Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I'm Aaron Powell. And I'm Matthew Feeney. And today we welcome back Brian Wilson. He's co-founder of Combat and Classics, a program out of St. John's that organizes free online seminars on classic texts for active duty reserve and veteran U.S. military. He also leads discussions for the partially examined live podcast, Non-School Program. Hi, guys. Thanks for having me, Matt.  And today we are doing the next dialogue in that sequence, which is the credo. So when we start having you tell us what's the context for this particular discussion. Yeah. So the credo, and if you haven't listened to the first one, spoilers ahead. Socrates is found guilty. So now he's in prison. But the issue at hand that he's wrestling here in the credo is he can get out, right? That's the pitch. And the subtext is that he, that the government of Athens, probably not a big deal because there was the talk of him being exiled as an option prior. So he is just going to talk with credo about, you know, is it, would it be right for me to ignore the verdict? Would it be right for me to leave?  But I also think there's a lot of ambiguity that you can chew on in this one. And like a lot of Socratic dialogues, and I always kind of harken back to the Republic with this is, you know, is, is Socrates really laying out a coach and argument here? Is he really? And I think this is something for the listeners to think through as we talk about this and then hopefully you're kind of spurred on to read it. And so whether you're just listening or whether you're reading, it's, you know, ask yourself in very specific terms and very like, okay, I need to define my terms is Socrates being consistent. So I just, I wanted to start off with a line in 46C where him and credo are already kind of in the mix and talking about these different options. And Socrates says, I value and respect the same principles as before. And if we have no better arguments to bring up at this moment, be sure that I shall not agree with you, not even if the power of the majority were to frighten us with more bogies as if we were children with threats of incarcerations and executions and confiscation of property. So like other St. John's seminars, you know, we start off with an opening question and then we just try to help each other learn. So Socrates is laying out this excuse to credo about why he's not going to break out of the jail. And he brings up this concept of the majority, but the question for you all is how is that different than what got him here in jail in the first place? Yeah, I think it's a very interesting question because in the previous episode we discussed the trial and an argument could be made that he was, well, this is what happened that there was a big jury that found him guilty and that's in some sense a majority rule. So on the one hand, he seems to have this reverence or respect for the state but also to be skeptical of majority rule, which I think is a very interesting two set of beliefs to hold at once. It's interesting that when he starts presenting the arguments for why he shouldn't run away. So credo has shown up and said, look, basically we can bribe people to get you out. It's not going to cost that much. People are kind of expecting us to do it. It'll be easy. And Socrates says, no, when he starts offering these arguments and credo has said, yeah, like, look, people are, he's going to hurt my reputation if I don't bust you out of here because people are expecting it. And Socrates said, why the hell should you care about what the majority thinks of you? You should only care about the people who are right. But when he starts giving the reasons why he needs to stay, he slides into speaking in the voice of the state. He says, I'm speaking. I can imagine the, I think he says, the laws and constitution of Athens saying. And then it shifts into it's now personified. It's no longer, so like the trial represented the will of the majority, which he seems to be very much opposed to, but when he's presenting the arguments for why he ought to obey the will of the majority, suddenly it's no longer the will of the majority, but this like personified state. I think it's, see, I take it a little more ambiguous ambiguity there than the state, right? So I'm trying to be very specific. Maybe it says the state in your translation, but in my translation it just says the laws. Right. It says the laws and constitution. So, and I, where does it say the constitution? Help me out on that one. I'm trying to find it. It's in my translation. Because you know, I'm reading this as the law. And I feel like with the law, you know, you get into a fuzzier place than the state, right? If he had just said the state, hmm, you know, he's not going to, he's not going to sell me as much, but if he's talking about the law, and especially like he said in the apology with his daimon, right? This daimon, this kind of God that he follows is the God of reason. And he doesn't mention the daimon, right? He doesn't mention reason. He doesn't mention virtue, right? He just mentions the laws and what the laws are saying. And it's fascinating to me that he has to have this conversation with himself, right? That he can't even use credo as his interlocutor, which is what he does in a lot of situations. So maybe credo's really dumb. That's an option, right? Or he's trying to give voice to this alternative and either try to talk himself into or out of it, or talking credo into or out of it. But, you know, by his actions, he stays. So it's just very confusing to me where he says this, you know, why should I respect the majority and the earlier part is very much about, you know, you need to find the person that understands good opinion, that has a good opinion to do good, and you follow that.  You do that and ignore the majority. And yet, here we are, where he's in jail because the majority of the jury put him there. And then he's following, or at least arguing with himself via this disembodied thing, the laws. So here I found the... So this is... My edition only says it's somewhere between 48e and 50a. But it says, look at it this way. Suppose that while we were preparing to run away from here, the laws and constitution of Athens were to come and confront us and ask this question. Now, Socrates, what are you proposing to do? Then later says... So again, the laws and constitution are speaking and say, so far as you have the power to destroy us the laws and the whole state as well. But this argument he's having with himself, it is true he kind of cuts credo out of the whole thing, but there's this weird admission at the end where... So almost all of the arguments he makes, which we'll go through, are simply him speaking in this imagined voice. Like, it's like he's not giving his own views or even asking the kinds of questions that aren't like, these aren't really my reviews. I'm just asking that's so typical of Socrates, because he said it's in... All of his speeches in quotes as the laws and constitution of Athens. But at the end he says, that my dear friend credo, I do assure you is what I seem to hear them saying, just as a mystic seems to hear the strains of music, and the sound of their arguments ring so loudly in my head that I cannot hear the other side. It's like this isn't even a dialogue. It's just...  Yeah, and 51C, the translation I have at least says, the laws might say... The laws might say... And then he goes on to talk about the sort of things that the laws provide and that Socrates should probably be thankful for. And he mentioned things like educating him and raising him. And it's a fascinating point, I think, because the context of this is so, I think, intuitively frightening. He's facing certain death and making an argument that to Libertarians like us is rather disturbing, saying that there's some sort of obligation to the entity that raised you, that educated you. And it's an argument you hear, I think, quite often actually outside of seminar rooms when discussing texts like this, that the laws are worth respecting or the state is worth respecting because without it, what would you be? You're here because of it. I think it's very tricky, right? Because if the laws are just, then you must do just by them, right? And that's kind of the layer beneath this idea of laws. Socrates says, he's like, I can't do injustice, right? Even if I have been unjustly tried, right? I can't do that. But he doesn't address the question if the laws are just or not, right? And I feel like this disembodied laws conversation is important to the dialogue. He's not presenting this to Credo. He's not saying, Credo, don't you believe that the laws nurtured you and the laws raised you and gave you this ability? He's not making that argument to Credo. He's arguing with the laws in his own head and I just think sometimes, I take, there's a part in the Book Four of the Republic where they're talking about. I think I brought this up in the last pod where Glaucon in the formation of their ideal state asks him, okay, well, you've provided for all the basic necessities without a state, but don't you want a footstool?  Okay, well, now we need gold people and silver people and bronze people and guardians and all this stuff. The rest of the Republic is kind of a satire or a joke as, you know, like this is what you need to provide this, which is also not true, but it's, you know, I feel like it's a similar, you know, conception of, you know, if the laws are just, then I cannot do injustice by them. I can't just leave, I can't use bribery, but the system is set up that way. You know, he's within this system. He's within Athenian justice and there's some part of Athenian, and the law, there's some part of Athenian culture that is saying to Socrates, it's okay.  But he has this conception of this dialogue with the laws that is forcing him to stay, and I don't understand it, you know? So he doesn't seem to, he seems to on the one hand take a procedural view of justice. Like the law is structured to do these certain things and the law has spoken because we had a trial and I was condemned, I was found guilty, so it would be violating the law irregardless of its content, right? Well, you can look at this in two ways, right? I think, maybe this is where you were going, like, you know, what came to my mind a lot of times is, you know, a letter from Birmingham Jail, right? So you have this idea of, you know, that peace and love is what drives mankind's relationships with one another and that if you oppress one, you oppress the many.  