Welcome to Bogleheads On Investing episode number nine and this episode I'll be speaking with Dr. Wesley Ray CEO of Alpha Architect where he and his colleagues are breaking new ground and the author are three books on quantitative investing Hi everyone, my name is Rick Ferry and this is Bogleheads On Investing This episode is sponsored by the John C. Bogle Center for Financial Literacy a 501 C3 corporation today. We're speaking with Dr. Wesley Gray After serving in the United States Marine Corps, Dr. Gray earned an NBA and a PhD in Finance from the University of Chicago where he studied under Nobel Prize winner Eugene Fama He then took a job in academia before starting his investment management company where he is on the cutting edge of new insights into factor investing with no further ado, let's bring in Dr. Wesley Gray Welcome to the show. How are you today? I'm great Rick. Appreciate you bringing me on Are you very much impressed me the very first time? I I learned about you and I talked with you the stuff you're working on is Cutting edge. I really believe that you are the new Jedi out there in the quant world Before we get into what you're currently doing now. I want to start at the beginning Where did you go at your undergraduate degree? I went to undergrad at the University of Pennsylvania at the Wharton School So I kind of started off with you know the uber finance geek undergrad and my kind of my first way I parlayed my myself into academic research is I walked into this gentleman's office named Chris gatesy Who who now writes a lot of papers on the 200 year history of momentum or? Relative strength or value or what have you and I just said I love this stuff Can you teach me how to be a professor and you basically said hey see that shelf right there? Grab these 10 books and read them and come back in two weeks and let's talk That was my initial start into geeking out and getting into academic research and moving along my initial path Which was to be a finance professor, but there was also another side to you You had this idea that perhaps you could figure out ways of outperforming the market. Well, yeah kind of it Simultaneous to the sign. I want to be a finance professor. I was also trading my own money doing a lot of investing I was there from 19 2002 and so that was obviously during the internet bubble and so I had this exposure Where I'd come off, you know reading every book everything I could get my hands on related to Ben Graham and Warren Buffett and the value investment philosophy, you know pets comms going up a thousand percent a day you know my dad's telling me to go buy the Janice global tech fund and And Like I'm a I'm a value by nature person and I'm watching these markets They could they're crazy and I'm obviously trading in value names getting destroyed But then on the other side of my life I'm like, hey, I just you know actually like this and you know, I was like, hey I should I want to stay this forever So it was kind of a weird barbell in the sense that I was you know sitting there trading stocks And then on the other hand I was reading, you know stochastic calculus books Just trying to get baseline, you know essentially to be a research assistant for Gatesy And so what happened is I kept doing all the investment stuff kept doing my stockpicking and and you know I started essentially I became for the Wharton Finance Department the I guess I don't want to use the Computer monkey. I was like the data monkey. So if someone needed to have a something coded up in Matlab That was my job. So like I kind of kind of became like a little mini You know workhorse for the apartment, you know, so like fast for a couple years and you know saying all these guys are also By the way, Chicago PhDs because for where reason Chicago tends to feed, you know, the Wharton faculty and Chris Gates is like, hey, you're gonna apply to Chicago and that's it I was like, well aren't there other schools like should I consider other PhD programs like no, you got to go to Chicago. They're like, we'll get you in and I'm like, okay How does that work? They're like, hey take all your tests and do all your stuff and it will write your recommendations letters and then so sure enough, you know, I apply to your Chicago PhD program Just straight out of undergrad, which is also not normal because typically go get a master's or what have you but I had a lot of you know, kind of close-holds in the department that were writing letters for me and PhD programs they only accept, you know, a handful of people every year. So it's a much more Kind of one-off deal. It's not like applying to an MBA program Long story short, I got in I was like, wow, I guess I'm gonna actually do this Since you entered the program in 2002 The Chicago school at the time and it still is to a certain extent It's just we're gonna take you in and we're just gonna beat you up Like you are gonna get destroyed in problem sets, workload and let's just see if you survive And so, you know, first two years are just you know, literally I was studying like 15 hours a day Seven days a week just trying to stay above water because I came in obviously without having a lot of experience or Grad score would have you so it was actually say pretty difficult I made it and so after the first two years there I I don't say I was burned out, but I was 24 I'd been Slaven away doing corn academic geek stuff forever and I just thought hey I need to maybe take a break or do something else. So you you really did do something else I would say that what you did was quite radical and of course, I'm proud of you for it So what I did is I decided I was gonna join the Marine Corps, which you're an alumnus of and It certainly seems radical But what was super interesting at the time is I would say good 20 to 30 percent of the Chicago Financial PhD program were actually former military officers a lot of them from Israel or Finland and what have you so they were all like Oh, yeah, of course you should do that Whereas many people on outside are like you must be the first time anyone's ever done that But it was super interesting is inside the program like my other fellow PhD mates were like hey That's that's pretty cool. And so yeah I went down to Professor Fama and at the time Professor Thaler who which is crazy I had these two Nobel Prize winners were actually like at the you know it wasn't my dissertation but our my curriculum paper advisors and I just had to ask them permission to get a four-year sabbatical and Professor Fama was actually like super cool about it. He's just like oh, that's awesome like proud of you Yeah, happy to sign, you know didn't even think twice about it. And then your professor Thaler he was more curious He was definitely like you're gonna do what? But eventually I got both those gentlemen to sign off and then submit it to the PhD program coordinator and took a four-year sabbatical That's amazing that you could actually do that take four years off Well, you so you can't you can take technically one year off And so that's the reason I had to go and have them sign off on this special kind of extend sabbatical Because it was a unique circumstance where most people don't go on sabbatical to do service The PhD program director kind of agreed like hey This is unique circumstance as long as you get your you know advisors to sign off on it We're cool with it. And so I had to do a few extra hoops to jump through to actually make it happen Well, that's great.  They sent me down To one of the islands in in Japan and you know did a bunch of like joint training missions with them It's been about a month there and then I got sent directly down to the Philippines and at the time This was I think was that 2004 2005 that we were there's a bunch of activity going on on this island called Hilo Which is a bunch of Muslim extremists and what have you but then there was this thing called the leite mudside disaster and a coup So I You know going crazy for a couple months there and then then right when I got back to Okinawa Which I was assigned there, but I rarely ever hung out there for like maybe a day or two The colonel calls me in office and he basically says hey you're you're going to Hawaii and I was like all right what? Why am I going to Hawaii like they're like oh you're on a mitt team a military Transition training team and you're going to get deployed to Iraq so that you know Then I went out to Hawaii did a big work up and then yeah Then we deployed out I was on one of the training teams where you embed with Iraqis and try to help them avoid Shooting themselves in the foot fact you wrote an entire book about your experience working with the Iraqis The name of the book was called embedded and it was a fascinating insight into what was going on Yeah, so I kind of went in To the service. I didn't join the service because I want to go to war per se I just you know I just wanted to do my time But I was certainly under the belief when you're probably a member but Colin Powell like showed that little Powder of that white powder and said hey, we're all gonna die kind of believe that I was like alright We need to do something here fast forward now. I'm actually deployed Living in an Iraqi battalion training up these Iraqi soldiers to you know, kind of take over their defense duties And I really got an opportunity to you know, actually live with these people eat with these people talk with these people and kind of get a better insight to the culture and kind of how they operate and That experience honestly just floored me and I took a whole 180 Right. I said I don't know what we're doing here This is crazy. Like I was not expecting this these people are tribal.  So so that I just got inspired like I got to share the story So I had just read a whole book basically about my time being embedded with the you know Iraqis and just trying to explain like their cultural nuance and why what we were trying to do like, you know bring freedom and democracy to their society just seem like a You know, maybe it wasn't a great idea That's pretty much what that that book was about just share my experiences there, which were you know Highly enlightening to me and I just I wanted to make sure other people got to at least experience it through at least my book Even if they can't be there themselves. I Understand that you speak Arabic and that you taught yourself I Did so I mean I could probably Converse in it if I got warmed up, but yeah so I was the intelligence officer and The more I read beforehand because I knew we were going to war in these areas Like you know speaking Arabic air like the actual language there is it means a heck of a lot more because it's associated with the religion You know because it's you know from a lot so you know kind of a big deal So the more if you want to win in those sort of culture wars You got a really you know Established bonds with the people you're working with and so learning the language is I thought was a main effort So yeah, I just put a ton of time up front to train extremely hard You know both on learn how to kill people and everything but also how to learn this language And then when I got there I just forced myself to literally embed with the people and not use a turp And then you know if you sit there long enough and get tired of using hand signals and not understand each other You know eventually you can start maneuvering so yeah I got to a point where I actually serve