Search results for: Financial Times Top 300 Advisors

FT 300: Top Registered Investment Advisers

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We are honored to announce that our firm, Ritholtz Wealth Management, has been named to the FT 300 list for 2017. This is a ranking of the top 300 registered investment advisers in the United States according to a comprehensive set of metrics developed by the Financial Times. The list is merit-based, and selects only the best in firms in each state according to that methodology.

For a young firm like ours (we are not quite 4 years old) it is an honor to be included. I am blessed to work with some great partners in Josh, Michael, and Kris; we have a wonderful staff, and a great group of professional advisors, CFAs and CFPs. What we do is the result of a team effort — RWM is a true ensemble practice.

Our goal is to continue delivering the finest services we can to our clients around the nation. We are fortunate to have an engaged, thoughtful and fascinating group of people as clients. We try to live up to the high standards and expectations you hold for us every day.

We are grateful to be included. See you there tonight for a drink . . .



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Video-O-Rama: Figuring out the lie of the financial land

Video-o-rama: Figuring out the lie of the financial land

In addition to more “Outlook for 2009” videos (dealt with in last week’s Video-o-rama), the past week saw material covering a hodgepodge of topics. Although the topics were varied, good viewing material was produced, with the likes of Marc Faber, Peter Schiff, Martin Feldstein, Barton Biggs, Jeff Saut and Bill Gross in attendance.

A few of the more interesting clips that attracted my attention are shared below, including a few items warning about a bubble in government bonds.

But before we get to the economy and the financial markets, please spend a few minutes viewing a worthwhile three-part production by the Wall Street Journal entitled the “End of Wall Street” – What happened? Why did it happen? And what happens next?

The Wall Street Journal: End of Wall Street
Chapter one: What happened?. In the first of this three-part series, Journal reporters explain how the housing bubble inflated and burst, and why easy money led to the collapse of Wall Street’s biggest financial institutions.
Click here or on the image below for Chapter one.

Chapter two: Why did it happened? What was going through the minds of CEOs, corporate boards, fund managers and mortgage lenders as they created hard-to-understand derivatives Warren Buffett once called ‘weapons of financial mass destruction’.

Click here for Chaper two.

Chapter three: What happens next? This final chapter of the crisis on Wall Street tells the story of the $700-billion bailout, as seen through a reporter’s eyes, and looks at what’s ahead for the global economy.

Click here for Chapter three.

Source: The Wall Street Journal, January 5, 2009.


About Barry Ritholtz


Barry L. Ritholtz is the co-founder and chief investment officer of Ritholtz Wealth Management LLC. Launched in 2013, RWM is a financial planning and asset management firm, with over $875 million in assets under management. The firm offers a variety of services to the investing public, including Financial Planning and Wealth Management, as well as LiftOff — a low cost online investment site.

In 2017, Ritholtz Wealth Management was named ETF Advisor of the Year. The firm was also named to the Financial Times Top 300 Advisors in the US, and is the 4th fastest-growing RIA in America, according to Financial Advisor magazine.

“To say that Barry Ritholtz ‘pulls no punches’ is like saying that Joe Louis had a nice right cross.”-Jesse’s Café Américain

In addition to running a wealth management and financial planning firm, Ritholtz is a frequent commentator on many financial topics. He was named one of the “15 Most Important Economic Journalists” in the United States, and has been called one of the 25 Most Dangerous People in Financial Media. He writes a daily column for Bloomberg View and previously wrote a monthly column on Personal Finance and Investing for The Washington Post.

Ritholtz is the creator and host of Masters in Business, a popular podcast on Bloomberg Radio. A 90-120 minute deep dive with sone of the most important people in business and finance, the radio/podcast on iTunesSoundcloud, and Bloomberg. It has quickly became one of Bloomberg’s most popular podcasts.

Beyond his commentary and published articles, Mr. Ritholtz also authors The Big Picture — a leading financial weblog, generating several million page views per month. The Big Picture covers Investing & Trading to Macro Economics, and everything else in between. The blog has quickly amassed ~130 million visitors. Media accolades for The Big Picture have poured in: TED named TBP one of top 100 Websites You Should Know and Use; TBP was featured in the 10th annual New York Times magazine “Year in Ideas,”(DIY Economics); Numerous traffic sites rank The Big Picture as one of the most trafficked Markets/Economic’s blogs on the web.

In 2008-09, Ritholtz wrote the book Bailout Nation, published by Wiley in 2009; the updated paperback was released in 2010. Bailout Nation became the best reviewed book on the bailouts, with NYT calling it “Irreverent,” and “an important book about a complicated subject, and yet you could still read it at the beach.WSJ noted “If you want to know how we got into this mess and what might still be coming, this is the book for you.” Bloomberg praised it as “A valuable new contribution to our understanding of how we arrived at this sorry juncture.” Bailout Nation was named “Investment Book of the Year” by Stock Trader’s Almanac, and won aFirst Amendment Award for Outstanding Journalism: Best Book. Numerous media — USA Today, Miami Herald, Marketplace Radio — named it as one of the best finance/business books of 2009.

