Transcript

[00:00:03] Stig Brodersen: On today’s episode, I’m joined by my close friend, David Fagan. David is the managing partner at mbf Chartered Professional Accountants in Nova Scotia, Canada. And for decades, he has advised countless business owners on investing, financial planning, and long-term wealth creation. We discuss why so many investors feel drawn towards sophisticated strategies, complicated portfolios, and endless optimization, even when the simple approach is often the better one.

[00:00:28] Stig Brodersen: A personal highlight from this episode is when David shares a story about a portfolio manager of one of the large banks in Canada who admitted he couldn’t manage a multimillion-dollar portfolio using just a few ETFs, because, in his words, it would look too simple. And with that, we open a much deeper conversation about incentives, status, human behavior, and why complexity often disguises itself as sophistication.

[00:00:53] Stig Brodersen: If you sometimes feel that the financial markets and life are becoming increasingly complex, this is an episode you don’t want to miss.

[00:01:03] Intro: Since 2014, with more than 200 million downloads, we have interviewed the world’s best investors, studied deeply the principles of value investing and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value investing accordingly, and sharing everything we learn with you. 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.

[00:01:48] Stig Brodersen: Welcome to The Investor’s Podcast. I’m your host, Stig Brodersen. And today I’m here with David Fagan again. David, how are you?

[00:01:55] David Fagan: I’m doing lovely. Just finished an intense tax season and ready to go.

[00:02:00] Stig Brodersen: That’s amazing. Now, David, today’s topic is simplicity beats complexity, and I think I’ll just throw it right over to you here at the very top of the show, so please take it away.

[00:02:13] David Fagan: Lovely. Let’s jump right in. Let’s do a little bit of a different type of deep dive today. Stig, not on an individual stock, but on one facet of life that can affect the businesses we run, the investments we choose, and even some of the personal decisions that we make. When I think of simplicity in one’s life, we don’t wake up planning to overcomplicate it.

[00:02:36] David Fagan: It just sort of happens one decision at a time, and I’ve found that if you’re not intentional about solving complexity, it can actually take over. Sometimes choosing simplicity when making decisions is not something that I arrived at right away. I mean, I would think it would be hard for any of us in our twenties to believe that the best answers are sometimes the easiest ones.

[00:02:58] David Fagan: But with age, and I’m not sure what comes first, a bit of wisdom or a few setbacks in life, you start to see things differently. You only have to get knocked down a few times before you start thinking there’s probably another way to do this. And Stig, life is full of paradoxes as we know. We have catch-22s that catch us, right?

[00:03:17] David Fagan: I mean, we read books, we learn, we grow, and we’re constantly telling ourselves to push and set bigger goals. But at the same time, we’re told to live in a way where we don’t take everything too seriously and don’t let our drive steal our passion. And I’ve found that if you only push, you have a higher chance of burning out.

[00:03:36] David Fagan: But if you’re only light and casual, you might drift and not realize your potential. And I’ve seen this same paradox show up with simplicity. Sometimes people assume that what looks like the easier path must be unintelligent or, or worse, lazy, right? Think about running a business or starting to manage real wealth.

[00:03:56] David Fagan: I suspect that if we fully understood how hard entrepreneurship would be, and I know you and I’ve talked about this before, I’m not sure some people would sign up for what’s gonna happen. I mean, the sleepless nights wondering if your errors are gonna be too large to overcome or carrying the weight of other people’s families on your shoulders.

[00:04:15] David Fagan: I mean, you don’t see that part on social media posted anywhere, right? This is tough, right? And take investing, for example, we’ve got asset allocation, diversification, risk tolerance, but no one prepares you for the emotional side, the second guessing, and then the temptation to act when you should actually sit still.

[00:04:35] David Fagan: You think it’s all about strategy, and then you realize so much of investing is really about temperament, right? And when I reflect on my life, I can say that I’ve been on the more practical end of learning. I’ve learned so much by trying and failing and adjusting. And I feel like I’ve learned a lot from other people’s mistakes as well.

[00:04:55] David Fagan: And that’s really been the pattern in my business, investing and life. And yeah, it really hurts sometimes, but if you can reflect and learn on those mistakes, something starts to shift over time. I believe that you stop chasing complexity and you start to look for better solutions. You know, simpler habits, just clear and honest feedback and conversations with people.

[00:05:19] David Fagan: And two of my favorites, consistency and discipline. You know, simplicity, it didn’t come first in my life. It kind of came from learning what not to do, which is a bit of a work-backwards mentality. And when I flipped to my business lens of the world, I watched something happen slowly over time. And honestly at first I didn’t even notice it.

[00:05:41] David Fagan: It only became clear as I got a little older. Early in my career, I was watching another firm grow in our marketplace. At the same time we were growing ours and we weren’t really competitors. I mean, there was more than enough work to go around. Both firms had similar access to the opportunities, but they started their firm with the motto, there isn’t anything we can’t do.

[00:06:02] David Fagan: And they chased that belief with enthusiasm. If a client mentioned a new need, they added it and they kept saying yes to whatever was right in front of them. And each of those yeses, they were starting to add building blocks and layers on this firm that they were building. And over time, I began to see what was slowly starting to happen within their firm.

[00:06:25] David Fagan: I mean, those building blocks, they weren’t being stacked, maybe not with a super-solid foundation and the layers, they started to not fit well together. Everything depended on working harder just to keep the whole thing from tipping over. And you know, they started to chase complexity because they believed it signaled strength.

[00:06:44] David Fagan: But what started to happen was actually it produced a little bit of disorganization. And with hindsight, I would say that’s when entropy really started to show up within their firm. And if you’re in professional services in the professional service world, this may sound familiar to you. ’cause the symptoms, they show up rather quickly.

[00:07:04] David Fagan: It’s rushed work. Constant stress, burnout, and staff turnover. That’s a big one. Unhappy clients and a culture built on effort rather than clarity. And that is what I saw happen. They went from a firm that said there wasn’t anything they couldn’t do to a firm that was starting to not get stuff done. It was quite an eye-opener.

[00:07:26] David Fagan: And you know, every business has its flaws. And of course we have more than enough to go around when we’re always working on them. I mean, you always want to keep that flywheel going. One of the things that I’m confident that we’ve got right over the past two decades in our accounting firm is the term that we call One Hour Flights.

[00:07:45] David Fagan: And it’s our shorthand for how much time we should be spending at the manager level to complete a file before sitting down with a client. If we’ve trained our staff well and we’ve set clear expectations with our clients, they don’t want to pay us for excessive senior management time just to get the compliance work finished.

[00:08:03] David Fagan: That’s not where the value is. Clients want us to lead them on their path to prosperity. They want coaching, guidance, clear thinking, and not complexity just for the sake of it. And you know, this discipline of one hour flights, it forces us to ask simple questions. Are we adding value to the engagement?