as a turp for our team And we would go on a convoys and I would be the turp, you know to the interface between our team and their rackies Yes, I Definitely highly recommend if anyone you know has to do that mission ever again to spend way more time Learn the language and lot less on you know tactics per se because it gives you a lot more Let's say with what the Iraqis called was to like, you know kind of karma and the ability to interact with them And have them actually listen to you if you actually know their language That's fascinating. Well you did that. Did you stay for four years? Yep did my did the four-year active duty and then after that you went back to the University of Chicago Got out was like early 2008 and then I just my mind. Well, you know being in the service It's just obviously way different than being in a PhD program at University of Chicago. So just like got out Yeah, yeah, it's kind of like 180 and so literally for the first three months I just had to relearn everything because my curriculum paper had a bunch of math in it and honestly I couldn't even read my own paper. I was like, well, I don't even know what this person's talking about But it was me. So I just I just put the basics on like hey here I got to relearn calculus and all this stuff and it is true that it is like You know riding a bike where if you know how to do it if you just get you know back into it You do quickly learn so so yeah re-enter the program move back to Chicago and You know, I was in much more like in I was in discipline mode versus a lot of my You know comrades there at the PhD program who are students because I kind of come out with a new look on life So I was like I'm getting out of here in two years And you know because usually you don't get out of the PhD program in a collective four years usually It's five six years, but I just didn't want to surround so I spent three months relearn everything and then I immediately went to work on dissertation so Yeah, and that because I my goal was I need to get out of this place by 2010 or my wife She's not going to be happy living on a ramen noodle salary for for longer than that And who was your mentor on your dissertation? So I so I went back to my old curriculum Papervisors and it was Thaler and Fama were the top two and then another gentleman Andrea Frazzini who's also famous now, but he actually left and went to a qr So when I came back basically Frazzini had already gone to go be a you know millionaire over at a qr Failure gotten too famous. So he obviously was gonna mess with PhD students anymore So really who I was left with was Fama because he was the only link in the chain that hadn't been broken So so I since you went to him and and he was kind of like, you know my core, you know advisor and then Another gentleman Stavros Panagias He helped me a lot because I had a theory paper as well as part of my dissertation Pietro Virenasi Was another one so it's I had a handful of them But I'd say the most influential and obviously the one that had the most experience in empirical Asset pricing work was obviously Professor Fama So so he was kind of the the one that hazed me the most I would say in the Dissertation writing stage your paper if I'm not mistaken was about active management Yeah, so you know being a marine and probably a little hard headed I yeah, I came back and I'd always been like a standing before a stock picker specifically a big believer in value investing in value investing stock picking and so what I decided was I Want to highlight to Professor Fama that you know active stock picking can add value because this whole efficient market Paying seems a little too crazy to me. So you're gonna tell Eugene Fama the future Nobel laureate that he was wrong It's at least out. That was my going in and so what I did is like, well, how am I gonna highlight this? Well, it turns out that there's you know, this organization called value investors club where a bunch of Superfiscated stock pickers a lot of them associated with hedge funds They would submit huge theses on basically stock pitches, right? So, you know best buys under value Here's my DCF. Here's the hunter reasons why and so what I thought is like hey, I've been following this club since 2000 I'm a member of this club, you know, I think they add a lot of value. They seem to have really good ideas I'm gonna read every single one of these stock pitches Systemically intermitted database and do the quant analysis on it to then assess Hey, do these people actually add value or have quote-unquote alpha? Long story short, they do at the margin and so I submitted this you know as part of my dissertation and Somehow by the you know grace a god, you know Fama agreed with the Dallas's he had some quibbles on You know takeaways, but at least at the margin I highlighted that there is some segment of the market where you know active stock picking might work at the margin So that was a small victory for me How did you meet up with Jack Vogel who you ultimately became partners with at alpha architect sure So what happened is is when I graduated from the program there? I went on the academic professor market and They're also my wife was going on the academic market. She's a peachy in history Which is a way less I'd say marketable profession and being a finance professor So I went out to a market and my wife's from Philly and she needed a job as a history professor And I ran into Drexel who gave me what they call an exploding offer So they gave me this offer.  So I was like, okay, well sign me up What are you gonna do? How often you got a twist my arm? And so I entered Drexel and then part of my package was having a dedicated Research assistant and that happened to be Jack Vogel. So just by Circumstance and a lot of great luck, you know, I I just had a gentleman who is you know, insanely smart Extremely well and extremely good at computer programming and doing all those data analysis and we just hit it off immediately So we've been working ever since you know, 2010 when I took that job the way I understood it was you know, Jack had read your dissertation and He said yeah, all this is great. These these people have Alpha they they're they're outperforming the market, but I can replicate that. Yeah using a computer So are they really outperforming the market? Can you tell me about that? Well? Yeah So so that was that was an insight that that that actually I had before I met Jack and kind of the takeaway from Well the interesting takeaway from the dissertation was we I catalog all this data on these individual stock pickers And it's sure enough. They had alpha you're relative to you know farm of French models What have you but essentially what they were doing for all intents and purposes was Small cap value investing in a certain element of concentration because there's only so many ideas That they would produce. It's not like you go buy 500 names at a time So so there'd usually be like five or six ideas a month sometimes 10 So on a rolling basis this portfolio would have anywhere from 50 to 100 stocks So but for essentially what they were doing from a quaint perspective is buying smaller stocks There were super cheap generally higher quality and doing it in somewhat concentrated fashion and Sure enough. You could also just have a computer Essentially do the same idea right concentrated small cheap quality and lo and behold It basically replicates what all these stock pickers were doing which it was certainly Well, it was kind of disheartening because at the time I was still kind of believing in stock picking because I was Stuck picker, but that kind of analysis there proved to me Why am I banging my head against the wall so hard to you know do these dissertations on these stocks? When you can essentially replicate a lot of the you know the core ideas with just use an algorithm And so that that was really kind of the the straw that broke the camel's back as they say they move me Much more heavy into just pure quaint and less into you know, I think I was gonna be Warren Buffett I think the the proof was in the numbers and Jack Bogle your research assistant was doing a dissertation similar to that So Jack's dissertation was a little bit different so what he looked at is there's a huge argument over whether Value investing which in defined in academic terms just means buying cheap stocks right on book to market or price stirrings Or what have you he was looking into argument Is this a risk-based phenomenon or is this a behavioral based phenomenon? Where just to explain the two ideas simply the risk-based Hypothesis essentially says that the reason cheap stocks earn higher returns Is because cheapness is a proxy for fundamental risk So the reason you're getting paid more on average is because these stocks are just fundamentally riskier the Behavioral argument which is on the other side of the coin is like no It's not because these stocks are riskier It's because the market generally throws the baby out with the bathwater and that's more related to a mispricing story That you know sentiment, you know throws these names out and beats them up too bad And so his dissertation was about how do we empirically? identify whether value is risk or mispricing and The short story is that it seems like if anything it's more likely mispricing Versus risk that explains the value premium, you know offices is highly debatable But that's what his dissertation was all about and after all of that you decided you were going to go out and create a company together Well kind of it actually all this happens simultaneously And it's one of the part of the crazier stories in in our industry So right when I actually got my job it actually was during the time I was on the professor markets At the time I was writing a blog and obviously my dissertation was out there I got cold call by a very large real estate family in New York and the son had been put in charge Of essentially managing it was around four billion dollars of like their liquid wealth and they were in the middle of just living through 2008 and they were big in hedge funds big in active management and they've got smoked and they're like we're firing Every one of these people we're gonna take control of our wealth.  