Debt is fantastic so if you're a poor person and you want to access opportunities you couldn't access otherwise there's the only one way to do that through borrowing you want to live in a house you don't have any right to live in how do you do it borrow you borrow you want to invest in education you don't have the resources how do you do it borrow it's like a liberating thing so people don't understand that Piece of it and then they don't understand the dangers [Music] all right welcome back everyone of the school of greatness
podcast we have a Harvard professor in the house today his name is miare me here de saigh is that right exactly right me here de sigh exactly good to see you thank you so much for being here no my pleasure L we got connected through I guess Eric Barker mentioned coming on the show Exactly and then I checked out your stuff I always vet it with Chris I'm like see if this guy's legit and this would be interesting and you passed the test for it to be inter test very good excellent uh you've got this
book called The Wisdom of Finance discovering Humanity in the world of risk and return um and you've been teaching Finance entrepreneurship business you you teach at the entrepreneurship program and the law school at Harvard correct for 18 Years you've been teaching there yeah you've been writing journal papers for 18 years right and teaching and kind of in the weeds and the thick of it with your students exactly right right and so why did you decide to do this book and why is this topic so important and uh share about that yeah so you're right I
was a totally traditional Economist writing academic papers and then basically over the last five years I wanted new challenges you know so the Thing about Academia that's crazy is you can look at your life 20 years forward once you get tenure and you know exactly what it is and that's great and it's terrifying right and so for me it was more terrifying so I wanted to change so I started an online course I started teaching at the law school and then I wanted to write a book it's really to me it's one of the biggest
challenges I've taken on it's not the way I write you know when you write an Academia you Write totally tight you you can only say so much you got to like really be really be tight this is loose and it's like stories and so it was a massive challenge for me what I really wanted to do the book though is one challenge myself but then B you know I teach finance and finance has got some serious problems and so I wanted to address them and the Really the two big problems I wanted to address is
one I want to demystify finance because I think it's Way too important for people not to understand and a lot of people demonize it for like the wrong reasons and then the second thing is chunks of Finance are broken we got to make it better right we live through like this massive financial crisis we got to make it better and so this book is an effort to say look there's nobility in finance and you should feel proud of that and you got to live up to it you can't just kind of behave in a bad
way yeah how come We're never taught these things growing up in you know Elementary School High School College how come these things are never really taught until you get to College unless you take those classes yeah and then we're just kind of illiterate with finance and we're broke and don't know what to do with the rest of our lives I mean like you think about student debt or you think about credit card debt even as an example I know doctors who come out they start a Private practice they have no clue what they're doing financially
it's Zer CL it's and it's kind of a crime right in fact the level of financial literacy is so low and if you think about the mistakes people are making like the terrible mistakes they make with debt I mean they're they're life-changing decisions and if you don't have some haunt you for the rest of your life yeah they they hang over you forever um and we don't do anything in fact that's one Of the I was joking with my daughters I have three daughters and uh one of my girls was telling me like the next
project should be the kids book version MH it's true yeah it's true it kind of struck me as crazy but uh these ideas you got to get them to kids because if you don't get them to kids they'll never they'll never learn it so is this like the advanced version of Rich Dad Poor Dad then is this kind of like cuz that's the story of like the Rich Dad and the Poor Dad and what they did and how they bought and how they whatever yeah you know it's funny because that book you know it's kind
of in a way it might be easy to ridicul but it has had an amazing impact on so many people on so many people opening them up and like oh if I just invest this way on something I make more money than just yeah well you know so it's funny as an academic you tend to look down on that kind of stuff right you look down on you're like Whatever and the reality is you're more pissed that he's just created such an Empire around a simple concept right right and you kind of but you kind
of look down on it frankly of course and I don't want to write that book but I want to speak to those people and so yeah you're right I'd like to think about this as an more elevated or Advanced version of that um and I think hopefully it could be I think if we get this into like schools and we get these ideas out There um people want to know Finance they want to learn it because they know how important it is it's really interesting on Rich Dad Poor Dad that thing has been on the
bestseller list for like 25 years it's crazy keep selling and selling you look at the bestsellers in finance and investing they're the same books for like the last 20 years and you know Ben Graham intelligent investor Rich Dad Poor Dad there's like five books um which makes You realize there's a ton of demand and there's not enough Supply right and so this is like a version of that uh which is trying to say well look let's try to speak about Finance in a clear way yeah so what are the things that we're confused about the
most with Finance in general as you know as a society yeah so I think there's a couple you know one is borrowing in debth MH I think people either think it's terrible um which is wrong it's wonderful borrowing money and Having debt having debt I mean the thing what people don't realize is and it's always been demonized through history right like so Socrates said it was you know immoral to charge interest and religions a lot of religions don't allow payment of interest but they don't realize that actually debt is fantastic so if you're a poor