[00:08:21] David Fagan: And you know, I’d like to say that it was an original idea for us, but nothing that we do is ever an original idea. That idea came from Southwest Airlines and how they operated. Southwest. For the listeners that aren’t familiar with them, they, they became famous and for almost obsessive focus on short-haul flights, little short point-to-point flights with fast turnaround times, and their goal wasn’t elegance or luxury.

[00:08:49] David Fagan: It was efficiency. And for years, their planes were turned around in roughly 25 minutes in airports compared to the industry average. That was often around 60 minutes. You know, if they couldn’t operate in an airport efficiently within that system, they simply didn’t fly there. You know, they were very intentional about not being all things to all people, no assigned seating, no first class, just a single aircraft with limited routes.

[00:09:17] David Fagan: And by narrowing their service offerings, they were able to say no to hundreds of decisions that created complexity inside most airlines. I mean, take the example of having this single aircraft, I mean, their mechanics would get really good at fixing the single type of aircraft time and time again, and not having a fleet of six or seven different ones.

[00:09:38] David Fagan: You know, at first glance, that kind of simplicity, it can look unsophisticated until all of a sudden, it doesn’t. And for Southwest, I mean the, the results were hard to ignore. For decades, they posted one of the longest profitable streaks in the airline industry, remaining profitable for, I think it was like 40 years until the pandemic.

[00:09:58] David Fagan: It was quite a run. And I would say that the performance wasn’t accidental. It was a byproduct of their focus. And, you know, their focus created win-win outcomes. Passengers benefited from low fares and reliable services. Employees worked within a system that was predictable, and owners were rewarded with returns, right?

[00:10:20] David Fagan: And so, can simplicity beat complexity every time? That might be an argument for a different day. I’m not sure any of us can know the answer to that, but what I do know is this, if you can’t comfortably say no to professional opportunities or really any opportunities at all, the structure you’re trying to build will eventually start to falter under scale.

[00:10:42] David Fagan: Right? I remember a long time ago at a professional development conference for CPAs. I was at one of these sessions and I had a really engaging conversation with a gentleman who was probably twice my age at the time, and like most of these conferences, Stig, it feels a little bit like speed dating when you explain to everyone what you do in the industry and, and you’re talking to different people at these conferences.

[00:11:04] David Fagan: When I told him that we ran a niche accounting firm in Annapolis Valley, his interest really sparked and he leaned in and said, what, what do you mean by that? Because he didn’t hear many firms describe themselves that way in the late 2000s. And you know, for me, this is someone who ran a very successful practice working with companies, preparing them for sale, and he would go in and help the ownership groups clean up and clean up their processes and prove their profitability before the sale.

[00:11:32] David Fagan: And so early in my career, it felt validating to hear someone with that level of experience and, and the respect I had for this gentleman just emphasize how important it was to focus on professional services. And that conversation always stayed with me. And over time we leaned further into working with just owner-managed clients instead of trying to be everything to everyone.

[00:11:57] David Fagan: And we were more focused and the more focused we became, the more valuable I feel our work became for the people that we were serving. And you know, what I certainly didn’t appreciate at the time was that focus is really a form of subtraction. You’re choosing what not to do, and this is the important part, so that you can focus on the important things and make those better.

[00:12:24] David Fagan: And I’ve come to see that that focus can actually compound. I mean, each year you stay in your lane and you understand your clients a little bit better. You see patterns earlier and you make fewer mistakes. Right? And, you know, investing works the same way. The, the people who do the best over time usually aren’t the ones that are chasing everything.

[00:12:46] David Fagan: They’re the ones that have decided what they don’t need to own or don’t need to do. And they focused. And I, I feel like that focus is critically important. If we can remove the noise and clutter and complication, there’s a good chance that clarity and even opportunity begins to appear. And I mean, we see what matters and we see what lasts.

[00:13:09] David Fagan: And I’ve come to believe that doing simple things isn’t the absence of effort. It’s aligning effort with what actually works. And over time it becomes kind of an operating system that quietly guides your organization and you know, you can extend that to guiding your life and your investment style and all kinds of stuff like that.

[00:13:27] David Fagan: Right. And so when you learn to specialize while running a business, you start to build on a much stronger foundation. And to me, that’s the quiet power of focus. It’s not dramatic in the moment, but incredibly powerful over decades. Right. And you know, Stig, you’ve spent years now studying markets and human behavior.

[00:13:52] David Fagan: I’m curious, when you look at investing through your own lens, where have you seen simplicity create an edge? Or, or maybe take the inverse of that and maybe where do people overcomplicate things to their detriment?

[00:14:05] Stig Brodersen: I mean, I, I see that everywhere. Like it’s one of those things that whenever you see it, you cannot unsee it.

[00:14:13] Stig Brodersen: But you, you know, I think, um, if you’ll allow me to take a, a step back, David, I would say that I found that we as people, we have just certain traits that are part of everyone’s DNA, for example. Everyone cares about what other people think of them. And it’s hardwired into us because in ancient times, we all needed to be a part of a tribe to survive.

[00:14:33] Stig Brodersen: And so I think a lot of it comes from this survival gene because it’s so strong in all of us. And if you even imagine that some people wouldn’t have that survival, gene wouldn’t think about what other people thought of them. Well, evolution made it so that those people just didn’t survive and procreate.

[00:14:49] Stig Brodersen: So it’s sort of like a self-selection process. And so I don’t necessarily think that it’s strong enough to choose complexity or simplicity, but I still think it’s hardwired to some extent, to all of us. And I think it basically comes back to complexity comes with status. And no matter what you want to achieve in life, status is just beneficial.

[00:15:10] Stig Brodersen: And you can really just, you know, thinking about it for a moment, whatever you want to achieve in your life, you want to be a Buddhist monk. If you want to spend more time with your kids, like it’s actually quite beneficial to have status. And you can always speak about direct and indirect, uh, derivatives of that.

[00:15:25] Stig Brodersen: And, you know, let’s just talk about the investing world. You know, last time we talked about why the vast majority should index and not pick individual stocks. So why do so many people then pick individual stocks and add complexity into their lives? Well, one of them is that complexity makes us feel special. If we think about this from an asset manager’s perspective, you can’t really run an investment fund and then tell people you just bought the S&P 500.

[00:15:53] Stig Brodersen: Now, if you are charging expensive fees, you have to make it complex. Basically, tell your clients that you can do something they cannot. And of course, by and large, that is true in most professions. You know, there’s a good reason why we have trained surgeons and you know, why we don’t try and operate on ourselves.

[00:16:10] Stig Brodersen: But the investment space is perhaps a little bit different. Perhaps that is something you can do for yourself. And of course, I’m not saying that an active fund manager, whenever they tell you a story about, you know, all the detailed adjustments that they’ve made, you know, while reading financial statements and how they conducted, you know, thorough scuttlebutt research and how they travel around the globe to look management in the eye and in the world of investing in so many other walks of life, of course the best story wins.