He's like hey, could you help me imagine this four billion dollars? We were to use computers. I really like your dissertation. How do we do this? So went up there madam Again, this is all at the same time. I'm sitting here like thinking I'm going to be a professor It gives I wasn't a hundred percent sure if this would actually lead to anything But it initially kind of led to like a basic consulting gig where the gentleman said help me for a couple years If you guys do a great job, you know, we'll seed your business on asset management side because they just got out of the whole Asset management hedge from world and they're like we're never going to see it or do that ever again And then I was putting the ask on the table So but they said hey give me two years and so essentially I kind of helped them initially and then I got Jack Involved immediately because it kept scaling up bigger and bigger and then so after two years in 2012 they essentially seeded $20 million in in the quantitative value strategy, which we have a book about and then very quickly They they ramped it up to 50 and they put the other part in the international quantitative value and this was all going on Simultaneous to when I was being a professor as my day job. It just things kept happening in the background So it was very hectic Time in my life I would say and you're having children at the same time. Yeah, I was I was up to two and we were working on three and Yeah, it was getting crazy and then essentially what what happened is after I think it was around three years into it You're like this was clearly becoming a real business because we were your manager $50 million managed account We've got like a huge consulting contract. I'm also date You know moonlight now at this point basically as a finance professor and I just think and hey I need to go one way or the other here and so I've talked to my boss directs the head of the parliament I just told him I was like listen I I think I need to resign But I don't want to screw you over here You know because recruiting for professors is like a total nightmare like at least like a one-year cycle So he's like hey put in one more year So we can at least recruit for your position and then you can you know go out into the sunset So that's essentially what happened I after my third year being a prof for all intents and purposes. I was all in on the business, but I was still technically professing Until they could recruit for my position and then then you know basically kicked me out the door Another interesting thing along the way is through this whole time period It wasn't just there's large family office for whatever reason people like what we were putting out there We were just being super transparent about putting a research putting our ideas So a bunch of random rich people would call us up and say how do I do this and we'd say well We have a managed account. That's how you could do it and so we kept building the business up We would do tax laws harvesting to try to minimize tax impact because everyone we're dealing with was it was taxable money and Another thing happened along this way another couple hundred million gentlemen out in the Midwest we were working for them as well and he had a tax problem and It was one of these situations where he had a low basis stock That was going to get bought out by a large conglomerate for cash And he was very afraid that he was gonna have to incur like a huge capital gain event So he says go figure this out and you know This is like one of these impossible things or like hey go figure out how to not pay tax But you know if the rich guy says jump, you know, I say how high and so that's what I did I went on this mission how am I going to deal with this problem and Arranging to a Gallaudet at a bank and structured product And this is not something you could really do anymore but but it was all related to the ETF structure and I started learn about how the ETF structure essentially allows Assets to come in at mark-to-market basis the ETF can then Don't you know any asset out even if it has low basis on to a market maker with no tax liability And it's essentially kind of a laundry mat for capital gains liabilities and This you know a light went off on my head like holy cow If I'm doing strategies that involve trading and turning over in taxes or you know Essentially Uncle Sam's 50% performance fee, you know, this seems like a good idea. So long story short We now in around 2014 we decided we're going to get into this ETF business because we thought it was a better structure to deliver These you know concentrated factor portfolios then doing them an SMA with tax loss harvesting Just out of curiosity yet all that work you did on the ETF Mm-hmm structure of how it yeah, but the creation of the redemption how you can push out Any unrealized gains onto the authorized participants? You had that one client in the Midwest who had this big capital gain problem and then you had this ETF over here I've always wondered is there any kind of a structured product or can there be a structured product where you could take people who have These stocks out there and put them all together and bring it in and just issue them shares of an ETF And then take the stock then that they put in kind into the ETF and then give it to an author rights participant to get rid of And now the cost basis is in the ETF Yeah, it's diversified is is so that possible. Yes. Yes and no the long story short is in the old days Yes, but what happened is all the big banks got smoked out on a bunch of tax things a few years ago and they just cut off anything that could even be perceived as You know being on the edge because they didn't want to make Treasury angry So my understanding from the inside baseball of talking to people that the deal in this world is In the old days they would actually do stuff like that for for like super ultra high net worth clients and You know where they control like the the custody and clearing pipes, but my understanding is nowadays That doesn't go on, but I certainly feel like an Enterprising entrepreneur that had the time and energy to try to figure that out. It could be possible We've looked into it from like 50 different angles and have middle figured out, but yeah, there's certainly There's something there. I just haven't solved it. I believe there's something there, too I believe that you know this thing called direct indexing where you can yeah You buy 250 or 300 stocks and then you individually sell off the ones that that are at a loss and do a tax swap And at the end when that's all played out four or five years down the road when there is no really longer any ability to Do a lot of tax swapping. You've got this portfolio of 200 300 stocks that have a low cost basis, but that looks an awful lot like an index So yeah, if you could just take that and just turn that into an ETF provider and get shares of a more diversified ETF with a cost basis of the ETF is the cost basis of all your stocks and aggregate But it's a lot more easy to manage one security than 400. Yeah. Yeah, I agree 100% And and I get in fights all the time with people arguing over you do you do the ETF structure do you do the tax loss harvesting structures and You know, it's kind of I still believe there's a marginal benefit like even if you're doing pure passive Like say for example like the parametric solution like S&P with tax loss harvesting or just go by the vanguard fund I still believe that the vanguard fund is better Because a lot of people also forget into your point that eventually you get basis and everything But the index changes like firms get bought out for cash Guess what you can deal with that problem in an ETF structure You can't if you are so security right like if you have low basis and you know Joe Blow wants to buy the company out for cash.  That's easy to cleanse in an ETF So I think and then there's the fee differential like those tax loss harvesting solutions are you know 2030 40 bits You know an S&P 500 ETF is basically zero So if you annuitize that cost differential over, you know, the life of the investment You know the lump sum of that's maybe two three percent of your wealth like does that make sense? Probably not You know, is that the value of the tax law shield you're gonna get I don't think so So I I think tax laws harvesting and direct indexing is total hype overblown versus just buying the passive index through an ETF structure for Zero that that seems like a better long-term solution to me, but yeah, I agree reasonable people can disagree Let's move on a little bit. So all of a sudden you decide you're gonna launch alpha architect and you open up Yeah, the world headquarters, which I've been to several times now Yeah, for sure. So the original world headquarters was in a little house. I had in New Jersey But that was five minutes from my mother-in-law. So both my wife and I agreed that hey we should probably move a little bit further away so we moved over here to the Pennsylvania side and I at the tide spent a year Doing a commute from Baltimore to Philly when I was first year as a professor there because we still had a place down there and And you know, I came out of service I'd swore off commuting because I actually wanted to hang out with my kids.  It's kind of a compound of sorts And now it's you know alpha architect global headquarters But yeah, since you we just built an office inside this residence, you know got it zoned and everything and You know we start off with obviously no aum Harley at all and you know now we're have almost a billion but You know it functionally achieves the goal we keep our costs down low and it keeps commuting time down So we're stuck with it So it's a bit awkward but in the in the world of you know, zero percent management fees You got to do weird things sometimes and understand some interesting artifacts went along with that house Yeah, so so we got this place from a big game hunter who was basically had a as a tragic situation He had pancreatic cancer and he was basically going to die in three months so it was kind of a liquidation opportunity of some sort both the house and our Friends we have he was a like I said a big game hunter So we acquired a grizzly bear a leopard and such other really cool taxidermy mounts And one of which we keep in the office the grizzly bear because we like to say that You know, we try to kill bear markets and we have evidence of it by having our grizzly bear here So we it's definitely a unique experience Visiting alpharctic headquarters It was for me because when I first time I went to visit you I'm driving down this residential street, and I'm saying this can't be it. Yeah, we've had many of Very very wealthy people and a lot of famous folks roll through here with that exact same expression In the world that this guy talked me into why am I hanging out in a residence in the suburbs of Philadelphia? Is this person crazy or what? So things have gone. Well, you've launched several ETFs and The way in which you do ETF and factor investing I find it to be kind of the right way of doing it's almost like the next generation of factor investing because it's so Deep and so concentrated that if you want to do factor investing that it seems to me You should be paying for as much exposure to these factors in a and a concentrated form as you can get So it appealed to me right away when I found out, you know, how you were doing it Yeah, so essentially the the genesis of this idea is When we're working for the family office, they were going to do the typical thing where they're like Let's go buy our cheap beta But then we need to figure out how to replicate a lot of these different exposures that we used to get from these hedge fund people and Hedge funds obviously aren't doing like cheap beta stuff. They're usually doing concentrated bets in you know with stock picking but what's essentially is factors like small value quality But they're doing it a much more focused way So we naturally thought well if we want to replicate these more unique exposures out there We need to replicate them how they need to be replicated That means we're going to do maybe factors But we're not going to hold 500 securities and focus so much on how how close this tracks the index We're going to do 50 stock portfolios and just tell people up front that this is not a closet index With a little tilt to like the value factor. This is pure Value where we're literally buying the cheapest, you know, 40 or 50 securities on you know Are you know a different metric we use enterprise multiples, but to keep it simple like PE ratio? So yeah, and that's