#604: Master Investor Ed Thorp on How to Think for Yourself, Mental Models for the Second Half of Life, How to Be Inner-Directed, How Basic Numeracy Is a Superpower, and The Dangers of Investing Fads

This episode is brought to you by Viore Clothing, spelled V-U-O-R-I. Viore. I've been wearing Vore. At least one. item per day for the last few months and You can use it for everything. It's performance apparel is

But it can be used for working out. It can be used for going out to dinner, at least in my case, I feel very comfortable with it. Super comfortable, super stylish, and uh I just want to read something that one of my employees said. She is an athlete. She is quite technical, although she would never say that. I asked her if she had ever used or heard of Viore and this was her response. I do love their stuff, been using them for about a year. I think I found them at REI, first for my partner, T shirts that are super soft but somehow last as he's hard on stuff. And then I got into the super soft cotton yoga pants and jogger. Sweatpants.

I live in them and they too have lasted. They're stylish enough I can wear them out and about. The material is just super soft and durable. I just got their Clementine running shorts for summer and love them. The brand seems pretty popular, constantly sold out. In closing, and I'm abbreviating here, but in closing With the exception of when I need technical outdoor gear, they're the only brand I've bought in the last year or so for yoga running loungewear that lasts and that I think look good also. I like the discrete logo. So that gives you some idea. That was not intended for the sponsor read. Uh that was just her response via text. Vore, again spelled V-U-O-R-I, is design for maximum comfort and versatility. you can wear it running, you can wear their stuff training, doing yoga, lounging, weekend errands, or in my case again, going out to dinner. It really doesn't matter what you're doing. Their clothing

Is so comfortable. And uh look so good and it's it's non offensive that you don't have a huge brand logo in your face. You'll just want to be in them all the time. And my girlfriend and I have been wearing them For the last few months, their men's core short K O R E. The most comfortable line athletic short is your one short for every sport. I've been using it for kettlebings, for runs, you name it, the Banks short. This is their go to land to see short. is the ultimate in versatility. It's made from recycled plastic bottles. And what I'm wearing right now

Which I had to pick one to recommend to folks out there, or at least to men out there, is the Ponto Performance Pant. And you'll find these at the link I'm gonna give you guys. You can check out what I'm talking about, but I'm wearing them right now. their thin performance sweatpants, but that doesn't do them justice. So you gotta check it out. PONTO Ponto Performance Pant. For you ladies, the women's performance jogger. is the softest jogger you'll ever own. Vieori.

isn't just an investment in your clothing, it's an investment in your happiness. And for you, my dear listeners, they're offering 20% off your first purchase. So get yourself some of the most comfortable and versatile clothing on the planet. It's super popular. A lot of my friends have now noticed are wearing this. And so am I. Voreclothing.com forward slash Tim. That's V U O R I clothing.com slash Tim. Not only will you receive 20% off your first purchase, but you'll also enjoy free shipping on any US orders over$75 and free returns. So check it out. Vory clothing.com slash Tim, that's V-U-O-R-I Clothing.com slash Tim, and discover the versatility.

of Viore clothing. This episode is brought to you by ASleep. My God, am I in love with ASleep. Good sleep is the ultimate game changer. More than thirty percent of Americans struggle with sleep, and I'm a member of that sad group, temperature. is one of the main causes of poor sleep and heat has always been my nemesis. I've suffered for decades tossing and turning, throwing blankets off, putting them back on, and repeating ad nauseum, but now I am falling asleep in record time faster than ever. Why? Because I'm using a simple device.

called the Pod Pro Cover. by eight sleep. It's the easiest and fastest way to sleep at the perfect temperature. It pair dynamic cooling and heating with biometric tracking to offer the most advanced, but most user friendly solution. on the market. I polled all of you guys on social media about the best tools for sleep enhancing sleep and ASleep was by far and away the crow favorite. I mean, people were just raving fans of this. So

I used it and here we are. Add the Pod Pro cover to your current mattress and start sleeping as cool as fifty five degrees Fahrenheit or as hot as 110 degrees Fahrenheit. It also splits your bed in half, so your partner can choose a totally different temperature. My girlfriend runs hot all the time. She doesn't need cooling, she loves the heat, and we can have our own bespoke temperatures on either side, which is exactly what we're doing. Now for me and for many people, the result, eight sleep users fall asleep up to thirty-two percent faster, reduce sleep interruptions by up to 40%, and get more restful sleep overall. I can personally attest to this because I track it in all sorts of ways. It's the total solution for enhanced recovery. So you can take on the next day feeling refreshed. And now, my dear listeners, that's you guys, you can get$250 off of the PodPro cover. That's a lot. Simply go to eight sleep. dot com slash Tim or use code Tim. That's eight all spelled out. E-I-G-H T Sleep.

dot com slash Tim Or use coupon code TIM TIM. Eight sleep. dot com slash Tim for$250 off your Pod Pro cover.

At this altitude, I can run flat out for a half mile before my hands start shaking. And then also your personal question. No se... A cybernetic organism, living tissue over metal endocet. Hello, boys and girls, ladies and germs. This is Tim Ferris and welcome to another episode of the Tim Ferris show. I'm gonna keep my intro short because I want to jump straight into the conversation. My guest today is Edward O Thorpe. He is the author of the bestseller Beat the Dealer, which transformed the game of Blackjack, his subsequent book. Beat the Market, co authored with Sheen T. Kasouf, influenced securities markets around the globe. He's also the author of A Man for All Markets, subtitle from Las Vegas to Wall Street, How I Beat the Dealer and the Market. Thorpe was one of the world's best blackjack players and investors, and his hedge funds were profitable every year for 29 years.

California and his website is Edwardothorpe.com Ed, welcome back to the podcast. It is so nice to see you again and thank you for taking the time. Pleasure to be here. I thought That we could start.

With a few of the points that I had spec'd out for our first conversation. And I want to recommend to everyone, if you haven't heard our first conversation, we cover a lot of your bio, a lot of your background, and we get into many, many topics, and we'll create a short link. So if you want to listen to episode one, just go to Tim.blog slash Thorpe. T H O R P and you can listen to the first episode. We'll try not to have too much overlap in this. So let's start with The topic of investing and specifically The value of long term thinking

And or the price of short term thinking. And perhaps we can begin. There in any way that makes sense to you. Well, short term thinking is What benefited me when I first

Investigated the markets. There were people who bought A common stock warrants and held them. And when the warrence only had a couple of years to go. They had much less value than they had

Many years earlier. But the people who owned them didn't seem to recognize that. So these warrants were vastly overpriced with around two years to go. So I discovered that. And that's how I first began to cash in with an edge in the marketplace.

Could you define just for people who may not have familiarity the common stock warrants? What is a common stock warrant? In this context. Common stock warrant is Yeah. Certificate issued by or a security issued by a company.

Typically. A claim on its own shares. Sometimes companies issue them on other companies. And They have shares in the treasury. Which they will give up to you.

If the terms of the warrant are realized. And the warrant is Basically like what people know as a call option today. And they were the Granddaddy. Of the whole thing.

Listed call option movement. So they led to very big changes in the securities industry. So you benefited from Short term. thinking or at least awareness of short term implications.

What are some other Examples of Or maybe combinations of short and long term thinking. How would you suggest people think about that? Here's an example from real estate. I used to have a friend that I walk with quite a bit.

And he wanted to sell his house around nineteen eighty nine or nineteen ninety. And At that time he could have sold his house for uh Believe it was uh Three million?

And He wanted to get Three and a quarter million. And of course It was a housing downturn.

And I said to him, Look Get rid of the house now. Use the money and invest it. Well he wouldn't do it. It took ten years before he could sell his house and get his price.

Meanwhile. This is short term thinking. You want it to hold out for a little extra money. And he was willing to hold out h however long it took. And He didn't understand that.

By holding out for the extra money he was tying up his capital. He was having an opportunity cost and he was missing maybe a multiple of two or three in the stock market over the next decade. So it cost them tremendously.

The Quarter million that he went for. Probably cost some uh six or eight million. Why do you think humans in general but Let's look at it.

within the sphere of investing, why people Are generally so poor. At taking the Longer term. perspective or at least considering

alternatives to that type of of short term. Focus. You know, I I talked to All kinds of people. Off and on I have through my life and what I found is that

Most people. Seem to Be focused on what's immediately around them. And what's happening then. For instance.

I know a very talented woman who is a lawyer for a charitable organization and she's been in this job for over twenty years. And She is brilliant. She does hard work. And she wants to do good.

But the organization. It's terrible. And the way they're managed. Victim. In a high middle management position.

