Introduction

Patrick: [00:01:21] My guest this week is one of the reasons this podcast exists because he helped me find an audience several years ago. I sent him a research piece, which he kindly shared with his rapidly growing follower base. Today, he is the avatar for the next generation of investors. His story reads like a myth, trials and tribulations, reformation, transformation, and a commitment to share what he has learned. Josh Brown, and I discuss his journey and have a lot of good laughs along the way. You can find show notes for this episode at investorfieldguide.com/Brown. In this episode, I ask the most important question first, so please enjoy.

Top 5 Dead or Alive

Patrick: [00:01:55] Yes.Josh, thank you so much for doing this with me by far, the most common question people wanted to know is in the world of hip hop rap, top five dead or alive.

Josh: [00:02:09] This is where we're starting?

Patrick: [00:02:11] Yes.

Josh: [00:02:11] All right. Dead or alive.

Patrick: [00:02:13] Yeah, of course.

Josh: [00:02:14] I mean, that makes it easy. Everyone's one and two has to be either Big and Pac.

Patrick: [00:02:18] Yeah but who's one?

Josh: [00:02:19] Well, I'm from the East coast, so it's Big. I respect the Pac arguments they're wrong, but I respect. I think you have to round up the top five with East Coast though. I think you have to keep it real. It's where it started. KRS and Mc Hammer, easy. The fifth slot's a little bit tougher. I typically default to Jay-Z.

Patrick: [00:02:40] Jay-z.

Josh: [00:02:41] It's a crowd pleaser to end with him, but I will say six through 10 is harder than one through five.

Patrick: [00:02:48] How about right now? Maybe top two.

Josh: [00:02:50] Who I'm listening to a lot?

Patrick: [00:02:52] Yeah.

Josh: [00:02:54] I'm not that far-field, I guess, in the mainstream, I'm listening to Kendrick and Kanye a lot, but some of the newer guys are really interesting to me. I think maybe the most fun rap record to have come out this year is by DRAM. A lot of people know the track he did with Yachty called Broccoli, but the full record, that's a fun record … We don't really make hip hop records anymore that are fun. The top selling rap record this year is Drake, which is the most depressing thing. I don't hate it, but it's mopey as hell. This is the polar opposite, it's live instrumentation. It doesn't make you want to kill yourself. There's a lot of new stuff coming out. I think the hurdle is higher for any of the new guys to ever break in. When you ask somebody top five live or dead, I don't see how somebody that comes out now, ever end's up in that list.

Patrick: [00:03:46] Well, it's like classic rock, right? The origin …

Josh: [00:03:49] It's the same paradigm.

Patrick: [00:03:49] People that were the trailblazers. It's just going to be hard to beat that paradigm.

Josh: [00:03:54] You could say, Pearl Jam is awesome. I love Pearl Jam, but you're not going to kick the who out of the top five. You know what I mean?

Patrick: [00:04:00] Right.

Josh: [00:04:01] I mean, you can, I guess, but you're going to get side long glances.

Patrick: [00:04:05] I think it's an interesting question because it's the question that gives people an opportunity to give an answer that says something about themselves versus what the actual truth is. Some of those you listed, I love and-

Josh: [00:04:17] Wait, but that's an interesting point. If you asked the question differently, who are your five favorites? When someone says top five, like Chris Rock movie, top five. Are you asking me who are my five favorites? Because that's different list. I have Tribe in my top five, if we're going to do it that way. But if you say definitively who are the best, un-objectively.

Patrick: [00:04:41] That's a matter of preference, right?

Josh: [00:04:43] But it can't be, we have to be objective.

Patrick: [00:04:46] I don't know.

Josh: [00:04:46] Jay-Z is not my favorite rapper, but I think he has to be in the top five list .

Patrick: [00:04:51] Quickly five favorites.

Josh: [00:04:52] I mean, this is going to sound crazy, but it's DMX, it's Eminem, Wu Tang clan, I can pick four or five of them. Big Daddy Kane who would not be in anyone's list of top 10 MCs. But for me he's a top five. It's harder.

Patrick: [00:05:12] I went through my Spotify list just figuring the answer that way to make it objective for myself. Not who I think and I want to say but who actually has the most on my big rap list and it was NAS was number one, Eminem was two, Tupac was three, Outkast was four and The Roots were five, which is a very different list.

Josh: [00:05:30] Oh men, Outkast. This gets really hard. You're going to get dragged for this because this is the whitest discussion of top five MCs maybe that's ever taken place.

Patrick: [00:05:37] I have ways for doing it.

Josh: [00:05:39] I'm from Long Island you're from Connecticut.

Patrick: [00:05:41] Minnesota originally even whiter.

Josh: [00:05:43] Even worse this is going to be tough. I might have to call some backup and get some help defending this.

The Reformation

Patrick: [00:05:51] Like I said, it's one of those questions you can lie about to make yourself sound better. That certainly doesn't seem like your personality. I would love to hear, because I've actually never heard it from you in person the story of your reformation, so to speak. Maybe the threshold crossing moment when you went from let's say a world where there were a lot of what you feel now and probably felt then or bad practices in the advisory space and the investing space to really being fed up and totally changing course.

Josh: [00:06:21] To the extent that I'm able to talk about myself without hating it, I can definitely tell stories about the way I used to do things which was all wrong. My book was about here's every mistake I've made and why I didn't realize until later that they were mistakes. Not to self aggrandize, it took me, let's say 10 years to realize that I was doing this business the wrong way. I feel it would have taken a smarter person three years, one year. I'm not thrilled with myself that it took so long to say, all right, this is counterproductive. It's not great for the clients, terrible for my own psyche. It's not helping anyone. It makes no sense. It took me a really long time, but I hope that I've made up for that because once I realized I didn't keep it to myself, I came out pretty publicly.

