Transcript

[00:00:03] Stig Brodersen: In today’s episode, I’m joined by my recurring guest and close friend David Fagan for a conversation about indexing and the uncomfortable truth most investors never hear. We talk about why indexing works for the vast majority of people and how missing just a few percentage points in annual returns can quietly cost you years of your life.

[00:00:25] Stig Brodersen: We also discuss what investors should really look for with evaluating track records, benchmarks, and the value provided by financial advisors and sometimes the lack their off. In this episode, as should also hear, we cover asset allocation, rebalancing, and what it really means to be the overseer of your investments, even when you trust someone else to manage them.

[00:00:47] Stig Brodersen: And finally, the conversation goes beyond investing into expectations, behavior, and leadership. We discuss how simplicity and consistency compound over time, both in markets and in life.

[00:01:02] Intro: Since 2014 and through more than 190 million downloads, we break down the principles of value investing and sit down with some of the world’s best asset managers. We uncover potential opportunities in the market and explore the intersection between money, happiness, and the art of living a good life.

[00:01:20] Intro: This show is not investment advice. It’s intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now, for your host, Stig Brodersen.

[00:01:44] Stig Brodersen: You are listening to The Investor’s Podcast. I’m your host, Stig Brodersen, and I am here today with my friend David Fagan. David, how are you today?

[00:01:52] David Fagan: Yeah, I’m doing great Stig. Thank you very much for the invite. I’m really looking forward to this.

[00:01:57] Stig Brodersen: David, thank you for making time, and let’s just jump right into the first topic here. Today we are going to talk about why we should index. So with that very cold start, I’m just going to throw it forward to you, David.

[00:02:10] David Fagan: No, that’s lovely. Yeah, I wanted to talk about indexing and how I use that with our family’s wealth and do a bit of a deep dive of the thinking behind it. I know many of the listeners come here for value investing, concentrated portfolios, and understanding individual businesses.

[00:02:28] David Fagan: So this episode might not be directly for you, but it might be for someone that you’re connected to. I’ve shared my indexing memo titled Compounding Simplicity with more than a few of our Mastermind community members, and it’s something that they’ve passed along to their friends, their family members, and anyone just starting out who needs a reliable framework to start building wealth.

[00:02:49] David Fagan: Today I want to encourage you to listen to see if this resonates with you or anyone that you’re connected with, like a friend or family member, to set them up on a strategy that will teach them about the market or the person who doesn’t really want to pick stocks at all and just wants a simple plan that works.

[00:03:05] David Fagan: You know, sometimes there’s accounts that are just too small to start out to do anything else in them. I mean, in Canada we have what’s called a tax free savings account. And once you turn 18, you can put up to a maximum of $7,000 in it. And this is a prime example of something that you can do in an account like this.

[00:03:23] David Fagan: Starting out is indexing. And for a lot of people, maybe you have a small allocation of your investments in index funds as well and want to learn a bit more about it. So to jump right in Stig, when someone like Warren Buffett says in his 2013 shareholder letter, my advice to my trustees of my state could not be more simple.

[00:03:44] David Fagan: Put 10% of cash and short term government bonds. 90% in a very low cost index, like the S&P 500. I think that really deserves our attention. I mean, what is he really saying and telling the world when he says, use index funds and sig, this conversation is worth having because indexing is one of the very few investment strategies that works for almost everyone regardless of experience and financial background.

[00:04:11] David Fagan: So I guess before we go a bit deeper, let’s just back up and do a quick overview of what an index is. I mean, there’s countless resources out there on what it is. So I’ll keep this really simple. I mean, index fund or an ETF, it’s just a basket of hundreds of companies packed into one low cost investment.

[00:04:29] David Fagan: So instead of trying to pick winners and outsmart the market index funds track the entire market, and you own all the companies in that chosen index, such as the S&P 500, or in Canada, the TSX. And as those businesses grow. Innovate and earn profits, the value of the basket rises with them. And so you’re not just betting on any one company, you’re actually buying the entire market to share A couple fun facts about the industry.

[00:04:58] David Fagan: I mean, even though there’s roughly 50% of assets are now classified as passive, only about 23% are held in true index funds in the US market and in Canada and Europe, it’s around 12 and 13%. Index funds account for only 1% of the trading volume in the us. So even though they own a quarter of the market, they’re hardly trading.

[00:05:22] David Fagan: And I feel like that means active investors are still overwhelmingly driving price discovery. Only 17% of individual stocks beat the market over the last decade and as the best and binder research report shows. That only 4% of the stocks created all the net worth in the market going all the way back to 1930.

[00:05:43] David Fagan: It’s a remarkable study for those that are not familiar with that. So a tiny number of superstar companies drive all the gains. And one of the reliable ways that you can ensure that you own those winners is to buy index funds. And lastly, it’s hard even for the pros to beat the market after fees and expenses.

[00:06:04] David Fagan: So in the US, roughly 90% of large cap managers underperform the S&P 500. And in the last 15 years, and candidates even more dramatic, 98% of the Canadian equity managers failed to beat the S&P TSX index. And just as an FYI grabbed those scorecards from S&P Global using their speed of reports that’s on their website.

[00:06:30] David Fagan: Stig from my own anecdotal evidence as an accountant preparing corporate tax returns and reviewing client portfolios for more than two decades, I can count on one hand how many times I’ve seen long-term capital returns beat a simple blend of the TSX and the S&P. And this is even after fees and allocating some, taking into account some fixed income allocations.

[00:06:52] David Fagan: The compounding just isn’t there for a lot of people. So yes, everyone wants to be Warren Buffett’s and compound at 20% for decades, but very few people live in that reality. And a lot of us are playing a different game. I mean, I think of investing for myself in three silos, real estate, public equity, and private equity in Canadian small businesses.

[00:07:17] David Fagan: And early in my career, I was very passive with my public investments. My focus was on saving money, minimizing taxes, and building wealth through entrepreneurship. My wife and I, we have eight accounts, four registered and four unregistered. And of course in Canada and many other places, there’s RSPs and TFSAs.

[00:07:37] David Fagan: And so it doesn’t take a whole lot to have a whole bunch of different accounts. We index six of those eight accounts, and because most of our wealth has come from entrepreneurship, I don’t need to chase home runs or swing for a 20% CAGR in the public markets. My priority is just really staying financially independent, protecting what we’ve built and indexing fits that reality for us.

[00:08:05] David Fagan: I mean, I do have the other two accounts that I spend a fair amount of time on, and that’s where I run a concentrated portfolio. That’s where I’ve personally chosen to challenge myself intellectually and do studying of different companies, but indexing is the core that gets us to where we need to go.