And also this conception of sacrifice, it's like, if you want me to sit here, I'll sit here. That's fine, but you can't stop where this is going. Whereas with Socrates, why not make a message like that? Why not have a message of rebellion, of still knowledge and justice and peace but rebellion at the same time. And I feel like that's missing from this and how to have, how do you have a fully logical, a fully reasonable account of your actions without an understanding of the nature of rebellion, of the nature of saying, no, this is not right. And I feel like there's something in there, and this is why I hang out with smart guys like you to help me understand this better, is there's something in there that's missing, and I feel like it's something around this dialogue with himself vis-a-vis the laws. Well, he does mention, again, when he's speaking for the law, he has them say, like, look, you had an opportunity to persuade us. Like, it feels like that notion of saying no and that notion of rebellion comes in under the idea of persuasion. That if you disagree, the thing to do is not to disobey because he thinks that disobeying destroys the law, which then destroys the state. Or to run off, but to make the attempts to persuade, which is what he arguably did, although we can question how good of a job he did or if he was even intentionally, like, if he was trying to persuade. But he made that attempt and failed. But the thing that I was going to say is that he's... So he's got this, he says, look, it's good because there's this procedure. The laws give us this procedure and I was found guilty, but it seems like the way that Credo is presenting the, come on, look, we can get you out and it'll be easy. And the expectation is that you will is that part of this procedure is then, and if you're found guilty, then we can buy off the guards and you can run. Like, this is the expectation and so it's not clear why the finding guilty is part of this grander law, you know, that the jury finds him this way, but the getting out of jail which is expected is not. Yeah, I think that's a pretty good take on it. I do think there's a good chance here that Socrates is worried about the reputation here. And of course the dialogue starts with Credo saying, well, you know, this will make me look bad and Socrates doesn't seem to care. And I do wonder if they had just gone off to Thessaly what Socrates' reputation might have been. But it's hard for me to get into the mindset of Socrates given what you said a little earlier which was that he might just treat this as a rhetorical battle lost that he stood in front of hundreds of people and tried to make a case and failed and he's willing to suffer the ultimate consequence of that. And like we discussed in the last episode, he knew that he was, you know, guilty and didn't exactly treat the jury with much respect with the first verdict. But again, how much of this is rhetorical flourish? I'm not sure. I think there's a lot in here as far as, you know, things that are maybe pointed at us as libertarians, right? And, you know, in the line that Matthew was just mentioning at the end of 52 when he's quoting the laws and he's saying the laws would say, surely they might say you're breaking the commitments and agreements that you made with us without compulsion or deceit and under no pressure of time for deliberation you've had 70 years during which you could have gone away if you did not like us and if you thought our agreements unjust, you did not choose to go to Sparta or to Crete which you are always saying are well-governed nor to any other city, Greek or foreign. And so there's, you know, that critique of us where we're like, why are we spending so much on entitlements and, you know, they're like, well, if you don't like it, it's not all right. And yet we don't.  It's a very worrying conception of consent, if you ask me. And it is, as you pointed out, I'm sure everyone at this table has heard the argument before, well, you could move to Canada or you could move to Australia or something like that, which ties into two thoughts that always come to my mind when this happens. Number one, values are subjective and you might be annoyed about some things the American government does, but you don't hate them enough that you would leave. But secondly, it's the moral burden seems the wrong way around in a strange way. It's up to me to exit this institution that I didn't have a choice in specifically where I was born. And I think, you know, I've discussed this with Aaron. I'm off-mic before and I know he thinks along the similar lines, is that fair? I don't want to put words in your mouth, Aaron. But Aaron is nodding. Yeah, like, so I want to, I mean, as I decide one of the, every, so three times a year because we have three interns, masters, three intern classes come through K to each year and for each one I give a talk about the problem of political obligation and authority and whether we have a duty to obey the law and the text that I assign them is the credo and the reason that I assign it is not just because it's great and everyone should read as much play-doh as you can but because the arguments that Socrates offers so this one that you just brought up, Brian, which is an implicit consent argument are basically the same arguments that people make today for why we have a duty to obey the state and all of the major arguments, the kinds of arguments that get made today really show up in some form in the credo so it's that Alfred Whitehead's quip that all of philosophy is footnotes to play-doh really shows up here with the credo but this is a really troubling thing. I mean, we know that Socrates, Socrates is like the consummate Athenian. He, I mean, he's, he mentions like he's never really left the city. He had some military adventures earlier on but since then he's, he hasn't left the city. He had no desire to leave the city. Athens is what he loves. It's the place he wants to be and so the cost of leaving, of heading off to some other town is enormous for him and these burdens do seem quite high and so that, you know, love it or leave it but the argument that we as libertarians get all the time I think really under appreciates how embedded we are in our culture, our way of life, our society, our friends, our family, that stuff, it discounts that.   Well, I mean, you know, the idea of a, I mean, really it's a quasi-cultural shift, right? Because if he goes to anywhere in Greece they're going to speak the same language, they'll be a bit of a patois but nothing that shocking. There are, you know, government entities that are well-governed and that's laid out as well but it's like, what is keeping in there? And I mean, I don't know if Matthew wants to talk about it. I mean, I don't know exactly where you're from, Matthew. I'm based on your accent, I'm assuming, like somewhere in Alabama. Close. But it's, you know, it's like why stay and why go? And especially if death is your other option. It doesn't make sense to me to appoint. Yeah, although I think some of it might be to make a point that I can't imagine making but Socrates as an ancient Greek probably could which is to put justice as an ideal more important than your own life. At 43B he says, speaking for the, you know, the laws, so be convinced by we who brought you up, Socrates, and do not put children or life or anything else ahead of justice. And I just find that mindset a little boggling myself and it seems not to mean that I don't think justice isn't important but I can't imagine being willing to sit in a prison with an open door with a cup of hemlock and thinking, I'll drink this rather than flee. How does that line factor play though with the idea that, so of course this, you know, you always have to mention that we don't actually know what were Socrates' ideas versus Plato's ideas. And these early dialogues probably represent Socrates more than the later ones say the Republic do which are more Plato's ideas but the Republic is about the nature of justice. But it's a, what we, it's ultimately like it's an individual virtue. Like this entire metaphor that he constructs in the Republic of the virtuous city is just to get at what does it mean for justice in the individual. And so if that's true and justice is a virtue then of people instead of, say, institutions then it would seem that this allegiance to justice that he has where we can't place anything else above it would seem to leave open or necessitate the questioning of okay great then but if justice is something about me then if the jury says X but X is not just then justice says ignore the jury. Yeah, I mean the strangest thing about this given our perspective is that he seems guilty of something that we might describe as a thought crime or just thinking the wrong things and influencing the youth. And people in the world today who sit in prison cells because they've said the wrong things I hope would intuitively think well the state is being unjust. I'm not the, you know, that's the problem. The problem here isn't that I just lost an argument in a courtroom. The problem is that the law is bad and that's the real injustice and it doesn't seem to occur to Socrates that's a point worth seriously considering. I mean although he does mention of course the importance of majorities. And it's so troubling, right? Well, it's troubling in that, you know, there are so many people, you know, kind of icons of philosophy of religion or whatever that are willing to martyr themselves for an ideal of justice that transcends the state to one degree or another, right? And it's mostly death and rebellion to the state, right? It's people that are going to stand up to the state's power, the state's apparatus no matter what, you know, form it might take.  You know, he just wanted to open a little corner food shop and, you know, the government wouldn't let him, right? So we somehow empathize with that and understand it to a degree in this idea of rebellion, this idea that, you know, sometimes rebellion causes or requires death. But this is, it's a rebellion, but it isn't, you know? And it's something that's just so hard for me to wrap myself around. And it's somebody that, you know, he was the gadfly, right? He was questioning everything and the state doesn't like it.  And the state gets its way. Like, he doesn't talk about politics. And now he's here kind of saying, taking this idea of the laws and laying it out very explicitly and maybe agreeing with it and accepting death rather than saying, no, this is wrong. No, there is a sense of justice outside of this. Well, and we discussed this in the last episode, but when discussing the possibility of death, he seems to have a different conception of it than we might have. He says on the one hand, well, the worst that happens is I just go to sleep.  And I suppose his fear of death, and we have to remember he's an old man and, you know, traveling all the way to Thessaly as an exile is not an insignificant thing. So it might just be, you know, don't romance it too much, but that the course of action he takes makes sense given the context and what he actually thinks about death. I feel like that's another giant contradiction that, at least in my mind, that I don't buy the I'm old, it's not a big deal, you know? Like, I've seen this in, like, the Marine Corps, right? When you have 24, 25-year-old guys and they're in a rock and they can stare death in the face and, like, they're okay, you know? They know what they're in for and they know that that's a possible result of their actions, of their being there. But I also, you know, I have a lot of older folks in their 60s and 70s that, you know, come to the seminars and that I talk to significantly and their grip on life is tight.  I don't hear, you know, from 72-year-olds that I have conversations with, like, nah, it's not a big deal, you know? I don't, it's, you know, and I'm sure there are people out there that might think that, but it's tricky for me to wrap my head around that. So this is probably not the case, but part of me wants to think, like, okay, so he knows he's not long for this world, regardless, because he's pretty old and means pretty old by our standards and so he's quite old by the ancient world standards. And if the people of Athens, so Socrates is certainly not a fan of democracy, he loves Athens, but he does not like democracy, but the people of Athens have made this dumb decision to kill him.  