Patrick: [00:07:15] Guns blazing.

Josh: [00:07:16] Yeah, listen, I said the truth and by the way, it's not that I was so courageous. I really didn't have anything to lose. It was late 2008 … Actually my eighth blog-versary is this week. But I was in a place where my career was basically over, not over because I was like, had a problem business wise. I just didn't want to do it what I was doing. I was in this really, really negative place. The world was coming to an end anyway, in financial markets. There probably weren't huge consequences for me to tell the truth. In hindsight, obviously it saved my life and it gave me a career. I don't look back and say, "Oh, I wish I would've come to my senses sooner." It is what it is.

But the silver lining is that I had a front row seat for everything you're not supposed to do in investing. I literally watched … We tell brokers who I would say are the worst investors for the most part, not every retail, but the ones that I watched, these are guys that regional firms were third tier broker dealers doing a lot of investment banking business. The clients were even worse in most cases. The clients were really into gambling and short-term speculation. Just that toxic combination of clients who have the wrong idea about what to do with their own money brokers who have a conflict embedded in how they get paid and also have their own gambling issues. Just watching that over the course of a few years pre-crisis and then during the crisis. The silver lining is I'm going to make other mistakes, I'm not going to make those. They're classic, the things that really destroy people's net worth some of the stuff that I saw people do.

Patrick: [00:09:03] I'm curious how you could tell this story via the composition of your portfolio. What did your portfolio look like in 2005, six and what does it look like today? Was that a 180 transition or was it gradual?

Josh: [00:09:21] Yes, it's more than 180. It's a different sport. When you're a retail broker and you're primarily working with clients who are high net worth and high risk tolerance, and what they really hired you for is to help them beat the market. To help them generate massive above average gains. The problem with that is that they expect that it's something that could be done consistently. When you're trained by people who train you to believe that's possible, it takes a while to realize, I see what's going on. This is a loser's game. This is work with a client. Try to give them what they're asking you for. It's not a possible thing. Doesn't work out, work with the next client, work with the next client. So a bull market.

Let's say from 2002 the low to 2007, you could do it. It could work. You could buy what you thought were good stocks, try to buy them with catalysts coming up. Try to own a few of them. By few like seven or eight per account. You'll always have one doing really badly or two or three. Then you'll always have one or two or three doing really well. You'll take profits where possible, you'll average down into the losers. You'll have a really big winner and the client will send you the rest of their money from the other five brokers who had blown up. But until you get into 07', early 08', when real things start to blow up outside of your portfolio, things like Bear Stearns going away. Then all of a sudden you realize, I made this client money for four or five years.

I lost it all in two months, everything that I made for them. They want to still play this game, but I can recognize this game is not working and has nothing to do with me, my skill, my intelligence, no one can actually do this. At that point I stopped listening to the analysts. We would have a meeting, we had guys covering stocks, gals, guys, whatever, come out and say, all right, here's the deal. These are the stocks that are going to get killed less. We're going to recommend these this month. Literally, that was … But that's what forced me to look outside for information, information that I never had. I don't have an MBA. That's when I started reading blogs. I started reading Barry Ritholtz and Barry's take on the financial situation, the housing mark, all of that was diametrically opposed to what Wall Street was saying and to what the analysts in my firm were saying. That was a really big turning point. My portfolio now is night and day from the way we were managing the accounts back then.

Patrick: [00:12:08] I know you are all proponents of low costs probably is the common denominator, but personally, are you almost all indexed? Do you still pick stocks?

Josh: [00:12:19] My retirement portfolio, my 401k is the same models that our clients have. We think that that alignment is really important, but then for fun, I have an IRA, a SEP-IRA, and I buy Blue-chip stocks and I try not to trade. The general idea with that portfolio is, and this is how I learned about the markets to begin with. The general idea is that through owning individual stocks in different sectors and following what's going on with them, it gives you a better feel for what's going on in the broader market, the economy. But the real money that I will make and hopefully the real money that I'll pass on to Mike will be in the same portfolios that we recommend to people, because it's what we believe it's our investment philosophy.

Patrick: [00:13:06] It seems very prudent, but sometimes the individual stocks, that can be a little more interesting and fun and great way to stay abreast of what's going on.

Josh: [00:13:12] I do mean like … My kids are learning the market through individual stocks. One of them, I bought Disney for and then the other one I bought Under Armour for it's his favorite brand. It's not about whether they go up or down. I think that that's the best way to learn investing it's with individual stocks. It gives us a reason every week, okay, let's go check the news on Disney. Let's go check the latest price, moving on Under Armour. Then through that prism, I could explain things about what's going on with the stocks. I think they're learning the market that way. It's more fun way to learn.

Patrick: [00:13:49] I'm curious when you're teaching them or talking about the stocks, do you get into the business model side of things? Do you say, okay, here's how Under Armour makes money. This is how you should think about it.

Josh: [00:13:57] Totally because the goal of it is not, my seven year old's shares of Under Armour are going to change our lives. The goal is by the time he's eight, nine, 10, he can fluently speak the language of investing. I didn't have that when I was 10 years … I knew baseball cards and I had a good idea of supply demand for comic books, which was cool. We're going to do it with stocks in our house. It's a cool experiment. We'll see what happens. I hope they don't both become hedge fund managers or anything as a result of it

Role of Advisor

Patrick: [00:14:31] We keep hearing the same thing over and over again. Now that you've got a lot of experience on the advisory side, that the role of the advisor has been squeezed out of investment management and into planning and say behavior, relationship management. I'd be curious to know-

Josh: [00:14:46] I don't know that that's true. I know that the media sees that. I don't know if that's really true though.