[00:08:23] David Fagan: Those accounts are indexed to main maintain our financial independence. I mean, I often think of what Howard Marks talks about longevity and wealth creation and that superior investment returns isn’t about ranking in the top 5% in any given year. It’s about consistency and steady returns over long periods of times.

[00:08:44] David Fagan: I mean, he just told the story to William in their most recent podcast that early in his career he was reviewing investment returns for different funds and he saw a pension fund that never ranked above the 27th percentile or that same pension fund didn’t rank below the 47th percentile yet after 14 years, guess what?

[00:09:07] David Fagan: They were in the, they were in the 4% overall on the ranking, and that’s a remarkable observation early in his career that has stayed with him for 40 years. Which is another remarkable piece to that story. I mean, the message is simple. Avoid big losses and let consistency win. And for me, indexing is exactly that average market returns, but for a very long time.

[00:09:34] David Fagan: And I guess just to kind of finish a little bit on my early thinking of this, just to kind of zoom out and look at the macro reasons why index and the rationale for that in line with the Bessembinder’s research report. It’s nice to know that you’re owning all the winners because the winners drive most of the returns.

[00:09:53] David Fagan: It’s good to apply Occam’s razor when you can and understand that simplicity beats complexity. And that’s a whole other tangent that we could go on in terms of what that means. ’cause that can go into many different aspects of your life. Then there’s the time paradox too. I mean, both time in the market and time that you save in your life.

[00:10:14] David Fagan: I mean, I spend a fair amount of time, and I know you do too, stay on a concentrated portfolio, but the reality for so many people is that they are not going to read investor presentations in 10 Ks. And so they, you have to understand that there’s a big commitment to time if you really want to get concentrated portfolio investing, right?

[00:10:36] David Fagan: I at least I think you should be dedicating a significant amount of time to it. Capitalism is very competitive. The other thing about indexing is the tax side and tax minimization studies have shown that portfolio turnover alone can cost up to 2% of gross returns every year. There’s lots of research reports that are out there that support that.

[00:10:58] David Fagan: So a 12% pre-tax return can quickly become 9% after turnover and fees and the taxes. And, you know, maybe the last thing about indexing is. Just fewer unforced errors, or as Munger would say, just being less stupid. So, you know, most people aren’t going to have a 40 year relationship with any single fund manager anyways.

[00:11:21] David Fagan: You know, often people switch brokers and they trigger a ton of changes when that happens. So their taxes are significant in their portfolios, and you’re going to introduce grinds on your returns at some point. So indexing is a plan that you can stick to for a very long time. Like it’s going to shield you from making decisions 20 years down the road and switching and getting in and out of investments.

[00:11:44] David Fagan: And, you know, it can also save you from a lot of the behavioral biases that, that so many people have in terms of herd mentality and FOMO and trying to time the market, all of that stuff. I mean, you can, it helps you ignore noise and focus on what can actually have a profound impact on your wealth savings. Discipline, tax efficiency and just simply good behavior in the markets.

[00:12:11] Stig Brodersen: So David, let me just try to play devil’s advocate here just because I can’t help myself. Some people, they hear about this 4% business binder stat and what they think is, oh, we should index because it’s so hard to find and hold on to those superstar stocks.

[00:12:28] Stig Brodersen: And then the others who think, well, if 4% creates all their turn, we better go out there and find those 4% stocks. With that being said, though, I’ll be the first to say that 99% of people should index. And I’m not saying 99% of the people listening to the show. I do know that there is a certain selection bias to the people who follow our show and their interest in the stock market.

[00:12:49] Stig Brodersen: But I would say that 99% of the people who want to come out their wealth and probably who doesn’t want to spend the time on it and doesn’t have the temperament to pick individual stocks. You know, I can just say it’s been a quite an eyeopener for me at least, to look at some of the track records of The Investor’s that we had on here on the past on the show.

[00:13:09] Stig Brodersen: And when now Preston and I started back in the day, we felt everyone in the space were way smarter than us. And I think that was probably ’cause it was true that they’re always smarter than us and perhaps they’re still smarter than us today. But one of the things that we did, I know it, it took us way too long to get to that was we started to look at people’s track records and we were like, Hey, you say really smart things and then, you know, you study Buffett’s and Munger, you’re like, okay, it’s one thing what people say, it’s another thing what people do.

[00:13:38] Stig Brodersen: And the best way, like the strongest signal you can find would be an audits track record where you benchmark to, you know, towards a reputable benchmark such as, you know, the P 500. And it really goes to your point before David, about how few investors who actually do that. The point is not to name any names.

[00:13:58] Stig Brodersen: If you follow someone and you really have a lot of faith in what they do, I think that’s great. I would also encourage you to check out their track record, and if you can’t find the track record, it might be because they’re too embarrassed that there are beating all of us and they’re the next one, Buffett’s, and they don’t want to tell anyone.

[00:14:17] Stig Brodersen: But also, it’s the same people who are out there in the public space all the time telling you about investing. And so there is certainly a selection bias. And we are talking about, some of them are, you know, some of them are billionaires and they’re just, they’re great at storytelling, but perhaps less so at picking stocks.

[00:14:32] Stig Brodersen: Also, and this was a shock to me. The name escapes me, but I read a book about this concept a long time ago, and it was about whenever you see a fund that’s performed really well, then the author went back and he looked at how many funds that was started by the same person. And he was like, Hey, just by, you know, pure math, some of those funds, if they’re concentrated enough, are going to show really good returns.

[00:14:55] Stig Brodersen: And then the trigger is that you just close down the funds that are not performing. And we see that quite often to be frank, but you have to know to think about it like that. We’re like, yeah, but again, if they set up a hundred fund and there are only two remaining, you know, there could also be that element.

[00:15:11] Stig Brodersen: And so I’ll be the first to say that indexing doesn’t sound exciting, but that is what most people should do. And I don’t want this to sound like I’m badmouthing asset managers will not be in the index. You know, it is incredible difficult to do. And I also think that if you do it for the right reasons, managing people’s money is one of the most admirable jobs that you can have.

[00:15:34] Stig Brodersen: But I would rather encourage you to take a step back and ask yourself why you manage money the way that you do. So for example, if you invest with an asset manager. They tell you their job is to beat the market. Well great and the best of luck. But then again, make sure that they actually do beat the market and it’s not like some kind of random benchmark they chose, which I also see all the time that it’s almost impossible not to beat that, or they continue to change the benchmark there.

