Carl Richards and Greg Davies are two of the smartest people in the field of behavioural finance.
Carl is a financial planner and a brilliant communicator. His particular skill is using sketches and succinct articles to explain complex subjects — in other words, making the complex simple. Greg, the Head of Behavioural Science at Oxford Risk, is from an academic background and, as he sometimes likes to quip, has been trained to do the opposite.
Together, Carl and Greg make a powerful combination, which is why it was a pleasure for my Regis Media colleagues and I to be asked to film a discussion between the two of them in London. We’ve broken the conversation down into four separate videos, of which this is the first.
Video 1 is 12 minutes long and, regardless of your level of knowledge of this subject, you’ll find plenty in it of interest.
In fact, what is particularly heartening about this video is the admission by Carl that even he, with all his knowledge of investor behaviour, and the danger of buying high and selling low, once made a big behavioural mistake himself. Early in 2000, he invested $10,000 in InfoSpace as the price of its stock soared towards $1,305 a share. Then the tech bubble burst and the price fell to $22. It was the first time in history that US stocks experienced five consecutive months of outflows.
“$10,000 was a lot of money back then,” recalls Carl, “and it’s a lot of money now. I bought $10,000 worth of InfoSpace after being disciplined, disciplined, disciplined. If you’re going to capitulate, capitulate early. Capitulating later just costs you more money! By 2002 it was worth more as a framed stock certificate.”
Carl also invokes one of Warren Buffett’s most famous quotes to make underline the importance of doing nothing: “Lethargy bordering on sloth remains the cornerstone of our investment style.”
“That’s fascinating,” says Carl. “It’s celebrating being lazy. (The stock market) is the one place you get rewarded for doing nothing. But the dilemma, of course, is that we’re wired (to do) the opposite.”
I’ll be posting the rest of these videos over the next three weeks. Please do share them if you find them helpful.
The Evidence-Based Investor is produced by Regis Media, a boutique provider of content and social media management to financial advice firms around the world. For more information, visit our website and YouTube channel, or email Sam Willet or Christina Waider.