The Progress Machine with Larry Siegel of the CFA Institute Research Foundation







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Join Greg as he sits down with the CFA Institute Research Foundation’s Director of Research Laurence “Larry” B. Siegel to discuss why investors have many reasons to be optimistic about the forward progression of society (and the economy). In this engaging episode, Larry talks about his new book, Richer, Greener, Fewer, offers a historical perspective on globalization and inflation, talks frankly about his endowment model debate versus Richard Ennis, and why investors should feel optimistic about the market. He also debunks several investment myths and shares his take on the ultimate investment strategy: buy, hold, and forget. This episode is one for the books that will leave listeners more knowledgeable and optimistic about the world we live in!


0:00 - Intro

0:35 - Episode Overview

2:26 - Some background on Larry

5:41 - Larry's take on why society has improved in a historical sense

8:01 - Choosing optimism

10:36 - What it means to be Richer, Greener, Fewer

13:45 - The impact of de-globalization

16:05 - Unknown Knowns and Puzzles of Inflation, Money, and Debt

20:07 - Debunking unlimited debt

23:09 - Advice from history for weathering inflation

25:22 - An endowment model debate with Richard Ennis

28:53 - Reviewing Pinker's Rationality

31:53 - Larry's book recommendations

34:33 - Larry's interests and current projects



Laurence B. Siegel, CFA

Director of Research at the CFA Institute Research Foundation and author, speaker, and investment industry consultant

Laurence B. Siegel is the Gary P. Brinson Director of Research at the CFA Institute Research Foundation and an author, speaker, and investment industry consultant. His book, Fewer, Richer, Greener: Prospects for Humanity in an Age of Abundance, was published by Wiley & Sons in 2019 and has received widespread acclaim. His second book, Unknown Knowns, a collection of previously published essays, was released by Montesquieu Press in 2021.


Greg Dowling, CFA, CAIA

Chief Investment Officer, Head of Research, FEG

Greg Dowling is Chief Investment Officer and Head of Research at FEG. Greg joined FEG in 2004 and focuses on managing the day-to-day activities of the Research department. Greg chairs the Firm’s Investment Policy Committee, which approves all manager recommendations and provides oversight on strategic asset allocations and capital market assumptions. He also is a member of the firm’s Leadership Team and Risk Committee.


Greg Dowling (00:05):

Welcome to the FEG Insight Bridge. This is Greg Dowling, head of research and CIO at FEG, an institutional investment consultant and OCIO firm serving nonprofits across the U.S. This show spans global markets and institutional investments through conversations with some of the world's leading investment, economic, and philanthropic minds to provide insights on how institutional investors can survive and even thrive in the world of markets and finance.

Greg Dowling (00:35):

We have lived through some difficult times these last few years. As such, it is easy to feel down and pessimistic about the future. Well, economic history certainly paints a much brighter picture, at least according to Laurence B. Siegel author of Fewer, Richer, Greener and Unknown Knowns. Besides penning several books, Larry is the Gary P Brinson director of research at the CFA Institute Research Foundation. He has also worked at the Ford Foundation as a director of research, and Ibbotson Associates as a managing director. On today's podcast, we will hear Larry weave his love for economics and history into a fascinating story of progress. How the world has gone from sick and poor to healthy and rich. He will also share some thoughts on inflation and the so-called "endowment model." By listening, you'll be better educated and just feel better about the world we live in, and I think we could all use that right now. Therefore, do not miss a minute.

Greg Dowling (01:38):

Larry, welcome to the FEG Insight Bridge.

Larry Siegel (01:41):

Thank you.

Greg Dowling (01:42):

Let me get this straight. You're here to tell us that things aren't so bad.

Larry Siegel (01:47):

This is a terrible day to try to tell you that. Russian troops are marching through Central Europe. We are getting pretty much over the pandemic, but it's been a hell of a two years. I'm here to tell you this in the long run.

Greg Dowling (02:03):

In the long run. That's right. It's not a straight line, not a straight line.

Larry Siegel (02:06):

Yeah. We're not climbing up a ski slope, we're climbing up a very jagged mountain. And just when you think you've gotten to the top, you realize that you're on a sub-peak and there are many more mountains to climb.

Greg Dowling (02:18):

We'll get more into that, because that's a favorite topic of yours, and I think we could all use some of those positive vibes. But let's get a little background on you. For listeners out there, tell us a little bit about yourself. You've had some pretty interesting jobs over the years, always in investing, and have worked with some great institutions and some great people. So what is your background, Larry?