[00:16:41] Stig Brodersen: But many people also have a vested interest in keeping things unnecessarily complex, you know? One of the most complex things that exist, if you’re thinking about the healthcare billing system. You know, how simple would it be if every service had a transparent, standardized pricing and patients could easily understand?

[00:16:59] Stig Brodersen: And of course there are reasons why it’s not that simple. You know, you have insurance structures, negotiated rates, regulations, but most people would probably agree that the current system is just far too complicated. Then of course, you also have a small group of people that benefit, outright, I would say, from that complexity, whether that’s consultants, billing specialists, intermediaries, whose livelihoods depend on navigating and managing that maze.

[00:17:25] Stig Brodersen: And of course, it’s not easy to convince someone to believe that life is simple whenever their livelihood depends on being complex. You know, it’s, it’s that simple. If you, if you allow me to say so, so you know. I also want to say for the record, I don’t think some people are just keeping things complex, you know, for malicious reasons because they’re evil.

[00:17:49] Stig Brodersen: That’s not what I’m saying at all. I think, you know, I, I know a lot of active fund managers and I don’t think any of them think they can’t beat the market. I think all of them wake up in the morning and think they’re, they’re better than the average. And, but, you know, the same way, I don’t think anyone gets married and thinks, Hey, I’m gonna be one of those 45% of people who are getting a divorce.

[00:18:07] Stig Brodersen: Like, that’s usually not the mindset you have whenever you’re getting married. And so if I look at myself and, and think, okay, when did I start to take my financial future seriously? Yeah, I, I’d probably say I was doing that my mid-twenties and thereabout and, and I wanted to become financially independent as quickly as possible.

[00:18:26] Stig Brodersen: And I know this is probably gonna sound a bit vain, but the simplicity of becoming financially independent was just, was just so basic that it was basically, you are shocked to realize it. You know, you have this simple concept of paying yourself first. It’s so powerful, so straightforward. So if you make a hundred thousand dollars, you pay yourself first, for example, $10,000 and then you invest in a low-cost index fund before you pay all the bills and start to consume.

[00:18:53] Stig Brodersen: And then if you got a $20,000 raise, you would not increase your consumption, but just tuck away that additional 20,000. So you would have 30,000 that you could then invest. And of course you might be saying Hey, dude, if it’s that simple, why don’t most people just do it? Then of course, we are both fighting the need to show how smart we are with complexity, but also a human instinct not to delay gratification.

[00:19:17] Stig Brodersen: And you know, that’s tricky. Uh, and I, I know you, David, as the way I know you is that you are a natural saver and having a long-term horizon. But that is not how a lot of people think. You know, for most people, money is just burning a hole in their pocket and keeping up with the Joneses. And I guess the idea of not spending excess cash, just buying a low-cost index fund such as the S&P 500 and then continue to dollar-cost average for decades is, is simple.

[00:19:46] Stig Brodersen: If our listeners haven’t already turned it off by now, you know, because they might be falling asleep just thinking about it, and that is actually why, ironically, it’s so powerful. It’s probably a lot more fun, certainly to tell your friends to, you know, buy this call option with expiration date tomorrow.

[00:20:03] Stig Brodersen: That’s out of the money. And that’s probably exactly why you shouldn’t. And you know, there’s this wonderful selection bias, and, and this is, I think I’m, I’m quoting Buffett as saying this. If you are smart, you have no need to use leverage to invest. And if you’re not smart, you have no business using leverage in the first place.

[00:20:21] Stig Brodersen: And of course, it’s hard to show your friends how smart you are if you’re saying, Hey, I live within my means and I invest in low-cost index funds. Like, that’s, that’s not an interesting conversation. And so David, you know, I always say that capitalism is brutal in that framework. I would say the financial markets are ultimately efficient and only the best should really be competing.

[00:20:43] Stig Brodersen: And of course, the problem is that it’s hard to separate the signal from the noise in investing because the feedback loop is just tricky. If you put me on the football pitch and you know, everyone would be able to spot right outta the gates, I don’t know what I’m doing. Like it’s, it’s super, super easy, but.

[00:20:58] Stig Brodersen: I think stock investing is more similar to poker in the sense that I would have no business playing poker with the best players in the world, but at the draw of a hand, you know, I might still get, get lucky and, and of course the feedback loop in poker is slightly quicker than, than stock investing.

[00:21:13] Stig Brodersen: But you can sort of like, you can disguise it in a different way than you have on a, kinda on a football pitch. And stock investing. It’s just very hard to tell if you’re good or if you’re lucky. And there’s also this human element where if you make money on stocks, of course you wanna say it’s ’cause I’m skilled.

[00:21:29] Stig Brodersen: And if you lose money, it’s because you’ve been unlucky. You know, it’s quite telling, I think it was in the last episode we did, David, I think you brought up this stat and you said like, I think in, in the US like 90% of large cap managers underperformed the S&P 500 over the last 15 years. And then you brought up this Canadian stat where it was even more dramatic.

[00:21:48] Stig Brodersen: It was 98% of Canadian equity managers that failed to beat the S&P/TSX. So it’s absolutely incredible to think of, but you know. When you pick stocks, I guess that’s my point. You are, you’re competing against really smart people who do it for a living and they don’t even beat the market. And of course, it doesn’t matter if you tell these people that simplicity beats complexity.

[00:22:10] Stig Brodersen: They believe they can beat the market. Why wouldn’t they believe they can beat the market? Most of us also believe that we are better drivers than average. And so it’s just, it’s, it’s ingrained in us to think well of ourselves. And that’s probably, that’s probably a good thing. But really here, before I, I throw it out to you, David, I just want to shift gears a bit here because I want to return to this intersection of personal finance and simplicity.

[00:22:34] Stig Brodersen: And I think it’s simple to say that you should spend less money than what you make. And if you don’t, your world becomes much more complex. And of course, another way to think about this is that if you’re hard on yourself, life will be easy on you. And if you’re easy on yourself, life will be hard on you.

[00:22:51] Stig Brodersen: And to your point before, if you ask people whether they want a simple or a complex life, they say they want a simple life. But it’s also like asking people, is the glass half full or half empty? And they know what they’re supposed to say, but they don’t really reflect too much whenever they say so. When people spend 110% of their income, which a lot of people do, they don’t do it because they want a complex life.

[00:23:13] Stig Brodersen: They want, you know, to keep up with the Joneses and because it’s human nature. And of course you and I can sit here all day and tell them, Hey, no, no, no, no, save and invest. And they will sit across from you and they would mean it in the moment you’re speaking with them. And it’s not because they’re lying to your face at all, but people are people.