[00:16:04] Stig Brodersen: And the benchmark is going lower and lower. That’s probably not what you want to see, but a reputable benchmark, let’s say at the S&P 500. And so that’s one thing to look at. You probably also want to look at not just, you know, the past five years, you know, not just at a period of time where everything has gone up, but at, you know, at least a decade preferably too.

[00:16:25] Stig Brodersen: And make sure that you have some really painful bear markets in that track two, and see how they reacted. Mm-hmm. So I can’t help to encourage you to study that. And of course if the asset managers, then saying, no, they haven’t been beaten the market, but now they’ve figured out how to do it and they just need your money to do it, make sure to be careful.

[00:16:46] Stig Brodersen: And now also, and I’m sorry I kind of feel I, I become a bit nerdy here about this, and that’s just because I track so many different investors probably to my own detriment. And I’ve seen so many benchmarks being used, probably also benchmark that are not reputable. And I can see, like, I can see a point where you say, look, I’m a micro-cap investor and I only invest in frontier markets.

[00:17:10] Stig Brodersen: Yeah, perhaps there is a good case why you won’t be using the S&P 500. But I think at the same time you can also say people listening to the show, they have access to the biggest benchmarks typically, and they can invest in the ETFs, tracking those benchmark relatively quickly. So., I don’t know. I just think that, you know, to your point, David, you can do yourself a service of, you know, comparing Apples travels.

[00:17:34] Stig Brodersen: And I know you have a really good story to this here later about a woman who wants to retire. Just, I read that, I was like, that is exactly why I keep on beating this thing here about the index and what are you really measuring? But anyways, I know we’ll get to that later here in the episode. And again, some of you out there, you know, you might have been following your show for a long time and you try to log in the stock market and you thoroughly enjoy it and you don’t beat the market.

[00:17:59] Stig Brodersen: Is there anything wrong with that? No, I think that’s perfectly fine. I just think you should know why you’re doing it and the upside and the downside of whatever kind of approach. And I think as long as you do that, you know, you cannot be the market as much as you want. But really one of the things that I also want to talk about is that, you know, whenever you, for example, David are talking about.

[00:18:20] Stig Brodersen: The stock market. I think whenever we hear the stock market, we think differently about it. I think some of the listeners are thinking, Ooh, that’s a dangerous place to be. Let’s hold cash. Cash is less risky. And I’d say that’s probably cash is the surest way to lose your money because of inflation.

[00:18:38] Stig Brodersen: And I know I’m sort of like going in all kinds of direction here, but you know, I’ll be the first to say like perhaps the CPI number, which is what, 2.7, whatever, that’s probably not the real inflation. And you could just look at, you know, the groceries you are buying or what’s happening to your college tuition, whatever.

[00:18:56] Stig Brodersen: Like it’s probably not 2.7%. And so really a big reason why you might want to invest in the stock market and why it’s not risky is actually because the biggest risk is not to be able to retain your purchasing power. So the last thing I just wanted to say here before I throw it over to you, David, is that.

[00:19:16] Stig Brodersen: Perhaps the listeners want to know if I invest index funds, I have around 15% at the time recording in passive indexes. And then closer to what, probably add another sevenish percent with you. Include my position in Berkshire, which is an individual stock. And I think a lot of people out there would say is sort of like a superpower ETF pun taken.

[00:19:37] Stig Brodersen: So that’s sort of like where I am. I publish my own track, record, my own portfolio and I’ll show a link to that. So please take it for what it is. But I think it’s, if you are a yo-yo like me who think they can beat the market, I think it’s also perfectly fine. You see, you know, what kind of thought process, what kind of positions and for you to be able to track that. So with that said, then through PE it’s you David,

[00:19:59] David Fagan: I think taking a step back and asking yourself why you invest is a great question. I had a wonderful lunch with one of our mastermind community members over the Christmas break, and one of the things we talked about was how our investment style really needs to match our temperament.

[00:20:15] David Fagan: And his point went a step further, not just how we invest, but generally how we make decisions and how we operate in other areas of our life as well. And that leads me to thinking about indexing from the perspective of entrepreneurship as well. I mean, we talk about risk and returns often, and since I run a business where I’m trying to make a 20 to 25% rate of return, when I look at my overall strategy across all three silos of private and public equities and real estate, as much as I want to make the largest returns I can in public securities, I am playing a slightly different game.

[00:20:54] David Fagan: And I think it’s wise to acknowledge the risk that I’m already taking in the other silos when I put my. Public market investments in decisions in a broader context. I mean, entrepreneurship can be fragile. My business partner James Allen and I, we often talk about the risk that could take our firm out of business.

[00:21:12] David Fagan: Yes, we want to generate high IRRs. And I mean, these are extreme scenarios, but we, you know, and that it could be highly unlikely, but the government of Canada could say there’s zero tax for small businesses in Canada. That’s not completely outlandish. And so there’s risk in that. I mean, we have key person risk.

[00:21:31] David Fagan: We could have a cybersecurity attack and just a plain randomness that of the things that can happen when you run your own business. And you know what it’s like when you build a business, STIG, you realize how fragile things can be and how many variables you don’t control. That’s where indexing can fit in so well for entrepreneurs.

[00:21:51] David Fagan: I mean, it gives you a foundation that isn’t as fragile. And what I mean by that is if you believe that the stock market will be a decent asset class for returns over the next 40 years, I, this strategy can work, right? I mean, invest systematically, dollar cost average, buy the entire market. Don’t use leverage.

[00:22:10] David Fagan: I mean, that’s a, that should be a durable strategy. And you know, you want reliability. You want something that compounds quietly in the background while you’re focusing on the business that demands your energy. I mean, for the vast majority of people who don’t want to read 10 Ks and study public companies, I absolutely believe that indexing is the right approach for them.

[00:22:31] David Fagan: I mean, most entrepreneurs don’t need an investment portfolio that adds more stress to their lives. I mean, I’m sure the business is already using up a lot of bandwidth their private business that they’re running. So. You don’t need another arena where you’re constantly making decisions and second guessing yourself and possibly adding more emotional weight.

[00:22:52] David Fagan: I mean, you actually need the opposite. Something that reduces noise and frees up attention and something that’s just going to build wealth without requiring as much mental energy. And you know, like for so many people, indexing can act like the shock absorber to part of their wealth creation plan. It just lets the business owner worry about their business and not their portfolio.

[00:23:13] David Fagan: And you know, on that same theme of entrepreneurs for many of their businesses is all the concentration they really need in life. And their portfolio should give them breathing room. And if you’re fortunate enough to generate even a 15 to 20% net return on your private business, your portfolio probably doesn’t need to.