Larry Siegel (02:40):

I've had 3 jobs in 45 years, which means that I am not a job hopper. I started my professional career at Ibbotson Associates. Roger Ibbotson was my finance teacher at the University of Chicago Graduate School of Business, which is now called Booth. Professors usually hire a student--a student who is smart, but can't get a job--to be their research assistant. He started a company, so I was the first employee. I did that for 15 years. We basically documented the returns on every asset in the world, sold the results--plus consulting--to the investment community. When I was turning 40, I jumped to the buy side, and I went to work for the Ford Foundation in New York as their director of research. And that is investing between $7 and $15 billion, depending on the year, for the benefit of various charities and organizations. Then I retired early from full-time work when I was 55 in 2009, and I set up kind of a consulting firm. Although it's a consulting practice, really. Other than me, it's just a few people who help me on an hourly basis. And I've kind of become a writer. I do other things, but people now know me mostly for my articles and essays, and sometimes these talks.

Greg Dowling (04:05):

So you're also the director of research for the CFA Institute. And for the record, because there's probably some candidates out there who have just taken level one or level two and are angry, you have nothing to do with that. This is a separate research institution, correct?

Larry Siegel (04:26):

Yes. Full disclosure, the CFA Research Foundation was established about 65 years ago to do independent research, not sponsored, not associated with a particular firm, and was merged with the CFA Institute in the 80s. So the names are similar, but we have an independent board and they do help fund us, are responsible for, I don't know, two-thirds or three- quarters of the finances, but they don't tell us what to do. I tell them what to do. What I mostly do is am a grant-maker. Give grants to authors to write what are called "research monographs," which are books on topics that we believe will be of interest to investors.

Greg Dowling (05:09):

So if you missed a derivatives question on level two, please do not send Larry an email.

Larry Siegel (05:16):

Oh, you can send me an email, but I'll send you back a wrong answer and we'll all sit around laughing. Sorry, I didn't really mean that.

Greg Dowling (05:25):

You've written two books recently and really kind of a collection of essays. The one that you wrote from start to finish is Fewer, Richer, Greener, and it's just a really optimistic book talking about how things are going to get better. The Malthusians were going to be wrong, and things are going to get better. So why has society gotten so much better?

Larry Siegel (05:43):

Well, the Malthusians were right for so long. Thomas Malthus lived around the same time as Thomas Jefferson and George Washington. Up to that time in history, when resources expanded, because there was more than you needed, the birth rate adjusted so that the resources would be consumed, and people didn't really get ahead. There have always been rich people, but the average person lived just above subsistence in most of the world. Right at that time, in Northwestern Europe--which is mostly England, Scotland, and the Netherlands--and in the United States, which was just the Eastern seaboard, standards of living were starting to move ahead. The reason was the Industrial Revolution, and we have since been through at least two more industrial revolutions, but why have we been through industrial revolutions now and not in 1400 or 300 BC, and so forth? We did go through those. The thing is that they got cut off early and the betterment didn't persist because there were no laws and institutions to carry forward what had been created and build on that.

Larry Siegel (06:51):

And now we have a system loosely called liberal democracy--although you don't literally have to have a liberal democracy to make progress, look at China, look at Vietnam--and capitalism, where there's an incentive, a reward system for doing things better, producing more with less or finding things to produce that nobody even knew they needed. In this apartment that I'm in, there are 2 TV sets, one of which is 72 inches wide. And people would've laughed--even 100 years ago, the people working on TVs were building these little 4-inch screens about the size of an iPhone. They had a horrible picture. If you told them that you'd be watching a football game on a screen that really looks like it belongs in a movie theater, they would've laughed and said that you were doing science fiction. So when progress takes place, it's very dramatic, very fast. And yet there are lots of areas where we haven't progressed. Look at the recent spike in crime, look at the electoral situation. It doesn't all happen at once, and it doesn't all even go the right direction. Sometimes the progress turns around and runs the wrong way.

Greg Dowling (08:01):

When you wrote the book, why did you feel you had to write a book like that? It seems like dystopia sells a little bit better.

Larry Siegel (08:07):

Well, first of all, a dystopia does sell a little bit better, but I would've had a lot of competition. Here my competition is Steve Pinker, Matt Ridley, Johan Norberg, Hans Rosling--a small group of mostly economists who have coalesced around what has become "progress studies." I don't know who came up with that. It's not a very good name, but it's a very good topic. I believe in it. The empirical evidence is overwhelming. Per capita income around the world has been growing about 1.8% a year, in real terms, for about 150 years. And at that rate, a lot of people have gone from extreme poverty to regular poverty, from regular poverty to the middle class. And less importantly--because that's true--from the middle class to the rich. The United States and the United Kingdom were way ahead of that curve, but the rest of the world, thank God, is catching up.

Greg Dowling (09:05):

So when a young person who expresses some anxiety about the future, the climate, poverty, and crime--that may not be the case, right?