I think that really does come through when, during the trial, given the chance to, after being found guilty, he's given the chance of proposing some kind of punishment and he just to be annoying, knowing that this would have just proposed as a pension. Like, he must have known, I think. But getting back to this text, I think, I'd love to hear what both of you think about the concept, and we've discussed it, I think, on a little layer of it, the concept of duty and where it comes from and why the allegiance to the laws is a good thing, because I think that discussion is kind of worth having. It seems very important to Socrates, especially. Yeah. I mean, you're talking about 51-D, right? We have given you birth, nurtured you, educated you. We have given you and all other citizens a share of all the good things we could. Do you buy that? Well, not particularly. You know, it gets worse when they say, I think this is the right passage, and that whether it is to be beaten or imprisoned or to be wounded or killed, if she, so the laws or the homeland, leads you into war, you must do it. Like, this sort of, yeah, I'm not sure I'm buying much of this, but that shouldn't be too surprising, I suppose. Right, but it's very troubling because these are all things that through his actions he follows through on. And so there's another huge curveball for me, is that he went to war, right? Multiple times, he was called to war and he went, right? The laws or the state call him to die, and he does that.  That gives me some hope, you know, some like little happy thread to hold on to, but I don't know if it's true. I can't, like, say, no, it's very specific. He says right here, I think that there's contradiction in what he says. You know, when he talks about it at the end of about going to Thessaly, you know, at the end of 53 at 53, and he's basically saying there, he's like, people will think bad of you. He just said he doesn't care. Like, he just said this entire time that he doesn't care what the majority thinks. You know, he only cares what is right.   What the majority thinks, right? So wrapping my head around what I see as contradictions and what I see as logical fallacies, but looking at his actions, it's what he follows through on. And it's tough. It's tough for me to wrap my head around. Yeah, and I think 53e also includes a passage that I quite liked when he says, let me find this. Oh, yeah. Will no one say that an old man who probably only has a short time left in his life was so greedy in his desire to live that he dared to violate the greatest laws? Perhaps not if you do not annoy anyone. And so... What's the chances of Socrates being annoying? Right, well, exactly, yeah. So a lot of this duty to obey the state argument and it takes, I mean, as he presents it and he makes the same argument several times, he repeats himself a fair amount when he's speaking as the lords, but a lot of it breaks down into two main categories, I think, three, possibly. So there's one that looks like a kind of natural duty argument, which is, like, you recognize that you have a duty to obey your father and that that's just part of who you are and what it means to have a father and be a son. The state is like a... and the laws are a superfather, and so therefore, like, if it applied a little bit there, boy, does it apply a lot here, then there's this implicit consent argument about you could have left at any time or you could have told us you didn't like this stuff. Well, of course, that's what he did at his trial, but you didn't, so therefore you have implicitly signed on to obey and then the third seems to be this gratitude account, which is the, like, we gave you life, we educated you, we provided you with all this awesome stuff and this is how you repay us. And all of these are the same arguments that we hear today all the time with the love it or leave it or, you know, these institutions are awesome, the kind of, like, founding fathers are awesome theory of government, or the, like, you didn't build that, you know, you use the public schools and now you have to repay it. And it seems like the mistake and it seems like a contradiction what he's saying too is this confusion of, like, yes, he probably does have duties to this society that helped him out and played a key role in raising him. Yes, he stuck around in this society and yes, it gave him things. It provided and it provided him with an education and enabled him to provide, I mean, ultimately, all of humanity with an education. But those are things about Athens, right? Those aren't necessarily things about this particular government that happens to be the one that set down this law about impiety and corrupting the youth and convened this trial, you know, and we know that he's rebelled before. He refused the, it was a critis and the tyrants when they gave him an order to participate in killing someone. Like, he refused to do that on grounds of justice. So he seems to be just flat out confusing, like, all of his arguments are about why he should respect the people of Athens and feel good about the society that he's in, but not necessarily arguments about why the proper way to discharge those duties or the proper way to demonstrate gratitude or the proper way to show this consent to obey the laws versus helping out his society in some way, which is the argument libertarians make all the time. Like, great, yes, I was educated and gained lots of things, so now let me start a business that will give lots of people jobs or invent something that will radically change everyone's life. I'd rather not just give that money so that we can use it to drop bombs on people. I love that you raised the issue of duties and particularly as a release to parents because that's an issue that Credo raises explicitly in the dialogue saying, I think you are betraying your sons whom you could raise and educate by going away and abandoning them and as far as you are concerned, they can experience whatever happens to come their way when it's likely that as orphans they'll get the usual treatment of orphans. One should either not have children or endure the hardship of raising and educating them, but it looks to me as though you are taking the laziest path and it's interesting that Credo seems to think this will be a tug, like appealing to Socrates, like okay, you can't argue against that duty, like this looks bad and Socrates does saying, at present I am not going to abandon the arguments I previously made and that really is an astonishing part of the dialogue and Credo uses the cliche, think of the kids and it's still not persuasive. Yeah, it's tricky. I was thinking as you were talking, Aaron, just about like our kind of doctrinal foundation for libertarianism, we talked about this a little bit and the apology is you usually start somewhere, right? You start from some idea of like I own me or something like the non-aggression principle and I'm just wondering if even though Socrates maybe didn't carry it to its full blossom, right, which we potentially see with him kind of succumbing to some degree mentally and physically to the state, but having a starting point of a libertarian ideal of, I don't know, I'm the least wise man in Athens. And where do you get from a political philosophy based on I don't know or based on I don't know, I can't always make good decisions about what I should be doing, you know, much less what I am going to demand at gunpoint of someone else. And I've been messing around with this, but I did the credo for Partially Examined Life a few weeks ago, did a seminar on that. And you know, that question just kind of popped into my head and I just kind of asked that idea of like, you know, how do you have a system of government that is based on, you know, this, what we would call almost obvious illogic of, you know, this guy's asking too many questions, we got to kill him, right? And then you get to what would Socrates ideal state be like, right? And I mean, it might be this, it might be Athens because he succumbs to what they demand of him, but what if then you could have a conception of the state that is just, I don't know, I don't, I'm not sure about anything, which I think then leads you to some kind of at least least harm principle. It leads you to almost a Hippocratic view of first do no harm. And I think that, you know, thinking through a lot of stuff based on that because it really sent me on kind of a deep dive on, you know, let's look at praxeology, let's look at Austrian economics, let's look at all this stuff through the lens of I don't know, I'm not sure as your starting point.  So you can almost start what I think is a fairly logical proof where, you know, the parallel lines don't meet, but it's not necessarily 90 degrees. And so instead of starting from this idea of non-aggression or this idea of property, you start from, I don't know, I don't know what's best. And you can have some fun kind of rhetorical games with yourself and it might just be that, it might just be rhetorical games, but you can also, I think the flaws in a lot of political thought and political system around the world come into sharper focus when you stop arguing about, because I've had the property argument in, you know, St. John's seminars where we actually don't, like, ever talk about personal politics, which is hilarious and fun for me, too, because it's like, oh, you guys don't know what I think. They probably do after about 20 minutes because I'm not super subtle. But, you know, starting with this idea of this Socratic ideal of I don't know I think leads you to some really fun places as far as kind of libertarian thought and libertarian ideals. And it forces you to, and we talked a little bit about this at the end of the apology, you know, it forces you to really make things that we think we believe in, like I own me or like, you know, all I owe you is non-aggression. And it forces you to really crystallize those in your mind or it forces you to have a little bit of give in that and then examine it a little more closely. Well, I know that if a regular Free Thoughts host Trevor Burrus was here, he would jump on the opportunity to talk about skepticism, just because I don't know is something I find libertarian saying quite often, especially in this building. But I think more importantly, the second question is when people say they do know whether the follow-up should be how. So in public policy, when people are proposing things that often are encroachments on liberties, it behooves us to ask how do you know what the education system should look like or how we should regulate our food or what substances you should be allowed to put in your body.  