[00:23:32] Stig Brodersen: It’s just that simple and it’s just that hard. And I meet countless people who ask me what to invest in. And you know, unless I know that they’re sophisticated investors who just can’t get enough outta reading 10-Ks, I always tell them to dollar cost average into a low-cost index fund, such as the S&P 500 or an MSCI World Index.

[00:23:53] Stig Brodersen: And of course, people find the simplicity of that advice so frustrating. And to me that is a bit ironic. You know, most people who ask me what to invest in, they literally don’t know how to buy a low-cost index fund, which is exactly why they should be buying it in the first place.

[00:24:14] David Fagan: Yeah, there’s, wow, a lot to unpack there.

[00:24:17] David Fagan: Kinda like Buffett saying the leverage comment as well, like, I’m gonna give you the advice, but you’re probably not gonna take it. I mean, you know, I want to pick up on one of your points that you just mentioned about having a vested interest in keeping things unnecessarily complicated when you were talking about the medical system.

[00:24:36] David Fagan: I mean, I live here in a rural area in Canada and there’s several towns kinda lined up within about a 20 minute driving radius of each other. There’s roughly five or 6,000 people in each of these towns. And about a decade ago there was a discussion around amalgamating some of these towns to reduce costs and simplify infrastructure, and streamline services.

[00:24:59] David Fagan: I mean, to me it all sounded pretty practical, but of course the people responsible for making those decisions were the ones who were gonna be most affected by them. So I probably don’t have to tell you what didn’t end up happening. You know, instead of choosing simplicity for decades ahead, I mean, this is infrastructure and large contracts to.

[00:25:20] David Fagan: Keep towns organized. The existing infrastructure stayed in place in part because it protected the people who were benefiting from it. And, you know, maybe a more direct example for the listeners here relates to an investing conversation I just had a few months ago with an individual. I was speaking with someone who manages portfolios for one of the large banks here in Canada.

[00:25:42] David Fagan: And when I asked if he could manage, say, a $5 million portfolio using just three or four well-researched ETFs with a small fixed income component to manage the volatility. He flat out told me, looked at me, he said, I can’t, it would look too simple. And that took me back quite a bit. I mean, he, he said there needs to be more evidence that there’s more work being done and I just couldn’t believe it in in that moment.

[00:26:08] David Fagan: You know? Now I don’t want to get into portfolio theory and asset allocation on this podcast. We can save that for another day, Stig. But when I see an investment statement that has say 75 individual holdings on it, and then compare it to the long-term results of a simple index strategy, I think the listeners can see where I’m going with this.

[00:26:28] David Fagan: And I’m not talking about a manager with a fund that’s deliberately taking on a different approach to outperform the market maybe in a concentrated way. I’m talking about a portfolio that looks complex but doesn’t need to be. And that’s the difference. I mean, sometimes complexity exists because it’s necessary, and sometimes it exists because it’s expected.

[00:26:52] David Fagan: And you know, I think I’m getting to the age where I start to see layers and layers of more. It just looks like chaos to me sometimes. People want to build wealth and they want a plan that they can stick to, and they want to avoid the mistakes that show up again and again in the financial world. Yet the industry sometimes makes it more complicated than it needs to be.

[00:27:16] David Fagan: And you know, Munger talked about this in his book, Poor Charlie’s Almanack, I mean, he used the term febezzlement to describe how people aren’t usually misled by outright lies. I mean, they’re not looking to be completely nefarious, but by unnecessary layers of products and jargon and moving parts create confusion.

[00:27:37] David Fagan: And that confusion quietly leads to poor decisions and less compounding. And I think Munger’s point was simple. The more complex the system becomes, the easier it is to make mistakes, and the harder it becomes to actually see what matters. And you know, for me, that’s behavior, discipline, cost, patience. You know, the, the list goes on.

[00:28:01] David Fagan: And you know, I can’t help but come back to one of the quotes directly in his book, ’cause I’ve seen this play out in my world time and time again. And just gimme a sec. I’m gonna read this verbatim. So, in Charlie’s words, anytime someone offers you a tax shelter, my advice would be don’t buy it. In fact, anytime anybody offers you anything with a big commission and a 200-page prospectus, don’t buy it.

[00:28:25] David Fagan: Occasionally you’ll be wrong, but over a lifetime you’ll be way ahead. And I’m gonna give you an example that I’ve seen, I’ve seen play out with my clients here. You know, there are a few products in Canada, and I’m sure there’s similar ones in other jurisdictions around the world where they’re commingling life insurance with investments and the agents selling them, they’re often highly incentivized.

[00:28:49] David Fagan: And these structures themselves are complex and they sound great at first, but once you get into the details, they’re costly to set up. They’re really expensive to unwind, and they’re difficult to fully understand. In fact, it’s not uncommon for the people who are selling them to pause and refer questions back to their tax departments just to explain how they actually work.

[00:29:13] David Fagan: If they get a question that’s past their sales pitch. And most of us have probably been pitched something like this at some point, whether it’s insurance or not, and Stig, I’m gonna give you a client experience that I, that I’ll never be able to forget. I mean, I had a client who had just paid off their business loan and was finally in a wonderful position to start saving seriously for their retirement.

[00:29:36] David Fagan: You know, they were saving, uh, at this point after the loan was paid off, they were saving $150,000 a year. And this was lovely, a great problem to have, and they had lots of runway and time on their side. They hired a new investment advisor and after one year, having saved their first $150,000, the advisor came back to them in year two with a really big idea.

[00:29:59] David Fagan: He wanted them to stop investing in equities altogether and put all their savings into a whole life policy for the next 10 years. And to put it in perspective, the insurance coverage that they were being sold could have been handled with a simple 10-year term policy for $3,000, leaving $147,000 still to be compounding in equities.

[00:30:22] David Fagan: But instead, the proposal had mashed everything together into one, to me, complicated product for them at their stage. And, and here’s the moment that stuck with me after being brought up to speed on their situation. This was towards the end of it. One client in this situation was a retired police officer, and his wife was the one who was running this wonderfully successful small business.

[00:30:44] David Fagan: He asked the advisor a very direct question, why would you recommend this instead of just managing our investments? And guess what? The advisor didn’t give them an answer to that question. And when asked what commission he’d make on the policy, he dodged the question completely. And for context for the listeners, that commission would’ve been north of $125,000 in year one to set up that policy.

[00:31:12] David Fagan: So needless to say, those non-answers got the spidey senses of the retired police officer up. And you know, to me, and getting back to Munger’s quote, I mean, in what world is a product with that large of a commission on day one really designed for the person buying it? I mean, I, I was looped in pretty much at the end of all this.

[00:31:35] David Fagan: And while I’ve seen whole life used a few times decently in limited cases, this wasn’t one of them. This was way too much too soon in their savings journey and far too complex for these clients where they were on their path. They just needed time and simplicity and compounding, not layers and layers of complication.