just what we did and we just told people up front of the downside Which is of course the tracking error and the relative performance that this stuff can bounce around both good and bad You know over long time periods and you just be prepared for that. It's not the Vanguard fund And we just wanted to deliver it, you know, transparently affordably and be very upfront about the potential pain associated with this style of investing And I think that's all very interesting Let's say that you want to have a slice of your portfolio to additional risk factors And the reason yeah additional risk factors is because I actually interviewed Gene Fama one time and I said, you know, if beta beta is a factor. So what do you call these other things you call them? Smart beta do you call them? What do you call them and he's his answer was they are additional risk factors. So they are additional betas I said, okay. Yeah, so let's say you wanted to expose you to something other than beta I guess you could do it by going long short. Yeah, but that would be expensive. Yeah in many ways Yeah, so you're you going long only, but you're doing it very concentrated and you're keeping the cost down Yes, that's right. So you got it So so the concept to Professor Farmer's point in our our portfolios are Constructed in a way that is much more akin to how Kind of academics form portfolios and that's what all the evidence shows like look how great they are The idea is we're not going to go long short to your point because it's much more expensive to run operate and just access those exposures and so and so we're going to stick on the long side, but it's not going to be Broad market beta exposure. It's going to be some beta obviously because it's long only But we're going to focus as much as we can on capturing You know the value risk premia or the momentum risk premia and again It's very important for us to communicate this element that this is a risk premia And this is very different because frankly the biggest issue with doing Different risk is that they're different than what a lot of people see on the news channel like on that speed 500 And if they're not mentally prepared for that, you know They're oftentimes going to be in at the wrong time out at the wrong time and kind of ruin the whole Reason for holding additional risk for me, which is to help your long long-term Performance and to kind of diversify your way from just owning generic beta That you and I went back and forth on Twitter a little bit about what what does the word long term holding mean You know how long yeah, how long is long and I think I said a lifetime and you said no, it's only 20 years And I said okay, we'll compromise at 25 years But you know this idea of holding these factors for a long Long time is really critical to the success of an investor. Yeah, it's just the advice from Bogals is actually timeless and it applies everywhere like when he talks about holding, you know equity He doesn't suggest you should go buy the S&P 500 fun or VT or VTI and just you know trade it every year He's like no This is like basically your permanent holding because you want to capture The equity risk premia well same thing here We're trying to capture, you know some specific factor risk premia and the same advice applies You're not going to capture it by trying to time it day-trade it Around all over the place. You've got to hold the thing and actually earn the associated risk premia with it which means you need to look at it more as a long-term strategic holding and not as a You know kind of a short-term Trading vehicle because that's not what it's really designed for So let's get down to the nitty gritty then the bottom line on all this It's gonna cost me more money to go after those additional betas because they have to pay a fee every year That's higher than the basically beta is free now. Yeah, so anything other than beta, which is now free out there I'm gonna decide to add additional betas or additional factors to my portfolio Using yeah using your funds, but your funds are not free your funds have cost So number one I have to get over that hurdle rate of the cost. Yeah, and there's a thing out there called a where we talk about it as a alpha decay or a Premium decay that's going on is more and more people are doing what you're doing There yeah seems to be a decay going on as to the expected return from these additional factors can you yeah, can you see that have you measured it to Are are your funds going to produce? Because I have to take money out of beta to put it into the additional factors Yeah, literally It's long only so I'm taking a slice of my total market index fund and I'm gonna allocate it to your fund And I'm going to pay you a higher fee and yeah, I need to at least get beta Which I know I'm going to get in the market. Yeah, I got to get above and beyond that. Is it worth it? So Yes, that that there's a lot of questions in there and it's all about cost and benefits so in general when you look at Any of these sort of factors like the cheaper you can get them the better right and a lot of times The price is going to be associated with the scarcity of said factor if if something has massive insane Capacity well at the margin that's something that vanguard can deliver at scale an example of a factor like that might be Market beta right that's obviously something that has trillions of dollars of capacity You can jam tons of money into it not not infinite amount of money by the way But you know in general that would make sense But then there's other sort of Strategies where if you're actually going to do the actual factor like for example like what we do 40 stocks You know mid cap a lot of times small cap weight like you just can't jam a trillion dollars into that strategy right so there's going to be a natural limit on Capacity which means you can't just scale it to infinity which means the cost can't be free Because got to pay the fixed costs and the bills and operational things for running this damn thing, right? so so that's just kind of economics of General capturing any exposure that doesn't have infinite scale the second question relates to well. What do these premiums? Actually deliver so for example value Let's say and and you could do value investing just generic Let's just call it low PE investing you could do it one of two ways We'll just make up one way is you could go buy a portfolio of say 40 stocks that have low PE Another way is you could go and wait you could go take the SP 500 stocks and kind of tilt more weight towards the low PE less weight to the high PE But on net you're basically not really doing much. You're kind of tilting one way or the other so clearly The potential value add from the so-called value factor is gonna be a lot higher in the Concentrated one then in the diluted one So that's one element like how's the thing constructed? But then the other important element is is this premium gonna pay off in the first place because if let's just say value Just doesn't work at all Well, then if I have it in a concentrated format or have it in a diluted format It's not gonna do anything for me and that gets back to the question of well why does a factor pay off in the first place and Because it's an open secret and because a lot of people know about it and because a lot of people are Proceed to be doing it. Will that make it decay? Well, why that that's we got to step back and say why do these things get why did they pay off in? historical sense well value generally paid off because to Fama's point it's risk here So unless you were to believe that risk preferences have changed Then one would probably want to believe that exposure to the value factor Will probably pay off at some point in the future clearly it hasn't paid off very well in the last five or ten years But just like generic market beta doesn't pay off all the time, you know, it's had 10 20-year droughts as well There's a reason to believe from economic perspective that value will pay off Just because a lot of times it's fundamentally riskier and then the second point is that if someone is going to do Value and you believe even in the mispricing Component of value like they people throw the baby out the bathwater.  They're probably gonna earn Some premium. I don't know what that will be You know historically like a concentrated value portfolio like like what we're doing, you know, maybe I don't know Maybe three to four percent over like a generic index which is going to be being sourced from being smaller being cheaper You know for the most part let's say that cuts in half to two percent right because at the margin it gets More efficient that so you may earn this two percent premium, but this is not like an arbitrage This means you're going to deal with probably more risk probably more ball Probably will definitely way more pain and anguish in a relative sense to like common benchmarks So you're probably going to earn this return But then the question is well, how much does it cost me to access this two percent premium? Well, if it costs me 200 bits that's probably a bad idea if it costs me, you know Zero that'd be a great idea right and then there's somewhere in between so what we do is like on our stuff We you know for the domestics we charge 49 basis points. So just under 50 bets, which is obviously Way more expensive than zero. I wouldn't call it outrageous But the idea is we're the bet on our stuff would be hey over the next 20 years Do I believe that the excess return associated with The factor exposures that I'm getting here are in excess of 49 basis points if not Then why would I do this? If so, okay, I might want to do this But then the second question would be well can someone else deliver it even cheaper because maybe vanguards got some Concentrated value factor fund for 30 bits right and the process is very similar. I like it Well, okay, I think I project. It's worth one percent, you know over a long haul or two percent It only cost me 30 bits here. I'll go do that one right so so it just it comes down to the trade-off between What do you expect this premium to pay off or the long haul? What do I got to pay for it and obviously you'd you want to pay less and earn more as best you can Which is what I argue a lot of these people that do factor investing are doing today They're not buying and holding, you know our funds for 20 years They're like day trading, you know, the ice shares factor funds that that's not that's not arbitraging Factor premiums. That's that's in the end Probably contributing to make them even higher in the future, but that's a Dating speed-dating factor funds rather than marrying one Yeah, yeah, exactly the only way you can pull premium out of the market is you need to have massive amounts of Permanent capital Sticking in something because it's kind of taking supply off the market But if all you've got is more day traders, you know throwing money around Sloshing around in factors, that's not arbitraging away the factor That's just money sloshing around and it's adding volatility to the factor But unless that money is like all mini warren buffets, you know holding for 20 years through thick and thin It's not going to depress the risk premium associated with them or it'd be very unlikely to do so And I frankly don't see that sort of mentality Amongst factor investors in the in the marketplace Nor do I see that as an incentive for product manufacturers because