And she needs to take her talent and go somewhere else. But Getting somebody To actually Make that uncomfortable transition. It's very difficult. Even though

For an outsider it's totally obvious. So a lot of people When it's involving them. They can't see clearly. When it's involving one of their friends or acquaintances they can generally see a lot better. Or think they can. Let's segue

Because I think this may be complimentary to what we've just been discussing to Numeracy. And Perhaps we could begin with a definition of terms, but it strikes me that this is one of the most valuable topics that I could ask your help in unpacking and exploring where would you like to begin? We could talk about numerac versus its opposite. We could talk about the fundamentals or basic numeracy. Where would you like to begin?

A chapter. Of conversing about numeracy. I can go back to nineteen sixty. When I was uh teaching at MIT. And I went to a a wonderful lecture in Kresky Auditorium, a public lecture.

And it was On the topic of Two cultures and a scientific revolution by a A well known. Englishman named C P Snow.

Charles Percy Snow, but I'm not positive about that. Anyhow, there are a lot of brilliant people on stage. And What The topic was Was how many people

Really accomplished people in the humanities. Don't understand much about science. But There are A lot of first class scientists that are very good.

In the humanities. And Lacking elementary Numerical skills. or comfort with it. And I'll put in that thought statistics and probability.

And game theory and Whole lot of other things that have become much more important. in the last many decades. So

When you, for example, talk to an attorney. Most often they're really good with words. But They make elementary numerical mistakes, so they'll get a decimal place in the wrong place and they won't realize it. That's one illustration of the sort of things that happen.

I think there's some fundamental Things that you miss. If you read a news article that's full of numbers The numbers will Often be presented to ridiculous precision like uh sixty three point eight percent of people poll says such and such.

When you think about the poll. What does that really mean? It means Somebody out there. Copied down some stuff and did a division. And came up with sixty.

Eight point three percent. But it doesn't mean that that ball represents what people really believe. It might have been badly worded. The sample might be too small. And so forth.

So actually You might read it if you're not a numeric person and think that sixty eight point three percent's pretty good precision. Well the real answer ought to be something like somewhere between thirty and eighty percent of people believe such and such we think. Put that way. You can go on to the next poll.

Another fundamental thing that people do Better understand the difference between averages And the way things are distributed in a population. So An example to drive the point home.

There were a hundred people in a bar. And Somebody knows who they are and says Gee, the average Not worth of.

The hundred people in the bar is a hundred thousand each. An hour goes by. One guy walks out of the bar. Another guy walks in. The guy checks again, he says.

The average net worth has gone to a billion and a half. What happened? Well one guy walked out and either Jeff Bezos or uh Elon Musk walked in. The average.

May tell you virtually nothing. About the distribution. And We deal with people often by thinking about averages. Instead of dealing with the individual person And all their unique qualities and where they might be in the distribution.

So when I need somebody. I don't think about them. As Be in any particular category? I think that

As far as I'm concerned, they're my equal. And they know things I don't know. I probably know things they don't know too, but I can learn from them. And I usually try to hear what they have to say instead of telling them what I have to say. Today's an exception. Ha

Well, you are on the hot seat, so I think you I think you're certainly allowed to answer more and say more than I do in this context. If we look at let's just say the example you gave of how averages can be misleading. And I think people listening, even if they are Let's just say they are Smart.

educated, but haven't had any particular training in this domain. and they're unsure of how to train themselves or develop this type of awareness. I'll make a recommendation. There's a book called Bad Science. By Ben Goldacre, who's a Believe he's uh

UK physician Excellent. communicator as well. And there are a number of sections in this book that I think are valuable for separating, for instance Absolute versus relative risk.

For instance, you might see a headline, as you point out in the newspaper, that says something like bananas double your risk of colorectal cancer. Something like that. I'm making this up, of course. And people might panic and stop eating bananas, but if the risk is one in A billion and then it goes to two in a billion. the the risk itself and how you should consider it in terms of your lifestyle choices. Pretty minimal. So there are certain resources like that book that I'm aware of, but how would you suggest someone

train themselves to become more numerate? Or are there other basic concepts that you would suggest they become aware of. There are two things that I would Encouraged somebody to start with. One of them is to understand

Elementary statistics. And how it works. Nothing complicated. There's a series called Shao's Outline. It's a sort of

What a crib book for college courses? They have a whole set of topics and one of them is on statistics, which I just gave to my uh one of my daughters because she was interested in this Exact conversation we're having. How do you spell shon?

I think it's S C H A U M. Got it. You'll find other simple college outline. books for statistics and what they do is they get down to how to do it. As opposed to a lot of fury.

And Math formulas and that sort of thing. They they should give you a few basic formulas and they show you how they work. That's really all you need to get started. Amen. If you're curious.

And Like it. Then you'll teach yourself more. If not. What you have will serve you well.

That's the first thing. The second thing is Elementary mental Calculations. People. Have their little

Apple phones or calculators and they can find all kinds of things out on that. But if they uh hit the wrong key. They won't. Often no. That what they've gotten is garbage instead of the right answer.

And you can Figure out a lot of things. In your head. Very easily if you get used to it. So I would learn how to uh multiply small numbers in my head if I were someone.

And Probably. How to make other calculations like in finance compound growth calculations in your head are very useful. My book has a little section about that called The Rule of Seventy Two. That's only the tip of the iceberg, but if you learn that and you like it.

You can go a lot further. And another pretty neat thing that I've come across is Yeah. Somebody asks. You

What day of the week was fourth of july seventeen seventy six, for example? You can figure it out. Yeah. Under a minute. In your head. And it turns out it'd be a Thursday.

So This is a well known thing. In the literature? I happen to stumble across it for myself, but that Of thousands of people.

Figure all this out one before I did. But I find it's very handy. And I tend to remember The calendar that way. I don't actually look at calendars. But if somebody says, Well, you know, what date is Christmas? I might say Sunday.

After thinking about it for a little while. But I don't have to go tap my calendar and find out. Do you know what that Method. is called of determining

The day of the week for a specific date. I remember Michael Conway, who is a mathematics professor at Princeton. could do this also very, very quickly. But if someone wanted to learn how to do that, how would you suggest They learn how to do that or or is there a particular name of the method? There is. I try and think.

Since it was discovered independently by many people, I'm not sure it has one name. But I'll just tell you briefly how it works. For every date. In a month.

Like uh well let's see. Today is uh Tuesday, June fourteenth, twenty twenty two. So Fourteen. is the day number that you assemble.

Each month has a number of its own. The number for June is four. Where this comes from requires a little investigation, but the people who write the books explain it all to you. You just have to memorize how it works. So you have twelve month numbers.

And then Every year of it. A particular sensory has a number that goes with it. And as a way to figure that out. Pretty easily.

And then uh Every century has a number. And so The calendar repeats every four hundred years. So you only need four century numbers.

Amen. It rolls over and repeats again. So you add up all these numbers. You throw away sevens and see what's left. Let's say if three is left, then it's a Wednesday. If two is left, it's a Tuesday. And so forth. This was made.

Pretty well known to people. Quite a long time ago and uh A movie called Rain Man? Did you ever hear that movie? Right. I have. I have, absolutely.

He had two Two super skills. One of them was to Deliver the day of the week for any calendar date. So we know how to do that.

And the other one was two count cards of Blackjack and win. And we know how to do that. Yeah. And by the merest chance. My wife and I were flying out on an airplane first class. Heading from I think LA to New York one time.

We looked across the aisle. And there was Dustin Hoffman and his retinue. I thought right, I said, should I go over and tell him That I know how to do all the Rainman stuff. No.

Don't bother, they're having a good time over there. Yeah. So let me mention a few things just for people who want to explore this. So the first is we will find links to this particular method and I'll put them in the show notes at Tim.blog.

Slash Thorpe. And this now second episode. I wanna come back to the rule of seventy two in just a s a moment because I think that'll be fun to Just explain briefly for folks. So the basis of Rayman is someone named Kim Peak, P E E K. Who also had some pretty astonishing capabilities. He could read a book by flipping the pages, and the fixation points of his two respective eyes would be on the two respective pages in a given spread. So he had some remarkable capabilities, but a lot of these capabilities, as you pointed out,

can be learned and learned very quickly. For instance, if you want to multiply a two digit number by eleven, it can get a little more complex than this, but if it's thirty-four times eleven, it's three hundred and seventy four. How do I know? Because it's three plus four, seven, you stick it in the middle, and it's really straightforward. So you can develop these heuristics, these shorthand methods and another I'll give a reference to another guest. Ed Cook has been on this podcast. He is a Or was a competitive memory champion. So he could memorize a shuffle deck of cards in sixty seconds, that or less, that type of thing. And we talk about various methods and mnemonics for memorizing long strings of digits, things like that. So people can check that out and I'll link to it in the show notes. Ed, would you mind Elaborating on the rule of seventy two.

Well known in real estate circles. If you want to know How long it takes something to double. How many years or how many periods, let's say. You take the interest rate.

Per year, let's say. Suppose the interest rate is eight percent. If you divide seventy two by eight. You get nine. And so the doubling time

For eight percent. Compound growth. It's nine years. Let's suppose that With eight percent the rule's very accurate.