[00:23:32] David Fagan: That’s the reality of it. I mean. As an entrepreneur, you don’t have to feel the pressure to beat the market. You just need to understand that your portfolio has a different job to do to protect your wealth that you’ve created in entrepreneurship and compound it in another asset class. Does that make sense?

[00:23:50] Stig Brodersen: Yeah, it makes a lot of sense, David. And you know, it reminds me, I was speaking with a business owner the other day and he actually told me that he was frustrated with index investing even though he understood why you should do it. But he felt like he didn’t get the reward that he got in his private business where if he worked harder, he would make more money.

[00:24:09] Stig Brodersen: And so he was set like tongue in cheek to take it for what it is, but he was like, if I could get 8% working really hard or 8% not working at all, investing. I would probably just work really hard to get that 8%. And he said to me, he knew it didn’t really make any sense, but he was just, he felt it was so counterintuitive just to buy and hold and really just, you know, set it and forget it.

[00:24:33] Stig Brodersen: And I think, you know, from one business owner to another, we wired a certain way, like to do the hustle and that’s what you are, quote unquote supposed to do sometimes to own detriment, I guess.

[00:24:45] David Fagan: You know, once you start viewing investing through downside risk, I mean, the next logical question is, okay, if I believe that indexing is going to work, how can I actually implement it?

[00:24:58] David Fagan: And I guess I want to talk to the listeners and for those that are learning a little bit from this episode about indexing just how I do it and if they, you know, can take some education from that. I mean, in terms of implementation, I follow Warren Buffett’s recommendation to his estate.

[00:25:15] David Fagan: Almost exactly 90% of each of the portfolios that we have are in low cost index funds and 10% is in fixed income. And that small 10% of fixed income allocation, it isn’t for returns. It’s actually to stabilize behavior during market cycles. You know, I rebalance once a year and my rule for rebalancing couldn’t be simpler.

[00:25:40] David Fagan: If fixed income falls to 5%, I trim equities, and if fixed income rises to 15%, I buy more. And this forces the behavior that every investor knows they should follow, but really struggles to execute, sell high and buy low. And what I’m trying to do is remove the noise and keep myself disciplined around that.

[00:26:02] David Fagan: And maybe the last point that I want to make on why I index comes down to my own wiring stick. I mean, there’s the emotional benefit that people rarely talk about. You know, I remember 2008 vividly, I was in my late twenties, and I didn’t have much invested in today’s comparison back as I did back then.

[00:26:23] David Fagan: But I can remember thinking that if things get any worse in the public market, society as a whole would be busted and we’d have to reinvent how we lived. I mean, people were talking about building bunkers and food security during that time. You want to talk about maximum fear and pessimism. I mean, it was a crazy nine month stretch that the heart of the nine month stretch between August 2008 and March 2009, you know?

[00:26:48] David Fagan: But through that period, the feeling that I had, that I was losing with everyone else because I was indexing, was oddly reassuring. I mean, I had the a, a sense of alignment during that period. I mean, I rose with the market. I fell with the market. Again, being down with the market was oddly comforting.

[00:27:09] David Fagan: I know everyone is wired their own way and, but for me that it made a lot of sense. And, you know, I often come back to Nassim Taleb, example of the dentist next door when it comes to indexing. Go to work, live below your means. Structure your life in a way that you can save a hundred thousand dollars a year for 35 years.

[00:27:30] David Fagan: Hopefully earn an eight to 9% rate of return and retire extremely wealthy. And, you know, as some would say, stay. It’s just that simple and just that hard. And so why do I index it? It’s funny, but to your point, indexing in some circles can just be looked down upon, and some would say that it just lacks brilliance.

[00:27:53] David Fagan: But can’t simplicity also be the ultimate form of sophistication? I mean, we’ve heard that so many times and you know, I’m rooted in that indexing for this reason. There’s a good chance that over the next four decades I think that the consistency of holding index funds will be really good for our family.

[00:28:10] Stig Brodersen: Yeah, and I’ll be the first to say that picking stocks is just such a competitive game and it probably doesn’t seem like it, you know, it’s if you are watching sports, you know, you can look at the pits and you’re like, oh, like that looks hard. I probably couldn’t do that. Or perhaps you’re sitting there like in your couch drinking beer and like, of course I could do that.

[00:28:32] Stig Brodersen: But you probably are thinking, yeah, that looks tough whenever it comes to stock investing, it looks relatively easy. Like, ’cause you could be sitting on your phone in your couch, you know, buying this stock or that stock. But you know, as a business owner, you really know how brutal capitalism is and.

[00:28:51] Stig Brodersen: Perhaps you don’t want to start competing in stock, investing in a game with less time and fewer skills than your competitors. You know, very few people can do that. It’s like bringing a knife to a gun fight and strong. Consider why you don’t index, and if it’s for the right reason, then of course the right reasons are quite subjective too, to, I think, you know, personally, a small part of my portfolio, even if I couldn’t beat the market, I think that would always be active.

[00:29:17] Stig Brodersen: It’s just because I enjoy it so much. You know, for me it’s like kind of a pure form of intellectual capitalism to sit there and pick stocks, and I can easily understand if that’s not how most people want to spend their life. But really, if you agree with your point, David, about the primary goal of your portfolio is to protect your family’s wealth rather than quote unquote have fun.

[00:29:38] Stig Brodersen: You know, then indexing is probably for you and indexing using a dollar cost, everything strategy is much more powerful than what it seems. It’s like riding a tailwind really. I mean, sometimes yes, the wind is blowing stronger than other times, but it’s always there and you automatically recycle the worst companies out of the index.

[00:29:58] Stig Brodersen: And then you include better companies in index, such as the S&P 500. And also because you compete so much against so many biases whenever you’re picking individual stocks, you know, one of them is anchoring. That’s one of my favorites because I’m so susceptible to it myself. And it’s so easy to think that the original price of what you bought a stock at, call it a hundred bucks, that is some kind of cosmic average.

[00:30:23] Stig Brodersen: And then you see the stock price slide and you continue to ever, its down because it looks cheaper and cheaper, but actually what happens is that you’re probably doubling down on a fold knife. That’s probably really what’s happening. And so unless you are wired the right way for the actual strategy, individual stocks are probably not for you.

[00:30:41] Stig Brodersen: And really to the point you had before there, David, like. Think about if you do run your own business or you work in a corporation, think about how many things you cannot control. Of course you can control even fewer things if you’re a public investor. But like even in your position or in my position where you run your own company, you’re supposed to be in control.