person and you want to access opportunities you couldn't access otherwise there's the only one way to do that through borrowing you Want to live in a house you you don't have any right to live in how do you do it borrow you borrow you want to invest in education you don't have the resources how do you do it borrow it's like a liberating thing so people don't understand that piece of it and then they don't understand the dangers they don't understand the dangers which is once you do that it is a really really serious commitment
and you can find yourself in a world and I tell the story Of what's called debt overhang which is this Finance idea which you have so much debt that you can't actually do the the best things for yourself because it's like booming over you and that is the Trap people fall into so they kind of either ignore the real virtues of it or they kind of just say well it's great and I'll just do it it's not a big deal so that I think is one big piece on the personal side how do how do
we make a decision of knowing like okay I'm stuck In this rut and if I go to this school that cost me 50 Grand a year I don't know what Harvard is maybe it's 80 grand a year now um then I'm going to get the opportunities and the insights that will help me for the rest of my life but I'll have a half a million in debt from four years exactly that's going to take me the rest of my life to pay off yeah well so here how do you make that decision well and the
short version is so you got to really think hard about what The Upfront investment is and then the hard part for people is you got to think about the incremental wages like how much more am I going to make not how much am I going to make but how much more am I going to make because of this investment how much better of my lifestyle going to be right exactly because of this investment and people don't usually do that and there's also you know the truth about education and I I'm not just saying this because
it's my Business I'm not I'm not just talking my own book but the truth is on average it's a great investment that doesn't mean it's always a good investment there's a lot of crappy Investments out there there's a lot of really bad Investments out there but on average it's great what you got to think about is there's a labor market out there and you got to have skills that are going to be valued if you don't develop the skills that aren't valued then you're Not going to be able to make money you're not goingon to
be able to make money and then you have to ask yourself if you want to do a degree and you want to do something that is not really valued in the labor market you know whatever it might be let's say you want to go to cooking school just to learn cooking you should understand that's basically consumption it's not an investment you're just having a good time pleasure and if you want to do that You go do that but don't kid yourself and think you're going to get it paid off right that's just you having fun
like you going to the Super Bowl or you know some big thing you want to go do so people have I think that's what's confusing about a lot of these things they're both investment and consumption it's like a house right it's a big investment but you live in it and you consume it all the time right and so it's got these there these things that Are weirdly both there's stuff you invest in and there's stuff you like really really enjoy sure um not like stocks which are an investment and not like food which is consumption
yeah right these things are actually in between and that makes it really confusing I think for people got it what else should we uh be aware of what are the other big things that we do so I think the other big thing that people struggle within finance and outside of Finance is they think there's a lot of skill in finance in in what in managing making investing Mone managing money and investing money and when they get good results they think it's their skill skill so the lesson of Finance is it's almost impossible to tell the
difference between luck and skill other than over the long run right so you got a buddy and I got a buddy and the Buddy says you know what I beat the stock market like three years in a row five years in a row I'm awesome yeah and the answer is I have no idea if you're awesome you may be awesome the market may have just been going up exactly and you just got into the right time and whatever and in fact like you know there's this old coin tossing trick right which is you get 80
people in a room you toss a coin 10 times and you kind of go through it and then you say who got nine heads maybe one or two people who got 10 heads you're pretty much guaranteed to get Somebody in that room get 10 heads and then you ask that person you know how did you do it and the person of course will honest usually answer honestly which is it was luck yeah but when you're a mutual fund manager and you beat the market 10 years in a row I'm the man I'm the woman I'm
the man I'm the woman and I did it right and so I think people think there's a lot of skill and it's the truth is it's really almost very very hard to beat the market Persistently there may a few people out there who can do it well over the long run I don't know who they are you don't know who they are don't believe the hype so for example you know as you may know there's this this massive rise in indexation right so like people basically just buying uh exchange traded funds or index funds and
that's because people have figured out pay that's that is what has worked over the years that's what's worked over the years invest in The index fund and 30 years you're going to make more than if you try to play you try to play the game yourself or frankly if you try to pay somebody who tell tells you they know how to play the game isn't this what Buffett does he just invests in index well so Buffett is like a guy who's Buffett's super interesting right because he actually people think he's beaten the market for a
long period of time and he may have but he also doesn't believe in a lot of these things Right he doesn't believe you can just kind of be successful no problem and in fact the way he works now it's so interesting about Buffett he basically monetizes his Halo right so when he invests in a company people Rush In And so what does he do he kind of like during the financial crisis he bought preferred stock at Goldman and GE he kind of rescued them he got terms that no you and I could not get of