If you Usual numbers below eight percent. The doubling time turns out to be a little shorter than the rule tells you. And if you use numbers. Above eight percent.

It gets a little longer the further away you get a uh Above eight percent. But it's pretty good for a first pass. So for instance. There's House.

On the beach that I looked at in nineteen seventy. Four. So that was uh Forty eight years. Forty eight years ago? Can it be that long?

Your your mental mathematics can be better than mine. I'll I'll I'll accept forty eight. Okay. So you can use Rules like The rule seventy two and their offspring.

To use That time period. To see What the compound rate of growth was. For investing in that house.

Now the house now sells for three hundred times what it did then. So You end up with a pretty good rate of return when you apply these rules. Anyhow, the rule can be used to calculate all kinds of stuff like that. And the easiest way to use it is to calculate.

Doubling things. For instance. Let's say that I Invest in the stock market. And long term it goes up.

Ten percent a year. long term, but it might be there might be bad very bad periods and and super good periods that mix together. But over a very long time, if it goes up ten percent a year, Yeah. I can figure out how long it takes to double. It'll be about seven point two years.

A little less goes right. The ten percent's higher than eight percent. So Called seven plus a small amount. What happens if you let it run for a hundred years? Well

Seven. Into a hundred. Is about fourteen. That's fourteen doublings. And one of the handy metal things that I

Yeah, you'll find it's very useful. Yeah. To know. What? The doubling powers are two four, eight, sixteen, thirty two, sixty four, one twenty eight, and so on.

Yeah. And For Fourteen periods. We're looking

That about. Well Ten doublings is about a thousand. And four more is about another sixteen more. Multiplying. So you get up to around sixteen thousand.

Times. So that's what the nominal growth. A ten percent. Well for structure is sixteen thousand multiple. So it tells you something about the power of compounding.

Um Why investing for the long term really pays off. It also tells you why wasting money really pays off in the negative way. A small example just at the low end. Suppose a guy buys two packs of cigarettes every day.

I don't know what that costs, I don't pay attention to that, but let's say it's cost fifteen dollars for two packs. So if he put that fifteen dollars a day. In the bank. And then every few months went and bought. an index fund in the stock market with the money that he'd saved up.

Yeah. Maybe sixty years or so? He might have half a million dollars. Just because he gave up. The two back a day habit. You'd also probably have seven more years of life.

And you probably also feel a whole lot better. So this is just a little thing that you can change with a huge long term impact. But Short term thinking says well. You know, it makes me feel good. I'll just have another pack today, another pack tomorrow. I'll get over it sometime.

Well let's come back to your friend just to use uh I suppose it's not entirely hypothetical to real case, but your friend who could have sold his house for three million but wanted to hold out for the the three point two five million hour or however much it was and ended up taking ten years. So you're dealing with or we are dealing with, he or she is dealing with knowns and unknowns. In

Whichever path they take in the decision tree, whether it is Hoping for the extra two hundred and fifty K in and Unpredictable real estate market. But also dealing with unknowns.

In putting Let's just say the three million into the stock market because as you said, there could be a bad stretch. There could be a really bad stretch of any number of years. How would you if you had been having a conversation with this friend and they Listen to your advice, and they said, Well, I read a book on indexes, and yes, I understand S P five hundred and retained earnings and over time.

X, Y, and Z over the long term, but what if I put it in and I have five, six, seven bad years, or however many bad years? How would you walk them through? the decision process. Understanding that we can't control outcomes necessarily, only the decision process. But if they voiced that, they said, I'm open to it, but I'm afraid that I'm gonna put it in and then the stock market's gonna crash because there'll be some terrorist attack or who knows what, how would you walk them through making the best decision given the knowns. I tell'em that if

You put it into something risky. It has good long term. History and good long term prospects. Then you're gonna get Shaken up a lot.

Along the way. So you have to be prepared to hold for Quite a long time. To ride out the speed bumps. If you're not prepared for that.

Then you're gonna make all kinds of bad decisions along the way, like getting out of the bottom. So Let me know first whether you're prepared to do that or not. And if you're not. You know, uh you're on your own.

What would you consider the minimally viable long term how many years in this particular case? If they said long term, sure, what's long term? For him? He was uh fifty or so.

And He was still working? And he had other assets. So He didn't depend.

On uh what happened to this money alone. If Mark were down uh By fifty percent at some point. That wouldn't hurt him. He could wait. Some people can't wait.

And so those are the people that have to uh do things differently. Yeah, they don't have enough capital. I was listening to Thomas Pickety. Talking about his new book. Which is very interesting. And one of the things he said was Yeah.

The poorer part of the country. Maybe the lower half. Have insignificant. Capital resources. So if they're out of a job, they've gotta get another job right away because they're living paycheck to paycheck.

And so they don't have the luxury. Of being able to make better choices. They're being forced. They make immediate choices that aren't good. So This long term investing advice is for somebody who's not being forced

To make immediate choices and don't think that they're going to be forced to do that. Yeah. Just a quick thanks to one of our sponsors and we'll be right back to the show. This episode is brought to you by Wealthfront. Wealthfront, you may have heard of it, pioneered the automated investing movement, sometimes referred to as RoboAdvising, and they currently oversee$27 billion of assets for their clients. Given all the stories out there, all of the flashy media pieces, you might think that day trading stocks is the secret to investing success, but Wealthfront's data show that time in the market almost always beats timing the market, or I should say, trying to time the market. Not even the best investors I know.

Can successfully Time. the market. So Don't miss out on the best days in the market. Stay invested in a long-term automated investment portfolio. Wealthfront's globally diversified portfolios automatically optimize to hit the goals you set at the risk level you choose and apply tax breaks that can boost your returns even when the market dips.

For the curious, that's called tax loss. harvesting. You can also personalize your portfolio with a selection of funds handpicked by Wealthfront's financial experts. Categories include social responsibility, clean energy, cannabis and cryptocurrency. Wealthfront is helping nearly half a million people build their wealth and Investipedia just named them their best robo advisor for twenty twenty two. To start building your wealth, And to get your first five thousand managed for free for life. Go to wealthfront.com slash Tim. That's w e a L T H F R O N T dot com slash Tim to start building your wealth.

One more time. Go to wealthfront. dot com slash Tim to get started today. Yeah. So in the case of your friend, fifty is still working. Would you say uh the

long term that he should be prepared to buckle in for is ten years, fifteen years. Where would you put that number if you had to peg a A number just For the sake of the year.

conversation if you were actually having this conversation with with him at the time. Okay. I'm talking to a person who's forty five years old, I believe, is that right? Right now, yeah, I'm close to forty five. Yes. Oh almost forty five. Pardon me. Almost forty five.

Ha ha. Okay. I would say Look at the rest of your life. How do you project it?

I can live to be eighty, ninety, a hundred? I mean I I hope I live to be And I know averages can be misleading, but let's just say the median death age of males in my family seems to be Eighty five.

two eighty eight. So you've already outrun that. I'm hoping to outrun that. So I'm aiming higher, but let's just for the sake of argument say Eighty five. Well, if you

Follow all kinds of healthy habits, which it seems to me that you do. And You're up on the latest things. That You believe actually have merit?

Not just any fat. And uh You haven't had any major issues. Means you've probably got good jeans. So far so good.

And You know, y you have economics behind you. Economics Wealth is associated positively with longevity. And it's obvious why. It's not fair, but that's

If somebody has advantages. They can avoid problems that people that don't have those advantages. Yeah. Force to face. Mm-hmm. So anyhow.

I would say That the odds of your reaching a hundred are substantial. I love this. Yes. I'm certainly aiming. As high as possible. Yeah.

So let's see. What was the question you just that triggered this? The question was, if we're personalizing this to me, I mean it may be a little strange to do so, but I'm just imagining a conversation between you and your friend. who had the opportunity to sell this home for three million. And you're talking about the different options and One being putting the three million into let's just say a low cost index fund for the long term. And your friend turns around and says, I'm open to it, but I know there are bad stretches. When you say long term, how many years should I be prepared to hold for?

I'm Us that as just a chance to clarify for people who may be listening what long term could mean in terms of absolute Years. When do you think you might need the money?

Really need it instead of keeping it compounding. In my case, I wouldn't need that money to pay the bills. You can let it run and run and run. I could. Now I mean this gets into some varied terrain just because I think in terms of not just life span, but also health span. So Am I hoping to build that capital and then uh let's say

whether it's give to family or give to charity, do I want to enjoy it in some fashion while I am still physically capable and able to be out and about and fully capable mentally and physically. I mean, these are certain questions that come to mind for me as well. But The truth is I would not I would not need

Two Liquidate that. to pay the bills. Yeah. If you can let it grow.