Larry Siegel (09:15):

In the large, it's not the case. Crime is a real problem. We have a war going on right now. But in 1820-something, Nathan Mayer Rothschild was the world's richest man. He was about as rich as Elon Musk is today, and came from the same country. And he got an infection and died in his 50s that could have been cured with $1 worth of penicillin. Penicillin had to wait another 100 years to be discovered. Fifty years later, kings and presidents couldn't call their mother unless she was in the next room. It wasn't that long after that that anyone could call their mother for next to nothing. Today, I have all the world's libraries at my fingertips. There was a time when there was only one copy of each book, which they had to hand-copy them. The printing press came along in the 1400s with Gutenberg, now I call this Gutenberg 2.0. Instead of going to the library to find the one copy, or the hundreds of copies that Gutenberg printed, the same books are on every computer and iPad and iPhone in the world, you just have to find them. Even my father--who was a modern man, born in 1915 and lived until fairly recently--could never possibly have imagined that. So this is a huge amount of change for the better in our own lifetimes.

Greg Dowling (10:36):

The other big takeaway from reading your book is that the population boom that we've had has really leveled off, seems like, in developed countries and heading that way for all countries. And that's going to have a big impact not only on resources, but just climate and everything else, correct? Like your title, that we'll be richer, greener, and there'll be fewer of us.

Larry Siegel (10:57):

Let me clarify that, because I've gotten a lot of pushback. Now we're not going to be that much fewer, but if you look at world population from prehistoric times to the present, arithmetic scale, it looks like we're about to populate ourselves off the planet. Elon Musk is going to move to Mars, which he'll have to do because there won't be a place for him on Earth. Well, this is completely wrong. Population growth has slowed to zero or negative in almost every corner of the world except for Central Africa and parts of the Middle East. On a log scale, the fastest population growth that got us to just under 8 billion people was during what's called the "demographic transition," which is when public health and medical improvements caused people to live much longer, 70 or 80 instead of 20 or 30 for a life expectancy. And this occurred between about 1700 and today.

Larry Siegel (11:54):

But this slow down... If you took out Central Africa and parts of the Middle East, it would be a decline. And do I think the decline is great? I don't know. A world full of old people with few young people to come up with new ideas, new products, new businesses, and to work hard so that we can receive the various government benefits that we've been promised is a transition cost. And it's not trivial to get through that. But when you reach a steady state and the whole world is going to be there by 2100, you've moved into a world where you don't have to keep feeding a billion new people every 10 or 20 years, and also clothing and housing them, finding oxygen for them to breathe and water for them to drink, and so forth, it just makes every problem easier to not have a booming population. So that is why I regard it as positive. Some people regard it as negative, but I'm trying to teach them otherwise. What I just said about fertility rates--even North Africa and Southern Africa are growing at more or less first-world rates. This is pretty good. I don't have the chart handy for what it looked like in 1957, 60 years earlier, the population was just booming everywhere. And that's how we got from the 3 billion of that time to 7.8 now, but it's slowed down and it's stopping. In our grandchildren's lifetime, it will go negative.

Greg Dowling (13:21):

You, in the book, talk about how the world has become more urban and we have a greater population of people living in cities and that allows for specializations. If there's specialization and there's a profit incentive--so we're talking some of the great economists, you know, Adam Smith specialization, visible hand, and that leads to all these wonderful things, especially in a global world. Now does a pandemic, does a war, does de-globalization throw a wrench in any of this? Or is it just a temporary slowdown?

Larry Siegel (13:54):

It's a temporary slow--yeah, it throws the wrench in it for a little while. The city is the third most important invention in the history of the world after the wheel and the alphabet. Putting people together where they can talk to each other and share ideas and decide which ones are good and which ones are worth working on to build into a business or a government agency or a charitable agency or whatever--that can only take place when there's physical proximity. Now, since about 1876 when we had the telephone, before that there was something called the Republic of Letters, where people put their best ideas in the mailbox. So Benjamin Franklin wrote to Adam Smith--I believe he actually may have done that. And at this glacial pace ideas did spread. In Shakespeare's day ideas did spread; they were performing his plays all over Europe and probably in America by the 1600s.

Larry Siegel (14:47):

I mean, he wrote some of them in the 1600s. But now, if you post an article on Archive, you've got all the specialists in your field reading it the same day. So we don't need a physical city anymore for this sharing. We've got Gutenberg 2.0 doing the sharing. So yeah, are cities relevant? Of course they are, because it's nice to be able to interact with other human beings and not just do it over the screen. Back to your question. We were in a pause due to a virus. It's about over, but some of the adjustment is happening slowly. People are moving very reluctantly back into offices, schools, factories. Get a cup of coffee, turns out that there's only one barista at Starbucks for each 40 customers. We get a little bit of regression. But this will fix itself. We've had much worse problems before: World Wars 1 and 2; the Great Depression; the Cold War, where we just about nuked ourselves; and now we're involved in a much colder war, but it's hot if you're in Kyiv.

