Why Money Isn't What You Think: Barry Ritholtz on the Meaning of Money and How NOT to Invest It
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For transcript and deep dive research https://nadig.com
In this initial episode of Rabbithole, Dave Nadig explores the psychology of money and investing with Barry Ritholtz, author of "How Not to Invest." Their conversation challenges conventional financial wisdom and reveals insights about what money is, and how we use and invest it.
Key topics include:
Why money is a tool for freedom and agency, not a store of value or end goal How childhood experiences shape our lifelong money behaviors and attitudes Why market crashes affect us differently at various life stages The dangers of algorithmic social media and information overload for investors Why avoiding mistakes is more important than chasing extraordinary returns Rethinking Bitcoin and other investments through better framing The wisdom of humility in financial decision-making
Barry shares candid personal stories and draws on decades of experience as a trader, strategist, and wealth manager to identify the ideas, numbers, and behaviors that typically destroy wealth.
0:00 - Introduction 0:21 - What we get wrong about money 1:15 - Money as a tool, not an end goal 2:44 - Why money is not a store of value 5:43 - Family dynamics and money psychology 8:05 - Why market crashes affect us differently at various life stages 11:05 - Agency and control in financial life 13:05 - The dollar's purpose as a medium of exchange 16:19 - The Keynesian money illusion 18:04 - How past experiences shape our financial decisions 19:47 - Bitcoin narratives and cryptocurrency framing 23:15 - Thinking of Bitcoin as a technology company 24:33 - Owning asset classes vs. individual stocks 26:47 - The problem with algorithmic social media 30:20 - The dangers of making too many investment decisions 31:15 - Charlie Munger's wisdom on being "less stupid" 34:15 - Book introduction: "How Not to Invest"
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Barry Rolz argues that most investors fail not from lack of intelligence but from behavioral errors and misunderstandings about money itself—success comes from recognizing what you don't know, curating reliable information sources, and minimizing unforced errors rather than seeking outsized returns.
- Money is a medium of exchange and tool for freedom, not a store of value or path to happiness, and this misconception shapes poor financial decisions
- 95% of fund managers underperform benchmarks over 10 years, yet investors waste effort seeking the exceptional few rather than accepting broad diversification
- Your information diet and media consumption are engineered to provoke emotional reactions that misalign with long-term investment horizons, creating systematic behavioral mistakes
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The Keynesian 'money illusion'—where people think in nominal rather than real terms—is fundamentally a cognitive constraint caused by the fact that our mental models are necessarily built from past experiences, and we traverse through time with 200-millisecond sensory delays, meaning we are always behind the curve of reality.
“we are traversing through time and the gray matter between our ears is filled with experiences that by definition are old in fact you and I had a conversation a couple of years ago where what you're seeing right now because of the 200 milliseconds it takes to get passed back to your brain and then the whole processing you're looking at immediate history you're not seeing the world”
Money's greatest value is that it frees you from having to do things you don't want to do and allows you to focus your effort, time, and energy on what you actually want to pursue.
“what money does do is it frees you up from first you don't have to do the things you don't want to you don't want to waste time on things you're not interested in money allows you to focus your effort your time your energy on what you want and and that is its greatest value”
The limiting factor for investment success is not analytical intelligence but how many decisions investors make and actions they take, because each additional decision increases the probability of unforced errors.
“you really have to be thoughtful and be aware of the more decisions you make and the more actions you take the more your your chance of substantial unforced errors increased and I think this is a big philosophical shift that you don't hear on Wall Street and finance people in general kind of come up in a fake it till you make it environment”
The best strategy for investors is to curate a team of trusted expert advisors with consistent track records and defensible processes, rather than trying to follow all financial media, because the information diet is the primary bottleneck for investor decision-making.
“create a team of experts and the nice thing is you don't have to pay them you don't have to put them on the payroll so Dave is my market structure ETF expert Sam row is a person who puts in the market cycle into into context Jonathan Miller understands residential real estate better than anybody and go on and on Ed yini and Ed Heyman in economics”
Young investors face greater financial stress from career uncertainty than from market volatility, but as they age and develop professional confidence, they become less vulnerable to market timing errors because they understand markets are cyclical and temporary.
“when you're younger you're probably more at risk for your income and your career than what's actually happening in the market and when you're older yeah you understand the cycle a little bit but the cycle and and how temporary these things tend to be but you also become a little more self-confident in your own skills to navigate this and more secure in where you are professionally”
Purchasing power is a double-entry bookkeeping problem: if the dollar has fallen, wages must be examined simultaneously to determine real purchasing power, and by this metric median income earners today can purchase more goods and services than could have been done a century ago despite nominal devaluation.
“this is a variation of denominator blindness where you're just looking at half the equation really this is more of a framing issue hey if the dollar has fallen that much how much have wages increased over the same period it's double entry bookkeeping if you're concerned about purchasing power what happened with your earning power and once you look at it that way you're better off today you can purchase more Goods more services Beyond mere survival today with a median income than you could have done a century ago”
Childhood economic experiences create lasting emotional relationships with money that persist into adulthood, causing people from the same household to develop radically different financial behaviors and attitudes based on when they grew up within that household.
“it's really funny three my family of three kids right I'm the oldest my sister's three years younger than me my brother's almost 9 years younger than her so we grew up in the same household I kind of grew up you know lower middle class...we each have a very different attitude with money due to our upbringing”
Money is not a store of value; it is a medium of exchange that should always be in motion and working on your behalf through investments, real estate, or business ventures rather than sitting idle in a bank account.
“if you have a million dollars you should not have a million dollars in your bank account you should be investing that money not necessarily in the stock market but certainly you should invest that money”
The first job of the investor is to understand reality as it is, not as desired or imagined, and this is what makes investing fundamentally different from politics where feedback loops are slow.