course right because he's Buffett and then he Does influence yeah he gets and he gets like he got like terms I would never get in the market if I want to go buy that stock and then he turns it into performance so you know it's really interesting and I think that's one of the big problems in finance is we think that they're these super skillful people out there and they're super smart reality is some of them may be but you don't know who they are mhm yeah yeah what should we be doing with our money
Then so that's a great question um so it kind of depends on who you are right so let's think about a typical kind of person yes let's say working and they have a income stream maybe they have a family so in terms of savings the first thing is save how much you as much the truth is um very few people overs saave right so what does over saving mean over saving means I'm depriving myself today so that when I retire I have more very few people make that mistake like 98% of People are making the
mistake of not depriving themselves today so they can have more later so for almost all people it is save more than you're doing now that's almost Universal as much as you can yeah I mean as much as you can and at some point you're going to be saying to yourself you know I'm skimping too much I'm making myself unhappy because I'm living in a shack and I'm like I don't need to live in a shack Robin noodles yeah and at some point you know Like you have to kind of get a little bit better and
you have to move up but first is you should be saving from the time you're earning money it's really really important it's like a tiny little bit as much is great um second thing you got to think about is where should you be saving it so the first thing is um and this is going to sound a little nitty-gritty but it's really true do anything that lets you save money on taxes there's all a lot of tax Advantaged ways to save do it what are the top five in your mind so IRAs Roth IRAs you
know pension plans that are sponsored by companies people don't opt into them it's crazy yeah if you're a private entrepreneur you can set up your own so like if you think about like uh fees and management fees and returns if you save 30% upfront because of taxes like that's a victory you know like that who cares about the fees yeah Exactly and it's like a lot of people will say like these IRAs are bogus and you're not going to really earn money over time it's like all these fees and all this like well it depends
on how marketing and blah blah blah well once we get into the IRA that's fine but first put it into something tax advantage any tax thing you have taer exactly and just max out on tax stuff the government's telling you you should you should do it so that's IRAs pensions That's is that insurance policies as well even like health savings accounts flexible spending accounts people don't use that stuff it's also kind max out all that you got to max out on that stuff I do it all and it's forced savings too the other cool thing
about it is it's kind of forced savings because they take it out right before you even get to touch it and then the final thing is uh don't pay a lot of money to have people manage your money Now this is like you know anathema to people in finance because there's a lot of wealth advisers and Brokers out there and the reality is unless you have Serious Coin don't pay a lot in fees is what you're saying I'm assuming right yeah so like for example take like half your money put it into like a Government
Bond Fund take like half your money put it into an equity index fund and then sit back yeah if you want to play and have fun take a small chunk of your Wealth and just go have fun but don't do it with all your wealth and don't pretend like you're doing something serious you're just having fun yeah if you lose it you lose it you lose it it's just like buying tickets to the movies you're just going to like have fun with this money over here and you're going to invest it because this your buddy
told you his company's great that's fine but don't pretend it's like consumption again right you're having fun you're not Investing you're just going and goofing off yeah so I think the big rules are you know save more than you think you need second try to think about taxes it sounds boring but it's so first order third don't pay a lot of people money for managing your money uh and then fourth create a little fun space and go then go have fun yeah um if you have a lot of money you can take 10% of it
and your buddy comes to you and says I got a business I want you to invest in 5 10 Grand and put it in there whatever then that's fine but don't pretend like you're going to get it back and no I've invested in many startups that have had zero I've made zero return over the last eight years well and you're not alone right so so many people have so what do we know about startups right like so like 80 90% of them are going to be zeros yes and then 5% if you're lucky will be
10x and then there's a bunch of junk in the Middle but basically it's totally bodal and for me I went into it thinking I'm going to lose this all like it's it's away from me to learn to build relationships to like get in with a certain industry well that's interesting and so I was like this is my Harvard degree you know this is like my investment in something that's well you're learning you're meeting people um and you are having fun sometimes right like it's just it's fun it's interesting Um I think as you get older
it gets harder to do that yeah because you know when I was 30 I was willing to do that stuff I was willing to write check three kids and now you got three kids and you're like geez I don't know if I should be doing that but that's the other big thing which is when you're young you should be taking more risk and that should taper down over life sure right because I'm 49 and you know you got to start tapering down your risk Profile so when you're young you should be taking a little bit
more risk and that I think is something people don't do enough of yeah do you feel like as a as a professor you follow your own advice cuz there's a lot of people that teach that don't actually do what they say you should do I do most of it right what I just said I'll tell you what I do wrong let me just say what I do you in startups kid well I used to I used to write checks uh to friends and former Students and I do that less now because I just you know