[00:31:57] David Fagan: And, you know, needless to say, I, I probably don’t have to tell you how that relationship ended up. I mean, they, that, that advisor didn’t last very long with them. And there’s the quiet danger of complexity. Stig, it often shows up dressed as sophistication, when really maybe it’s just misalignment or misguidance.

[00:32:18] David Fagan: And you know, a good barometer that I always use for myself. If there are added layers of friction around setup or management or cost, liquidity, exit, anything like that, you really have to ask yourself why you want to take this on before you say yes. And you know, Warren Buffett’s said it perfectly. There seems to be some perverse human characteristic that likes to make easy things difficult.

[00:32:47] David Fagan: And his solution, as many listeners have probably heard, is jump over one foot bars, not seven foot ones. You know here, I’m just going to jump into the story of Long-Term Capital Management. I mean, it was built by some of the smartest minds in the world. I mean, Nobel Prize winners, physicists, mathematicians.

[00:33:08] David Fagan: There were Wall Street traders in here, and they engineered a really high-precision model designed to capture tiny price discrepancies across global markets. And on paper, it looked amazing. But the system depended on layers of leverage and assumptions that were just so wound tight that even small shifts in real-world conditions would break it.

[00:33:32] David Fagan: And that, of course, as most that have followed the story know, that’s exactly what happened. When the markets moved outside their expected range, the strategy unraveled and it unraveled at speed. I mean, the fund lost billions and billions of dollars. The investors lost nearly a hundred percent of their capital.

[00:33:51] David Fagan: And as the book goes, genius didn’t save them, it failed them. Right. And the complexity they believed was their edge became the very thing that destroyed them. You know, I’ve seen simple things beat complexity. Not as a rule, but as a discipline. You know, it can help you stay committed long enough for things to actually compound in investing, and that’s worth it all by itself.

[00:34:17] David Fagan: You know, I’ve talked before why our family indexes a large portion of our wealth and a previous podcast, and it comes back to simplicity. When too many layers are introduced in investing, it has the potential to raise fees when investments are outsourced, it can increase behavioral mistakes, which we’ve talked about, and it makes it harder to stay invested when emotions run high for individual investors.

[00:34:42] David Fagan: You know, for some, I believe, a simple investment approach can create clarity and my approach using index funds for a significant portion of our investable assets is built on just broad diversification, low cost, tax efficiency, which we won’t go into today. We’ll, maybe we’ll save that for another episode.

[00:35:04] David Fagan: long time horizons, and I’m hoping that the market just rewards us for patience. You know, and simplicity is a practice, and it can be in your finances, it could be in your, the businesses you run or can even be in the relationships that you hold, right? I mean, you, you can ask yourself this question like, what are the few things that matter most?

[00:35:27] David Fagan: And what could I stop doing that would actually make everything else work better? I mean, that’s always a powerful thought to think about because over time, clarity can compound just like capital does. And if you can remove noise, then clarity can appear.

[00:35:45] Stig Brodersen: Yeah, I think that’s such a great point, David. And you know, we’re all driven by incentives.

[00:35:49] Stig Brodersen: You invoked Munger before who was so famous for talking about incentives, but I also think whenever you, you study Munger, I think one of the wonderful things about him is that when he talks about incentives, he’s not just talking about financial incentives. Like the example you had before with the advisor and he gets this $125,000 commission, you’re like, that is there for us to see.

[00:36:11] Stig Brodersen: But there are so many other incentives in place that dictate how we handle things. Like, for example, let’s say that our financial advisor is a good family friend. You know, it’s so incredibly complicated not to continue working with him because it’s awkward and we try to, you know, just. Not do awkward things and we’re going to do it tomorrow.

[00:36:35] Stig Brodersen: And of course, tomorrow is a year and the year is 10 years. And so we’re all driven by incentives, uh, one way or the other. And I really like what you said there about, about clarity and about noise because you, we rarely notice whenever we are drifting, of course. And I think one of the reasons is that it doesn’t feel like we’re getting lost.

[00:36:56] Stig Brodersen: It rather feels like we are just staying busy. And so simplicity is all about how you find your way back and identify your North Star. And I think the best way probably to do that is through mental models. Now that we have talked about Charlie Munger. So let me throw it back over to you.

[00:37:13] David Fagan: Yep. You’re, you’re right, I mean.

[00:37:15] David Fagan: We all use certain operating systems to navigate our life. And like you said, some people do call these mental models. They’re just simple frameworks that can help us make decisions. Right. And you know, I’ve, I’ve thought about this a fair amount. I mean, when it comes to making things simple, there are two models that I lean on often.

[00:37:36] David Fagan: Occam’s Razor and irreducibility, and together they help me find the balance point between clarity and completeness. Occam’s Razor nudges us to begin with the simplest explanation or solution. Most challenges don’t need heroic thinking. They need clear thinking, fewer assumptions and fewer stories that we tell ourselves.

[00:37:59] David Fagan: Then irreducibility is the counterweight. It reminds us that every system has essential pieces, elements that cannot be removed without breaking the system. So we reduce boldly, but we don’t cut past the point where everything just falls apart and together, when you put them together, it’s an inspiring philosophy.

[00:38:21] David Fagan: Occam’s Razor keeps us from adding what isn’t needed. And then irreducibility keeps us from removing what must remain. And getting back to professional services, which I can’t help because it’s dominated my life for so long. This is how most trusted advisors operate. They don’t always name these models, but they follow them instinctively.

[00:38:45] David Fagan: And when you use them both, you land in the sweet spot, simple enough to work, but complete enough to rely on. And that’s where I feel good decisions happen and how good systems can endure. And these models are not abstract either. They’re pretty practical. And let’s get back to investing. For example.

[00:39:04] David Fagan: Irreducible tells us to start with the foundation, the part that can’t be simplified any further. And in wealth creation, Stig, that foundation is saving. I mean, nothing happens until you save. There’s no return, there’s no compounding, there’s no plan without that first irreducible step. And then once that foundation is set, Occam’s razor guides the next choice.

[00:39:28] David Fagan: Use the simplest system that allows your savings to grow. And you don’t need a complex strategy or exotic products or forecast about the future. You just need a clear, low cost, evidence-based approach to do the heavy lifting for you. And I know we’ve talked about that many times. You know, if we zoom out too and step back and look across other professions, you’ll see the same truth repeated again and again.

[00:39:53] David Fagan: Simplicity wins. You know, I’ve talked about it in our accounting world. It can win in engineering, medicine and many other professions as well. I mean, in Lean Six Sigma training there, there’s an engineering story that talks about a factory that was struggling with a major conveyor belt malfunction. And after $200,000 of diagnostics and airflow management studies within the factory itself, the true cause finally appeared.

[00:40:22] David Fagan: Bob, the assembly line worker, had plugged in a $30 fan during his shift on the assembly line that was blowing products off the belt. If you unplug the fan, you fix the problem, and sometimes the simplest answer is sitting in plain sight right in front of us, but we’re too busy over-engineering the solution.

