty hard trick to pull off. And so, if you step back and ask, what is the effect of these folks versus what is the image of the missed Tik Tok gurus, you know, selling scammy courses, they've actually had quite a big impact for the good. Now, yeah, I tell people don't buy their seminars. Just everything they say that's good is usually for free. And so, you don't need to do much more than take what's for free. >> You talked at the beginning about your first experience buying real estate and getting a loan right before the financial crisis. We also wanted to touch on some of your other adventures in investing. You once invested in a West Coast startup that developed technology to help ALS patients communicate, but you ended up losing your entire investment. >> Mhm. >> What lesson did you take away from that experience? >> Uh well, from that one in particular, and I I just have so much admiration for the young people who started that business, but what I took away was it's really hard to have a successful business. Like successful business is hard. And anyone listening to this who's run a business understands that. Anyone who's I know I was joking with somebody recently. They said, "What turns you from a lefty humanities professor to a kind of moderate conservative kind of pro-capitalism guy?" And I said, "Making payroll." If you've ever had to make payroll, if you've ever actually had to sell enough of a product of any kind, or provide a service of any kind that you are paid for, knowing that you have to put that in the bank because other people are going to pay their bills, the people who work for you are going to pay their bills from that, you get real aware of how hard it is to run a business. And those young people did an incredible thing, made an incredible product, but as it turns out, making an incredible product is not enough. You actually have to make an incredible product that the market will reward, and do it on a sustained basis, and that's much more difficult. Now, I did a lot of self-experimentation for the book. Like the whole idea that I had about maybe 5 years in, 4 years in, was, "Okay, I realized I was kind of making a recipe book of all the things Americans had whipped up to try to get ahead." Not just become middle class, but like go from where they were to where they dreamed of being. And so, all right, well, if it's going to be a recipe book, I need to like eat the cooking. So, everything I could find in the past that people did, I would try in the present. And the only line that was drawn was my wife saying, "Under no circumstances." But everything below that line I tried, and one of them was angel investing, right? Because that was obviously a big a big part of how we how we imagined the '90s and 2000s as kind of these angel investors finding these startups, investing in them before anyone else could, and making tons of money. And as it turns out, picking the angels is harder than it looks. >> So, you also tried shorting stocks recommended by Jim Cramer. Can you talk about that experiment and whether it was educational, profitable, or just kind of good for laughs? >> It was all three. >> Yeah. >> I So, there's a an economics paper that I can't remember exactly what year it came out that showed that Jim Cramer show Mad Money under a very strict set of criteria and I need to emphasize that point because I don't want anybody to hear this and just go shorting everything Jim Cramer says. But under a very strict set of criteria when Jim Cramer on his show Mad Money would recommend a buy on a stock you could short that stock because it would bounce for 50 to 55 days and come back to Earth and in that 50 to 55 days you could short it. Well, because I was trying everything else I was finding I decided to try that. And for 3 months of my life I sat glued to a television waiting for all of those factors to align which it occasionally did and then I would rush over to the computer and try to short the stock. Um believe it or not I actually beat the market. Now net of fees because you got to be I'm using a I had a history professor salary. I don't know if anybody's ever told you this but we don't make a lot of money. History professors get paid in prestige. You know, we're all professors really, right? And so I'm, you know, taking my small professor salary money and actually it was some of my daughter's college money and putting it on this this gamble. And what I learned in that is I actually did beat the market. Net of fees I lost. But while Cramer was yelling at me like I was a child and setting off alarm sirens that were bothering my wife and family, I heard my wife holler from the downstairs, "Come quick, she's doing it." And I missed my daughter's first steps. So I beat the market. Was it worth it? And the point that I try to make in the book but it being educational is actually there's this all this rhetoric around you can't beat the market so don't try. I actually find that literature to be pretty paper thin. I know there's a lot of those studies. What they're actually measuring is professional money managers ability to beat the market which is a very different thing than saying you can. Because professional money managers are operating in a very constrained environment. And bluntly, if you can't beat the market, then Warren Buffett doesn't exist. You actually There's another study that shows that certain money managers, especially managing $600 million or more, do tend to beat the market by about 1/2 of 1%. Which if you multiply that by $600 million, is a ton of money. But if you take the average 401k balance, and you tried to do what that money manager does, which by the way you can't, but let's just imagine, which is, you know, you got to go to Yale for 4 years and pay tuition. You got to work a grueling internship, and then you need to