Patrick: [00:14:52] This is what I want to dig in on. What aspects of what you do with clients, or just more generally speaking, that financial advisors can do is future-proof. Meaning like right now, a good financial planner's definitely worth their weight in gold, but certainly with technology 10 years, 20 years from now a really good question here is probably going to be able to get you a lot of what a financial planner could get you today. I'd be curious to the extent there are things that are future proof in the advisory space, what you and you think other advisors can do now that will still be very valid in 10 years.

Josh: [00:15:29] I think it's important first to say that financial advice is one of the oldest industries on earth. I mean, you can go back to the old Testament, when the Pharaoh was having a dream and he needs it interpreted and it's about the economy. I think anything that's that long lived, people are always going to have money. New people that aren't used to having money are always going to get money. Those are the people that are going to need advice and advice is not, should I buy Coke or Pepsi into the earnings, or is the Small Cap 600 index better than the Russell 2000? That's not advice. That's tactics and it's interesting. Yes, there will be differences between whether you recommend one or the other. There will be different investment outcomes, but that's not going to help anyone.

I think what does help people is having an advisor they have a relationship with. I'm not sure how that's replicated by technology. It definitely can be helped by technology, which is one of the things that gets us very excited here. I look at us as very progressive about incorporating tools into the practice to help us be better advisors or to enable us to scale. I mean, that's really what I see all of these tools and the best way I've heard this described is TurboTax being a good metaphor. When TurboTax first came along, there was the same idea that's it? No more accountants. There are more accountants than ever right now. They're all using TurboTax or a competitor of it.

It enables them to do work quicker, more efficient. The way the custodians describe this concept to the advisors that work with them, is they say, and I think this is true. They say standardize the process, but customize the advice. By definition, you can't give advice to someone with software. It's a human component. However, if you can take a lot of the tasks that are time consuming and not fiduciary tasks, frankly, if you can remove them from the process by standardizing them and using technology, I think you can give better advice to more people. You can broaden the types of advice that you're giving out.

Patrick: [00:17:43] What do you look for in people that might be working at Ritholtz with you and an investor and potential clients. Are there things that you screen for or screen against, maybe a negative thing?

Josh: [00:17:56] I had to learn this relatively recently in the last five years, because as a broker, you're taught to just take money from anyone that would give it to you. Then when somebody calls and says, "Hey, I was reading Barron's and I really like healthcare for 2017." No problem. I'll find you some healthcare stocks. Let me see what our analyst's like, let me see what the traders are buzzing about. This is the other way around. Rick Edelman likes to say … Rick Edelman founded one of the largest financial advisory firms in the country. He likes to say, "No, this isn't Burger King. No, you cannot have it your way." If someone comes to us and they've got a really specific sense of what they want their portfolio to be, it's really tough for us to turn that situation around and explain to them, no, no, no.

We have to figure out what you're trying to accomplish with your money and what your risk tolerance is and what your priorities are. When you'll be using the money, what your tax rate is, inflation, all of these, we have to figure that out. Only then frankly, are we equipped to have a conversation about your portfolio. Look, I'd rather talk about Nvidia and Adobe and all these stocks. I'd rather do that too, but that's not really what we're trying to accomplish here. We're looking for people that understand that from the get go, and that's both advisors and clients. The second thing is there are probably a lot of people that were not a good fit for, and that sounds anathema to my industry. Some say asset gathering, that's the … We would never be able to grow at the rate that we're growing.

If we were just saying yes to everyone, because by taking on clients who have expectations that differ from what you can actually deliver, you actually impede your own growth. You impede your ability to service the good clients, because you're trying to change the bad clients and not bad in the judgmental sense, but bad because they're bad fit. I think learning that lesson was a really big turning point for me professionally to just say like, all right, this is what we do. We're really good at it. We only want to do it for people who a, want it. B, understand the value of it and that's not everyone. Somebody that comes along, hey, I have $5 million I'll give you half a million of it let's see how you do against this other hedge fund I own and this other advisor. We have to say, no, thank you. Every time we do it, there's a benefit in our favor. We have more time to do the work that we actually want to do.

Patrick: [00:20:23] Did you see it actually happen? Were you taking those in the early days of the advisory business?

Josh: [00:20:28] No, but we had some really close calls with people like that because when you're just getting started, you're like, "Hey man, I got to make money." How are we going to get this practice off and running if we say no to everyone? Actually my partner, Barry, we had a really, I think this was like a formative moment where … Barry's not an advisor, Barry's the strategist, the firm, I'm the advisor at the time. This is before we launched the firm and we get a call from someone, nice guy. Barry, I've been reading your column for seven years. I just inherited, I think the number was 5 million. I could be wrong. I just inherited $5 million. Here's what I want to do. I want to give you and four other advisors, a million dollars each.

I want to judge you for a year to see how it goes. Then whoever does the best for me gets all of the 5 million. I don't know if he meant just performance. Does the best, maybe the relationship is, but Barry said … Barry over here is me having this conversation and he basically takes the phone. If you know Barry you know what I'm telling you. He basically pulls the phone out of my hand. He's standing over me, I'm literally facing his crotch because I'm sitting in the seat and he's just right in front of me. He basically lays down a little bit this guy says, first of all, if you're a fan of mine, I appreciate it. That's why I'm willing to even say this to you.