So much that. Not spend it down. Then you have the luxury of being able to invest for a very long time. But if If you need to

uh spend on capital. Take a person who's retired, who has no sources of income but social security, and they've got a million dollar Retirement fund? And they're gonna live another twenty to thirty years, maybe? They've got to be pretty careful. Assume they're not able to or willing to work anymore.

And so Somebody like that needs. A plan. That will Cause the money to last.

As long as possible. While they're still alive and take care of them. But also they need to be able to spend at a rate that uh g gives them a decent life. So that's a tricky, tricky trade off. Everybody's different. I would say that The more pressure there is In which you might have to spend

Down your capital at some future point. Probably The less likely you are to try to become a long term. Investor in something that's uh quite risky.

There's no one thing that's gonna satisfy everybody. It's a well known problem in financial economics. The uh lifetime consumption problem. But my view is if you can get ahead enough so you have enough capital so you're comfortable, then this problem mostly goes away. Just stick it in for the long run at a high rate of return and let it go. And uh You spend some of it as time goes by.

But you don't have to spend so much as to really uh eat into it early. So let me pause for just a moment. To mention and ask a few things. So the first is the Shelms outline of statistics is spelled exactly as you said, S C H A U M apostrophe S, and covers any number of subjects, so I'm excited to dig into that.

Someone very close to me is actually going to be taking statistics in grad school soon and they're very intimidated. So this will be ordered today. My question for you Is to develop More new mercy. And

Basic familiarity with probabilities slash statistics. Something that comes to mind for me, and this is from recently interviewing a poker player, is that perhaps by Encouraging people to play poker or blackjack. you could enable them to absorb some of these Principles.

While having fun or doing something that has an objective outside of just becoming Numerate? Are there any Approaches like that.

Or that come to mind that you might suggest to people who would like to absorb And cultivate some of These principles and numeracy. Aside from reading a book on statistics. There are other

Games, other Activities, anything that comes to mind? There's a mathematician out at in the Claremont Colleges named Arthur Benjamin I think he has a book called Math and Magic. And he also has uh

A course on the great courses. I don't know I haven't followed the great courses for a while, but I've seen That he has such a course. And You can learn how to do A lot of

Math in your head. Bye. Looking at his stuff. Wonderful. Math and Magic. Arthur Benjamin. Alright, I will link to all of that.

What I thought we might do next, we we're talking about A fairly Common and simple example of your friend with the real estate decision. We discussed in our last conversation

A number of things related to hedge funds and there were questions around Citadel and Listeners wanted to know how one might get an edge in hedge fund investing. What would you like to say to that or any comments you'd like to Add to satisfy some of those folks.

The hedge run world has gotten very big. When I was in it. There are only when I first started there were only a couple hundred hedge funds. And I had fund.

In its original usage meant a Private limited partnership. That invests in Typically Financial

Products. Um It could be Things like uh real estate. Loans.

Equities. Commodities. Very wide ranging. Kind of a catch all for private limited investment partnership. The typical structure is The

There are A group of limited partners. There could be. A hundred, two hundred of them? Yeah.

A managing general partner and the limiter partners Just collect whatever returns they get. And the managing general partner. Charges a fee.

Typically uh so much per year plus a percent of the returns. That's the basic structure. Yeah. Citadel that I talked about last time. Isn't Such a thing.

It is a Collection of businesses. And Only one part of those businesses. Yeah.

Yeah. private limited investment fund that I happened. Three. Lemon Department R. So

Just a clarification on that. Now The asset class of hedge funds is very large. It's now about three trillion dollars. Which is like two percent of the entire net worth of the United States.

And it has Perhaps ten thousand. Hedge funds in it. Some of them very large, like Your guest Ray Dalio?

Or like Citadel. Then they they range in size all the way down from the multi billion dollar ones. Down to Few million dollars. And they often start.

At a small level like that. It's pretty hard to run one now. And start it up because of all the costs if it's less than a few million dollars. So The hedge fund world used to be A much better place for individuals to invest. Now it's better for institutions. I'll give you an illustration.

Yeah. The hedge fund that I was in for thirty or so years In the head from part of Citadel. They In the first

I don't know, seventeen. Years or so? We were making twenty plus percent annualized not to us after all the fees. It's incredible. It was incredible. Now

It wasn't so good for me. Because I was taxable. So I might be getting uh fourteen percent. Thirty five percent. Combined state federal tax rate.

But then For an institution, it was a fabulous a tax exempt institution like the University Endowment Fund. And then maybe from Two thousand eight true. Two thousand fifteen.

Returns were somewhat less. I d I don't remember the exact numbers, but let's say they were fourteen percent and now I'm in the fifty percent tax bracket. Taxes went up. So I'm only getting seven percent. So the market long term is riskier. But it's gonna give me ten percent.

And I don't have to do any work. All I do is uh invest once. I don't any paperwork, that sort of thing. And so At that point, for me. The market's probably a better choice.

But for the tax exempt investor, they're still getting fourteen percent. It's a wonderful choice. So That's sort of how the w headphone world changed. For the really good hedge funds. But the not so good ones.

They As a group. I've gotten. Less and less attractive. For people.

Now you might say who should invest in hedge funds today? I would say wealthy Tax exempt investors. Whether they be individuals or institutions. You might say, Well, how many of my listeners uh have that? That agree.

Maybe not very many. But When you think about all the people who are listening to this A lot of them are probably on the boards. Oh.

Tax exempt. Entities. Like the university endowment funds. And so They can advise them.

If they want to learn about this sort of thing. And see whether Some of these hedge funds are good choices. I might say the collection of all hedge funds together Taken as a pool. Are not attractive. That as if there were an an index.

A cap weighted index of hedge funds. It would not be an attractive asset class anymore. My opinion. But there are exceptions, like the Citadel operation. Well, I should say the hedge fund part.

Oh. Citadel. The whole business is is beyond me. It's you know, it's like I invest in the Amazon bookstore. Initially. No, I wasn't Amazon has all these other things.

So I don't have anything to do with all the other things as a passive investor. I'm I'm still invested in the bookstore. Ha I'll also mention just in passing that If you were to look at the venture capital

industry, let's call it, as a whole, it would make a terrible index. If you were to average it all out, it would it would perform under the market more times than not. But there are there are standouts. I wanted to recommend two books and if you have any opinions on these Actually I suppose it's more of an author recommendation than anything else, but for people who want to gain some familiarity with the history of hedge funds and what constitutes a hedge fund. In other words, a fund that has hedges versus those that are, say, unidirectional, but nonetheless call themselves hedge funds, et cetera. There's a book called More Money Than God by Sebastian Malaby that I found very entertaining. And he has written a new book, which I've not read. I believe it's called The Power Law, which really delves into venture capital and there are some striking similarities. I will just leave those two aside. Ed, I would love to ask you next.

About a few books that I have Here in front of me, the titles of that is. That We're in some notes I had for our last conversation. And it relates to expert advice, predictions.

and more, but there is a book here which I've not read, but I've heard of before called Extraordinary Popular Delusions and the Madness of Crowds. Yeah. Yes. It was originally written, I think, back in eighteen fifty one. I forget who the author is. I the name Charles McKay comes to mind, but I don't know if that's the publisher or the author.

And uh You're finding out now. I am. You know the madness of crowds. No, you got it, Charles McKay. Extraordinary popular delusions and the madness of crowds by Charles McKay, M A C K A Y. And I'll I'll say this about it. It's not Wholly accurate. I've seen the critiques and corrections of it.

But it's a great read. And it it gives you the flavor. Of uh Crowd madness. It might be good reading for people.

Who are involved in cryptocurrency now, for instance. Or in the GameStop. And I will also just mention for folks that There is a it looks like a decent

Wikipedia page. for this book. Which covers some of the main tenets and anecdotes. in stories within it. It was first published in eighteen forty one. What would you hope people to get out of this? Let's just say that they are in the midst Of buying and selling cryptocurrency and they say.

This Ed Thorpe seems like a very bright guy. I'm gonna take his advice and read this book. What would you hope them to gain from Reading this book. I think the first thing. Fundamental thing is

If everybody's heard about it already. There's Historically at least. No reason to believe that you have any kind of edge. Your

Basically rolling dice. Or buying lottery tickets. And Just as in the gambling casinos, where most people do not have an edge. You hear stories about lucky winners?

And that draws in more people who want to play. But if you look at all of them as a group Including the good players who actually have an edge. If you look at all of them as a group They lose. And that's how the casino survived.

If they didn't lose as a group, the casinos wouldn't be there. Right. Let's segue. off to a to slight well, a completely different subject area which is

Physical And mental fitness. We covered some of this. In our last conversation. But there's certainly more

specifics that we can explore here. So just to ensure I'm doing my fact checking, are you still eighty nine Years of age. Or have you have you already turned a new birthday? Still eighty nine, but getting close. All right. So I will reiterate for people who didn't hear.