[00:31:02] Stig Brodersen: I look at something like podcasting. You know, podcasting used to be listened to on iTunes and some of the younger listeners are sitting out there and like, what’s iTunes back in the day? You listen to podcasts and it was only audio. No one thought of video, and it was two dudes talking about a niche topic, fly fishing, whatever.

[00:31:20] Stig Brodersen: And today it’s video, it’s on YouTube, it’s two celebrities shooting the breeze. Like everything is changing. And so we have no control over that, you know? So, and again, you have even less as a public investor, but you get that control back from investing in, let’s call it 500 stocks in the S&P 500 or a vanguard’s VT.

[00:31:42] Stig Brodersen: It’s 10,000. Essentially there’s a big difference between 510,000 companies. But you know, it’s a way of, as much as it feels like you don’t have control, you actually take back some of the control through diversification. And I really like that you talk there about the great financial crisis, like it seems forever ago today.

[00:32:02] Stig Brodersen: And I think many of the people perhaps listen to the show that don’t remember how brutal it was. Some people might think of COVID, but COVID was just, it was just so different in, so, in so many ways, but also, especially if you look in the financial markets, that kind of like V-shape and that everything just popped up again.

[00:32:21] Stig Brodersen: And that was not at all what happened during the great financial crisis. It was very different and it felt very painful in a different way. And so you really have to figure out how you are wired and for better, for words. I always felt like a bit of an outsider, so. I want to say that I probably never had a problem standing outside the crowd sometimes to my own detriment.

[00:32:46] Stig Brodersen: And that’s probably also why value investing resonates so well with me. But more often than not, there’s a reason why the crowd do certain things and you probably want to follow the crowd. And getting market returns is kind of wonderful because you’ll become wealthy if you’re a patient, you live within your means.

[00:33:03] Stig Brodersen: And because humans are humans, for the vast majority of us, it’s actually quite good for a stress level that we make money when other people make money and we lose money whenever other people lose money. I know that’s not supposed to be that way, and I know it sounds boring and it sounds like a bit of a defeatist approach, but we all humans and so no, you won’t be thought of as the next Warren Buffett’s if you index, but perhaps you can optimize for other things in your life that you are, that’s more suited for you in the first place.

[00:33:34] Stig Brodersen: And. I would probably make a somewhat bold statement that 99% of people should be happy with that lower stress level and the market returns that would follow.

[00:33:42] David Fagan: Yeah, and absolutely. You know, to a lot of the things that we’ve already talked about, I want to transition a little bit to overseeing your investment results.

[00:33:52] David Fagan: It’s an angle that we have to pay attention to and oftentimes goes completely unnoticed you. You talked about this earlier, it’s the idea that you should be overseeing your results when you’ve outsourced the management of your investments. And to a lot of listeners, it’s going to be hard to believe that some people don’t spend any time understanding how their investments have actually performed relative to their risk profile and the broader markets.

[00:34:21] David Fagan: I’ve spent decades as a chartered professional account accountant, helping business owners build stronger financial futures, and it’s something that I’ve seen over and over again when I talk to clients. Last year, STIG, you talked about your track record and how intentional you are about measuring it, and you think about it often, but for some people, they’re simply not interested in following the results.

[00:34:46] David Fagan: And it can be a fault, it can actually get to the fault stage. I mean, I don’t recommend people check their investments all the time, but you should check them enough to know whether you’re on track. I mean, it’d be similar to playing 18 holes of golf and never keeping score and having no idea whether you’re improving or not.

[00:35:02] David Fagan: I mean, you know, when I ask people about their investment returns, this is a very quantitative questions. I usually hear one of three things. It often starts with, I’m not sure, but my advisor’s a great friend. I trust my advisor or my advisor’s a really nice person. And every time I hear that, I smile a little bit because trust is a wonderful thing.

[00:35:26] David Fagan: But it can be dangerous when it replaces oversight. I mean, your investment returns, they aren’t just numbers, they’re your livelihood. You know, being the overseer doesn’t mean that you have to manage your own money. It just means that you have a job. You have to stay aware and ask the right questions and know your numbers just a little bit.

[00:35:47] David Fagan: You know, it would be like handing your kids over to someone and never checking on them and asking how they’re doing. You know, it. It’s just something that you probably shouldn’t do. So let me share the story that I shared with you earlier of getting ready for this, about how this reality has shaped my life.

[00:36:03] David Fagan: I had one of my longtime clients who started her career later in life. She was saving a hundred thousand dollars a year, and she did this for 16 years. She sat across from me one day in the boardroom and said, David, listen I’m tired and I want to retire. And I realized something very painful in that moment.

[00:36:21] David Fagan: Her investments has had averaged about a 5% compounded rate of return for those 16 years, and she didn’t have enough to provide for her family with the lifestyle she wanted to in retirement. If she had earned just 8%, I could have told her in that meeting on that day, yes, I think you’re ready to retire.

[00:36:42] David Fagan: Mi missing that 3% meant that she had to work another six to seven years and she did everything right. Her shortfall wasn’t necessarily her fault. I mean, in part it was mine. I mean, early on I didn’t pay enough attention to her investment returns, and later in my career, I avoided the uncomfortable conversation with her broker.

[00:37:04] David Fagan: I mean, I was only 28 years old when I started working with her. But I told myself, just stay in your lane. You’re her accountant. And, you know, maybe I should have been doing a more holistic job and acting as the overseer of her entire financial life, missing that 3% represented time she could have spent with her family traveling, or more importantly in that meeting at retiring after decades of a demanding career.

[00:37:31] David Fagan: And that was the real cost of not paying attention to those investment returns. So, you know, really for the listeners of this call and for those that share this episode with people that are learning a little bit about investments as well, I’d encourage everyone to understand how their investment results are doing.

[00:37:49] David Fagan: And to do this, you just need to set clear goals. You have to know exactly why you’re investing, whether it’s for retirement or freedom, or helping your kids or building a legacy. You’ve got to review your actual results every six months. And this is the important part, you’ve got to ask yourself, what is my return and how does it compare to the market given my risk profile?

[00:38:14] David Fagan: You don’t have to know all the technical details, just whether or not your portfolio is doing its job. You also, you’ve got to know the fees that you’re paying. I mean, if you’re paying over 2% in management fees, cutting that in half alone can save into hundreds of thousands of dollars over time. I will caveat that with the, I mean, if you’re paying five or 6% but are getting rates of returns that are doing well because that, then that’s wonderful.