One of the few strategists who saw the the coming housing implosion and derivative mess far in advance, Ritholtz issued warnings about the market collapse and recession in time for his clients and readers to seek safe harbor. Dow Jones Market Talk noted that “many market observers predict tops and bottoms, but few successfully get their timing right. Jeremy Grantham and Barry Ritholtz sit in the latter category…”  (A summary of major market calls can be found here). His observations are unique in that they are the result of both quantitative data AND behavioral economics, most likely a function of his unusual career path in finance.

Mr. Ritholtz is a frequent commentator on economics and financial markets, and has appeared as a regular guest in most major media outlets.* He has been profiled in the Wall Street Journal’s Quite Contrary column (August 3, 2004; Page C3), and was the subject of several Barron’s interviews (December 8, 2008 and October 26, 2010). Ritholtz was honored to be the dedicatee of Stock Trader’s Almanac‘s 40th Anniversary edition in 2007 and the Yahoo Tech Ticker’s Guest of the Year in 2009.

Mr. Ritholtz performed his graduate studies at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, where he focused on Economics, Anti-Trust and Corporate Law. He was a member of the Law Review, and graduated Cum Laude with a 3.56 GPA. His undergraduate work was at Stony Brook University, where on a Regents Scholarship, he focused on Mathematics and Physics, graduating with an Bachelor Arts & Sciences degree in Political Science. He was a member of the Stony Brook Equestrian Team, and competed successfully in the National Championships (1981) of the Intercollegiate Horse Show Association. In addition to writing the National Affairs column for the campus weekly (The Stony Brook Press), he was elected Vice-President of the student body. (Ritholtz best describes it as his Bizarre Academic Career)

After passing the Bar exams in New York and New Jersey, Ritholtz practiced law for a few years, but became disenchanted with his career choice. He shifted his focus to technology and markets, has been an angel investor in early stage technology companies. He is on the Board of Advisors of Riskalyze (creating quantitative measurements of client risk tolerances) and Peer Street (a marketplace that provides unprecedented access to high quality real estate loan investments). He is also an investor in StockTwits, a Twitter based stock community.

When not bemoaning the New York Knicks‘ all-too-frequent offensive lapses, Mr. Ritholtz is a vintage sports car enthusiast. He and his wife Wendy, an artist and teacher, live on the North Shore of Long Island, New York with monsters Teddy and Jackson.


  • CNBC, Bloomberg, Fox, CNN, ABC, CBS, NBC, PBS, MSNBC, and C/SPAN, including shows, such as Nightline,ABC World News Tonight, NBC Nightly News with Brian Williams, Fast Money, Kudlow & Co, and Power Lunch, and has guest-hosted Squawk Box on numerous occasions. He appears regularly on radio for Bloomberg, NPR, CBS, and other broadcasters. His market perspectives are quoted regularly in the New York Times, Wall Street Journal, Barron’s, GQ, Forbes, Fortune, Smart Money, Kiplingers, and other print media.

10 Monday AM Reads

My back to work morning train reads:

• Foreign investment in the United States plunged 32% in 2017 (CNN Money)
• Unlike most millennials, Norway’s are rich (BBC)
• The fallacy that became itself a fallacy (Medium)
• How the Kremlin crafted a popular brand: Putin (Washington Post) see also China and the world: how Beijing spreads the message (Financial Times)
• Tired of Being Crammed Into an Airline Seat? You Have Options (New York Times)

Be sure to check out our Masters in Business interview this weekend with Dave Butler, Co-Chief Executive Officer and Head of Global Financial Advisor Services at Dimensional Fund Advisors, which manages $600 billion dollars.

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10 Weekend Reads

The weekend is here! Pour yourself a mug of French Mocha coffee, grab a seat on the beach, and get ready for our longer form weekend reads:

• The Entire History of Steel: From hunks of iron streaking through the sky, to the construction of skyscrapers and megastructures, this is the history of the world’s greatest alloy. (Popular Mechanics)
• People Aren’t Dumb. The World Is Hard. (Freakonomics)
• The endless reign of Rupert Murdoch (The Monthly)
• Hell for Elon Musk Is a Midsize Sedan (Bloomberg Businessweek)
• Don’t imagine you’re smarter (London Review of Books)
• The Flawed Legend of Preet Bharara: Slip the martyrdom — he failed to prosecute the Wall Streeters who brought us the financial crisis (The Nation)
• How the BBC Lost the Plot on Brexit (New York Review of Books)
• So Many Seats, So Many Tax Breaks (New York Times)
• Inside the radical, uncomfortable movement to reform white supremacists (Mother Jones)
• How Smart Speakers Are Changing the Way We Listen to Music (Pitchfork)

Be sure to check out our Masters in Business interview this weekend with Dave Butler, Co-Chief Executive Officer and Head of Global Financial Advisor Services at Dimensional Fund Advisors, which manages $600 billion dollars.