I want you to know you are setting up the world's most fucking retarded incentive system like imaginable, because think about it. You've got five guys. They know they have a year, they're all swinging for the fences because if they don't win, well it wasn't their money. They had nothing to lose. If they swing for the fences and win, which is very probable, then they've got the whole 5 million. Just hearing him be that blunt and saying that to someone, and in my shoes at the time, I'm like, dude, that's a potentially … That's a penta, what they call penta-millionaire. That's a penta-millionaire you're talking to like that. If I'm not mistaken, the guy came back and said, thank you at some point later. We didn't take the-

Patrick: [00:22:37] He learned the lesson somewhere else?

Josh: [00:22:38] Maybe I don't really remember how it ended, but it was just that point that you've got to say no, because if you say yes and you try to be conservative with that client and do what you know is the right thing. You're wasting your time because one of the other four, they're going to do some wacky thing. They're going to put 25% on Amazon and it's going to hit. You wasted your time. If you do the wrong thing, well you're just violating everything about yourself that you said were your principles, and that's obviously not an option with me. I learned a lot from just the bluntness of how that was explained. I think that definitely was formative.

Patrick: [00:23:20] What are some things, very specific things that don't feel like work to you, but that other people from the outside looking in seem like hard work?

Josh: [00:23:29] Well people say like, how do you guys have so much time to write? Or how do you guys have so much time to put up all this great content? I think from the outside looking in, it seems like it's a lot of work to do it. That's fine. But one of the things about me is that this is investing and becoming a better investor is definitely my passion. I don't do fantasy football. I don't do square dancing lesson. This is what I do. I wake up, I read about markets. I read about investing all day, go home, play with my kids. They go to sleep. Maybe the game is on, but I'm probably reading even more. All of this by the way is not in an effort to produce content. It's in an effort to get smarter and to learn more.

The fact that I can do that publicly and take people with me on that journey, I think has been behind the success of the blog. My blog is not, "Hey guys, I'm 39 years old. Here's how the world works." My blog is, I don't know a lot about this topic. The market seem to be really focused on it. Here's some things I'm reading today maybe you'll find them interesting too. That's a very, very big difference between that and the newsletter guys who are like, here's, what's going to happen.

Patrick: [00:24:41] Here's the truth.

Josh: [00:24:43] Here's what the world is keeping from you. I think that shtick works to sell subscriptions. I don't think you could sell a subscription to what I do on the blog, but I think it's probably 10 times more valuable for the readers, because a, I'm a little bit more open-minded. B, from day one, I've said, this is all about me trying to get better at investing. That's it. It's not about me telling other people what to do with themselves.

Social Media

Patrick: [00:25:06] If you had to characterize yourself as one company, what company would you characterize yourself as and why?

Josh: [00:25:13] That's a really good question. In terms of my personality or in terms of?

Patrick: [00:25:17] Interpret it however you want.

Josh: [00:25:18] Well, what's your answer to that?

Patrick: [00:25:19] I don't have one. I just thought of this question.

Josh: [00:25:21] Can I do you, and then I'll do me?

Patrick: [00:25:24] Sure you mean you're going to characterize me as a company?

Josh: [00:25:26] Yeah.

Patrick: [00:25:26] Sure. Go for it.

Josh: [00:25:27] I'm going to say you're like Google.

Patrick: [00:25:29] I'll take Google.

Josh: [00:25:30] Well, do you want to know why or?

Patrick: [00:25:31] Of course.

Josh: [00:25:32] Or we're just going to have dead air?

Patrick: [00:25:33] No enlighten me.

Josh: [00:25:34] Because I would say that you have this book list and I think you're reading a book every three hours.

Patrick: [00:25:40] Something like that.

Josh: [00:25:41] I forget how many books … I read your spreadsheet. I think you're up to hundreds of books this year though, is that real?

Patrick: [00:25:47] It's probably about a hundred a year.

Josh: [00:25:49] All right. That's insane. You're like indexing the world's information in your brain. So I think you are like Google. I don't know, I guess I'm Twitter, isn't that the obvious?

Patrick: [00:25:57] All right, that's too obvious. What's second place?

Josh: [00:26:00] I don't know, Yum! Brands. You can often find pizza, fried chicken and tacos inside of me at the same time. You've ever been to one of those, trip with the kids ?

Patrick: [00:26:11] Yes.

Josh: [00:26:11] I think maybe I'm Yum! Brands.

Patrick: [00:26:13] I mean, you're definitely Twitter, I guess that's maybe an obvious answer I should've expected. Talk a little bit about that. I mean, you're the exemplar in our business for using it probably mostly for good and for spreading some of the things that you've learned. I mean, why this nonlinear explosion of attention that you get, what do you think it is about what you do that has so many people interested?

Josh: [00:26:37] I'm going to keep it real with you, Patrick. I don't know. I really don't. I don't know what … Look, I've obviously found my voice on the platform, but I obviously put a lot of time into it too. I don't think it's like, oh, I was born to tweet because I was born in 1977. It would be a good 30 years before my platform of choice came along. I think there's a couple of things. There's an element of right time, right place. I think I started on Twitter in 2009 and there were probably 20 people talking about investing there. That helps of course.

Patrick: [00:27:12] You're a founder.

Josh: [00:27:13] Because then Twitter gets hot and Barron's and Wall Street Journal, and Time Magazine have all named me, one of the top people to follow, which is great. I like to tell people that, but then … I was one of the only people to follow at that time also, but whatever, I'm still here and I'm still making the list. So that's good. I think by the way, DJ Khaled on Snapchat, it's the same.

Patrick: [00:27:35] Right. Right place, right time.

Josh: [00:27:38] Shout out to Khaled and no offense, but that content is garbage. I like his music. His Snapchat is garbage. There's nothing going … It's I'm getting a haircut. Haircuts are major key. Get outside I'm watering my plants. We the best. I've watched enough of it to be able to realize, no, I'm not missing anything. He's just early. There weren't a lot of rap guys and it built a young audience. The young audience likes his music. I like his music. I think there was some element of that. I wasn't watering my plants on Twitter or whatever. I was trying to have substantive conversations. I'm sure my early tweets are embarrassing. I don't go back and read them. I mean, why would anyone.