I think extraordinary claims require extraordinary evidence and nothing is more extraordinary to me than saying, listen, I know we've never met, but I know what you should do about your life. So maybe four years ago, I published an essay in a book called Why Liberty? edited by Tom Palmer and put out by Students for Liberty and Atlas called The Humble Case for Liberty, which was this argument. So start with the idea that more or less everything I think is true right now, I could be wrong about to one extent or another and then where do you go from there and how do you build a society? And there is the first do no harm part of it and there's the call for humility because I think the one way you could go with that is like, look, we might be wrong. And so you could take the rational ignorance argument that says like, well, the voters don't know anything for often very good reasons. So don't let them decide. Let the people who probably do know, so the technocrats, the experts, decide, which is to some extent the kind of argument that Socrates is making here when he's talking about like, look, you shouldn't care about what the majority thinks. Like, if you're worried about health, you talk to the doctor. You don't listen. You don't let the people decide. And if you do, you're going to end up unhealthy. But I think the counter to that, because that can lead to really horrific outcomes as we've seen, I mean, the 20th century is right with that sort of stuff, is that the experts often lack that humility as well. And so it's funny that Socrates makes this argument because by our standards, those doctors that he thinks are the ones you ought to listen to were often pretty nuts. I mean, that medicine was, let's just say, rather primitive at his time. And so the very fact that this is a 2,000-year-old document like shows that that argument doesn't work quite as well or at least counsels us to have that level of humility. But I do think there is a strong libertarian case to be made from that starting point of, I'm not certain, you're not certain that what that means is that even when we try to act correctly, we may do harm because we just don't have enough information. And so at the very least, don't institutionalize it at gunpoint because what that means is that if the more power you give to the potential errors, like the state decides we should all follow the food pyramid, and then it turns out like, oh no, that was not actually that good of an idea. Well, now you've done a lot of damage to all sorts of people who might have chosen otherwise. So at least you don't have that, you reduce the number of negative externalities from the error because I'm only affecting me and not you and you as well. But yeah, I think you can spin out a pretty good system from just that simple like I could be wrong statement. I hope everybody's clear about the, where you can pick that book up and that this was just a total plug for... We'll put a link to it in the show notes. We gotta move that product, people. Podcast doesn't pay for itself. Yeah, so I liked your narrative, Aaron. I liked this concept of gadfly to the end. And I love the fact that you guys do this for the interns, you know, for every intern class. I think this is a wonderful place to start. There's a great Richard Feynman quote about I would rather have unanswered questions than answers that can't be questioned, right? And this is the tricky part about Play-Doh. And maybe the magic is in economics. Maybe that's why it's such a critical part of libertarian thought, libertarian ideals is because you can show that cause and effect. And this is where Glaucon's Footstool is, that can be the title of your next essay.   And Socrates didn't like that.  But it was still a quasi-free market system. And he didn't see a discrepancy there between that and the state. And, yeah, I mean, these economic questions are in there. This thing just goes everywhere, doesn't it? Well, I really enjoy a privilege of working at the Cato Institute. I get to sit sometimes in the back of the classes and talk to these interns. And you can tell by the body language that the first few minutes are rather uncomfortable. And what's fun about this is, I think, and the reason why this is such a valuable dialogue to read if you're interested in political theory is if you do believe that democracy is a good system and that majority's rule and that you ought to obey the laws because you have a duty to the state or you should have gratitude or you have some sort of social contract, well, this is potentially what it will look like on the receiving end if you happen to have the wrong ideas or do the wrong sort of thing. I like that Socrates is the logical anti-libertarian on this point that he's just, I guess, this is what's going to end up happening. And that, of course, I read this dialogue before I was a libertarian, but I enjoy it much more now. Yeah, I mean, it's a wonderfully rich dialogue, as are all of these. I encourage, probably the one following this, Fido, I, we probably will not discuss on an episode of Free Thoughts because it's not on a topic remotely related to what we talk about in the show, but I encourage everyone to read it as well because there is, I mean, just the, these four dialogues in these last days of Socrates as works of literature stand among the best that have ever been produced and Socrates as a character and I challenge anyone not to read the closing pages as Socrates drinks the hemlock and not tear up a bit. But the richness, I think, of the credo in particular is the fact that the arguments that he makes feel very contemporary. I mean, these are the arguments we make today and they're convincing for a lot of people and what's wrong with them is not immediately apparent and you don't get, sometimes, play-doh stuff that the arguments are very weird because you're not an Athenian at the time and so you're not hooked into that culture and so it just seems bizarre, but the credo does not feel that way at all. It feels very contemporary and speaks across the millennia to us and these are arguments well worth wrestling with. Thank you for listening. Free Thoughts is produced by Evan Banks and Mark McDaniel. To learn more, find us on the web at www.libertarianism.org.


Welcome to Bogleheads On Investing, episode number 18. Today I have a special guest, Paul Merriman. Paul is an author, speaker, philanthropist, a 50 year veteran of the investment industry and a former guest on Lou Rickhauser's Wall Street Week. My name is Rick Ferri and I'm the host of Bogleheads On Investing. This episode, as with all episodes, is brought to you by the John C. Bogle Center for Financial Literacy, a 501C3 Corporation. Today my guest is Paul Merriman. Paul is a Renaissance man. He started out in the investment industry in the 1960s as a broker, right out of college. He has run manufacturing plants. He has been successful in his own investment management firm and now he's a successful philanthropist and educator, particularly interested in educating young people. With no further ado, let me introduce Paul Merriman. Welcome to Bogleheads On Investing, Paul. Well, it's great to be with you, Rick. I mean that. I've been waiting years to have a chance to talk to the Bogleheads. When I told the BogleheadsOnTheBogleheads.org forum that you are going to be my next guest, it immediately lit up and I got all kinds of questions for you. Now most of them investment questions, of course, strategy questions. Before we get to that, can you tell us something about yourself? Who is Paul Merriman? Well, Rick, I'm a very old man who started working when he was very young and could never stop working and it rarely had to do with money, although if you do good work for people, you do okay financially, I think. And so I had the good fortune at age 40 to be able to do what those fire people are working to do and that is to retire at a young age. But retire certainly didn't mean to quit working. What it really meant was instead of educating and then managing money, I could just spend all that time educating. I was in the investment advisory business for 30 years. During the week when the market was open and markets were going up and down, it was always uncomfortable. I was always at a certain amount of anxiety because what that market did was going to impact the people I was working for. And on weekends, I felt so at ease with the world. And then I retired in 2012 and started my foundation and started to educate and write and do videos and podcasts. And I never had that, that same sense of responsibility. So I have a good time seven days a week now, rather than two days. So you are all about education now. I am dedicated to helping investors, young and old. I go from high school all the way up to retired people. Figure out how to do better with their investments. Well, Paul, you and I have a similar background in many ways. You actually worked as a broker for a major Wall Street firm back in the 1960s. Can you tell us about that experience and how that shaped you for what you did later on? Well, I did start young. In fact, I started in the industry at a time when they first started hiring young people. Before then, they wanted people to be in their late 20s or their 30s, but they were hiring college graduates and training them at the New York Institute of Finance. I don't know if you went there, Rick, but it was a sales course. I went through the broker boot camp at Kidder Peabody, actually. Oh, yeah. I was with Harris Upham, which became part of Smith Barney. And I learned quickly that the conflicts of interest in that industry are so great that I just could not live with those conflicts of interest. And so I was a broker for less than three years and went to do other things because I really couldn't live with what they were asking me to do. And I was working for a great firm in many ways. But I still didn't like that conflict of interest. And many years later when I'm 40, I have a chance to get back into it. But I love the business. I love helping people. It's just nice to be able to recommend a no-load mutual fund instead of a mutual fund that charges 8.5%. It's nice to be able to recommend an index fund instead of an actively managed fund. You know, those kind of things weren't around in the mid-60s, the index fund and no-load funds like we have today. A whole different world. Absolutely. I completely agree. That was just getting started when I went into the industry. So it has been a real benefit and things have really changed quite a bit. We can talk about how the industry has changed so much during, well, the 50 years that you've been in it, if you will. But you actually left the finance industry and you went into manufacturing. You became the president and the chairman of a manufacturing company up in the Pacific Northwest. I mean, could you tell us a little bit about that experience? Well, it really wasn't about manufacturing for me. I had guided some people to invest in a company. I was, I did not much money, but enough that I felt responsible for them. And the company was going to go bankrupt. And I knew nothing about manufacturing, but I had a good relationship with some people in the brokerage industry. So the company invited me. I offered to do it without any compensation. Well, Paul, that almost sounds like a Warren Buffett story in many ways. You had guided investors to this particular company that was going bankrupt and then you stepped in. Well, I would hesitate to compare the size of this company with a story about Warren Buffett, but in a way, yes, I mean, these people were, many of them were friends. And as it turned out, the man who was running the company before I came in to run it did not have a trusting relationship with the bank. And the reason I got in was because a friend of mine from a bank said, this is the guy you can trust. He doesn't know anything about manufacturing, but I think he'll tell you the truth. So I went to the people on the floor of the manufacturing company. They knew the solutions. I didn't. I didn't have much choice but to listen to them and keep the creditors at bay long enough to solve the problem and keep them out of bankruptcy. And we did. And it was a very rewarding, not financially necessarily, but it was a great experience for me. It made me realize I don't want to run a manufacturing company. But I also, by the way, Rick, I had a jewelry making equipment and lapidary equipment supply house at one point in my career. I did a lot of things before I was 40 and actually found a 30 year career that was absolutely the most fun I've ever had. Well, once you went into the investment industry back in 1983, I mean, back then there was maybe one index one available. But as you were saying, they had the no load fund started coming out T row price and a few other companies were available in no load. So what was your strategy back then? And then how did it change over the years? Well, you, of course, know that in 1983, we had just been through about 17 years of markets that went up and back down and up and back down and up and it kind of went nowhere for a long period of time. And investors hadn't made much money, if any, because because they had been whipsawed and been disappointed and concluded I'll never invest in the market