I'm just more measured about the way I think about things and I think the startup scene is so crazy right now frankly in addition um I think the thing I do wrong is I like everybody I tend to overestimate you know my abilities a little bit so I like inv I do it a little bit I think if you actually I think I've done you know pretty well but I think if you actually looked at my returns over time I think I'm probably way overestimating my ability and if you thought about like if I just
parked it somewhere I would have probably done better and I would have spent less time in my life like wasting on that so I probably overestimate my abilities and I think everybody does everyone but I do follow all the tax stuff I do follow all the indexation stuff no paying fees um I actually worry sometimes that I save too much like I worry that I'm I'm too worried about Things in the future um that's like the good Indian way right it's like well that's the way you're raised and how it's supposed to be yeah so
I'm I was born in Bombay I mean I my parents you know when we came we you know money was something you thought hard about I mean I remember my parents had a little notebook where I had all my little accounts and what I spent when I since I was age seven or eight wow and you're right once you're an immigrant you're Never you know you never lose that you never lose that sense of wait a second you know we don't have as much as we need we have to fight a little harder we got
to work a little harder we got to save a little more because who knows what's going to happen right um and I think Indians always you know Indians Save A Lot in gold and in otherwise right they do a lot of crazy stuff um but especially on money stuff they they worry about that stuff more Than they probably should yeah huh what are some other lessons we should be knowing or understanding about finance and the wisdom behind it well so in the book can return and all that stuff yeah so in the book what I
try to do is take these ideas that people in finance would be in a textbook right and I basically try to explain them just using stories about graphs and charts no graphs no equations stuff that hurts my brain and they hurt a lot of people's brains and There's no reason to do that that way right so for example um risk management which is about options and diversification like some of the most complex derivatives so in the book The Way I try to explain it is I use Jane Austin and Pride and Prejudice so is like
a she's a fantastic English novelist and she basically tells a story of these young women who are facing risk in the marriage market right there's like these suitors who come along and Some of them are drunks and some of them have a lot of money but they're mean and some are nice but they don't have any money you know it's all about that it's like that's the whole plotline what do I want to do I want to have this debt of someone mean to me for the 40 years exactly or do I want to like
be with somebody I'm happy with but we'll never make it you know this exactly what Jane Austin is about right and so these young women are Really exposed and Men by the way she points out have it really easy because if men make a mistake it's okay in the 19th century right but women if you make a mistake in the marriage Market it's over you have to weigh your options you have to weigh your options so she actually describes options and diversification as like strategies for dealing with risk wow and it's kind of nice because
then options aren't some crazy derivative thing but they're Actually like something in your life right and in fact actually one of the I think the things I'm proudest about this book is I wrote a piece for the Crimson which is the Harvard newspaper called The Trouble with optionality so the reason I really like that piece is people in finance overlearn the idea of options right because they think Give me the give me the breakdown of options so the idea of options is you know you want to have choices right and the more Choices you have
the better and options are contracts which basically say you don't own something but you have the right to own something buy it and people love it because that's what optionality is right so a lot of young people I see are obsessed with optionality right they're like okay I'm going to go to school because I need more optionality in my life because then I'll have more opportunities available to me I'm going to be in part of networks because I need More optionality I'm going to go work at a prestigious firm because I need more optionality in
my life so the thing I and that sounds great right because then you get to do more things in the future so what I tried to point out in the book and I do this essay is you know what most of those people they get obsessed with buying optionality and that's all they ever do they never make a decision they never go and exercise the option they never make the big investment Because buying options is addictive you just buy more and more and more and then you have to pull the trigger on something big and
you're like no more optionality more optionality that's all I want and so then they end up and I've seen this with so many kids because they're these are kids who are really smart they got like the best safety nets in the world right right and then they keep buying more safety nets and you're like what the heck are you doing just go Do something R and the truth what's weird is people don't understand like the more safety nets you buy the more you value safety nets you like I got to buy another one cuz I'm
so used to doing it and then you end up like 40 years old and you're like I've got all these degrees I've got all this stuff and I have all these safety units but I've never really done the risky thing that I wanted to do and it's it's really sad and so that's what I see with Optionality that's an example that's kind of throughout the book which is you take this Finance idea which sounds really weird and Abstract options and optionality you try to explain it with Jane Austin um and then you say look it
actually applies to your life and like you you may be getting it wrong right so even if you're in finance because people in finance talk about this all the time they talk about marriage as the death of optionality right that's what you know And it sounds kind of like a ridiculous thing to say but that's the way you people think about it the relationship World sure yeah it's the death of optionality and but people don't also realize like that's how great things happen right when you close off options and so people in finan just consumed