Mortgage rates in the 21st century

Source: @lenkiefer


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10 Friday AM Reads

My Friday the 13th, morning train reads:

• The Scooter Wars will be a bloodbath — and Uber will win (Recodesee also The Age of Floating Transport: Many years ago, humans invented the wheel. Then one day they invented the app. Now you need apps to use wheels (Medium)
• Hedge Funds Should Be Thriving Right Now. They Aren’t. (New York Times)
• On coincidence (Aeon)
• From Kellyanne Conway to Stephen Miller, Trump’s advisers face taunts from hecklers around D.C. (Washington Post)
• How to Host a Wine-Soaked BBQ (Vivino)

Be sure to check out our Masters in Business interview this weekend with Dave Butler, Co-Chief Executive Officer and Head of Global Financial Advisor Services at Dimensional Fund Advisors, which manages $600 billion dollars.

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Can central bankers become Superforecasters?

Can central bankers become Superforecasters?
Aakash Mankodi and Tim Pike
Bank Underground, March 12, 2018






Tetlock and Gardner’s acclaimed work on Superforecasting provides a compelling case for seeing forecasting as a skill that can be improved, and one that is related to the behavioural traits of the forecaster. These so-called Superforecasters have in recent years been pitted against experts ranging from U.S intelligence analysts to participants in the World Economic Forum, and have performed on par or better by accurately predicting the outcomes of a broad range of questions. Sounds like music to a central banker’s ears? In this post, we examine the traits of these individuals, compare them with economic forecasting and draw some related lessons. We conclude that considering the principles and applications of Superforecasting can enhance the work of central bank forecasting.

Setting the scene

It is helpful to begin by considering the purpose of forecasting in central banks, and how the process works in practice.  This speech by Gertjan Vlieghe explains how forecasting is an important tool that helps policymakers diagnose the state and outlook for the economy, and in turn assess – and communicate – the implications for current and future policy. So achieving accuracy is not always the sole aim of the forecast. However, forecasts are also a means to provide public accountability of central bank actionsand the presence of persistent or significant forecast errors may damage the credibility of the policy making institution amongst key stakeholders (individuals, governments and financial and capital markets).

A typical forecast set-up at a central bank is (see here) supported by two pillars: i) statistical frameworks underpinned by specific (for example, New Keynesian General Equilibrium) economic concepts, which can be supported by tools that process a range of economic and financial data, and ii) monetary policymakers’ judgements and deliberations that overlay these strict model-based forecasts – all of which form part of the deliberation process.

The accuracy of such forecasts has come under much scrutiny (see here) since the financial crisis, resulting in a great deal of effort to improve their performance. Several reviews and studies (see Stockton (2012)BoE IEO (2015)FRBNY Staff Report (2014) and ECB WP 1635 (2014)) have evaluated forecast performance across many major central banks and suggested improvements in calibrating economic models (e.g. to reduce bias), challenging prior conventions more and learning more from other central banks/economic forecasters.  The BoE’s MPC for example has also started commenting on its own ‘key judgements’ in its quarterly Inflation Report.

This is all welcome progress. But this iterative process from inside the central banking community over time leaves us with an impression that improving forecast performance could benefit from further considering the successes of forecasting  in other fields (similar to taking an “outside view” when forecasting as described by Kahneman). We may then move forward from this process of gradual evolution… to a potential revolution.


Superforecasters have been described as “unusually thoughtful humans on a wide spectrum of problems”. They are drawn from necessarily diverse backgrounds, and include amateurs and experts in a given field. They compete in tournaments which test their judgements on a range of questions about economic or geopolitical events. And through making these predictions they are expected to hone a range of forecasting skills. They are judged on several measures (including a daily average ‘Brier score’ – a measure of forecast accuracy originally proposed to test weather forecasting), and they receive their title by consistently outperforming a top percentile of their peers.

Superforecasters were first identified on the back of The Good Judgement Project (now a private enterprise)which was part of a US Intelligence Agency program in 2011. The GJP’s testing team included renowned advisors from psychology, statistics and economics. Their work used personality trait tests and training methods to reduce cognitive biases and improve the forecasting abilities of their volunteer forecasters. They then identified individuals who consistently out-performed their peers. Subsequent studies of this experiment found that when these top forecasters were placed in teams with other such forecasters  (described here as ‘group of average citizens doing Google searches in their suburban town homes’), they performed around 30% better than the average for intelligence community analysts who had access to confidential intercepts and other relevant data. Pretty Super-ising results one might say!