I think there's some element of that, but then the other thing is I don't fight on Twitter. I made this decision five years ago, maybe, because I would see people, I respect like Cliff Asness and amazing … Doug Kass, who's always been total mensch to me, a really nice guy. He's in a Twitter fight every day. Now I know it's his fault. Three years ago I would have been like, "Hey, leave Doug alone." He wants it. He loves it obviously. But I watch these guys who I don't even understand why they would bother. They get into these fights with egg avatars or there's this whole layer of anonymous, either traders or hedge fund analysts. They're angry because they have to be anonymous or they're … I don't really get it.

I'm friends with a lot of them on Twitter. I learn from them, they share great stuff. Then every once in a while they'll say something mean about me or about someone else. I just totally stay out of it because I realized there were days where I was having a bad day in the markets or in business or personally and you have this urge to just lash out at someone.

Patrick: [00:29:38] Spew.

Josh: [00:29:38] I think there's a lot of that going on. I think my decision to not do it, I think it helped … Look, I could get on there. I could tear someone's heart out. I don't think it's that hard to do that. To look at someone who's put their life on Twitter and just say, all right, I know exactly how to hurt this person. Anyone can do that. I think staying out of those wars and just keeping it about having fun and learning and linking a great content and talking about markets and leaving all the other stuff out, maybe that's elevated my Twitter brand. I don't know. The more I think about it, the more I realize it's foolish to think about.

Patrick: [00:30:19] Is there anything else out there right now where you guys are amazing in that you have, you've really keep up the speed on new technology in the financial space, new platforms for getting your message out. Is there anything else that feels kind of early days could be technology could be social media, it could be anything where you are juiced about it?

Josh: [00:30:40] It's interesting. There've been a bunch of new financial excuse me, a bunch of new social media platforms. I always said to myself all right, I'll create a profile and I'll just see if there's anything to it. I'll experiment. Honestly, in the last couple of years it seems they all failed. They don't fail they fail to get traction for finance. Maybe a bunch of examples, Meerkat and Periscope two years ago that looked like, "Oh my God, this is going to be huge."

Patrick: [00:31:10] Can't miss out.

Josh: [00:31:13] Whoever figures out interesting things to do on Periscope or Meerkat to do live broadcast is going to win. It's just you're going to win. I'm friends with all the venture tech, finance guys. I know them all. We all were trying and experimenting. Then you realize no one's that interesting that you want to watch them broadcast live every day from their phone. Not talking to good guests or not having good scenery or not actually having a point just rambling. Nobody wants to let anyone do that.

Patrick: [00:31:46] Except for DJ Khaled.

Josh: [00:31:47] Right. No, but I'm saying for investing, yeah. I'm talking shit about this guy, he has 20 million, 30 million people watching him right now and he's eating cereal. All right, that's a good example of something that this seems so obvious everyone's going to want to do self broadcast it, but turns out like people don't have that much to say, or viewers aren't that interested.

Then there's Peach and ELO and there's no finance Instagram that I'm aware of. Certain platforms … There's no finance Facebook PS, certain platforms just don't lend themselves, I think, to conversations about the subject matter that we're having. I think LinkedIn and Twitter for finance are the big ones and Google Hangouts didn't work. I can go down this huge list of things just in the last couple of years. I'm a little bit surprised by that. I don't spend a ton of time experimenting. I try to focus on what I know is working.

Patrick: [00:32:49] How do you feel about Slack so far?

Josh: [00:32:50] Slack is life-changing. We've standardized all interoffice communication on Slack. We have the compliance from archiving it obviously, but what we're not doing there is doing what we're doing with encrypted email. With encrypted email, if we need to share client personal data, you that there, you can't do it on Slack. You can't encrypt it, but things like, hey, the meeting's in five minutes, or did you see that email from Mr. Jones about opening his wife's IRA, stuff like that. That used to be back and forth emails with eight people CC-ed. It's a joke. It's a joke. I think I send less than 20 emails a day now. I mean, I receive like a 100, but I'm not sending emails anymore because so many interoffice things can just be a chat function, archived for compliance, nothing in there that's personal data or sensitive, just regular …

Now here's why that's critical. I have employees in Oregon, in Florida, out on Long Island, here in New York City, in Michigan, we've got to have a give and take that's almost as gap-less as a conversation like you and I are having now. That's how we do it.

Patrick: [00:34:06] What I found amazing about Slack, there's those studies that show cities with greater population density produce more innovation. Just because ideas and people are just bouncing off each other all the time. Slack is the first thing that I've seen and I use it all the time. I've got several different groups where there's almost that virtually, and you can get to know people faster. It's an amazing … If Twitter is the top of the funnel for finding interesting stuff-

Josh: [00:34:34] You're in my secret Slack group.

Patrick: [00:34:37] One of my secret Slackers.

Josh: [00:34:38] We shouldn't talk about that.

Patrick: [00:34:39] First rule of secret Slacker, don't talk about it. The bottom of the funnel seems like Slack, that the people that have been most interesting I've found elsewhere somehow get them onto that platform. I would encourage everyone to do that. It's definitely the coolest piece of technology, even though it's super simple.

Josh: [00:34:57] It's AOL instant message, internal.

Patrick: [00:35:01] Searchable.