again, that kind of thing that that turns buying holders into something other than a buying holder. And I happened to know something about market timing. And I thought, well, wait a minute, if somebody could help these people navigate these ups and downs in the market, maybe they could stay the course, maybe they would have the trust to wait out the declines knowing that they wouldn't get out at the top and they wouldn't get in right at the bottom. But if they could get the majority of the move, that would be a value to them and they might actually have a good long term return. So I became a real expert, I think, on market timing and and developed a pretty good following doing that. And then in about 1993 or 2004, we had a lot of our clients who had money with us, but but had a lot of money and more money elsewhere. And they were using buy and hold. I think they liked our firm the way we treated them. And they asked if we could provide buy and hold as well. And in fact, over the years, Rick, a lot of people ended up being half in buy and hold, and half in timing, as I myself happened to be. And yet, I know, I know from all of my experience with timing and buy and hold, that probably a good 60% of the folks out there to learn how to be a good buy and holder, maybe 2% of the folks out there can learn to be a good market timer, because there's no question market timing emotionally. Tax wise is the is the toughest strategy of all, but particularly emotionally, it was a different time. Like you were saying, I was actually in college during the 1970s, and I was taking finance courses. And I remember one college professor, every time we walked in the room, he said, hey, look at interest rates. Now they're at 11%. And then the next week, look at interest rates now they're 12%. And it was it was just a completely different time inflation was going out of control in 1980, there was high unemployment. And like you were saying, nobody was making any money in either the stock market or the bond market. So stocks and bonds were highly correlated. And they were both bad. Everything was bad. And it had been that way for a long time. And I can understand where you were coming from that the only way you could hope to make a rate of return when everything is going bad, was to try to get in at a better time and try to get out at a better time and do some sort of a tactical asset allocation. And then I can also understand that later on, by the 1990s, when the market finally bottomed out and started going up, that your you would also have investors who decided that they didn't want to do the tactical asset allocation, at least part of their money, they just wanted to do a buy and hold, which has worked very well. Also, so I can see where you're coming from. But are you still doing that?  It's time to get in. And if so, what is it that makes you one of the 2% that that's able to do it? Well, the the old firm that I I sold my firm in 2012, and I did I did not retain any ownership, because I I really did not want to have any conflict of interest as I moved into being an educator. But they still do both buy and hold and timing. And by the way, you have a background, I know, with the dimensional funds, we certainly never did any timing with dimensional funds, or they would have, they would have thrown us out. We actually had a good relationship with DFA, even though we also did some timing. But we use just traditional trend following kinds of timing. What made us unique in the 80s is we developed a strategy that focused on asset allocation, plus timing, just as we did with buy and hold, except you didn't use the timing. So we had timing with big and small and value and growth in US and international and fixed income. But the fact is that you are wrong so often with timing, that investors just don't get it. I think as my recent article focused on this idea of creating better expectations, that the expectations for timing are almost always going to be that the timer is going to get me out at the top and get me in at the bottom. And I'm going to make money when the market goes down, even though it may only be money market returns. But it's never that easy. You know that it isn't that easy with buy and hold. Well, at least I'm not making any kind of a decision. I'm not hanging my hat, if you will, on my ability to get people in and out at various times. I know how difficult that is because when I first came in the industry, I did use active managers who made or break me, you know, on their decisions. It was I hung my hat on their ability to outperform. And when they didn't, I lost clients. One of the reasons I went to buy hold rebalance of just index funds is because I didn't want to lose clients, you know, I wanted to be able to control what I could control. And I was never good at market timing. You know, it's so hard, you might be able to pick it right, went to get out. But now you got to pick it right when to get back in. So difficult. But when it's all automatic, Rick, it isn't difficult.  No, no, I've never known the future. I'm only really good on the past. And and so if you don't live up to their expectations, it's it is hard, I think to keep a client positioned in a strategy, when there's activity and when you're wrong part of the time, I have 10% of my own portfolio in a fund that I started in 1995. It's a combination of market timing and leverage. And in the last 10 years that the last decade, it compounded at a little better than 6%. Now, how would a person feel about having spent 10 years at 6% when the S&P 500 made twice that? Well, I feel just fine, partly because one, I know that 10 years is not a meaningful period of time. Well, it is in my life, but not in the life of the market. But the previous 10 years when the S&P 500 lost 1% a year almost, that fund compounded at over 18% a year.  And some people have a bias towards buy and hold. Other people when you sit and talk with them, their bias is really market timing. They may tell you, I don't believe in market timing, but their bias is to doing something when things aren't going right. As opposed to John Bogle, who says, don't just do something, stand there. Yes. And I had 90 minutes with Mr. Bogle back in June of 2017. It had a lot of impact on me. But I want people to stand in the right place. That's what I'm trying to get people to do. And where John Bogle, God bless him. I mean, I love what he's done for the world and my friends and all the people that are paying less in expenses today than they used to. We had a major difference of opinion about something that I think is of the greatest import in terms of how an investor should think about the market. So yes, I want them to stand there, but stand in the right place. And I want you to elaborate on that a little more because I find this very interesting. So if you could dig into that a little more, what exactly do you mean by stand in the right place? Well, here's what John Bogle and his Vanguard, what they recommend. And by the way, everything I recommend can be done in Vanguard. It just might not, well, it won't be done the same way that John Bogle and others do it for people. We don't know the future. We have faith in the future. So we're always preaching at some level. But they tell people that if you put your money into the total market index, that you have done the right thing. Now, I'm not suggesting you've done a bad thing. I'm not even suggesting that I think that or that the way I suggest to do it will do better because we don't know what's going to happen. But I do know this, that when we invest in a target date fund, I love target date funds. And what you end up with is a portfolio of equities that are total market, total market US, total market international. And what do we get when we get the S&P 500 and the total market index? We get a cap weighted portfolio. That means that almost all of your your exposure to risk is in large cap growth, I shouldn't say almost all, but certainly over 50% is in large cap growth. And that's not necessarily bad. But when we look at the past that the academics have recreated going back to the 20s, what we know is first thing we know that I that I want to clear up is the return of the S&P 500 is virtually the same over the last 90 years that the total market index is not turning out a better rate of return or it does not create an expected higher return than the S&P 500. Oh, they'll say they've got small cap and they've got value and stuff.  So what I advocate for is in the US market is a simple approach where you would you would spread the money away not based on cap weighted, but based on asset class weighted. And this is not anything I ever came up with, Rick. I don't think I've had an original thought in my life. But I went through the DFA process as as you did. And I think they teach you a lot of really good stuff about how investing works. And one way to improve earnings, at least looking backwards, is to rebuild the portfolio to have some small and some value and some large cap in the US. Now, whether you add internationals or not, I'd like you to but you don't have to to historically get a decent rate of return. And what happens is that when you go that route, if you talk in terms of under performance, the large cap driven index funds have produced lower rates of return over time than a combination of big small value growth. And the risk if you look at it over time, it doesn't appear to be any more as a matter of fact, I just did some tables that show the market broken down into decades from the 30s, the 40s, all the way to the last 10 years. And I create a look alike of big small value growth versus the S&P 500. And there are times the S&P 500 is right at the bottom, or just off the bottom of all the equity asset classes. But the combination is always just kind of floating in the middle. Never gets to the top can never get to the top because it's made up of the asset classes that one of them are going to make it to the top. So it never gets to the top. But it also doesn't get to the bottom. So my view is one, people will get a better rate of return. They'll have more peace of mind. And they'll retire earlier, they'll have more to leave to others. And I'm not recommending they put everything in this, but to the extent that they want equities. Personally, I'd rather see them have a broadly diversified asset classes than have it basically be one asset class. And I asked John Bogle about that. And he said, where I'm wrong, is that I don't understand the impact on people when they own a portfolio that has this small and this growth and this value. And those asset classes stink. And the S&P 500, where they should have had their money, is rolling along. And on the other hand, when the S&P 500 doesn't do well, nobody ever seems to go to come to the conclusion that the S&P 500 premium is gone. And it's never going to make a good return again like it did in the past. That's because people trust it. And they don't think to throw it out of out of the house like he would a kid he didn't like anymore. It's this emotional attachment people have to that. Well, people in this country have a bias towards the S&P 500 because their companies they trust. And while you're really talking about what or at least what you're saying that John Bogle was saying here is not that maybe the S&P 500 is the ultimate way to invest. He's not saying that. What he's saying is that people will tolerate bad performance by the S&P 500, but they won't tolerate bad performance by a slice and dice portfolio that has these other magnified sectors. I know you keep calling them asset classes. I have a real difficult time calling small value an asset class. To me, the asset class is US equity. And that means everything in US