[00:40:42] David Fagan: Right. And in medicine, doctors live by a simple truth. When you hear hoofbeats, think horses, not zebras, start with the most likely cause and only chase complexity when the simple explanation fails. Simple first, complex second, and you know, simplicity, it doesn’t stop at business or investing either. It shows up in how we spend our time and our, our energy and, you know, I’ll just flip to the personal lens of my life, you know, one of the frameworks that I return to every year, and I’ve shared this in our lovely TIP mastermind community on a call earlier this year.

[00:41:21] David Fagan: It’s the stop start and continue methodology and it forces me to look back before I add something new. And it asks me, what am I doing that I should stop? What’s worth starting and what deserves to continue? And then, you know, if you think of both entrepreneurship especially, I mean, you start to wear lots of hats and it’s remarkably easy to never take one of them off.

[00:41:47] David Fagan: And the same thing happens with our personal commitments as well. We say yes, and the calendar fills up and before long we’re running at full speed and we’re never stopping to ask if this stuff we’re doing still fits. And so a simple check-in can prevent a lot of drift. And so here’s a question for you and, and some of the listeners.

[00:42:08] David Fagan: You know, what’s one commitment in your life that if you were to be honest, you might not say yes to again? And that’s the question that answers where complexity starts to show up in your life, not all at once, but from the yeses that you continually say. And you know, a good rule I try to follow, and I’ll be the first to admit I don’t always get this right, is to remove something before I add something new.

[00:42:33] David Fagan: And before committing to something, just ask whether it makes life easier in some way. And that pause alone can create just a little bit of protection. And since we’ve been talking about mental models, I’ll just drive one more point home here, Stig. I mean, my wife and I, we’ve always managed our personal finances well, and, but we never called it a budget.

[00:42:58] David Fagan: We called it a personal spending plan. And there’s a big difference between the two. And I’ll, I’ll share this with the listeners. We earn, we, we save, we pay our taxes and with the net income that comes home to us, we spend it happily, no guilt, no second guessing. I mean, of course we’re mindful of the necessities, but the system is designed so that when the big priorities are handled in the master plan, we don’t even think twice about the micro decisions that drain so many people’s energy.

[00:43:30] David Fagan: I mean, the structure does the work for us. You know, I might be dating myself a little bit here, but years ago when you actually wrote checks for things, I’d sometimes draw a little smiley face on them. And it was just a small reminder of gratitude and a signal to myself that if we planned properly, we should feel good about spending our money.

[00:43:51] David Fagan: Right. And you know, when we circle back to the mental models, I mean, irreducible reminds us that every system has a core. And there are elements that you simply can’t remove without breaking it. And if you strip things back too far, that whole structure is going to fall apart. And Occam’s razor, it challenges us to question what we’re adding in the first place.

[00:44:13] David Fagan: So before complexity creeps in, it just asks a simple question, is this actually necessary? And I believe when you start using those two together, you end up with systems that are simple enough to run, but strong enough to last. So Stig, I hope you’re reflecting on your own personal commitments as we speak right now.

[00:44:35] David Fagan: And I’d love to hear your take, and not just with personal commitments, but beyond investing, just where simplicity might add some clarity or stuff that you might be able to remove.

[00:44:48] Stig Brodersen: Yeah, there are so many. Uh, you know, it’s, it might be one of those, do as I say and not as I do. You know, when, when someone is joining our company, The Investor’s Podcast Network here, we always ask them to take the Myers-Briggs personality test.

[00:45:03] Stig Brodersen: And I know it sounds very corporate, ironically, but knowing someone’s personality test score makes it a lot easier to work with them because, you know, some of the filters that they see the world through. And David, I, I don’t know your personality type. I think I’ve known you for such a long time now that I would know what your personality type is.

[00:45:24] Stig Brodersen: So there, there are a number of different letters and I, I don’t want to go into the weeds of that, but there is one I would like to speak a bit about, and it’s about whether you are a J or a P and Js like to make schedules and plans and they prefer to make decisions early. And so the motto would be, let’s decide and move forward.

[00:45:45] Stig Brodersen: And so in the world of investing, that would mean that they’d like to stick to predefined rules. And so I don’t know if I know, you know, a lot more accountants than I do, David, but I would, I would imagine that a lot of accountants tend to be Jays and certainly a lot of people in, in what we do, they’re Js. On our team, we’re 20 people and 90% of them are Js.

[00:46:08] Stig Brodersen: And so I know this is not, it’s not politically correct to say this. I know we, I’m supposed to say something about diversity and we’re all supposed to complement each other and that’s probably all fine, good, and well, and, and we are all good at different things and whatnot. But I, I do think that there is something to be said about that in an organization that there are certain things you need to do a certain way and people should lean into how they are naturally wired.

[00:46:35] Stig Brodersen: And if they’re not naturally wired that way, perhaps they shouldn’t be a part of that organization. And so there are some professions where some personality types are just more suited than others. For example, I often speak with my team about are we airline pilots or are we software engineers? And so, you know, we, and we are generally the, the latter because we are moving in a space that’s just, it’s just moving so fast and we have to test a lot of things and then a lot of things fail and then that’s fine and then we move on to the next thing.

[00:47:03] Stig Brodersen: But really the job of an airline pilot is not to kill his passengers. Like that’s a success. And I’m sure there are some airline pilots out there who are like, well there’s a bit more to that. But my point is that, you know, if you’re an airline pilot, your excellence is demanded at all times. And bugs are not to be tolerated.

[00:47:19] Stig Brodersen: If you are a software engineer, you know you’re going to have bugs in the code and expect it, and you can correct those bugs. And whenever you do that, you know, you can send out a patch and it’s fixed everywhere, then you move on. That’s obviously not how it works if you crash the plane. And so with you, David, you know, being a J, and I’m pretty presumptuous here, but I think it’s okay that I’m presumptuous because whenever you are not in the call, like five minutes before, I think it turns out we, we were actually using different links, but I’m like, Hmm, that doesn’t sound like David.

[00:47:47] Stig Brodersen: Then there’s sometimes there are Ps who are, five minutes after, like, by the way, I’m going to be 50 minutes late. You know, it’s like, that’s a typical P sign. And so you have a natural inclination where you’re better at meeting deadlines and you, you know, you like to do things the day before and preferably sooner, and so you have that, and then on one hand you have other people who would say deadlines stimulate them, and they tend to work better whenever they’re close to the actual deadline.

[00:48:12] Stig Brodersen: But what I found interesting from working with people of different personality types in my career is that everyone feels that their way of working is the most efficient. And they sort of have a hard time understanding that other people can be successful using a different approach than they are. Which is also why we test them.

