Nobody Wants To Invest In Your Sh*t | #178

Episode Summary

Executive Summary: Meb Faber argues that investors should treat every portfolio addition like a transaction: if an investment doesn’t improve returns, reduce risk, boost discipline, or lower fees/taxes, it doesn’t deserve capital. Using the provocative idea that “nobody wants to invest in your shit,” he reframes portfolio construction around investor utility, not manager ambition, and urges a high bar for active products versus a cheap global market portfolio base case.

Main Topics: Writing as a transaction, investing as a transaction (Priority: 5/5): Faber borrows from a writing book to argue that both readers and investors give scarce resources—attention or capital—and expect value in return. Motives of creators vs. motives of users (Priority: 5/5): He contrasts why authors/fund managers create products (money, fame, brand-building) with why readers/investors engage (learning, enjoyment, better outcomes). Applying the analogy to portfolio management (Priority: 5/5): The central thesis becomes: portfolio managers must ask whether an investment is return-enhancing, risk-reducing, discipline-improving, or tax/fee-efficient. Global market portfolio as the benchmark base case (Priority: 4/5): Faber presents the low-cost global market portfolio as the default standard against which all other investments should be judged. Behavioral and emotional barriers to selling (Priority: 4/5): He notes that investors often keep poor holdings due to attachment, hope, greed, and inertia, unlike book readers who can simply stop reading. When active departures can be justified (Priority: 4/5): Faber outlines selective tilts and strategies—value, momentum, trend following, tail risk, angel investing, farmland—that may clear one or more of the four hurdles. High skepticism toward fund pitches (Priority: 5/5): He closes by warning investors about new mutual fund managers and proprietary alpha pitches, especially when managers have little or no personal capital invested.

Key Arguments: Investing is a transaction: investors donate scarce capital and deserve something materially valuable in return. Most financial products are launched to satisfy manager goals—wealth, fame, brand-building—rather than investor needs. A fund or investment should only be owned if it improves returns, reduces risk, improves behavior/adherence, or lowers costs/taxes. The global market portfolio offers a strong, low-cost baseline, so any active deviation must clear a high hurdle. Unlike readers, investors often remain stuck in bad positions due to psychological attachment and loss aversion. Some active strategies can be justified when they are additive to a disciplined, low-cost, tax-aware portfolio. Investors should be especially skeptical of fund pitches from managers who do not meaningfully invest in their own product.

Data Points: Number of books authored: 7 - Faber notes his own writing output while joking he is a “veritable shitstorm.” Number of white papers: 12+ - He says he has written “dozen white papers.” Number of podcast episodes: 150+ - He references the scale of his podcast catalog. Number of mutual funds and ETFs in the U.S.: Over 10,000 - Used to illustrate how crowded and competitive the investment product landscape is. Historical return of the global market portfolio: About 9% per year - Presented as the base-case benchmark for investors. Historical volatility of the global market portfolio: About 8% - Used as part of the benchmark’s risk profile. Historical Sharpe ratio of the global market portfolio: 0.55 - Cited as evidence of strong risk-adjusted performance. Typical drawdowns of the global market portfolio: About 25–30% - Used to set expectations for long-term investors. Fund manager personal investment in own fund: 60% to 80% have nothing invested in their own fund - Cited as a reason to distrust aggressive fund pitches.

Pivotal Quotes: "Nobody wants to invest in your shit." — Meb Faber: The episode’s core thesis and closing admonition to skeptical investors. "When you understand that nobody wants to read your shit, your mind becomes powerfully concentrated." — Steven Pressfield: Quoted to explain the writer-reader transaction that Faber adapts to investing. "You begin to understand that investing is, above all, a transaction." — Meb Faber: His reframing of portfolio management as a value exchange between investor and manager.

Implications: Listeners should evaluate every holding through an investor-first lens and demand clear, measurable benefits before adding products. For the industry, the episode reinforces skepticism toward expensive, story-driven funds and favors systematic, low-cost, tax-aware implementation.