“the first job of the investor is to understand reality as it is what makes investing so fascinating and so different from politics if you vote for the wrong guy and this guy eventually Cuts your Medicaid and 20 years later you need an operation that you can't afford hey that's a long slow feedback loop if you go into the market with a delusional idea and it doesn't have to be that the world is flat it just has to be that hey this lockdown is going to last for decades and I'm going to load up on peltin and DocuSign you find out pretty quickly”
Charlie Munger stated that he and Warren Buffett believed they were not smarter than others, just 'less stupid,' which captures the essence of investor success—avoiding mistakes rather than exceptional brilliance.
“someone once asked Munger hey were you and Warren just smarter than everybody else he's like no we we don't think we're smarter than everybody else we're just less stupid”
Behavioral control and emotional control are far more important than IQ for investment success, with Charlie Munger arguing that any IQ above 125 is wasted and the limiting factor is emotional discipline.
“Buffett followed that up with any IQ point over 125 is wasted you need to have behavioral control and emotional control far more important than having a 140 or a 160 IQ”
'Winning the Loser's Game' refers to the principle that investment success is determined primarily by avoiding losses rather than by generating alpha, meaning the path to outperformance is through restraint and discipline rather than clever analysis.
“does that come back to just like classic Charlie Ellis I mean a lot of what you're saying sounds like winning the losers game right that as an investor avoiding those unforced errors like in tennis unless you were at the very top of the game you win by not losing”
Bitcoin's security properties were (and remain) questionable—the example of someone losing $100 million in Bitcoin because they couldn't find their password illustrates that while the price charts look good, the practical usability and security are poor compared to traditional currencies.
“now explain to me the guy who lost $100 million because he can't find his password so the all the numbers are always misleading”
Even famous successful investors like Peter Lynch, Warren Buffett, Bill Dermot, and Howard Marks had tiny asset bases when they were starting out, and we only know them today as successful because we see the winners; we never hear of the 10,000 portfolio managers who were flushed out and failed—a case of survivorship bias.
“we know who Peter Lynch and Warren Buffett is today we know who will Dermot is and go through the list the Char Howard marks and on and on but when they're first starting out they had teeny tiny well and and dude let's remember the 10,000 portfolio managers who got flushed that we have never heard of right so there there's a section in the book about survivorship bias”
Money is not the path to happiness, and accumulating beyond a threshold sufficient for security and freedom produces no additional happiness gains.
“money is a tool it's not a means to an end it's not an end goal itself it's not how we measure our success or failure let me just give you a few things that money is not it's not a store of value it is a media of exchange it is not the path to happiness”
Paul Graham's insight that 'experts are experts on an earlier version of the world' is brilliant because it explains both expert overconfidence and expert obsolescence—their models work until the world changes, and they're often last to recognize change.
“there's a great Paul Graham quote when experts are wrong it's because they're experts on an earlier version of the world and that's really a brilliant Insight but let's extrapolate that bigger all of us have a view of the world whether we're an expert or not and that view was foundationally formed in the past”
People's experience of past events anchors their expectations for future events more strongly than current fundamentals do, making historical trauma (poverty, scarcity) predictive of future behavior (hoarding money) even when circumstances change dramatically (becoming wealthy).
“he's the guy with a million dollars in the bank cuz he's freaked out because I think the transition from being broke to having money very much affected him how you experienced it growing up it really has a big impact on your relationship with it”
People mentally anchor to housing prices from the past and fail to update models when market conditions change, causing them to demand the same prices they would have received in prior years despite changed market fundamentals.
“I have a vivid recollection of speaking to people in 0809 2010 hey uh Bob down the street has the same model house as me and he got 700,000 why can't I get 700,000 my answer was always you can get a time machine and go back to 04 you get 700,000 but now following what happened your house is 450”
Avoiding unforced errors through restraint is a fundamental shift from the 'fake it till you make it' environment of Wall Street, where activity is mistaken for skill.
“I think this is a big philosophical shift that you don't hear on Wall Street and finance people in general kind of come up in a fake it till you make it environment that's 180 degrees away from we need a little humbleness we need a little humility”
During the 2005-2006 housing peak, lenders stopped evaluating borrowers' ability to service debt and instead evaluated their own ability to sell debt to securitizers, creating a moral hazard where loan quality collapsed because risk was transferred away from originators.
“there was an excess of credit available it it the underlying um basic philosophy of credit used to be the borrower's ability to service that debt and it very briefly for less than 5 or 6 years became the lender's ability to sell it to a securitizer so who cares if they can pay the debt and that obviously didn't work out so well”
Algorithmic social media has been engineered to optimize for outrage and anger, which is not only misaligned with long-term investor needs but also amplifies cognitive biases through targeted ad profiling based on credit scores, browsing habits, and personal preferences.
“the problem isn't social media the problem is algorithmic social media that has been beautifully engineered to a terrible goal which is to outrage infuriate generate anger because they want your attention your energy your eyeballs your clicks your focus”
Equity index ownership is a bet on human ingenuity and innovation generally, while individual stock ownership is a bet on specific company management, technology, and competitive position—only broad indices have historically survived across centuries.
“owning asset classes is a bet on human Ingenuity and Innovation at least Equity is owning specific stocks is a bet on this company this management team this technology this place in the economy and we've seen time and time again deodoran over at NYU his new book talks about the life cycles of companies they're born they go through this growth period they mature and they die”
Warren Buffett and Charlie Munger's success came not from being smarter than everyone else but from being 'less stupid' through greater emotional and behavioral control, and IQ above 125 is wasted without behavioral discipline.