equity and small value is a style. Value is a style. Size small cap is a style, if you will. So I mean, so I have a I don't consider them separate asset classes, but that's a different conversation. But anyway, it sounds to me like what John Bogle's issue was was that people will accept bad returns when the market is bad, and probably not jump ship. But when the slice and dice portfolio is bad, it's an active type strategy, and people will jump ship. And so in the aggregate, he doesn't like it. Staying in the market is really the key. And the total market fund does that for you. Rather than slice and dice. Is that what I hear you saying? You know something I love. No, I understand what you're saying. But but you have said something that I guess I would disagree with. I don't call it an active strategy. I really don't. I would say that the S&P 500. It is an index that represents large cap blend. Now, I don't know if you'd agree with that, but that's how I see it. No, I agree with that. Okay, you're saying large clap blend. Yes, I would agree with that. If you agree with that. Why couldn't you and oh, and that blend is made up of growth and value. Why couldn't you call a portfolio of all the large value standing on its own large cap value? Why isn't that doesn't that have the right to be a an asset class just like large cap land or large cap growth and well, hold on, Paul, I mean, I didn't say the S&P 500 was an asset class. It's an index of large cap blend, but I didn't call it an asset class. To me, the asset class is US stocks. The entire market. That's the asset class. Now within there, you could divide it up into value growth. You could divide it into industry sectors. I mean, there's a lot you can do with the asset class called US stocks. So my only question was on semantics. I mean, you're referring to these things as asset classes where it's to me, the asset classes US stocks. And these are sectors of that. That was the only difference.  So I really I see where you're coming from. And I think the reason that I reject calling them the US market is because I think then a lot of people might say, I want to put my money into the US market. And so what it ends up following is probably the total market index. I'd agree with that. Yeah, and so I think it's leading them down a path that is going to hurt them. And I might say hurt them. I don't mean it's gonna they aren't even gonna know they've been hurt, Rick, because most people I talk to, they don't know what return they've had. They know they've done fine. They've done just fine. They've made good money. They may be two or 3% a year below the S&P 500 doesn't matter to them. They're doing fine. So I think a lot of people that are attracted and by the way, the number of people who are attracted to my website, it's in this whole scheme of things. It's a very small group of people. But these are folks, many cases, engineers, or you've seen that in the Bogleheads, I'm sure half of them are engineers. Seems that way. know that. But but but it's but but I do I do believe let me just give you one more example with with Mr. Bogle. And he was so kind to me. Oh, my God, he was supposed to give me 60 minutes and he gave me 90. And he answered every question I had. And he gave me advice on how to and how to make do a better job for people. But I asked him about why would a 21 year old have 10% of their portfolio in a target date fund in fixed income? What I have learned is that when you have 10% of your portfolio in fixed income, based on market returns, over the last 90 plus years, it will cost you one half of 1% a year. Okay, I don't like that. Because a half of percent is life changing over a lifetime. So they're sitting with 10% in bonds. And I'm thinking, wait a minute, I want young people when the market is in decline to have all of their money buying lower price securities, not less. And 10% what is 10% it's not going to turn a bear market into something that is much better than what 90% 100% would be. It's almost meaningless. But here was his response. And it's a good one. What we're trying to do is train them to understand there's a process that includes over your lifetime, a gentle increase in exposure to fixed income. And so they are showing them how that works. And I'm thinking to myself, okay, that's great. But what would an education do for these people? What if they understood that they aren't going to protect themselves very much, but it's going to cost them buying lots of good stuff when the market's down and dirty, and etc.  And yet, they do that to make that fun something people can last a lifetime with. I don't argue that they may get there. But I think with some small changes, it could make a huge difference in what somebody has. When they retire, how much they live on in retirement and how much they leave to others. And I'll be dead and buried before I'll know how it worked out. I'm just hoping somebody will come to my grave and put something I don't know.  I mean, it's a three fund portfolio in what you advocate is two fold. It appears. Number one, you treat the various styles of large, small value and small cap value as different asset classes, and to have an allocation to basically those asset classes. And yes, the second thing is that you also advocate a an element of market timing to to this. And by the way, I'm going to jump a little bit around here, I'm going to jump to the bogal head questions, because when I put your when I announced to the bogal heads that you were going to be my next guest, like I said, it lit up and had all kinds of questions. So I mean, one of them asks very specifically about market timing. And this is what he asks is, what do you expect the benefit of your portfolio market timing would be compared to buy hold and rebalance? And that another person asked very similarly, what is the exact buy and sell signals that somebody would use for your market timing portion? So I want to get into this idea that you brought up earlier about being in the right track, and about people who may believe, as you said, when you sit down and you actually talk with them, they believe there is some way of which they could benefit. Well, to begin with, what I believe starts with my fear of the market. I believe that it's highly likely that in my lifetime, which isn't all that much longer, that I will live through a catastrophic event. Now, when I was young, that didn't matter. I didn't have anything. But now I do. And I have always, in fact, it's hurt me financially by a lot. I've always been too conservative, because I've been afraid of a market collapse like we had in in 29, the late 30s. And and so with that in mind, I'm uncomfortable having too much inequities without some sort of an exit strategy. And it's just that simple. I'm afraid. Now, in my buy and hold portion, and that's half of my portfolio, I'm half in stocks, half in bonds. I'm half in US in the half that stocks, I'm half an international. I'm half in small, I'm half in large, I'm basically a little more than half in value and a little less than half in growth. It's like, I don't believe in anything, but in essence, I believe in everything. I'm trying to get the exposure to the market, where I've got massive diversification. And by the way, investors, if they don't know what should know it, according to the academic studies, the more diversified we are, the likelihood is we'll get a higher return, not a not a lower return. You ask about in the timing portion of my portfolio, I'm not 5050 stocks and bonds, I'm 70% stocks and 30% bonds. Why more stocks there? Because when you use timing and you sit out part of the time in money market funds, you have at that point when you're sitting in cash, you have less volatility than a person who buys and holds equities. So in 1987, and everybody in this industry goes back to some time when they looked really good. But in 1987, we had all of our clients money out of the market about a month before the market crashed in October. And it made me for them I was a hero. You're famous. I got on Wall Street. And you know something? Everybody wanted to make a big deal out of it. And I said, wait a minute, I didn't call the market. I happened to be out of the market when it collapsed. There is a difference. But people always looking for gurus, there are no gurus. But the trend following systems you could use, you could use a 100 day moving average, you could use a 150 day moving average. Then doesn't have to be something complex, you just need something that forces you to get in and to get out. And yes, you'll go through whipsaws, etc. But here's the part I think is fascinating. The standard deviation of a 7030 with market timing, 70 equities, 30% fixed income is virtually the same as a 5050 buy and hold. Almost exactly the same standard deviation. And the returns are very similar as well. Now, do they go up and down together? No. And in 2008, and all equity portfolio with these simple trend following systems that the company used after fees, they lost 18% or 15%. It was it was a relatively small amount. And in 1987, I had accounts, actual accounts that were up over 50%. That's the good news. And then everybody rushed. In fact, after that weekend, I was on Wall Street week, or that weekend, actually, we got 400 phone calls at my office, looking for theoretically our help. I mean, we were not prepared. But the fact is the following year, our returns were mediocre. And by the way, you and I know something a lot of other people may not know. And that is a portfolio from 95 to 99, properly diversified big, small value growth US international compounded at 11%, while the S&P 500 compounded at over 28%. That's the way it is. Now, it's also the way that it occurred in the last five years. If you look back to 2014, going forward till today. So the market timing strategy that you employ is relatively simple. It's a moving average 100 to 150 days, something. We're saying now, I want to go back to one point before I get off the market timing. And that is that you earlier talked about young people should have almost 100% of their money in the market. But so when it comes to market timing there, you mentioned that young people, when the market goes down, they should just work and put more money in the market. So when you're talking about market timing, are you speaking about everybody? Go ahead. Old people. Old people. Okay, that's what I was getting at. Old people like me and you. Well, you're older than me. You buy a lot. Yes, it is for, it's for people where preservation is important. But having said that, as critical as I was of the target date fund at age 20, sitting on 10% in fixed income, I've met lots of 20 year olds and 25 year olds who have all of their money in fixed income, because they are afraid of stocks. And I'm begging them just put 20 30% inequities. Let me show you I've got a my my favorite table is called fine tuning your asset allocation. And it shows these different combinations of stocks and bonds over the last 50 years. And and and and what you see is, if you just have 20% in equities, it'll kick your return up by about one and a half percent a year. If you can get up to 30%, you might even kick your return up. I'm sorry, it raises about 1% a year. If you go to 30, it raises it to about 1.5 or so depends on what asset class you use in the equity portion. But I want those young people who are scared to death of the market to just take a little risk. I don't want them to have as much money as the target date fund represents because it's going to end up scaring them out. Okay, let's go ahead and move on to the second phase of that, which we've done the market timing thing. You've differentiated how young people should invest versus old people. Well, now we need to look at the other side. It really where I think most of the questions from the Bogle heads have come in and it is with your 10 fund portfolio and now your new two fund portfolio. And and so this is actually, if you don't mind me saying or using this phrase, the slice and dice of what you do and what you really believe in. Number one, could you talk about the 10 fund portfolio and the complexity of it, and then move then into the two fund portfolio and how that solves the complexity problem? You betcha. So this started maybe 15 plus years ago that I created something I got from DFA, by the way, what I call the ultimate buy and hold strategy. And I was quick to say that it wasn't necessarily anybody else's ultimate buy and hold. But it was the best that I could find without placing any big bets. So what I did was starting with a portfolio that's 100% in the S&P 500. Then all I do is I take 10% of that money and I put it into large cap value. And what happens is you make a little more money. And then I go the next route, the next step, and I put in 10% of small cap blend. Make a little more money. By the way, that little more money is sometimes only one or two tenths of a percent. Then I take another step and I take out another 10% from the S&P 500 and put it in small cap value. No big bets. No big bets. Then I take 10% and I put it in Reets. Now I have 50% in this combination of five different equity asset classes. 