The first episode You look like you're sixty. It is remarkable. Certainly something to aspire to and removes any excuses I might have. And I have notes in front of me with a number of things that I would love to discuss. The the first He is Developing awareness.

And I have a note here about recording your weight. What is your suggestion for people and is this something that you have done Yourself. Yes. First of all, I had a relative

Who was Significantly overweight. And he He wished to lose weight. And so I said the first thing you do

I'm not gonna tell you what to eat. Or how to eat it or anything else. The first thing you do is you you get on the scale every morning. And you write down the date? And how much you wait. And just observe that number and do that day after day.

Well it turned out he didn't really want to lose weight and so after a while he stopped doing this. And so I got after him and drew it again for a while. And then he quit again. And his weight would go down and bounce back up and go down and bounce back up. But when he was writing it down It seemed to alter his behavior.

Um His weight would slowly drift downward. So I made a habit myself. Of getting on the scale. Maybe not every morning'cause I don't need to anymore.

But For a long time I'd get on. Every morning. And Just observe what I weighed.

And I've been pretty well bracketed. Between one fifty one and about one fifty eight. For as long as I can remember.

And if I get near one fifty eight. I say, Well you know I don't need that dessert tonight. Yeah. That beer?

We'll have it some other time. Or how about a great big healthy salad today instead of uh a burger. And uh That's enough. To shift me down. Then I have another little thing that

I checked. There's a simplistic notion of uh Apples and pears. In people. Have you heard about this one?

I have. Mm-hmm. Tends toward getting a big pot belly when they gain weight. Yeah, I come from a family of apples. And uh this is not healthy because you get all this fat around your internal organs. So one of the things I put on my list early was never

Get that pot belly. So all I have to do is I can look down if I see anything that isn't flat down there, I know I way too much. That's a that's another awareness needs to change things. Those two feedbacks. Are more than enough. To control my weight for a lifetime.

And I really have to use them. But anyhow, I would say that a person can develop their own feedbacks, whatever those are. And use them. And measurement is important because You want facts.

On which to base what you do instead of hopes, beliefs Where's So on. I remember a T shirt that I was given a long time ago by the uh

director James Cameron. It was actually an original staff shirt. for the film Avatar and the very top of it said hope is not a strategy which I liked which I liked quite a lot. And you're weighing Just to get specific, is before breakfast and without clothes, or what you would recommend. Is that accurate? I do two things.

When that's convenient, I do that. When it's not convenient. I just happened to go To the scale. Maybe before a shower in the middle of the day.

And I'd wear myself and put that down as a little Side. Fact. And of course I'm gonna weigh more in the middle of the day than I did first thing in the morning. So I know that. So maybe I weigh one fifty two in the morning.

But when I put my little side thing down it might say at three PM might say uh one fifty four and a half. So I know. Yeah. Roughly speaking. About each third of the day corresponding to each

Password meal. I gained about one pound. Mm-hmm. So I can mentally correct back to the beginning of the day. I don't have to weigh myself every morning if it's not convenient.

By that other feedback. Absolutely. The whole thing about health and fitness as I see it is You want to do things that are preventative. And You want to make sure you're not missing something important.

Because it's the things you miss. That are gonna do more damage. Then the Positive things. Are to save you.

I mean you can work out and be fit and have higher obvious and so on. But if you're not going in for uh uh routine colonoscopies and skin cancer checks and so on, you're leaving a a big risk factor open for yourself. So you you gotta try to get rid of of the risks. That uh you can cover. Do you have a checklist for yourself, or how do you ensure that you are not missing

Gaps or blind spots. I think about it and I talk to people. And I I pick up information all overnight. My list expands. You know, there's a lot of topics on the list.

There's uh physical fitness of various kinds. There is mental health. There are supplements which I Don't take much of because

The evidence isn't strong enough in my mind for them. Other people will disagree. But I'm I'm not heavy on supplements. Only if I think they've really been proven. I found that really worked well was Bone supplements.

I was able to reverse osteopenia and turn it into uh excess bone after uh several years. Bone supplements meaning, say calcium, magnesium. K two.

Things of that type. Yeah. Mm-hmm. Yeah. I have a few

bullet points that I would love to hear you expand on. And actually before I get to that, I should say that It is incredible how much behavioral change can subconsciously seep into someone's life, also consciously, but I find the subconscious side especially interesting. If they simply begin to measure Whether it's body weight or body composition. Which is partially why

self-directed observational studies or At home. Clinical trials or experiments are so difficult. to design well because you can say to someone, all right, you're gonna follow the Mediterranean diet, keep all of your other variables the same, don't change anything else, but rarely is that gonna be the case. So that's just a side note. One more factoid for folks. Mr. Rogers was also very

Diligent about weighing His body, I think it was every day when he swam and his magic number was one forty three. He s he tended to stay within a few pounds of one forty three. There are a few bullets here I would love to hear you expand on the First.

Is Limit alcohol to a total of a few drinks a week. So this Make sense to me. Do you Drink alcohol yourself? If so, what do you drink? I typically drink

Maybe a half a beer. Three or four times a week. And maybe when I have company. A glass of or two of wine. That's pretty much it.

No, I think it's too much. You think that's too much. Yeah. Do you have favorite beer or favorite wine that you tend to consume if you're rationing in that way? I never drank beer until a few years ago, but we went over to Ireland and we visited the uh Guinness Brewery.

Which has a long, colorful history. Really interesting. And The stuff was really great. So I I did not see that coming. Wow. All right. So you picked up beer.

A few years ago. So eighty five, eighty six, something like that. I love that. I probably need to go the in the opposite direction with some of my alcohol consumption. There are no breweries. Yeah. I'm actually pretty good these days. My girlfriend doesn't drink very much at all, and she's like twenty pounds, so we tend not to drink too much. One is reduced stress. Now this is also something that at face value I think will make sense to a lot of people, but Begs the question of Specifics.

How do you reduce stress? What have you done to reduce stress? in your life that you've found to have a meaningful impact. One thing that really Works for me. Is listening to music.

And also another thing is just going for walks and thinking about whatever. My mind just kinda runs free and I'll maybe after this conversation I'll go for an hour walk and I'll think about the things we said and what I wish I said but forgot, and so on. Or Is there a type of music? I happen to like classical, but I also like guitar.

I like a lot of old. Songs. And music from the movies. Reminds me of pleasant times I've had.

I like ja I like uh soft jaunds too. I do too. I've developed a real Pred election and this eagerness to to consume more jazz and and blues. I'm not sure maybe it's my maybe my proximity to a lot of that in Austin and recently spent time in New Orleans, but I'm on the same page. With those. There's a bullet here. Avoid unnecessary risks.

Could you expand on that? What type of risks have you trained yourself to avoid? Well The really everywhere. I have a laundry list of them that gets longer and longer as I think about them more. Here's a for instance. Covid.

Good current example. People are wandering around now. Mostly without masks. And they're acting like uh it's over. But

I don't see any reason to catch it. And it's not gonna do'em any good if I do catch it, especially being eighty nine. High risk group. The death rate there is Probably close to twenty percent.

in the eighty nine year old category. Now I'm healthier and I probably have better medical access than most people, so it might be only two or three percent for me. But that's too big. So I try to be careful. Avoid crowds.

No commercial travel unless it's forced upon me. You just can't avoid it. The key thing is don't share air. With people that might Possibly be.

Deal with Covid. Yeah. Some of them don't know it. So anyhow that That's unavoidable. A largely avoidable risk.

If you're willing to Limit. Your activities. What I'm hoping is that it'll have a broad spectrum. Antiviral.

That will allow us to get a shot. And parent all this. But government seems very slow in getting its act together. And that's uh there's no telling how long it's gonna be. That's one risk.

Another one is uh travel. Let's say that I wanna go from Orange County, California. To New York City.

I could fly out of Orange County Airport. Non stop. To New York. And take. Somewhat less convenient for me flight.

Or I could uh I could connect. Land somewhere. Take off again on the way. I so called direct flight, but it's not nonstop. Or I could go to LAX.

And get all kinds of flights with uh much greater time ranges. If I go to LAX. I'm going to Spam. Forty plus miles in a car.

Two ways. The risk of driving in a car. Yeah. Roughly a hundred times per mile what it is flying an airplane. Which is um

Gigantic difference. Now airplane risk. Most of the risk is take off and landing. So I won't take a direct flight if I can help it because there are more takeoffs and landings. So my optimum is to go to Orange County.

Take a l somewhat less convenient flight. Avoid takeoffs and landings. So there's a bit a small risk reduction. You might say, Well How much risk reduction is there? It's maybe, you know, a chance in a million.

But With little thinking I can get rid of it. Here's another example. I don't know if we Talked about this before or not. It was about Uh story I heard by uh Benjamin Stein.

on his program. He is the uh son of Herbert Stein, famous economist. Benjamin Stein himself is the economist, but also he's partly comedian. On purpose. He and Milton Friedman are well known name.