“someone once asked Munger hey were you and Warren just smarter than everybody else he's like no we we don't think we're smarter than everybody else we're just less stupid and that's the Munger version of Ellis and and Buffett followed that up with any IQ point over 125 is wasted you need to have behavioral control and emotional control far more important than having a 140 or a 160 IQ”
Even very old companies like 600-year-old English breweries or 1000-year-old Japanese sushi restaurants are exceptions that prove the rule—the vast majority of companies fail, mature, or underperform, making their survival data points rather than investment templates.
“whenever someone talks about a 600-year-old um company that makes a stout Ale in England or the thousand-year-old sushi company in Japan it's like exactly you have two examples out of a bajillion that the exception that proves the RO you found the tales congratulations right”
A deflationary or zero-inflation world creates perverse incentives where consumers rationally delay purchases because goods will be cheaper tomorrow, triggering negative economic spirals, which is why some modest amount of inflation is structurally healthy for economies.
“when you have a zero inflation world or worse a deflationary world it's not everything is flat zero some of stuff is going up some stuff is going down what tends to happen are the things where there are economies of scale the prices fall and in a zero inflation World they tend to fall faster than other prices rise and so you run into the risk that the consumer is going to say why do I want to buy this today if it's going to be cheaper tomorrow and so suddenly you're in this negative economic spiral”
95% of professional fund managers underperform their benchmark over 10 years net of fees, and worse, individual investors underperform their own investment choices through behavioral errors like buying after runups when the manager appears on television.
“the basic number is 95% over 10 years net of fees are not going to beat their Benchmark”
Company life cycles are relatively short—most companies are born, grow, mature, and die—and the rare exceptions like the 600-year-old English ale company or 1000-year-old Japanese sushi company are statistical anomalies that prove the rule rather than examples to imitate.
“his new book talks about the life cycles of companies they're born they go through this growth period they mature and they die and whenever someone talks about a 600-year-old um company that makes a stout Ale in England or the thousand-year-old sushi company in Japan it's like exactly you have two examples out of a bajillion that the exception that proves the RO”
Ritholtz has rejected clients who insisted on 60% portfolio allocation to a single stock like Nvidia, demonstrating that limiting concentration is non-negotiable as a fiduciary principle.
“we've had people say that and we fire them as clients hey we want nothing to do with that that and what happened the past two weeks is exactly why if you shouldn't have 60% of your assets in anything other than a broad index class”
Bitcoin's utility as an actual currency (for buying things legally) is extremely limited, which is why Rolfs says it doesn't work 'really poorly' if you actually want to use it as money unless you're 'a blackmailer or working on the dark web'.
“if you want to go buy something with Bitcoin assuming that you're not a blackmailer or working on the dark web very hard to do”
Owning broad asset classes is a bet on human ingenuity and innovation, while owning individual stocks is a bet on a specific company's management, technology, and economic position—and the latter is far riskier because specific companies are subject to disruption, management failure, and obsolescence.
“owning asset classes is a bet on human Ingenuity and Innovation at least Equity is owning specific stocks is a bet on this company this management team this technology this place in the economy”
Money does not serve as an effective store of value over time because it should always be in motion, invested in real estate, business, bonds, or other income-generating assets rather than sitting idle, as dormant capital loses purchasing power to inflation.
“if you have a million dollars you should not have a million dollars in your bank account you should be investing that money not necessarily in the stock market but certainly you should invest that money you can invest that money in real estate in starting a business in yourself everybody who went to college made a huge investment of time effort and money in their s but the the point is you should never have a million dollars sitting around money does its best work when it's in motion when it's operating on your behalf”
Algorithmic social media is engineered to maximize engagement through outrage and anger, tracking user behavior, browsing habits, preferences, and credit scores to tailor advertisements specifically for manipulation.
“the problem is algorithmic social media that has been beautifully engineered to a terrible goal which is to outrage infuriate generate anger because they want your attention your energy your eyeballs your clicks your focus the technology is such that we can track not only what you're watching but then we could tie it to your credit score and your internet browsing habit and what you like and and you have an a profile at least in the United States Europe is a little more aggressive about stopping that where they could really tailor ads that are specific and effective for you”
Housing bubble psychology showed consumers anchored to past prices, unable to fathom price declines even though fundamental credit conditions had changed, illustrating denominator blindness and failure to update mental models when regimes shift.
“I have a very Vivid recollection of speaking to people in 0809 2010 hey uh Bob down the street has the same model house as me and he got 700,000 why can't I get 700,000 my answer was always you can get a time machine and go back to 04 you get 700,000 but now following what happened your house is 450”
The market crash during the housing bubble reflected a temporary inversion of lending standards where lender ability to securitize debt replaced borrower ability to service debt as the criteria for credit approval.
“there was an excess of credit available it it the underlying um basic philosophy of credit used to be the borrower's ability to service that debt and it very briefly for less than 5 or 6 years became the lender's ability to sell it to a securitizer so who cares if they can pay the debt and that obviously didn't work out so well”
In a deflationary or zero-inflation environment, consumer behavior becomes negatively biased because rational actors delay purchases if goods will be cheaper tomorrow, creating self-reinforcing economic contraction spirals where falling demand causes further price declines.
“when you have a zero inflation world or worse a deflationary world it's not everything is flat zero some of stuff is going up some stuff is going down what tends to happen are the things where there are economies of scale the prices fall and in a zero inflation World they tend to fall faster than other prices rise and so you run into the risk that the consumer is going to say why do I want to buy this today if it's going to be cheaper tomorrow and so suddenly you're in this negative economic spiral”
Retail investors systematically underperform their own fund investments because they buy after large runups when managers become visible on television, then sell during downturns, realizing behavioral losses worse than the managers' own underperformance.