[00:38:40] David Fagan: But you have to know the relationship there. And when you talk to your advisor, you have to ask direct questions. You can’t settle for vague answers like, you’re doing fine. Like, you have to, you should ask like, how are my results compared to a balanced index portfolio? How am I doing? This question.

[00:38:59] David Fagan: It shouldn’t be confrontational. It’s just now you doing your job and finally you just have to stay curious. You don’t need to be an expert. You just have to stay engaged enough to notice whether your money is compounding the way it should. And like, I like to tell people, when you hire an investment advisor, trust feels good, but the results are your livelihood.

[00:39:22] Stig Brodersen: I love that point, David. Compounding is such a powerful force, and it will test your patience in the beginning and then your astonishment later. And again if you want to work, to your point, if you want to work in the advisor, think that’s perfectly fine, but think about the value they provide and whether or not it’s worth it.

[00:39:39] Stig Brodersen: So what I would suggest is basically to do this, compare your returns with a globally diversified index. And you know, we talked about Vanguard’s VT before, so the expense ratio is six basis points. It’s, that’s 0.06%. That’s very cheap. I just want to save for the record. So, and now you own a small slice of 10,000 of the best companies in the world.

[00:40:00] Stig Brodersen: And then, you know, compare those call the six basis points to what you are paying your financial advisor. And keep in mind that you also, if you work with a financial advisor, you are paying both expenses. You’re paying the fees to the advisor, and then you’re also paying the ETF cost and how does those returns stack up to whatever kind of benchmark you’re looking at.

[00:40:18] Stig Brodersen: And if you have a, an advisor that’s a little too fancy with, you know, picking individual stocks you know that’s one way to go. That could be a concern, especially if you’re under underperforming the market. And there’s also a bit of a selection bias here, and I don’t know if I forget to offend anyone here, I kind of feel I’ve been offending a lot of people, but also to some extent, there is a selection bias, right?

[00:40:43] Stig Brodersen: If this person you are sitting next to were the next Warren Buffett. Why is that guy sitting in that chair speaking with you about X, Y, Z? So there’s also selection bias there. So I think it’s really up to you to figure out what is it that you’re paying for. You know, definitely there could be something optimizing for taxes that could be rebalancing.

[00:41:06] Stig Brodersen: There could be a lot of good reasons why you want to work with an advisor. But if it’s a question of you going to get some kind of generic portfolio allocation, like 60% stocks and 40% bonds, or whatever it is, like you can go to YouTube. What a free video, and you probably have to go through some painful YouTube ads first if you don’t have YouTube premium.

[00:41:30] Stig Brodersen: But that’s the cost. And then the time, like, it’s sort of like whenever you rephrase that and you’re like, okay, I’m going to spend, you know, an hour of my life and then I won’t be paying 1% out of a million dollar portfolio. So, okay, that’s $10,000 for an hour your time trying to, you know, figure out on a free YouTube video how to do it yourself.

[00:41:49] Stig Brodersen: Like you could take a family on vacation for that $10,000 or donate it to, to charity. You know, there’s no reason to donate it to the Financial Advisor without Yacht Foundation. Plenty of people have been contributing to that foundation. You don’t have to do it. And really, it’s a bit like going to fitness.

[00:42:05] Stig Brodersen: Like the more you move, the more you lose. And unfortunately, that’s also how it is with many advisors and active money managers. So you move around a lot. Just to bring the metaphor back home here and then, no, not losing weight, but probably losing some dollars along the way. You know, there’s this, oh, this is going to sound so draconian, but there’s this saying that if you want a good friend in politics, you should get a dog.

[00:42:29] Stig Brodersen: And to David’s point before, I’m sure your financial advisor is nice, you know, that’s very often what you hear. It’s like, oh, but you know, Brian is so nice how, like, our fame have been using Brian for decades. How can we t you know, I get that it like, it’s emotional. It’s very challenging, but you’re dealing with your financial future and your family depends on you.

[00:42:52] Stig Brodersen: And being a nice person and building generic portfolio should not be enough to earn your business. And the last point I just wanted to drive home here is that no one cares as much about your money as you do. And just always make sure to remember that.

[00:43:09] David Fagan: Yeah, there’s a lot to unpack here in, in that one.

[00:43:12] David Fagan: But I think I’ll start by saying like, I don’t think there’s anything wrong with hiring a financial advisor and in many cases. It could actually be the best move that you make. I mean if you it’s like if you have a coach helping you on the behavioral side, making sure that you don’t make major mistakes out of fear and emotion.

[00:43:30] David Fagan: And I feel like there’s a lot of value in that. And Stig, sometimes it really does pay to outsource. I mean, you and I have talked about this before, you are more than capable of filing your own corporate taxes. I mean, you taught accounting at university, you wrote a book on Warren Buffett’s accounting, and yet you still choose to hire someone to handle your corporate filings.

[00:43:50] David Fagan: That’s a conscious decision around time, focus and behavior. And you know, we all have to make trade-offs like that. And when someone just isn’t wired to manage their own wealth but is fortunate enough to have it, hiring the right person can make a lot of sense. And you know, I guess just to transition a little bit here, STIG, ’cause we’re talking about the behavioral side.

[00:44:13] David Fagan: I do want to tie in some stuff that I’ve been talking about around expectations and leadership and knowing when to simplify things that are in your life and how leadership and the role of expectations can play in how people show up. And there are some parallels with investing in this.

[00:44:32] David Fagan: And as you know, STIG I look at almost everything in my life through the same three lenses, investing business and life. And of course life has a big package there in terms of where that can take you. In a previous podcast, you and I talked about how being a better businessperson makes you a better investor and a better investor makes you a better businessperson.

[00:44:53] David Fagan: Those worlds feed on each other and you know, recently I’ve been thinking a lot about leadership through that same lens and specifically how expectations can shape the people around us. I mean, in investing we expect durable businesses. We expect certain returns and we track our performance and then we reassess.

[00:45:15] David Fagan: But do we apply that same clarity inside our organizations? You know, I’m finding that expectations can quiet quietly elevate someone or limit them without even realizing it. You know, sometimes a challenge in leadership is that we hold on to old judgments far too long. We freeze people in time based on where they were instead of who they’ve now become.

[00:45:41] David Fagan: And I mean, we can certainly apply the same thought process to a specific investment that we might have that we still hold on today, but maybe for the wrong reasons. And early in my career, I certainly carried a childhood impression of someone well into my twenties, that it took me far too long to update my lens on.

[00:46:01] David Fagan: And even today, I have to be mindful of catching myself forming impressions too soon and too early. Those old judgements, you know, they can turn into expectations before we even say a word. And I find that people can fall or rise to the expectations we hold of them. And the truth is that they can, people can often feel our expectations long before we even speak to them out loud.