they're they're in the business of Activity so the more I can get you to like day trade on do this than the other thing That's that's good for the business out there So I think people have an incentive to promote activity in factors And you've written a lot about this you've got three books out there numerous papers The books are quantitative value quantitative Momentum and then DIY do-it-yourself financial advisor Did I read the book and Thought it's easy is I think you make it out to be in that book How you can do all of this as a do-it-yourself investor, but Well, yeah, I Would say it's just like on Bogo head you can go review to start here Here's how it's done, and yeah, you can read it and there's the cookbook But at the right price sometimes people will still be like, you know what thanks I really appreciate the transparency understand what you're gonna do But I have better uses for my time and rather pay you to do this for me So but there are people that definitely are DIY, but there's certainly a lot of people You know like my grandma for example, where she's probably she's probably not Well-suited to DIY even if she read the book and thought it was cool because her grandson wrote it Oh, it's a bit of a misnomer on the title We're coming up on the end of our time. I'd just like to switch gears here for one last second Could you talk about your March for the Fallen and what that's all about? Yeah, so March for the Fallen is a 28-mile March held at the Pennsylvania National Guard training unit and the the idea here is You're out there representing Full on behalf of those who lost loved ones in the military So we're supporting Gold Star families and people who have lost people in war It's not a charity in the sense that you give money It's a charity in the sense that people that have lost their loved ones Like to know that other people are remembering and honoring the Fallen So that's what you do you're out there in your charities kind of your blood sweat and tears to represent and You know let them know that that we still appreciate You know sacrifices they gave as a family and so you go out there and hang out and it's a great cause And you meet a lot of great people and I really enjoy, you know Promoting it and trying to encourage as many folks as possible to come out And if somebody was interested in joining your group you you've got a pretty large group that you've put together Yep, so you got so last year we had around a hundred and fifty This year I imagine we'll have probably 200 plus All you got to do if you want to be on notifications I'll just reach out direct or just you go to alpharquetech.com Slash MFTF there's a whole website about training plans nutrition How to sign up and all these sort of other things and all you got to do is just show up We take care of lodging and chow and I think it's like 35 bucks. You got to pay to the National Guard So it's very low-cost Superficient great cause you meet a bunch of great people and I think everyone should at least do it one time in their life Thank you, Wes. It's been a great conversation. I really appreciate you joining us here on bogelaheads on investing You got it's been an honor and keep doing what you guys do over bogelheads I love the education and and and love the effort for DIY investors out there This concludes the ninth episode of bogelheads on investing. I'm your host Rick Ferry Join us each month to hear a new special guest in the meantime Visit bogelheads.org and the bogelheads wiki Participate in the forum and help others find the forum. Thanks for listening


This is Think Tech Hawaii, the immunity matters here. Okay, Hawaii, the state of clean energy. I'm Jay Fidel and this is our favorite show, the Hawaii Energy Policy Forum Show on Wednesday at four every week. I love it. And I love it even on a day with a hurricane, because somehow it puts things in a different perspective when you're dealing with the nature, mother nature, who is sometimes offended. Okay. We have to my left. We have Lauren Reichelt with Blue Planet Foundation, then to her left, we have Brennan Morioka with Wine Electric. And to his left, we have Greg Gogh, and he's with Ulupono Initiative. This is a really VIP show. Smile. Because you're here. Yeah. And what are we going to talk about? Of course, electrification of transportation today. It's very important. And we have to, you know, have to keep pushing forward on it. It doesn't sound right pushing when you talk about transportation, but hey. And it's about electrification. It's about bringing the whole piece together. It's about changing the way people feel about their transportation, their rides.  Who wants to talk about it first? Who's in charge? You can talk about National Drive Electric Week. Yeah, that one. Yeah. Okay. So National Drive Electric Week is September 8th to September 16th, and it's a nationwide celebration of electrified transit or transportation. And so it's really an awareness event. We're trying to increase awareness of the various plug-in hybrid and battery electric vehicles that exist and their environmental and financial benefits. Okay. So how is this being conducted on the mainland? How is it being conducted here? And is it the same in both places? Yeah. It's, there's sort of an umbrella organization that encourages a lot of localized events. So there are events going on all over car shows and ride-and-drive events. Here we have a number of events. There were, there was an EV fair last weekend and an EV ride-and-drive event. And then this upcoming weekend, there's another EV ride-and-drive event on Kauai and one on Big Island as well in Hilo. So it's just like everybody gets in an electric car and drives. Like, you know, they used to have this with the Model T four years ago, right? And it drives across the country with the Model T, you know, and they help each other and they need to and all that. It's more about exposure for folks who don't already own an electric vehicle. So sales associates will bring the cars that they have for sales, the electric vehicles, and the public can come in and test drive them in a really pressure-free environment and also get in multiple models at once and be able to compare them on the spot. Oh, this is good. So it's a showroom of sorts. It is. I can, you know, finally get my wife to agree to get an electric car this way. I should take her. Yeah. Authentic information. So the rest of you guys, Brendan, are you involved in this electrification program that's coming up? Yeah, absolutely. I mean, you know, all of us here partner on a number of different activities. We are also a part of Drive Electric Kauai, which is a coalition of organizations both on the private sector, advocacy groups like Blue Planet and Ulupono Initiative, all of the utilities, and then a number of state government and county government entities as well. And it's really an effort by us to provide educational opportunities for the general public or for people who have been looking at buying an EV and maybe are on the fence. Ride and drive or EV fairs are opportunities for them to actually kind of touch and feel, test it out and just kind of ask a lot more questions that they maybe just can't find online or somewhere else. So these face-to-face kind of opportunities are very vital in the outreach and educational aspects of electrification and transportation, getting people to consider buying an electric vehicle. And so it's been very successful. Hoan Electric has partnered with a number of these organizations on these events that we did for National Drive Electric Week, but also on a fairly regular basis. We also had an event at the University of Hawaii football game. Last weekend versus Rice, which was a very successful, not just game, but also event because... One said to the other. Yeah. You know, we're right there in front of the gate entry and one of the entry points and there's a lot of people who just come by and we have, we're a number of vendors that are surrounding us, but we get a good share of that audience and people ask really good questions. And so we're there to just provide that kind of opportunity to have a conversation with them. You were involved too, Greg. Yeah. We've been supportive and like Brandon said, partnered with both Blue Planet and HECO and other stakeholders to try to move this forward, right? I mean, transportation in general is our larger consumer of imported oils. Ground transportation is a big component of that. So this is very important for us in terms of how do we reduce our dependence on imported oils. And EVs and electrification of transportation is a good way to do that. It's a viable technology right now. There's more and more options coming out with auto manufacturers. And so part of the challenge is there's a lot of misperceptions, a lot of lack of information out there. And so these events are meant to get some of informed people, whether from the dealers or private parties like us, to go out there and share information and like Lauren said, in a non-sales environment to educate informed people and hopefully get them to better understand what electric vehicles are all about, what they can do, what they can't do and hopefully ease their mind. So when they go to purchase a new vehicle, next time they really consider an electric and ideally they choose an electric, whether it's 100% battery electric or even just a plug-in hybrid that maybe gets 30 to 50 miles a range on the battery, which for most people would cover all their daily needs. I usually support that as well. Absolutely. Absolutely. Anything to reduce the consumption of oil? Well let me ask you a question about that. I mean I'm really putting into all three of you, to the extent that we're still using oil and creating the electrical energy that feeds these cars, they're not completely green. They're partly green and they're partly not green. What do you say to people when they, maybe when you go have this program, nobody shows up. And that's a very valid question and it's a very valid point. And as the utilities across the state transition towards 100% renewable portfolio, that energy that is used to power these cars start to become cleaner and cleaner. As compared to if you have just a regular gasoline car, that will continually be providing carbon emissions that is just going to continue to contribute towards an environment that is just not as clean as it could be. So even though it may not be as clean today as it will be tomorrow, I think putting all the right pieces in place will put us on the right path and going towards that I think is very important, especially not just towards a cleaner environment, but also towards the energy security aspects that Greg was alluding to. And to build up on that, as of 2017 I think statewide or at least maybe through the high electric companies, it was about 27% renewable energy. So right off the bat, a quarter of your fuel, or a little bit more than a quarter, is renewable. Is renewable driving your vehicle. But a key aspect, whether it's still fossil fuels versus gasoline at the pump, it's more efficient to go through the utility and because of that you're going to save money. So although gasoline is expensive here, as is electricity, on average you could save a third to even two-thirds the cost of fuel for an electric vehicle versus a gasoline-powered vehicle. Regardless, even though we're only 25% to 30% renewable energy. And also I would add this