work 70 to 80-hour workweeks. You would eke out an additional $500 a year for the average American's 401k balance. Not the gains that you make, the extra 500 is what you get for all the 80-hour workweeks. Well, that's one night in a hotel in Miami in hurricane season. It's not worth it. And so, I try to tell people, can you beat the market? Sure. Do you want to? Probably not. Probably want to use the market to beat your own personal goals, and that's good enough for most people. >> Another interesting point in the book is that stocks haven't always been good long-term investments. And if you look at history up until about 1862, there were some extended periods when stocks actually had negative returns and bonds outperformed. Why is that part of market history largely ignored? >> Yeah, so I think it's largely ignored because it's not a very good story. So, we have a story that we want to be true, so that's the story we tell. And Jeremy Siegel came out with his book, you know, Stocks for the Long Run, and and that was a story everyone wanted to hear. And look, I'm not trying to throw shade on Siegel's book at all, but the reality is it was a very good book for the data set he used, but the data set he used was not complete. Why was it not complete? Because it's actually really hard to know what all the stocks and returns were for all of American history. Let's start with the fact that Wall Street wasn't the Wall Street we think of today. There were probably a dozen plus stock markets that were actively trading stocks and not all the stocks in one traded on all the others. Um there was a stock market in Connecticut. Obviously there was one Chestnut Street in Philadelphia. There's one in South Carolina. Uh one of the most active was Natchez, Mississippi. But no one goes back and looks at the Natchez, Mississippi stock market to see what the returns were because in the long run they were pretty abysmal. So when you actually piece together all the stocks you could buy for all of American history, it turns out bonds beat stocks for most of the 1800s. They were tied until about World War II and stocks have been beating bonds ever since except for a few 15 plus year periods when a few moments when bonds outperformed. What does that mean? It means that stocks for the long run is true, but only as old as our last two presidents. And that is not a universal law of history. I'm a historian in my line of work we call that a rounding error. So 80 years is a lot of time, but it's not enough time to know exactly how things will always work going forward. Now, I'm not trying to say invest in bonds over stocks. That's not what I'm saying. I'm just pointing out people have an illusion of history that is an illusion. And we would do better just be frank about the fact that every historical era is different. What worked in different historical eras was different. So let's not try to learn the lessons of 1850 as if that's a stock market strategy we can employ today because they lived in a very different world than you live in. >> One of your strongest findings is that marriage has historically been one of the best predictors of financial success. So can you talk about how you arrived at that and what characteristics make for a financially successful marriage? >> Great question. Um I arrived at that because you couldn't avoid it when you looked. Like if you actually look at the financial advice people were receiving for most of history, a lot of it was intertwined as marriage advice. This is true for men and women, by the way. Um and I actually think this holds all the way to the present day. In fact, there's uh some wonderful Oh, and the book title just escaped me, so I will be kicking myself that I can't remember the title, but there's this wonderful book that looks at some of the modern billionaires, the lesser-known billionaires, the really successful Wall Street uh investors, and kind of ask them about their life and says, "What's the through-line?" Like, "What are the real lessons you take away?" Almost every one of them says their spouse. There's like spouse to this day is a strong indicator of financial success. So, if you go to the the history books, it's everywhere. People are talking about the financial wisdom of the right kind of marriage. If you go to the 1840s, there's this card game. I don't know if I I have kids, and one of the things that's a great joy of parenting is forcing your kids to play a game they don't want to play because you as a parent have something you want to teach them. And there's There's this card game in the 1840s where you would play as a family at night, and you're trying to draw the cards that will give The winner is the person who has the best spouse, and you're drawing characteristics of a spouse as you go. And parents are making their kids play this game cuz they're trying to teach them, like, maybe the bad breath card is not so bad if you also are holding the work ethic card. Um so, it's just it was so important to parents to teach young people this. If you go into the novels of the late 1800s, there's a whole genre of novels in which young women are having to make decisions about some, you know, rapacious man who's after her in some way, usually tied to money and inheritance. And in You know how Zach Galifianakis is kind of the universal sidekick in our movies today or or Shrek's donkey? Like, there's always this like sidekick character who's always an area male. In their area, it was a female. It was the female best friend of the the woman who's the center of the novel. And her best friend always ends up marrying just for love and not thinking about the financial issues and she always ends up in a terrible situation. Like that was the kind of running joke of novels of that period. So not thinking about the finances of your marriage