Greg Dowling (15:51):

You wrote Fewer, Richer, Greener in 2019, you then put together Unknown Knowns in '21, which is really just a collection of essays--it has some themes, but it's a little broader, it has a little bit more investments and savings. If people are interested in that, maybe just quickly, what are the main few points from unknowns?

Larry Siegel (16:12):

The most important point is retirement income generation. Most people are approaching retirement--not all of them, some are doing very well--with a lot of uncertainty as to what's going to happen to them. It's very important to be able to spread your income from your working life over your whole life. And to do that, you need a certain amount of financial engineering. You can't just save and expect the money to still be there when you need it for two reasons. One is you'll spend it. Nobody can save that much without some institutional help. And the other is that we don't know how long we're going to live. So people who try to do all their own savings have to save to the maximum possible age that they think they're going to live, let's say 110. But if you pool your resources with other people, nobody knows how long they're going to live, statistically you're going to get a pool where some people live to 55, the average is about 82, and some live to 110. And the ones who live shorter help pay for the ones who live longer. That's called a pension fund if it's operated by a corporation, or an annuity if it's operated by an insurance company. Now the government already does this for us through social security, but it's just not enough. So by combining all these different resources, you can retire, people do retire, but it's nice to have an operating manual.

Greg Dowling (17:33):

Very important. You can't save too much, and there's a lot of different ways that you can be smart about that. You also wrote in that same year, Puzzles of Inflation, Money, and Debt. That seems maybe not as fun as your other book, but maybe just as important. Would you mind maybe giving us a brief history of inflation?

Larry Siegel (17:52):

For most of human history, people have used gold or silver or stones with a hole through the middle or something, some kind of physical commodity money. And so it's hard to have inflation because inflation is an increase in the money supply and gold is at the bottom of a gold mine and it's very expensive to mine. Starting in 1913 with the Federal Reserve Act in the United States, and then it just sort of crept around the world, we moved to a system of fiat money where money is whatever the government tells us money is. And this can be more easily manipulated. When the government wants to stimulate the economy or hand out money to people who don't have any, or do some other thing, they can basically just print it. So we get inflation, because the classic equation of MV=PQ, money times velocity equals price times the physical amount of output.

Larry Siegel (18:46):

So it's just an accounting identity. If there's more and everything else stays the same, prices have to go up. Well, we've now moved to a new world where nobody has any money, we have credit. Four of us sat around and ate dinner last night--a magnificent feast that cost in funny money that nobody had, about $200. And when we were done we just walked away. Then we hand a little piece of plastic to somebody and they hand it back. No money changes, hands. Something else changed hands, or they wouldn't have given us the food. A monetary theory of this century, this millennium, has to take that into account. The fiscal theory of the price level, which is what I wrote about, tries to address that. I can't tell you the fiscal theory in enough time to leave room for anything else, but what I will say is that I didn't really write the book. Tom Coleman, who was a great friend of mine and a professor at the University of Chicago, had the idea for it, and he basically thinks of me as a pretty good writer, so we agreed that he would do the thinking and I would be kind of the monkey.

Greg Dowling (19:54):


Larry Siegel (19:56):

I do have my own ideas and I contributed them, or I wouldn't have gotten my name on the cover.

Greg Dowling (20:00):

Well, you did some good monkeying. And the title is debt, right? You talked about inflation and money.

Larry Siegel (20:05):

Yeah. Debt is money.

Greg Dowling (20:07):

Debt is money. There's this notion out there though that somebody recently has come up with over the last decade or so that there can be unlimited debts or the MMT. Can you maybe debunk that a little bit?

Larry Siegel (20:19):

Voltaire said the Holy Roman Empire was not holy, nor Roman, nor an empire. In the same sense, MMT--modern monetary theory--is not modern, it's not monetary, and it's not a theory. It's not modern because the 18th century French revolutionaries did it. It is fiscal, not monetary, because the whole point of it is to remove budgetary constraints on fiscal policy by asserting that governments that issue their own currency can't go broke. And it's not a theory because it's not testable and falsifiable, it's just advocating a particular set of policies. Now it comes in two flavors: hard and soft. Hard MMT asserts that governments can live on seigniorage, which is the difference between the physical cost of printing money and the face value of the money that's been printed. Governments have tried this over time. It was basically the way that Germany got into the Weimar hyperinflation.