We're walking in New York City. And they came They came to one of these cross streets. Where the right light was red. But didn't seem like anybody was uh going back and forth. So

Benjamin Stein stepped off the curb. And Milton Friedman said. Benji, wait a minute. And Benjamin Sign said, No, it's safe to go. And Melton Trevan said You know, Gungie?

Probably it is, but Maybe it isn't. Why should I risk the rest of my life to save twenty seconds? And That's the sort of decision that we're going to do.

A lot of people don't make. They'll run that red light'cause they can just barely get through. Once in a while one of them gets T boned. So the risk everywhere like this. If you think about them a little bit and make it a habit, you get over piles of them.

There's a book. Called uh let's see. The Unthinkable, I think by Amanda Ripley. And She talks about

Horrible situations people have found themselves in. For example, the twin towers. In two thousand and one. And People made various decisions, some of which save their lives, others caused people to lose their lives.

So she has Three steps. Denial? We're This can't be happening.

Deliberation where you Say, Well, you know, this is happening, what am I gonna do? And then there's decision. Okay. I'm gonna do something now. So

I'm a little more uh Proactive. I say that for me there's awareness. And then as Analysis.

And then there's action. So What kinds of things could happen? Well, besides the twin towers you might find yourself in a burning theater. You might find your building shaking. From an earthquake.

You might see A We hope none of these things happen. You might see a The sky light up like a thousand suns. And uh

You figure out that there's been a nuclear detonation? So the multiple things. Or a huge volcanic explosion somewhere, or a tidal wave. There are a million and one very remote things. But then there are things in everyday life.

Somebody start shooting here in the crowd. You have very little time. to decide what to do. I mean what I'd drop to the ground first thing. And then figure out what to do next. Because you're a smaller target.

And then see how you can help. But people have These things suddenly thrust upon them. Some thought about h how you'd act in some of those things. What kind of what I do in my

high rise office building if there was an earthquake. If you have some idea w of how you'd act ahead of time. It helps prepare you so that you can uh Probably have a better chance of coming out of it. With

Less lost or damage. So That's another approach for big risk. The sort of things most people Most of us don't like to think about and prefer to think about happy things.

You know, it's having Been through a number of natural disasters and also crisis situations, for instance in Austin, Texas, but also in San Francisco. It is always astonishing to me, and maybe I just have a healthy, sometimes unhealthy degree of paranoia about low probability events, but

You look at re even recent history, like the Loma Prieta earthquakes in San Francisco, or you look at the freezes in Austin that Paralyzed the city, prevented Transport trucks from delivering goods. ended up disrupting water supply. I am amazed how few people have a week or two worth of backup water.

It's just an example of something that you could remedy with a few hundred dollars. Less than they spend on a given weekend at restaurants. But just how few people have that type of contingency planned for even after They have had a really close call. I remember

In Austin. Deep freeze lasts a week. And I had some involvement during this entire thing with Yeah. Yeah.

And It was pure luck that we had the thaw when we did. If it had lasted another day or two, it would have been catastrophic in terms of lives lost for a number of reasons. But even after that happened I spoke with a number of uh acquaintances who had been in dire straits and I asked them if they had bought backup water and a few other things and they said no, that was a one in a hundred years type of storm. That'll never happen again.

This is puzzling. Puzzling. Yeah. Are there any other risks? from say an exercise perspective or a behavioral perspective, a day to day

kind of week to week perspective that you have removed. By doing this type of analysis for yourself, things that you used to do that you no longer do. Yeah, I used to run. On roads when I was training.

And I Soon changed that because I read about what the statistics were. For runners are being hit by cars on roads. Even if you run on the side in the bike paths. It's too much risk, so I went off road.

And now when I walk, it's the same thing. I don't walk on roads like I walk off road. Except enough. community where there's basically no act no action and I can see and hear everything. What is the age guessing experiment? Yeah, that was a funny thing.

About I think I was about eighty two or so. People go saying gee, you look like you're sixty. I said, Well that's very flattering. Yeah, it's nice to hear. I wonder how much truth there is in this.

So Can I measure this? Has this got any fact behind it? So what I decided to do Was

Approach strangers at convenient places. Like a waiter in a restaurant where I'd never eaten before? I'd say I have five dollars here. I'd like you to answer.

A question about me. Assuming you know nothing about me. And Than you. Or close.

I'll give you the five dollars. And the question was, How old am I? Within five years. I did this with a wide range of people. About twenty people altogether over several months just to entertain myself.

Yeah. I had a lot of fun with it. In one restaurant? When uh somebody just Okay. Fifty three.

I said no and they said, Well my friend wants the guest And I said, Friend, do you want to go higher or lower? So France thought oh wow, I think they went higher. So there says something like Sixty five or so. And I said no.

And They tried again. Seventy five, no. But One woman came pretty close. She was uh

An old lady in a senior citizens library. She was uh about eighty three. And I asked her the same question and she looked at me and she said

I think you're about seventy two. That's no five years. And uh see that uh kid walking along there? How old do you think he is? Kid was about eighteen or twenty, she said, Well, I think about forty.

Ha ha Yeah. The mean was in the uh fifties then, but But that was several years ago.

Well, I mean just that just sounds like a fun game to play also. It's very entertaining. You can play with any other kind of question too. Ed, it strikes me that you have developed An ability and perhaps this is somewhat innate as well, but to think for yourself and to

Attempt to start from first principles whenever Possible. I'd love to pick up on a thread that I was hoping to explore last time, which is other directed versus inner directed. And there's another book title. I believe it's a book called The Lonely Crowd.

Yeah, by David Reisman, uh. That's right. That's right. Could you speak to this And Provide

Any elaboration that you think is helpful and if there are any resources or approaches that you might suggest to people who want to become more Interdirected. First about the Lonely Crowd. It basically explores the idea.

Of People who are quote interdirected, you'd call them maybe introverts. But it's not quite the same thing. And people who are other directed. Who tend to overlap with extroverts and uh other directed people.

Tend to get their direction and their values. And their uh ratification. From the people around them. So they tend to conform. And they tend to

Go with fads. And They tend to Go with the majority vote on things. And interdirected people.

Self deciding. About things. They tend to be more associated with the introverts, but not exclusively. There are a lot of I'll call them interdirected uh extroverts then.

I think of yourself as having your own Independent. moral and ethical compass. And kind of set of rules for living and guiding yourself. And another directed person tends to pick those up from others.

Others basically. Indicate to them. What the right things to do are and what the wrong things to do are. So it's an interesting uh line of thought. There's a way to get into this a little bit.

There's A book. It is uh A personality Typing.

Scheme. Started by uh mother and daughter. They have four major Personality. Dimensions.

One is introvert extrovert. The next is uh Sensing Versus Myers Briggs? Yes, it is.

That's it. Thank you. Right. The Meier's type indicator. Mm-hmm. Yes. And so The

Is I think very useful, even though it's simplistic. It kinda breaks people down into Sixteen major categories depending on Which choice they are in each of four dimensions? Two times two times two times two. And then it

It gives you a General description. Oh. A pure type, like I and T J is a pure type. And so the general description will be scientist slash mastermind or something like that. And uh E S T P.

is promoter. So all kinds of things come with promoter. But uh E is extrovert. Yes. Sensing which means more

I guess more sensitive to the people around you? How they do things and how they act, you can read'em. So If you look at these categories You realise that they

Individual people. Aren't any one of these sixteen types? But if you run into a person you'll often find that one of them is very much like One of those sixteen types. And when you find that out.

You can understand a lot of things about them very quickly. Sometimes it'll be a mixture. Again. It's not too hard to figure out a lot of things about them. And if you

Type yourself and you're anywhere near one of the uh sixteen. Pure types. Your hair will stand on the back of your head. At least so. Either of us have it here. Oh well. You have more hair you have a lot more hair than I do. I've been growing it and growing it.

So It's incredible. Sometimes. The insights that you'll suddenly get into somebody that you know. You say oh this kind of verse. They're they're artistic. And artistic has these things that go with it all the time almost.

So you learn quite a bit quickly about people. Not everything. And you run the risk of stereotyping. Oh. Taking a

Prototype from a group. And using that to represent Everybody in the group. And of course it's a huge spread among the people in the group. What we talked about before about averages and distributions, same idea.

But anyhow, it's a useful introduction. To thinking about other people and realising. They're different from you. They're not better, they're not worse, if they're a different type. They're just different. And you need to try to understand. Where they're coming from. And it it helps one do that a bit.

So I'd recommend that as a kind of psychology introduction. to understanding people better. What is your type? Do you know your type? Oh it's IN TJ. I and T J I'm a nicely. I am the I I did the typing a long time ago for Myers Brig and I'm also an INT J.