Can central banks become this ‘super’?

The story so far could imply that the answer simply lies in replacing central bank forecasters with these Superforecasters and leaving them to it. However, central bank forecasting is as much about forming a coherent economic narrative (the preserve of economists) as it is about numerical accuracy (for which the traits that make these individuals outperform the ‘experts’ matter). Central bankers may have a comparative advantage in the former, but their forecasting can be enhanced by considering key behavioural traits of those responsible for forecasting.

So how do central bankers fare against these Superforecasters?

The similarities: Superforecasters (most importantly) have a ‘growth mind-set’, which is a real willingness to address why a forecast is different from its eventual outcome, rather than just an ex-post evaluation of whether the prediction was correct. They also demonstrate a good balance of data and judgements when forming conclusions, not placing undue weight on either one.

Central bankers in comparison likely fare favourably against these traits, given most major central banks provide detailed updated assessments (the ‘why’) accompanying changes to their forecasts on a regular (usually quarterly) basis. At the BoE, these follow a substantial consultation process between staff and policymakers.

Some differences:

Using the wisdom of crowds: Another key trait of Superforecasters is that their forecasting abilities are enhanced when working in diverse teams – with people drawn from a range of disciplines, levels and areas of expertise. This enables them to tap into the well-known concept of the wisdom of crowds, and the process reportedly leads to better forecasts by providing a more stimulating environment for debate. Results are further aggregated to give more weight to forecasters who have a better track-record.

The central bank forecasting process does incorporate some elements of this – for example, many central bank policymakers make decisions in committees, after debate and exchanging views.  Moreover, several central banks regularly use surveys of external economic forecasters as an input to the forecasting process, or draw on external views, e.g. the use of the Agency or Market Intelligence networks to gather views in the BoE.

But (we would assert that) the forecasting outputs do not benefit in the same way as the Superforecasting process, where particular behavioural traits, a mix of expert/non-expert opinions or previous track records of those forecasters are considered.  Engaging a wider cohort of participants in forecasting could address this.  One suggestion would be to createCitizen Economists – as suggested by Andy Haldane in this speech, who argued that the wisdom of crowds can be harnessed by regularly canvassing the views of the public on the economy. Central banks could consider creating an online platform that engages the public directly with forecasting – which might also improve public understanding of policy and the economy (the RSA’s Citizen Economic Council and the Bank’s recently announced Citizen Panels for example intend to achieve a similar purpose). Central bankers can use these as an input into their own forecast process (perhaps even publishing the alternative crowd sourced forecast, similar to the way that the Fed publishes a staff forecast alongside the FOMC’s official one), though policymakers would remain accountable for their own forecasts and any policy decisions based on them.

Competing forecasts: A further avenue to explore is whether central banks might engageexternal Superforecasters (who aren’t constrained by the same institutional challenges as central banks) to produce their own macro-economic forecasts. Superforecasters currently partner with organisations (e.g. humanitarian or policy-making) around the world on topics ranging from geopolitics, future currency movements, and economics. In a similar vein, central banks could use Superforecasters’ macro-economic forecasts alongside their surveys of external economic forecasters as an additional input to the forecasting process.

Central Bank Superforecasters: Central banks could also try to identify and train their owninternal economic Superforecastersby employing the same techniques of cognitive training, team-work and result aggregation as another additional input to the forecasting process. One part of such a programme could be the continual assessment of forecasting performance, as measured by Brier scores.


With continuous forecasting challenges on the horizon in coming years, perhaps it is an opportune time to incorporate these ideas in the central banking sphere. Economic forecasting will always be an imperfect science. So while it is unlikely that a major shock such as the global financial crisis would have been averted by improving the accuracy of forecasting efforts in these ways, we believe the lessons learnt through the experiment of Superforecasting have a lot to offer to take forecasting a step forward in that direction.  Potentially over time, we might be able to create a next generation of central bank Superforecasters.

Aakash Mankodi works in the Bank’s Market Intelligence and Analysis Division and Tim Pike works in the Bank’s Agencies Division.

Transcript: Alliance Bernstein’s Kathleen Fisher



The transcript from this week’s MIB: Kathleen Fisher, Alliance Bernstein is below.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.


This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BU.S.INESS:  This week on the podcast, we have a special guest, her name is Kathleen Fisher, she is the head of wealth and investment strategies at AllianceBernstein.  Bernstein manages about $540 billion, they’re just a giant company in 22 countries, 3,500 employees, I think that something like 200 analysts and 150 portfolio managers, they are just a behemoth and she runs all of wealth and investment strategies.