Larry Siegel (21:13):

If that worked, there'd be no need for any other tax. But there is a need for other taxes because governments don't have any of their own money, they have to get it from the people. And so soft MMT, which recognizes that fact, says that governments can live off of all inflation taxes combined. Not direct taxes, but inflation taxes that are raised indirectly by debasing the currency. The obvious one, the only one I'll actually focus on, is that your savings become worth less--not worthless, but worth less over time due to inflation. And that's a transfer of your wealth to the government, which, since they're the issuer--you have government bonds in your portfolio--those are debts they can pay off at a lower real price. The problem, as Margaret Thatcher said, is that sooner or later you run out of other people's money.

Larry Siegel (22:04):

After the 1970s, when we had this huge amount of inflation, you'd think we would've learned our lesson, but we're going through the exact same thing again. It was forecastable, if you believe in this demographic theory, that when the people responsible for the disaster of the 1970s had either died or had been retired so long that they had no influence, we would do it again because it's so good for the government to buy things and not pay for them. Just like it's good for me to buy things and not pay for them, I just don't have that option. So long story short, MMT will either result in an extended depression because people aren't getting paid for their labor or a lot of inflation where they're getting paid in a money that becomes worth less over time. History suggests that we're going to go the inflation direction because it's easier. I'll get off my soapbox.

Greg Dowling (22:56):

No, it's--I appreciated the soapbox. It's very good. So you were involved with this book, you were involved at Ibbotson at documenting the historical returns of every asset class that's out there. So if investors are concerned about the potential for increased inflation, what do they do? Historically, what has worked and what would you recommend?

Larry Siegel (23:17):

Well, first of all, the government does issue inflation-indexed bonds. They're called TIPS If they're the kind that are institutionally held and I bonds for the personal account. Fortunately, when I bonds were first issued, they were issued at a maximum amount of $10,000, which was a reasonable amount of money, although not that reasonable. Now it's kind of worthless. If you're going to be able to earn 7 when other people are earning 0, you should at least do it on that $10,000. Now it's $10,000 per person per year. So if you have a family of four--and kids can own them, you just pay for it and the kid owns it--that's $40,000 a year. If you do that for 25 years, you have a million dollars growing at whatever the going inflation rate is. But right now it's 7. So that's one thing you can do.

Larry Siegel (24:08):

The other is to invest in a TIPS fund where the money management firm, usually an index fund firm, handles the transactions--otherwise it really becomes quite a nightmare. And then you just own shares of the fund. When you need money, you sell the shares. So that's what you can do on the fixed income side. On the equity side, equities are real assets and they should rise with inflation, but with a lot of volatility--just look at the last 2 months. So sometimes you win, sometimes you lose, but when you do win, you win a lot more than you lose. And $1 invested in 1926, when the Ibbotson studies began, would have ground to some number close to $10,000 today--of course, nobody held on that long, but a family could, or an institution could. So a mix of TIPS and equities, and then the third great inflation hedge is real estate. I don't know much about investing in real estate, but I know that it tends to go up with inflation because so do wages and then rents, and then obviously, because of that, the price of the real estate.

Greg Dowling (25:14):

One of the great things about having you on the podcast is your eclectic interests. You write books, you write articles, you do a little bit of everything. You do a little bit of a debate that I think would interest some of our listeners, being that most people out there that are our clients are institutions. And you participated in a bit of a debate with Richard Ennis, formerly of Ennis Knupp, about what he thought were the problems with the endowment model, David Swensen's famous endowment model. You were a little bit more supportive of that. Maybe give us his thoughts and then what your rebuttal was.

Larry Siegel (25:47):

Sure. First of all, I told them before starting this, I could take either side. I just regarded it as a chance to engage in an Oxford Union-type debate where you're told which side you're on after you show up in the room. But I do believe the endowment model has merit. I worked for an endowment fund and we made vast amounts of money in private equity, less in hedge funds, but some. The basic argument is that public equities and publicly traded bonds--mostly in the United States--is only a sliver of all the opportunity that exists in the world. And if you're going to be an active investor at all, you should regard every investment in the world as your opportunity set. You're going to throw away most of them because you can't get the liquidity you need or you just can't get your hands on them, and the fastest-growing economy in the world is Rwanda, but they don't have any stocks.

Larry Siegel (26:39):

So how do you buy Rwanda? Well you buy the stocks of companies that are selling them something, but that's not a portfolio, that's 1/10 of 1% of a portfolio. So what people have done is to expand the opportunity set to include things you can get your hands on: private equity, hedge funds, commodities, private debt, things I regard as private equity, like interest structure--it has a slightly different flavor--and try to expand the opportunity set. Now, is it always going to work? No, sometimes you're going to pay most of the money to the manager and fees. Richard came back and said, "Wait a--not so fast here, Siegel. The track record of alternatives was great from 1994 to 2007, and then fell off a cliff."