Which is not to imply I have your personality or skill set. Well that shows you how different the people in the category can be. And of course we're not We're not pure either. You know or ninety percent I and or something like that, or eighty percent. Or happens to be.

Instead of a hundred percent. I think I'm uh it's you know introverted, intuitive thinking, judging. I'm probably ninety nine percent judging, which I'm not sure always helps me. Uh it's a joke. It's a joke. The lonely crowd just to Pick up on that.

What is the takeaway or what would you hope people in an overarching way to glean from The lonely crowd. Is it the personality differentiation that you're describing along the lines of a Myers Briggs? Or is there more to that book that you would hope people

Would notice. I think the the biggest takeaway for me was simply the notion That People who are quote other directors unquote. Which means that They pick up their cues about what to do and how to behave and what's good and what's bad from

The crowd. Those people I kind of A float. Without a compass.

And it's harder to be that kind of person. And Those people are lonely. Because they don't know. We have anything.

Inside. It helps them. Feel a sense of worth. And helps them make Decisions that are

Clear cut. And that they feel like they can really Count upon. They kind of adrift away. Yeah. I'd love to tie two things together because I'm all I always wonder for myself, how does one develop

this is a skill as opposed to an inborn attribute, let's say, or is it developable? If I want to learn to swim, I can improve my stroke, but I'm never going to have the same phenotype as Michael Phelps, right? I'm just not gonna have these these crazy anomalous flipper feet, for instance, with hyper range of motion. It's just not gonna happen. So in the case of the lonely crowd and developing an inner compass Yeah.

I wanna tie that back to numeracy because I find that If someone learns how to Say scrutinize studies. Or

journalists who try to interpret studies, it is incredibly liberating and confidence building because they no longer feel entirely dependent on some high priesthood of interpreters to tell them how to think or to tell them how to Digest or metabolize. data they can actually go straight to the source. So I do feel like developing a basic, basic, basic

understanding of probabilities and statistics, a very basic ability to do a handful of mental calculations, a very basic ability to read a study for oneself. And I think all three of those check boxes could be checked in a single month. I think with a few hours a week for a few weeks you could make an incredible amount of headway. For me, uh, that seems to correspond to people who are more

Internally directed. I don't know if that resonates at all for you, but I did want to at least from my experience tie those two things together. That resonates fully with me. So I'll add some more resources in addition to those that you mentioned into the show notes for this episode so people can pick up

On that. People will Haran me if I don't follow up on one comment that you made, which was I've been growing and growing my hair. So how does an eighty nine year old grow and grow their hair? I stumbled on th one thing accidentally, which may or may not work for everybody. It and only applies to men, by the way.

There is a drug called It's an asteroid. Mm-hmm. Or Proscar. Have you have you heard of the structure? I have. Mm-hmm. If you have

An enlarged prostate. Which Most older men tend to get. Yeah, one low. Keep that thing from getting larger and larger because it

Squashes other things down there. Mm-hmm. Your bladder. For example. So you have to go to the bathroom more often if you have a huge prostate?

Oh. Often from the opera gone into The restroom and intermission? And there's guys who are standing there for Five minutes. I know they have a large prostate.

So Slowing the growth of your prostate's a good thing. So if an asteroid does that. However, it just so happens that it also promotes hair growth. Yeah.

It's the best thing I've ever heard of. for promoting hair growth. It doesn't promote massive hair growth, but it's noticeable. And it also causes you to retain your hair. So I noticed more hair right away when I started taking it. How long have you been taking it?

Probably twenty years. Twenty years. Do you have much baldness in your family? My father was bald. Okay. All right. Alright. See my father's not bald, but and my mom is not bald, but I certainly at this point am bald. Maybe I'll pick up the phenestride. For people wondering also finestride. is also sold as Propicia, so it's well known as Propicia as well. It's a five alpha reductase inhibitor.

I think you get a higher dose if you get an asteroid prescribed. I won't swear to that, but I'm pretty sure that's true'cause I knew about The over the counter. Versions. They were Maybe a fifth as strong at the time I checked.

Mm-hmm. That makes sense. And of course I'll just mention because it's a good idea, speak to your doctor. Neither of us are doctors, we don't play them on the internet, so please speak with your medical professional. There are possible side effects with this and and most drugs. But Priscar. Finastered. Look it up. Mm-hmm. Is there anything else that you would like to mention on The

health side of things and we can potentially And we can we can discuss this another time. look at adding something on TeamDot blog that might outline some of this in greater detail. But is there anything else that you think we would be remiss not to mention? Or that we should include in the conversation of health and longevity.

Pretty well covered from my standpoint. I think we've covered quite a bit. There's really one more thing that I have highlighted here that I'd love to Hear you. Expand on and that is Using scrap time.

I've I've never seen this expression before, although I can sort of intuit what it might mean. How do you use scrap time? Or recommend people use scrap time and what is that? I just made it up for the show. Oh, you did? Great. 'Cause I was thinking about things.

Ha ha Perfect. This is an exclusive, a worldwide exclusive. Yeah. Well, a lot of people complain.

That they're bored. Were they yet impatient? When they're stuck somewhere. For example What's I mate?

at a long traffic line. I I happen to have to drive through about three or four Two minute traffic lights. Sometimes they catch me, sometimes they don't. This is A couple of days a week I

Go in for a few hours to my office. So now if the traffic lights sitting there, what do I do? I could save. I wish this light would change. Maybe I should have run that light. I don't do that.

And so I said, you know. I've got a couple of minutes here. I can do whatever I want. Well, my neck's a little stiff today. Why don't I do a few neck exercises? Or a few shoulder shrugs.

Or whatever. And by the time I'm uh on to that the two minutes is gone and I'm ready to go to the next traffic light. So the scrap time turns out to be a payoff rather than uh a negative. And I don't care about the incident lights. Not at all. Or uh a doctor's office. Like going to the doctor's office.

They say, Well, we were gonna take you at ten thirty, but there's been a delay. The doctor had to uh do an operation, he won't be here for a while. He'll be back at eleven. If I don't have something else scheduled, I say, Okay, fine. If I have anything on my phone, I do that, I'll use the scrap talk. If I run out of stuff like that. I try to get some exercise then.

Some stretches. Some Malin bring up and so on. And it's amazing. When I start doing that. Because everybody knows. This guy's been forced to wait and wait and wait. It's not why I do it.

I'll try to go as subtly as possible. Or I'm sitting there in the uh The doctors. Room number seven, waiting for him to show up. Same thing. More scrap time.

I can get ten or fifteen minutes. L leg raises. Push ups, all kinds of stuff, yeah. Ha. You know, another advantage I can imagine is that they see you doing all this and they're like

This patient is scaring the other patients. We have to get him through the system as quickly as possible. They move you along. Ed, I'd love to know and if there's no answer that comes readily to mind, that's fine as well, but I'm forty five.

And I'm wondering or roughly forty five. After So I'm thinking, you know, I I am roughly at the the midpoint to My next target, which is to get to your age and then from there to a hundred and twenty or Who knows where.

You know, by then the world will have changed a lot. And your odds will be a lot better. One can hope. A boy can dream. So I hope that is the case and that we're not living in some dystopian future where no one has any reproductive health. So I am hoping for the the upside case. Let's assume that is true. Yeah. What are some of the

New beliefs or changes in beliefs. That Most positively impacted Your second half.

And of course I'm this is self serving and it's possibly a hard question, but how did your Thinking or priority or beliefs change. After the midpoint. that you think, retrospectively looking at it, have most benefit. You or those around you.

I started running. Probably when I was about Forty just. a mile or so, uh on a Saturday and then I as it we talked about last time I built it up. Then I started actually running marathons when I was forty seven. So I got into running very late.

But marathon taught me quite a bit. About life in a way. 'Cause I began to say to myself, you know, life is a lot like running a marathon. Um If you look at it that way.

Here I am. At that age then back in Roughly around fifty. Here I am, uh at the midpoint. Perhaps of a marathon.

So if you're running a marathon. You don't spray? Because you'll burn yourself out early? You Are careful not to step in potholes. There are all kinds of other things that you need to take care of in order to get

So the finish line. And you eventually learn Some of us learn how to get through the wall without there being a wall anymore. Which It took me seven marathons to figure that one out.

So I thought to myself, well The same thing about life. You if you plan ahead. You can avoid. A lot of problems that sink other people. Ne replacements.

Heart clogging up. Catching diseases'cause you don't do proper vaccination. Going to Countries where there are horrible diseases to catch in the first place. You can't protect yourself fully, maybe, that sort of thing. So

Thinking long term. It's one thing that running a marathon teaches. Us. And so I I tend to think long term anyhow, but that was a great reinforcement. In the last say five to ten years, is there anything you've

Profoundly changed your mind about? Or it could be recently. I don't need to put a time frame on it. To me the value of Being around good people. And not being around a few bad people.