“and worse because of our behavioral problems we have this tendency to to underperform our own Investments if if you're buying somebody a fund um after it's had a giant runup and after you found out about this person when they're on TV the odds are it's not going to work out for you”
The Satoshi Nakamoto paper was released about a year after the first iPhone, and Bitcoin started trading about a year later in the immediate aftermath of the 2008 financial crisis, embedding the post-crisis narrative about not trusting governments and Wall Street into Bitcoin's origin story.
“the Satoshi paper comes out a year or so after the first I iPhone comes out and then Bitcoin starts trading a year after that in the immediate aftermath of the financial crisis”
Experts are systematically wrong about the future because they are experts on an earlier version of the world, not the current one, meaning past expertise becomes a liability rather than an asset when conditions change.
“there's a great Paul Graham quote when experts are wrong it's because they're experts on an earlier version of the world and that's really a brilliant Insight”
Survivorship bias caused decades of incorrect belief that average mutual funds outperformed the market—academic research in the early 1990s revealed that excluding failed funds showed most survivors were substantially underperforming, meaning the base rate of failure was high but invisible.
“there's a section in the book about survivorship bias and and why for a long time we thought the average mutual fund outperformed the market it was only when this academic study was done in I don't know was it ' 91 or 96 something like that that we've kind of learned by the way once you back this out not only are these guys underperforming net of fees many of them are substantially underperforming”
Individual emotional relationship with money is shaped by the specific historical period and economic class during which a person grew up, creating vastly different attitudes toward saving, spending, and risk across siblings who experienced different economic conditions in the same family.
“there's really no one correct answer because everybody has a very different relationship with money it depends on your specific history how you grew up with it what sort of traumas you have around money whether you had too much money and have become complacent about it and don't recognize its value”
Most people are poor investors who buy wrong stocks, trade too frequently, engage in panic selling, and believe in wrong numbers, creating cumulative negative returns; avoiding these 90% of common mistakes puts you ahead of 90% of peers.
“we've had a century of people telling us how to invest and let's be honest most people are pretty crappy investors you know they they buy the wrong stuff they trade too much they engage in panic selling the ideas they believe the numbers they think are important and how they act on those all have been a cumulative negative 90% of the book is don't do this don't believe that and try not to engage in this behavior and if you avoid these things you're ahead of 90% of your peers”
The S&P 500 has had only two major crashes exceeding 50% in the past 50+ years (1973-74 and 2008-09), both of which fully recovered, providing historical evidence that broad equity ownership is far less risky than concentrated single-stock ownership.
“the worst case scenario is in the past I don't know half century what do we have a 56% and a 57% crash in the S&P going back to 1973 74 and then again 0809 and it recovered”
Maslow's hierarchy of needs explains why people's attitudes toward money change as they move from lower-income to upper-income levels—the meaning of money shifts from survival (food, clothing) to security to agency to meaning, making universal statements about 'the right' money attitude impossible.
“all those things change do human beings particularly sort of Western American type human beings have a very similar pathway as they go from younger to older and what can we learn from that so the standard answer which is technically correct but I don't know how useful it is... as you work your way up it as you go from lower CL lower income to Middle income to Upper Middle income all those things change”
The belief that you can identify fund managers who will outperform their benchmark in the future is irrational because it requires solving two impossible problems: identifying who is skilled (versus lucky) before they become famous, and predicting future outperformance from past data.
“and so and that raises the question what makes you think you're going to find the one in 20 manager that's going to beat their Benchmark for a DEC deade we know who Peter Lynch and Warren Buffett is today we know who will Dermot is and go through the list the Char Howard marks and on and on but when they're first starting out they had teeny tiny well and and dude let's remember the 10,000 portfolio managers who got flushed that we have never heard of right”
95% of actively managed mutual funds underperform their benchmarks net of fees over a 10-year period, meaning identifying the next Peter Lynch, Warren Buffett, or other exceptional outperformer before they become famous is nearly impossible.
“and the book is filled with all this academic research about how often fund managers underperform their Benchmark and the basic number is 95% over 10 years net of fees are not going to beat their Benchmark and so and that raises the question what makes you think you're going to find the one in 20 manager that's going to beat their Benchmark for a DEC deade”
The worst case scenario for S&P 500 equity investors in the past half-century has been a 56-57% drawdown (1973-1974 and 2008-2009), and the market recovered from both, demonstrating that broad diversification provides meaningful downside protection versus single-name concentration.
“the worst case scenario is in the past I don't know half century what do we have a 56% and a 57% crash in the S&P going back to 1973 74 and then again 0809 and it recovered”
Money is not a path to happiness, and moving from lower-middle-class to upper-middle-class wealth does produce perception changes and increased freedom, but the happiness gains plateau rather than continuing to increase with additional wealth.
“it is not the path to happiness I know across my lifetime I went from broke to lower middle class to upper middle class to like oh okay now I have enough money to do most of this crap I want to and you change your perception along the way”
Survivorship bias led economists to incorrectly believe that the average mutual fund outperformed the market until an academic study in the 1990s (circa 1991 or 1996) revealed that once failed funds were included in analysis, most managers substantially underperformed after fees.
“there's a section in the book about survivorship bias and and why for a long time we thought the average mutual fund outperformed the market it was only when this academic study was done in I don't know was it '91 or 96 something like that that we've kind of learned by the way once you back this out not only are these guys underperforming net of fees many of them are substantially underperforming”
Most investors overestimate their influence on currency and market outcomes and should not obsess over Federal Reserve policy or inflation narratives because the U.S. dollar has structural economic advantages that protect its status, and individual investors have minimal control over these forces regardless.