If you’re at all interested in asset management and what it’s like working at a giant firm or what it’s like to be a woman at a very senior level and really Wall Street still is a male-dominated profession, this is really an interesting conversation.

There are a few people who know this business and know the human side of it as well as Kathy, she’s just tremendously knowledgeable and insightful and full of all sorts of intelligent commentary.

I think this is the sort of conversation so if you’re at all interested in asset management, wealth strategies, investment portfolio strategies, this is the podcast for you.  With no further ado, here is my conversation with AllianceBernstein’s Kathleen Fisher.

My guest this week is Kathleen Fisher, she is the head of wealth and investment strategies at AllianceBernstein, a firm that manages about $540 billion with 3,500 employees in 22 countries.  She joined the firm as a senior portfolio manager and member of Bernstein’s private client investment policy group.  Before joining Bernstein, she spent 15 years at JPMorgan, most recently as managing director advising banks on acquisitions, divestitures, and financing techniques.  She graduated from Bates College and has an MBA from NYU.

Kathleen Fisher, welcome to Bloomberg.


RITHOLTZ:  And I’m going to call you Kathy instead of Kathleen.

FISHER:  Yes, thank you.

RITHOLTZ:  I know that is your  to the article you Kathy Kathleen.  I know that is your everyday name.  You  started as an equity analyst, what attracted you to finance in the first place?

FISHER:  Let me back up say I started as a young economist, I started at the Federal Reserve Bank of New York, I was there for three years, I did monetary research as well as GDP research.  It was an amazingly wonderful learning experience to do high quality  research.  It was very academic but I learned the importance of getting your facts right which today is more relevant than ever, isn’t it, when we have a word that’s called fake news.

RITHOLTZ:  Fake news.

FISHER:  But it was a great learning experience about the importance of footnotes, about citing your sources that has followed me in everything I have done since then.

Having come to New York to do that job, I did start meeting people who were in investment banking and equity research and lo and behold, someone I met gave me an opportunity to go to Morgan Stanley to be a bank stock analyst and that’s how I got into equity research which back then, it was still a relatively new field, very exciting, and for me, very intellectually rewarding to focus on relative valuations but to also learn that what you think is so right often takes the market much longer to agree with or perhaps never agree with.

So it’s a great learning experience.

RITHOLTZ:  Any particular example stand out?

FISHER:  Well.

RITHOLTZ:  This was quite the memorable experience.

FISHER:  I was covering bank stocks at a time when bank stocks were very much out of favor, and therefore no one wanted to hear a word I said for quite some time.  So let’s just say that in it of itself was a great experience.

RITHOLTZ:  So you spent a lot of your career at JPMorgan after Morgan Stanley, what was that experience like?  What did you do for them?

FISHER:  My turning it JPMorgan was incredibly fortuitous because I did a lot of bank M&A at a time when bank M&A was absolutely a huge trend in the late 80s, early 90s, mid-90s, so it was a very active space and tons of activity so it was really — a wonderful experience and one captured both all that one does in M&A and corporate finance valuations and the right price to pay for a deal.

But also it brought in the human side of things because the bank mergers, needless to say, cost reduction and people reduction, and you had to get your head around that and the important thing is in a world that makes sense over time, it didn’t  makes sense for the banking industry to shrink.  Those job cuts would come eventually, those mergers accelerated them but it was something that you have to stand back and so now what’s going to happen over time regardless of when.

RITHOLTZ:  So your tenure at JPMorgan, I believe, that predated the Jamie Dimon era, is that correct?

FISHER:  Very much predated, it was pre Chase merger, actually.

RITHOLTZ:  Oh, okay.


RITHOLTZ:  So I was going to ask you how much time you spent working with Jamie, but obviously…

FISHER:  Quite a long time ago.

RITHOLTZ:  Obviously not.

So what led you to AllianceBernstein although if memory serves, when you joined, it was Bernstein still, right?

FISHER:  Now I joined in 2001 and the merger occurred in 2000.  And so I came post the AllianceBernstein merger, I joined AllianceBernstein because several of my colleagues in JPMorgan had migrated to AllianceBernstein over time and therefore they enticed me to join the firm.

RITHOLTZ:  And you’ve been there ever since?

FISHER:  I have been there ever since 2001?

RITHOLTZ:  So your current title is head of wealth and investment strategies, what does the head of wealth and investment strategies do?

FISHER:  Well I am blessed to work with a team of 35 extraordinary experienced professionals who are in two separate groups.  One is the Wealth Strategies Group which developed the models that help our clients preexperience the likely financial outcomes of decisions they can make.  Whether those decisions are around wealth transfer strategies or retirement or charitable giving, the idea that you have many variables you can control and therefore how to think about different asset allocations, different structures, we help our clients think through all those options.