50% in the S&P 500. I think people would be probably just happy as could be right there if they stopped because they would have made an appreciable increase in their return.  So if you just did that, you had made a big difference historically. Don't know about the future, but historically you would have. Okay. But I keep going because I do want internationals in the portfolio. There obviously are times, I wish I didn't have internationals in the portfolio, but I believe that that diversification is what a person should do if they really want to diversify properly. So I take another 10% and go into large cap blend internationally and then 10 in large cap value and 10 in small cap blend and 10 in small cap value. And then the last 10 goes into emerging markets. So I have a lot of really risky investments in that portfolio. And that is what my retirement looks like in terms of equity. I do exactly that 10% each in those 10 asset classes. But the bottom line is for people who are really do it yourselfers, trying to rebalance 10 different equity asset classes can be something they can't figure out. And when I was a money manager, we had a firm. That's what we did. We did it for them. But Chris Pedersen did this analysis of all the ETFs. And he came up with the best large cap blend, the best large cap value, every one of those 10 equity asset classes, he made a recommendation. My belief is, and you probably know this, but supposedly, Schwab is going to be trading ETFs with partial shares. Once Schwab is able to trade partial shares with ETFs or their clients are, then there's no reason why they can't let people build a portfolio and have them automatically rebalanced. Moving along then to the two fund portfolio, which I find to be really interesting. So you solve the problem of complexity with the two fund portfolio.  He had been on our radio show for years. So he knew us and he knew that we were trying to help people. He said, but you've got it wrong. What you're doing with 10 funds is it's just too complex for people and they aren't going to do it. And so Chris Pedersen donating his valuable time as a volunteer to our foundation along with Darryl Balls, another systems analyst, smart guy, you know, that really understands computer work have put together this strategy. And what Chris came up with is the key to treating the extra fund, the second fund in a similar fashion as you would with a target date fund. Because if you put, for example, 20% in a small cap value, and 80% in a target date fund, and you don't ever reduce the exposure in the small cap value fund, you could end up with 50% of your money in small cap value at age 65. So so what? And we really want young people to be exposed to small cap value and then to reduce that exposure as they get older. And what Chris came up with is so simple, you multiply your age of 20, let's say by by 1.5. Now you've got 30. That is the amount that you would put into the small to the target date fund. The rest you put into small cat value too aggressive. Okay, how about large cap value instead? We could do that as well. But it would just be less aggressive. So as you age once a year, you could do it every two years, and it doesn't have to be done every year. But what you're doing by the time you're 30, you'd have 45% in the target date fund, 55 in the small cap value at age 40, you got 60 and 40 at age 60, you are 90% in the target date fund and 10% in small cap value at age 66, you're zero in small cap value. Oh, I see. Okay, I got it. It is so simple. Now, I know what's gonna happen. If anybody really thinks this is a good idea, they're going to reconfigure it and make it better. Because the idea now is there. It's a simple thing to do. But how what formula do you use? It sounds like this, this, this strategy would work with the young person who's just getting invested in a 401k plan, where you've got maybe Vanguard target date funds or other target date funds that are available to you and you're 25 or you say you're 30 years old, you would also need to have in the 401k a small cap value index fund. If you had those two things available, and you wanted to do something more than just target date, and you were more sophisticated, and then you knew what you really understood what you were doing that this would work because by the time you retire at age 66, you don't have any left in the small cap values just all in the target date. So it does make sense from that perspective. And by the way, I work with a lot of people my age, suggesting things for their grandkids. When there's a new grandchild, I'm thinking either 100, I'm sorry, 365 a year for 21 years, or $3,000 once put that in small cap value, keep it in small cap value. When they start working and they can do an IRA, take money out of this account, put it in the Roth IRA, and just let it go, keep contributing to that money is gone. And literally, literally, if you took 3% off of the compound rate of return of the past from small cap value, you could have created 20 million in retirement income, and 30 million as a gift to the heirs at age 95. Now, obviously, it's it sounds like something that you get at a county fair. But the fact is, if you get 12% a year, and why is 12% unreasonable? If 10% in the S&P 500 is reasonable, and it includes the depression, then why isn't 12% reasonable for small cap value? It is the premium for taking that risk. I have to tell you that one of the Bogleheads suggested that I get a glass of wine. And I put it in front of me. And every time you say small cap value, I have to take a sip. So that that's exactly what I did.  We're getting there. And I have to tell you, the glass is now empty. We've been talking for quite a while, I want to get into a few other things before we wrap it up. And some of the Bogle's are curious about just a little bit more about your life. You know, one of the Bogleheads asks, what is the greatest mistake that you made that you are willing to talk about that we can all learn from? Well, I don't know. Mistakes I made as an investor, I lost everything. I was conned, I shouldn't say I was conned. I was talked into putting my original investment of $1,000 into a commodity trade, which I doubled in a matter of weeks. And having found out how easy that is, I took the guy's advice again, and I lost it all. And so that money, if I hadn't lost it, if I had, I put it into small cap value, oh, there's another glass is already empty.  But if you had invested it rather than than having it leak out the bottom in a rush out the bottom of your bail, it would have meant something to somebody. And so I made a lot of mistakes like that early in my career. I invested in some small companies that had products that seem to have some potential. Again, I try to talk young people out of doing that. Their parents say, I'll let them make mistakes. I don't want to let them make mistakes. The cost of those mistakes are way, way more than people know. And they might even get lucky and hit a good one and think they know something. And then it'll even cost them more later. So I did those things. And, and, and I think the other thing is I've never learned the mistake. I'm still I'm still struggling with how do I not work 60 hours a week? I love what I'm doing. Well, anyway, I want to go as long as I can. That's one of the things that John Bogle did for me. He he inspired me. And I'll tell you where I feel my work has value. We are giving advice, very specific advice on how to invest if you're conservative, moderate, aggressive. I don't mean I talk to you. I don't mean I review your situation. I mean, we give you if you want to learn what we believe and then we make it possible for you to know what to do if you believe that. That's not easy for people to do. So Paul, that gives me a great opportunity to ask you, could you tell us about your website and tell us about all the things you're doing and, and how are you educating people? Well, first of all, we've got free books. Probably the best one is entitled 101 Investment Decisions Guaranteed to Change Your Financial Future. By the way, I quickly tell people, I guarantee it will change. I don't know if it will be better or worse. But I think it'll be better. But it's nothing more than best practices. So that was the beginning when we started the foundation. I have portfolios there on our site for Vanguard, Fidelity, T-Roll Price, and the ETFs, Best in Class ETFs. We have over 400 articles and podcasts there. We have videos that we've made. We have a new book coming out in a few months. It is all about $12 million decisions. Well, actually, half of it is about $12 million decisions. And the other half is about two funds for life, because I think you can actually do those 12 things and use the two funds for life and take advantage of those, what I call $12 million decisions. That book will be free to everybody who is on our email list. And by the way, if you're not on our email list, and you know the book is out, you'll be able to get it free. I want I want to help as many people as I can. And I love working for people. I love helping people's lives get get better. I do a lot of nonprofit work here on Bambur's Island and getting medical publications, free medical publications into the hands of physicians in developing nations through an organization called Global Help. So I've got other things I'm working on. I just can't I can't seem to stop. You're doing a great job for a lot of people. You got tremendous respect by the Bogleheads. Tremendous respect from the investment community for providing information. Now, everybody doesn't have to agree with you on everything. Oh, I know that they don't. Well, Paul, it's been wonderful having you on the show. And I know that the listeners have all really enjoyed a lot of the conversation with we've had today. And I'm really looking forward to talking with you again. The website is Paul Merriman.com. Thank you so much for for joining us today. It's been my pleasure, Rick. Thank you and all the best to all those. This concludes the 18th episode of Bogleheads on investing. I'm your host, Rick Ferry. Join us each month to hear a new special guest. In the meantime, visit Bogleheads.org and the Bogleheads Wiki. Participate in the forum and help others find the forum. Thanks for listening.