“the snarky answer is what are your other options you're going to go to the euro hey go buy some Chinese W and if that's too risky for you perhaps the Russ Ruble is where you want to you want to get paid in that if you want to say it's the cleanest shirt in the hamper I think that's wrong the the United States has a number of economic advantages over the rest of the world and there's a reason why we enjoy this exorbitant privilege”
All narratives—around money, Bitcoin, gold, dollars—are surrounded by stories that persist until disproven or fall out of favor, then rotate to new narratives; this is a universal pattern of how humans construct meaning around currencies and stores of value.
“I always find amusing it doesn't matter whether it's the dollar or Bitcoin or gold they're always surrounded by a narrative and that narrative persists until it's either disproven or sort of falls out of favor and then the narrative rotates”
Charlie Ellis's 'Winning the Loser's Game' principle applies to investing: most people win by avoiding losses rather than by making winning picks, similar to tennis where lower-ranked players win by making fewer unforced errors than by hitting winners.
“does that come back to just like classic Charlie Ellis I mean a lot of what you're saying sounds like winning the losers game right that as an investor avoiding those unforced errors like in tennis unless you were at the very top of the game you win by not losing and if you make fewer decisions and take fewer actions you have fewer chances to screw it up is it that simple I dedicated the book to two Charlies Charlie Ellis and Charlie Monger”
Concentrating 60% or more of a portfolio in a single holding like Nvidia is unjustifiable because the worst-case historical S&P 500 crash is 56-57% (1973-74, 2008-09) with recovery, but a single company can go to zero or suffer permanent impairment.
“we've had people say that and we fire them as clients hey we want nothing to do with that that and what happened the past two weeks is exactly why if you shouldn't have 60% of your assets in anything other than a broad index class that you know the worst case scenario is in the past I don't know half century what do we have a 56% and a 57% crash in the S&P going back to 1973 74 and then again 0809 and it recovered you don't get that with a single holding be it Bitcoin or GE or heaven forbid Leman brothers”
The United States dollar, despite inflation concerns, remains the cleanest shirt in the hamper compared to alternatives like the euro, Chinese yuan, or Russian ruble, and the US maintains economic advantages that support continued dollar dominance and exorbitant privilege.
“the snarky answer is what are your other options you're going to go to the euro hey go buy some Chinese W and if that's too risky for you perhaps the Russ Ruble is where you want to you want to get paid in that if you want to say it's the cleanest shirt in the hamper I think that's wrong the the United States has a number of economic advantages over the rest of the world and there's a reason why we enjoy this exorbitant privilege”
Modern investor mistakes cluster in three areas: (1) terrible information diet from algorithmically-optimized social media designed to provoke outrage rather than provide accurate context, (2) failure to curate trusted expert sources for diverse analytical perspectives, and (3) overfrequent decision-making that increases unforced errors.
“so I'm going to give you like a three-phase answer starting with everybody's information diet tends to be terrible right if you're an investor you're not putting your money away for next Wednesday the fire hose of noise that comes from Twitter Financial television newspaper the internet Tik Tock Instagram it's just it's a fire hose of that is not only asymmetrically timed with your needs for this money decades down the road but it creates this artifice”
The United States dollar, despite inflation concerns, remains the cleanest major currency because the US maintains significant economic advantages over other major economies, making alternatives like the euro, Chinese yuan, or Russian ruble worse choices from a currency perspective.
“the snarky answer is what are your other options you're going to go to the euro hey go buy some Chinese W and if that's too risky for you perhaps the Russ Ruble is where you want to you want to get paid in that if you want to say it's the cleanest shirt in the hamper I think that's wrong the the United States has a number of economic advantages over the rest of the world”
A dollar's primary purpose is to serve as a medium of exchange for trading hours and expertise for cash, and it needs to be a store of value only for the very short time between receipt (paycheck) and expenditure (mortgage, food, travel, investing)—it serves this function splendidly.
“what is a dollar's purpose as a medium of exchange you trade your hours and experience for money when when you're young you cha you you're trading your time and your effort when you're older you're trading your hours and your expertise and you get an exchange cash it's a medium of exchange and it needs to be a store of value for the very short time between when I get paid and when I pay my mortgage or rent buy food enjoy travel and entertainment invest in my business invest in the market and it does that splendidly”
The past is filled with rosy nostalgia and our best versions of ourselves (younger, handsomer, stronger, faster), while the future is completely framed by wishful thinking, meaning both are cognitive creations rather than objective reality.
“the past is filled with Rosy Nostalgia and our best versions of ourselves younger handsomer stronger faster and the future is completely framed by so much wishful thinking”
Rolfs is increasingly acknowledging that we know very little about what's happening in the future and even in the present, which represents a philosophical evolution from industry-standard confidence.
“coming to the conclusion holy I don't know anything about what's happening in the future and I'm having an increasing acknowledgment of how little we know about right now”
Keynes's 'money illusion'—the human tendency to think in nominal rather than real terms—is fundamentally a problem of being stuck in the past, since all our models of the world are formed from historical experiences and our brains process information with a 200-millisecond delay.
“I I have a I'll start with an anecdote and then I'll explain it I have a very Vivid recollection of the 2000s leading into the financial crisis... what ke's called the money illusion is to me really just the fact that we are traversing through time and the gray matter between our ears is filled with experiences that by definition are old in fact you and I had a conversation a couple of years ago where what you're seeing right now because of the 200 milliseconds it takes to get passed back to your brain and then the whole processing you're looking at immediate history you're not seeing the world”
The dollar's essential function is as a medium of exchange, and it only needs to serve as a short-term store of value between receipt of payment and expenditure on consumption, investment, or debt service—this modest requirement it fulfills splendidly across normal economic conditions.