Larry Siegel (27:25):

And it's true that the track record got worse after the crash. But it didn't get worse relative to itself, it got worse relative to a stock market that went on a tear that hasn't been seen since the 1950s. And when you're comparing anything to the one asset in the world that's going up and up and up and up, you're going to look bad. And his response in the debate was, he said, "pithall, I say." Well, I told him in the next article, I said, "I can think of better insults than that. I went to prep school and I know how to throw gentlemen insults, it's the stuff of nonsense." And I used a couple more without using any foul language. There's a whole library of 18th and 19th century insults, just read Samuel Johnson, he was fabulous. He was asked to define what oats were because he was writing a dictionary. He said, "a substance used to feed horses in England and people in Scotland."

Greg Dowling (28:30):

That's great. The answer often is, "It depends." Right? How do you do it? What are your resources? Not everybody should do the endowment model, many people should just index. But if you have the resources and the time horizon, you can do quite well.

Larry Siegel (28:43):

Yes, and there's nothing wrong with just indexing, which is what Richard Ennis was suggesting. It's a perfectly legitimate strategy, and for most individuals, that's what I suggest.

Greg Dowling (28:53):

So on the non-investment side, you also write a lot of articles. One of my favorites that you had done recently was an instruction manual for your brain. So tell me, how should my brain work?

Larry Siegel (29:04):

Well, the book that I was reviewing by Pinker is called Rationality. And the idea is: for evolutionary reasons--and just because we make mistakes--our brains are conditioned to do all kinds of crazy stuff. We go to the casino at the same time as we're sending money to our Vanguard index funds. So what you lose on one side, you win on the other, and so forth. There's a lot of irrationality in human behavior. What Pinker did was to try to define seven or eight issues that describe a circle of rational thinking around which you can... For example, Bayesian statistics. Most people who haven't really studied Bayesian statistics think it's some kind of guesswork where you take the data and you say, "Well, I don't think that's right, I'm going to decide for myself what's right." That isn't it at all.

Larry Siegel (29:52):

And it just... Read the chapter on Bayesian statistics in Pinker and you'll get it. It combines information you already have with new information that you're acquiring in an organized way. The various mental biases we have--say recency bias. The thing I've been thinking about recently is Russian troops marching across Central Europe. Western Ukraine really is Central Europe, Eastern Ukraine is a little more Russia. But we've seen this before, and it reminds us of all kinds of stuff stored in our neurons through chemicals. And we react in predictable ways that may not be what's best for us. So understanding how these processes take place and why they take place, which is that, as Pinker said, if you hear a rustle in the grass and you're a hominid from 375,000 years ago, you can think, "Well, it's a tiger or a little bit of wind."

Larry Siegel (30:55):

If you think that it's a little bit of wind but it turns out to be a tiger, you leave no descendants, and those people are not around to influence our thinking. But if you think that it's a tiger but it turns out to be just a little bit of wind, you're fine because you escape the non-tiger and you did leave descendants and it's part of our DNA. With this kind of picking apart the elements of irrationality, you can learn how to be rational. And that's why I recommended the book and called my review of it "How to Think." We already know how to feel.

Greg Dowling (31:36):

[laughs]. Well, I think we could all use a little bit more logical thought process in all of our decision-making. That was very good. I enjoyed it, and I do enjoy his work. Again, Enlightenment Now, great book. He also mentioned Matthew Ridley, The Rational Optimist--another really easy book to read. You love to read. You love to write. So maybe for folks that are out there, what are some of your top investment books or just top books for people to read?

Larry Siegel (32:02):

Well, investment books and top books are a different question. Investment books is easier. Anything by Bill Bernstein, anything by Peter Bernstein--who is not his father.

Greg Dowling (32:12):

Yeah. Against the Gods is probably one of my favorite--

Larry Siegel (32:14):

Against the Gods is his best book, but Capital Ideas is... Usually somebody's second-best book is not really awesome, but Capital Ideas is really awesome. Now he died more than a decade ago, so some of the news is old news, but most of it is timeless. It is what you need to know to be an investor. I have certainly been influenced more by Jack Bogle than any other actual manager. He's the man who invented the index fund. And although I obviously wrote an article saying index funds aren't everything, they're a lot of what you need.

Greg Dowling (32:53):


Larry Siegel (32:53):

And then on the other side, Jeremy Siegel. You know, there's a kind of a Siegel versus Bogle fight that goes on over the decades. Bogle is the winner, but Siegel's points are worth hearing, which are that stocks really do win in the long run and you have a global world to invest in--it's not just the United States. Bogle doesn't agree with that. And surprisingly, when a country shuts down--this is relevant this week--when a country shuts down, the stocks tend to survive and the bonds don't. The reason is that the stocks are issued by corporations, which, first of all, they can move. It's not easy to move General Motors from the United States to Taiwan or wherever they might want to move, but the shares can move.