[00:48:32] Stig Brodersen: Because we want to see like what is their natural inclination. How do they see the world? And so whenever you communicate with them, you have an idea of what in their world is the right and wrong way to work. And that’s, I don’t think you can necessarily change that, but I think it’s a good thing as a business leader that you are aware of their reality, just like you have your own flawed reality.

[00:48:51] Stig Brodersen: And so. It might sound a bit ironic as I’m saying this next, but I would recommend that 99% of people set up an investment system because if you are a J like you and I, David, you should do it because it comes natural to you. But if you are a P, you should actually do it because it doesn’t come natural to you to have an investment system.

[00:49:11] Stig Brodersen: So let me break this down. It really goes to what you said before there about you and your wife. You have this personal spending plan, not a budget. So you earn, you save, you pay your taxes, and then with the remainder you spend it without guilt. And I absolutely love that, David. And I know quite a few Ps and they spend all the money they make and they sort of know in the back of their heads that they’re supposed to save and invest, but they just don’t know how to do it, which is why they need this investment system because once the money comes in, before it hits their spending account, they should transfer a set amount, like clockwork, to an investment account, and then buy a global diversified index fund.

[00:49:54] Stig Brodersen: And if they do, they can spend the rest of their money guilt-free. And they don’t need to think about, is the stock market expensive? Is it, is it cheap? What do the headlines say? No, they’re buying it, it’s globally diversified. They do the same thing every month. So the average of the average is the average and that’s just the way math works.

[00:50:14] Stig Brodersen: And that is also why on average they’re going to do quite well. And there’s just so many walks of life where simplicity is just superior to complexity and it’s even more important in a world that just seems to be more and more complex. You know, lemme just give you one example. Like many people are on a diet and they still love dessert.

[00:50:35] Stig Brodersen: It’s a lot simpler to say that you don’t eat dessert than saying I’m only going to have desserts once in a while if, if it’s really delicious because then you have to spend a lot of willpower defining for yourself if something counts as a delicious dessert or not. And you know, let me make a bit of a jump here, but perhaps the best advertising slogan I’ve ever seen is L’Oréal’s ‘Because I’m worth it.’ It goes all the way back from 1973 and it still stands today, right?

[00:51:03] Stig Brodersen: So who doesn’t think they’re worth whatever it is whenever it comes to spending money? And of course this goes directly to this principle of simplicity and frugality, but of course you can make the argument that consumerism has never been about simplicity in the first place and all of this. It’s of course much easier said than done.

[00:51:23] Stig Brodersen: One thing I’ve learned whenever it comes to creating simplicity in our life is that we are often our own worst enemies. For example, I have this friend who’s, he’s really into, into watches, and I, I’m inclined to say that I refuse to go down that path. And it’s not because I don’t appreciate a nice watch, but because I know whenever it comes to something like that, I’m my own worst enemy.

[00:51:45] Stig Brodersen: You know, I, I know not because I’ve, I’ve bought a lot of expensive watches over the years. I actually think when I was 15, that was the last time I bought a watch. It was like $200 watch. And, and that’s my lifetime spending on watches. But I know the way that I’m wired. Like if I have really nice stuff and I don’t really tend to have too much of that, like if I bought a $10,000 watch, I would appreciate it.

[00:52:05] Stig Brodersen: But I also think I have this thing in me where I’m like, yeah, but now I’m a collector, right? Like, now, now I need this even more expensive watch. And I, I just don’t want to go down that path. And I’m not saying that’s a problem for everyone who buys nice watches. I’m sure a lot of listeners are fine with that, but, and hopefully they’re just wired differently than what I am.

[00:52:23] Stig Brodersen: But let me give you another example. If you and I met up tonight, I might suggest that we will go out for a beer. And I know that alcohol can quickly become complex for some, you know, I can go a month, three months, six months, I don’t know, very, very long time without alcohol. And you know, alcohol addiction is the last thing that’s on my mind.

[00:52:44] Stig Brodersen: If we went out for a beer with or without alcohol, whatever we go out for, it would more be like an expression more than actually going out for a beer for me. But I’m also sure that for some people it’s the complete opposite. I mean, they might appreciate a nice watch and they would stop right there, but when they taste that first beer, they just can’t say no to the second.

[00:53:04] Stig Brodersen: And my point is that we need to understand what brings simplicity and complexity into our lives. And while it’s great to learn from other people’s mistakes. And we definitely should, we typically have to make our own mistakes before we probably learn, at least with a lot of things here in life. And lemme just give you one example.

[00:53:23] Stig Brodersen: You know, I, I previously here and, and definitely in a mastermind community, I, I talked about how I’ve been struggling with this idea of how long my social battery is, you know, for some activities it’s like three hours. For others, I might be able to do five hours and I, I just, I know from experience I can seldom be around other people other than my wife for more than five hours before I just become exhausted.

[00:53:47] Stig Brodersen: And it’s not because other people bore me by any means, but it’s just my social battery is just spent and I just need to be alone to recharge. And knowing the duration of my social battery I found really feeds into this concept of simplicity. And if you’re an introvert like me, you know the complexities of letting your social battery fully discharge.

[00:54:07] Stig Brodersen: It’s just nothing good is going to come out of it. And of course, similarly, if you are an extrovert, you also notice the complexities in life and all the problems it is going to throw at you if you are sitting alone and you need the energy from being around other people to recharge. So it, it’s basically the same thing.

[00:54:23] Stig Brodersen: But shifting gears here. I spoke with a previous coworker here the other day and, uh, he works in, in marketing. And we talked about how conventional TV watching was just, you know, whether or not that was over because Gen Z’s habits are just so different than millennials and, and Gen X. And what he said to me really stuck with me because he said, yes, habits are different.

[00:54:46] Stig Brodersen: And some things are tied to a different generation doing different things, but it’s also a reflection that whenever you’re 25 you just do different things. Whenever you’re 45, that’s because they’re 25. You know? It’s that simple and, and it’s that hard. And it goes to this point of the very top of the episode, David, because whenever we grow and become young adults, we want to explore anything in the world because we no longer feel basically constrained by our parents and we feel we can do anything.

[00:55:16] Stig Brodersen: And we keep adding new things into our lives. And then after some time doing that, perhaps we find a significant other. Perhaps we get a career, we get very, very busy. But now we feel we need to live a life of subtraction and that life just suits us better, perhaps we basically want to sit in front of the tv, even though it probably sounds super boring to a 25-year-old, not because simplicity is always better, but because different stages of life call for different life strategies.

[00:55:44] David Fagan: No, absolutely. I mean, it’s completely anecdotal earlier when you said that the world seems to be getting a bit more complicated, Stig, but now I’m going to agree with you and say that the world seems to be getting more complicated. I was just literally having this conversation a month ago with a client as she was working through some staffing challenges, and to your point, just how differently people are wired these days and how people are working and, and, and living.