[00:46:30] David Fagan: You know, we talk about quality in our mastermind community and how there’s a frequency to quality and I feel like there’s a frequency to expectations that often go untalked about and unsaid. There’s a famous study in that was done in 1968 by psychologist Robert Rosenthal and Lauren Jacobson called Pygmalion in the Classroom.

[00:46:52] David Fagan: And these teachers were told that certain students, these students were chosen completely at random, had exceptional potential. Nothing about these students change only the teachers’ expectations of those students change. Eight months later, those students posted significantly larger IQ gains. The teachers changed their belief and their tone with those kids, and then their encouragement and that belief changed the student’s performance.

[00:47:21] David Fagan: I mean, it is an unbelievably remarkable study just how changing expectations can change outcomes. I mean, only if investing were that easy, STIG, if we could just be so lucky to expect a 15% rate of return and it just happened just like that. But there is a parallel here. And investing discipline can compound returns.

[00:47:41] David Fagan: And in leadership, I feel that the right expectations can compound behavior. And you know, for listeners who don’t know who Helen Keller is, she’s a wonderful example of how expectations can elevate someone. I mean, she went blind and deaf at 19 months old and lived in silence for years. Most people thought that she would never communicate.

[00:48:05] David Fagan: Then Anne Sullivan arrived and eventually became her lifelong friend. I mean, Anne was around 20 years old when they met. I think Helen was maybe around nine or 10. And Anne carried one unshakeable expectation that Helen could learn. She treated Helen as capable of learning long before Helen believed it herself.

[00:48:25] David Fagan: And as their story unfolds, the moment that Anne spelled water in Helen’s hand while running cold water over her other hand, everything changed. Helen made the connection that she felt what she felt in one hand was water and spelt in the others. And her world opened up after that. I mean, her learning sped up and she went on to graduate from Ratcliffe College and publish books and lecture globally.

[00:48:51] David Fagan: I mean, it’s quite a story for those who aren’t familiar with her. And you know, Helen and Anne’s story was an amazing success of expectations, and you know what they can do. Just know that expectations can go the other way. As to, and I’ll just share a short story here. You know, back when I was in school, I knew a couple of students that were getting ready for a Christmas concert that was coming up.

[00:49:16] David Fagan: And the two of the kids in this Christmas concert were really struggling with their tone. And the music teacher who was completely impatient, moved them to the back row. And over time, she expected less and less of them. And then, oh, obviously what’s going to happen is those students started expecting less of themselves.

[00:49:35] David Fagan: I mean, it’s not a great story. I mean, this is just and then the final blow was a week before the concert. She actually asked them to lip sync during it, I mean, in one small sentence. And it became a lifetime wound for these kids. And I am not making this story up. I mean, this is awful.

[00:49:51] David Fagan: And that’s the quiet destruction of negative expectations. And of course the comment was just that much worse, but. There’s, you know, I said this before. There’s a frequency to expectations that we have to respect and people can feel them even before we speak to them. And I love this quote from John Wooden.

[00:50:13] David Fagan: He, John Wooden was the legendary UCLA coach who won all those national championships. And he said it beautifully. He said, the best leaders are those who expect greatness from others. And communicate that expectation with belief and not pressure. And, you know, when someone believes in us that belief transfers, I mean, it changes behavior and ambition and those expectations, fuel effort drives results.

[00:50:39] David Fagan: Results reinforce belief, and it becomes a flywheel just like compounding. I mean, compounding starts small, then accelerates. And if we can remove some of the noise and bias and investing, and we put systems in place and let the investments do their job. That’s the same idea behind the right expectations.

[00:50:57] David Fagan: And when we set the right expectations, we can up uplift someone and give them direction and start to see them compound their behavior in a positive way. And, you know, expectation can be a just a powerful compounding engine for leadership. And, you know, we can use them to elevate people or relegate, but the choice is ours.

[00:51:18] David Fagan: And you know, STIG, I know you run a small business similar to the size of mine, and I’m wondering who in your world might rise if you simply expect it more of them. And does the Rosenthal study resonate with you?

[00:51:31] Stig Brodersen: It very much resonated with me. I had to say that I’ve forgotten everything about it until, well, I saw the outline.

[00:51:37] Stig Brodersen: We’ve been chatting back and forth and we talked about the study and then something from my childhood popped up. ’cause I remember my mom telling me about it whenever I was a kid. So I haven’t been thinking about it for the longest time. And some of you might be thinking that’s the weirdest thing for a mother to talk to a kid about.

[00:51:53] Stig Brodersen: I don’t know if that’s what you’re thinking. My mom, she’s retired now, but she used to work in early childhood education, so we probably spoke a bit more about children psychology around the dinner table compared to the average family. So anyways, no it is a study I’m quite familiar with and I can’t help but say tongue in cheek that I’m a child of the 1980s.

[00:52:13] Stig Brodersen: I was born in 1980s. I was born just before kids were special. And I know I’m going to sound like a grumpy old man as I’m going to say this, you know, soccer has said like 400 years BC or so. There’s like this I’m going to butcher the quote, but it’s something along the lines of the children now love luxury.

[00:52:31] Stig Brodersen: They have bad manners, contempt for authorities, they disrespect elders and they love chatter in place of exercise. Children are now tyrants and not servants of the household. And so. I know how ridiculous it’s going to sound whenever I’m bashing the younger generation, because old people such as myself has been doing that for centuries.

[00:52:53] Stig Brodersen: That said, I sometimes wonder about the new generation entering the workforce today who have been told they can do anything they want and who have parents who have removed every obstacle in your child’s way. And you know, we tried to fill a position at some point in time here in our company, and someone’s father applied on behalf of his son.

[00:53:14] Stig Brodersen: And needless to say, the son didn’t get the job. But it’s, I kind of feel like I’m a bit torn, right? Because it’s super empowering that kids are told, oh, you can do anything. But in reality, of course, kids are like the rest of us. They’re humans and they have a lot of potential and they have a lot of limitations.

[00:53:33] Stig Brodersen: And whenever they start. After graduation and whatnot they started the wrong of the ladder and I’ve noticed that a lot of people are completely unprepared for the fact that few, if any, are going to listen to them. You know, they’ve taken this very nice education and the study management and they’re like, I’m going to be the new CEO.

[00:53:52] Stig Brodersen: And then they get their own cubicle and no one cares and they’re on their own. And they probably haven’t developed the social skills to navigate a workplace with adults. I certainly hadn’t after I started management, now I came out of school. But anyways, you know, striking the balance of setting the right expectations and then lift up young people is not easy.