could get you and that's what people wanted you to understand. Now it did not just mean marrying up and into more money. It meant marrying into the kind of person who you could build something with over the course of your lifetime. Because at the end of the day, you're two people sitting over the kitchen table with a yellow legal pad running a small nonprofit and you have to figure out how you're going to manage this. By the way, this still holds today. To this day, marriage is one of the strongest predictors, the quality of a marriage is one of the strongest predictors of financial outcomes that we have and it confounds things you would not expect it to confound. Married black men earn more than single white men. Married women at the age of 55 are earning two x what single women at the age of 55 are earning. Married men's net worth at retirement wildly outperform single men's net worth at retirement. Same-sex married couples out earn heterosexuals who are single of their same age cohort. Like it just it confounds everything you would think it wouldn't confound. So there's just something about marriage that you don't choose the family you start with so the family you end up starting is one of the biggest things under your control and as it turns out, marriage is a superpower because capitalism is a team sport and you just win more games playing on two-player mode. And this kind of makes sense when you think about it. Like there's there's risks that each of you can take that you can only take because the other one is there to cover the risks. Right? It's like you stay late at night, I'll take the kids to Chick-fil-A. They may they may eat Chick-fil-A, right? Like it may not told my wife this I was like, they may not eat what you would want them to eat but you stay late and do what you need to do to advance your career and I'll handle this. If you compound that over the lifetime of a career, there's promotions in there you don't otherwise get. And you could just see this over and over and over for men and for women. Marriage is one of the biggest predictors of financial success. >> Another adventure you had was investing in real estate, owning and renting out homes. And you as a landlord had to deal with hoarders, human traffickers, squatters, the FBI. Um does the real estate industry kind of undersell how difficult owning real estate and being a landlord really is? >> Oh, of course, because otherwise who would show up to the seminars? But this my book is not an advertisement for real estate investing, although it worked out well for me. I Uh so one of the many things I mean I tried so many self-experiments in this book. I Airbnb'd all the rooms in my house because believe it or not that was how Americans paid off their mortgage. That was the primary financial advice about how to pay off your mortgage early was to rent out rooms in your house for a long, long time. One in three Americans at any given time was a landlord for most of history. Because they were trying to pay off their house. I you know, all kinds of crazy stuff. I bought land on the moon because that was a big rage in the early space era. People like trying to claim they owned the moon. But one of the things that comes out of World War II is you get a housing shortage. And housing shortages, believe it or not, it's hard to believe today especially, but believe it or not housing shortages were pretty rare in American history. Because you could build it pretty fast. But coming out of World War II there was a housing shortage. And because of that, people who had housing, especially rental properties, did really well. And so then the first one of these to write a book about it in the 1950s called How I Became a Millionaire in My Spare Time, becomes a bestseller. And people start teaching courses on real estate investing, how to get into it. That's a pretty low inflationary environment in the '50s and '60s. But then in the late '60s and in '70s inflation just explodes upwards and so does real estate investing. And so people are rushing to try to buy a house with as little money down as possible and to teach other people how to do it. And by doing that, the logic is, well, if the house is going to go up by 10% just because of inflation and you put down very little, you get the entire gain on that house and the return on your actual invested capital is huge. And there's this race to the bottom on this that becomes almost not almost, becomes like darkly humorous, so that by the early 1980s, there's actually a book that sold pretty well that told people to not only buy a house with no money down, buy it when you actually have no money in your checking account. But as long as you can take the at the closing table, they'll hand you the security deposits for the renters, the tenants, and you can rush to the bank. Keep in mind, this is the '80s, right? You're not doing this on your phone. You could rush to the bank and deposit it before your check clears and then you basically hide the check, put the money in. It's, by the way, illegal. Can't do that. It was illegal then, it's illegal now. Well, anyway, in this idea of like, I'm going to try out everything they tried then, I decided I would try little money down real estate investing again to try to show people what is it like to try to do what they did now. And I tried this, of course, in the post-2008 crash, so in the, you know, early 2010s, going around in real estate investing, if you look at it back today, people are like, well, duh, of course you made money. I promise you it was not as easy as it sounded. You could find houses for really cheap. You couldn't find people to lend you the money. And the people living in those houses, especially working-class houses, were, you know, were people who had their own issues that they were dealing with. And I went