by that so I do that with options in the book um I do that with bankruptcy so the I really like the bankruptcy Chapter comes at the the end um but I tell the Story of this guy Robert Morris who I'm sure I imagine you've never heard of nobody's ever heard of that's what's great about the story nobody's ever heard of him so he's the richest man in the colonies okay uh he finances the Battle of Yorktown with his personal script okay George Washington asks him to be the first Secretary of the Treasury before he
asks Alexander Hamilton and he says no so why does he say no he says no because he lost some Wealth during the Revolutionary War helping the you know young Republic and Washington says become the first Secretary of the Treasury he's like no go ask Hamilton I got to rebuild my wealth he goes back he rebuilds his wealth he owns uh 40% of New Jersey like the state he owns a quarter of the District of Columbia which was going to become the capital and then he goes bankrupt and what did we do to people who went
bankrupt back then he went to Jail wow and he went to jail and he was sitting in a jail in Philadelphia he went from the richest man in the colonies owning to jail because own the land where the jail was so that's actually the reason I tell that story is that's how we used to think about failure wow we used to think about failure people fail they're morally problematic they need to be punished wow so the reason I tell that story is George Washington visits him in the jail In Phil in Philadelphia and actually it's
a great story because George Washington risks yellow fever I mean these jails were terrible and he and other founding fathers look at at Robert mois sitting in jail and they're like something's wrong mhm this guy helped us Finance the Revolution and he's sitting in jail that leads to the way we rethink bankruptcy with the 1800 Act of bankruptcy 18 1800 bankruptcy act which where we basically say no more punishing People who fail so now what do we do with people who go bankrupt we actually prioritize them starting again right we're like we're going to protect
you from the creditors right we're going to actually get you a clean slate we're going to get you stay we're going to actually do all the things to help you which I think is really analogous to how you should think about failure right which is you don't want to stigmatize it historically what have we done with Failure we stigmatize it like I failed I'm bad you know you failed you're something's wrong with you the way we should think about failure is the way finance things about failure which is it happens let's get a clean slate
let's start again and let's protect you from all the people who have claims on you and then let's kind of get you started so that's another example of kind of saying you know bankruptcy and this idea in finance actually applies to the way You can think about your life in that case um failure the other example that I I kind of like is leverage so this is about yeah so that's about debt right and people in finance love leverage they're like because their fortunes have been built on Leverage um think about a lot of people
especially in real estate a lot of areas it's been built on Leverage they borrow money and then it allows them to own assets they have no right to own they leverage that asset They lever that asset and then if things go well their returns are outsized right because leverage that's what leverage does to your returns and so I kind of talk about that but then what I try to do in the book is say you know that's totally analogous to commitments you know what is debt it's a commitment it's like a really really serious commitment
um so I do this via The Merchant of Venice Shakespeare's story right nominally it's about debt this is the Play where is this money lender and he's like I want to pounder your flesh because you didn't pay me back people think it's about debt it's really about commitments like it's about commitments between people so the point of the story is that commitments are like debt they allow you to do things you wouldn't be able to do otherwise commitments to people to spouses to families to jobs to organizations you get to do things you can't do
by Yourself for example what do you mean so I give a couple of examples so I talk about these two artists um one is George Orwell who wrote 1984 and one is Jeff Coons who's a modern artist you may have heard of he's makes these massive sculptures yeah so George Orwell is a low-leverage guy he is like living in London everybody wants a piece of him after World War II he's like I'm going away he goes to the Scottish islands Hees islands and he Spends three years alone and he writes 1984 by himself that's low
leverage he's not committing to anybody he's doing it all by himself right Jeff Coons I think is arguably the greatest modern artist um the Whitney Museum in New York had a retrospective of just him for the whole building he creates these sculptures that are the size of this room one's called Play-Doh they're made of metal and glass and just incredible stuff he has 150 people in his Factory he doesn't Actually know how to use the material that he's working with he relies on other people who use that material it's kind of like the the Visionary
he's the Visionary and he's he actually like literally in one interview says I'm the idea guy he's gone bankrupt like three times he's bankrupted dealers wow he is living a high leverage life and he produces art that he wouldn't be able to produce otherwise you can't do that by yourself so the point is kind of like to Say commitments um and embedding yourself in a world of networks and commitments actually allows you to do stuff that you wouldn't be able to do otherwise right did I end that chapter with a great quote from Jefferson actually
the picture on the cover of the book is um Archimedes so Archimedes has a famous quote about leverage which is leverage comes down to a lever right and a lever is this amazing thing in engineering when you push down on it you Get to move stuff you got no right to move right that's like Leverage in fin you get to own a house you have no right to own so Archimedes says you know give me a place to stand and a lever and I'll move the world so Jefferson says the biggest lever in life is