[00:54:14] Stig Brodersen: And again, most things are done with the best of intentions. You know, I know you’re kindly asked into to the team here, and I’m slimly just going to use myself as an example here, but take it for what it is, David. But I remember I was probably 11 or 12. That’s how I remember it.

[00:54:31] Stig Brodersen: A family friend told me that it was expected that I would win at least one noble prize. And perhaps it was just said as a joke. I don’t know. Today I think that comment did more harm than good, and I don’t know if anyone is familiar with Cal Rec’s growth and fixed mindset, but I think I’d probably ’cause it.

[00:54:52] Stig Brodersen: It spoke to me ego, I don’t know. But I think that experience, perhaps a few others, kept you very much in a fixed mindset for the longest time. David, to your point, you know, whenever you are a business leader, you are a coach for everyone in your organization, especially in a small organization like perhaps in large organizations with tens of thousands of employees.

[00:55:17] Stig Brodersen: You are more indirectly involved in the development of the people. But the first thing you want to learn. Is how this specific employee is wired and what makes them tick. And there’s this saying that to treat everyone equally, you have to treat them different. And that the kind of thing that’s very true.

[00:55:32] Stig Brodersen: Like everyone wants to feel appreciated, but how they feel appreciated can vary. Some people like to be giving a very few guidelines and on a major project and then go out into the world and solve it and then hand it back to you and then others, like constant feedback and make sure them the right path.

[00:55:50] Stig Brodersen: But then the first group might feel like they’re micromanaged if you give the constant feedback, even if that’s what you think that the want. So as a business leader, you are responsible for helping your team become the best version of yourself. And of course, I’ve been on both sides of the table, you know, both as an employer and as an employee.

[00:56:09] Stig Brodersen: And you know, I’ve heard, you know, as an employee, I’ve heard my colleagues complain about their bosses, about a million different things. I’ve never heard an employee ever complain about their employer telling them too often how much they were appreciated. That’s still left to be seen, and I’ve since taken that to heart and promised myself that if I ever had something nice to say to someone on the team, I will let them know, because why wouldn’t I?

[00:56:36] Stig Brodersen: So this comes to mind because as I was, as I got this message from you the other day, David, I was reading a book about Michelangelo and it talked about how he was asked by the Pope about the famous David sculpture that you can see in Florence. And Michelangelo said that David was always there in the model.

[00:56:58] Stig Brodersen: He simply took away everything that was not David. And I want to make sure that a new host or newish host Daniel, he’s already been with us for a year now. It’s like, that was just the first thing I thought of, like. That dude has so much raw talent. Like it’s unbelievable. And a part of my job is sort of like metaphorically to see this big blog of marble, but then find that future masterpiece that’s there and like help and guide him.

[00:57:25] Stig Brodersen: And I don’t necessarily know if I should do sort of like my performance review here, live on a podcast, but you know, it was just like one in, in real time example of, hey, I want to tell Daniel how much he was appreciated. So I did that the very next morning and I sent him a message about how awesome he was.

[00:57:44] Stig Brodersen: And I, I hope he was happy about that message. And so I guess that’s my way of saying that to the employers who are tuning in. Like please never hesitate to tell your team how much they are appreciated. Most bosses get their employees they deserve, and most employees get the bosses they deserve.

[00:58:01] Stig Brodersen: And whenever you think about like that, you might do a few things differently. Appreciation takes many shapes and forms, and mu has to do with what we are telling ourselves because expectations are a complex thing. You know, most people have good intentions, but they can backfire as we’ve seen so often.

[00:58:22] Stig Brodersen: You can think of the parents who figuratively and metaphorically went hungry because they were wealthy and gave their kids everything they ever wanted because they did not want their kids to experience what they did. But really what they achieved was that they ruined their kids in the process.

[00:58:39] Stig Brodersen: And so the way I approached people on my path is to access the current level and help guide them to the next level, whatever that next level is. And I typically would encourage also listeners here to extend trust and providing loved ones with those resources that they need and then together with them.

[00:59:00] Stig Brodersen: For example, let’s say that this is a team you’re working with. We define goals, but then also make sure to get out of the way and then observe what happens whenever they do their magic. And of course the world isn’t always that kind. You know, some ships will find a harbor and others won’t, but your team will always grow in the process.

[00:59:19] Stig Brodersen: And finally, I want to mention that you as a boss might be the best person to see the potential in your team, but you might also be the worst because you might have these preconceived notions of what they can and can’t do, which goes back to your original point, David, about, you know, you have to update your lens all the time.

[00:59:41] David Fagan: Yeah, I mean, expectations, they can be complex. I mean, this is a wonderful conversation and you know, may, and maybe sometimes they can have unintentional consequences. So, I mean, sometimes if we set the bar too high people. People don’t rise to them. They might freeze. They might stop taking risks because they’re afraid of letting you down.

[01:00:02] David Fagan: I mean, I think of this a lot as a parent, and there’s such a fine line between setting expectations that can motivate your kids and pushing them so hard that they burn out or feel like they can never quite measure up. And you know, you’ve just shared some personal stories on that. I mean, often in sports, the kids who last late into their teens and go beyond maybe high school and play at the next level at college and whatnot, sometimes I’ve noticed that those are the kids that come from parents who didn’t push their kids too hard.

[01:00:36] David Fagan: Yes, there’s the Tiger Woods and Serena Williams, parents of the world. But you know, there, there’s more that I’ve seen in my life where the kids who get to the next level, the ones that didn’t have too much expectations put onto them. I mean, it’s complicated and I think we’ll just stop talking about parenting.

[01:00:56] David Fagan: Now we can tackle that on another episode. But to your point about getting the boss and the employees you deserve, the older I get the more I appreciate culture inside an organization. It’s incredibly important and often underestimated. I mean, I wish there was a screen for public companies on culture, like, what is your culture like?

[01:01:16] David Fagan: And there was a box you can tick and get some information that way. I mean, maybe I’ll just have to step up my scuttlebutt game, Stig, I don’t know. But you know, in terms of culture, to your point that you talked about, I mean, it’s amazing how far simple things go. Thank you and recognizing someone for their efforts. I mean, those small signals can compound over time.

[01:01:41] Stig Brodersen: I cannot think of a better way to end this episode, David, than with those words.

[01:01:46] David Fagan: This is lovely. Thank you so much. Just want to give a small shout out to some of the TIP community members that, that we have and we’re able to connect with. And just thank Kyle and Clay for all the hard work in the community it’s lovely.

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