Josh: [00:35:02] Right. I mean, I think it's incredible. I can't believe they had told me like, Salesforce is going to buy Twitter because there's so much data from marketers on there. Well, they can have that data anyway. Number one, they need to buy Slack. They're crazy not to buy Slack and Slack should get a LinkedIn ESK multiple whoever buys it. But we've standardized all interoffice communications that are not encrypted email worthy. We're doing that on Slack. I recommend it to companies in any vertical. It's been huge for us.

Career Highlights & Famous Investors

Patrick: [00:35:37] What's the most memorable individual day of your career?

Josh: [00:35:41] Probably the day that I came to work with Barry, I'll tell you why. Because prior to that, as a retail broker at a firm that had borrowed a bunch of money during the crisis and was failing, and I had only ever worked for idiots. I didn't know it at the time, because I was in my twenties. When you get your first job out of school and you're whatever, my first job in the industry was an internship. I was 19 years old, cold-calling at Duke and Company, which was an offshoot of Stratton Oakmont. I was 19 and I was in school. What are you going to do this summer? I don't know. This guy has five Porsches in front of his house, in my town. I'm going to work for him. He must be doing something right.

He was an idiot. He was a bouncer who got a Series 7 fine. But I had only ever worked for idiots, but I didn't know it at the time. Maybe they were well-meaning maybe it's not nice to say that. I don't really care. But going to work for Barry it's the first time where I said I'm gong to learn something from this person now that could actually be helpful to me for the rest of my career. I really felt I was going to work for a mentor and keep in mind, I started reading Barry in 2001 or something. He was writing at TheStreet.com. He was the guy that wasn't Cramer basically. But that was, I think for me, probably the most memorable day, when I dropped my Series 7 and I'm not a broker anymore ever again.

I'll never sell another financial product to anyone, as long as I live. That was a really big moment for me. I write about it in my book. I almost felt I was walking on air. I wish I could ever have that feeling again. But other than getting married, the birth of my children, that's a big one for me. I'll never forget it.

Patrick: [00:37:29] It's a lot of mentorship in that answer who are people right now that you're learning the most from?

Josh: [00:37:35] Well, so they're all younger than me. It's funny because they work for me or they're younger than me, but the two guys that do most of the research in my firm are Ben Carlson and Michael Batnick. In addition to being personal friends of mine, I probably learn more from them every week than I've learned from other people I've worked with ever put together. These are guys that just are relentless in their pursuit of important investment truths. These are guys that if they were in any industry, if they were in medicine, they would be doing the same thing. Just relentlessly trying to figure out real true consistent things to be able to say and explain about medicine.

I just think that they're incredible people to work with and really, really influential. Those two, and then just in the broader investing realm, people I've either met or I've been waiting for a long time. My list is like Chanos. I would say Asness. I would say Robert Arnott, I would say Mohammed El-Erian. I've met a lot of these guys, but even before I had just read a lot about what they said and how they thought, and thank God for that, because I was in the dark ages with what I was doing professionally.

Just knowing there was a broader world out there. I never expected I'd meet any of these people by the way. That's been a perk, but I probably have a list of 10 or 15 people. Nick Murray has been hugely influential. His book might've changed more about my investment philosophy than any other book. It's called Simple Wealth, Inevitable Wealth. It's a classic among a certain group of advisors, but I go back to it once every couple of years. I don't know I'm sure if I could think more, I'd have a more in depth list, but.

Patrick: [00:39:31] It's a good list. What are some of the things that you enjoy most about the show on CNBC and what are some of the things that you wish were different about it? Or let's say you were the producer or the executive of the show over the coming years, how will it evolve or morph?

Josh: [00:39:46] I love the show because it keeps me really sharp about what's going on in the markets. It forces me to be aware of the trends, the crosscurrent, sentiment, the fundamentals, because every single day, that's what they're talking about. If I'm on the show two or three days a week, I have to know what's going on. I think there's a tendency for people that are managing long-term wealth to sometimes not understand what's going on. There's an argument to be made, it's better off if I don't. I don't really buy into that. I'm one of these people that if I'm involved with something, I want to know everything about it. I think it really, really helps me from that standpoint. I also really enjoy the comradery of the people on the show, and I love the guests.

We could spend an hour with Mario Gabelli. We can have people on the show that are managing 10 billion, 20 billion, 50 billion. We've had Carl Icahn. We've had all of the iconic living investors have done the show or do it regularly. Just listening to them and understanding how they look at markets and having that give and take, I couldn't get that anywhere else. It's incredible. I feel I'm really, really lucky to be a part of it. I think we put out the best daily hour show about investing and trading that exists. I'm obviously biased, but I think that's what we're trying to do. I think we accomplish it more often than not. That being said, there are always segments that I'm asked to be a part of that maybe I don't think are particularly important, but that's part of the deal.

If you're someone who is a public commentary on politics, not every discussion maybe is that exciting to you or that momentous to you, but that's a very minor drawback for a very big benefit. Because I end up in a lot of meetings in my firm, in my regular career that I say, "Man, I don't want to sit through this meeting." I think everyone's got that. But look, that's a very minor thing. The big picture is we get to talk about my favorite thing, which is investing in stocks and we get to do so with some really, really brilliant people. I don't really know of any other way that this would be possible. I appreciate every day that I'm able to do it.

Patrick: [00:42:12] If you had to give all your money to one of the guests that you've had on the show, and I promise you that they're going to live for the next 20 years or it could be an older investor. Just buy and hold that investor who would it be and why?

Josh: [00:42:25] That's a really, really good question. Is it cheating if I say it's one of the venture capitalists?

Patrick: [00:42:30] No, you can say anyone you want.

Josh: [00:42:31] I don't know, it's maybe Gurley. We've had a lot of people who manage huge money. I think the problem with that is it eventually gets in the way of performance. The bigger you are, the harder it is to keep that consistent. That's what makes that question tough. If you tell me I could have their past track record, it's much, much easier to answer.