your reputation so if you commit to the world it's like Buffet yeah like exactly like that exactly what Buffett does when he monetizes his Halo so Jefferson says basically if you're good to the world Then the world because you have a good reputation will let you do things you have no right to do which is true right that's what reputations do and that's why it's so so hard when you lose your reputation because reputation is the stuff that lets you say I trust you go ahead you can do it so you commit to good behavior
and then you get to do things you have no right to do yeah and that's the essence of commitments and that's kind of the essence of Leverage As well that's powerful who's a smartest person you've taught come through one of your classes wow so I've had I've Had The Good Fortune to you know teach a lot of great people MH God you know I have had um I am so proud of a lot of my former students so it's kind of hard for me to think about that one I get it yeah yeah maybe a
few that you can think of who've done extraordinary things or God you know I'll I'll tell you I'll give you kind of A bunch of different people because I think it's useful to kind of they're different types of people right um so an entrepreneur there's you know entrepreneur who I think is really spectacular um Sarah cow she built swell you know the water bottles y as well yeah very popular right now she's spectacular and I you know I don't think she might me telling you you know I had her as a first year student at
HBS and she was she was really nervous about Finance and she was really you know nervous and she has just built like a great company yeah out of something that you know the water bottle business you might not have even thought about but she's made it into something aesthetically beautiful like that's spectacular yeah um I'll give you another type of person because that's like an entrepreneur type of person uh another type of person as I've had a couple of authors so um Le carpenter has Written a book about Navy Seals uh Gail lemon wrote Ashley's
War which is a spectacular story I think they like took a totally different path yeah yeah like you know they go to business school and then they go write novels and journalism it's spectacular um and then I had a former student who went to government I've had a number of students who gone to government service so a guy who used to run the IRS Doug Schulman um it was a Former student so I guess I picked those three kind of randomly run the IRS he used to yeah um and so I picked those three people
because think it's one of the luxuries I have is I see people who have impacts on the world in very very different ways um I don't really know who's smartest you know the truth is l i don't you know as you get older I think smarts become less and less what you know let me put it differently I Sur I'm Surrounded by a lot of smart people yeah and I have that luxury smarts don't matter unless you can execute well and unless you're a good person unless you care about people and make an impact it's
like and especially who cares how smart you are and you know I hate to say that but like at some level like smarts are cheap yeah right at some level smarts are the valuable the scarce resource and then at some level smarts are not the scarce resource yeah Especially at Harvard everyone's you know got a thousand smart people in one room yeah and so like is one person smarter than the other yeah sure fine whatever I mean it is true and it's when you see people like that and I especially in the undergrad population sometimes
you see kids like that and it's the law school sometimes you see kids like that they're just they they're special like they're way off the tail um but the thing I really care about is Attitude dude mhm and like I hate to be it's like a traditional Indian immigrant thing right but um like work ethic mhm like just hard workers who are hungry and they're smart then you're like damn that's that's the package because that is really powerful um yeah so I hate to say that but I think smarts are um I don't focus on
it as much you know I love smart people and I like to be around them but like small gradations in smarts it's kind of like in sports too You know when you have just a talented player who doesn't work hard and is lazy exactly you're like get off my team or you're just like oh I wish you would work hard because then you'd be incredible and you've got someone who works hard but isn't talented you keep them on the team because it's like they lift everyone up yeah but if you can put it together it's
like and in fact those people who have talents and who don't work hard they're the they're the most Tragic stories right the worst because you feel like you give me some of that talent and you have no idea what you have oh my gosh and in fact just just to go back to the book a little bit the one of the there's a story in the Bible um called the parable of the talents MH it's like this great story in the Bible parable of the talents right yeah is this the one with the the father
gives the son talents or something what how's it go it's great so here's the story Which is um there's a master who's supposed to be God okay and he's going out of town and he's got these three servants and he says I'm going out of town you got to take care of my talents so talents today are like these special things we have like that make us special back then it was money yeah the origin of the word talents is money so he gives one guy he's like look here are five talents take care of
this I'm going out of town here's another guy three talents Take care of this I'm going out of town he gives the third guy one talent and he says I'm going out of town take care of it he comes back and obviously he's supposed to be God in this story and these are like normal people so the guy with five talents comes to him and says you know master I took your five talents and I invested it and uh I lent it out and I made it into 10 talents and he gives it back to
the master and the master says one wonderful enter the Kingdom of God second person says I took your three talents and I made it into six talents and the master says great job welcome into the kingdom of God third guy is like you know I only had one talent and I was a little nervous and I wanted to make sure and have it so I buried it it's here and I want to give it back to you and the master says you're out you know you're damned you didn't do what you were supposed to do
so the reason I love that story it's About um it's about how you're given these incredible gifts and you have to use them it also in the value creation chapter it's kind of exactly what Finance says about value creation you know which is you're a steward for resources you got to do more than people expect you to do in finance that's called beating your cost of capital because otherwise you wasted you've wasted an opportunity and if you just sit on things that's actually value Destroying it's not value creating so that Parable it's just like your