out to buy a house, went looking in a corridor outside of Charlotte, North Carolina, and I ended up buying a house and a four-unit apartment building. And I came home, my wife was like, I said you could buy one. I was like, well, it was a good deal, you know, like, oh, no, they talked me into it and we renovated the house and woman came out of the woodwork and said, I'd love to rent it. I already own a home, I just have to move for work for a few years. I was like, oh, this is great. And we never saw her again. And it turns out she worked for a temp agency that was managing the lithium mines of North Carolina where they were importing illegal labor. And so, before I knew it, 40-something Haitian immigrants were living in my 1,003 bedroom house. And I went to the cops, who went to the FBI, and they said, "Look, this is a human trafficking ring. You can evict them if you want, but we'd really appreciate if you'd let us sit on it so we could stake it out and kind of track it." And I grit my teeth. So, that sounds like what I should do. And before I know it, like I'm on a conference call with the FBI, and they're like raiding my rental property. And I was like, "By the way, all of those renovations were destroyed because you just can't have 40 people living in a house of three bedrooms." But, in the apartment building, I had hoarders, which then meant we had rats, which meant that the rats from the hoarders were getting into the other apartments. And I had to go and I politely informed them, "You can't do that here, right? Like your your your neighbors are suffering because of what you're doing." And they promptly pulled a shotgun on me. And I distinctly remember leaping off the steps, trying to run to my car with a shotgun pointed at my back, that had just a second ago been pointed at my belly. And instead of like thinking about my life and like my children, all I could remember was this old like rock song, "Give me three steps, give me three steps, mister." And I'm just like running for dear life, thinking about this old rock song my dad used to listen to. And as I'm driving away, I finally thought, "I may have made a mistake. This might not be for me." But, I sat down and I thought, "Well, this is probably as bad as real estate investing can get. So, what if I run this like a business and see how, you know, what's what's the upside?" And so, over time, I just got really good at it. It helped that I was raised by a dad who was an electrician. And therefore, I knew that what I owned was not homes, but what I owned was, you know, 2 by 4s and electrical wire and pipes. And so, I I kind of understood intuitively what to do when things went wrong. But, also, I just kind of decided to eat my own cooking. What was the one lesson of history to get ahead? Concentration. And then diversify. You diversify at the end of your life, not the beginning. And so I decided I'm going to go all in. I'm going to concentrate and see if I can make a million dollars. And to my great surprise, I overshot. And one day I looked up and was like, "Honey, we're I think we're millionaires." And then it kept going, it kept going, and eventually I was able to just say, "All right, I can just sit at home and write." And that was a It was an interesting experience. I have failed upwards as an academic into a place where I never thought I'd be. >> Well, Amy and I have a million more questions for you, but I'm curious to find out how you see your career evolve going forward. Do you view yourself primarily as an academic, a journalist, a writer, real estate investor? What do you think you'll be doing in the future? >> Well, thank you for having the time to have this conversation. I think going forward, I I I am at some level who I've always been, which is a a kid from the rural South who fell in love with history and wanted to teach other people about it. And so I really think of myself Everything I'm doing is in some degree trying to educate and inspire people to get excited about something. Because I promise you, if you teach the 8:00 a.m. US history survey uh for 5 years of your life, you have to figure out how to make history really exciting to those kids who do not want to be there in the slot. Most of them are the football team because they have practice this afternoon. And so I really it's kind of my my what I do with my life is I'm trying to make history fun, exciting, enjoyable, but also useful. And whether I'm writing on my Substack, which I try to do like once a month an essay on how history can teach you about finances and markets and these kinds of things. Uh or whether it's giving, you know, I I go around, I give talks, you know, presentations. Uh writing other books in the future. I I do love being a writer. Writing is is one of my great passions. But at the end of the day, it's all kind of bundled together by the desire to make all of this fun, interesting, and useful. So whether that's writing it down or speaking it, that's it. >> Yeah. >> Yeah. Thank you so much Joseph for joining us and we really enjoyed talking with you. >> I really enjoyed the conversation. Thank you so much and look forward to more conversations in the future. Really appreciate it. >> Thanks so much Joseph. >> Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts. You can follow me on social media at Amy Arnott on LinkedIn. >> And at Christine Benz on LinkedIn or at Christine _benz on X. George Castady is our engineer for the podcast. Jessica Bevel produces the show notes each week and Jennifer Garrett copy edits our transcripts. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us at the longview@morningstar.com. Until next time, thanks for joining us. >> This recording is for informational purposes only and should not be considered investment advice. 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