“the last answer to the question is what is a dollar's purpose as a medium of exchange you trade your hours and experience for money when when you're young you cha you you're trading your time and your effort when you're older you're trading your hours and your expertise and you get an exchange cash it's a medium of exchange and it needs to be a store of value for the very short time between when I get paid and when I pay my mortgage or rent buy food enjoy travel and entertainment invest in my business invest in the market and it does that splendidly”
Inflation discussions often suffer from denominator blindness—people focus on losing purchasing power of the dollar but ignore that wages and earning power have roughly doubled over the same century, so real purchasing power for median income earners has increased substantially.
“when you go out and buy money buy something today you're not spending $1 1925 you're spending 20 $25 and this is a variation of denominator blindness where you're just looking at half the equation really this is more of a framing issue hey if the dollar has fallen that much how much have wages increased over the same period it's double entry bookkeeping if you're concerned about purchasing power what happened with your earning power and once you look at it that way you're better off today you can purchase more Goods more services Beyond mere survival today with a median income than you could have done a century ago”
The past is filled with rosy nostalgia and idealized self-remembering while the future is entirely framed by wishful thinking, meaning that to ground decision-making you can only rely on the present moment.
“the past is filled with Rosy Nostalgia and our best versions of ourselves younger handsomer stronger faster and the future is completely framed by so much wishful thinking yes that all of these things are cognitive Creations arguably time is a human construct there is no past there is no future there is only the immediate Here and Now”
Leaving law to switch to trading eliminated Ritholtz's sense of agency as an attorney—where his research contributions were underutilized and he received no feedback—and money ultimately mattered to him as a path to freedom from that sense of powerlessness rather than as wealth per se.
“I got to sign something on a Friday afternoon I have to have this Monday morning at 8:00 a.m. kills my weekend I bust my ass turns out that having really good research skills is is a not an asset in a law firm someone hunted me down and like Ral can find that crap and so I handed the assignment in on a Monday morning and then don't see that lawyer for like two weeks and when I finally bump into her again hey I didn't get any feedback on the piece how did it go oh I haven't read yet and that's just a debilitating sensation of oh I'm her”
Lack of agency—being subject to the whims of others and unable to control one's work or decisions—is psychologically debilitating and a major driver of career dissatisfaction, often worse than actual financial constraint.
“I I got to sign something on a Friday afternoon I have to have this Monday morning at 8:00 a.m. kills my weekend I bust my ass turns out that having really good research skills is is a not an asset in a law firm someone hunted me down and like Ral can find that crap and so I handed the assignment in on a Monday morning and then don't see that lawyer for like two weeks and when I finally bump into her again hey I didn't get any feedback on the piece how did it go oh I haven't read yet and that's just a debilitating sensation of oh I'm her I didn't realize that I am just a a a you know a grunt worker I'm the lowest rung of the totem pole and I have to rethink my career because I can't do this crap”
The market crash where Ritholtz had the most at risk—the COVID crash in Q1 2020—was the one where he felt completely blasé, whereas earlier crashes with smaller stakes felt terrifying, suggesting that experience and perspective matter more than percentage losses for emotional response.
“the shock was the crash where I had the most at risk mattered it was just like yeah this is what happens get oh is this a surprise you know markets go up and down it's not just one way is”
Career risk and income uncertainty in early career stages are more psychologically damaging and economically significant than portfolio losses, because losing a job or career path threatens survival while portfolio losses are typically recoverable.
“when you're in your 20s and 30s and you have no idea if your career will work out and how it'll work out the stress of not knowing is really substantial and the best part about launching our own firm and having a sense of agency and control is that you're no longer subject to the whims of third parties”
Young adults carry greater stress from career and income uncertainty than from market volatility, and this career-stage risk dominates financial decision-making in early years more than portfolio losses, making financial security less about asset values and more about employment security.
“I think you're when especially when you're younger you're probably more at risk for your income and your career than what's actually happening in the market and when you're older yeah you understand the cycle a little bit but the cycle and and how temporary these things tend to be but you also become a little more self-confident in your own skills to navigate this and more secure in where you are professionally”
As people age and accumulate wealth, they become less emotionally affected by short-term market crashes because they have experienced previous cycles, understand that markets are cyclical, and possess greater financial security, making them rationally capable of holding through volatility even when exposure to risk is highest.
“you know as you grow and mature and go through life experiences hopefully you pick a few things up along the way and and one of those things is everything is a cycle you've seen this movie Before You Know How It Ends the solomonic phrase this too shall pass is very much in in your head and so the shock was the crash where I had the most at risk mattered it was just like yeah this is what happens get oh is this a surprise you know markets go up and down”
Bitcoin should be understood as a technology stock valued between Google and Facebook, not as a currency or new asset class, and narratives surrounding Bitcoin shift cyclically—from anti-government story to deflationary hedge to inflation hedge to financial adoption—without fundamental changes to its actual use case.
“Bitcoin isn't a new asset class it's not a currency think of it as a technology company somewhere between Google and Facebook it's a little bigger than meta it's a little smaller than alphabet you know at at 90,000 and it's way below that today but at 90,000 it's 17 or6 trillion more than Facebook less than Google”
The narrative surrounding Bitcoin has rotated through approximately a dozen different framings (deflation hedge, inflation hedge, financial adoption story, etc.) over 15 years, each persisting until disproven or falling out of favor, demonstrating that all currencies and assets are surrounded by narratives rather than fundamentals.
“it's private and nobody can track that eventually one a few people got arrested the FBI has figured out how to track it that narrative changed and it rotated we went from narrative after narrative it's this is deflation Bitcoin is a hedge then it's inflation Bitcoin is a hedge and then once the world of Finance started to adopt it hey you have to own this because this is going to be embraced by finance and so we've had I don't know dozen different narratives over 15 years”
Money is not a store of value; it is a medium of exchange whose greatest purpose is to free you from activities you don't want to do and allow you to focus your effort, time, and energy on what you want.