Transcript: Jerome Schneider, PIMCO



The transcript from this week’s MiB: PIMCO’s Jerome Schneider  is below.  

You can stream/download the full conversation, including the podcast extras on BloombergiTunesOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.


ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST: This weekend on the podcast, I have an extra special guest. His name is Jerome Schneider. He is the head of had a short-term portfolio management of PIMCO. If you are remotely interested in fixed income bonds, trading, the plumbing of how finance works, this is a master class and tremendous details of how the fixed income market works. It is absolutely fascinating.

If you are remotely considering any sort of fixed income investing, working on a bond desk, being a portfolio manager of any sort, then this is a conversation you have to listen to. It’s absolutely fascinating.

With no further ado, my conversation with PIMCO’s Jerome Schneider.

My special guest today is Jerome Schneider. He is the head of short-term portfolio management and funding at PIMCO which manages about $1.75 trillion as of the end of 2017.

Prior to joining PIMCO in 2008, he was a senior managing director at Bear Stearns specializing in credit and mortgage related funding transactions. He held a number of various positions on the municipal and fixed-income trading desks at Bear. Morning Star named him the Fixed Income Fund Manager of the Year for 2015. He manages three separate funds, one over $14 billion dollars, the other, over $8 billion, the smallest, a mere $2.2 billion. Jerome Schneider, welcome to Bloomberg.


RITHOLTZ: This is the perfect time to be speaking with you given everything that’s going on in — with the Fed, with rising rates, with yield curve, but let me start with a little bit of background. How did you first get interested in finance?

SCHNEIDER: Pretty easily on, I had a great uncle who was always sort of fascinated with the stock market at that point in time and had bought me a handful of shares, you know, like everybody does and from that fascination, you quickly realize that the power of capital and I think at the age of 11, I had asked my dad, you know this stock market thing is pretty interesting.

Let’s read about it. Let’s read about it on the Wall Street Journal, and for my 12th birthday, he actually took me to the Stock Exchange on the floor and for young chap from Oklahoma, Oklahoma City that is — that’s a pretty, pretty empowering thing to see your dream location come true.

So, for me it was a trip to the Stock Exchange and to see the Yankees who I loved at that point in time and really, put together in your mind how you actually get to that point from being 12 to being a young professional and the steps it takes, so that was a magical moment in my formative years.

RITHOLTZ: And that was back in the day when you could both A, get on the floor of the Stock Exchange, you can’t do that really today and B, it’s not just the front (ph) for a television studio, that was where stocks were actually traded back then.

SCHNEIDER: Yes, and amazing and thinking about it, you know, I was probably hardly five-feet tall at that point in time. You know, it was a scrum and this was in the mid-early 80s and I looked back at the photos we took and the funniest thing, obviously is the people and how they are dressed and second of all, it was a functioning entity in a physical sense, not just a literal sense and a spiritual sense as it is now, along with computers, but it’s a physical breathing entity.

And then today, obviously, it’s changed and the NYSE is — and all the stock exchanges have their functioning perspective to code up to technology, but I think more importantly, and this is the thing that I would say is that, as a young person having the ability to have that experience and learning from people what it took — it takes to get there and then putting those steppingstones in place, seeing the right people, understanding what they took to get there even though they might be 10, 20, 30, 40 years your senior — that’s a very powerful thing.

And I think, one of the key things for people whether they are interested in finance or otherwise is to find people that will serve as mentors, rabbis — whatever it is to help empower them to achieve their goals in that kind of way and I was just fortunate to have a ton of people around me.

RITHOLTZ: It sounds like that was a formative experience for you.

SCHNEIDER: Yes, it was. It was great and I think, you know, people recognized that at that point in time, as odd as it might be from young kid in Oklahoma City, it might have been one of those things that it was a way out, so to speak, and so for me Oklahoma is a great place to be from and is a great place to be going back to with family, but at the same time, I haven’t lived there since high school.

RITHOLTZ: No interest in being a roughneck and working in the oil fields or any of that?


RITHOLTZ: Physical labor?

SCHNEIDER: Not at this point. Well, I mean, that was the other formative expense in my life actually being exposed to the roughnecks and when you grow up in Oklahoma and Texas and your whole family is exposed to the oil industry, in the late 70s and early 80s —

RITHOLTZ: During the oil crash? Yes, sure.

SCHNEIDER: The oil bust basically was an eye-opening experience and then frankly, that was one of the things that led me to want to understand capital markets because, you know when you’re in the oil business, you’re putting together a ton of capital, a lot of it is not your money and so your incentives are very different.

And at the same time, when you think about the ramifications of a re-pricing event, in that case, it’s oil and everybody — I mean, they’re in there sitting on the oil patch and things, oil prices only go, up but as a young kid, you see everybody going from having literally Learjets and third and fourth lake homes and multiple cars to nothing overnight and you look around, and you know, we had a very modest upbringing.