Larry Siegel (33:41):

You just put the share certificates in your pocket and get on a ship and leave Hitler's Germany and come to the United States and you still have the shares. Turns out--Jeremy Siegel showed, with the help of a German academic, that those companies did eventually recover, they didn't go to zero. Whereas obviously the German bonds were completely worthless. Germany repudiated the debt when it was conquered by the U.S. and Soviet Russia. So that's my short reading list. Then I haven't had time to think about the rest of the reading list, but send me an email and I will give you my thoughts.

Greg Dowling (34:17):

And just for folks who--we mentioned a few Peter Bernstein books. Bill Bernstein, he wrote Four Pillars, The Investment Manifesto...

Larry Siegel (34:26):

The Birth of Plenty.

Greg Dowling (34:27):

Birth of Plenty. Yeah. That might be his probably best-selling book, I would think. Some great books there. What are you working on right now? Pre-call you said you were working on or updating an article that you've written a handful of times. I've always heard you write nine and a half investment myths. It sounds like you're working on seven and a half. Why are you cutting two?

Larry Siegel (34:47):

I think we're back to nine.

Greg Dowling (34:48):

Back to nine.

Larry Siegel (34:49):

The "and a half" is a hook. People will always say, "four of this, eight of that." So it's a hook. I have a co-author named Steve Sexauer who runs the San Diego County pension fund, and he's a great thinker. Sometimes if you put his head and mine together, you get neat stuff. So let me just go over the myths--not the answers, but the questions. There is so much indexing that the market must be getting more inefficient because there's not enough money managed by people who analyze securities right now. Fat chance. If the market was so inefficient, we'd see it in the alphas. And it's very hard to beat the market. It really takes large institutions with large staffs running computers day and night.

Larry Siegel (35:33):

Myth number two: governments can spend as much money as they want because they own the printing press. Well, I've already talked about that. And the sort of two and a half is central bankers can get us out of any kind of scrape we get ourselves into. Well they do it by debasing the currency, so we don't know that the way that central bankers have helped us is by hurting us on a different part of our balance sheet. That's a neat trick until people discover that the person being taxed to help you is you. Then three: we're in a new era of technological change where growth outperforms value permanently, or at least for a very long time. Well growth and value have run in cycles for as long a period of time as we have the data, and I believe we're now at the beginning of another value cycle. But please don't take that investment advice, because I gave that advice in 2010, 2011, then again in 2016, and various other little value booms--it was wrong every time.

Larry Siegel (36:33):

And this time really does feel different. Growth stocks have absolutely trounced value for a very long time. Now Cliff Asness would say, "Well that just means that when value does come back. It'll be even bigger. And I don't know. But the myth is that growth is the only style. Myth number four: we're in a new bipolar world of U.S. and Chinese competition for dominance, and they're the only two countries that matter. When I point out that the United States becomes substantially less than half the world--it's 43%--China grows because they have a lot of unlisted shares that basically belong to the government. Europe is as big as China, and that's if you don't count the UK or Eastern Europe and Russia. All this other stuff--non-China Asia is as big as China.

Larry Siegel (37:22):

And then you've got South America, Africa, and so forth, which are disappointingly small. Those are great potential economies, but they haven't produced much in the way of stocks. This is the real opportunity set. It's not just the U.S., and it's not just the U.S. plus China. So that's one of the myths, is that just getting the U.S.-China call right and investing mostly in the United States is a good investment. It's actually very limiting. The fastest-growing economies in the world are down here. India, Vietnam, Bangladesh, and so forth. They're growing faster than either the United States or--at this time--than China, which has slowed down. But the one that I would emphasize kind of ties back to where we started, is that we are in a low return environment forever. It's just ridiculous. Prices are high. Prices of bonds are insanely high. But we are in a low return environment for a while, until either the economy catches up and justifies those prices, or the prices come down.

Larry Siegel (38:26):

In the last few days, we've seen the prices come down enough to make the case--not very convincingly, but still make the case that when the price adjusts you buy--kind of dollar cost average your way into the market--it's very difficult to do. A long-term strategy is really buy, hold, and forget. I wish I had pursued that strategy. Because I called the crash in 2007-2008, I got almost entirely out of stocks. Bonds did well enough for a while to console me. Then the stock market sextupled. It actually septupled but it backed down, so it only sextupled. Well, I could use six times the amount of money that I have now. Okay? Although I do have some stocks, it's not anywhere near what the people who have gotten rich in this bull market have. So if I had ignored the fact that I called the crash, held on through it, I would just have so much more money now that I wouldn't even be doing this podcast.

Greg Dowling (39:28):

[laughs] You wouldn't have to be selling books.