story about this athlete right um it's a really weird Parable though right CU this young this one guy who had one Talent he's like the poorest guy and he just because of his fear he gets damned he gets like literally cast out of the kingdom of God but it's a powerful story for saying you know we are all given a lot and you have to make everything you can out of it yeah um it's I really like That story because it has to do with Finance but it's also this really interesting story you know more
generally making the most in the world and making the most of what we all have we're not going to have five talents sometimes times yeah we're have one little talent but it's like what's how can you make that into 10 exactly in your own way and it's like it's your duty yeah right it's not like you can if you want like the story of the parable Is it's your duty you got to you've been given something and you have to make the most of it so I like that right because it's almost like it's incumbent
upon us to realize what our talents are and then make the most of it and you know so there are a lot of people who have found that terrible um you know in a way that's almost terrifying right CU you're like am I making the most of my talents and so the story in the book is about these two guys John Milton who wrote Paradise Lost and Samuel Johnson they were haunted by that Parable really yeah because they like spent their life like oh my God and these are two seriously talented people right Samuel Johnson
wrote the first dictionary like in eight months I mean it's like he's a crazy guy John Milton wrote Paradise Lost when he was blind these are crazy people and yet they were they were always asking themselves am I doing enough have I've been given so much am I doing enough and It's kind of an interesting way to live you know you don't want to take it too far because you'll beat yourself up all the time but I think more of us should probably be doing that yeah because we all are very lucky uh in different
ways I think it's important to live an urgency too you know and not just like oh I'll wait until I'm ready type of feeling I'll wait till I get the degree no start something now even if it's going to fail at least you're learning Something and you're trying to do something with your talents yeah right I agree I mean I think people over incubate a little bit right so they kind of wait for their ideas to get a little bit more clear but the reality is just go and just do it because and in that
version of the story it's incumbent on you like you got to go do it um I really like that idea of not just like you've been given something so do it but like you got to go do it because if you're Not you're wasting like this really the privilege you've been given mhm what's the greatest lesson you've learned over the last 18 years of teaching you know uh well let me say a couple let me say two things right so one is I learned something about teaching um the art of connecting with your students and
and it's really it's fundamentally when I teach best and I don't always teach great but when I do It's like an act of empathy right like you got to go into the other person's you have to think about how the other person is thinking about it so like too many people who are teachers are especially in an academic environment it's like about my ideas I'm projecting it on to you and fundamentally it's about empathy like if you if you can get in other people's shoes then you can help them understand Something yeah um and then
the second thing that's about teaching just about what it is really because it is kind of my life's work along with research and writing um I think the big lesson though you learn from teaching and especially where I teach it's it's you know humility you don't know who who the kids are who are going to go do great things yeah you know you sometimes see them and you kind of get a sense but everybody has something different in them and People who in a classroom don't say anything or don't do anything you come they come
talk to you later and they're like spectacular and then like these people who you know are always talking and always saying stuff and sound really smart they're actually kind of empty vessels you know so you're you're a little bit don't judge people yeah don't judge people and you're a little more humble about um everybody has different capacities and I don't I judge people Much less than I used to because I just I don't know what your capacities are I you know I don't know what you're really K in the back of the class who doesn't
speak could be like the next best whatever yeah and I think that's the related part is you know encouragement is so important I used to be a little bit more of a hard ass I used to be like when people would you know when you're younger you're a little bit tougher right I think and as I gotten older I Kind of feel like encouragement is so important because you don't know who who's struggling with what and you don't know what they're good at um so you always want to air on the side of encouragement yeah
because if you air on the side of being you know like pushing too hard that can do damage to people yeah um so I think I those I think that's the most important thing I think humility and just this sense of you know people are incredible in different ways And you don't know and you shouldn't pretend to know yeah um and you just have to help them it's like raising children you know you have you have to help them be the best person they can be in in like this very limited way in a classroom
obviously not like being a parent yeah let's uh um let's imagine that it's your it's your final class you're ever going to teach and the world is connected to your mic right now and they're all going to Be in your classroom listening to you they can all understand English and you have your final lesson to share to the largest classroom and you'd have 60 seconds to share any lesson you want roughly 60 seconds if you're going to ask questions like this you should send them in advance I should this is unfair no this is a