thought that there's a mindfulness issue. If I go out and buy an electric car, I'm making a statement not only to my friends and family but to myself. I'm committing to this. And so I'm more likely to be a guy who has solar on the roof. I'm more likely to be somebody who supports green energy in general if I am supporting green energy for the electric car. Well, and then I hear stories of people who buy the plug-in hybrid. And then because they do that, it's almost like a challenge to themselves. They make it a gain. Like, how much can I drive only on electric this week? And then in the end it's practically used as a fully electric car because they maximize their battery use. You must do something to you when you're driving down the street. You see all those stats coming up on the dash. Exactly how well am I doing right now? And Jay, and you bring up a good point, but that participating in having a cleaner environment is one thing. And that was really the motivation of many of the early adopters. But as electric vehicle technology has improved, it really starts to become more about cost savings for the individual consumer, but also just owning a better car. As the price of the vehicle comes down and it does become more affordable, the leaves and the bolts and the bolts, and even the new Tesla, the Tesla 3, which is still expensive, but it is becoming more and more affordable. But the vehicles are probably the most, I mean, I own a leaf and it's probably the best handling vehicle that I have ever owned. I want to talk about that, yeah. So you say it's a better car. Absolutely. And then we put aside the fact that it's an electric car, just put that aside for a minute. Handling. Okay. What the sound the door makes when it closes, right? All that. Especially when they're new. Especially when they're new, right? And then not treat you. I mean, if you're going to put a lot of technology into a vehicle, you're not going to put it just into the electric system, you're going to put it into everything, because otherwise you know, you're cheating yourself as a manufacturer. So tell me, how good are they?  They're phenomenal. Are you asking a trick question? Yeah. It's not Apple Apples there, but they're phenomenal. And to be honest, I mean, my wife and I, and we have two small kids, which means two car seats. We have a leaf. We have, you know, plenty of room in there for the car seats, for the kids, for the strollers, everything. It's a very family-friendly car. And we got our first one about four years ago. And what really sold me, and right I'm an advocate for this, was the test drive. I mean, as Brandon said, you get in there and test drive it, and it is a very smooth, very sound vehicle. The acceleration is beyond most traditional cars, because it's a 100% torque, almost from the start. And that's what really got me. And it's quiet. What about being too quiet?  You're too young for this now. No, I know exactly what I'm talking about. It's just so it would make a little noise. It's almost like maybe for an X-Tree, you get a plug in that makes a little noise, you know? So the leaf actually has a very distinct noise that it makes, where if you, as soon as you kind of get a tune to it, like, I mean, if I'm walking around and I, you know, just hear a car coming, I know instantly if it's a leaf or not because of the unique noise that it makes. So they do make some noise. They do it purposely. Yeah. I mean, it's not, you know, the rumbling, like, V8 engine that some of us might be used to, but they do make some noise. So what are the products that are in the marketplace now that I should consider and go down to this celebration? What should I be looking at? I mean, I like the Tesla, but what else? I mean, is, you know, we talk, I think we talked about this before, about the leaf out came out and there was a special discount or rebate going on just about a year ago, as I recall, and that was very attractive. And I knew some guys who bought that car. They have been in love with it ever since and the price. They were in love with the price. So what should I be looking at? The Toyota, the Tesla, the, what's the? So, yeah, almost every manufacturer at this point is either in the process of creating a plug-in or already has one on the market. And so Kia, for example, just released their Kia Niro, which is a plug-in hybrid. Sure, the car show, that was a very nice looking car. Yeah, I haven't driven that one yet, but that's the next one on my list. And we have the Chevy Bolt has probably the longest range, 238 mile range on one charge, and people really love that car as well. It was rated as one of the best cars in production right now, aside from being electric, and we have the Nissan Leaf, which everyone knows about. There's also some minivans that are being released, the Chrysler Pacifica plug-in hybrid. Plenty of choices. BMW, yep, Mitsubishi released. It's a crossover outlander, they're everywhere now. So they're starting to get bigger, the argument that my family can't fit in it, those things are sort of starting to melt away a little and ease people's minds. And I think trucks are probably going to be next, I think once we get the forerunners. Then the Toyota truck turns into the Toyota electric truck. There's a company called Workhorse that has a full-sized truck out there that sells, I think right now it sells for about $55,000. It's not fully commercialized yet, but as it hits the market, I think in 2019, 2020, and the price becomes much more affordable, I think you're going to start seeing people make that switch. Trucks is really the tipping point for Hawaii, I think. Yeah, everybody loves it. The Toyota Tacoma is the most popular vehicle purchased in Hawaii. Even more so as you go to the neighbor islands, the shift towards trucks becomes even more prevalent. So as you start getting the different models coming online, especially the larger SUVs and the trucks, I think that's when you really start seeing the shifts. And that's in a couple of years from now. So what about that hydrogen car, Mariah with it? Where does that fit in this discussion, in this landscape? Where does that fit? Well, hydrogen fuel cell is another version of electric vehicles. I mean, it's an electric car, but you don't plug it in. You fuel it by hydrogen produced in various forms. The Mariah is one of the models that are out there right now. There's also some larger trucks that are fueled by hydrogen, including buses. One of the challenges with hydrogen fuel cell right now is just the cost of infrastructure. It's extremely expensive to produce the hydrogen. Still 50,000 plus. Yeah, so it's difficult, but I think the technology is there. It works. But before it becomes a much more commercially viable product, the cost to produce the hydrogen needs to be coming down significantly more before it actually becomes much more prevalent in Hawaii. One other question before I go to the break, and that is, it's appealing to me, but I don't know if it's happening, and that is, so I have solar on my roof, and I bleed a little wire off the side, and when I come home, I'm feeding that car off either a battery or the solar, depends on what time I get home. I usually get home late. So is that popular? Is that happening? Is that something I should consider? In other words, charging my car at home with solar instead of going to a charging station? So I'll provide some input that may be deferred to Brennan. I think that's one of the key attractive benefits for the electrification of transportation is the benefits that it can bring to the grid and to helping integrate renewable energies, like timing charging electric vehicles, whether it's personal or even buses or commercial vehicles. During the day when there's peak sun, that's not only powering your solar but powering utility grid scale solar plants and other locations around the island, and I know HIKO is doing some work to best align the strategies as best we can. HIKO has been putting in charging stations all over Oahu as far as I know, and you have a regular campaign going on to do that. There must be quite a few by now, no? Yeah, it was actually across all of our three service territories, so Oahu, Maui, Maui County, and Hawaii Island. And so we have 13 currently right now, and we're in the process of trying to install four this calendar year and then another five next year. And public charging or access to public charging is one of the obstacles that we talk about towards EV adoption. We discussed the cost of a vehicle, the model types, two of which are very important consumer choices that people have when they're thinking about buying a type of car. So those are two obstacles, but the other biggest obstacle is access to public charging. And one of the, you know, the majority of people charge at home, like get home, plug in their car, let it sit over there. You know, 120. Yeah, 120. Some people choose to get the little faster ones, the 240, but even I charge mines with just my regular 120 outlet, I'm sure. We do the same, yeah. So charging at home is very easy, but for those who don't have access to home charging, like those condos, you know, public charging becomes very important. So they have access to the level two chargers out there in the public, but those take a little longer. So the fast chargers that Juan Electric has been installing become a very popular choice for condominium owners as well as TNC operators. So, you know, Uber and Lyft, they're always at our charging stations. Oh yeah, that's a whole new thing. I got an ad this morning that was at Uber or Lyft. One of the two were going to offer me a free ride today because it was hurricane. You know how to build a brand, eh? Yeah. Let's take a short break, guys, and we'll come back and talk about some of the macro factors about legislation regulation, about encouraging me to go into business and start my own charging station and where it's all going in the future. And the big bottom line question is, are we going to make it? Absolutely. Yeah, absolutely. Yeah. Okay. Why not? How many zeal we get in that question? This is Think Tech Hawaii, raising public awareness. Living in this crazy world, so caught up in the confusion, nothing is making sense for me and you. 2 p.m. I hope you'll join me for a likable science, where we'll dig into the science, dig into the meat of science, dig into the joy and delight of science. We'll discover why science is indeed fun, why science is interesting, why people should care about science and care about the research that's being done out there. It's all great, it's all entertaining, it's all educational, so I hope you'll join me for a likable science. We're back, we're live, and we have, which I can't meet my, Brennan Morioka, Lauren Reichelt and Greg Gow, all committed to electrification of transportation. Lauren is with Blue Planet, Greg is with Uluponu, and, sorry, Brennan is with Hawaiian Electric, okay, and they're working on this big project here, this celebration coming soon, when is it exactly? It's right now. National Draft Electric Week. It's right now. It's this week. Where do I go and when and how do I get there? The remaining events are on Kauai at Kauai Community College on Saturday morning from 9 to 12, we're doing electric vehicle test drives. I can actually drive it. You can actually drive it. Do you have a license? What was that? You do need a license, unfortunately, and then there will also be an event on Saturday in Hilo. Okay, all right, good. So let's talk about the economics. Right now, if I buy a car, I've got to spend, what, somewhere 30,000 plus, is that fair to say? The average new car is about $35,000. $35,000, okay, and that is before or after the federal tax credit? So that's for the average of all cars is roughly $35,000. All cars, I'm talking about electric cars. Electric cars, it varies. Usually more. I mean, it depends, right? I think people go usually more because of Tesla, which is obviously a high-end vehicle. Excuse the curve. But if you look at, you know, the new Nissan Leaf starts at $28,000, and then there's a $7,500 federal tax credit on top of that. So you know, if you can utilize that, you're down to, you know, close to $21,000 for a brand new high-tech vehicle. And then you're going to save, I would estimate, anywhere from $500 to $1,000 a year in fuel and maintenance costs. Oh, is that right? Yeah. So, big question. I meant to cover this. Is it easier to maintain an electric car than a gas car? Rotate your tires and change your windshield wipers. It's about it. Yeah. The dealers must love that. Yeah? Okay. No further questions. Yeah. Well, and on top of what Greg said, you know, about the federal tax credit and reducing the cost of, like, a Nissan Leaf, Nissan also has a $3,000 rebate this year. Oh, this is like what happened last year. Yeah. Last year, Nissan offered a $10,000 rebate for the Nissan Leafs, and that was wildly popular. This year, because the car has improved in some of its technologies, they've offered a $3,000 rebate, you know, BMW has a $10,000 rebate on the i3.  