Larry Siegel (39:30):

No, I would be giving them away. I would've still written the books, but I wouldn't have charged--I wouldn't charge for them.

Greg Dowling (39:37):

Market timing is so tough, isn't it? It just goes to show you that having the right asset allocation and riding out the storm is usually the best plan of action.

Larry Siegel (39:49):

Right? And to use a little French, I suck at it.

Greg Dowling (39:51):


Larry Siegel (39:53):

It's just buy, hold, and forget.

Greg Dowling (39:56):

It's hard. Some people are good at buying. Some people are good at selling. There's not many people that are good at buying and then selling. Those are two different things.

Larry Siegel (40:03):

Those are the billionaires.

Greg Dowling (40:06):

Those are the handful of people that...

Larry Siegel (40:09):

Handful of people. Those are the Jim Simons and Cliff Asness. Actually Cliff isn't that great at buying and selling, he's that great at figuring out what to buy. And if he never sells any of it, he would've outperformed what he actually did do.

Greg Dowling (40:26):

[laughs] I won't tell Cliff that.

Larry Siegel (40:28):

Oh no, he knows it. He's a value guy.

Greg Dowling (40:31):

He's definitely a value guy, for sure.

Larry Siegel (40:34):

He makes tremendously powerful arguments in favor of what he believes. You send him a question and he sends back 40-page-long answers.

Greg Dowling (40:45):

[laughs] We've had him on this podcast. He's fantastic.

Larry Siegel (40:47):

Just fantastic.

Greg Dowling (40:49):

Very thoughtful, and humorous as well. And that's another difficult thing to do when you're very academic--to actually be funny, that's tough.

Larry Siegel (40:56):

Well that's why he's a billionaire and his mentor, Gene Fama, is not.

Greg Dowling (41:01):

That's exactly right. So you mentioned earlier you play the violin, you do a little golf--

Larry Siegel (41:07):

Guitar and the piano.

Greg Dowling (41:08):

Guitar and piano. So besides writing books, that's it? It's music and a little bit of golf?

Larry Siegel (41:14):

Kind of joking about golf. My son was teaching it to me, then he moved out here and kind of stopped, but I am married.

Greg Dowling (41:22):

That's a project.

Larry Siegel (41:23):

I love to travel. I'm a little old to be involved in the sports scene. And my other interests are mostly satisfied by reading books and going places. When people post on Instagram where they're standing in front of a building or a painting or something like that, it hits a neuron in my brain that says, "I've been there."

Greg Dowling (41:45):


Larry Siegel (41:46):

And you get that over 40 years of just sort of wandering around.

Greg Dowling (41:49):

This is the last question. Since you love to travel, favorite place you've been to?

Larry Siegel (41:53):

I would say that Rome, Italy, is the most interesting place I've been to because I can be in the 3rd century BC, the 14th century, and the 21st century, all within a 3-block walk.

Greg Dowling (42:08):

And have a couple of nice glasses of wine in between. Current events aside, I have to say that I not only feel smarter, but I feel a little less depressed, and your book certainly helped that. So thank you for that. This has been absolutely fantastic, Larry. Thank you for your time today.

Larry Siegel (42:23):

Thank you. Please buy my book. Type in "fewer, richer, greener" into Amazon.

Greg Dowling (42:32):

If you are interested in information on FEG, check out our website at and don't forget to subscribe to our communications so you don't miss the next episode. Please keep in mind that this information is intended to be general education that needs to be framed within the unique risk and return objectives of each client; therefore, nobody should consider these to be FEG recommendations. This podcast was prepared by FEG. Neither the information nor any opinion expressed in this podcast constitutes an offer or an invitation to make an offer to buy or sell any securities. The views and opinions expressed by guest speakers are solely their own and do not necessarily represent the views or opinions of their firm or of FEG.

This was prepared by FEG (also known as Fund Evaluation Group, LLC), a federally registered investment adviser under the Investment Advisers Act of 1940, as amended, providing non-discretionary and discretionary investment advice to its clients on an individual basis. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Fund Evaluation Group, LLC, Form ADV Part 2A & 2B can be obtained by written request directly to: Fund Evaluation Group, LLC, 201 East Fifth Street, Suite 1600, Cincinnati, OH 45202, Attention: Compliance Department. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities. The information herein was obtained from various sources. FEG does not guarantee the accuracy or completeness of such information provided by third parties. The information is given as of the date indicated and believed to be reliable. FEG assumes no obligation to update this information, or to advise on further developments relating to it. Past performance is not an indicator or guarantee of future results. Diversification or Asset Allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss. The views or opinions expressed by guest speakers are solely their own and do not represent the views or opinions of Fund Evaluation Group, LLC.


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