great question it's a spectacular question you had one lesson that you'd had to share to the world and This was like all right after this lesson you don't get to hear anymore from me you don't get any more books from me you don't get any more research here's my greatest thing I could teach oh gosh so no pressure I know exactly so I would say two things um and one is going to sound very current but the other one is going to be a little more transcendental so I think the current thing I would say
is we have got to figure out uh and I'm Not like a big environmental guy but we got to figure this out and like we're really in a very perilous situation and you got to take that seriously I mean this isn't even my area right but I've come to believe it and I think we don't even understand like the existential risk that we're facing and then the second thing I would say is you know fundamentally you know kindness and generosity are massively Underestimated the power of those things uh is just incredible I'm not saying I've
lived up to that by the way just to be clear I don't think I have um but you know I become convinced that that is the most kind of important when I see this in my children or I see it in many people I say that's the attribute we need more of and everybody has this capacity for it and yet on WE layer on on top of it you know intellectual stuff and other stuff but that core thing is The thing we all have to get back in touch with because it's so important to the
Future and it's so important to the Next Generation and the generation after that yeah so saving the planet and kindness and generosity well I think you know you know and by the way I would do it with a story because I think well you know the reason I wrote this this way is it's all stories because I don't think lectures like if I just say to you you got to be more X it's hard to remember It's hard to remember do like you know assimilate how do you assimilate it right and I think what I
learned from writing this book is stories are everything because people remember stories like the parable of the talents like you get it right and then it stays with you if I say well value Christi is about beating the cost to God you know it's like it's hard to remember right but if I had that 60 seconds I would think hard about the Story I would tell um because I'm an economist and I was you know we only believe things in data and we get distrustful we become distrustful of stories and this book taught me that
you know not all stories are true but stories help people understand the world absolutely and if you don't tell stories people aren't going to understand you um and the greatest communicators politicians you you understand that like stories stories anchor everybody's Thinking and without them you're just left in a sea of stuff you need a narrative to organize your life without a narrative it's like chaos are you yeah it's funny one of my uh your friends and early kind of business mentors would always say facts tell stories sell so if you want to sell any idea
yeah product business whatever tell a story yeah yes I think facts are important to understand as part of yes absolutely and you don't want to tell Stories that violate facts that's really important because that's living in truth um but it's also not just sell I think like I'm sure you've done this too right like at difficult times in your life you have to tell a story to yourself about your life mhm right like there's got to be narrative in your head yeah about who you are and how things are going to play out so one
of my narratives everybody's got different narratives right so one of my narratives is it's not the most Important one but one of them is I tend to um fall behind and then come back like so that's like one of my narratives right like I tend to kind of do something that's almost like self-defeating because I want to come back and claim victory yeah that's something that I just do and it's a narrative in my head right and you know we all have those narratives like the Immigrant narrative that you talked about earlier right you're like
an Outsider a little bit you know you don't know if you're going to GMO you know you know you gota like you got to work harder and you got to save more and you got to do all these things more these are all narratives that are like so important to the way you organize your life I like it this is awesome the wisdom of Finance discovering Humanity in the world of risk and return uh make sure you guys go pick this up do you guys do you have a website for this as Well um so
my personal website is mehs side.org side.org exactly and it's got links to the book as well cool we'll have it all linked up in the show notes um before I ask the final question I want to acknowledge you me here for uh doing a book that I think is going to help people through stories because for me it's impossible for me to read something that has numbers and graphs and charts it's like it's I shut The book right away yeah it's ex exhausting for a brain like mine well and you're not alone right I mean
I think it's really really hard for people yeah so you for for stepping out of your comfort zone to create something to use your talent and multiply it for the world to to receive it because um you know if you didn't do this only your you the students would have got the information and not the world so I think this is a thing I appreciate it with That story yeah um are you on social media as well I just got on all right so I'm on Twitter and Linkedin I'm not pretend Twitter you're on there
like what once a week I you know the truth is I am on it but I don't know what I'm doing sure sure so all I'm doing is promoting the book got it like I'm not actually learning how to use Twitter so I should probably figure it out from you but I think you know I got to get better at kind of creating a personality um Right now I'm just kind of pimping the book got it got that's all I'm doing it's all good it's all good uh we'll have everything linked up um but the
final question is what's your definition of greatness wow my definition of greatness uh you know it goes back to what what we talked about earlier um which is it is making the most of what you've been given and so greatness resides in Everybody I think the thing we make the mistake of is you know that guy over there you know Mahatma Gandhi was great or whoever and the reality is I think we can all be great it's just about uh looking inside and making the more than you could have made out of what you've been
given I think that's greatness awesome and when we see it in like Muhammad Ali or muhad Gandhi it's like particularly spectacular yeah but it's in everybody awesome thanks so much for Coming on thanks so much this was great thank you