On today's episode, we're going to be taking a look at the Capcom versus Tessaga character's book. Let's do this. I was originally going to say it's an art book, but really it's more of a reference guide and information and all that fun stuff. Hopefully this book does get translated. I just saw an opportunity and went with it from a Japanese store on eBay that was selling it, not as cheap as I would have liked, but once in a while I look at stuff like this and I go, yeah, I need it. Forget it. Let's just splurge on this one thing. If there is an item in 2021 that I splurged on that I didn't really need, but man, do I love that I own it right now, is this bad boy right here Capcom versus Tessaga characters. Now this is an art exhibit that started around this time last year, October 2020, and it lasted up to February of 2021. Now there is a dash event, sort of a continuation that started right now as of this, the recording of this video, which will feature new art. So I'm really excited about that. Hopefully we get a second book out of it. This is really cool guys. I love it. I'm a huge Capcom fan. That's one of my favorite video game companies. And of course I love most of Osamu Tessaga's creations. And to have this creative mishmash is really awesome. Obviously I'm a huge fan of Bengus and to see the play on the Marvel versus Capcom poster is really awesome. So here is a closer look at that wonderful poster image right there that was used on all the promotional pamphlets and illustrations and the actual main poster I guess for the event. Here's the spine of the book right here, Capcom versus Tessaga characters. And in the back we get a really cool illustration of course Tessaga's Hiyotansugi. If I'm saying that correctly. Really cool stuff. And sort of a breakdown of what you can expect. Three rounds or three main chapters in this book. An introduction, the fights if you will, like a bit more fighting game. And some extra items right there. I'm just going to take this dust jacket off. Not as exciting but still cool as you can see. It's a faded image. We're going to set that aside for now. Obviously you're going to say man I mean this is cool but it's all in Japanese. And what happens if you can't read Japanese? Fortunately there's enough illustrations here to compensate that fact. And there are applications that you can take a picture of all the writing and it will translate most of it. It's not that great but it's simple enough that the text here is simple enough that everybody can can read and enjoy you know what they are discussing about. As you can see here the big C and the big T. Blue Bomber right there. And I do like that they went 8-bit style for Astro Boy. That is really cool. You can read most of it like page 6. Capcom History followed by Tessaga Productions History. You get creator profiles from both sides. And then the title matches which is going to be the comparison between the characters from Capcom and Tessaga characters. Yeah zoom in a little bit. Sorry about the lighting. Working a little handheld here with my phone and it's not the most ideal setup but hopefully you guys appreciate the art in these pages. Now when we open up we got the Capcom History and it goes year by year from the original Rockman Final Fight Street Fighter Biohazard or Resident Evil. And it goes on and on like this Devil May Cry Ace Attorney. Here we have the Tessaga Productions History from 19 oh and I did not mention I just in case this book covers from 1979 for Capcom all the way to this year 2021. For Tessaga we get the same treatment here 1928 with there is Tessaga himself and his different creations all the way up to 2019 with all the stuff that the Tessaga staff is working on. So here's round two. This is where we begin with the title matches. Now this is what you're here for. Here we have the first match Rockman versus Mighty Adam himself. Here we have the Blue Bomber himself Mega Man drawn in Tessaga style and Astro Boy in Capcom style. Yes please can we license this can we make a video game in this style please. I know we've had Astro Games in the past but can we get a new one just like this pretty please. So we get some info on them again you can probably scan and read more about it. Here we have a brief history of Mega Man with the covers of the first 11 main games as well as villains and behind the scenes of the creation of the game and the sprites and characters. Here we have some artwork on the characters character models art exhibits photos from the actual art exhibit sorry the video game the actual video game boxes and cartridges and over here we get the same thing but for Astro Boy. So you see here some really cool art and manga panels which is great because I'm a big fan of anime and manga so to have this is really awesome as well. Comic and of course the animation process from the original Astro Boy anime and then we cross over to the second fight here is Monster Hunter versus Phoenix. You can see here sort of the history of the franchise and of course the Magnum Opus if you will from Tessaga which is Phoenix. Really wish this were available and not super out of print the manga but here are some illustrations. Third fight here we have Biohazard or Resident Evil up against I believe this is Vampire and the character specifically is Rock which if you are a big fan of Tezuka and you know this hero this both hero and anti-hero he's part of the Tezuka star system and he crosses over with multiple Tezuka manga but this is really cool to see him in this in this style and of course having Resident Evil characters you know such a grim series to have it drawn in this cartoony manner is actually pretty amusing. Here we have like like what I've been highlighting the history of Resident Evil the games and the video game development there we go right there Leon Kennedy the liquor all these famous characters from that franchise we have Rock and the vampire manga. Next fight is probably my favorite because I am a huge fan of Chun Li from Street Fighter one of my all-time favorite video game characters and to see her drawn like this is super cute and awesome here she is next to a Capcom rendering of Princess Knight here we have the Street Fighter characters and Princess Knight illustrations another emblematic iconic Tezuka creation in my honest opinion Ace Attorney Tezuka style and Blackjack Capcom style here we have the Ace Attorney games and of course the characters some really awesome Blackjack illustrations after Astro Boy I really enjoy Blackjack he's one of my favorite classic manga characters here we have Singoku Basara versus Dororo we have art from the game and some Dororo illustrations if I were to do a top three Tezuka creations I think would be Astro Boy Dororo Blackjack but there's so many to choose from those are my immediate top three which I think a lot of people share as well here we have the Tezuka manga museum which I hope to one day visit in person if it's still available obviously here we have round three extra time so what is extra time you get a little manga of Blackjack versus Ace Attorney so hopefully I can read this translated at some point and we also have a goods collection basically if you were at the art exhibit you could buy all the memorabilia although personally I would go I would get if the camera can focus I would totally get this as a poster and frame it on the wall that is awesome here we have a Capcom gallery overall all their video games all the classic games right there and a Tezuka gallery would have been nice to have a versus Kingba section that would have been cool so what about you guys what other bouts or versus profiles would you have liked to have seen in this exhibit I'm pretty sure they're going to do new ones with the dash modified exhibit this year here are more goods collections as well as an interview with Yusuke Nakamura and here at the end here we have an interview with the staff and artists like a couple questions and answers here's another look at the main illustration obviously Marvel versus Capcom inspired which is great here's an awesome piece of Mega Man and I believe these were made to be keychains and this is the actual illustrations that they use for the keychains of the pairs looking really cute look at that come on phone work with me here there you go yeah so that's about it so we got right and at the end the two of them together like that so that's about it guys thank you so much this is a complete overview I guess I didn't leave anything to the imagination I gave you a hands-on with this book if you're a huge fan of Tezuka characters and if you're a big fan of Capcom games and their characters as well I think you got to pick this up right this is a must-have in your art book section of your library it's a reference book because it has a lot of text but I do consider it somewhat of an art book honestly and I love that I was able to get this typically wouldn't be something that I would get my hands on because everybody snatches these things up pretty quickly but nonetheless you know splurge a little and treat it myself to this gem of a book I'm a huge fan of both sides and I hope in the future we get more collaborations from this from different studios and whether it be a different bonga creator or a different video game company whatever it may be I love when you take this creative freedom and mish-mash properties that you love and create something new exciting and unexpected for fans of both mediums thank you everybody so much for liking commenting subscribing being a part of a week in victim it truly does mean a lot thank you for being a part of the family god bless stay safe out there I've got to go I will catch all of you in our next video


If the peacock is the bird of paradise, then the India I know is paradise. A thousand mirrors shine from its tail. A thousand beauties are reflected in the mirrors. That's what Amir Khosrow said about the land of his birth. Poets, composers and singers rise from this land as naturally and as abundantly as grass. He said, how great is this land which produces men who deserve to be called men? If Pachan, Samkhurasani, Arab or Rumi comes here, he will not have to ask for anything. They will treat him as their own. As long as we can smell his fragrance, we shall stay here. That is what they are saying. The group of fair-faced Iranians who have travelled all the way from Tehran to join voices with the singers of India from the regions of Kashmir, Awadh and the city of Khosrow, Delhi. They look like brothers separated by geography, not time. In their music there is dialogue. When one begins, the other picks up, then the other. Bound in the same spiritual chain, they sing of love and beauty that is open to every human heart. Sufism has created its own art independent of the mosque and the court. Nurtured it through artisan guilds and khanakas, as can be seen in Sufi poetry, music and the sacred dance. Love to a Sufi is to feel God's presence in each and everything and embrace it in a spirit of submission and surrender. Amir Khosrow recognised this abundance even as a child and poured it out in song. Khosrow's solitariness came to an end when he found his peer in Hazrat Nizamuddin Auliya, a unique attachment of Peer Murshid that lasted 50 years till the end of their lives. Khosrow was away from Delhi and the saint died. Hearing the news he broke down in song, a farewell that occurs in every Sufi Dargah across India to this day. Unlike Khosrow, Rumi when separated from his great friend Shams did not stop writing. Going in search of him, he came to the realisation that what he was searching was in him. Why should I seek? I am the same as he. His essence speaks through me. I've been looking for myself. To constantly remember this divine love is the way of the Sufi. They call it the zikr. To receive zikr is like catching a seed scattered by the wind. And once the zikr is planted in the heart, takes root, grows and bears fruit, the language of love travels well and travels long routes.