And if you look at some of the vehicles that are out there, like Greg said, the Nissan Leaf starts at $28,000. The Nissan, I mean the Kia Soul, electric version of the Kia Soul, starts at about $30,000, you know, and then you tack on the federal tax credit and then whatever rebates you can get from the manufacturers or the dealerships, you know, it starts to become very affordable. And then when you start looking long term, you know, at the maintenance cost, as Greg was alluding to, you know, you start getting a lot more savings on that. Do we need a state tax credit like we used to have? Do we need it? It wouldn't hurt. You know, whenever you looked at other jurisdictions, Georgia had a state tax credit that was very well utilized. And once the tax credit was sunset and taken away, the sales of EVs in Georgia dropped dramatically. Interesting. That's very interesting. And the affordability of electric vehicles is very dependent on, you know, that perception that I'm able to afford that upfront cost. Because people don't always, you know, they don't always look towards the long term life cycle costs and the savings that they'll have by the full ownership of their vehicle. Because they already have a problem just even putting down the down payment. So we need to, number one, educate them on the long term viability of owning an EV. But also, how do we help provide incentives to help reduce the cost of that up front Aside from the state tax credit, there are other incentives that I think would really help just sort of change people's thought process when they're making the decision. So right now there's some benefits that really help like access to HOV lanes, free parking and all. We don't have that. State and county lots. We do have all that right now. We have access to HOV. HOV. We have free parking in all county and state lots. There's always space in the parking lots. The law still requires that anybody in the parking lot of more than X stalls has to have some spaces for at least one EV charger. Right. Oh, charger. Right. Charger. Okay. Yep. And parking at the airport as well is free. And those are, they've been around for a while and so it's really important that we keep those incentives in place and then potentially look to additional incentives until we reach a tipping point where it's no longer sort of a nesting. We didn't reach that point yet though. No, not even close. Last time I knew the numbers. You guys can, all three of you at the same time can correct me. It was like just over 5,000 electric cars in the state. I'm totally wrong about that, right? Yes. How many? We're now about 7,500. 7,500. Okay. Yeah. And what is it increasing per annum? It's about 25% year-over-year growth versus overall car sales are basically flat. So it's a high growth sector. It's faster than overall car sales. Yes. Absolutely. So here we are. And I always sort of get a shudder when I realize how close we are to 2045. We're close. Are we going to make it? Are we going to be 100% and what do we need to do to get there?  You're king of Hawaii. Nothing about sovereignty.  I'm not even king of my home. Okay. This is an imaginary discussion. What would you do to make very sure that we hit our mark at 2045? One of the biggest drivers that we've found in some of our analysis is that the availability of public charging is going to be one of the most important drivers. And so being able to have the ability as a utility to drive some of that initially build the market, because I think part of the problem with the charging industry is that there is not, even though we're number two in the country in terms of EVs per capita, the number of EVs is still low in comparison to other areas. And so the market in Hawaii, we're supposed to be way ahead, right? Well, I mean, we're number two in the country in terms of EVs per capita. But when you compare the number, the sheer number or volume of EVs to someplace like California or Oregon. Just an absolute number. In sheer, pure numbers, you know, it's very difficult for a company to come in and make the kind of investments for charging infrastructure and then wait for a period of time to make some kind of return on that investment. And so the utility can play that role initially. Build the market, build the number of EVs that are actually on our roads. And then once we hit a certain saturation, then the private sector can come in and fill that the remaining gap. It's a great idea. We can do that? Yes, we are doing that. Yeah. Well, that's part of our electrification transportation roadmap that we submitted to the PUC that we've been working with them and all of our stakeholders, namely Blue Planet and Ulupono Initiative here, I'm trying to push that forward because a lot of the initiatives that we outlined in our roadmap are meant to drive an uptick of electric vehicles, not just passenger vehicles, but also electric buses as well. Sorry, to clarify too, when we talk about public transportation, it's across the board. So we're talking workplace charging, which is critical. And all this is not only meant to ease everybody, but to try to, as we talked about before, help those living in apartments or condos. They may not be able to charge when they get home. But if they could charge at work, where they're there for eight hours a day, you could easily do that and almost never have to worry about charging anywhere else. You wouldn't need it in the condo. Right. And it's real expensive in condos, so you can make it available outside. How are those young fellows who are doing the, gee, I forget the name of the company, the stainless steel, they were building it in Kakaako and it had advertisements on it and they put them in shopping centers. And the shopping center owner was so happy to have them, there would be no rent. So this is, I think you're referring to Volta. Yeah, thank you. Thank you. So we have at Ulupono, we've actually invested three charging infrastructure companies to try to help kind of get not only us here in Hawaii over that hump and that hurdle, but also on the mainland. And Volta is one of them. They're an ad-based company where their revenue is driven by ads, so it's no upfront cost to the site owner, and they are maybe some revenue share in there depending on what's negotiated. But there's lots of different options, which I think is another kind of poor information out there, and that's one of the reasons why we have these discussions, these events that share that information in terms of, for site owners, for property managers, there's a number of different options for EV charging from low cost, nuts and bolts to the Cadillac versions to ad-based, to mobile battery-based, to fast chargers, to level two chargers, and they can manage them in a number of different ways, whether they cover all the cost or whether they charge the user for the electricity or the power, or maybe a small margin, a low margin on that. So there's a number of different options for property owners out there, and so part of it is up to us to kind of educate and form and to Brennan's point and try to set the market. So you're actually testing the market.  You're investing in these companies, and that's a way of getting grassroots entrepreneurial development, and maybe one of those models will work better, it'll emerge and prevail. And I suspect with Wine Electric, there'll come a time, maybe some tipping point time, where you will say to me, Jay, you want to buy one of these charging station places, you can buy it, and you can own it and you can see if you can make a buck on it. Well, if we get to that point, then we've done our job, and that means there is a robust market in the electric vehicle sector that there's so many electric vehicles that people just want to put in chargers because they think that they can make some money off of it. So yeah, if we get to that point, then I think we've done our job. And it can actually be good for property owners, too. We did a survey a couple years ago on EV drivers. So it attracts traffic. And about, I think, 70% to 75% of respondents said they target specific places where there's charging. So if you're a restaurant or a retail center and you want to attract this demographic of EV drivers, put it in a charging station because people will target that specifically for the charging and then visit the properties. Part of that is the technology, though. If you tell me that I can come to a shopping center, but I'm not going to get charged or even a serious charge or much less a top-off in anything short of three hours, which may be the case. In fact, right now, that's too much for me. So what's the state of the technology now? In terms of fast charging, really fast. Is there somebody coming down the pike? Why don't you invest in that fast charging? What about you? What about you? Really fast. They're working on, there's a number of players in the market that are looking at faster and faster charging. But I mean, for here in Hawaii, realistically, we're not driving that far. So the new leaf has a 150-mile range. The boat, this range is around 240 miles. You could go a whole week and probably never use 100% of that. So if you're going to the grocery store or get a cup of coffee, you stop in, you charge for 20, 30 minutes while you're there, that's probably going to top you off and cover you for the next few days. In terms of distances, we live on the windward side. We have our leaf. It's about a 13-mile commute one way. So my wife and I could easily go multiple days, stop at the stores on the way home, and never have to recharge. From here to Waianae, we have some projects out there. It's about 35 miles one way. So at 70 miles round trip, which on 150 miles, you should be pretty comfortable with. It's definitely, people like to use that comparison a lot. And well, once an