Patrick: [00:42:52] All right, let's do it that way. You get the skill of whoever it is. They're going to be around for 20 years.

Josh: [00:42:57] I get to decide when I come out.

Patrick: [00:42:59] It's 20 years, I'd say.

Josh: [00:43:01] It's Icahn, right. I feel like that's easy. But then when I come out is when he's on the cover of Time magazine.

Patrick: [00:43:08] Here's a contrary indicator.

Josh: [00:43:10] That's it for me. Congratulations, you're the best investor alive and now everyone knows it so I got to go.

Patrick: [00:43:16] From an outsider's perspective that just has CNBC on and pays attention every so often. It seems him and Tepper are the most refreshingly just themselves and just completely honest is that would you agree with that?

Josh: [00:43:29] They're also freaks. They're so good. If you say like, what's your process? I think they could give you half a sentence and then they'd be just like, I don't fucking know man. I show up, I do my thing. They'll never say this about themselves, but I'm thinking they're inter-model. They're I'm really bright. I know the right people to ask questions of and I have great gut instincts. Now you can't put that on a prospectus. You can't be like-

Patrick: [00:43:57] We live in the age of process now everyone's got to have their process.

Josh: [00:44:01] That's my joke. Everyone does have to have their process except for a very small handful of select individuals who have this freakish quality that they're like Jedi's. I don't know how else to explain it. It seems the people that have racked up the biggest gains in the industry through history, the most out-sized enormous and sometimes it's a one day home run. Sometimes it's just really, really quiet for five years and then all of a sudden they get a big macro shift really, really, right.

Those guys are not process guys. Not that they're winging it, but they're not systematized. They're basically really open-minded, really smart and they have great instincts. I don't think you can teach that to someone else. If David Tepper sat down with a finance course at, I think Carnegie Mellon is big for him. It's in Pittsburgh. If he sat down with those kids every day for four years, I don't think you end up with 50 new David Tepper's. I mean he's really special, but by the way, that's why everyone else needs to have a process. Because if you don't and you go out chasing that dream, you're putting yourself at a lot of risks that you don't need to take.

Patrick: [00:45:18] To that point do you think that we're screwing people, investors out there now by glorifying these people? Because we hold Tepper, Icahn, et cetera, up on a pedestal typically later in their careers, when they get more attention, when scale has become a problem for them, or they're just closed to new investors.

Josh: [00:45:34] Let me correct you though. Here's how smart David Tepper is. Scale has not become a problem because he gives the money back every year. The better he does, the more he gives back. Because he gets it.

Patrick: [00:45:44] Sure. But he's closed, right? He's not taking new money. So the people that are making new investments, it seems to me there's more of a gross stock, lottery stock, lottery manager, chasing because of how much we glorify the history's really successful investors when the reality is Carmen's the same way, right?

Klarman sends money back, RenTech, no one's been able to get in there for decades. It seems like all of these the best managers are impossible. I mean, shoot, the moon managers are impossible to identify ahead of time. It's very easy to identify.

Josh: [00:46:19] They're also impossible to hold through their draw downs. Very few people have been able to do it.

Patrick: [00:46:26] It's like Amazon. They're like the Amazon stock as a manager.

Josh: [00:46:30] How many times has Amazon been down 60% from its all time high. 1000 times.

Patrick: [00:46:34] I mean, other than Bezos who's made money on this.

Josh: [00:46:38] But when you say we, we're glorifying this, you saying like investors in general or the media, or?

Patrick: [00:46:44] I guess media most specifically.

Josh: [00:46:46] I mean, this is something that goes back to the beginning of-

Patrick: [00:46:50] I'm not saying it's going to change.

Josh: [00:46:51] Yeah. I mean, look, you can find old newspaper stories from the early 1900s or late 1800s, even talking about swashbuckling investors as though they're Indiana Jones and marveling at their feet. I mean, Livermore was a celebrity in his day. You couldn't have lived with his portfolio, fortunately, for other people, it wasn't their money. It was his, nobody could live through that. But they did it with him and didn't end up well for him. I think that's a bigger question of hero worship. Hero worship is also thousands of years old. I don't think the cave paintings of a man hunting a herd of animal I don't think that's an anonymous man. I think that's somebody, a dude who was one of them.

Patrick: [00:47:41] Celebrity.

Josh: [00:47:43] Yeah. The first celebrity who ever lived is Alexander the Great. Just because you were somebody chronicling and I think only one person actually did contemporaneously or very shortly after. But just because you were writing about Alexander the Great that shouldn't be taken by the people reading it as an exhortation to go out and try to conquer land for yourself. At a certain point it's personal responsibility.

Patrick: [00:48:10] I mean, I'm like anyone else. Fortune, whoever it was writes a story on Kellen, I'm reading it. It's interesting stuff to hear that-

Josh: [00:48:17] Another guy that can't be systematized or replicated.

Patrick: [00:48:21] He's just, like you said, a Jedi trader of sorts.

Josh: [00:48:23] I think there's some element of that. Right, what are we going to ignore them? They are incredible.

Patrick: [00:48:29] Yeah. I mean, I don't think it'll ever go-

Josh: [00:48:31] We're going to talk about them.

Patrick: [00:48:33] I don't think it'll ever go away.