“money is a tool it's not a means to an end it's not an end goal itself it's not how we measure our success or failure let me just give you a few things that money is not it's not a store of value it is a media of exchange it is not the path to happiness”
Many investors feel a lack of control over their financial lives because they read headlines about Federal Reserve policy and money printing, but this perceived powerlessness is partly an illusion—their focus on external monetary policy distracts from actionable personal financial decisions.
“I think a lot of folks a lot of investors feel like a lot of this is out of their control because they read all the headlines about what the FED is doing and we're printing too much money and now we're going to save all this money do we get too caught up in what these externalities are because there's only so much we can do about them both as just individuals and as investors”
Money is fundamentally a medium of exchange, not a store of value, but it must function as a short-term store of value (from payday to rent payment) in order to be useful as a medium of exchange—collapsing these two timescales creates conceptual confusion.
“what is a dollar's purpose as a medium of exchange you trade your hours and experience for money... and it needs to be a store of value for the very short time between when I get paid and when I pay my mortgage or rent if you're a renter buy food enjoy travel and entertainment invest in my business invest in the market and it does that splendidly”
Data targeting and advertising technology in the United States is less restrictive than in Europe (GDPR), allowing platforms to tie user browsing history, credit scores, social media behavior, and preferences into individualized psychological profiles for precisely targeted advertising.
“the technology is such that we can track not only what you're watching but then we could tie it to your credit score and your internet browsing habit and what you like and and you have an a profile at least in the United States Europe is a little more aggressive about stopping that where they could really tailor ads that are specific and effective for you”
Rolfs' wife joked about how broke they were when first married, and his decision to switch careers from law to finance created significant career uncertainty during their 20s and 30s, but the stress of career uncertainty and not knowing if his career path would work out was substantial during that period.
“my wife and I um were joking about how broke we were when we were first married she's like I thought I was marrying a lawyer you you declared you're going to switch careers a few years later all right... when you're in your 20s and 30s and you have no idea if your career will work out and how it'll work out the stress of not knowing is really substantial”
Investors should build a personal team of trusted expert sources in specific domains (market structure, market cycles, real estate, economics) who are consistently correct over time, understand data context, and distinguish between ephemeral noise and important signals.
“create a team of experts and the nice thing is you don't have to pay them you don't have to put them on the payroll so Dave is my market structure ETF expert Sam row is a person who puts in the market cycle into into context Jonathan Miller understands residential real estate better than anybody and go on and on Ed yini and Ed Heyman in economics I mean uh I have a list of of a dozen and what all these people have in common is is it's not just a one big outlier call they got right they are consistently much more right than wrong over time they have a defendable process but they understand the context of where all this data comes in they know what's right and important and what's ephemeral and meaningless”
The first job of the investor is to understand reality as it is, not as desired, because market feedback loops are short (delusional beliefs get disproven within a year or two) while political feedback loops are long (bad policy takes decades to harm), making investing inherently better at forcing reality-checks than voting.
“Ray Dalo the first job of the investor is to understand reality as it is what makes investing so fascinating and so different from politics if you vote for the wrong guy and this guy eventually Cuts your Medicaid and 20 years later you need an operation that you can't afford hey that's a long slow feedback loop if you go into the market with a delusional idea and it doesn't have to be that the world is flat it just has to be that hey this lockdown is going to last for decades and I'm going to load up on peltin and DocuSign you find out pretty quickly”
Overconfidence and lack of humility are epidemic in Wall Street and financial professionals who operate in fake-it-till-you-make-it environments, when instead the field needs to emphasize what we don't know and limitations of confidence.
“I think this is a big philosophical shift that you don't hear on Wall Street and finance people in general kind of come up in a fake it till you make it environment that's 180 degrees away from we need a little humbleness we need a little humility”
The probability of U.S. dollar collapse has ticked up slightly from nearly-zero to marginally-higher due to geopolitical and economic shifts, warranting some awareness but not panic, as it remains a tail risk rather than a baseline scenario.
“it's not that a recession is imminent but I had written a piece a week before saying just tune out all this noise this is all garbage and I woke up on sun morning thinking I don't want anyone thinking I'm too Blas so here are areas where risks are rising and one of the areas was the collapse of the dollar is still at this moment highly unlikely but the probabilities of that happening have ticked up a little bit and you should be aware of it”
Money market funds performing at approximately 3-4% have allowed Ritholtz to maintain liquid cash for vacation property purchase while remaining effectively ahead of inflation, demonstrating that short-duration cash instruments can fulfill the store-of-value function adequately for the time horizon between income and deployment.
“we've been shopping for uh a vacation property for a couple of years and I've been putting money in a money market fund because all I wanted to do was have liquid cash that wasn't falling behind inflation and for most of the past 5 years it did that even with this inflation Spike I'm still effectively ahead of where I would have been had I just left that sitting around in dollar bills”
Bitcoin should be understood as a technology stock (valued between Google and Facebook in market cap) rather than as a currency or new asset class, and viewing it this way clarifies its poor performance as a medium of exchange and store of value.
“Bitcoin isn't a new asset class it's not a currency think of it as a technology company somewhere between Google and Facebook it's a little bigger than meta it's a little smaller than alphabet”
The financial advisory and wealth management industry encourages Rolfs and his peers to be confident and make strong calls ('fake it till you make it'), but the book advocates the opposite philosophy of humility and recognizing what you don't know.
“you know me long enough to know that humility probably isn't the first word that leap I was going to say you're an odd messenger for this message but what's so funny about this is like coming to the conclusion holy I don't know anything about what's happening in the future and I'm having an increasing acknowledgment of how little we know about right now”
Bitcoin's price volatility and historical losses (e.g., people losing access to passwords) make the 'bought 15 years ago' returns chart misleading because the actual experience of individual holders includes catastrophic losses that aggregate returns obscure.