electric car has the same range as my gas car, then I'll adopt. But it's really behavioral change. Shifting your mindset about what charging means and how it fits into your life, it becomes more passive. You don't actively go out and seek. I mean, unless you're already going to go to the grocery store, you actively seek a grocery store with a charger. But you don't have to actively seek a gas station anymore. You can plug in in your garage, or you can find one as you go about your normal day. And so the faster the charger isn't necessarily going to make your life any easier, because that's not really the charging model anymore. Yeah. So do you have an electric car? I do not. OK, well, I don't need it. Don't feel bad. These two guys, I know they do. They do. Although some people have both, but put it in each camp. I still need my truck, which is why your truck question is not a fair question. But I do have a nice sun blinder on my car, though, that says my next car is an electric vehicle. I'm working on it, guys. So we're about out of time, and I wanted each of you to sort of tell them your thoughts. What you would leave with people? About the mindfulness about green energy, and about getting electrified in transportation, not only for themselves, but for the community. Because however much you enjoy it, however much it saves you money or time, how good you feel about it, it's really the community at the end of the day we're interested in. So let's start with you, Greg. What would you tell the people? Yeah, for the community, I mean, for me, it's really about whether you want to continue polluting the planet or not. And we have specific laws and rules for polluting and throwing trash on the ground. And every day we get into our gas vehicles, we are knowingly or not polluting the planet, which arguably is global warming, and we're going through lots of hurricanes right now. It's all kind of tied together. So to help the community, help the globe, let's try to do our best that we can to transition to cleaner energy and electric vehicles is a viable option at the moment that's going to save us all money. All right, Fredin, what would you tell them? Well, I would just say the majority of households or families over the next three or four years are going to be looking at buying at least one new car or getting another car. And whether it's a new car or even a used car, there are options of electric vehicles out there for you. And so I would just say, do your homework before you make your next purchase. There are tools out there. We have an EVWAT tool on our web page. There are other EVWAT tool is on our web page. It allows someone to go in and compare the different gas cars to an electric vehicle version where you live, how much you drive, so that you can also get a comparison of how much you might save over the life of the cars. So on our hornelectric.com, just go look for our electric vehicle web pages. It's the EVWAT tool is on there. But also do the test drives. Go out to one that Lauren is setting up, that we're going to be also participating in. Actually jump in the car, see how it performs. Make sure that it suits your lifestyle. If you're single, you have a family, there are different options for you out there. It's not the old just the bubble-eye Nissan Leaf anymore. There's, sorry if that's the one. But I mean, the models are changing. There's far more varieties. And so there is an electric vehicle that suits everyone's lifestyle.  And then I'm sure you'll make that dive.  Call me anytime. OK, Lauren, how about you? And don't forget to mention yet again the celebrations this weekend. Well, I'd like to reiterate the things that Greg and Brennan just said. Are you trying to tell me you agree with them? I do, I agree with them. Anything they said you don't agree with? I'd have to pick back through it. Generally agreed. But definitely while electric vehicles aren't charged on 100% clean energy right now, a gas car will never be. A gas car will never get cleaner. It's always going to be using fossil fuels. And an electric vehicle will continuously get cleaner as our grid continues to get cleaner. And so I mean, we're sitting here on a day that there's a tropical storm outside. We thought it was going to be a hurricane hitting us dead on. And it's been a relatively active hurricane year. And it's going to continue to get worse the longer we continue to pollute. So I think it's really important and it's really impacting us directly here, whether we see the connections or not. And so I just would advocate for everyone coming to our events. Trying an electric vehicle, you will fall in love with it. We have an EV ride and drive event on Saturday, this weekend, Saturday, September 15th, from 9 to 12 at the Kauai Community College Community Farmers Market. OK, I have two things I want to say. Something you said made me think of this. Is that some people think that because we're so small, alone in the Pacific Ocean, we have no effect on climate change. I reject that. Everybody has an effect on climate change. And it should be a global initiative. The second thing is people think, well, we've got these bad storms and there'll be bad ones coming too, more bad ones. It's too late that we can't do anything anymore. We're already in another normal that is going to be really deadly. That's wrong too. We still have to try. I know you will agree. And finally, I want to thank Maria, Tomei for setting this up today, as I always do. She's out there somewhere. Thank you, Maria. And thanks to the Hawaii Energy Policy Forum. And thank you, Greg. And thank you, Brennan. And thank you, Lauren. Thank you. Thank you. Aloha.


For the purposes of this lesson, we're going to encourage you just to go ahead and scroll to page 10 of the accompanying PDF. We offer two options for creating the data set that we're going to be using for today. There's a shortcut, which is the one that we're going to use, and there's also creating it from scratch using code that we introduced in the previous workshop. But because that material has already been covered in that previous workshop, we're going to go ahead and just take a shortcut. And as I mentioned earlier, because this one has a lot of URLs, we're downloading a file that we've already created and stored online. I encourage you to just copy and paste this code block from your PDF just to avoid any kind of unnecessary errors. So I've already done that. So I've gone ahead and pasted this here. And as we did before, I'm going to introduce with a hashtag a title for this section. Okay, and we're using the download.file function here. The first argument in this function is just the online location of the CSV file that we're using. Okay, so you can see that this is stored in the CMU library's GitHub account. You can navigate to this directly if you want to and download it from the source location. All that is open access. The second argument in this function is the location on our hard drive where we want to store it. So we're storing this in the data output folder, which is right here. And the name of that file is going to be interviews underscore plotting. Okay, so this is an edited version of our original data set that we're going to use for these plotting exercises and it's a CSV file. Again, the mode is just an additional argument that specifies the kind of download method that R is going to use to download that file. So go ahead and run that. Your console should say that the file has been downloaded. It's 36 kilobytes. And then if you look in your data output folder, it should appear here. Okay, and so the next thing that we're going to want to do is actually store this data set in a new data object within our environment. And this is going to be stored as a data frame, which if you remember is just kind of the default data type that's used for tabular storing tabular data within R. We're going to call this object data plotting. Follow that by the assignment operator. We're using the read CSV function from the tidyverse package and then in quotation marks. I'm going to specify first the location, the folder where that data set is stored, and then just the name here and I'll just go ahead and copy and paste that from above. Okay, when you run that, you should see in your global environment that that data frame object has been created. It's got 131 observations and 45 variables. Okay, again, if you want to preview this data, you can just click here and then a tab will open here and you can just scroll around to examine that data. So you can see all the additional field names that we've created in the previous exercise. These are going to become important for the plotting exercises that we're doing here. One quick note is that you may remember in the previous exercise that we had added an additional argument to this read CSV function to indicate what R should do with the missing values, the nulls or NAs. In this case, because this data set has already been cleaned, we don't need to specify that. These are optional arguments, so we can include them whenever they apply, but if they don't apply, it's perfectly fine to leave them out.


ಮ ಾವರನೂ ಜಟಾರ್ ಊದ್ ಊಟಜ ಮನು ತೆಯದ ಚಳಾಮ ಥ್ರಂದ ಬ ಗಟರ್ ಬ ಸತೂತಿರಿಸ ಎಎಸಿ ಯಿಗಳ ಕ�槃ತಿಯಗಿನಾ ರಿಲMANDರಿ ಷುಶಚಿಂದಾದ ತಳಿಡತ್ಿಸಿನೂದಾದ...ಟಣಿ ಸಡಕಿನ손 ಭಾರ್ ᓖಟಽಿಲಾ ಸದ କ କ କ ઄ ༀ ક ઄ ઄ ༀ ૞ ਬ ઉ ઒ ଆ જ ଫ ઍ જ ઄ ୂ র ં ૝ જ ૜ ઙ ૌ ઓ ૝ ડ ં ક ૺ જ ૩ ૤ ૼ ડ ૤ ઍ ૸ ૸ ઘ ઈ ૂ ૜ ત બ ૸ ૜ ૹ ૪ ૂ ૸ ૹ ધ if one of i is not equaling to null then this condition will be true or is equaling to null it means if one of i tulee 묻 Kelsey or if one of i is not equaling to null then this condition will be true sir, nah, blo Radic λp or Viedvij давай if s1 of i is not equal to s2 of i so if this condition is true it means contains are not equal so i can assign 1 into f and i can break the loop if this if condition is true then only loop will be terminated otherwise loop will be repeated so if contains of s1 and s2 are not equal then f will be containing 1 otherwise f will remain 0 so after completion of this loop i can check value of f if it is 0 then i can print strings are equal otherwise i can print strings are unequal so this way i have implemented the complete code in front of you which can compare whether the contents of strings are equal or not now i am going to execute this code so in first string i am entering ABC and in second string i am entering small ABC so this comparison is case sensitive so in this input you can see logically contents are same but their case is different so you can see the output strings are unequal so program is working properly it is showing the correct result now again i am executing this code this time i am entering same contents so you can see the output strings are equal now again i am executing this code so that we can check whether it is checking contains or length so this time i am i am entering XYZ so here you can see first string is containing ABC and second string is containing XYZ again you can see the result strings are unequal so this way program is working properly in both the way in all the ways so if you want to compare the contents of two strings you can apply this logic i hope you have understood how i have implemented this code in front of you if you want to watch more programming related videos you can follow or subscribe my youtube channel through the URL youtube.com slash you can download my programming app tag image which is available on google play thank you for watching this video