I would say that, you know, in retrospect, it was – the (ph) down side is fairly limited compared to some people —

RITHOLTZ: Not a lot of leverage —

SCHNEIDER: Well, not a lot of leverage, so to speak, but at the same time, not a lot of the different up side, but I learned at that point in time, the strength of leverage and the danger of leverage, which oddly, as my professional career evolved in the fixed income — that obviously became a keystone to that.

RITHOLTZ: So, you go to University of Pennsylvania and then you get your MBA at NYU Stern?


RITHOLTZ: And what was your first job right out of the school?

SCHNEIDER: So, when I graduated Penn, I wanted sort of a degree that was related to finance, but really more economics related and so I had a more customized degree in international finance economics and international relations and so, Penn was a perfect place to do that.

Unfortunately, when I was graduating and started with an interview in 1994, my background was a series of internships for a small — from a small shop in Oklahoma City called Stifel Nicolaus —

RITHOLTZ: Oh sure.

SCHNEIDER: And then —

RITHOLTZ: Which is now not such a small shop.

SCHNEIDER: Not such a small shop, but they were really focused on muni bonds back then, which is a good and bad thing and the other one was running a guy’s campaign for state treasurer of Oklahoma, which was successful, but that was both — it took me back to Oklahoma and so, as a result, at Penn, you’re looking out for internships and most of the kids in the East Coast had connections to New York and Wall Street and things like that and I didn’t have any of those connections, so to speak.

So, I was really trying to find my way to get to Wall Street at that point in time and it took a little bit more effort. That combined with the fact that when I was graduating in 1994, it wasn’t the best job market in the in the world and when you think about it, you had to get in on any floor whatsoever. So, I interviewed. I interviewed with people who were trying to sell limited partnerships, limited — people who were trying to trade stocks and be in the operations group, and oddly, coincidentally, the job I took was with Bear Stearns and I joined their operations training program at that that tender young age for a very small salary, but a great opportunity to learn.


Transcript: MiB with Tom Gilovich of Cornell University



The transcript from this week’s MiB podcast with Tom Gilovich is below.

You can stream/download the full conversation, including the podcast extras, on BloombergiTunesOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.



ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST: This week on the podcast, I have an extra special guest. His name is Tom Gilovich, he is a professor of psychology at Cornell University and I have to say he is a person who has had over the years, tremendous influence on my career although admittedly unknowingly, I began in this industry as a trader and I was frequently perplexed and fascinated by why the people on the desk around me were doing either poorly or well any given day, week, month, and I eventually figured out it wasn’t that one guy was smarter than another or someone had more knowledge, it was their own behavior that led to their success or failures. And so I started hunting for some information about why people made certain behavioral decisions that they did.

I ended up tracking down a book of his from 1991, “How We Know What Isn’t So” and that pretty much sent me down the rabbit hole of behavioral economics which has been a tremendous asset to me both in the world of finance and media. Understanding what motivates people to make either good or bad decisions with their money is a tremendous asset both what you should be doing with your money and what you should be advising other people to do with their money.

This is, to me, one of the more fascinating conversations that you’ll hear if you are at all interested in fill in the blank, psychology, behavioral economics, heuristics, biases, et cetera, I could’ve gone on for another three hours with him I barely got to scratch the surface of all my questions.

With no further ado, my conversation with Tom Gilovich.

I have an extra special guest this week and his name is Professor Thomas Gilovich, he is a professor of psychology at Cornell University, he has published numerous peer-reviewed works on cognition and heuristics and is among the most cited academics in the field working on behavioral psychology and economics.

His work has debunked to the idea of the hot hand in basketball, the spotlight affect, the bias blind site, clustering allusion, and numerous other cognitive issues are in his purview, he is the author of numerous books including a textbook on heuristics and biases. He is the co-author of “Why Smart People Make Big Money Mistakes And What You Can Do To Correct Them.”

I became familiar with his work “How We Know What Isn’t So: The Fallibility of Human Reason in Everyday Life.” It was one of the first popular books on behavioral economics and one that I found incredibly influential. Thomas Gilovich, welcome to Bloomberg.


RITHOLTZ: Let’s start out with how we know what isn’t so, you begin the book with a quote from Artemis Ward, “It ain’t the things we don’t know that get us into trouble, it’s the things we know that just ain’t so.” Tell us about that.

GILOVICH: Well if we are convinced of things that aren’t true, we’re going to go down certain paths that aren’t going to be productive and that quote captures that idea very well. And what I like about that quote is that most people attribute it to Mark Twain or Will Rogers, the source I thought at the time was Artemis Ward and maybe two years after the publication of a book, a reader wrote to me and said well it’s really interesting, you are sort of telling everyone they got it wrong with Will Rogers and Mark Twain, but in fact it goes back even earlier than Artemis Ward to someone named Josh Billings that I hadn’t heard of.