“I love these charts if you would have bought Bitcoin 15 years ago here's what it's worth all right now explain to me the guy who lost $100 million because he can't find his password so the all the numbers are always misleading”
Rolfs' firm (Rolfs Wealth Management) manages a couple of billion dollars in assets, meaning his personal wealth is directly tied to market performance.
“I'm the big owner in rol's wealth management and you're a couple of billion dollars in assets”
Recession probability is currently unlikely, but the probability of dollar collapse has ticked up 'a little bit' from negligible levels, and investors should be aware of this tail risk even while it remains improbable.
“it's not that a recession is imminent but I had written a piece a week before saying just tune out all this noise this is all garbage and I woke up on sun morning thinking I don't want anyone thinking I'm too Blas so here are areas where risks are rising and one of the areas was the collapse of the dollar is still at this moment highly unlikely but the probabilities of that happening have ticked up a little bit and you should be aware of it”
Algorithmic targeting technology allows companies to track not only what you're watching but also to tie that to credit scores, internet browsing habits, and preferences, enabling hyper-personalized ad targeting that is highly effective.
“the technology is such that we can track not only what you're watching but then we could tie it to your credit score and your internet browsing habit and what you like and and you have an a profile at least in the United States Europe is a little more aggressive about stopping that where they could really tailor ads that are specific and effective for you”
European regulatory frameworks are more aggressive than US frameworks in restricting algorithmic profiling and targeted advertising, suggesting different approaches to protecting consumer privacy from technology companies' data exploitation.
“the technology is such that we can track not only what you're watching but then we could tie it to your credit score and your internet browsing habit and what you like and and you have an a profile at least in the United States Europe is a little more aggressive about stopping that”
Ray Dalio's economic machine framework treats the economy as a deterministic system with interacting components (credit cycles, productivity growth, deleveraging) that can be modeled and predicted.
“credit cycles, productivity growth, and deleveraging all interacting”
Human beings experience wealth in three phases: accumulation (when young, trading time for money), maintenance (middle age, when cash is at risk), and distribution (retirement, when drawing down wealth), and this pattern reflects both financial reality and psychological shifts.
“the standard answer which is technically correct but I don't know how useful it is is we go through three phases of accumulation maintenance and distribution... when you're young you trade your time for money and experience as you get a little older and have some expertise you start making a little more money now you actually have cash at risk you have a 401k may have a mortgage and then as you get older you move from that maintenance era to the distribution era”
Money market funds in low-return environments (like the past 5 years of low rates) can still beat inflation and serve as effective short-term holdings for capital earmarked for specific purposes.
“we've been shopping for uh a vacation property for a couple of years and I've been putting money in a money market fund because all I wanted to do was have liquid cash that wasn't falling behind inflation and for most of the past 5 years it did that even with this inflation Spike I'm still effectively ahead of where I would have been had I just left that sitting around in dollar bills”
Rolz's book 'How Not to Invest' is approximately 100 chapters of short nuggets identifying biases and mistakes, with 90% of the book focused on avoiding errors rather than identifying opportunities.
“in the book which you know is is great people should go buy it it's I don't know how many individual sub chapters and sections are but it's like 100 it's like hundred of them you go short really short these sort of nuggets of like here's a bias here's a thing people get wrong here's a reason for it”
Rolz's clients sometimes ask if they should allocate 60% or more of their portfolio to Bitcoin or individual concentrated positions, representing a fundamental misunderstanding of portfolio construction and risk management principles.
“well we've had people say that and we fire them as clients hey we want nothing to do with that that”
Humility is not naturally associated with Rolz's public persona, but he has come to the realization that knowing what you don't know is more important than what you do know, creating an ironic messenger for a humility-based message.
“you have to be humble you have to recognize what you know and and what you don't and Dave you know me long enough to know that humility probably isn't the first word that leap I was going to say you're an odd messenger for this message but what's so funny about this is like coming to the conclusion holy I don't know anything about what's happening in the future and I'm having an increasing acknowledgment of how little we know about right now”
Research skill in professional contexts (like law firms) is not always valued or rewarded despite being useful, leading to career misalignment where competence doesn't translate to success or satisfaction.
“turns out that having really good research skills is is a not an asset in a law firm someone hunted me down and like Ral can find that crap”
How Not to Invest presents approximately 100 short nuggets of behavioral biases, investment mistakes, and reasoning errors, with 90% of the book dedicated to avoidance strategies ('don't do this') rather than positive prescriptions.
“it's like 100 it's like hundred of them you go short really short these sort of nuggets of like here's a bias here's a thing people get wrong here's a reason for it”
Zeke Faux's book 'Number Go Up' provides a terrifying and eye-opening account of Bitcoin and related financial dynamics, according to Rolfs' assessment.
“there's a great Paul Graham quote... Zeke Fox's book number go up is just terrifying an eye opening”
The podcast episode is branded 'Rabbit Hole' and features Dave Natic as host interviewing guests about investing and financial thinking.
“welcome to Rabbit Hole I'm Dave natic I've got Barry rolz with me he's got a new book out which we're not going to let him talk about till the very end”
Barry Rolz is the author of 'How Not to Invest: The Ideas, Numbers, and Behaviors That Destroy Wealth and How to Avoid Them' and is a wealth manager with three decades of experience as a trader, strategist, and financial advisor.
“Barry uh tell us a little bit name of the book where they can get it what's the best way for them to buy it sure so I just happen to have a copy right here how not to invest the ideas numbers and behaviors uh that destroy wealth and how to avoid them it's a combination of really interesting stories interwoven with indepth academic research that I've been consuming for decades along with you know three decades of being a Trader strategist and wealth manager”