[00:56:10] David Fagan: The complexity in people’s lives, it’s showing up everywhere. Now. When I think about what’s required today to file a corporate tax return in Canada, compared to 25 years ago, almost everything that has been added has increased complexity, not reduced it. Nothing seems to be getting simpler. It’s always another layer of something that needs to get done.

[00:56:34] David Fagan: And it’s rare to hear someone say, you know what? You actually don’t need to do that anymore. It’s extremely rare. You, you just don’t hear that. And it’s not just taxes. I mean, think about what’s required today to do banking and legal processes, development approvals, and building code requirements. I mean, the list just keeps going on and on.

[00:56:54] David Fagan: Everything seems to be getting a bit more complex, So maybe it isn’t anecdotal after all, Stig, I don’t know if the world, uh, I guess if the world around us is, is becoming a bit more complex and we have to be really intentional about pushing back against it. Right? And I don’t wanna sound naive about simplicity, uh, as well.

[00:57:15] David Fagan: I know we’re doing a deep dive on it today. I mean, like I said at the beginning, life is full of catch-22s and sometimes you do have to take on difficult challenges in order to grow and find new things. And, you know, but I was reminded of this recently when I was reading The Paradox of Choice by Barry Schwartz.

[00:57:33] David Fagan: It is a beautiful book and in it, he explains that now we’re faced with an unprecedented number of choices in nearly every area of life. Consumer goods, careers, relationships, and of course business and investing, and a lot of the stuff that we talked about today. You know, we tend to believe that more options lead to greater freedom and better outcomes.

[00:57:58] David Fagan: But his research is showing the complete opposite. Too many choices create overload, which leads to decision paralysis and stress, and sometimes avoiding making decisions altogether, right? And his conclusion was pretty simple but powerful: well-being improves when we actually limit our options, when we can reduce excess comparisons and accept good enough decisions and focus on what truly matters instead of endlessly searching for the optimal choice.

[00:58:31] David Fagan: And I really like that. Good-enough framework versus perfection. You know, and as I was preparing for this episode, of course, when you buy a red car, you start noticing all the red cars on the road. I started to notice how often simplicity shows up across all the books that I’ve been reading, and it’s remarkable how many thoughtful investors and writers come back to the same idea time and time again.

[00:58:55] David Fagan: And often they’re coming from different angles too. You know, I just mentioned Schwartz, and of course many of the listeners know that William writes about simplicity in his chapter on Joel Greenblatt. And even in a book with complex themes like Antifragile by Nassim Taleb, he never frames his work explicitly around simplicity.

[00:59:16] David Fagan: But if you dig down a little bit, it’s everywhere in the subtext. He argues for subtraction over addition and real-world feedback over elegant models again and again. He shows how complexity hides fragility, while durable systems tend to be the simpler ones, and the ones that are grounded in reality. And you know, a really funny story that he tells in the book is about the wheeled suitcase.

[00:59:44] David Fagan: He said back in the eighties, his arms were always burning, walking through airports ’cause he was carrying his luggage that was loaded full of books. And then he questioned why did it take society so long to put wheels on the bottom of those darn suitcases, right? I mean, the wheel has existed for 6,000 years, yet rolling luggage has only appeared just a few decades ago.

[01:00:06] David Fagan: You know, how do we miss something so simple, right? The Stoics, they talked about subtraction thousands of years ago. Remove what isn’t essential so you can focus on what truly matters. Greg McKeown had a wonderful book on Essentialism. And Nassim Taleb, he calls it via negativa, improving systems, not by adding more, but by removing what makes them fragile.

[01:00:32] David Fagan: And you know, the same idea shows up. Clarity doesn’t come from adding more. It comes from removing what doesn’t belong. And when you look at business investing and life through the lens of simplicity, I believe that it can create consistency. And consistency is what allows things to compound in a quiet and meaningful way.

[01:00:54] David Fagan: So how can simplicity become a superpower in life? By creating simple systems that are easy to follow, easy to fix, and easy to repeat. In a world that often feels over-engineered and full of unlimited choices, we can still choose what Buffett calls stepping over one foot bars instead of seven foot bars.

[01:01:16] Stig Brodersen: I absolutely love that, David. And you know, it’s very interesting that you would say that about simplicity. I had this experience not too long ago. I was checking up on, on our team in the Philippines and I went there and I had this feeling that anything was possible and sort of like the type of metropolitan feeling you can get when you’re young in a city with 12 to 15, I think someone on our team actually said there were 20 million people if you included the entire metropolitan area.

[01:01:43] Stig Brodersen: And especially for like, uh, for someone like me who grew up in the rural area here in Denmark, it’s like you got this, at least for me, and, and again, I’m not saying this is the case for everyone. I know a lot of people are very happy about living in big cities, so I don’t know if it comes across the wrong way, but like there was something extremely liberating about this feeling like I could do anything I wanted.

[01:02:03] Stig Brodersen: But there was also almost like, uh, to your point, like I always felt stressed. Like I had so many options. There were so many things to do 24/7, and there is like a, a strength to the simple life, you know, where there are not a lot of stuff happening around here after 5:00 PM and I guess if you’re based in Manila, you would say nothing is happening also before 5:00 PM But like, there’s only so many things I can do whenever I’m, I’m home.

[01:02:29] Stig Brodersen: And at least to me that’s actually quite nice. And again, I’m sure other people would very much disagree and say that the best life is, you know, living in a big city. And that’s probably true for them. Or perhaps it’s true at a certain age. Who knows? I’d probably be all over it whenever I was younger.

[01:02:44] Stig Brodersen: Anyways. David, before we end the episode here, I want to give a handoff to a new website you and I created. It’s called Compounding Simplicity. And you know, we just completed our soft launch, so please forgive us if everything doesn’t look exactly as it should yet on the website. Our target group specifically is Canadian business owners, but anyone can go out and check out the site.

[01:03:06] Stig Brodersen: It’s completely free. And we also set up a YouTube channel also called Compounding Simplicity, so we didn’t strain the muscles there. And then once a month, we’re going to publish a video. It’s hosted by you, David, but it’s produced by The Investor’s Podcast Network. We want to educate people on how to achieve your financial goals.

[01:03:24] Stig Brodersen: And so our intention really is that after watching the videos, you should be able to manage your own portfolio. And at the very core of the philosophy is the idea that you don’t need professional help. And also that managing your portfolio should take almost no time because you should be an overseer of your portfolio.

[01:03:44] Stig Brodersen: You shouldn’t be an active portfolio manager. And so definitely feel free to check that out. Again, the target group is, you know, we’re specifically looking at things in Canada, but we also think that there is a, a timelessness to some of the evergreen topics we are also going to cover. So let me just throw it to you, David.

[01:04:02] David Fagan: Yeah, that’s lovely. Thanks for that summary. Really looking forward to the launch, Stig. It’s nice working with you and your team. We’re excited to lead people on their path to prosperity and it’s encouraging to see everything we’ve accomplished so far and check us out.

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