Evidence-Based Investing Conference Post-Mortem (EP.04)

Episode Summary

Executive Summary: The episode is a post-mortem of Animal Spirits’ evidence-based investing conference in New York, highlighting standout talks on markets, behavioral finance, quant investing, private equity, ETFs, and Vanguard’s role in indexing. The hosts also discuss what they learned from speakers like Scott Galloway, Liz Ann Saunders, Cliff Asness, Jason Zweig, and the Vanguard CEO, then finish with a long movie/TV recommendations segment.

Main Topics: Conference recap and standout speakers (Priority: 5/5): The hosts review their evidence-based investing conference, emphasizing strong turnout, networking, and the overall quality of presentations and panel discussions across the day. Behavioral finance and investor psychology (Priority: 5/5): Jason Zweig’s session is treated as a highlight, focusing on self-awareness, bias, and the idea that behavioral finance should be used as a mirror rather than a weapon against others. Indexing, passive investing, and Vanguard’s role (Priority: 5/5): The discussion centers on the growth of indexing, Vanguard’s scale, criticisms of passive investing, and whether passive flows are cyclical or secular. Quant investing and machine management (Priority: 4/5): A quant panel explored the continuing importance of quantitative strategies and the need for human oversight in managing models, allocation, and decision-making. Private equity valuations and illiquidity premium (Priority: 4/5): A panel on private equity considered rising purchase multiples, whether illiquidity still commands a premium, and how cycle timing affects returns. Media, speaking skill, and market communication (Priority: 3/5): Scott Galloway, Cliff Asness, and others are praised for communication style, humor, and audience control, reinforcing how valuable clear public speaking is in finance. Movie and TV recommendations (Priority: 2/5): The episode ends with a lighter segment covering recent watches and recommendations, including praise for Lion, Spider-Man: Homecoming, Baby Driver, and warnings against Live by Night and 1922.

Key Arguments: Great market communication matters: several speakers were praised for turning complex or boring topics into engaging, memorable presentations. Behavioral finance should start with self-examination; the biggest mistake investors make is failing to identify their own biases. Women may be better long-term investors on average, with the hosts citing anecdotes and studies that suggest less emotional, less revenge-driven behavior. Quant investing will remain a major force, but models need humans to manage them and make judgment calls about implementation. Passive investing is likely both secular and cyclical; flows can change with market stress, but indexing is not just a temporary fad. Indexing’s influence on markets is debated, but the argument made here is that indexing remains a small share of total trading volume despite its large asset share. Private equity valuations have risen substantially, narrowing the illiquidity premium and increasing the risk of buying at the wrong point in the cycle. Vanguard’s scale and cost advantage make it hard to compete in plain-vanilla indexing and ETF products. ETF providers may create conflicts if they move into advisor-facing services and compete directly with their distribution partners. Movie recommendations are offered as a practical, listener-friendly coda to the episode, with the hosts clearly distinguishing quality watches from time-wasters.

Data Points: Amazon 10-year bond yield: 3.2% - Scott Galloway cited Amazon as borrowing more cheaply than China. China 10-year bond yield: 3.6% - Compared with Amazon’s 10-year borrowing cost. Women control more wealth than men: Threshold crossed in 2017 - Liz Ann Saunders said women now control more wealth in the U.S. than men. NASDAQ 100 vs S&P 500 outperformance years: 8 of 9 years since 2009 - Used to illustrate the persistence of growth dominance and value investing underperformance. NASDAQ 100 cumulative return since 2009: 465% - Compared with the S&P 500 over the same period. S&P 500 cumulative return since 2009: 242% - Benchmark used in the growth-versus-value discussion. Indexing share of the market: 30% - Cited in response to concerns that passive investing harms price discovery. Indexing share of all trading: 5% - Used to counter the argument that passive funds dominate trading activity. Private equity purchase multiples (historical): 6x EBITDA - Earlier-cycle transaction pricing referenced on the private equity panel. Private equity purchase multiples (later): 7x-8x EBITDA - Intermediate expansion in valuations discussed on the panel. Private equity purchase multiples (current): 10x-12x EBITDA - Panelists said multiples have risen into double digits. Conference attendance vibe: 100-150 people at pre-event happy hour - Used to describe the size and energy of the networking event.

Pivotal Quotes: "the stupidity of others through a window instead of a mirror" — Jason Zweig: On how behavioral finance should be used to understand your own bias rather than mock others. "all of them" — Vanguard CEO: Asked for his favorite stock, he answered that all stocks are his favorite, reflecting Vanguard’s broad market philosophy. "what's your favorite factor? and he said value" — Barry Ritholtz / Cliff Asness discussion: Cliff Asness named value despite its long periods of underperformance.

Implications: Listeners should come away thinking less about predicting markets and more about structure, behavior, and process. The episode reinforces diversified investing, humility about biases, and skepticism toward hot narratives in passive, quant, and private markets.