Josh: [00:48:34] Well, now here's something. I have a problem with this actually, if you're someone who's selling a fund or product, and you're giving the audience the idea that you're able to replicate that, I have a problem with that. There are guys out there that are like, I knew, I was friendly with such and such. I used to have lunch with this guy. I trained that famous manager. I taught him everything he knew, and now I've launched my firm. It's like, dude, if you respect Soros and Buffet and all these people that you're name dropping, don't, don't act like, oh yeah I'm going to give you what they do. It's insane. I do have a problem with that. I don't know it's the media think that certain people in the industry that are playing this affinity game, like, I know these people. I've studied them and I can bring their success to you. I think that's a really, really big problem.

Patrick: [00:49:37] What's the kindest thing that anyone's ever done for you?

Josh: [00:49:40] Honestly, I think a lot of people have done me a kindness in accepting me when I first started writing because the stuff I was writing was terrible because I really didn't know that much. I knew a couple of things really, really well viscerally from my experience in the business. A lot of what I was talking about in the early days was brokerage stuff. I knew it better than almost anyone because I had been a reluctant student of what was going on there. But then I started to branch out a little bit and talk a lot more about markets and investing and I had experience there. I was trading professionally for accounts and investing for myself, but there's no way I was even close to as knowledgeable as I am now.

I mean, none of us are from eight years to now. I think people were really forgiving of whatever I didn't seem to know. They were willing to stick with me as I got better. I got better as a writer and got smarter as an investor. I think that that's been a really important kindness that I guess the public paid to me. Because it would have been easier to just say this kid's an idiot and maybe a lot of people did and I didn't hear about it. But just, I think people that have been reading me consistently and I hear from them all the time and they'll say, listen, you got a little bit shaky for a while.

In 2011, some of the things you were talking about, the European macro situation, I was a little worried about you, Josh. But you pulled through. I think there are people that knew that they knew more than me, but they appreciated the writing and they gave me time to get better and smarter and to build my career. Frankly, I wasn't managing much money then I wasn't really going anywhere career wise and people were just like, I don't care. I want to hear what this guy has to say. Now obviously things have gotten better for me professionally, personally, and those people are still around and they paid me that kindness. They gave me a chance and I hope that I'm playing that role with other people who are now in the shoes that I was in.

Try to link to a lot of the new up and coming financial bloggers, analysts, researchers. Guys send me stuff all the time I try to read it. It's not easy. I have two kids. I have a full-time job, but I think I'm trying to encourage people that are trying to figure out investing for themselves. I hope I'm helping. I'm not licking the garbage just because let me do this guy a favor. If somebody does something really smart and I could give you a few examples of new up and coming blogs, I'll link to it. I'll send a few thousand people to that site. If they keep going, they'll build their own audience, they don't need any help from me. I think there've been a lot of guys like that, that I've helped and other people have helped. I try to repay it.

Patrick: [00:52:23] Last question I'm obsessed with, people's daily habits, meditations, whatever they do.

Josh: [00:52:28] I have the worst habits in the world, though.

Patrick: [00:52:29] Even if they're bad, what are the things that define your days? What are the things that happen every day for you?

Josh: [00:52:36] All right. My signature sex move is I fall asleep at 8:30 and then I like to wake up around 2:00 AM for no reason. I'll lay in bed and scroll through my iPad and read British Twitter, which is horrendously stupid of me to be doing. Then I'll take a melatonin. I'm up to like 3 and I'll go to the bathroom and then I'll get back in bed. My bladder is the size of a walnut at this point. Then the alarm will go off at 5:45 and I'll say to myself, all right, you don't really have time to work out today.

I'll do that five days a week. Sometimes I will go to the gym actually. All right, that's my routine, but probably from 6:00 AM on I'm working. I don't know if that's so good, but in the morning there's so much that's already happened. The thing with this business, that's why I was out in California two weeks ago, talking to financial advisors and traders. I'm like, how did you guys do this? Because you got to start at 4 in the morning or 3 in the morning, so fine, but there's so much already that's going on at 6, 7 AM. I'm knee-deep in it and I'm reading everything and I'm putting together my list of things that I want to read later that morning, which I publish. Then I'm on the train and I work on the train. I think it's interesting because I think there's a generational divide.

It almost feels like people over 45 on the train are talking with their friends or reading the New York Post or sleeping. Then everyone under 45, first of all, has headphones on, second of all has a laptop or a phone and they are furiously clicking away. They could be reading TMZ. I don't know, but it just seems everyone, my age and younger is working. I'm working and I get good use out of that time because by the time I'm in the office, I'm basically done with any of that reading and writing. Because that's when it's like, all right meetings, what's going on in the firm? What's the latest thing that we're trying to get across to clients? What do we have coming up in terms of our quarterly letters? We do conference calls.

We do so much. Then I'm doing the show. Then I'm in meetings or I'm recording podcasts with Patrick O'Shaughnessy. My day doesn't really allow for a lot of time reflecting. The early morning is key for me. One of my other bad habits, happy hour once a week, huge mistake. I'm a waste the next day, but I still power through. Then at night my kids are in sports. I'm assistant coaching softball, assistant coaching soccer this season. Basketball is starting this week. That's really important for me because the only time I'm not thinking about whatever I read or wrote that day or whatever conversation.

That's actually the common part of the routine is helping out. Then I go home and try to salvage, whatever's left in my relationship with my wife. I eat a lot of carbs and I get back in bed, fall asleep too early. I'm back up at 2 in the morning. I'm going to write a book about that. I hope you buy it for someone you love this Christmas.

Patrick: [00:55:43] Well, this has been awesome. I'd ask where people can find you, but the answer is everywhere. Thanks for doing this.

Josh: [00:55:48] Patrick. Thank you.

Patrick: [00:55:49] Awesome.

Josh: [00:55:49] Do we shake hands now or?

Patrick: [00:55:51] Yeah, let's do it.

Josh: [00:55:52] Wow. That was super weird.

Created by @jrod109