Is uh Much higher than it ever was before. And the people In my life. I've considered

The most important. And my actions. With. Good people. The most important thing.

You know I enjoy other things, but I think at this stage. Yeah basically done. Most of the stuff. That you're gonna do.

Of any General. Broad significance. And so That's a time to reflect.

And to think about life. And enjoy it. And if one has any wisdom to uh assure it to some extent. Well, you seem as sharp and as lively as ever, as far as I can tell. I mean you you certainly have more

Vitality, however, I know that's a bit of a maybe an italicized word, but life force than a lot of the forty somethings I know. So whatever you're doing. Well thank you. Keep doing it. And uh is there anything else, Ed, that you'd like to add before we Bring this conversation To a close. I think

A an important thing for everyone. Is to think about The world and society. As Uh.

Instead of me. And To try to act that way. And to think longer term. Think about How the things one does.

A facts. The people around them not only right away. But down through the years. And it's it might seem like it doesn't matter. But it does in a way. And a lot of these things will

That you make better now. For the future. Well actually. benefit us a lot sooner than you might think otherwise. Pollution, for example. Climate change is

Is coming along, it's coming along pretty fast. And people might say, Well What do I care about what happens fifty years from now? But it's happening in increments. It'll be a little worse next year and a little worse the year after and so on. And you might not want to be around when it's really bad fifty or hundred years from now. But you might not care because you're only gonna be alive another

Ten years, let's say if you're Pretty old person. But Still. These things come along.

Sometimes faster than you think and in ways that you don't expect. And so it's wise, I think. True. Just try to make the world a better place in any way you can, even though you might not reap all the benefits. Yeah, here, here. I've I recall a conversation a friend had with an engineer I won't name, very famous founder.

They were discussing artificial intelligence and the two questions were For anyone who this particular founder would speak to about AI, he said. Number one I asked them, Do you have kids? And number two I asked them, Do you know how to code? And The do you know how to code is kind of self-explanatory. It's engineering bi bias, which is understandable. But the do you have kids was

to evaluate if they are thinking sufficiently long term. That was just one of the One of the hurdles that he hoped people would pass. And if not for your own kids, if you don't have kids, then just think about your closest friends and their kids or their grandkids. I mean, there are many ways. Ed.

I So enjoy. Our conversations. I know we've only had two long form conversations thus far. I hope this is is just the second of more. And people can find you Certainly online, Edward.com, your books, Beat the Dealer, Beat the Market, and A Man for All Markets, subtitle From Las Vegas to Wall Street, How I Beat the Dealer and the Market. Is there anything else you would like to point people to, any other recommendations that you would like to

Make Requests of the audience other than what you Just requested. No, I think uh we've covered everything. Thank you. All right. Well thank you so much, Ed. As always. And for people listening, we will include resources

Everything we discussed, links to all the books and concepts and so on at Tim.blog slash podcast, or better yet, just go to Tim.blog slash Thorpe T H O R P and we will add as many helpful things as me and my team can think up and call from this interview. And until next time, be a little kinder than is necessary. Think long term. become a little more interdirected, learn a little bit more about probability statistics and math and magic. I w I will link to that. And thanks for tuning in. Hey guys, this is Tim again, just one more thing before you take off, and that is Five Bullet Friday. Would you enjoy getting a short email from me every Friday that provides a little fun before the weekend?

Between one and a half and two million people subscribe to my free newsletter, my super short newsletter called Five Bullet Friday. Easy to sign up, easy to cancel. It is basically a half page that I send out every Friday to share the coolest things I've found or discovered or have started exploring over that week. It's kind of like my diary of cool things. includes articles I'm reading, books I'm reading. albums perhaps, gadgets, gizmas, all sorts of tech tricks and so on that get sent to me by my friends, including a lot of podcast guests, and these strange esoteric things end up in my field and then I test them and then I share them with you. So if that sounds fun. Again, it's very short, a little tiny bite of goodness before you head off for the weekend, something to think about. If you'd like to try it out, just go to Tim.blog slash Friday. Type that into your browser, Tim.blog slash Friday. Drop in your email, and you'll get the very next one. Thanks for listening.

This episode is brought to you by Aidsleep. My god am I in love with Aidsleep. Good sleep is the ultimate game changer. More than 30% of Americans struggle sleep, and I'm a member of that sad group. Temperature is one of the main causes of poor sleep and heat has always been my nemesis. I've suffered for decades tossing and turning, throwing blankets off, putting them back on, and repeating ad nauseum, but now I am falling asleep in record time, faster than ever. Why? Because I'm using a simple device. called the Pod Pro Cover by ASleep. It's the easiest and fastest way to sleep at the perfect temperature. It pairs dynamic cooling and heating with biometric tracking to offer the most advanced, but most user friendly solution. on the market. I polled all of you guys on social media about the best tools for sleep, enhancing sleep, and uh eight sleep was by far and away the crowd favorite. And people were just raving fans of this. So I used it and here we are.

Add the Pod Pro cover to your current mattress and start sleeping as cool as 55 degrees Fahrenheit or as hot as 110 degrees Fahrenheit. It also splits your bed in half, so your partner can choose a totally different temperature. My girlfriend runs hot all the time. She doesn't need cooling, she loves the heat, and we can have our own bespoke temperatures on either side, which is exactly what we're doing. Now for me and for many people, the result, eight sleep users fall asleep up to 32% faster, reduce sleep interruptions by up to 40%, and get more restful sleep overall. I can personally attest to this because I track it in all sorts of ways. It's the total solution for enhanced recovery, so you can take on the next day feeling refreshed. And now my dear listeners, that's you guys, you can get$250 off of the Pod Pro cover. That's a lot. Simply go to 8 Sleep. or use code Tim. That's eight, all spelled out E-I-G-H-T. Sleep.com slash Tim. or use coupon code TIM T-I-M. 8Sleep.com slash Tim

for$250 off your Pod Pro cover. This episode is brought to you by Viore Clothing spelled V-U-O-R-I. I've been wearing Viore at least one item per day for the last few months and You can use it for everything. It's performance apparel.

but it can be used for working out, it can be used for going out to dinner, at least in my case, I feel very comfortable with it. Super comfortable, super stylish, and uh I just want to read something that one of my employees said. She is an athlete, she is quite technical, although she would never say that. I asked her if she had ever used or heard of Viore and this was her response. I do love their stuff, been using them for about a year. I think I found them at RAI, first for my partner, T-shirts that are super soft but somehow last as he's hard on stuff, and then I got into the super soft cotton yoga pants and jogger sweatpants. I live in them and they too have lasted. They're stylish enough I can wear them out and about. The material is just super soft and durable. I just got their Clementine running shorts for summer and love them. The brand seems pretty popular, constantly sold out. In closing, and I'm abbreviating here, but in closing, with the exception of when I need technical outdoor gear, they're the only brand I've bought in the last year or so for yoga. running loungewear that lasts and that I think look good also. I like the discrete logo.

So that gives you some idea. That was not intended for the sponsor read. That was just her response via text. V Ori, again spelled V-U-O-R-I, is design for maximum comfort and versatility. You can wear it running. You can wear their stuff training. doing yoga, lounging, weekend errands, or in my case again, going out to dinner. It really doesn't matter what you're doing. Their clothing is so comfortable and uh looks so good and it's it's non-offensive. You don't have a huge brand logo in your face. You'll just want to be in them all the time. And my girlfriend and I have been wearing them For the last few months, their men's core short K-O-R-E, the most comfortable line athletic short, is your one short for every sport. I've been using it. For kettleb swings, for runs, you name it, the Banks short. This is their go-to land to sea short is the ultimate versatility. It's made from recycled plastic bottles. And what I'm wearing right now, which I had to pick one to recommend to folks out there, or at least to men out there, is the Ponto Performance Pant. and you'll find these at the link I'm gonna give you guys. You can check out what I'm talking about, but I'm wearing them right now. They're thin performance sweatpants, but that doesn't do them justice. So you gotta check it out, PONTO Ponto Performance Pant.

For you ladies, the women's performance jogger is the softest jogger you'll ever own. Fjury isn't just an investment in your clothing, it's an investment in your happiness. And for you, my dear listeners, they're offering 20% off your first purchase. So get yourself some of the most comfortable and versatile clothing on the planet. It's super popular, a lot of my friends have now noticed are wearing this, and so am I. Bioriclothing.com forward slash Tim. That's V-U-O-R-I Clothing.com slash Tim. Not only will you receive 20% off your first purchase, but you'll also enjoy free shipping on any US orders over$75 and free returns. So check it out. Fiorieclothing.com slash Tim, that's B-U-O-R-I Clothing.com slash Tim, and discover the versatility of Fiore clothing.

What you see above is a preview of the first minutes. One unlock costs 3 credits and covers this episode forever: full segment and word-level timestamps on this page, plus .txt, .srt, .vtt and word-level JSON downloads, as many times as you like.