So it’s kind of ironic starting off a book on allusion and error, the very first sentence of the book contains a citation error at least.

RITHOLTZ: But that citation error did not lead you down a path filled with errors, let’s discuss a little bit about the things that you discovered and published in the book and we’ll begin with a very simple question, what are heuristics and biases?

GILOVICH: Well the bias part is quite easy it’s a term that people are familiar with when there’s a systematic departure between a belief that you have in reality or a tendency to choose to veer in one direction when you should be bearing in another direction, so it’s a systematic departure from reality or the best assessment of reality.

Heuristics is a little more complicated for most folks, it’s generally defined in the behavioral economics world as a rough approximation seat-of-the-pants —

RITHOLTZ: Rule of thumb.

GILOVICH: Rule of thumb is another way of describing it, yes.

RITHOLTZ: And why do these heuristics lead people down the wrong path?

GILOVICH: Because they generally work pretty well in one of the earliest examples used and applied to psychology was Daniel Kahnemann and Amos Tversky’s examples of we use the clarity of an image as a cue for how far away it is. The farther things are, the harder it is to see them clearly, so they will see more indistinct and that generally works pretty well. We’re able to see whether something very far away is relatively close up.

But on a hazy day, that’s going to make things seem farther away than they really are and conversely on a spectacularly clear day, you often have the reaction of whoa those mountains are — I didn’t realize they were that close.

RITHOLTZ: Let’s use another example of some biases, you’re in line at the supermarket and your line doesn’t seem to be moving, the line next to you really looks like it’s flying, are you waiting for a tollbooth? I know parts of the country still have tollbooths and you switch lines and suddenly the line you’re in comes to a dead halt and the line you just left seems to be moving.

What is it about our life experience that causes that illusion or is it an illusion?

GILOVICH: That one as far as the grocery lines, I don’t know if anyone has formally studied it, but you have to ask what principle of the universe would there be that would systematically distort things such that whenever you moved to a line, it would slow down and the line that you are in suddenly sped up.

But it’s easy to explain why people would believe that, even if it’s not true. That is to say those times when you stay in your overly busy line, you’re tempted to move to another one and it turns out that that you can see that that would’ve been a better thing, your line stays slow, you can see people speeding through the other line, that bothers you, but you get over it.

If on the other hand you make the opposite mistake — you switch to the seemingly speedy line and it slows down — the line you are in suddenly speeds up, you are going to kick yourself and say why did I do that? I was in the right line, I brought this on myself and it’s more annoying and because it’s more annoying, it’s more memorable and therefore you’re going to have a distorted sense in your head of how common it is.

Very much like there’s a belief in the sports world, the baseball world that if your team, your pitcher has a no-hitter in progress, don’t comment on it and that’s partly fed by the idea that if your pitcher does have a no-hitter and you say, oh we got a no-hitter going this is great and then they lose it, you draw an association between those two and those are going to stand out and you are going to think that it’s what you’ve done has played some determined role which of course hasn’t.

RITHOLTZ: So let’s talk a little about mean reversion. Very often, when we see things that are outliers to the upset or the downside, we’re sort of surprised when the next item in that series is not as extreme be it how fast the line is moving or how easily a no-hitter is lost and goes back to normal — issues why do people have such a hard time with mean reversion?

GILOVICH: That’s a great question and there are a number of things that contribute to this belief, the failure to recognize the fact that regression to the mean is happening and one of them is that it is the same story that I’ve described before which is when it reverts and particularly when it reverts after you’ve done something that that stands out in your memory more and distorts your — the intuitive database that you have in your head.

And so there a lot of superstitions that are essentially a failure to recognize the operational progression, the Sports Illustrated Jinx being one of them that it’s believed that if you get your picture on the cover of Sports Illustrated, but that’s bad luck and doesn’t take that much insight to recognize that really is a mean aversion account that is you only get your picture on the cover of Sports Illustrated if you had a run of success and extraordinary success at time one is going to be followed not by abject failure but by somewhat less extreme run of success afterwards.

So you’re right there on the peak on average people to do less well the next time that gives rise to this belief that it’s bad luck to be pictured on the cover of Sports Illustrated magazine. And people — athletes truly believe it, some of them have turned down the opportunity to be on the cover of Sports Illustrated simply because they thought it was bad luck.

RITHOLTZ: Let’s talk a little about the hot hands in basketball. You first wrote about this affect with the Amos Tversky, is about 30 years ago, is that right?

GILOVICH: Yes, the paper came out in 1985.